<PAGE>
As filed with the Securities and Exchange Commission on March 24, 2000
Registration No. 333-95813
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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INVENTA TECHNOLOGIES, INC.
(Exact name of Registrant as specified in its charter)
---------------
<TABLE>
<CAPTION>
Delaware 7371 77-0217480
<S> <C> <C>
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification Number)
</TABLE>
255 Shoreline Drive, Suite 200
Redwood Shores, CA 94065
(650) 413-1100
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
---------------
David A. Lavanty
President and Chief Executive Officer
Inventa Technologies, Inc. 255 Shoreline Drive, Suite 200 Redwood Shores, CA
94065 (650) 413-1100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------
Copies to:
<TABLE>
<CAPTION>
Michael J. O'Donnell Richard Capelouto
<S> <C>
Richard L. Picheny Daniel Clivner
Wilson Sonsini Goodrich & Rosati Simpson Thacher & Bartlett
Professional Corporation 3373 Hillview Avenue, Suite 250
650 Page Mill Road Palo Alto, CA 94304
Palo Alto, CA 94304 (650) 251-5000
(650) 493-9300
</TABLE>
---------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule
434, check the following box. [_]
---------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated March 24, 2000
PROSPECTUS
3,500,000 Shares
[Inventa Logo]
Common Stock
- --------------------------------------------------------------------------------
This is our initial public offering of shares of common stock. No public market
currently exists for our shares.
We have applied to list the shares on the Nasdaq National Market under the
symbol "INVA."
Investing in our shares involves risks. Risk Factors begin on page 5.
<TABLE>
<CAPTION>
Per Share Total
--------- -----------
<S> <C> <C>
Public Offering Price..................................... $11.00 $38,500,000
Underwriting Discount..................................... $ 0.77 $ 2,695,000
Proceeds to Inventa....................................... $10.23 $35,805,000
</TABLE>
We have granted the underwriters a 30-day option to purchase up to 525,000
additional shares of common stock on the same terms and conditions as set forth
above solely to cover over-allotments, if any.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is accurate or complete. Any representation to the contrary is
a criminal offense.
Lehman Brothers, on behalf of the underwriters, expects to deliver the shares
on or about , 2000.
- --------------------------------------------------------------------------------
Lehman Brothers
First Union Securities, Inc.
Friedman Billings Ramsey
, 2000
<PAGE>
ARTWORK AND DIAGRAMS
[TO BE FILED BY AMENDMENT]
<PAGE>
TABLE OF CONTENTS
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Page
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Prospectus Summary....................................................... 1
Risk Factors............................................................. 5
Use of Proceeds.......................................................... 13
Dividend Policy.......................................................... 13
Capitalization........................................................... 14
Dilution................................................................. 15
Selected Consolidated Financial Data..................................... 16
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 18
Business................................................................. 26
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Management................................................................. 40
Certain Relationships and Related Transactions............................. 50
Principal Stockholders..................................................... 51
Description of Capital Stock............................................... 53
Shares Eligible for Future Sale............................................ 57
Underwriting............................................................... 59
Legal Matters.............................................................. 62
Experts.................................................................... 62
Additional Information..................................................... 62
Index to Financial Statements.............................................. F-1
</TABLE>
ABOUT THIS PROSPECTUS
Investors should rely only on the information contained in this prospectus.
Inventa and the underwriters have not authorized anyone to provide any
different or additional information. This prospectus is not an offer to sell
or a solicitation of an offer to buy our common stock in any jurisdiction
where it is unlawful. The information contained in this prospectus is accurate
only as of the date of this prospectus, regardless of the time of delivery of
this prospectus or of any sale of our common stock. This preliminary
prospectus is subject to completion prior to this offering.
The Inventa name is a registered trademark of Inventa Technologies, Inc. In
addition, Inventa has filed for trademark registration of the Inventa logo,
"LightSpeed," "i2K," "eSales" and "eCare." This prospectus also includes
trademarks and tradenames of other parties.
Until , 2000, all dealers selling shares of our common stock,
whether or not participating in this offering, may be required to deliver a
prospectus. This is in addition to the obligation of dealers to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information and financial statements and notes appearing elsewhere in this
prospectus. Except as otherwise indicated, the information in this prospectus
assumes that the over-allotment option granted to the underwriters is not
exercised and that all shares of our outstanding preferred stock are converted
into our common stock.
Inventa Technologies, Inc.
Our Business
We are a leading Internet professional services firm helping businesses to
use the Internet to engage in electronic commerce activities with other
businesses in order to improve their productivity and expand their online
offerings. We principally create and support:
. Electronic markets that allow businesses to interact over the Internet
with their trading partners, conduct commerce electronically and process
business transactions in real time
. Electronic customer relationship management systems that enable
businesses to use the Internet to manage their relationships with
business customers and other trading partners
Since 1995, we have focused exclusively on engagements that enable our
clients to utilize the Internet to conduct electronic commerce with other
businesses. We believe that our early focus on business-to-business electronic
commerce engagements, our experience with business processes and our
methodologies for approaching these engagements enable us to rapidly and
efficiently implement advanced Internet systems for our clients. In 1999, our
clients included Automatic Data Processing, Inc., Amkor Technology, Inc.,
Cadence Design Systems, Inc., Citigroup, Inc., Crane Co., ePolicy.com, Fujitsu
PC Corporation, GoTo.com, Inc., Pure Markets Corporation, Shaman
Botanicals.com, Siemens Corporation, SMART Modular Technologies, Inc., Sun
Microsystems, Inc. and Trade Pacific Investments Limited, or tradepac.com.
Examples of some of our recent engagements include:
. GoTo.com -- we designed an electronic customer relationship management
system that allows our client and its customers to track the progress of
customer care. Among other features, the system allows users to access
answers to frequently asked questions in real time
. Pure Markets -- we created an electronic market for commercial leasing
transactions that provides for online bidding, execution of leasing
transactions and automation of routine business processes
. tradepac.com -- we designed an electronic market for inventory
liquidation that provides for online bidding and that matches buyers
worldwide with sellers from the Asia-Pacific region
Our Solution
We deliver our services through teams of talented professionals with
extensive experience in business process analysis, project management and
software engineering. Using our proprietary LightSpeed delivery model and i2K
architectural framework, our professionals are able to quickly design and
engineer Internet-based electronic commerce applications that are integrated
with our clients' existing internal systems. Our approach allows us to quickly
deliver, with predictable fees and project schedules, complex systems that are
capable of being rapidly expanded and extended to handle large numbers of
transactions and connections to trading partners' systems.
We engineer our e-commerce systems to facilitate:
. integration of complex Internet and legacy technologies with multiple
business processes within a company and with its trading partners'
systems
1
<PAGE>
. integration of multiple databases to allow the flow of information in
multiple directions
. real-time access by trading partners from a variety of technology
platforms
. flexibility in accommodating the variety of contractual relationships,
processes and payment methods that exist between businesses
Our experience and expertise have allowed us to offer two products in the
form of packaged service offerings, eCare and eSales. eCare is our Internet-
based customer support service offering developed to enable our clients to
provide high-quality customer service and improve their customer retention.
eSales is our packaged service offering developed to help clients generate
revenue through Internet-based channels. Each of our packaged service offerings
addresses predetermined business functions and is implemented using a
combination of commercially available software and the collective knowledge of
our professionals. We believe that our packaged service offerings allow us to
leverage our extensive experience, reduce our project risk and speed the time
in which our clients reach the market.
Our Market Opportunity
Businesses are increasingly using electronic commerce to interact with other
businesses. This enhances their competitive positions by improving operating
efficiencies, strengthening their relationships with trading partners and
enabling them to identify and capitalize on business opportunities. Developing
and supporting business-to-business electronic commerce systems requires
substantial expertise with respect to, among other matters:
. design of new business processes and systems that integrate with
existing operations
. selection of appropriate Internet technologies
. management of a fast-paced implementation process
Many businesses lack this expertise. As a result, an increasing number of
businesses from start-up ventures to large corporations engage Internet
professional services firms like ours to help them design, implement and
integrate their electronic commerce systems. International Data Corporation
estimates that the market for Internet professional services will grow from
$7.8 billion in 1998 to $78.6 billion in 2003, representing a 59% compound
annual growth rate.
Our Strategy
Our strategy is to enhance our position and reputation as a leading provider
of Internet professional services for businesses to interact electronically
with other businesses. The key elements of our growth strategy are to:
. maintain our exclusive focus on engagements that enable our business
clients to utilize the Internet to engage in electronic commerce with
other businesses
. maintain our technology leadership by pursuing highly complex
engagements
. continue to offer packaged services such as eCare and eSales and
introduce new packaged services that target other business processes
. hire, train and retain skilled professionals and maintain a culture that
fosters innovation
. leverage our reputation for client satisfaction and innovation to
attract new engagements from both new and existing clients
2
<PAGE>
The Offering
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<S> <C>
Common stock offered by Inventa.. 3,500,000 shares
Common stock outstanding after
this offering................... 25,196,929 shares
Use of proceeds.................. General corporate purposes, including
reducing outstanding debt of approximately
$4.0 million; increasing our recruiting
capabilities; expanding our sales and
marketing capabilities; increasing our brand
awareness; investing in our internal systems
and processes; opening new offices; and
pursuing selected strategic investments or
acquisitions.
Proposed Nasdaq National Market
symbol.......................... "INVA"
</TABLE>
At our request, the underwriters have reserved up to 12% of the common stock
offered in this prospectus for sale at the initial public offering price to our
directors, prior investors and other persons associated with Inventa.
Common stock outstanding after this offering:
. is based on the number of shares outstanding as of February 29, 2000
. assumes the conversion of all outstanding shares of series A, B, C and D
preferred stock into an aggregate of 14,615,511 shares of common stock,
which will automatically occur at the completion of this offering
. includes 293,255 shares of common stock to be issued to holders of series
D preferred stock in a private placement to be made contemporaneously
with this offering at the initial offering price less the underwriting
discount
. includes 290,000 shares issuable at the completion of this offering in
connection with an employment agreement
. excludes 3,993,653 shares of common stock issuable upon the exercise of
stock options outstanding at February 29, 2000, at a weighted average
exercise price of $1.81 per share
. excludes 713,184 shares of common stock reserved for future grant under
our stock option plans
. excludes 160,000 shares of common stock issuable upon the exercise of
warrants outstanding at February 29, 2000, at an exercise price of $2.50
per share
Additional Information
We were incorporated in California in 1988 as Inventa Corporation. We
reincorporated in Delaware on March 23, 2000, as Inventa Technologies, Inc. Our
principal executive offices are located at 255 Shoreline Drive, Suite 200,
Redwood Shores, CA 94065, and our telephone number is (650) 413-1100. We
maintain a site on the World Wide Web at www.inventa.com. The reference to our
web address does not constitute incorporation by reference of the information
contained at that site. The information found on our site is not part of this
prospectus and should not be relied upon when making a decision to invest in
our common stock.
3
<PAGE>
Summary Consolidated Financial Data
The following table summarizes the consolidated statement of operations and
consolidated balance sheet data for our business. For a more detailed
explanation of this financial data, see "Selected Consolidated Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements located elsewhere in this
prospectus.
The unaudited pro forma consolidated balance sheet data reflects the
following assumptions:
. issuance of 1,350,000 shares of our common stock with a fair value of
$14.9 million in connection with the acquisition of XTEND-Tech, Inc.,
which had an effective date of January 1, 2000
. acquisition of assets and liabilities of XTEND-Tech. See details in our
consolidated financial statements located elsewhere in this prospectus.
. receipt of approximately $22.2 million from the issuance of 3,000,000
shares of series D mandatorily redeemable convertible preferred stock on
January 19, 2000, at $7.41 per share
. conversion of 1,000,000 shares of our series A convertible preferred
stock and 13,615,511 shares of our series B, C and D mandatorily
redeemable convertible preferred stock into 14,615,511 shares of our
common stock upon the completion of this offering
See Note 1 of the notes to our consolidated financial statements for a
description of the methods we used to compute our weighted average shares and
basic and diluted net loss per share and pro forma basic and diluted net loss
per share.
The unaudited pro forma, as adjusted, consolidated balance sheet data gives
effect to the sale of the shares offered by us at an assumed initial public
offering price of $11.00 per share, the midpoint of the anticipated range, and
the application of the net proceeds as described in "Use of Proceeds," after
deducting the estimated underwriting discount and estimated offering expenses.
In addition, the unaudited pro forma, as adjusted, balance sheet data gives
effect to the sale of 293,255 shares of common stock to be issued to holders of
series D preferred stock in a private placement to be made contemporaneously
with this offering and the application of the net proceeds of $3.0 million.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
(in thousands, except
per share data)
<S> <C> <C> <C>
Consolidated Statement of Operations Data:
Revenues........................................... $ 5,196 $ 8,016 $ 13,520
Loss from operations............................... (2,795) (1,692) (10,906)
Net loss........................................... (2,964) (1,658) (15,788)
Net loss per share:
Basic and diluted................................ $ (0.65) $ (0.36) $ (3.36)
======= ======= ========
Weighted average shares.......................... 4,557 4,659 4,698
Pro forma net loss per share (unaudited):
Basic and diluted................................ -- -- $ (0.76)
========
Weighted average shares.......................... -- -- 14,447
</TABLE>
<TABLE>
<CAPTION>
As of December 31, 1999
-------------------------------
Pro Forma,
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents..................... $ 3,244 $25,617 $58,862
Working capital............................... (1,842) 20,438 57,683
Total assets.................................. 9,222 40,928 74,173
Long-term borrowings and capital lease
obligations, net of current portion.......... 454 562 562
Mandatorily redeemable convertible preferred
stock........................................ 18,132 -- --
Total stockholders' equity (deficit).......... (18,138) 30,973 68,218
</TABLE>
4
<PAGE>
RISK FACTORS
Investing in shares of our common stock involves risks. You should carefully
consider the risks described below and other information in this prospectus
before making an investment decision. If any of the following risks actually
occur, our business, financial condition, results of operations and reputation
could be harmed. As a result, the trading price of our common stock may
decline, and you may lose all or part of your investment.
