EXHIBIT 10.1
PHONEPRINT, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
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December 10, 1994
TABLE OF CONTENTS
Page
1. Purchase and Sale of Stock............................................ 1
1.1 Sale and Issuance of Series A Preferred Stock................... 1
1.2 Closing......................................................... 1
2. Representations and Warranties of the Company......................... 1
2.1 Organization, Good Standing and Qualification................... 2
2.2 Capitalization and Voting Rights................................ 2
2.3 Subsidiaries.................................................... 2
2.4 Authorization................................................... 2
2.5 Valid Issuance of Preferred and Common Stock.................... 3
2.6 Governmental Consents........................................... 3
2.7 Litigation...................................................... 3
2.8 Compliance with Other Instruments............................... 3
2.9 Agreements; Action.............................................. 4
2.10 Related-Party Transactions...................................... 5
2.11 Permits......................................................... 5
2.12 Disclosure...................................................... 5
2.13 Minute Books.................................................... 5
2.14 Labor Agreements and Actions.................................... 5
3. Representations and Warranties of the Investor........................ 6
3.1 Authorization................................................... 6
3.2 Purchase Entirely for Own Account............................... 6
3.3 Disclosure of Information....................................... 6
3.4 Investment Experience........................................... 6
3.5 Accredited Investor............................................. 7
3.6 Restricted Securities........................................... 7
3.7 Further Limitations on Disposition.............................. 7
3.8 Legends......................................................... 7
4. California Commissioner of Corporations............................... 8
4.1 Corporate Securities Law....................................... 8
5. Conditions of Investor's Obligations at Closing....................... 8
5.1 Representations and Warranties................................... 8
5.2 Performance...................................................... 8
5.3 Compliance Certificate........................................... 8
5.4 Qualifications................................................... 9
5.5 Proceedings and Documents........................................ 9
5.6 Bylaws........................................................... 9
5.7 Board of Directors............................................... 9
(i)
5.8 Investors' Rights Agreement...................................... 9
6. Conditions of the Company's Obligations at Closing.................... 9
6.1 Representations and Warranties................................... 9
6.2 Payment of Purchase Price........................................ 9
6.3 California Qualification......................................... 9
7. Miscellaneous......................................................... 9
7.1 Survival of Warranties........................................... 9
7.2 Successors and Assigns........................................... 10
7.3 Governing Law.................................................... 10
7.4 Counterparts..................................................... 10
7.5 Titles and Subtitles............................................. 10
7.6 Notices.......................................................... 10
7.7 Finder's Fee..................................................... 10
7.8 Expenses......................................................... 10
7.9 Amendments and Waivers........................................... 11
7.10 Severability.................................................... 11
7.11 Aggregation of Stock............................................ 11
7.12 Entire Agreement................................................ 11
SCHEDULE A - Schedule of Investors
EXHIBIT A - Certificate of Incorporation
EXHIBIT B - Form of Promissory Note
EXHIBIT C - Investors' Rights Agreement
(ii)
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
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THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT is made as of the 10th day of
December, 1994, by and between PhonePrint, Inc., a Delaware corporation (the
"Company") and the investors listed on Schedule A hereto, each of which is
herein referred to as an "Investor."
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Stock.
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1.1 Sale and Issuance of Series A Preferred Stock.
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(a) The Company shall adopt and file with the Secretary of State of
Delaware on or before the Closing (as defined below) the Certificate of
Incorporation in the form attached hereto as Exhibit A.
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(b) Subject to the terms and conditions of this Agreement, each
Investor agrees, severally, to purchase at the Closing and the Company agrees to
sell and issue to each Investor at the Closing, that number of shares of the
Company's Series A Preferred Stock set forth opposite each Investor's name on
Schedule A hereto for the purchase price set forth thereon. Such purchase shall
be payable by Investor by delivery to Company by Investor of (i) a check in the
amount of the purchase price set forth opposite such Investor's name under the
heading "Cash Purchase Price" on Schedule A payable to the Company's order or by
wire transfer of funds in such amount to the Company's designated bank account
and (ii) a promissory note in the form attached hereto as Exhibit B in the
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amount set forth opposite such Investor's name under the heading "Promissory
Note" on Schedule A.
1.2 Closing. The purchase and sale of the Series A Preferred Stock
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shall take place at the offices of βββββββ�, βββββββ� & ββββββββ, βββ� ββββ "β�"
ββββββ, βββββ� ββββ, βββ� βββββ�, ββββββββββ at 11:00 o'clock A.M., on December 8,
1994, or at such other time and place as the Company and Investors acquiring in
the aggregate more than half the shares of Series A Preferred Stock sold
pursuant hereto mutually agree upon orally or in writing (which time and place
are designated as the "Closing"). At the Closing the Company shall deliver to
each Investor a certificate representing the Series A Preferred Stock which such
Investor is purchasing against delivery to the Company by such Investor of the
purchase price in the form as set forth above in Section 1.1(b).
2. Representations and Warranties of the Company. The Company hereby
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represents and warrants to each Investor that, except as set forth on a Schedule
of Exceptions furnished each Investor, and special counsel for the Investors,
specifically identifying the relevant subparagraph hereof, which exceptions
shall be deemed to be representations and warranties as if made hereunder:
2.1 Organization, Good Standing and Qualification. The Company is a
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corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
carry on its business as now conducted. The Company is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure so to qualify would have a material adverse effect on its business or
properties.
2.2 Capitalization and Voting Rights. The authorized capital of the
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Company consists, or will consist prior to the Closing, of:
(i) Preferred Stock. 8,120,000 shares of Preferred Stock (the
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"Preferred Stock"), of which 8,120,000 shares have been designated Series A
Preferred Stock and up to 6,100,150 will be sold pursuant to this Agreement.
The rights, privileges and preferences of the Series A Preferred Stock will be
as stated in the Company's Certificate of Incorporation attached hereto as
Exhibit A.
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(ii) Common Stock. 18,270,000 shares of common stock ("Common
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Stock"), none of which are currently issued and outstanding.
(iii) Except for the conversion privileges of the Series A
Preferred Stock to be issued under this Agreement, and the rights provided in
paragraph 2.4 of the Investors' Rights Agreement, there are not outstanding any
options, warrants, rights (including conversion or preemptive rights) or
agreements for the purchase or acquisition from the Company of any shares of its
capital stock. The Company is not a party or subject to any agreement or
understanding, and, to the Company's knowledge, there is no agreement or
understanding between any persons and/or entities, which affects or relates to
the voting or giving of written consents with respect to any security or by a
director of the Company.
2.3 Subsidiaries. The Company does not presently own or control, directly
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or indirectly, any interest in any other corporation, association, or other
business entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement.
2.4 Authorization. All corporate action on the part of the Company, its
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officers, directors and shareholders necessary for the authorization, execution
and delivery of this Agreement, the Investors' Rights Agreement and any other
agreement to which the Company is a party, the execution and delivery of which
is contemplated hereby (the "Ancillary Agreements"), the performance of all
obligations of the Company hereunder and thereunder and the authorization,
issuance (or reservation for issuance) and delivery of the Series A Preferred
Stock being sold hereunder and the Common Stock issuable upon conversion of the
Series A Preferred Stock has been taken or will be taken prior to the Closing,
and this Agreement, the Investors' Rights Agreement and any Ancillary Agreements
constitute valid and legally binding obligations of the Company, enforceable in
accordance with their respective terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application
affecting enforcement of creditors' rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief, or
other equitable remedies, and (iii) to the extent the indemnification provisions
contained in the Investors' Rights Agreement may be limited by applicable
federal or state securities laws.
2.5 Valid Issuance of Preferred and Common Stock. The Series A Preferred
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Stock which is being purchased by the Investors hereunder, when issued, sold and
delivered in accordance with the terms hereof for the consideration expressed
herein, will be duly and validly issued, fully paid and nonassessable and, based
in part upon the representations of the Investors in this Agreement, will be
issued in compliance with all applicable federal and state securities laws. The
Common Stock issuable upon conversion of the Series A Preferred Stock purchased
under this Agreement has been duly and validly reserved for issuance and, upon
issuance in accordance with the terms of the Certificate of Incorporation, shall
be duly and validly issued, fully paid and nonassessable, and issued in
compliance with all applicable securities laws, as presently in effect, of the
United States and each of the states whose securities laws govern the issuance
of any of the Series A Preferred Stock hereunder.
2.6 Governmental Consents. No consent, approval, order or authorization
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of, or registration, qualification, designation, declaration or filing with, any
federal, state, local or provincial governmental authority on the part of the
Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for the filing pursuant to Section
25102(f) of the California Corporate Securities Law of 1968, as amended, and the
rules thereunder, which filing will be effected within 15 days of the sale of
the Series A Preferred Stock hereunder.
2.7 Litigation. There is no action, suit, proceeding or investigation
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pending or currently threatened against the Company which questions the validity
of this Agreement, the Investors' Rights Agreement or any Ancillary Agreements,
or the right of the Company to enter into any of them, or to consummate the
transactions contemplated hereby or thereby, or which might result, either
individually or in the aggregate, in any material adverse changes in the assets,
condition, affairs or prospects of the Company, financially or otherwise, or any
change in the current equity ownership of the Company, nor is the Company aware
that there is any basis for the foregoing. The Company is not a party or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
2.8 Compliance with Other Instruments.
---------------------------------
(a) The Company is not in violation or default of any provisions of
its Certificate of Incorporation or Bylaws or of any instrument, judgment,
order, writ, decree or contract to which it is a party or by which it is bound
or, to its knowledge, of any provision of federal or state statute, rule or
regulation applicable to the Company. The execution, delivery and performance
of this Agreement, the Investors' Rights
Agreement or any Ancillary Agreements and the consummation of the transactions
contemplated hereby and thereby will not result in any such violation or be in
conflict with or constitute, with or without the passage of time and giving of
notice, either a default under any such provision, instrument, judgment, order,
writ, decree or contract or an event which results in the creation of any lien,
charge or encumbrance upon any assets of the Company or the suspension,
revocation, impairment, forfeiture, or nonrenewal of any material permit,
license, authorization, or approval applicable to the Company, its business or
operations or any of its assets or properties.
(b) The Company has avoided every condition, and has not
performed any act, the occurrence of which would result in the Company's loss of
any right granted under any license, distribution or other agreement.
2.9 Agreements; Action.
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(a) Except for agreements explicitly contemplated hereby and by
the Investors' Rights Agreement and any Ancillary Agreements, there are no
agreements, understandings or proposed transactions between the Company and any
of its officers, directors, affiliates, or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or by which it is bound which may involve (i) obligations
(contingent or otherwise) of, or payments to the Company in excess of, $5,000,
or (ii) the license of any patent, copyright, trade secret or other proprietary
right to or from the Company or (iii) provisions restricting or affecting the
development, manufacture or distribution of the Company's products or services
or (iv) indemnification by the Company with respect to infringements of
proprietary rights.
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities individually in excess of $5,000 or, in the case of
indebtedness and/or liabilities individually less than $5,000, in excess of
$25,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for travel expenses, or (iv) sold, exchanged or otherwise
disposed of any of its assets or rights, other than the sale of its inventory in
the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(e) The Company is not a party to and is not bound by any
contract, agreement or instrument, or subject to any restriction under its
Certificate of
Incorporation or Bylaws, which adversely affects its business as now conducted
or as proposed to be conducted in the Business Plan, its properties or its
financial condition.