Risks Related to Our Business
We may have difficulty managing our growth, which could damage our ability to
retain clients and become profitable
Our growth has placed significant demands on our management and other
resources. Our revenues for the year ended December 31, 1999, increased
approximately 69% from the year ended December 31, 1998. Our staff increased
from 57 full-time employees at December 31, 1998, to 245 at February 29, 2000.
Our future success will depend on our ability to manage our growth, including:
. continuing to train, motivate, manage and retain our existing employees
and to attract and assimilate new employees
. maintaining project quality
. maintaining high rates of employee utilization
. accurately estimating time and resources required to complete engagements
. developing and improving our operational, financial, accounting and other
internal systems and controls
. improving our business development capabilities
If we are unable to manage our growth, our ability to retain clients and
become profitable could be damaged.
We have a history of operating losses, and we may never achieve significant or
sustained profitability
We reported an operating loss of $10.9 million and a net loss of $15.8
million for the year ended December 31, 1999. We anticipate incurring losses in
2000 and 2001 as well. As we strive to grow our business, we expect to spend
significant funds for general corporate purposes, including working capital,
marketing, recruiting and hiring additional personnel, upgrading our
infrastructure and expanding into new geographic markets. Although our revenues
have increased in recent periods, we may not sustain these growth rates. To the
extent that our revenues do not increase at a rate commensurate with these
costs and expenditures, our results of operations and our stock's performance
could be harmed. In particular, we expect that our plan for increases in
expenses and capital expenditures over the next year will result in higher
operating losses. If we achieve profitability in the future, it may or may not
be sustainable.
If we do not retain our key management personnel and professionals or if we
fail to recruit additional professionals, our ability to serve existing and new
clients would be impaired
Our business is labor intensive, and our success depends on identifying,
hiring, training and retaining experienced, knowledgeable management and
professionals. This dependence is particularly important to our business
because we believe personal relationships are critical to obtaining and
maintaining a cohesive culture. In 1999, 8.7% of our professional staff and
14.5% of our non-professional staff, which includes management and support
staff, left us. If a significant number of our senior management personnel or
professionals leave, we may be unable to complete or retain existing
engagements or bid for new projects. In addition, if any of these key employees
joins a competitor or forms a competing company, some of our clients might
choose to use the services of that competitor or new company instead of our
own.
5
<PAGE>
Even if we retain our current employees, we must continually recruit and
train talented professionals in order for our business to grow. There is
currently a shortage of qualified professionals in the Internet professional
services field, and this shortage is likely to continue. Furthermore, there is
significant competition for employees with the skills required to perform the
services we offer. We may not be able to attract a sufficient number of
qualified employees in the future, and we may not be successful in motivating
and retaining the employees we do attract. If we cannot attract, motivate and
retain qualified management and professionals, our ability to provide our
services to new and existing clients will be impaired.
Our management team has limited experience working together, which could affect
their ability to function effectively as a team
We have employed our president and chief executive officer only since
January 1999. Five of our other officers, including our chief financial
officer, have joined us within the past 12 months. Therefore, there has been
little or no opportunity to evaluate the effectiveness of our executive
management team. The failure of our executive management to function
effectively as a team may hurt our ability to manage our business and growth,
obtain and execute client engagements, maintain a cohesive culture and compete
effectively.
We depend heavily on a limited number of clients. The loss of a principal
client or a reduction in the work we perform for any particular client could
harm our reputation and reduce our revenues
We derive a significant portion of our revenue from a limited number of
clients. In 1999, our five largest clients accounted for approximately 75% of
our revenues, with ADP and ePolicy.com each accounting for over 10% of our
revenues. Our clients retain us on an engagement-by-engagement basis, rather
than under long-term contracts. Our contracts typically provide that our
clients can terminate the contracts without penalty. There is a risk that once
we complete an engagement, these principal clients may not retain us for
additional work in the future. Any cancellation, deferral or reduction in work
performed for one of these principal clients or a number of smaller clients
could harm our reputation and reduce our revenues.
Our business may be harmed by cost overruns and penalties associated with
fixed-price, fixed-time contracts if we fail to accurately estimate the time
and resources necessary for the performance of our services
For the year ended December 31, 1999, approximately 88% of our revenues was
derived from fixed-price, fixed-time contracts. We expect that most of our
future revenues will continue to be derived from fixed-price, fixed-time
contracts. Less than 10% of our contracts provide for financial penalties if we
do not meet specified deadlines. To date, we have not had to pay any of these
penalties. To mitigate losses from fixed-price, fixed-time contracts, we must,
among other things:
. accurately estimate the resources required to perform these contracts
. complete our clients' projects on a timely basis
. effectively manage our clients' expectations
. complete projects within budget and to our clients' satisfaction
If we do not successfully manage these project risks, we could be exposed to
cost overruns and penalties. If this occurs in connection with a large project
or a sufficient number of projects, we may suffer lower gross margins and
delays in recognizing revenues, and our financial condition, results of
operations and reputation could be harmed.
Quarterly fluctuations in our revenues and earnings could affect the market
price of our common stock
Our quarterly revenues and earnings have varied in the past and may vary
significantly. This fluctuation may cause our operating results to be below the
expectations of securities analysts and investors, and the price of our stock
may fall. Factors that could cause quarterly fluctuations include:
. the number, size and scope of client engagements commenced or completed
during a quarter
6
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. professional staff utilization rates
. unanticipated project terminations, delays or deferrals
. the accuracy of our estimates of resources required to complete ongoing
projects
. the contractual terms and degree of completion of projects in which we
are engaged
A large percentage of our expenses, particularly employee compensation and
rent, are fixed in advance of any particular quarter. In addition, we may incur
unanticipated expenses relating to increased utilization of subcontractors. Any
decline in revenues or earnings, unanticipated project termination or delay, or
greater than expected costs for any quarter could harm our results of
operations and result in a decline in the market price of our common stock,
even if not reflective of any long-term problems with our business.
Competition from larger, more established competitors with greater financial
resources and from new competitors could result in price reductions and reduced
revenues and loss of current and future clients
The Internet professional services market is intensely competitive. We
expect competition to continue and intensify, which could result in price
reductions, reduced revenues and the loss of current and future clients. Our
competitors fall into six major categories:
. Internet professional services firms
. information technology consulting and systems integration firms
. services divisions of computer hardware and software vendors
. web design firms
. information technology strategy consulting firms
. in-house information technology departments of our current and potential
clients
Many of our competitors have longer operating histories and client
relationships, greater resources, larger client bases and greater brand or name
recognition than we have. Our competitors may be able to respond more quickly
to technological developments and changes in clients' needs. This ability of
our competitors may place us at a disadvantage in responding to our
competitors' pricing strategies, technological advances, advertising campaigns,
strategic partnerships and other initiatives.
Further, there are low barriers to entry into our industry segment. We do
not own any technologies that preclude or inhibit potential competitors from
entering our industry. Since the potential market opportunity is large, while
costs to develop and provide Internet professional services are relatively low,
we expect to continue to face additional competition from new competitors.
If we do not keep pace with technological changes, industry standards and
client preferences, our reputation could be harmed, and we could lose clients,
which would reduce our revenues
Our success will depend in part on our ability to develop information
technology solutions that keep pace with continuing changes in Internet
technology, evolving industry standards and changing client preferences. We may
not be successful in addressing these developments on a timely basis, or at
all. Our failure to respond quickly and cost-effectively to new developments
could harm our reputation and cause us to lose current and potential business
opportunities, resulting in reduced revenues.
In particular, we have derived a significant portion of our revenues from
projects based primarily on:
. open systems technologies
. multi-tier software architectures
. Internet-based architectures
7
<PAGE>
These areas are continuing to develop and are subject to rapid change. Any
factors impeding the acceptance of information technology systems using
Internet-based architectures could reduce our revenues and impair our results
of operations, especially if we are unable to develop skills and replacement
technologies for these types of information technology systems.
We may face intellectual property claims that could result in substantial costs
or limit our ability to use intellectual property in the future
It is possible that other parties may assert infringement claims against us
in the future or claim that we have violated their intellectual property
rights. While we know of no basis for any claims of this type, authorship of
intellectual property rights can be difficult to verify. Competitors could
assert, for example, that former employees of theirs whom we have hired have
misappropriated their proprietary information for our benefit. A successful
infringement claim against us could damage us in the following ways:
. we may be liable for damages and litigation costs, including attorneys'
fees
. we may be prohibited from further use of the intellectual property in
dispute
. we may have to license the intellectual property, incurring licensing
fees
. we may have to develop a non-infringing alternative, which could be
costly and delay projects
. we may have to indemnify clients with respect to losses incurred as a
result of our infringement of the intellectual property
Regardless of the outcome, an infringement claim could result in substantial
costs, diversion of resources and management attention, clients' termination of
project engagements and harm to our financial condition and reputation.
If we are not able to resell or reuse intellectual property developed for
specific clients, our ability to provide our services efficiently would be
impaired
Our LightSpeed delivery model and i2K architectural model, as well as our
knowledge management system, known as Inside Inventa, depend heavily on using
information and techniques learned and developed during prior engagements.
Moreover, a portion of our business involves the development of software
applications for specific client engagements. Our clients generally retain
ownership of client-specific software, although we retain rights to some of the
applications, processes and other intellectual property developed in connection
with client engagements. Some clients have prohibited us from marketing the
applications developed for them, or similar applications, for specified periods
or to specified types of potential clients. Our clients may demand similar or
other restrictions in the future, and disputes may arise that affect our
ability to resell or reuse such applications, processes and other intellectual
property. These disputes could damage our relationships with our clients and
divert our management's attention. A successful suit that prevents us from
reusing information and techniques would also impair our ability to provide our
services efficiently.
If we are unable to maintain our reputation and expand our name recognition, we
may have difficulty in attracting new clients and retaining current clients and
professionals
We believe that establishing and maintaining a good reputation and name
recognition are critical for attracting and retaining our clients and
professional staff. We also believe that the importance of reputation and name
recognition will increase due to the growing number of Internet professional
services firms. If our reputation is damaged or if potential clients are not
familiar with us or the services we provide, we may become less competitive or
lose our market position. Promotion and enhancement of our name will depend
largely on our success in continuing to provide effective Internet technology
solutions. If clients do not perceive our solutions to be effective or of high
quality, our brand name and reputation will suffer. In addition, if solutions
we provide have defects, critical business functions of our clients may fail,
and we could suffer adverse publicity as well as economic liability.
8
<PAGE>
If we fail to secure written contracts, our ability to collect fees, protect
our intellectual property and protect ourselves from liability to others could
be impaired
We attempt to protect ourselves by entering into written contracts with our
clients covering the terms and contingencies of a project engagement. In most
of our engagements, we begin work for clients on the basis of a limited
statement of work or a verbal agreement before a detailed written contract can
be finalized. To the extent that we fail to have detailed written contracts in
place, our ability to collect fees, recognize revenues, protect our
intellectual property and protect ourselves from liability to others may be
impaired.
We may need additional capital in the future, which may not be available to us.
The raising of any additional capital may dilute your ownership in us
In the future, we may need to raise additional funds through public or
private debt or equity financings to take advantage of expansion or acquisition
opportunities, develop new solutions or compete effectively in the marketplace.
Any additional capital raised through the sale of equity or equity-linked
debt securities would dilute your ownership percentage in us. Those securities
could also have rights, preferences or privileges senior to those of your
common stock. Furthermore, we may not be able to obtain additional financing
when needed or on terms favorable to us or our stockholders. If additional
financing is not available on favorable terms, or at all, this may limit our
ability to develop or enhance our services, take advantage of business
opportunities or respond to competitive pressures.
Risks Related to Our Industry
Our business may suffer if growth in the use of the Internet declines
Because Internet technologies are central to many of our solutions, our
business depends upon continued growth in the use of the Internet by our
clients, prospective clients and their suppliers and other trading partners.
Capacity constraints caused by growth in Internet usage may, unless resolved,
impede further growth in Internet use. Factors that may affect Internet usage
or electronic commerce adoption include:
. actual or perceived lack of security of information
. congestion of Internet traffic or other usage delays
. inconsistent quality of service
. increases in costs of accessing the Internet
. adverse government regulation
. uncertainty regarding intellectual property ownership
. reluctance of companies to adopt new business methods
. costs associated with the obsolescence of existing infrastructure
. lack of economic viability of the electronic commerce model
Our success will depend on market acceptance of our industry
Widespread market acceptance of the outsourcing of the design, development
and maintenance of Internet-based applications to Internet professional
services firms like ours is uncertain. Many of our potential clients may
ultimately decide to perform these services in-house. In-house personnel may
have better access to both key client decision-makers and the information
required to prepare proposals for such solutions. If independent providers of
Internet professional services prove to be unreliable, ineffective or too
expensive, or if software
9
<PAGE>
companies develop tools that are sufficiently user-friendly and cost-effective,
companies may instead choose to design, develop or maintain their Internet-
based applications internally. Our revenues will decline if the market for our
services does not continue to develop or develops more slowly than we expect,
or if the market does not accept our services.
Government regulation and legal uncertainties relating to the Internet could
decrease demand for our services, increase our operating costs or otherwise
harm our business
Increased regulation of the Internet or taxation of electronic commerce
might slow the growth in use of the Internet, which could decrease demand for
our services, increase our cost of doing business or otherwise harm our
business. Congress, federal regulatory agencies and the states have recently
passed legislation or taken other actions regulating certain aspects of the
Internet, including:
. online content . liability for third-party activities
. interaction with children . transmission of sexually explicit
materials
. copyright infringement . defamation
. user privacy . consumer protection
. taxation . jurisdiction
. access charges
In addition, federal, state and local governmental organizations as well as
foreign governments are considering other legislative and regulatory proposals
that would regulate these and other aspects of the Internet. We do not know how
courts will interpret laws governing the Internet or the extent to which they
will apply existing laws to the Internet. Therefore, we are not certain how
existing or future laws governing the Internet or applied to the Internet will
affect our business.
Risks Related to our Common Stock
If the market price of our common stock fluctuates significantly, you may not
be able to sell our shares at or above the initial public offering price, and
therefore, you may suffer a loss on your investment
The initial public offering price will be determined through negotiation
between us and representatives of the underwriters and may not be indicative of
the market price for our common stock after this offering.
The market price of our common stock could fluctuate significantly as a
result of:
. our susceptibility to quarterly variations in our operating results,
which may cause us to fail to meet analysts' or investors' expectations
. changes in financial estimates by the analysts following our stock
. earnings and other announcements by, and changes in investors'
evaluations of, Internet professional services firms
. economic and stock market conditions specific to Internet professional
services firms
. changes in business or regulatory conditions affecting information
technology services
. announcements or implementation by us or our competitors of technological
innovations or new products or services
. trading volume of our common stock
The securities of many companies have experienced significant price and
volume fluctuations in recent years, often unrelated to the companies'
operating performance. Specifically, market prices for securities of
10
<PAGE>
Internet-related and technology companies have frequently reached elevated
levels, often following their initial public offerings. These levels, if
attained in the future, may not be sustainable and may not bear any
relationship to these companies' operating performances. If the market price of
our common stock reaches an elevated level following this offering, it may
significantly and rapidly decline. In the past, following periods of volatility
in the market price of a company's securities, stockholders have often
instituted securities class action litigation against the company. If we were
to become involved in securities litigation, it could cause a substantial loss
and divert resources and the attention of senior management from our business.
Because an active trading market for our common stock may not develop after
this offering, it may be difficult for you to sell your shares
There is currently no trading market for our common stock. Accordingly, an
active public trading market may not develop or be sustained after this
offering. If an active and liquid trading market does not develop, you may have
difficulty selling your shares.
The sale or availability for sale of substantial amounts of our common stock
could cause our stock price to decline
Sales of substantial amounts of our common stock in the public market after
the completion of this offering or the public perception that these sales could
occur could cause a decline in the market price of our common stock and could
impair our future ability to raise capital through offerings of our common
stock. There will be 25,196,929 shares of common stock outstanding immediately
after this offering including those shares issued upon conversion of the
convertible securities, shares issued in the contemporaneous private placement,
and those shares issuable at the close of this offering under an employment
agreement, or 25,721,929 shares if the underwriters exercise their over-
allotment option in full. The 3,500,000 shares sold in this offering will be
freely tradable without restriction or further registration under the
Securities Act, unless held by our "affiliates" as that term is defined in Rule
144 under the Securities Act. The remaining shares are "restricted securities,"
and will become eligible for sale in the public market at various times after
180 days after the date of this prospectus, subject to the limitations and
other conditions of Rule 144 under the Securities Act.
In connection with this offering, we, our executive officers and directors
and 21 of our stockholders and their affiliates have agreed, except in limited
circumstances, not to sell the 20,533,342 shares of common stock owned by them
for 180 days after completion of this offering without the consent of Lehman
Brothers Inc. These shares, however, may be released from these restrictions by
Lehman Brothers Inc. at any time. We cannot predict what effect, if any, market
sales of shares held by principal stockholders or any other stockholder or the
availability of these shares for future sale will have on the market price of
our common stock.
A number of our stockholders are parties to an agreement with us that
provides these stockholders with the right to require us to register the sale
of shares owned by them. These rights cover approximately 16,238,238 shares,
representing 64% of our common stock outstanding after this offering and will
also cover any shares obtained by these stockholders from time to time.
Registration of these shares of our common stock would permit the sale of these
shares without regard to the restrictions of Rule 144 and Rule 144(k).
Concentration of ownership of our common stock may limit your ability to
influence corporate matters
Immediately following this offering, our executive officers and directors,
or entities controlled by them, will own approximately 77% of the outstanding
shares of our common stock.
If our significant stockholders choose to act or vote together on corporate
matters, they will have the power to control the approval of any action
requiring the approval of our stockholders, including any mergers,
acquisitions, sales of all of our assets or amendments to our certificate of
incorporation. In addition, without the consent of these stockholders, we could
be prevented from entering into transactions that could be beneficial to us.
Also, third parties could be discouraged from making a tender offer or bid to
acquire our company at a price per share that is above the then-prevailing
market price.
11
<PAGE>
The net proceeds of this offering may be allocated in ways with which you and
other stockholders may not agree
Our management will have significant flexibility in applying the proceeds we
receive in this offering. Because the proceeds are not required to be allocated
to any specific purpose, investment or transaction, you cannot determine at
this time the value or propriety of our management's application of the
proceeds on our behalf and you and other stockholders may not agree with our
management's decisions.
Investors in this offering will experience immediate and substantial dilution
and will pay a higher price for our common stock than paid by our existing
stockholders
If you purchase common stock in this offering, you will pay more for your
shares than the amounts paid by existing stockholders for their shares. As a
result, you will experience immediate and substantial dilution of approximately
$8.58 per share, representing the difference between our book value per share
as of December 31, 1999, after giving effect to this offering and the initial
public offering price. In addition, you may experience further dilution to the
extent that shares of our common stock are issued upon the exercise of stock
options or under our employee stock purchase plan. All of the shares issuable
upon the exercise of currently outstanding stock options will be issued at a
purchase price less than the public offering price per share in this offering.
Antitakeover provisions of Delaware's General Corporation Law and our
certificate of incorporation could delay or deter a change in control
Amendments to our certificate of incorporation and our bylaws, as well as
various provisions of the Delaware General Corporation Law, may make it more
difficult to effect a change in control of our company. The existence of these
provisions may adversely affect the price of our common stock, discourage third
parties from making a bid for us or reduce any premiums paid to our
stockholders for their common stock. For example, our certificate of
incorporation authorizes our board of directors to issue up to 14,779,511
shares of blank check preferred stock and to attach special rights and
preferences to this preferred stock. The issuance of this preferred stock may
make it more difficult for a third party to acquire control of us. Our
certificate of incorporation also provides for the division of our board of
directors into three classes as nearly equal in size as possible with staggered
three-year terms. This classification of the board of directors could have the
effect of making it more difficult for a third party to acquire our company or
of discouraging a third party from acquiring control of us.
Forward-looking statements contained in this prospectus may not be realized
This prospectus contains forward-looking statements that involve risk and
uncertainties. These forward-looking statements relate to, among other things,
our competition, strength of business model, strategy, plans and timing of the
introduction of new services, plans for entering into strategic relationships
and making acquisitions, and other expectations, intentions and plans contained
in this prospectus that are not historical facts.
When used in this prospectus, the words "expects," "anticipates," "intends,"
"plans," "may," "believes," "seeks," "estimates" and similar expressions
generally identify forward-looking statements. These statements reflect our
current expectations. They are subject to a number of risks and uncertainties,
including but not limited to, changes in technology and changes in the Internet
professional services market. In light of the many risks and uncertainties
surrounding the Internet professional services market, the forward-looking
statements contained in this prospectus may not be realized.
12
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds to us from the offering will be
approximately $34.2 million at an assumed initial public offering price of
$11.00 per share, the mid-point of the anticipated range, and approximately
$39.6 million if the underwriters exercise the over-allotment option in full,
in each case, after deducting the estimated underwriting discount and estimated
offering expenses payable by us.
We intend to use the net proceeds of the offering primarily for general
corporate purposes, including:
. reducing outstanding debt of approximately $4.0 million, which is due
November 30, 2000, and bears interest at the prime rate plus 2.00%
(currently 10.75%). The proceeds of this loan were used to pay off our
equipment lease line with a balance of $375,000. The remaining proceeds
are being used to fund working capital and to purchase equipment.
. increasing our recruiting capabilities
. expanding our sales and marketing capabilities
. increasing our brand awareness
. investing in our internal systems and processes
. opening new offices
In addition, we may use the proceeds to make selected strategic investments
or acquisitions. We cannot specify with certainty all or particular allocations
of the use of proceeds from this offering.
DIVIDEND POLICY
We have never declared or paid any cash dividends, and we do not anticipate
paying cash dividends in the foreseeable future. We currently intend to retain
future earnings, if any, to finance operations and the expansion of our
business. Any future determination to pay dividends will be at the sole
discretion of our board of directors and will depend upon our financial
condition, operating results, capital requirements and other factors our board
of directors deems relevant. In addition, our current lines of credit
facilities restrict our ability to declare and pay any dividends without the
prior consent of our lenders.
13
<PAGE>
CAPITALIZATION
The following table sets forth our actual capitalization and our unaudited
pro forma and unaudited pro forma, as adjusted, capitalization as of December
31, 1999. You should read this information in conjunction with our consolidated
financial statements and the related notes to those consolidated financial
statements included elsewhere in this prospectus.
<TABLE>
<CAPTION>
As of December 31, 1999
--------------------------------
Pro Forma,
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands)
<S> <C> <C> <C>
Long-term borrowings and capital lease
obligations, current portion.................. $ 192 $ 241 $ 241
======== ======== =======
Long-term borrowings and capital lease
obligations, net of current portion........... 454 562 562
-------- -------- -------
Mandatorily redeemable convertible preferred
stock:
Series B, $0.001 par value; 2,560,000 shares
authorized; 2,560,000 shares issued and
outstanding, actual; no shares issued and
outstanding, pro forma and pro forma, as
adjusted.................................... 4,373 -- --
Series C, $0.001 par value; 8,219,511 shares
authorized; 8,055,511 shares issued and
outstanding, actual; no shares issued and
outstanding, pro forma and pro forma, as
adjusted.................................... 13,759 -- --
Series D, $0.001 par value; 3,000,000 shares
authorized; no shares issued and
outstanding, actual; no shares issued and
outstanding, pro forma and pro forma, as
adjusted.................................... -- -- --
-------- -------- -------
18,132 -- --
-------- -------- -------
Series A convertible preferred stock, $0.001
par value; 1,000,000 shares authorized;
1,000,000 shares issued and outstanding,
actual; no shares issued and outstanding,
pro forma and pro forma, as adjusted........ 1 -- --
Common stock, $0.001 par value; 25,000,000
shares authorized; 4,759,402 shares issued
and outstanding, actual; 20,724,913 shares
issued and outstanding, pro forma and
24,518,168 shares issued and outstanding pro
forma, as adjusted.......................... 5 20 24
Additional paid-in capital................... 1,861 67,829 105,070
Deferred stock-based compensation............ (4,662) (10,733) (10,733)
Accumulated deficit.......................... (15,343) (26,143) (26,143)
-------- -------- -------
Total stockholders' equity (deficit)....... (18,138) 30,973 68,218
-------- -------- -------
Total capitalization..................... $ 640 $ 31,776 $69,021
======== ======== =======
</TABLE>
The foregoing table excludes the following shares at December 31, 1999:
. 3,492,000 shares of common stock issuable upon exercise of outstanding
options with a weighted average exercise price of $0.42 per share
. 1,474,000 shares of common stock available for future grant as of
December 31, 1999
For a description of the assumptions underlying the unaudited pro forma and
unaudited pro forma, as adjusted, data, see "Summary Consolidated Financial
Data."