(f) The Company has not engaged in the past three (3) months in
any discussion (i) with any representative of any corporation or corporations
regarding the consolidation or merger of the Company with or into any such
corporation or corporations, (ii) with any corporation, partnership, association
or other business entity or any individual regarding the sale, conveyance or
disposition of all or substantially all of the assets of the Company of a
transaction or series of related transactions in which more than fifty percent
(50%) of the voting power of the Company is disposed of, or (iii) regarding any
other form of acquisition, liquidation, dissolution or winding up of the
Company.
2.10 Related-Party Transactions. No employee, officer, or director
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of the Company or member of his or her immediate family is indebted to the
Company, nor is the Company indebted (or committed to make loans or extend or
guarantee credit) to any of them. To the best of the Company's knowledge, none
of such persons has any direct or indirect ownership interest in any firm or
corporation with which the Company is affiliated or with which the Company has a
business relationship, or any firm or corporation that competes with the
Company, except that employees, officers, or directors of the Company and
members of their immediate families may own stock in publicly traded companies
that may compete with the Company. No member of the immediate family of any
officer or director of the Company is directly or indirectly interested in any
material contract with the Company.
2.11 Permits. The Company has all franchises, permits, licenses,
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and any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties, prospects, or financial condition of the Company and
believes it can obtain, without undue burden or expense, any similar authority
for the conduct of its business as planned to be conducted. The Company is not
in default in any material respect under any of such franchises, permits,
licenses, or other similar authority.
2.12 Disclosure. The Company has fully provided each Investor with
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all the information which such Investor has requested for deciding whether to
purchase the Series A Preferred Stock and all information which the Company
believes is reasonably necessary to enable such Investor to make such decision.
Neither this Agreement, the Investors' Rights Agreement and any Ancillary
Agreements, nor any other statements or certificates made or delivered in
connection herewith or therewith contains any untrue statement of a material
fact or omits to state a material fact necessary to make the statements herein
or therein not misleading.
2.13 Minute Books. The minute books of the Company provided to the
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Investors contain a complete summary of all meetings of directors and
stockholders since the time of incorporation and reflect all transactions
referred to in such minutes accurately in all material respects.
2.14 Labor Agreements and Actions. The Company is not bound by or
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subject to (and none of its assets or properties is bound by or subject to) any
written or oral, express or implied, contract, commitment or arrangement with
any labor union, and no labor union has requested or, to the knowledge of the
Company, has sought to represent any of the employees, representatives or agents
of the Company. There is no strike or other labor dispute involving the Company
pending, or to the knowledge of the Company threatened, which could have a
material adverse effect on the assets, properties, financial condition,
operating results, or business of the Company (as such business is presently
conducted and as it is proposed to be conducted), nor is the Company aware of
any labor organization activity involving its employees. The Company is not
aware that any officer or key employee, or that any group of key employees,
intends to terminate their employment with the Company, nor does the Company
have a present intention to terminate the employment of any of the foregoing.
Subject to general principles related to wrongful termination of employees, the
employment of each officer and employee of the Company is terminable at the will
of the Company.
3. Representations and Warranties of the Investor. Each Investor hereby
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represents and warrants that:
3.1 Authorization. This Agreement constitutes its valid and legally
-------------
binding obligation, enforceable in accordance with its terms.
3.2 Purchase Entirely for Own Account. This Agreement is made with
---------------------------------
each Investor in reliance upon such Investor's representation to the Company,
which by such Investor's execution of this Agreement such Investor hereby
confirms, that the Series A Preferred Stock to be received by such Investor and
the Common Stock issuable upon conversion thereof (collectively, the
"Securities") will be acquired for investment for such Investor's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that such Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, each Investor further represents that such Investor does not
have any contract, undertaking, agreement or arrangement with any person to
sell, transfer or grant participations to such person or to any third person,
with respect to any of the Securities. Each Investor represents that it has full
power and authority to enter into this Agreement.
3.3 Disclosure of Information. It believes it has received all the
-------------------------
information it considers necessary or appropriate for deciding whether to
purchase the Series A Preferred Stock. Each Investor further represents that it
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Series A Preferred
Stock. The foregoing, however, does not limit or modify the representations and
warranties of the Company in Section 2 of this Agreement or the right of the
Investors to rely thereon.
3.4 Investment Experience. Each Investor is an investor in
---------------------
securities of companies in the development stage and acknowledges that it is
able to fend for itself,
can bear the economic risk of its investment and has such knowledge and
experience in financial or business matters that it is capable of evaluating the
merits and risks of the investment in the Series A Preferred Stock. If other
than an individual, Investor also represents it has not been organized for the
purpose of acquiring the Series A Preferred Stock.
3.5 Accredited Investor. Each Investor is an "accredited investor"
-------------------
within the meaning of SEC Rule 501 of Regulation D, as presently in effect.
3.6 Restricted Securities. It understands that the shares of
---------------------
Series A Preferred Stock it is purchasing are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
without registration under the Act, only in certain limited circumstances. In
this connection, each Investor represents that it is familiar with SEC Rule 144,
as presently in effect, and understands the resale limitations imposed thereby
and by the Act.
3.7 Further Limitations on Disposition. Without in any way limiting
----------------------------------
the representations set forth above, each Investor further agrees not to make
any disposition of all or any portion of the Series A Preferred Stock (or the
Common Stock issuable upon the conversion thereof) unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 3.7, provided and to the extent such section is then applicable and
Investors' Rights Agreement and any applicable Ancillary Agreement and:
(a) There is then in effect a Registration Statement under the
Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii) if
reasonably requested by the Company, such Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the Act. It
is agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by an Investor which is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the date
hereof, or to the estate of any such partner or retired partner or the transfer
by gift, will or intestate succession of any partner to his spouse or to the
siblings, lineal descendants or ancestors of such
partner or his spouse, if the transferee agrees in writing to be subject to the
terms hereof to the same extent as if he were an original Investor hereunder.
3.8 Legends. It is understood that the certificates evidencing the
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Series A Preferred Stock (and the Common Stock issuable upon conversion thereof)
may bear one or all of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with respect
to the securities under such Act or an opinion of counsel satisfactory to the
Company that such registration is not required or unless sold pursuant to Rule
144 of such Act."
(b) Any legend required by the laws of the State of California,
including any legend required by the California Department of Corporations and
Sections 417 and 418 of the Code.
4. California Commissioner of Corporations.
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4.1 Corporate Securities Law. 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.
5. Conditions of Investor's Obligations at Closing. The obligations of
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each Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which shall not be effective against any Investor who does not consent
in writing thereto:
5.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 2 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the date of such Closing.
5.2 Performance. The Company shall have performed and complied
-----------
with all agreements, obligations and conditions contained in this Agreement that
are required to be performed or complied with by it on or before the Closing.
5.3 Compliance Certificate. The Chairman of the Board of the Company
----------------------
shall deliver to each Investor at the Closing a certificate certifying that the
conditions specified in Sections 5.1 and 5.2 have been fulfilled and stating
that there shall have been no adverse change in the business, affairs,
prospects, operations, properties, assets or condition of the Company since the
date of the Business Plan.
5.4 Qualifications. The Commissioner of Corporations of the State of
--------------
California shall have issued a permit qualifying the offer and sale of the
Series A Preferred Stock and the underlying Common Stock to the Investors
pursuant to this Agreement, or such offer and sale shall be exempt from such
qualification.
5.5 Proceedings and Documents. All corporate and other proceedings
-------------------------
in connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to Investors' special counsel, and they shall have received all such
counterpart original and certified or other copies of such documents as they may
reasonably request.
5.6 Bylaws. The Bylaws of the Company shall provide that the Board
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of Directors of the Company shall consist of five (5) persons which number shall
not be changed by an Amendment to the Certificate of Incorporation or the Bylaws
without consent of a majority of the Series A Preferred Stock.
5.7 Board of Directors. The directors of the Company shall be βββββ�
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βββββββ� and there shall be four (4) vacancies on the Board of Directors.
5.8 Investors' Rights Agreement. The Company and each Investor shall
---------------------------
have entered into the Investors' Rights Agreement in the form attached as
Exhibit C .
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6. Conditions of the Company's Obligations at Closing. The obligations
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of the Company to each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by that
Investor:
6.1 Representations and Warranties. The representations and
------------------------------
warranties of the Investor contained in Section 3 shall be true on and as of the
Closing with the same effect as though such representations and warranties had
been made on and as of the Closing.
6.2 Payment of Purchase Price. The Investor shall have delivered the
-------------------------
purchase price specified in Section 1.2.
6.3 California Qualification. The Commissioner of Corporations of
------------------------
the State of California shall have issued a permit qualifying the offer and sale
to the Investor of the Series A Preferred Stock and the Common Stock issuable
upon the conversion thereof or such offer and sale shall be exempt from such
qualification.
7. Miscellaneous.
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7.1 Survival of Warranties. The warranties, representations and
----------------------
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors or the Company.
7.2 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Series A Preferred Stock sold hereunder or any
Common Stock issued upon conversion thereof). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
7.3 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
7.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7.5 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.6 Notices. Unless otherwise provided, any notice required or
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permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written notice to the
other parties.
7.7 Finder's Fee. Each party represents that it neither is nor
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will be obligated for any finders' fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, partners,
employees, or representatives is responsible. The Company agrees to indemnify
and hold harmless each Investor from any liability for any commission or
compensation in the nature of a finders' fee (and the costs and expenses
of defending against such liability or asserted liability) for which the Company
or any of its officers, employees or representatives is responsible.
7.8 Expenses. Irrespective of whether the Closing is effected, the
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Company shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement. If the
Closing is effected, the Company shall, at the Closing, reimburse the reasonable
fees of special counsel for the Investors and shall, upon receipt of a ββββ
therefor, reimburse the out of pocket expenses of such counsel. If any action
at law or in equity is necessary to enforce or interpret the terms of this
Agreement or the Certificate of Incorporation, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
7.9 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
a majority of the Common Stock issued or issuable upon conversion of the Series
A Preferred Stock. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each holder of any securities purchased under
this Agreement at the time outstanding (including securities into which such
securities are convertible), each future holder of all such securities, and the
Company; provided, however, that no condition set forth in Section 5 hereof may
be waived with respect to any Investor who does not consent thereto.
7.10 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
7.11 Aggregation of Stock. All shares of the Preferred Stock held or
--------------------
acquired by affiliated entities or persons shall be aggregated together for the
purpose of determining the availability of any rights under this Agreement.