14
<PAGE>
DILUTION
On a pro forma basis after giving effect to the conversion of 11,615,511
outstanding shares of series A, B, and C preferred stock, the issuance and
subsequent conversion of 3,000,000 shares of series D preferred stock at $7.41
per share, the issuance of 1,350,000 shares of common stock in connection with
the acquisition of XTEND-Tech, and the acquisition of the net tangible assets
of XTEND-Tech, our pro forma net tangible book value as of December 31, 1999,
was $22.2 million or $1.07 per share of common stock. Pro forma net tangible
book value per share represents the amount of our total tangible assets reduced
by the amount of our total liabilities and divided by the total number of
shares of common stock outstanding. After giving effect to the sale of
3,500,000 shares of common stock offered by this prospectus at an assumed
initial public offering price of $11.00 per share and receipt of the estimated
net proceeds from the sale, and the sale of 293,255 shares at $10.23 per share
in connection with our contemporaneous private placement and receipt of the
estimated net proceeds of $3.0 million from the sale, our pro forma net
tangible book value as of December 31, 1999, would have been approximately
$59.4 million or $2.42 per share. This represents an immediate increase in net
tangible book value of $1.35 per share to existing stockholders and an
immediate dilution of $8.58 per share to the new investors. If the initial
public offering price is higher or lower, the dilution to new investors will
be, respectively, greater or less. The following table illustrates this per
share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............... $11.00
------
Pro forma net tangible book value per share as of December 31,
1999......................................................... $1.07
Increase per share attributable to new investors.............. $1.35
-----
Pro forma net tangible book value per share after this
offering..................................................... $ 2.42
------
Net tangible book value dilution per share to new investors... $ 8.58
======
</TABLE>
The following table sets forth as of December 31, 1999, assuming the pro
forma effects described above, the difference between the number of shares of
common stock purchased from us, the total consideration and the average price
per share paid by the existing stockholders and by the new investors at an
assumed initial public offering price of $11.00 per share for shares purchased
in this offering, before deducting the estimated underwriting discounts and
estimated offering expenses and $10.23 for shares purchased in the
contemporaneous private placement:
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ ------------------- Price Per
Number Percent Amount Percent Share
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders....... 20,724,913 85.0% $36,021,925 46.0% $ 1.74
New investors............... 3,793,255 15.0 41,500,000 54.0 $10.94
---------- ----- ----------- -----
Total..................... 24,518,168 100.0% $77,521,925 100.0%
========== ===== =========== =====
</TABLE>
This table assumes that the underwriters do not exercise their over-
allotment option. If the underwriters' over-allotment option is exercised in
full, the pro forma, as adjusted net tangible book value per share after giving
effect to this offering would be $2.60 per share. After deducting underwriting
discounts and commissions and estimated transaction expenses, the increase in
the net tangible book value per share to existing stockholders would be $2.59
and the dilution to new public investors would be $8.41 per share.
This table also assumes that no options or warrants have been or are
exercised after December 31, 1999. As of December 31, 1999, there were
outstanding options to purchase an aggregate of 3,492,000 shares of common
stock at a weighted average exercise price of $0.42 per share, excluding
warrants to purchase 160,000 shares of series C preferred stock at $2.50 per
share. If all such options and warrants had been exercised on December 31,
1999, and the underwriters' over-allotment option is exercised in full, our net
tangible book value on that date would have been $66.7 million or $2.33 per
share, the increase in net tangible book value attributable to new investors
would have been $1.26 per share, and the dilution in net tangible book value to
new investors would have been $8.67 per share.
15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated statement of operations data for the
years ended December 31, 1997, 1998 and 1999, and the consolidated balance
sheet data at December 31, 1997, 1998 and 1999, are derived from the audited
consolidated financial statements included elsewhere in this prospectus. The
selected consolidated statement of operations data for the year ended
December 31, 1996, and the consolidated balance sheet data at December 31,
1996, are derived from our audited consolidated financial statements not
included in this prospectus. The selected consolidated statement of operations
data for the year ended December 31, 1995, and the consolidated balance sheet
data at December 31, 1995, are derived from our unaudited consolidated
financial statements that include, in our opinion, all adjustments, consisting
of only normal recurring adjustments, necessary for fair presentation of the
financial condition at that date and results of operations for such period. The
historical results presented below are not necessarily indicative of the
results to be expected for any future period. The selected consolidated
financial data should be read in conjunction with our consolidated financial
statements and the related notes to those consolidated financial statements and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" located elsewhere in this prospectus.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1995 1996 1997 1998 1999
----------- ------ ------- ------- --------
(unaudited)
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Consolidated Statement of
Operations Data:
Revenues....................... $2,416 $5,032 $ 5,196 $ 8,016 $ 13,520
Operating expenses:
Project personnel............. 1,185 2,635 2,677 2,799 8,610
Sales and marketing........... 72 135 1,671 1,838 4,230
General and administrative.... 951 2,123 3,456 4,519 9,434
Depreciation.................. 149 131 187 252 562
Amortization of deferred
stock-based compensation..... -- -- -- 50 1,590
Non-recurring expenses on
closing of foreign
operations................... -- -- -- 250 --
------ ------ ------- ------- --------
Total operating expenses..... 2,357 5,024 7,991 9,708 24,426
------ ------ ------- ------- --------
Income (loss) from operations.. 59 8 (2,795) (1,692) (10,906)
Other income (expense), net.... (16) (51) (79) 36 (5)
------ ------ ------- ------- --------
Income (loss) before income
taxes......................... 43 (43) (2,874) (1,656) (10,911)
Income tax benefit (expense)... (16) 14 (90) (2) (15)
------ ------ ------- ------- --------
Net income (loss).............. 27 (29) (2,964) (1,658) (10,926)
Accretion of mandatorily
redeemable convertible
preferred stock to redemption
value......................... -- -- -- -- (4,862)
------ ------ ------- ------- --------
Net income (loss) attributable
to common stockholders........ $ 27 $ (29) $(2,964) $(1,658) $(15,788)
====== ====== ======= ======= ========
Net income (loss) per share:
Basic and diluted............. $ 0.01 $(0.01) $ (0.65) $ (0.36) $ (3.36)
====== ====== ======= ======= ========
Weighted average shares....... 4,529 4,541 4,557 4,659 4,698
Pro forma net loss per share
(unaudited):
Basic and diluted............. -- -- -- -- $ (0.76)
========
Weighted average shares....... -- -- -- -- 14,447
========
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
As of December 31,
---------------------------------------------
1995 1996 1997 1998 1999
----------- ------ ------- ------- --------
(unaudited)
(in thousands)
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet Data:
Cash and cash equivalents....... $ 68 $ 48 $ 671 $ 4,783 $ 3,244
Working capital................. 387 317 429 3,802 (1,842)
Total assets.................... 954 1,878 1,822 6,295 9,222
Long-term borrowings and capital
lease obligations, net of
current portion................ 37 70 192 373 454
Mandatorily redeemable
convertible preferred stock.... -- -- 3,200 8,270 18,132
Total stockholders' equity
(deficit)...................... 627 600 (2,496) (4,125) (18,138)
</TABLE>
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion together with "Selected
Consolidated Financial Data," our consolidated financial statements and the
related notes to those consolidated financial statements located elsewhere in
this prospectus. In addition to historical information, this discussion
contains forward-looking information that involves risks and uncertainties. Our
actual results could differ materially from those anticipated by such forward-
looking information due to competitive factors, risks associated with our
expansion plans and other factors discussed under "Risk Factors" and elsewhere
in this prospectus.
Overview
Revenues. Our revenues are substantially derived from fixed-price, fixed-
time contracts. Revenues earned under fixed-price, fixed-time projects are
recognized on the percentage-of-completion method based on the ratio of actual
costs incurred to total estimated costs. We recognize revenues on our other
projects on a time and materials basis. Revenues exclude reimbursable expenses
charged to clients.
Approximately 88% of our revenues for the year ended December 31, 1999, was
derived from fixed-price, fixed-time arrangements.
Due to our use of fixed-price, fixed-time contracts, our operating results
may be harmed by inaccurate estimates of costs and time required to complete
projects. Therefore, we closely monitor project progress through a series of
processes designed to help estimate cost and time to completion, including a
detailed review at the end of each project stage to determine project
percentage of completion. We typically invoice for an advance payment from our
clients upon contract signing, with additional billings upon our attainment of
project milestones. This practice of invoicing in advance of revenue
recognition in combination with significant new projects in the fourth quarter
of 1999 have resulted in an increase in the current year's receivables, as a
percentage of revenues, as compared to prior years. Deferred revenues consist
primarily of payments received in advance of services rendered. We recognize
those payments as revenues upon performance of services.
Cost Structure. Project personnel expenses consist primarily of payroll,
associated taxes, employee benefits, any third-party fees and net travel costs
incurred in the delivery of our services. Sales and marketing expenses consist
primarily of personnel costs and commissions as well as the costs associated
with the development and maintenance of our marketing materials and programs.
General and administrative expenses consist primarily of the costs associated
with operations management, finance, human resources, information systems,
facilities and other administrative support for project personnel.
We regularly review the fees we charge for our services, our employee
compensation and our overhead costs in an effort to remain competitive within
our industry. In addition, we monitor the progress of our projects with our
clients' senior management. Monitoring the costs and progress associated with
each project is aided by our intranet-based project management systems. We
manage the activities of our service delivery personnel by closely monitoring
project schedules and staffing requirements for new projects. Most of our
client projects can, and may in the future, be terminated by our clients
without penalty. However, our contracts generally provide that we will be
compensated based on the percentage of work completed relative to the fixed
price of the engagement. Termination of a client project could require us to
maintain underutilized employees, resulting in a higher than expected number of
inactive professionals. We maintain a sufficient number of senior professionals
to oversee existing and anticipated client projects and participate in our
sales efforts to engage new client projects.
Variability of Operating Results. Our operating results have fluctuated from
quarter to quarter and may continue to fluctuate in the future. These
fluctuations may be significant. We may not always forecast accurately the
frequency and duration of our projects. We incur expenses, which are mainly
fixed expenses, based on our expectations concerning the costs of our future
projects. We may not be able to reduce our
18
<PAGE>
spending in a timely manner to compensate for any shortfall in our projected
revenues. In the event of such a shortfall, our expenses as a percentage of our
revenues would increase. Our quarterly operating results may not meet the
expectations of analysts or investors. This may cause a decline in the market
price of our common stock.
Recent Net Losses. Our net loss was $10.9 million for the year ended
December 31, 1999, compared to $1.7 million for the year ended December 31,
1998. We primarily attribute our increased net losses to higher project
personnel expenses, sales and marketing expenses and general and administrative
expenses. The overall increase in expenses was primarily attributable to costs
incurred to expand or increase the number of project personnel as well as
significant investment in office facilities and related infrastructure
management and administrative personnel and sales and marketing.
Recent Events. In January 2000, we acquired the business of XTEND-Tech, a
30-employee information technology consulting organization serving Global 1000
companies. This acquisition will expand the breadth of our service offerings
and contribute to our future revenue growth. XTEND-Tech has a cost structure
that is similar to ours. We issued 1,350,000 shares of our common stock in
connection with this acquisition with an estimated fair value of approximately
$14.9 million. This consideration consisted of a combination of the purchase
price paid for the outstanding common stock of XTEND-Tech and consideration to
certain employee stockholders of XTEND-Tech for continued employment with us.
The acquisition was accounted for using the purchase method of accounting. The
total amount of the consideration treated as purchase price for this
acquisition was approximately $8.8 million and was allocated to the tangible
and intangible assets acquired and liabilities assumed based upon their
respective fair values at the acquisition date. The amortization of the
intangible assets will occur over the estimated periods to be benefited. In
connection with this acquisition we signed restricted stock agreements with
employee-stockholders of XTEND-Tech as consideration for continued employment.
The fair value of the unvested shares, which relate to these restricted stock
agreements, amounting to $6.1 million, has been recorded as deferred stock-
based compensation, which will be amortized over the three-year vesting period
of the restricted stock.
Results of Operations
The following table sets forth, as a percentage of revenues, our
consolidated statement of operations for the years ended December 31, 1997,
1998 and 1999.
<TABLE>
<CAPTION>
Year Ended
December 31,
------------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Consolidated Statement of Operations Data:
Revenues............................................... 100% 100% 100%
Operating expenses:
Project personnel..................................... 51 35 63
Sales and marketing................................... 32 23 31
General and administrative............................ 67 56 70
Depreciation.......................................... 3 3 4
Amortization of deferred stock-based compensation..... -- 1 12
Non-recurring expenses on closing of foreign
operations........................................... -- 3 --
--- --- ---
Total operating expenses............................. 153 121 180
--- --- ---
Income (loss) from operations.......................... (53) (21) (80)
Other income (expense), net............................ (2) -- --
--- --- ---
Income (loss) before income taxes...................... (55) (21) (80)
Income tax benefit (expense)........................... (2) -- --
--- --- ---
Net income (loss)...................................... (57)% (21)% (80)%
=== === ===
</TABLE>
19
<PAGE>
1999 Compared to 1998
Revenues. Our revenues increased 69% to $13.5 million for the year ended
December 31, 1999, compared to $8.0 million for the year ended December 31,
1998. We attribute our revenue growth primarily to an increase in the volume of
services delivered to new clients. We will continue to focus our efforts on new
client capture and expect this trend to continue. In 1999, our five largest
clients accounted for approximately 75% of our revenues. In 1998, our five
largest clients accounted for approximately 85% of our revenues. Compared to
the fourth quarter of 1998, the decline in revenues in the first quarter of
1999 can be attributed to a delay by a major client in its transition from its
legacy business systems. The decline in the second quarter of 1999 can be
attributed to the loss of a major client.
Project Personnel Expenses. Project personnel expenses increased $5.8
million, or 208%, to $8.6 million for the year ended December 31, 1999, from
$2.8 million for the year ended December 31, 1998. The increase was primarily
attributable to the hiring of additional project personnel to accommodate
current and anticipated increases in demand for our services. This increase in
project personnel resulted in a decline in utilization levels to approximately
60% in 1999, from an average of approximately 76% in 1998. Headcount for
project personnel as of December 31, 1999, was 112 compared to 36 as of
December 31, 1998. As a percentage of revenues, project personnel expenses were
63% for the year ended December 31, 1999, and 35% for the year ended December
31, 1998.