7.12 Entire Agreement. This Agreement and the documents referred to
----------------
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
PHONEPRINT, INC., a Delaware corporation
By: /s/ βββββ� βββββββ�
----------------------------------------
βββββ� βββββββ�,
Chairman of the Board
Address: βββ� ββββ βββββ�
βββββββββ�, ββββββββββ βββββ�
INVESTORS:
βββββββ� βββββββ� ββββββββ & βββββ� VII
By: /s/ βββββ� βββββββ�
----------------------------------------
Address: ββββ ββββ ββββ ββββ
βββββ� ββββ, ββββββββββ βββββ�
KPCB VII FOUNDERS FUND
By:/s/ βββββ� βββββββ�
-----------------------------------------
Address: ββββ ββββ ββββ ββββ
βββββ� ββββ, ββββββββββ βββββ�
βββββ�-βββββ� IV
By: /s/ βββββ� βββ�
----------------------------------------
Address: Two Galleria Tower
βββββ� ββββ ββββ, βββββ� ββββ
ββββββ, βββββ� βββββ�
[SIGNATURES TO SERIES A PREFERRED STOCK PURCHASE AGREEMENT
CONTINUED ON NEXT PAGE]
βββββ�-βββββ�-βββββββ� MANAGEMENT COMPANY
By: /s/ βββββ� βββ�
----------------------------------------
Address: Two Galleria Tower
βββββ� ββββ ββββ, βββββ� ββββ
ββββββ, βββββ� βββββ�
NORWEST EQUITY PARTNERS IV, a
Minnesota Limited Partnership
By: Itasca Partners
Its: General Partner
By: /s/ ββββββ βββββ�, Partner
----------------------------------------
Address: ββββ βββββ� βββββββ� βββββ�
βββββββββββ�, βββββββββ� βββββ�
NEEDHAM CAPITAL SBIC, L.P.
By: Needham Capital Management
Partners, L.P.
By: /s/ ββββ ββββββββββ
----------------------------------------
Address: βββ� ββββ ββββββ
βββ� ββββ, ββ βββββ�
NEEDHAM EMERGING GROWTH PARTNERS
By: /s/ βββ� ββββββββββ
----------------------------------------
Address: βββ� ββββ ββββββ
βββ� ββββ, ββ βββββ�
[SIGNATURE PAGE TO SERIES A
PREFERRED STOCK PURCHASE AGREEMENT]
SCHEDULE A
SCHEDULE OF INVESTORS
Total
Cash Purchase Promissory Purchase No. of
Name and Address Price Note Price Shares
-------------------------------------- ------------- ---------- ----------- ---------
βββββββ� βββββββ� ββββββββ & βββββ� VII $2,714,776 $ 885,224 $ 3,600,000 1,800,000
ββββ ββββ ββββ ββββ
βββββ�, ββ βββββ�
KPCB VII Founders Fund $ 301,642 $ 98,358 $ 400,000 200,000
ββββ ββββ ββββ ββββ
βββββ�, ββ βββββ�
βββββ�-βββββ� IV $3,006,418 $ 983,582 $ 3,990,000 1,995,000
Two Galleria Tower
βββββ� ββββ ββββ, βββββ� ββββ
ββββββ, ββ βββββ�
βββββ�-βββββ�-βββββββ� Management $ 10,000 ------ $ 10,000 5,000
Company
Two Galleria Tower
βββββ� ββββ ββββ, βββββ� ββββ
ββββββ, ββ βββββ�
Norwest Equity Partners IV $2,413,360 $ 786,940 $ 3,200,300 1,600,150
ββββ βββββ� βββββββ� βββββ�
βββββββββββ�, ββ βββββ�
Needham Capital SBIC, L.P. $ 377,052 $ 122,948 $ 500,000 250,000
βββ� ββββ ββββββ
βββ� ββββ, ββ βββββ�
Needham Emerging Growth Partners $ 377,052 $ 122,948 $ 500,000 250,000
βββ� ββββ ββββββ
βββ� ββββ, ββ βββββ�
---------- ---------- ----------- ---------
CLOSING TOTALS $9,200,300 $3,000,000 $12,200,300 6,100,150
EXHIBIT A
CERTIFICATE OF INCORPORATION
----------------------------
A-1
CERTIFICATE OF INCORPORATION
OF PHONEPRINT, INC.,
a Delaware corporation
ARTICLE I
The name of this corporation is PhonePrint, Inc..
ARTICLE II
The address of this corporation's registered office in the State of
Delaware is ββ ββββ βββββ� ββββββ, ββββ ββ βββββ�, ββββββ of Kent 19901. The name
of its registered agent at such address is Incorporating Services, Ltd.
ARTICLE III
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may now or hereafter be organized under the Delaware
General Corporation Law.
ARTICLE IV
A. Classes of Stock. This corporation is authorized to issue two
----------------
classes of stock to be designated, respectively, "Common Stock" and "Series A
Preferred Stock." The total number of shares which the corporation is authorized
to issue is Eighteen Million Two Hundred Seventy Thousand (18,270,000) shares.
Ten Million One Hundred Fifty Thousand (10,150,000) shares shall be Common
Stock, $.001 par value per share, and Eight Million One Hundred Twenty Thousand
(8,120,000) shares shall be Series A Preferred Stock, $.001 par value per share.
B. Rights, Preferences and Restrictions of Preferred Stock. The rights,
-------------------------------------------------------
preferences, restrictions and other matters relating to the Series A Preferred
Stock are as follows:
1. Dividend Provisions.
-------------------
a. The holders of shares of Series A Preferred Stock shall be
entitled to receive dividends, out of any assets legally available therefor,
prior and in preference to any declaration or payment of any dividend (payable
other than in Common Stock or other securities and rights convertible into or
entitling the holder thereof to receive, directly or indirectly, additional
shares of Common Stock of this
corporation) on the Common Stock of this corporation, at the rate of $0.10 per
share (subject to appropriate adjustments for stock splits, stock dividends,
combinations or other recapitalizations) per annum payable when, as and if
declared by the Board of Directors. Such dividends shall not be cumulative.
b. In the event this corporation shall declare a distribution
payable in securities of other persons, evidences of indebtedness issued by this
corporation or other persons, assets (excluding cash dividends) or options or
rights to purchase any such securities or evidences of indebtedness, then, in
each case the holders of the Series A Preferred Stock shall be entitled to a
proportionate share of any such distribution as though the holders of the Series
A Preferred Stock were the holders of the number of shares of Common Stock of
this corporation into which their respective shares of Series A Preferred Stock
are convertible as of the record date fixed for the determination of the holders
of Common Stock of this corporation entitled to receive such distribution.
2. Liquidation Preference.
----------------------
a. In the event of any liquidation, dissolution or winding up
of this corporation, either voluntary or involuntary, the holders of Series A
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets of this corporation to the holders of Common
Stock by reason of their ownership thereof, an amount per share equal to the sum
of (i) $2.00 for each outstanding share of Series A Preferred Stock (subject to
appropriate adjustments for stock splits, stock dividends, combinations or other
recapitalizations and hereafter referred to as the "Original Series A Issue
Price") and (ii) an amount equal to declared but unpaid dividends on such share.
If upon the occurrence of such event, the assets and funds thus distributed
among the holders of the Series A Preferred Stock shall be insufficient to
permit the payment to such holders of the full aforesaid preferential amounts,
then, the entire assets and funds of the corporation legally available for
distribution shall be distributed ratably among the holders of the Series A
Preferred Stock in proportion to the amount of such stock owned by each such
holder.
b. After the distributions described in subsection (a) above
have been paid, the remaining assets of the corporation available for
distribution to shareholders shall be distributed among the holders of Series A
Preferred Stock and Common Stock pro rata based on the number of shares of
Common Stock held by each (assuming conversion of all such Series A Preferred
Stock).
c. A consolidation or merger of this corporation with or into
any other corporation or corporations, or a sale, conveyance or disposition of
all or substantially all of the assets of this corporation or the effectuation
by the corporation of a transaction or series of related transactions in which
more than 50% of the voting power of the corporation is disposed of (excluding
the issuance of shares of Series A Preferred Stock pursuant to the Series A
Preferred Stock Purchase Agreement), shall be deemed to be a liquidation,
dissolution or winding up within the meaning of this Section 2.
-2-
3. Redemption.
----------
a. On or at any time after November 30, 2001, this corporation
may at any time it may lawfully do so, at the option of the Board of Directors,
redeem in whole or in part the Series A Preferred Stock by paying in cash
therefor a sum per share equal to the Original Series A Issue Price together
with all dividends declared, but unpaid, with respect to such share to the
Redemption Date (such total amount is hereinafter referred to as the "Series A
Redemption Price").
b. Within thirty (30) days after the receipt by this
corporation of the written request of the holders of not less than sixty-six and
two-thirds percent (66%) of the then outstanding Series A Preferred Stock, this
corporation shall redeem the percentage of the Series A Preferred Stock
specified in such request (or, if less, the maximum amount it may lawfully
redeem) by paying in cash therefor a sum per share equal to the Series A
Redemption Price.
c. i) In the event of any redemption of only a part of the
then outstanding Series A Preferred Stock, this corporation shall effect such
redemption pro rata according to the number of shares held by each holder
thereof.
ii) At least 30 (or, in the case of a redemption pursuant
to subsection 3(b), 20) but no more than 60 days prior to the date fixed for any
redemption of Series A Preferred Stock (the "Redemption Date"), written notice
shall be mailed, first class postage prepaid, to each holder of record (at the
close of business on the business day next preceding the day on which notice is
given) of the Series A Preferred Stock to be redeemed, at the address last shown
on the records of this corporation for such holder or given by the holder to
this corporation for the purpose of notice or, if no such address appears or is
given, at the place where the principal executive office of this corporation is
located, notifying such holder of the redemption to be effected, specifying the
number of shares to be redeemed from such holder, the Redemption Date, the
Redemption Price, the place at which payment may be obtained and the date on
which such holder's Conversion Rights (as hereinafter defined) as to such shares
terminate and calling upon such holder to surrender to this corporation, in the
manner and at the place designated, his certificate or certificates representing
the shares to be redeemed (the "Redemption Notice"). Except as provided in
subsection 3(c)(iii), on or after the Redemption Date, each holder of Series A
Preferred Stock to be redeemed shall surrender to this corporation the
certificate or certificates representing such shares, in the manner and at the
place designated in the Redemption Notice, and thereupon the Redemption Price of
such shares shall be payable to the order of the person whose name appears on
such certificate or certificates as the owner thereof and each surrendered
certificate shall be cancelled. In the event less than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.
iii) From and after the Redemption Date, unless there shall
have been a default in payment of the Redemption Price, all rights of the
holders of such
-3-
shares as holders of Series A Preferred Stock (except the right to receive the
Redemption Price without interest upon surrender of their certificate or
certificates) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of this corporation or be deemed to be
outstanding for any purpose whatsoever. If the funds of the corporation legally
available for redemption of shares of Series A Preferred Stock on any Redemption
Date are insufficient to redeem the total number of shares of Series A Preferred
Stock to be redeemed on such date, those funds which are legally available will
be used to redeem the maximum possible number of such shares ratably among the
holders of such shares to be redeemed. The shares of Series A Preferred Stock
not redeemed shall remain outstanding and entitled to all the rights and
preferences provided herein. At any time thereafter when additional funds of
the Company are legally available for the redemption of shares of Series A
Preferred Stock, such funds will immediately be used to redeem the balance of
the shares which the Company has become obligated to redeem on any Redemption
Date but which it has not redeemed.
4. Conversion. The holders of the Series A Preferred Stock shall
----------
have conversion rights as follows (the "Conversion Rights"):
a. Right to Convert.