Sales and Marketing Expenses. Sales and marketing expenses increased $2.4
million, or 130%, to $4.2 million for the year ended December 31, 1999, from
$1.8 million for the year ended December 31, 1998. The increase was due to our
investment in our sales and marketing programs. Headcount for sales and
marketing personnel increased to 15 at December 31, 1999, from 8 at December
31, 1998. As a percentage of revenues, sales and marketing expenses were 31%
for the year ended December 31, 1999, and 23% for the year ended December 31,
1998.
General and Administrative Expenses. General and administrative expenses
increased $4.9 million, or 108%, to $9.4 million for the year ended December
31, 1999, from $4.5 million for the year ended December 31, 1998. Office rent
expenses increased to $828,000 for the year ended December 31, 1999, from
$214,000 for the year ended December 31, 1998. Headcount for managerial and
administrative personnel increased to 39 as of December 31, 1999, from 13 as of
December 31, 1998. The increases in office rent expenses accounted for 12% of
the overall increase. In addition, personnel expenses accounted for 68% of this
increase. As a percentage of revenues, general and administrative expenses were
70% for the year ended December 31, 1999, and 56% for the year ended December
31, 1998.
Depreciation. Depreciation expense increased $311,000, or 124%, to $562,000
for the year ended December 31, 1999, from $251,000 for the year ended December
31, 1998. The increase was attributable to capital expenditures for new
equipment and leasehold improvements.
Amortization of Deferred Stock-based Compensation. We recorded $1.6 million
in amortization of deferred stock-based compensation expense for the year ended
December 31, 1999. This expense represented the amortization of the difference
between the deemed fair value of the underlying options at the time of grant
and their exercise price.
Other Income (Expense), Net. Other expense was $5,000 for the year ended
December 31, 1999, compared to income of $36,000 for the year ended December
31, 1998. The variance was primarily due to an increase in interest expense.
The average aggregate balance outstanding on our line of credit and term loan
was $1.2 million during the year ended December 31, 1999, as compared to
$172,000 during the year ended December 31, 1998. Interest expense under these
facilities was $106,000 for the year ended December 31, 1999, and $56,000 for
the year ended December 31, 1998.
Income Tax Expense. We incurred income tax expense of $15,000 for the year
ended December 31, 1999, and $2,000 for the year ended December 31, 1998. As of
December 31, 1999, we had approximately $13.0 million of federal net operating
loss carryforwards and approximately $11.0 million of state net operating loss
carryforwards available to offset future taxable income. The federal net
operating loss carryforwards will expire between 2011 and 2019, and the state
net operating loss carryforwards will expire between 2004 and 2006, if not
utilized.
20
<PAGE>
Under the Tax Reform Act of 1986, the amounts of and the benefit from net
operating losses that can be carried forward may be limited upon a cumulative
stock ownership change of more than 50% over a three-year period. Any unused
annual limitation may be carried forward to future years for the balance of the
net operating loss carryforward period.
1998 Compared to 1997
Revenues. Our revenues increased 53% to $8.0 million for the year ended
December 31, 1998, compared to $5.2 million for the year ended December 31,
1997. We attribute approximately 35% of our revenue growth to an increase in
the volume of services delivered to new clients and approximately 65% to
additional projects for existing clients. In 1998, our five largest clients
accounted for approximately 85% of our revenues. In 1997, our five largest
clients accounted for approximately 55% of our revenues.
Project Personnel Expenses. Project personnel expenses increased by
$122,000, or 5%, to $2.8 million for the year ended December 31, 1998, from
$2.7 million for the year ended December 31, 1997. The increase was
attributable to the hiring of additional project personnel during the second
half of 1998. As a percentage of revenues, project personnel expenses declined
to 35% for the year ended December 31, 1998, compared to 51% for the year ended
December 31, 1997. The decrease in project personnel expenses in 1998 as a
percentage of revenues was the result of our delay of hiring additional
personnel until the second half of 1998, which resulted in a higher utilization
rate and a slower growth of expenses relative to the growth in revenues.
Sales and Marketing Expenses. Sales and marketing expenses increased by
$167,000, or 10%, to $1.8 million for the year ended December 31, 1998, from
$1.7 million for the year ended December 31, 1997. The increase in these
expenses was primarily attributable to the hiring of business development and
marketing personnel, increased public relations activities and the
implementation of new and continuation of our existing marketing programs.
Headcount for sales and marketing personnel increased to eight at December 31,
1998, from five at December 31, 1997. As a percentage of revenues, sales and
marketing expenses were 23% for the year ended December 31, 1998, and 32% for
the year ended December 31, 1997.
General and Administrative Expenses. General and administrative expenses
increased $1.0 million, or 31%, to $4.5 million for the year ended December 31,
1998, from $3.5 million for the year ended December 31, 1997. The increase was
primarily attributable to expenses incurred to accommodate our current and
anticipated growth, including the expansion of our office facilities and the
increased cost of management and administrative personnel and other general
operating expenses in the areas of accounting, human resources and general
operations. Office rent expenses increased to $214,000 for the year ended
December 31, 1998, from $157,000 for the year ended December 31, 1997.
Headcount for management and administrative personnel increased to 12 at
December 31, 1998, from six at December 31, 1997. As a percentage of revenues,
general and administrative expenses were 56% for the year ended December 31,
1998, and 67% for the year ended December 31, 1997. Also, reflected in the
results for the quarter ended December 31, 1998, was a reduction in costs
associated with a decrease in hiring activity, an adjustment to the incentive
compensation accrual, based on a revision of management's estimate of the
required level, and savings associated with a reduction in professional
services expenses.
Depreciation. Depreciation increased by $64,000 to $251,000 for the year
ended December 31, 1998, from $187,000 for the year ended December 31, 1997.
The increase was related to increased investments in furniture and equipment.
Amortization of Deferred Stock-based Compensation. We recorded $50,000 in
amortization of deferred stock-based compensation expense for the year ended
December 31, 1998. This expense represented the amortization of the difference
between the deemed fair value of the underlying options at the date of grant
and their exercise price.
Non-Recurring Expenses on Closing of Foreign Operations. In November 1998,
we announced our intention to close our operations in Malaysia. In conjunction
with this announcement, we recorded a reserve of
21
<PAGE>
$250,000 for anticipated liquidation costs of our Malaysian subsidiary. This
amount consisted of $157,000 for the write-down from the liquidation of the
assets, $47,000 for remaining trade obligations and $46,000 for legal and other
professional services to be provided during the liquidation process. Operations
ceased during 1998, and all employee severance related costs were incurred
prior to December 31, 1998. During 1999, the liquidation of the assets and
settlement of the obligations was completed. As of December 31, 1999, $41,000
remains accrued to cover a pending claim from a former customer of the
Malaysian subsidiary. We anticipate that this claim will be settled during
2000.
Other Income (Expense), Net. Other income increased by $115,000 to $36,000
for the year ended December 31, 1998, from an expense of $79,000 for the year
ended December 31, 1997. The increase was primarily attributable to increased
interest income and a decrease in interest expense related to borrowings under
our revolving line of credit and capital lease obligations. Interest expense
was $56,000 for the year ended December 31, 1998, and $83,000 for the year
ended December 31, 1997.
Income Tax Expense. We incurred a $2,000 income tax expense for the year
ended December 31, 1998, as compared with $90,000 for the year ended December
31, 1997. As of December 31, 1998, we had approximately $3.0 million of federal
net operating loss carryforwards and $2.0 million of state net operating loss
carryforwards available to offset future taxable income.
22
<PAGE>
Quarterly Operating Results
The following table sets forth a summary of our unaudited quarterly
consolidated operating results for each of our eight most recently ended fiscal
quarters. We have derived this information from our unaudited quarterly
financial statements, which in our opinion, have been prepared on a basis
consistent with our audited consolidated financial statements contained
elsewhere in this prospectus and include all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation in accordance
with generally accepted accounting principles when read in conjunction with our
consolidated financial statements and the related notes included elsewhere in
this prospectus. Our quarterly consolidated operating results are not
necessarily indicative of future results of operations.
<TABLE>
<CAPTION>
Three Months Ended
---------------------------------------------------------------------------------
Mar. 31, Jun. 30, Sep. 30, Dec. 31, Mar. 31, Jun. 30, Sep. 30, Dec. 31,
1998 1998 1998 1998 1999 1999 1999 1999
-------- -------- -------- -------- -------- -------- -------- --------
(in thousands, unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Consolidated Statement
of Operations Data:
Revenues................ $1,681 $2,040 $2,280 $2,015 $ 1,818 $ 1,907 $ 4,199 $ 5,596
Operating expenses:
Project personnel...... 611 655 739 794 1,168 1,561 2,531 3,350
Sales and marketing.... 425 575 518 320 798 706 1,056 1,670
General and
administrative........ 1,134 1,212 1,266 907 1,380 2,001 2,346 3,707
Depreciation........... 52 59 63 78 84 118 164 196
Amortization of
deferred stock-based
compensation.......... -- -- -- 50 179 225 432 754
Non-recurring expense
on closing of foreign
operations............ -- -- -- 250 -- -- -- --
------ ------ ------ ------ ------- ------- ------- -------
Total operating
expenses............ 2,222 2,501 2,586 2,399 3,609 4,611 6,529 9,677
------ ------ ------ ------ ------- ------- ------- -------
Loss from operations.... (541) (461) (306) (384) (1,791) (2,704) (2,330) (4,081)
Other income (expense),
net.................... (15) 4 21 26 17 (7) 4 (19)
------ ------ ------ ------ ------- ------- ------- -------
Loss before income
taxes.................. (556) (457) (285) (358) (1,774) (2,711) (2,326) (4,100)
Income tax expense...... -- -- -- (2) (5) (5) (5) --
------ ------ ------ ------ ------- ------- ------- -------
Net loss................ $ (556) $ (457) $ (285) $ (360) $(1,779) $(2,716) $(2,331) $(4,100)
====== ====== ====== ====== ======= ======= ======= =======
As a Percentage of
Revenue:
Revenues................ 100% 100% 100% 100% 100% 100% 100% 100%
Operating expenses:
Project personnel...... 36 32 32 40 64 82 60 60
Sales and marketing.... 25 28 23 16 44 37 25 30
General and
administrative........ 68 59 56 45 76 105 56 66
Depreciation........... 3 3 3 4 5 6 4 3
Amortization of
deferred stock-based
compensation.......... -- -- -- 2 10 12 10 13
Non-recurring expense
on closing of foreign
operations............ -- -- -- 12 -- -- -- --
------ ------ ------ ------ ------- ------- ------- -------
Total operating
expenses............ 132 122 114 119 199 242 155 172
------ ------ ------ ------ ------- ------- ------- -------
Income (loss) from
operations............. (32) (22) (14) (19) (99) (142) (55) (72)
Other income (expense),
net.................... (1) -- 1 1 1 -- -- --
------ ------ ------ ------ ------- ------- ------- -------
Income (loss) before
income taxes .......... (33) (22) (13) (18) (98) (142) (55) (72)
Income tax benefit
(expense).............. -- -- -- -- -- -- -- --
------ ------ ------ ------ ------- ------- ------- -------
Net income (loss)....... (33)% (22)% (13)% (18)% (98)% (142)% (55)% (72)%
====== ====== ====== ====== ======= ======= ======= =======
</TABLE>
23
<PAGE>
Liquidity and Capital Resources
Since 1997, we have financed our operations primarily from sales of
preferred stock and borrowings under a line of credit and a term loan from a
commercial bank. As of December 31, 1999, we have raised approximately $17.7
million, net of offering expenses, $13.7 million through the sale of our
preferred stock and $4.0 million from a term loan. At December 31, 1999, we had
approximately $3.2 million in cash and cash equivalents.
Net cash used in operating activities was $2.2 million for the year ended
December 31, 1997, $340,000 for the year ended December 31, 1998, and $8.7
million for the year ended December 31, 1999. Cash used in operating activities
in each of these periods was primarily the result of net losses, adjusted for
non-cash items primarily related to depreciation, increases in accounts
receivable and fees and unbilled revenues resulting from increased sales
revenue in the fourth quarter, partially offset by increases in accounts
payable and accrued expenses resulting from increased operating expenses
associated with the sales revenue growth. The losses during 1999 resulted in
negative working capital of $1.9 million for the period ending December 31,
1999, versus positive working capital of $429,000 and $3.8 million,
respectively, for the periods ending December 31, 1997, and December 31, 1998.
Net cash used in investing activities was $50,000 for the year ended
December 31, 1997, $460,000 for the year ended December 31, 1998, and $1.3
million for the year ended December 31, 1999. Cash used in investing activities
in each period consisted primarily of purchases of furniture and equipment.
Net cash provided by financing activities was $2.9 million for the year
ended December 31, 1997, $4.9 million for the year ended December 31, 1998, and
$8.4 million for the year ended December 31, 1999. In 1997 and 1998, the cash
provided by our financing activities was primarily from the sale of our
preferred stock. For the year ended December 31, 1999, the cash provided from
our financing activities was primarily from the sale of our preferred stock and
borrowings under a term loan and equipment leases.
As of December 31, 1999, our principal commitments consisted of obligations
under a term loan and under equipment leases, which funded our purchases of
furniture and equipment. Our equipment leasing arrangements consist primarily
of us paying rental fees to third-party leasing providers at interest rates
between 11.00% and 13.00%. Borrowings under the term loan bear interest at the
prime rate plus 2.00% (10.75% currently), with accrued interest paid monthly,
and are due at November 30, 2000. As of December 31, 1999, we borrowed $4.0
million, the entire amount available under the term loan. We have $2.0 million
available under a revolving line of credit. Borrowing under the line of credit
is limited to the lesser of 80% of the amount of eligible accounts receivable
or $2.0 million and bears interest at the prime rate plus 2.00% (10.75%
currently). We have never borrowed under the line of credit. Although we have
no material commitments for capital expenditures, we anticipate an increase in
our capital expenditures consistent with anticipated growth in our operations,
infrastructure and personnel.
Subsequent to December 31, 1999, we issued 3,000,000 shares of series D
preferred stock in a private placement for gross proceeds of approximately
$22.2 million. The difference between the deemed fair value of the Series D
preferred stock of $11.00, the mid-point of the range of share prices
anticipated for this offering, and the price per share of $7.41 was considered
to be a beneficial conversion feature analogous to a dividend to the preferred
stockholders. The value of the beneficial conversion feature of $10.8 million
will be recognized in fiscal 2000 as a non-cash charge to net loss attributable
to common stockholders. In February 2000, we entered into two letters of credit
for approximately $2.8 million and $198,000 to secure lease deposits to expand
into two new office facilities. These letters of credit expire in February
2001, and are secured by certificates of deposit in the same amounts.
We believe that the net proceeds from this offering, combined with the
proceeds of the series D private placement, the proceeds of the private
placement to be closed contemporaneously with this offering, current
24
<PAGE>
cash balances and borrowing capacity under our credit facilities will be
sufficient to fund our requirements for working capital and capital
expenditures for at least the next twelve months. Thereafter, we may sell
additional equity or debt securities or seek additional credit facilities.
Sales of additional equity or convertible debt securities would result in
additional dilution to our stockholders. We may need to raise additional funds
sooner in order to support expansion, develop new or enhanced services, respond
to competitive pressures, acquire complementary businesses or technologies or
take advantage of unanticipated opportunities. Our future liquidity and capital
requirements will depend upon numerous factors, including the success of our
existing and new service offerings and competing technological and market
developments. Additional financing, if any, may not be available on
satisfactory terms.
Disclosure About Market Risk
Our exposure to market risk for changes in interest rates relates primarily
to the increase or decrease in the amount of interest income we can earn on our
available funds for investment and on the increase or decrease in the amount of
interest expense we must pay with respect to our various outstanding debt
instruments. The risk associated with fluctuating interest expense is limited,
however, to the exposure related to those debt instruments and credit
facilities that are tied to variable market rates. We do not plan to use
derivative financial instruments in our investment portfolio. We plan to ensure
the safety and preservation of our invested principal funds by limiting default
risks, market risk and reinvestment risk. We plan to mitigate default risk by
investing in high-credit quality securities.
All of our revenues are realized currently in U.S. dollars and are from
customers primarily in the United States. Therefore, we do not believe that we
currently have any significant direct foreign currency exchange rate risk.
25
<PAGE>
BUSINESS
Overview
We are a leading Internet professional services firm providing strategy,
technology, implementation and support services solutions to large corporations
and emerging Internet businesses that engage in e-commerce with other
businesses. We focus on helping our clients conceive and implement e-markets
and electronic customer relationship management systems. E-markets are
electronic marketplaces that enable businesses to collaborate with trading
partners, conduct e-commerce, manage distribution relationships and enhance
business partnerships. Electronic customer relationship management is an
Internet-based approach to coordinating a company's customer relationships
across communications channels, business functions and trading partners.
We believe our capabilities are well-suited to developing the extremely
complex, highly integrated systems required for effective business-to-business
e-commerce solutions. Our professionals create scalable, reliable and
integrated business systems using our proprietary LightSpeed delivery model and
i2K architectural framework. We provide our services through our staff of 168
professionals, who have an average of ten years experience in business process
analysis, technology architecture, project management and software engineering.
Industry Background
The Internet enables millions of businesses and consumers to share
information and conduct commerce electronically. Businesses initially used
their Internet sites primarily for advertising and promotional purposes. As
Internet usage increased, businesses realized the Internet could also be used
as an effective medium for directly targeting consumers, improving
communications with customers and generating business-to-consumer e-commerce
transactions. Forrester Research, Inc. estimates that the total value of goods
exchanged in the United States business-to-consumer e-commerce market will
exceed $100 billion by 2003. Driven by the scale and scope of this rapidly
emerging business opportunity, businesses began to develop increasingly
complex, higher transaction volume consumer-oriented websites.
While business-to-consumer e-commerce was evolving, companies also began to
use Internet technology to streamline their internal operations and
electronically integrate select internal processes with other businesses,
including their suppliers, distributors and key business customers. Today,
businesses are using Internet technologies to improve their competitive
positions by increasing operating efficiencies, strengthening their trading
partner relationships and identifying and capitalizing on emerging business
opportunities by developing various Internet-based business models. Forrester
Research, Inc. estimates that the total value of goods exchanged in the United
States business-to-business e-commerce market will increase from $43.1 billion
in 1998 to $2.7 trillion in 2004, representing a 99% six-year compound annual
growth rate.
An important emerging Internet-based business model is the electronic
market. Electronic markets provide Internet-based trading hubs where multiple
buyers and sellers communicate and conduct electronic commerce. The creation of
these e-markets enables innovative methods for trading between business
partners, including auctions, reverse auctions, aggregation, inventory
liquidation and on-line negotiation. These electronic markets provide
unprecedented global opportunities for businesses to exchange information and
execute transactions with the efficiency, cost effectiveness and global reach
provided by Internet technologies, while supporting individual contractual
relationships between trading partners. Examples of these e-markets include
autoExchange.com, ePolicy.com, Pure Markets, tradepac.com and VerticalNet.
Businesses are rapidly developing e-markets and other business-to-business
e-commerce systems in order to fully realize the market opportunity. Business-
to-business e-commerce systems are engineered to facilitate:
. significant increases in the value and complexity of data and
transactions processed
. improved performance and response times to support real-time access by
trading partners from a variety of technology platforms
26
<PAGE>
. improved reliability, accuracy and security for transactions
. high degrees of integration between legacy applications, networks and
technology platforms within a company as well as across diverse
businesses
. the execution of a broad variety of processes and payment methods that
exist between trading partners
These business-to-business systems are highly complex and often involve a
greater number of steps per transaction and more processes than business-to-
consumer systems, creating a longer, more intricate commerce chain and
resulting in a more complex delivery infrastructure. Some of the typical
differences between business-to-consumer and business-to-business e-commerce
are highlighted below:
<TABLE>
<CAPTION>
Characteristic Business-to-Consumer Business-to-Business
-------------- ---------------------------- -------------------------------------
<S> <C> <C>
Users and
Participants .One-to-many .Many-to-many
.Individuals .Fragmented buyers, suppliers,
partners and distributors
- -------------------------------------------------------------------------------------
Products and
Services .Standardized, mass market .Higher degrees of customization
.Convenient .Complex configuration
.Price points: $100s-$1000s .Price points: $1000s-millions
.Mission critical
.Highly time-sensitive
- -------------------------------------------------------------------------------------
Delivery and
Fulfillment .Credit card payment .Credit/financing key issues
.Straightforward fulfillment .Intricate synchronization
.Multi-stage shipping
.Customs, tariffs and inspections
- -------------------------------------------------------------------------------------
Infrastructure .Supplier-side systems only .Real-time, customized front-end
.Tight back-office integration
.Security and bandwidth for heavy
volumes
- -------------------------------------------------------------------------------------
Outcome
Objective .Building brand .Enabling commerce between businesses
</TABLE>
Developing and supporting business-to-business e-commerce systems requires
substantial expertise in designing new business processes that integrate with
existing operations, selecting and implementing the appropriate Internet
technologies and managing the implementation process to meet the time-to-market
needs characteristic of today's competitive business environment. There is a
limited supply of high-quality, experienced Internet services professionals,
and demand for these professionals is increasing rapidly. This makes it
increasingly difficult for companies seeking to internally implement business-
to-business e-commerce solutions to hire, develop and retain these
professionals. As a result, an increasing number of businesses, from start-ups
to Fortune 1000 companies, engage third-party Internet professional services
firms to help them design and implement business-to-business e-commerce
systems.
The demand for these and related Internet and e-commerce services is
projected to grow dramatically. International Data Corporation estimates that
this market will grow from approximately $7.8 billion in 1998 to $78.6 billion
in 2003, representing a 59% compound annual growth rate.
27
<PAGE>
We believe there are only a few Internet professional services firms with an
exclusive focus on business-to-business e-commerce engagements. Additionally,
we believe that in order to be successful in this market, Internet professional
services firms must possess an integrated model of business-to-business-
oriented process analysis, substantial software engineering expertise, strong
technology architecture and integration skills, and effective client and
project management capabilities.
Our Solution
We are a leading Internet professional services firm. We provide business-
to-business e-commerce systems solutions to large corporations and emerging
Internet businesses and focus on building and supporting complex e-markets and
electronic customer relationship management solutions.
The key elements of our solution are:
Early and Exclusive Business-to-Business e-Commerce Focus. We have delivered
business-to-business software applications for our clients since 1995. We
provide our services through teams of talented professionals with extensive
experience in business process analysis, project management and software
engineering. We believe our early vision and business-to-business experience
enables us to rapidly and efficiently architect and implement Internet
solutions.
Proprietary LightSpeed Delivery Model. LightSpeed, our proprietary
collection of operating principles, methods and frameworks, is an Internet-
based model for governing the way we interact with our clients, including how
we define, price, staff and manage our projects. We believe the successful
application of LightSpeed in our engagements enables us to more accurately
forecast project schedules and costs. LightSpeed also allows us to better
manage project risk and to identify, capture and reuse valuable Internet
frameworks, designs, processes and techniques that we have developed while
working on prior engagements.
Proprietary i2K Architectural Model. i2K is a collection of principles,
methods and frameworks we have created to guide development of complex
e-commerce systems. Using i2K we help our clients to develop e-markets and
electronic customer relationship management systems that leverage and integrate
information between their Internet-based and legacy systems and those of their
trading partners. We believe the successful design and implementation of
projects using our i2K model result in secure, reliable systems and a highly
extendable architectural platform.
Packaging of Services. Based on our extensive experience in business-to-
business e-markets and electronic customer relationship management solutions,
we have developed modular solutions tailored for discrete business processes.
Our packaged service offerings are comprised of three major elements: pre-
defined business functions, proven business practices and pre-defined
technology architecture. We believe packaging our services in this manner
reduces our project risk, increases our operating margins, improves our sales
force's productivity, speeds time-to-market for our clients and differentiates
us from our competition.
Integrated End-to-End Implementation Capabilities. We believe we provide the
complete range of capabilities required to deliver comprehensive business-to-
business e-commerce solutions to our clients. Our core competencies range from
business process analysis and technology architecture to Internet application
development and post-launch managed web services.
We believe our breadth of capabilities enables us to engineer and deliver
complete electronic markets and electronic customer relationship management
solutions for a fixed price and within fixed timeframes.
Knowledge Management and Transfer. We collect, store and organize
information we acquire from interaction with our clients in order to enhance
our existing base of technology and business process expertise. Inside Inventa,
our corporate intranet, is a secure integrated knowledge management repository
that facilitates
28
<PAGE>
the dissemination of this intellectual capital across our organization. In
addition, eTrack, our internal Internet-based project management system,
enables us to capture, monitor and manage information for project scheduling;
project status review; document and deliverable distribution to our
professionals and our clients; and detailed information on the resources
required to achieve specific tasks on a project. We believe this expanding base
of readily accessible knowledge enables us to meet our clients' ever-increasing
expectations for our performance, improves our ability to forecast the
estimated time and resources required to complete our client engagements and
increases the reusability of our intellectual capital, thereby reducing risks
to us and our clients.
Our Strategy
Our objective is to enhance our position and reputation as a leading
provider of Internet professional services in the context of business-to-
business e-commerce. The key elements of our growth strategy are to:
Maintain Our Exclusive Business-to-Business e-Commerce Focus. We intend to
maintain our exclusive focus on business-to-business e-commerce. We believe
this segment of the market is the most strategic to our clients, is the fastest
growing segment of the e-commerce market and is best aligned with our core
competencies. Currently, we target two major business-to-business e-commerce
practice areas:
. e-markets, where we engineer and support business-to-business electronic
markets that facilitate the timely exchange of information and goods
between trading partners
. electronic customer relationship management, where we deliver solutions
for a broad range of business-to-business customer interaction processes,
including sales, marketing and customer support
We also intend to expand our service offerings by developing additional
practices to cover the full range of business-to-business e-commerce processes
and relationships in which our clients and prospective clients are likely to
engage, including electronic partner relationship management and electronic
supply chain management.