----------------
i) Subject to subsection (c), each share of Series A
Preferred Stock shall be convertible, at the option of the holder thereof, at
any time after the date of issuance of such share and prior to the close of
business on any Redemption Date as may have been fixed in any Redemption Notice
with respect to such share, at the office of this corporation or any transfer
agent for the Series A Preferred Stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the Original
Series A Issue Price plus all declared but unpaid dividends thereon for each
share of Series A Preferred Stock, by the Conversion Price at the time in effect
for such share. The initial Conversion Price per share for shares of Series A
Preferred Stock shall be the Original Series A Issue Price; provided, however,
that the Conversion Price for the Series A Preferred Stock shall be subject to
adjustment as set forth in subsection 4(c).
ii) In the event of a call for redemption of any shares of
Series A Preferred Stock pursuant to Section 3 hereof, the Conversion Rights
shall terminate as to the shares designated for redemption at the close of
business on the Redemption Date, unless default is made in payment of the
Redemption Price in which case the Conversion Rights shall terminate on the date
such Redemption Price is paid.
iii) Each share of Series A Preferred Stock shall
automatically be converted into shares of Common Stock at the Conversion Price
at the time in effect for such Series A Preferred Stock immediately upon the
earlier of (A) the consummation of the corporation's sale of its Common Stock in
a bona fide, firm commitment underwriting pursuant to a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), the public
offering price of which was not less than
-4-
$10.00 per share (subject to appropriate adjustments for stock splits, stock
dividends, combinations or other recapitalizations) and $7,500,000 in the
aggregate or (B) the date upon which the corporation obtains the consent of the
holders of a majority of the then outstanding shares of Series A Preferred
Stock.
b. Mechanics of Conversion. Before any holder of Series A
-----------------------
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of this corporation or of any transfer agent for the
Series A Preferred Stock, and shall give written notice by mail, postage
prepaid, to this corporation at its principal corporate office, of the election
to convert the same and shall state therein the name or names in which the
certificate or certificates for shares of Common Stock are to be issued. This
corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Series A Preferred Stock, or to the nominee or nominees
of such holder, a certificate or certificates for the number of shares of Common
Stock to which such holder shall be entitled as aforesaid. Such conversion shall
be deemed to have been made immediately prior to the close of business on the
date of such surrender of the shares of Series A Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of such date. If the
conversion is in connection with an underwritten offer of securities registered
pursuant to the Securities Act, the conversion may, at the option of any holder
tendering Series A Preferred Stock for conversion, be conditioned upon the
closing with the underwriter of the sale of securities pursuant to such
offering, in which event the person(s) entitled to receive the Common Stock
issuable upon such conversion of the Series A Preferred Stock, shall not be
deemed to have converted such Series A Preferred Stock until immediately prior
to the closing of such sale of securities.
c. Conversion Price Adjustments of Preferred Stock. The
-----------------------------------------------
Conversion Price of the Series A Preferred Stock shall be subject to adjustment
from time to time as follows:
i) A. If the corporation shall issue any Additional
Stock (as defined below) without consideration or for a consideration per share
less than the Conversion Price for the Series A Preferred Stock in effect
immediately prior to the issuance of such Additional Stock, the Conversion Price
for the Series A Preferred Stock in effect immediately prior to each such
issuance shall forthwith (except as otherwise provided in this clause (i)) be
adjusted to a price equal to the quotient obtained by dividing the total
computed under clause (x) below by the total computed under clause (y) below as
follows:
(x) an amount equal to the sum of
(1) the aggregate purchase price of the
shares of the Series A Preferred Stock sold pursuant to the
agreements
-5-
pursuant to which shares of Series A Preferred Stock are first issued
(the "Stock Purchase Agreement"), plus
(2) the aggregate consideration, if any,
received by the corporation for all Additional Stock issued on or
after the date of the Stock Purchase Agreement (the "Purchase Date")
other than shares of Common Stock issued or issuable with respect to
the Series A Preferred Stock issued pursuant to the Stock Purchase
Agreement;
(y) an amount equal to the sum of
(1) the aggregate purchase price of the
shares of Series A Preferred Stock sold pursuant to the Stock Purchase
Agreement divided by the Conversion Price for such shares in effect at
the Purchase Date (or such higher or lower Conversion Price for such
series as results from the application of subsections 4(c)(iii) and
(iv) and assuming that this Certificate was in effect as of the
Purchase Date) plus
(2) the number of shares of Additional Stock
issued since the Purchase Date (increased or decreased to the extent
that the number of such shares of Additional Stock shall have been
increased or decreased as the result of the application of subsections
4(c)(iii) and (iv)).
B. No adjustment of the Conversion Price for the
Series A Preferred Stock shall be made in an amount less than one cent per
share, provided that any adjustments which are not required to be made by reason
of this sentence shall be carried forward and shall be either taken into account
in any subsequent adjustment made prior to 3 years from the date of the event
giving rise to the adjustment being carried forward, or shall be made at the end
of 3 years from the date of the event giving rise to the adjustment being
carried forward. Except to the limited extent provided for in subsections (E)(3)
and (E)(4), no adjustment of such Conversion Price pursuant to this subsection
4(c)(i) shall have the effect of increasing the Conversion Price above the
Conversion Price in effect immediately prior to such adjustment.
C. In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, commissions or other expenses
allowed, paid or incurred by this corporation for any underwriting or otherwise
in connection with the issuance and sale thereof.
D. In the case of the issuance of the Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as determined by the
Board of Directors irrespective of any accounting treatment.
-6-
E. In the case of the issuance (whether before, on or
after the Purchase Date) of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities, the following provisions shall apply for all
purposes of this subsection 4(c)(i) and subsection 4(c)(ii):
1. The aggregate maximum number of shares of
Common Stock deliverable upon exercise of such options to
purchase or rights to subscribe for Common Stock shall be deemed
to have been issued at the time such options or rights were
issued and for a consideration equal to the consideration
(determined in the manner provided in subsections 4(c)(i)(C) and
(c)(i)(D)), if any, received by the corporation upon the issuance
of such options or rights plus the minimum exercise price
provided in such options or rights (without taking into account
potential antidilution adjustments) for the Common Stock covered
thereby.
2. The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange for
any such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent conversion
or exchange thereof shall be deemed to have been issued at the
time such securities were issued or such options or rights were
issued and for a consideration equal to the consideration, if
any, received by the corporation for any such securities and
related options or rights (excluding any cash received on account
of accrued interest or accrued dividends), plus the minimum
additional consideration, if any, to be received by the
corporation (without taking into account potential antidilution
adjustments) upon the conversion or exchange of such securities
or the exercise of any related options or rights (the
consideration in each case to be determined in the manner
provided in subsections 4(c)(i)(C) and (c)(i)(D)).
3. In the event of any change in the number of
shares of Common Stock deliverable or in the consideration
payable to this corporation upon exercise of such options or
rights or upon conversion of or in exchange for such convertible
or exchangeable securities, including, but not limited to, a
change resulting from the antidilution provisions thereof, the
Conversion Price of the Series A Preferred Stock, to the extent
in any way affected by or computed using such options, rights or
securities, shall be recomputed to reflect such change, but no
further adjustment shall be made for the actual issuance of
Common Stock or any payment of such consideration upon the
exercise of any such options or rights or the conversion or
exchange of such securities.
-7-
4. Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange
or the expiration of any options or rights related to such
convertible or exchangeable securities, the Conversion Price of
the Series A Preferred Stock, to the extent in any way affected
by or computed using such options, rights or securities or
options or rights related to such securities, shall be recomputed
to reflect the issuance of only the number of shares of Common
Stock (and convertible or exchangeable securities which remain in
effect) actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities or
upon the exercise of the options or rights related to such
securities.
5. The number of shares of Common Stock deemed
issued and the consideration deemed paid therefor pursuant to
subsections 4(c)(i)(E)(1) and (2) shall be appropriately adjusted
to reflect any change, termination or expiration of the type
described in either subsection 4(c)(i)(E)(3) or (4).
ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 4(c)(i)(E))
by this corporation before, on or after the Purchase Date other than
A. shares of Common Stock issued pursuant to a
transaction described in subsection 4(c)(iii) hereof,
B. shares of Common Stock issued upon conversion of
the Series A Preferred Stock,
C. shares of Common Stock issuable or issued to
employees, consultants, or directors of this corporation directly
or pursuant to a stock option plan or agreement or restricted
stock plan or agreement approved by the Board of Directors of
this corporation at any time when the total number of shares of
Common Stock so issuable or issued (and not repurchased at cost
by the corporation in connection with the termination of
employment or service) does not exceed 2,030,000 (subject to
appropriate adjustments for stock splits, stock dividends,
combinations or other recapitalizations) since the date of
incorporation, or
D. shares of Common Stock issued or issuable (I) in a
public offering before or in connection with which all
outstanding shares of Series A Preferred Stock will be converted
to Common Stock or (II) upon exercise of warrants or rights
granted to underwriters in connection with such a public
offering.
-8-
iii) In the event the corporation should at any time or from
time to time after the Purchase Date fix a record date for the effectuation of a
split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of the Series A Preferred Stock then in effect shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion of
each share of such series shall be increased in proportion to such increase of
the aggregate of shares of Common Stock outstanding and those issuable with
respect to such Common Stock Equivalents.
iv) If the number of shares of Common Stock outstanding at
any time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for the Series A Preferred Stock then in
effect shall be appropriately increased so that the number of shares of Common
Stock issuable on conversion of each share of such series shall be decreased in
proportion to such decrease in outstanding shares.
d. Other Distributions. In the event this corporation shall
-------------------
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 4(c)(iii), then,
in each such case for the purpose of this subsection 4(d), the holders of the
Series A Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the corporation into which their shares of Series A Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the corporation entitled to receive such distribution.
e. Recapitalizations. If at any time or from time to time
-----------------
there shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
this Section 4) provision shall be made so that the holders of the Series A
Preferred Stock shall thereafter be entitled to receive upon conversion of the
Series A Preferred Stock the number of shares of stock or other securities or
property of the Company or otherwise, to which a holder of Common Stock
deliverable upon conversion would have been entitled on such recapitalization.
In any such case, appropriate adjustment shall be made in the application of the
provisions of this Section 4 with respect to the rights of the holders of the
Series A Preferred Stock after the recapitalization to the end that the
provisions of this Section 4 (including adjustment of the Conversion Price then
in effect and the
-9-
number of shares purchasable upon conversion of the Series A Preferred Stock)
shall be applicable after that event as nearly equivalent as may be practicable.
f. No Impairment. This corporation will not, by amendment of
-------------
its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by this corporation, but will at all times in good faith assist in the
carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred Stock against
impairment.
g. No Fractional Shares and Certificate as to Adjustments.
------------------------------------------------------
i) No fractional shares shall be issued upon conversion of
the Series A Preferred Stock, and the number of shares of Common Stock to be
issued shall be rounded up to the nearest whole share. Whether or not fractional
shares are issuable upon such conversion shall be determined on the basis of the
total number of shares of Series A Preferred Stock the holder is at the time
converting into Common Stock and the number of shares of Common Stock issuable
upon such aggregate conversion.
ii) Upon the occurrence of each adjustment or readjustment
of the Conversion Price of Series A Preferred Stock pursuant to this Section 4,
this corporation, at its expense, shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series A Preferred Stock a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. This corporation shall, upon the written request at any
time of any holder of Series A Preferred Stock, furnish or cause to be furnished
to such holder a like certificate setting forth (A) such adjustment and
readjustment, (B) the Conversion Price at the time in effect, and (C) the number
of shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of a share of Series A Preferred
Stock.
h. Notices of Record Date. In the event of any taking by this
----------------------
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, this
corporation shall mail to each holder of Series A Preferred Stock, at least 20
days prior to the date specified therein, a notice specifying the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right, and the amount and character of such dividend, distribution or right.
i. Reservation of Stock Issuable Upon Conversion. This
---------------------------------------------
corporation shall at all times reserve and keep available out of its authorized
but
-10-
unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series A Preferred Stock; and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of the
Series A Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Preferred Stock, this corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes.
j. Notices. Any notice required by the provisions of this
-------
Section 4 to be given to the holders of shares of Series A Preferred Stock shall
be deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of this
corporation.
5. Voting Rights.
-------------
a. General Voting Rights. The holder of each share of Series A
---------------------
Preferred Stock shall have the right to one vote for each share of Common Stock
into which such Series A Preferred Stock could then be converted (with any
fractional share determined on an aggregate conversion basis being rounded to
the nearest whole share), and with respect to such vote, such holder shall have
full voting rights and powers equal to the voting rights and powers of the
holders of Common Stock, and shall be entitled, notwithstanding any provision
hereof, to notice of any stockholders' meeting in accordance with the by-laws of
this corporation, and shall be entitled to vote, together as a single class with
holders of Common Stock, with respect to any question upon which holders of
Common Stock have the right to vote; except for the election of directors.
b. Election of Directors. The authorized number of directors
---------------------
of this Corporation shall be Five (5). Notwithstanding 5(a) above, the holders
of Series A Preferred Stock, voting as a separate class, shall be entitled to
elect four (4) directors of the corporation; and the holders of the Series A
Preferred Stock and Common Stock, voting together on an as converted basis,
shall be entitled to elect one (1) director of the corporation. At any meeting
held for the purpose of electing directors, the presence in person or by proxy
of the holders of a majority of the Series A Preferred Stock then outstanding
shall constitute a quorum of the Series A Preferred Stock for the election of
directors to be elected solely by the holders of Series A Preferred Stock. At
any meeting held for the purpose of electing directors, the presence in person
or by proxy of the holders of a majority of the Series A Preferred Stock and
Common Stock then outstanding, on an as converted basis, shall constitute a
quorum of the Series A Preferred Stock and Common Stock for the election of
directors to be elected solely by the holders of the Series A Preferred Stock
and Common Stock, voting together on an as converted basis. A vacancy in any
directorship elected by the holders of Series A Preferred Stock shall be filled
only by vote of the holders of Series A Preferred Stock; and a vacancy in any
directorship elected by the holders of Series A Preferred Stock and
-11-
Common Stock voting together shall be filled only by the vote of the holders of
Series A Preferred Stock and Common Stock voting together as provided above.
6. Protective Provisions. So long as shares of Series A Preferred
---------------------
Stock are outstanding, this corporation shall not without first obtaining the
approval (by vote or written consent, as provided by law) of the holders of a
majority of the then outstanding shares of Series A Preferred Stock:
a. Sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate with
any other corporation (other than a wholly owned subsidiary corporation) or
effect any transaction or series of related transactions in which more than 50%
of the voting power of the corporation is disposed of;
b. alter or change the rights, preferences or privileges of the
shares of Series A Preferred Stock so as to affect adversely the shares;
c. increase the authorized number of shares of Series A
Preferred Stock or Common Stock;
d. create any new class or series of stock or any other
securities convertible into equity securities of the corporation (i) having a
preference over, or being on a parity with, the Series A Preferred Stock with
respect to voting, dividends or upon liquidation, or (ii) having rights similar
to any of the rights of the Series A Preferred Stock under this Section 6; or
e. change authorized number of directors from five (5).
7. Status of Converted or Redeemed Stock. In the event any shares
-------------------------------------
of Series A Preferred Stock shall be redeemed or converted pursuant to Section 3
or Section 4 hereof, the shares so converted or redeemed shall be cancelled and
shall not be issuable by the corporation. The Certificate of Incorporation of
this corporation shall be appropriately amended to effect the corresponding
reduction in the corporation's authorized capital stock.
C. Common Stock.
------------
1. Dividend Rights. Subject to the prior rights of holders
---------------
of all classes of stock at the time outstanding having prior rights as to
dividends, the holders of the Common Stock shall be entitled to receive, when
and as declared by the Board of Directors, out of any assets of the corporation
legally available therefor, such dividends as may be declared from time to time
by the Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or
------------------
winding up of the corporation, the assets of the corporation shall be
distributed as provided in Section 2 of Division (B) of this Article IV hereof.
-12-
3. Redemption. The Common Stock is not redeemable.
----------
4. Voting Rights. The holder of each share of Common Stock
-------------
shall have the right to one vote, and shall be entitled to notice of any
shareholders' meeting in accordance with the By-laws of this corporation, and
shall be entitled to vote upon such matters and in such manner as may be
provided by law.
ARTICLE V
A. Exculpation. A director of the Corporation shall not be personally
-----------
liable to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived any
improper personal benefit. If the Delaware General Corporation Law is hereafter
amended to further reduce or to authorize, with the approval of the
Corporation's stockholders, further reductions in the liability of the
Corporation's directors for breach of fiduciary duty, then a director of the
Corporation shall not be liable for any such breach to the fullest extent
permitted by the Delaware General Corporation Law as so amended.
B. Indemnification. To the extent permitted by applicable law, this
---------------
Corporation is also authorized to provide indemnification of (and advancement of
expenses to) such agents (and any other persons to which Delaware law permits
this Corporation to provide indemnification) through bylaw provisions,
agreements with such agents or other persons, vote of stockholders or
disinterested directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware General
Corporation Law, subject only to limits created by applicable Delaware law
(statutory or non-statutory), with respect to actions for breach of duty to the
Corporation, its stockholders, and others.
C. Effect of Repeal or Modification. Any repeal or modification of any
--------------------------------
of the foregoing provisions of this Article V shall not adversely affect any
right or protection of a director, officer, agent or other person existing at
the time of, or increase the liability of any director of the Corporation with
respect to any acts or omissions of such director occurring prior to, such
repeal or modification.
ARTICLE VI
The name and mailing address of the incorporator is βββββ� βββββββ�, ββββ
ββββ ββββ ββββ, βββββ� ββββ, ββ βββββ�.
-13-
ARTICLE VII
Except as otherwise provided in this Certificate of Incorporation, in
furtherance and not in limitation of the powers conferred by statute, the Board
of Directors of this corporation is expressly authorized to make, alter, amend,
rescind or repeal the bylaws of the corporation.
ARTICLE VIII
Elections of directors need not be by written ballot except and to the
extent provided in the bylaws of the corporation.
ARTICLE IX
The corporation reserves the right to repeal, alter, amend or rescind any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred on stockholders herein
are granted subject to this reservation.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-14-
IN WITNESS WHEREOF, the undersigned has signed this Certificate of
Incorporation as of this 22nd day of November, 1994.
____________________________________________
βββββ� βββββββ�, Incorporator
[SIGNATURE PAGE TO CERTIFICATE OF INCORPORATION]
EXHIBIT B
FORM OF PROMISSORY NOTE
-----------------------
B-1
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THESE SECURITIES HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO
DISTRIBUTION OR RESALE, AND THEREFORE THEY MAY NOT BE
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR ASSIGNED
UNLESS REGISTERED UNDER THE APPLICABLE PROVISIONS OF
THE SECURITIES ACT OF 1933, OR UNLESS PURSUANT TO
RULE 144 UNDER SUCH ACT OR UNLESS THE COMPANY HAS
RECEIVED AN OPINION FROM LEGAL COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER SUCH ACT
NON-NEGOTIABLE PROMISSORY NOTE
------------------------------
$885,224 December 10, 1994
Palo Alto, California
βββββββ� βββββββ� ββββββββ & βββββ� VII ("Obligor"), for value received,
hereby promises to pay to the order of PhonePrint, Inc., a Delaware corporation
("Payee"), in lawful money of the United States at βββ� ββββ βββββ�, βββββββββ�, ββ
βββββ� the principal sum of EIGHT HUNDRED EIGHTY FIVE THOUSAND TWO HUNDRED TWENTY
FOUR DOLLARS ($885,224), on December 10, 1997.
Unpaid principal of this Note shall bear interest, from the date hereof
(the "Closing Date") until such principal is due and payable, at a rate per
annum equal at all times to the greater of 6.34% per annum or the minimum rate
required under the Internal Revenue Code on the date of execution of this Note
to avoid imputed interest (the "Rate"), compounded annually. In the event that
any amount of principal or inter est, or any other amount payable hereunder, is
not paid in full when due (whether at stated maturity, by acceleration or
otherwise), Obligor shall pay interest on such unpaid principal amount, from the
date such amount becomes due until the date such amount is paid in full, payable
on demand, at a rate per annum equal at all times to the Rate plus 1%. All
computations of interest shall be made on the basis of a year of 365 or 366
days, as the case may be, for the actual number of days (including the first day
but excluding the last day) occurring in the period for which such interest is
payable. All payments with respect to this Note shall be credited first to the
payment of accrued but unpaid interest and then to the repayment of principal.
Any payment shall be deemed made upon receipt by Payee.
Anything herein to the contrary notwithstanding, if during any period for
which interest is computed hereunder, the amount of interest computed on the
basis provided for in this Note, together with all fees, charges and other
payments which are treated as
interest under applicable law, as provided for herein or in any other document
executed in connection herewith, would exceed the amount of such interest
computed on the basis of the Highest Lawful Rate, Obligor shall not be obligated
to pay, and Payee shall not be entitled to charge, collect, receive, reserve or
take, interest in excess of the Highest Lawful Rate, and during any such period
the interest payable hereunder shall be computed on the basis of the Highest
Lawful Rate. As used herein, "Highest Lawful Rate" means the maximum non-
usurious rate of interest, as in effect from time to time, which may be charged,
contracted for, reserved, received or collected by Payee in connection with this
Note under applicable law.
Obligor may, at any time, prepay the outstanding amount hereof in whole or
in part, without premium or penalty. In addition, Obligor shall be required to
prepay, without premium or penalty, the principal amount of this Note at the
same time and in the same proration as Payee's payments prior to maturity
(whether by prepayment, acceleration or otherwise) under that certain promissory
note in the principal amount of Three Million Dollars ($3,000,000) in favor of
ESL Incorporated ("ESL Note") become due. Payee shall deliver written notice to
Obligor at least fifteen (15) days prior to any date that some or all of the ESL
Note becomes due, which notice shall specify the amount of the ESL Note that is
payable and the due date and the portion of this Note then due and payable. If
Payee fails to deliver such written notice to Obligor at least fifteen (15) days
prior to any ESL Note due date, then the due date for Obligor's payment as
required by this paragraph shall be extended to the fifteenth (15th) day after
Obligor's receipt of such written notice. Together with any prepayment
hereunder, Obligor shall pay accrued interest to the date of such prepayment on
the principal amount prepaid. Notwithstanding the terms of the ESL Note or the
Investor Notes (described below), in no event shall Obligor's obligations exceed
or go beyond Obligor's obligation to pay the principal and interest described in
this Note.