Maintain Our Technology Leadership. We believe that our clients choose to
work with us because of our reputation for technology leadership and for
successfully solving some of the most challenging business-to-business e-
commerce problems with leading-edge Internet technologies. We believe working
on complex assignments will make us more attractive to high-quality
professionals, who enlarge our technology skill set and knowledge base. We
intend to maintain our technology leadership by:
. pursuing complex engagements that allow us to refine and advance our
business-to-business e-commerce capabilities
. researching emerging technologies for their relevance and applicability
to our clients' business strategies
. refining and enhancing our proprietary i2K architectural model to take
advantage of advances in Internet technology
. deepening our current partner relationships and establishing new
partnerships to maintain our status as an early adopter of emerging
technologies and skill sets
. enhancing our knowledge management infrastructure to improve the breadth,
depth and quality of access to technology-related information by our
professionals
Continue to Package Our Services. We intend to continue to package our
services. We believe packaging our services:
. permits faster and more predictable project implementations resulting in
higher operating margins
29
<PAGE>
. facilitates marketing our services and solutions to prospective clients
. demonstrates our thought leadership and competencies
. improves training for our professional staff and increases sales force
productivity
. differentiates us from our competitors
We intend to expand our packaged service offerings beyond our current eSales
and eCare products by leveraging knowledge and experience from our engagements,
continuing to refine and enhance our LightSpeed delivery model and identifying
and establishing the partner relationships relevant to effective packaging of
our services.
Recruit and Retain Highly-Skilled Professionals. We intend to continue to
hire, train and retain individuals who are highly skilled in the engineering of
complex Internet systems and business processes . To provide an environment
conducive to recruitment and retention, we have created a corporate culture
that emphasizes balance between one's professional and personal life,
challenging work assignments, broad equity ownership, promotion from within,
opportunities for advanced training and direct involvement in growing our
business.
Further, we have designed our LightSpeed delivery model to be a key employee
recruiting and retention tool by:
. encouraging direct client contact at all levels of our project teams
. basing our teams at our facilities to reduce professionals' travel time
. conducting our engagements using small, highly-specialized project teams
We will continue to expand our in-house recruiting staff and to invest in
initiatives focused on direct and Internet-based recruitment, employee referral
programs and on-campus recruiting. In addition, we intend to expand the
geographic reach of our recruitment efforts and to advertise and promote our
brand to generate awareness of our company among potential employees in
relevant markets.
Expand Existing and Establish New Client Relationships. We believe our track
record of successful engagements has resulted in strong relationships with our
clients. As a result, our clients often request that we expand the scope and
complexity of our engagements. This reinforces our growing reputation as an
innovative provider of business-to-business e-commerce solutions. We intend to
leverage our reputation for client satisfaction and innovation to attract new
engagements with our existing clients and to capture new clients through
referral-driven sales.
In addition, we intend to engage new clients by continuing to:
. expand our direct sales force in our current geographic markets
. invest in promotional activities designed to improve brand awareness and
provide sales leads
. establish new strategic business and technology alliances
. expand geographically, both within the United States and internationally
Our Services
We have developed a broad range of capabilities in designing and
implementing business-to-business e-commerce systems and applications for our
clients, from integrating demand-side Internet applications with front- and
back-office systems to supply-side Internet applications for servicing trading
partners. Our capabilities include:
. competitive assessment of our clients' Internet strategies and
capabilities
30
<PAGE>
. business process analysis
. application portfolio definition and functionality prioritization
. requirements definition and concept prototyping
. technology architecture design and engineering
. custom Internet application development
. e-commerce software implementation
. systems integration
. enterprise application integration (within and between businesses)
. applications management and enhancement
. service productization
We leverage these skill sets and our substantial expertise in two major
business-to-business e-commerce practice areas, e-markets and electronic
customer relationship management, as described below:
Electronic Markets. We engineer and support business-to-business
marketplaces that are highly scalable and extendable to accommodate the rapid
growth that well-designed and well-marketed business-to-business systems are
likely to experience.
Electronic Customer Relationship Management. We design and engineer
Internet-based systems and applications for a broad range of business-to-
business customer interaction processes, including sales, marketing, customer
support, distribution and fulfillment.
These service offerings are comprehensive, scalable, extendable and secure,
thereby helping our clients ensure the quality and integrity of their
relationships with their business customers and other trading partners.
Although each of our solutions is uniquely engineered and customized to meet
the expectations of each of our clients, we design them using standard Internet
technologies and commercially available software to accelerate project delivery
and ease system maintenance.
We deliver our solutions using the following service models:
LightSpeed Delivery Model. LightSpeed is our proprietary Internet-based
model for governing the way we deliver solutions to our clients. Using
LightSpeed, we usually complete entire projects for our clients in five to six
months.
31
<PAGE>
LightSpeed is composed of four distinct stages:
<TABLE>
<C> <S>
Innovate Our professionals work closely with our clients' senior
executives to conduct a strategic assessment of their
competitive positioning in the Internet marketplace and
create a business and technology roadmap for the development
of a business-to-business solution. We then arrive at a
shared vision of our clients' business-to-business
initiative and explore potential software applications,
identify architectural issues and highlight potential
obstacles to success. Finally, we deliver an agreed-upon
business-to-business e-commerce roadmap for the development
of a solution.
- -------------------------------------------------------------------------------
Blueprint We work with our clients to define and prioritize the scope,
functionality and business processes for their projects.
Using intensive workshops, storyboarding and prototyping
techniques, we deliver functional requirements, an
application prototype, architecture and technology
recommendations and a detailed plan for the LightSpeed
Create and Launch stage.
- -------------------------------------------------------------------------------
Create and Launch We develop a detailed engineering design and create a
comprehensive quality assurance plan. We then implement our
solution in a series of progressively more functional
releases. With this approach, we deliver a production-
quality release with meaningful, business-relevant
functionality usually within ten weeks. The entire Create
and Launch stage typically takes between 16 and 24 weeks and
may include two or three releases.
- -------------------------------------------------------------------------------
Enhance We help our clients evaluate an individual project's success
before embarking on the next project or major phase. We
refine our most recent implementation and enhance the
application in response to changes in user requirements. We
also offer our clients opportunities to expand their
implementations with application enhancement and database
consulting services.
</TABLE>
i2K Architectural Model. i2K is our proprietary collection of principles,
methods and frameworks for business-to-business e-commerce solutions. It
provides a schematic for developing electronic markets and electronic customer
relationship management systems that are scalable, adaptable, integrated with
our clients' Internet-based and legacy systems and extendable outside their
enterprises to their trading partners' systems. We believe each of our clients'
competitive advantage is directly related to how quickly and how well they
leverage and integrate information within their Internet-based and legacy
systems and with those of their trading partners. Accessing and combining this
information in meaningful ways is essential to leveraging the potential of the
Internet.
Packaged Service Offerings. We have combined our LightSpeed delivery model,
our i2K architectural model, commercially available software and the collective
knowledge of our professionals into packaged service offerings for specific
business processes. We currently have targeted two critical business processes
with these Internet offerings, sales through our eSales offering and customer
care through our eCare offering. With eSales and eCare, we can quickly assess
and analyze our clients' businesses and recommend a portfolio of applications,
develop an implementation strategy, define system requirements, design the
technology architecture, and then prototype, engineer and enhance the
solutions. Using eSales and eCare, we can rapidly deliver what we have
determined to be the most common functionality for business-to-business
customer relationship management processes.
Upon implementation of eSales or eCare, our clients' and their trading
partners' sales or customer service representatives have access to a broad
variety of capabilities to facilitate interaction with, and satisfy the needs
of, their business customers. Some of the more common functionalities include:
. customer profiling
. sales or customer service workflow or process management
32
<PAGE>
. sales or customer service case management
. custom database-driven views of customers, products, suppliers and orders
. e-mail messaging
. sales and customer care management reporting
. integration with call center operations
eSales enables our clients to generate revenue through Internet-based sales
channels; satisfy and retain customers through online order and sales
management; and streamline the purchasing process for their business
customers.
eCare enables our clients to ensure consistent, high-quality customer
interaction; retain customers through personalized and responsive service;
reduce overhead and call center volume; and capture customer data.
Clients
The following is a list of our clients that generated more than $100,000 in
services revenue during 1999:
ADP
GoTo.com
Amkor Technology
Pure Markets
Cadence Design Systems
Shaman Botanicals.com
Citigroup
Siemens
Crane Co.
SMART Modular Technologies
ePolicy.com
Sun Microsystems
Fujitsu
tradepac.com
In 1999, our five largest clients represented 75% of our revenues,
including ADP and ePolicy.com, each of which represented more than 10% of our
revenues.
In addition, we began engagements for the following additional clients
since the beginning of the fourth quarter of 1999:
Charles Schwab & Co., Inc.
Portera Systems
Grainger.com (a subsidiary of W.W. Grainger, Inc.)
Utility.com, Inc.
Moai Technologies, Inc.
Vastera Inc.
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<PAGE>
Case Studies
<TABLE>
<C> <S>
The Problem
ADP ADP recognized an opportunity to enhance and extend its service offerings
to small business customers after seeing an increasing number of small
businesses obtaining Internet access. In addition, their market was
changing as new competitors arrived with other offerings. In order for
ADP to compete, sustain its leadership position and protect its brand, it
needed to deliver a digital offering for its customers. ADP believed the
new offering should provide its customers a payroll choice model, improve
the level and quality of customer service, and increase customer
convenience and control. ADP required that the system provide unlimited
access to its customers for entering payroll data and reduce the number
of errors entered into payroll databases. Bringing the service to market
quickly was critical, as was seamless integration with legacy payroll
systems, application of complex payroll and taxation issues and security.
- -------------------------------------------------------------------------------
Our Solution: Electronic Customer Relationship Management System
Our solution, EasyPayNet, is an easy to use, fully functional Web-based
payroll system that accesses ADP's wide range of services, including
federal, state and local tax filing, direct deposit and 401(k) services.
Moreover, access is available 24 hours a day, seven days a week through a
secure global network. In the Innovate stage, our business analysts
identified and prioritized the functional requirements for providing
payroll services over the Internet to ADP customers. We provided ADP with
insights and options on how to leverage Internet technologies to provide
functionality to their customers that it could not with its existing
systems. We prioritized the resulting functionality for progressive
releases of the solution and described the expected customer experience
in each one of these releases. In the Blueprint stage, our architects
defined the requirements for the first release, identified and selected
the architectural and technology components and developed an application
prototype. We selected Oracle's Relational DBMS as the database on NT
servers, integrated with legacy data from an IBM AS/-400 using Oracle
replication services. We created custom application services adapters for
replication from the AS/-400 platform. We then selected Active Software's
ActiveWeb technology on a Microsoft IIS WebServer for application
services. We created a user experience base using a combination of custom
HTML and Java Servelets. In the Create and Launch stage, we completed the
technical design of the application and data models and identified legacy
system integration requirements. We developed, tested and deployed the
first release of the application and then delivered a production support
environment that includes application support and maintenance services.
Since the first release, we have implemented incremental enhancements,
installing changes based on customer feedback. In addition, we have
improved the level and quality of the infrastructure, optimized
application performance and created a framework for enabling the
integration of ADP's trading partners. The project was delivered in time
to meet ADP's expectations for sustaining its competitive position and
expanding its offerings via a digital channel.
- -------------------------------------------------------------------------------
The Benefits
The increased flexibility that EasyPayNet provides meets the unique needs
of ADP's small business customers and increases ADP's competitiveness by
streamlining operations on the Internet. In addition to satisfying its
current customers, ADP is selling the service to a new market of
customers it could not previously serve. As a by-product of the solution,
ADP re-evaluated all its existing business processes and expects to
derive infrastructure efficiencies.
</TABLE>
34
<PAGE>
<TABLE>
<C> <S>
The Problem
Cadence Design Cadence Design Systems is the leading vendor of engineering
Systems design software. Its Customer Support organization realized
it lacked value-added support services for its clients, a
result of its inability to access an enterprise-wide profile
of important customer information. Cadence needed an
effective, seamless and transparent integration of key
supply chain databases. Cadence wanted a single system to
provide all the services it required. Cadence wanted to
leverage its nonintegrated legacy information sources,
rather than engineer a completely new solution.
- -------------------------------------------------------------------------------
Our Solution: Electronic Customer Relationship Management
System
Our Innovate stage with Cadence enabled evaluation of the
strengths and weaknesses of its existing service model and
resulted in an initial architecture that met expectations
for integration of the heterogeneous legacy systems. In our
Blueprint Stage, our architects developed requirements for a
global customer entitlement system and the framework for
data mining, extracting and integrating from the legacy
customer service systems. Cadence was presented a discovery
document with implementation and architectural roadmaps and
a functionality prioritization matrix. In our Create and
Launch Stage, our engineers developed the global customer
entitlement system using NetDynamics Application Server as
the core, Oracle as the back-end database server, Sun
Solaris as the implementation platform, and completely
customized the integration solution in HTML and Java. The
application also used Oracle's Data Replication services.
Our engineers developed several adapters to integrate
Cadence's legacy systems, with order processing
applications, the Scopus Call Tracking System and their
online technical support system. The entire project was
completed in 16 weeks.
- -------------------------------------------------------------------------------
The Benefits
The system now presents a global and accurate view of
customer service entitlements by customer and product.
Customer Service representatives are making better decisions
and customers are experiencing less frustration. Cadence
expects to earn additional revenue, to reduce its case load
</TABLE> and to experience cost savings of approximately $720,000
annually.