This Note is one of a series of promissory notes in favor of Payee dated
the date hereof in the aggregate principal amount of Three Million Dollars
($3,000,000) (such promissory notes to be collectively referred to as the
"Investor Notes").
This Note may be modified, amended or terminated either: (i) by a writing
signed by Obligor and Payee; or (ii) in connection with a modification,
amendment or termination of all the Investor Notes, by a writing signed by Payee
and the obligors of Investor Notes representing a majority of the aggregate
principal amount then outstanding under the Investor Notes ("Majority in
Interest"). Any action relating to the Investor Notes approved by a Majority in
Interest will be binding upon all of the obligors of the Investor Notes
irrespective of whether any obligor individually acted to approve or disapprove
such action; provided, however, that neither the principal hereof nor any
interest rate hereunder may be increased or the due dates hereunder changed to
any earlier dates without the written consent of Obligor.
The execution, delivery and performance by Obligor of this Note have been
duly authorized by all necessary corporate or partnership action of Obligor, no
consent or approval of any person or entity is required in connection herewith,
and this Note is the
-2-
legal, valid and binding obligation of Obligor, enforceable against Obligor in
accordance with its terms.
So long as any amount of principal or interest hereon remains unpaid,
Obligor will not merge with or into any entity or sell, transfer, lease or
otherwise dispose of (whether in one transaction or in a series of transactions)
all or substantially all of its assets, unless the entity that survives any
merger or acquires such assets assumes in writing the obligations of Obligor
hereunder.
Any of the following events which shall occur shall constitute an "Event of
Default":
1. Obligor shall fail to pay when due any amount of principal or
interest hereunder or other amount payable hereunder, and such failure shall
continue for 5 business days.
2. Any representation or warranty by Obligor under or in connection
with this Note shall prove to have been incorrect in any material respect when
made or deemed made.
3. Obligor shall fail to perform or observe any term, covenant or
agreement contained in the immediately preceding paragraph above, and such
failure shall continue for 15 business days.
4. Obligor shall admit in writing its inability to, or shall fail
generally or be generally unable to, pay its debts (including its payrolls) as
such debts become due, or shall make a general assignment for the benefit of
creditors; or Obligor shall file a voluntary petition in bankruptcy or a
petition or answer seeking reorganization, to effect a plan or other arrangement
with creditors or any other relief under the Bankruptcy Reform Act of 1978, as
amended or recodified from time to time (the "Bankruptcy Code") or under any
other state or federal law relating to bankruptcy or reorganization granting
relief to debtors, whether now or hereafter in effect, or shall file an answer
admitting the jurisdiction of the court and the material allegations of any
involuntary petition filed against Obligor pursuant to the Bankruptcy Code or
any such other state or federal law; or Obligor shall be adjudicated a bankrupt,
or shall make an assignment for the benefit of creditors, or shall apply for or
consent to the appointment of any custodian, receiver or trustee for all or any
substantial part of Obligor's property, or shall take any action to authorize
any of the actions or events set forth above in this paragraph; or an
involuntary petition seeking any of the relief specified in this paragraph shall
be filed against Obligor and shall not be dismissed within 30 days; or any order
for relief shall be entered against Obligor in any involuntary proceeding under
the Bankruptcy Code or any such other state or federal law referred to in this
paragraph 4.
5. Obligor shall liquidate, wind up or dissolve (or suffer any
liquidation, wind-up or dissolution), except in connection with a transaction
expressly permitted by this Note.
-3-
If any Event of Default shall occur and be continuing, Payee may, by notice
to Obligor, declare the entire unpaid principal amount of this Note, all
interest accrued and unpaid hereon and all other amounts payable hereunder to be
forthwith due and payable, whereupon all unpaid principal under this Note, all
such accrued interest and all such other amounts shall become and be forthwith
due and payable, without presentment, demand, protest or further notice of any
kind, all of which are hereby expressly waived by Obligor.
Upon payment in full of all principal and interest payable hereunder, this
Note shall be surrendered to Obligor for cancellation.
This Note shall be binding upon, inure to the benefit of and be enforceable
by Obligor, Payee and their respective successors and assigns; provided that
without the written consent of a Majority in Interest of the obligors of the
Investor Notes, this Note may not be transferred or assigned by the Payee,
except for an assignment for security purposes to ESL Incorporated.
No delay on the part of Payee in exercising any right hereunder shall
operate as a waiver of such right under this Note.
This Note is being delivered in and shall be construed in accordance with
the laws of the State of California.
All notices and other communications provided for hereunder shall, unless
otherwise stated herein, be in writing (including by facsimile) and mailed, sent
or delivered to the respective parties hereto at or to the following addresses
(or at or to such other address or facsimile number as shall be designated by
any party in a written notice to the other party hereto):
If to Payee: PhonePrint, Inc.
βββ� ββββ βββββ�
βββββββββ�, ββ βββββ�
Attn: βββββ� βββββββ�
If to Obligor: βββββββ� βββββββ� ββββββββ & βββββ� VII
ββββ ββββ ββββ ββββ
βββββ� ββββ, ββ βββββ�
Attn: βββββ� βββββββ�
All such notices and communications shall be effective (i) if delivered by hand,
upon delivery; (ii) if sent by mail, upon the earlier of the date of receipt or
five business days after deposit in the mail, first class, postage prepaid; and
(iii) if sent by facsimile, when sent.
Obligor agrees to pay on demand all costs and expenses of Payee in
connection with the enforcement and collection of this Note, including
reasonable attorneys' fees.
-4-
IN WITNESS WHEREOF, Obligor has duly executed this Note, as of the date
first above written.
βββββββ� βββββββ� ββββββββ & βββββ� VII
By: _______________________________________________________
βββββ� βββββββ�
-5-
EXHIBIT C
INVESTORS' RIGHTS AGREEMENT
---------------------------
C-1
PHONEPRINT, INC.
INVESTORS' RIGHTS AGREEMENT
_____________________
December 10, 1994
TABLE OF CONTENTS
-----------------
Page
----
1. Registration Rights.................................................... 1
1.1 Definitions...................................................... 1
1.2 Request for Registration......................................... 2
1.3 Company Registration............................................. 3
1.4 Obligations of the Company....................................... 3
1.5 Furnish Information.............................................. 5
1.6 Expenses of Demand Registration.................................. 5
1.7 Expenses of Company Registration................................. 5
1.8 Underwriting Requirements........................................ 6
1.9 Delay of Registration............................................ 6
1.10 Indemnification.................................................. 6
1.11 Reports Under Securities Exchange Act of 1934.................... 8
1.12 Form S-3 Registration............................................ 9
1.13 Assignment of Registration Rights................................ 10
1.14 Limitations on Subsequent Registration Rights.................... 11
1.15 "Market Stand-Off" Agreement..................................... 11
1.16 Termination of Registration Rights............................... 11
2. Covenants of the Company............................................... 12
2.1 Delivery of Financial Statements.................................. 12
2.2 Inspection........................................................ 13
2.3 Termination of Information and Inspection Covenants............... 13
2.4 Right of First Offer.............................................. 13
2.5 Management Stock.................................................. 14
3. Miscellaneous.......................................................... 15
3.1 Successors and Assigns........................................... 15
3.2 Governing Law.................................................... 15
3.3 Counterparts..................................................... 15
3.4 Titles and Subtitles............................................. 15
3.5 Notices.......................................................... 15
3.6 Expenses......................................................... 15
3.7 Amendments and Waivers........................................... 16
3.8 Severability..................................................... 16
3.9 Aggregation of Stock............................................. 16
3.10 Entire Agreement; Amendment; Waiver.............................. 16
(i)
INVESTORS' RIGHTS AGREEMENT
---------------------------
THIS INVESTORS' RIGHTS AGREEMENT is made as of the 10th day of December,
1994, by and among PhonePrint, Inc. a Delaware corporation (the "Company") and
the investors listed on the signature page, each of which is herein referred to
as an "Investor."
RECITALS
--------
WHEREAS, the Company and the Investors are parties to the Series A
Preferred Stock Purchase Agreement of even date herewith (the "Series A
Agreement");
WHEREAS, in order to induce the Company to enter into the Series A
Agreement and to induce the Investors to invest funds in the Company pursuant to
the Series A Agreement, the Investors and the Company hereby agree that this
Agreement shall govern the rights of the Investor to cause the Company to
register shares of Common Stock issuable to the Investors and certain other
matters as set forth herein;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and agrees as follows:
-------------------
1.1 Definitions. For purposes of this Section 1:
-----------
(a) The term "Act" means the Securities Act of 1933, as amended.
(b) The term "register", "registered," and "registration" refer
to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Act, and the declaration or ordering of
effectiveness of such registration statement or document;
(c) The term "Registrable Securities" means (1) the Common Stock
issuable or issued upon conversion of the Series A Preferred Stock, and (2) any
Common Stock of the Company issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a dividend
or other distribution with respect to, or in exchange for or in replacement of,
such Series A Preferred Stock or Common Stock, excluding in all cases, however,
any Registrable Securities sold by a person in a transaction in which his rights
under this Section 1 are not assigned;
(d) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.
The term "Holder" means any person owning or having the right to
acquire Registrable Securities or any assignee thereof in accordance with
Section 1.13 hereof; and
(e) The term "Form S-3" means such form under the Act as in effect on
the date hereof or any registration form under the Act subsequently adopted by
the Securities and Exchange Commission ("SEC") which permits inclusion or
incorporation of substantial information by reference to other documents filed
by the Company with the SEC.
1.2 Request for Registration.
------------------------
(a) If the Company shall receive at any time after the earlier of (i)
the fourth anniversary date of this Agreement, or (ii) three (3) months after
the effective date of the first registration statement for a public offering of
securities of the Company (other than a registration statement relating either
to the sale of securities to employees of the Company pursuant to a stock
option, stock purchase or similar plan or a SEC Rule 145 transaction), a written
request from the Holders of at least thirty-three percent (33%) of the
Registrable Securities then outstanding that the Company file a registration
statement under the Act covering the registration of at least twenty percent
(20%) of the Registrable Securities then outstanding (or a lesser percent if the
anticipated aggregate offering price, net of underwriting discounts and
commissions, would exceed $1,000,000), then the Company shall, within ten (10)
days of the receipt thereof, give written notice of such request to all Holders
and shall, subject to the limitations of subsection 1.2(b), effect as soon as
practicable, and in any event within 60 days of the receipt of such request, the
registration under the Act of all Registrable Securities which the Holders
request to be registered within twenty (20) days of the mailing of such notice
by the Company in accordance with paragraph 3.5.
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
by their request by means of an underwriting, they shall so advise the Company
as a part of their request made pursuant to this Section 1.2 and the Company
shall include such information in the written notice referred to in subsection
1.2(a). The underwriter will be selected by a majority in interest of the
Initiating Holders and shall be reasonably acceptable to the Company. In such
event, the right of any Holder to include his Registrable Securities in such
registration shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting (unless otherwise mutually agreed by a majority in interest of the
Initiating Holders and such Holder) to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Company as provided in subsection 1.4(e)) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by a majority in interest of the Initiating
Holders. Notwithstanding any other provision of this Section 1.2, if the
underwriter advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
-2-
Initiating Holders shall so advise all Holders of Registrable Securities which
would otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities of
the Company owned by each Holder; provided, however, that the number of shares
of Registrable Securities to be included in such underwriting shall not be
reduced unless all other securities are first entirely excluded from the
underwriting.
(c) The Company is obligated to effect only two (2) such registrations
pursuant to this Section 1.2.
(d) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 1.2, a
certificate signed by the President of the Company stating that in the good
faith judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than 60 days after receipt of the request of the
Initiating Holders; provided, however, that the Company may not utilize this
right more than once in any twelve month period.
1.3 Company Registration. If (but without any obligation to do so) the
--------------------
Company proposes to register (including for this purpose a registration effected
by the Company for shareholders other than the Holders) any of its stock or
other securities under the Act in connection with the public offering of such
securities solely for cash (other than a registration relating solely to the
sale of securities to participants in a Company stock plan, or a registration on
any form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities or a registration on Form S-4), the Company shall, at
such time, promptly give each Holder written notice of such registration. Upon
the written request of each Holder given within twenty (20) days after mailing
of such notice by the Company in accordance with Section 3.5, the Company shall,
subject to the provisions of Section 1.8, cause to be registered under the Act
all of the Registrable Securities that each such Holder has requested to be
registered.
1.4 Obligations of the Company. Whenever required under this Section 1
--------------------------
to effect the registration of any Registrable Securities, the Company shall, as
expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to one hundred twenty (120) days.
-3-
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act, and such other documents as they may reasonably request in order to
facilitate the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing.
(g) Use its best efforts to furnish, at the request of any Holder
requesting registration of Registrable Securities pursuant to this Section 1, on
the date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Section 1, if such
securities are being sold through underwriters, or, if such securities are not
being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and to
the Holders requesting registration of Registrable Securities and (ii) a letter
dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering, addressed
to the underwriters, if any, and to the Holders requesting registration of
Registrable Securities.
-4-
1.5 Furnish Information.
-------------------
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.12 if, due to the
operation of subsection 1.5(a), the number of shares or the anticipated
aggregate offering price of the Registrable Securities to be included in the
registration does not equal or exceed the number of shares or the anticipated
aggregate offering price required to originally trigger the Company's obligation
to initiate such registration as specified in subsection 1.2(a) or subsection
1.12(b)(2), whichever is applicable.
1.6 Expenses of Demand Registration. All expenses other than
-------------------------------
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders shall
be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all Participating Holders shall bear such expenses on
a pro rata basis), unless the Holders of a majority of the Registrable
Securities agree to forfeit their right to one demand registration pursuant to
Section 1.2; provided further, however, that if at the time of such withdrawal,
the Holders have learned of a material adverse change in the condition,
business, or prospects of the Company from that known to the Holders at the time
of their request and have withdrawn the request with reasonable promptness
following disclosure by the Company of such material adverse change, then the
Holders shall not be required to pay any of such expenses and shall retain their
rights pursuant to Section 1.2.
1.7 Expenses of Company Registration. The Company shall bear and pay
--------------------------------
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.13), including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto and the fees and disbursements of one counsel for the selling Holders
selected by them, but excluding underwriting discounts and commissions relating
to Registrable Securities.
-5-
1.8 Underwriting Requirements. In connection with any offering involving
-------------------------
an underwriting of shares of the Company's capital stock, the Company shall not
be required under Section 1.3 to include any of the Holders' securities in such
underwriting unless they accept the terms of the underwriting as agreed upon
between the Company and the underwriters selected by it (or by other persons
entitled to select the underwriters), and then only in such quantity as the
underwriters determine in their sole discretion will not jeopardize the success
of the offering by the Company. If the total amount of securities, including
Registrable Securities, requested by shareholders to be included in such
offering exceeds the amount of securities sold other than by the Company that
the underwriters determine in their sole discretion is compatible with the
success of the offering, then the Company shall be required to include in the
offering only that number of such securities, including Registrable Securities,
which the underwriters determine in their sole discretion will not jeopardize
the success of the offering (the securities so included to be apportioned pro
rata among the selling shareholders according to the total amount of securities
entitled to be included therein owned by each selling Shareholder or in such
other proportions as shall mutually be agreed to by such selling shareholders)
but in no event shall (i) the amount of securities of the selling Holders
included in the offering be reduced below thirty percent (30%) of the total
amount of securities included in such offering, unless such offering is the
initial public offering of the Company's securities in which case the selling
shareholders may be excluded if the underwriters make the determination
described above and no other shareholder's securities are included or (ii)
notwithstanding (i) above, any shares being sold by a shareholder exercising a
demand registration right similar to that granted in Section 1.2 be excluded
from such offering. For purposes of the preceding parenthetical concerning
apportionment, for any selling shareholder which is a holder of Registrable
Securities and which is a partnership or corporation, the partners, retired
partners and shareholders of such holder, or the estates and family members of
any such partners and retired partners and any trusts for the benefit of any of
the foregoing persons shall be deemed to be a single "selling shareholder", and
any pro-rata reduction with respect to such "selling shareholder" shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling shareholder", as defined in
this sentence.
1.9 Delay of Registration. No Holder shall have any right to obtain or
---------------------
seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 1.
1.10 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the Securities Exchange Act of 1934, as amended (the
"1934 Act"), against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject
-6-
under the Act, or the 1934 Act, insofar as such losses, claims, damages, or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation"): (i) any untrue statement or alleged untrue statement of a material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus contained therein or any amendments or
supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements
therein not misleading, or (iii) any violation or alleged violation by the
Company of the Act, the 1934 Act, or any rule or regulation promulgated under
the Act, or the 1934 Act; and the Company will pay to each such Holder,
underwriter or controlling person, as incurred, any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 1.10(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability, or action to the extent that
it arises out of or is based upon a Violation which occurs in reliance upon and
in conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers who
has signed the registration statement, each person, if any, who controls the
Company within the meaning of the Act, any underwriter, any other Holder selling
securities in such registration statement and any controlling person of any such
underwriter or other Holder, against any losses, claims, damages, or liabilities
(joint or several) to which any of the foregoing persons may become subject,
under the Act, or the 1934 Act insofar as such losses, claims, damages, or
liabilities (or actions in respect thereto) arise out of or are based upon any
Violation, in each case to the extent (and only to the extent) that such
Violation occurs in reliance upon and in conformity with written information
furnished by such Holder expressly for use in connection with such registration;
and each such Holder will pay, as incurred, any legal or other expenses
reasonably incurred by any person intended to be indemnified pursuant to this
subsection 1.10(b), in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection 1.10(b) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, that, in no event shall any indemnity
under this subsection 1.10(b) exceed the gross proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
1.10 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 1.10, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the
-7-
right to participate in, and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume the
defense thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party (together with all other indemnified parties
which may be represented without conflict by one counsel) shall have the right
to retain one separate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action, if prejudicial to its ability to defend such action, shall
relieve such indemnifying party of any liability to the indemnified party under
this Section 1.10, but the omission so to deliver written notice to the
indemnifying party will not relieve it of any liability that it may have to any
indemnified party otherwise than under this Section 1.10.
(d) If the indemnification provided for in this Section 1.10 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
(f) The obligations of the Company and Holders under this Section 1.10
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.11 Reports Under Securities Exchange Act of 1934. With a view to
---------------------------------------------
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
-8-
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144 (at any time
after ninety (90) days after the effective date of the first registration
statement filed by the Company), the Act and the 1934 Act (at any time after it
has become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company, and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
1.12 Form S-3 Registration. In case the Company shall receive from the
---------------------
Holder or Holders of at least twenty percent (20%) of the Registrable Securities
then outstanding a written request or requests that the Company effect a
registration on Form S-3 and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within 15
days after receipt of such written notice from the Company; provided, however,
that the Company shall not be obligated to effect any such registration,
qualification or compliance, pursuant to this section 1.12: (1) if Form S-3 is
not available for such offering by the Holders; (2) if the Holders, together
with the holders of any other securities of the Company entitled to inclusion in
such
-9-
registration, propose to sell Registrable Securities and such other securities
(if any) at an aggregate price to the public (net of any underwriters' discounts
or commissions) of less than $250,000; (3) if the Company shall furnish to the
Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such Form S-3
Registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement for a
period of not more than 60 days after receipt of the request of the Holder or
Holders under this Section 1.12; provided, however, that the Company shall not
utilize this right more than once in any twelve month period; or (4) in any
particular jurisdiction in which the Company would be required to qualify to do
business or to execute a general consent to service of process in effecting such
registration, qualification or compliance.
(c) Subject to the foregoing, the Company shall file a registration
statement covering the Registrable Securities and other securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Holders. All expenses incurred in connection with a registration
requested pursuant to Section 1.12, including (without limitation) all
registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of counsel for the selling Holder or Holders
and counsel for the Company, shall be borne pro rata by the Holder or Holders
participating in the Form S-3 Registration. Registrations effected pursuant to
this Section 1.12 shall not be counted as demands for registration or
registrations effected pursuant to Sections 1.2 or 1.3, respectively.
1.13 Assignment of Registration Rights. The rights to cause the Company
---------------------------------
to register Registrable Securities pursuant to this Section 1 may be assigned
(but only with all related obligations) by a Holder to a transferee or assignee
of such securities who, after such assignment or transfer, holds at least
375,000 shares of Registrable Securities (subject to appropriate adjustment for
stock splits, stock dividends, combinations and other recapitalizations),
provided the Company is, within a reasonable time after such transfer, furnished
with written notice of the name and address of such transferee or assignee and
the securities with respect to which such registration rights are being
assigned; and provided, further, that such assignment shall be effective only if
immediately following such transfer the further disposition of such securities
by the transferee or assignee is restricted under the Act. For the purposes of
determining the number of shares of Registrable Securities held by a transferee
or assignee, the holdings of transferees and assignees of a partnership who are
partners or retired partners of such partnership (including spouses and
ancestors, lineal descendants and siblings of such partners or spouses who
acquire Registrable Securities by gift, will or intestate succession) shall be
aggregated together and with the partnership; provided that all assignees and
transferees who would not qualify individually for assignment of registration
rights shall have a single attorney-in-fact for the purpose of exercising any
rights, receiving notices or taking any action under this Section 1.
-10-
1.14 Limitations on Subsequent Registration Rights. From and after the
---------------------------------------------
date of this Agreement, the Company shall not, without the prior written consent
of the Holders of a majority of the outstanding Registrable Securities, enter
into any agreement with any holder or prospective holder of any securities of
the Company which would allow such holder or prospective holder (a) to include
such securities in any registration filed under Section 1.2 or 1.3 hereof,
unless under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of his securities will not reduce the amount of the Registrable
Securities of the Holders which are included or (b) to make a demand
registration which could result in such registration statement being declared
effective prior to the earlier of either of the dates set forth in subsection
1.2(a) or within one hundred twenty (120) days of the effective date of any
registration effected pursuant to Section 1.2.
1.15 "Market Stand-Off" Agreement. Each Holder hereby agrees that,
----------------------------
during the period of duration specified by the Company and an underwriter of
common stock or other securities of the Company, following the effective date of
a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by it at any time during such period except common stock included in such
registration; provided, however, that:
(a) such agreement shall be applicable only to the first such
registration statement of the Company which covers common stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
(b) all officers and directors of the Company and all other persons
with registration rights (whether or not pursuant to this Agreement) enter into
similar agreements; and
(c) such market stand-off time period shall not exceed 180 days.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.16 Termination of Registration Rights. No Holder shall be entitled to
----------------------------------
exercise any right provided for in this Section 1 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.
-11-
2. Covenants of the Company.
------------------------
2.1 Delivery of Financial Statements. The Company shall deliver to
--------------------------------
each Investor:
(a) as soon as practicable, but in any event within ninety (90)
days after the end of each fiscal year of the Company, an income statement for
such fiscal year, a balance sheet of the Company and statement of shareholder's
equity as of the end of such year, and a schedule as to the sources and
applications of funds for such year, such year-end financial reports to be in
reasonable detail, prepared in accordance with generally accepted accounting
principles ("gaap"), and audited and certified by independent public accountants
of nationally recognized standing selected by the Company;
(b) as soon as practicable, but in any event within forty-five
(45) days after the end of each of the first three (3) quarters of each fiscal
year of the Company, an unaudited profit or loss statement, schedule as to the
sources and application of funds for such fiscal quarter and an unaudited
balance sheet as of the end of such fiscal quarter.
(c) within thirty (30) days of the end of each month, an
unaudited income statement and schedule as to the sources and application of
funds and balance sheet for and as of the end of such month, in reasonable
detail;
(d) as soon as practicable, but in any event thirty (30) days
prior to the end of each fiscal year, a budget and business plan for the next
fiscal year, prepared on a monthly basis, including balance sheets and sources
and applications of funds statements for such months and, as soon as prepared,
any other budgets or revised budgets prepared by the Company;
(e) with respect to the financial statements called for in
subsections (b) and (c) of this Section 2.1, an instrument executed by the Chief
Financial Officer or President of the Company and certifying that such
financials were prepared in accordance with gaap consistently applied with prior
practice for earlier periods (with the exception of footnotes that may be
required by gaap) and fairly present the financial condition of the Company and
its results of operation for the period specified, subject to year-end audit
adjustment;
(f) such other information relating to the financial condition,
business, prospects or corporate affairs of the Company as the Investor or any
assignee of the Investor may from time to time request, provided, however, that
the Company shall not be obligated under this subsection (f) or any other
subsection of Section 2.1 to provide information which it deems in good faith to
be a trade secret or similar confidential information.
-12-
2.2 Inspection. The Company shall permit each Investor, at such
----------
Investor's expense, as the case may be, to visit and inspect the Company's
properties, to examine its books of account and records and to discuss the
Company's affairs, finances and accounts with its officers, all at such
reasonable times as may be requested by the Investor; provided, however, that
the Company shall not be obligated pursuant to this Section 2.2 to provide
access to any information which it reasonably considers to be a trade secret or
similar confidential information.
2.3 Termination of Information and Inspection Covenants. The
---------------------------------------------------
covenants set forth in subsections 2.1(c), (d) and (f) and Section 2.2 shall
terminate as to Investors and be of no further force or effect when the sale of
securities pursuant to a registration statement filed by the Company under the
Act in connection with the firm commitment underwritten offering of its
securities to the general public is consummated or when the Company first
becomes subject to the periodic reporting requirements of Sections 12(g) or
15(d) of the 1934 Act, whichever event shall first occur.
2.4 Right of First Offer. Subject to the terms and conditions
--------------------
specified in this paragraph 2.4, the Company hereby grants to each Major
Investor (as hereinafter defined) a right of first offer with respect to future
sales by the Company of its Shares (as hereinafter defined). For purposes of
this Section 2.4, a Major Investor shall mean (i) any Investor who holds at
least 10% of the original investment such Investor makes in the Company pursuant
to the Series A Agreement and (ii) any person who acquires at least 10% of the
Series A Preferred Stock (or the common stock issued upon conversion thereof)
issued pursuant to the Series A Agreement. For purposes of this Section 2.4,
Investor includes any general partners and affiliates of an Investor. An
Investor shall be entitled to apportion the right of first offer hereby granted
it among itself and its partners and affiliates in such proportions as it deems
appropriate.
Each time the Company proposes to offer any shares of, or
securities convertible into or exercisable for any shares of, any class of its
capital stock ("Shares"), the Company shall first make an offering of such
Shares to each Major Investor in accordance with the following provisions:
(a) The Company shall deliver a notice by certified mail
("Notice") to the Major Investors stating (i) its bona fide intention to offer
such Shares, (ii) the number of such Shares to be offered, and (iii) the price
and terms, if any, upon which it proposes to offer such Shares.
(b) Within 20 calendar days after receipt of the Notice, the
Major Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares which equals the
proportion that the number of shares of common stock issued and held, or
issuable upon conversion of the Series A Preferred Stock then held, by such
Major Investor bears to the total number of shares of common stock of the
Company then outstanding (assuming full conversion and exercise of all
convertible or exercisable securities). The Company shall promptly, in writing,
inform each Major Investor which purchases all the shares available to it
-13-
("Fully-Exercising Investor") of any other Major Investor's failure to do
likewise. During the ten-day period commencing after receipt of such
information is given, each Fully-Exercising Investor shall be entitled to obtain
that portion of the Shares not subscribed for by the Major Investors which is
equal to the proportion that the number of shares of common stock issued and
held, or issuable upon conversion of Series A Preferred Stock then held, by such
Fully-Exercising Investor bears to the total number of shares of common stock
issued and held, or issuable upon conversion of the Series A Preferred Stock
then held, by all Fully-Exercising Investors who wish to purchase some of the
unsubscribed shares.
(c) If all Shares which Investors are entitled to obtain
pursuant to subsection 2.4(b) are not elected to be obtained as provided in
subsection 2.4(b) hereof, the Company may, during the 30-day period following
the expiration of the period provided in subsection 2.4(b) hereof, offer the
remaining unsubscribed portion of such Shares to any person or persons at a
price not less than, and upon terms no more favorable to the offeree than those
specified in the Notice. If the Company does not enter into an agreement for the
sale of the Shares within such period, or if such agreement is not consummated
within 30 days of the execution thereof, the right provided hereunder shall be
deemed to be revived and such Shares shall not be offered unless first reoffered
to the Major Investors in accordance herewith.
(d) The right of first offer in this paragraph 2.4 shall not be
applicable (i) to the issuance or sale of not to exceed 2,030,000 shares of
common stock (or options therefor) to employees for the primary purpose of
soliciting or retaining their employment, provided each employee executes an
agreement containing the provisions set forth in Section 2.5(b) hereof, (ii) to
or after consummation of a bona fide, firmly underwritten public offering of
shares of common stock, registered under the Act pursuant to a registration
statement on Form S-1, at an offering price of at least $10.00 per share
(appropriately adjusted for any stock split, dividend, combination or other
recapitalization) and $7,500,000 in the aggregate, (iii) the issuance of
securities pursuant to the conversion or exercise of convertible or exercisable
securities, (iv) the issuance of securities in connection with a bona fide
business acquisition of or by the Company, whether by merger, consolidation,
sale of assets, sale or exchange of stock or otherwise or (v) the issuance of
stock, warrants or other securities or rights to persons or entities with which
the Company has business relationships, provided such issuances are for other
than primarily equity financing purposes.
2.5 Management Stock.
----------------
(a) Employee Reserve. An initial pool of 2,030,000 shares of the
----------------
Company's Common Stock shall be reserved for purchase or incentive grants to
employees, consultants, directors or officers under those incentive and non-
qualified stock purchase or stock option plans or agreements ("Employee
Reserve").
-14-
(b) Vesting and Restrictions on Transfer. The shares or options
------------------------------------
issued from the Employee Reserve provided for in Section 2.5 shall vest
following the grant or issuance of such shares or options, as follows: 25% shall
vest after an initial 12-month cliff period and the remainder shall vest in
equal monthly installments over the next thirty-six (36) months following the
cliff period, as approved by the Company's Board of Directors. The Company
shall have a repurchase option at cost with respect to unvested shares.
Unvested shares may not be transferred. The Company shall have a right of first
refusal on vested shares until such time that the Company consummates an initial
public offering. The shares shall be subject to a market stand-off agreement
for a period of up to 180 days in connection with stock offerings by the
Company.
3. Miscellaneous.
-------------
3.1 Successors and Assigns. Except as otherwise provided herein, the
----------------------
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
3.2 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
3.3 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 Notices. Unless otherwise provided, any notice required or
-------
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written notice to the
other parties.
3.6 Expenses. If any action at law or in equity is necessary to
--------
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
-15-
3.7 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either generally
or in a particular instance and either retroactively or prospectively), only
with the written consent of the Company and the holders of a majority of the
Registrable Securities then outstanding. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any
Registrable Securities then outstanding, each future holder of all such
Registrable Securities, and the Company.
3.8 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
3.9 Aggregation of Stock. All shares of Registrable Securities held
--------------------
or acquired by affiliated entities or persons shall be aggregated together for
the purpose of determining the availability of any rights under this Agreement.
3.10 Entire Agreement; Amendment; Waiver. This Agreement (including
-----------------------------------
the Exhibits hereto, if any) constitutes the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-16-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
PHONEPRINT, INC., a Delaware corporation
By:_______________________________________________
βββββ� βββββββ�, Chairman of the Board,
Address: βββ� ββββ βββββ�
βββββββββ�, ββββββββββ βββββ�
INVESTORS:
βββββββ� βββββββ� ββββββββ & βββββ� VII
By:_______________________________________________
Address: ββββ ββββ ββββ ββββ
βββββ� ββββ, ββββββββββ βββββ�
KPCB VII FOUNDERS FUND
By:_______________________________________________
Address: ββββ ββββ ββββ ββββ
βββββ� ββββ, ββββββββββ βββββ�
βββββ�-βββββ� IV
By:_______________________________________________
Address: Two Galleria Tower
βββββ� ββββ ββββ, βββββ� ββββ
ββββββ, βββββ� βββββ�
[SIGNATURES TO INVESTORS' RIGHTS AGREEMENT
CONTINUED ON NEXT PAGE]
βββββ�-βββββ�-βββββββ� MANAGEMENT COMPANY
By:_______________________________________________
Address: Two Galleria Tower
βββββ� ββββ ββββ, βββββ� ββββ
ββββββ, βββββ� βββββ�
NORWEST EQUITY PARTNERS IV, a
Minnesota Limited Partnership
By: Itasca Partners
Its: General Partner
By:_______________________________________________
Address: ββββ βββββ� βββββββ� βββββ�
βββββββββββ�, βββββββββ� βββββ�
NEEDHAM CAPITAL SBIC, L.P.
By: Needham Capital Management
Partners, L.P.
By:_______________________________________________
Address: βββ� ββββ ββββββ
βββ� ββββ, ββ βββββ�
NEEDHAM EMERGING GROWTH PARTNERS
By:_______________________________________________
Address: βββ� ββββ ββββββ
βββ� ββββ, ββ βββββ�
[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]