35
<PAGE>
<TABLE>
<C> <S>
The Problem
ePolicy.com Cal-Surance, Inc., a leading insurance broker based in Southern
California, wanted to find a more effective and efficient way to
sell and service commercial insurance for small businesses and
professionals.
- -------------------------------------------------------------------------------
Our Solution: Electronic Market
In our Innovate Stage, our analysts developed an Internet
strategy, competitive analysis and solution portfolio for Cal-
Surance. Our business analysts identified that the opportunity
space for real-time online quoting and purchasing of insurance
was tightly connected to the concept of progressive disclosure of
information and the simplification of the quoting process. In our
Blueprint Stage, our architects prioritized the application
portfolio into three distinct development phases: customer,
partner and internal interaction. Our engineers also designed the
application framework: Microsoft Commerce Server on NT for the
core, Oracle for the back-end database server, Sun Solaris for
the application platform, TideStone's NT spreadsheet/matrix
quoting engine, Active Server Pages for the presentation layer,
Microsoft COM for back-end integration, CyberSource for debit and
credit card payments and custom engineered adapters for legacy
claims systems. Our architects proceeded to complete the customer
facing system blueprint phase in three weeks, producing a
functional requirements document, concept prototype, detailed
project plan and a fixed-price, fixed-time guaranteed proposal.
In our Create and Launch Stage, our engineers were required to
perform significant customization on the components in order to
meet the specifications and requirements defined in the
blueprint. Two releases covered the seven life cycle customer
states: prospecting, buying, insured, renewing, maintaining,
canceling and formerly insured. The site's functionality was
defined in three weeks. In three months, the first release was
uploaded for testing and review, and the second release followed
six weeks later.
- -------------------------------------------------------------------------------
The Benefits
Our solution enables the offering of a broader set of products
through a new digital channel. The electronic market was
eventually spun off into a new company, ePolicy.com, a business-
to-business Internet company that is creating a new way for
</TABLE> professionals and small business to purchase insurance.
36
<PAGE>
<TABLE>
<C> <S>
The Problem
Pure Markets The equipment leasing industry has multiple layers of
intermediaries and complex product offerings, creating an
inefficient market. This inefficiency results in lost
opportunities and higher costs. Pure Markets wanted to
create an electronic market to enable lessees and lessors to
conduct leasing transactions more efficiently and
effectively.
- -------------------------------------------------------------------------------
Our Solution: Electronic Market
Their electronic market, Pure Markets.com, empowers lessees
to easily and quickly structure their lease finance request,
to solicit bids from a greater number of lessors and to
identify and select the optimal bid (on features and cost)
through PureMarket's intelligent bid comparator. Lessors
benefit by expanding the breadth of their market, being able
to target transactions attractive to them, reducing
origination costs, and increasing the share of leasing as a
finance option. In the Innovate stage, we defined the
technical capability needed to transform Pure Markets'
vision into a business reality. We helped Pure Markets
define its requirements and presented it with an
implementable technology architecture. In the Blueprint
Stage, we conducted extensive interviews with Pure Markets'
employees to define and document the variety of leasing
structures our solution would have to accommodate, and to
develop processes, user interface, application functionality
and data management services that comprised the leasing
electronic market. This stage required substantial
interaction between our project team and Pure Markets'
representatives due to the complexity of the user
interfaces. At the conclusion of the Blueprint Stage, we
delivered a comprehensive functional specification, a
functionality prioritization matrix and a schedule for
release delivery. In the Create and Launch stage, we used
Oracle as the database system on a Sun Solaris platform,
ColdFusion as the application server on an NT platform and
completed the presentation layer in a combination of HTML,
Java and ColdFusion applets. Our rapid and thorough
Blueprint Stage greatly facilitated Pure Markets'
development of this highly complex application.
- -------------------------------------------------------------------------------
The Benefits
Pure Markets benefited by being able to achieve a rapid
time-to-market for an electronic market, a new channel that
brings together lessees and lessors on the Internet. Lessees
now have the opportunity to easily request bids from a
larger population of lessors and to compare bids using a
normalizing analytical tool, thereby enabling faster,
</TABLE> simpler and more effective decisions. Lessors have access to
a much larger market, with greater targeting precision and
lower origination costs.
Employees
As of February 29, 2000, we had 245 employees. Of these employees, 168 were
consulting and services delivery professionals, and 77 were personnel
performing marketing, sales, human resources, finance, accounting, legal,
internal information systems and administrative functions, including 11
executives and 20 sales and marketing personnel. None of our employees is
represented by a labor union, and we consider our employee relations to be
excellent.
Competition
The market for Internet professional services is intensely competitive. We
believe the principal competitive factors in our industry are reputation and
client satisfaction, the experience and skill levels of professionals, advanced
technical architecture and project management expertise, ability to predict
project cost and manage resource scheduling and ability to recruit and retain
professionals.
37
<PAGE>
While we primarily use the fixed-price, fixed-time pricing model, most of our
competitors use both fixed-price and time and materials pricing models for
their projects. We are not aware of a trend toward either pricing model.
Our competition falls into the following categories:
. Internet professional services firms (such as Lante, Proxicom, Sapient,
Scient, US Interactive and Viant)
. information technology consulting and systems integration firms (such as
Andersen Consulting, Cambridge Technology Partners and EDS)
. services divisions of computer hardware and software vendors (such as IBM
and Oracle)
. web design firms (such as Modem Media. Poppe Tyson and Razorfish)
. information technology strategy consulting firms (such as @McKinsey,
Diamond Technology Partners and Mainspring)
. in-house information technology departments of our current and potential
clients
Future competitors may offer services that provide significant performance,
price, creative or other advantages over those offered by us. Therefore, we
expect to face additional competition from new competitors.
Alliances
We leverage our marketing and sales efforts through alliances with a number
of vendors of Internet technology. Our partners include Active Software, Art
Technology Group, BroadVision, Exodus Communications, Extricity Software,
Hewlett-Packard, Microsoft, Moai Technologies, Selectica, Silknet Software,
webMethods and Vitria. These partners may recommend our services to their
clients, provide us sales leads, deliver training for our professionals and
enable us to obtain advance access to their technologies.
Sales and Marketing
Our sales efforts are targeted at corporate clients who are investing
significant resources in their business-to-business e-commerce strategies. Our
sales force generates leads through a combination of direct mail, targeted
events with industry thought leaders and cooperative marketing with our
alliance partners. We have sales offices in the metropolitan areas of San
Francisco, New York, Chicago and Washington, D.C.
To augment our sales effort we also have a separate marketing department
focused on two key objectives:
. building brand recognition at a national level to drive business growth
and support our recruiting efforts
. developing and cultivating leads for our sales force
To achieve these objectives, we engage in market research, public relations
and advertising, participate in trade shows and conduct seminars. In addition,
we employ a communication strategy based on standards for our logo, corporate
identity, website and marketing materials.
Our most significant recent marketing initiative occurred in January 2000,
when we committed $300,000 to become the leading sponsor of the Inventa
Everest Environmental Expedition. This expedition involves the most
comprehensive clean-up of debris from the high camps of Mount Everest planned
to date.
Intellectual Property Rights
Our proprietary knowledge base and the other intellectual property rights
that we develop for our clients are an integral part of our business. Our
clients generally retain ownership of custom work product and we
38
<PAGE>
retain a royalty-free license to use some or all of the applications, processes
and intellectual property developed in connection with customer projects. This
information is accessible on our knowledge base only to our employees via our
secure corporate intranet.
Development of Our Business
We were incorporated in California in 1988 as Inventa Corporation. From 1988
to 1994, we were a client-server technology-based, system services firm. We
formed our Malaysian subsidiary in 1994 to serve the Asian markets. During
1995, we began to focus on Internet applications for business and in 1996 began
to focus exclusively on Internet business applications. We established our New
York area office in 1997. We decided to close our Malaysian subsidiary in 1998,
as a result of the Asian economic crisis, which prevented us from successfully
developing our business in that region. During 1999, we established offices in
the Chicago and Washington, D.C. areas. We reincorporated in Delaware in March
2000.
Facilities
Our principal executive offices are located in approximately 45,000 square
feet of leased office space in Redwood Shores, California. The lease for this
office space is for a term of seven years and expires in May 2007. We also have
offices in the metropolitan areas of New York, New York, Washington, D.C. and
Chicago, Illinois. We lease all of our facilities and consider these facilities
to be adequate for our needs for the foreseeable future.
Legal Proceedings
We are not a party to any material legal proceedings.
39
<PAGE>
MANAGEMENT
Executive Officers, Directors and Key Employees
Our executive officers, directors and other key employees are as follows:
<TABLE>
<CAPTION>
Name Age Position(s)
------------------------------------ --- -----------------------------------
<C> <C> <S>
Ashok Santhanam..................... 46 Chairman of the Board of Directors
and Founder
David A. Lavanty.................... 39 President, Chief Executive Officer
and Director
Michael B. Shahbazian............... 52 Senior Vice President and Chief
Financial Officer
Richard M. Cerwonka................. 48 Senior Vice President
Carol C. Halliday................... 53 Senior Vice President
Anthony H. Moretto.................. 51 Senior Vice President
Elizabeth Campbell.................. 39 Vice President of Human Resources
Michael Makishima................... 38 Vice President of Finance
Tobias Younis....................... 50 Vice President of Marketing
Robert J. Kudis..................... 34 Vice President and General Manager,
Central Region
Edward F. Leppert................... 39 Vice President and General Manager,
Northeast Region
Srikantan Moorthy................... 37 General Manager, Southeast Region
Michael Bealmear.................... 51 Director
Todd Dagres......................... 39 Director
Robert Ducommun..................... 48 Director
Frank Pinto......................... 46 Director
Jon Q. Reynolds, Jr................. 32 Director
</TABLE>
Ashok Santhanam is our founder and has served as the Chairman of our Board
of Directors since January 1999. From our inception to January 1999, Mr.
Santhanam was our President and Chief Executive Officer. Prior to founding
Inventa, Mr. Santhanam was the founder and President of Ventura Data Systems
Pvt. Ltd., an information technology services firm based in Bangalore, India.
Before establishing Ventura, Mr. Santhanam held various technical and
management positions at Gould Inc., a publicly held technology company,
including Director of Operations in the Recording Systems Division from 1983 to
1986. Mr. Santhanam holds a Bachelor of Technology degree from the Indian
Institute of Technology in Madras, India and an MBA from Harvard Business
School.
David A. Lavanty has served as our President and Chief Executive Officer
since January 1999. From June 1998 to December 1998, he served as Senior Vice
President, Worldwide Consulting for Siebel Systems, Inc., an enterprise
relationship management application software company. From March 1995 to April
1998, Mr. Lavanty held several positions at Sybase, Inc., a software company,
including Vice President and General Manager, Professional Services for the
Americas and Vice President, Southeast and Federal Professional Services. Prior
to Sybase, Mr. Lavanty held positions as Vice President of Consulting Services
at Oracle Corporation, a software company, and Senior Vice President at PRC
Realty Systems, a systems integration company. Mr. Lavanty received a BS from
the University of Akron and an MBA from Marymount University.
Michael B. Shahbazian has served as our Senior Vice President and Chief
Financial Officer since February 2000. From April 1999 to January 2000, he was
Senior Vice President and Chief Financial Officer of Walker Interactive
Systems, Inc., a software applications and services company. From June 1979 to
April 1999, Mr. Shahbazian held a variety of positions with Amdahl Corporation,
a computer hardware and services company, including Vice President and
Treasurer, Director of Business Information Systems, European Director of
Finance and Director of Financial Planning and Analysis. Mr. Shahbazian holds a
BS degree from California State University at Fresno and an MBA from the
University of Southern California.
Richard M. Cerwonka has served as a Senior Vice President since January
2000. From May 1999 to January 2000, he was President and Chief Executive
Officer of XTEND-Tech. From November 1998 to May
40
<PAGE>
1999, Mr. Cerwonka was Area Vice President, Southeast for the Enterprise
Solutions Division of Sybase. From April 1998 to November 1998, he served as
the Area Vice President, Southeast Professional Services for Sybase. From July
1995 to April 1998, Mr. Cerwonka was a Practice Director, Professional Services
for Sybase. From January 1980 to July 1995, he held a variety of positions at
Sea-Land Service, Inc., a global transportation company, including Director of
Equipment Engineering, Director of Information Technology and Director of
Terminal Operations.
Carol C. Halliday has served as a Senior Vice President since January 2000.
From April 1999 to January 2000, she was our Vice President and General Manager
of the Western Region. From October 1991 to April 1999, Ms. Halliday held a
variety of positions at Sybase, including Area Vice President, West
Professional Services, Vice President, Strategic Solutions Division and
Practice Director, Rocky Mountain Professional Services. Prior to Sybase, she
served as Director of Distributed Application Development for Fidelity
Investments, a financial services company.
Anthony H. Moretto has served as a Senior Vice President since April 1999.
From April 1993 to April 1999, Mr. Moretto held a variety of positions at
Sybase, including Vice President and General Manager, Professional Services,
Area Vice President, Southeast Professional Services and Practice Manager,
Professional Services. Prior to Sybase, he served as a Senior Managing
Consultant for Oracle, Branch Manager for Cap Gemini America, a systems
integration company, and Director, Commercial Systems Integration for Martin
Marietta Data Systems, a systems integration company. Mr. Moretto holds a BBA
from the Wharton School at the University of Pennsylvania.
Elizabeth Campbell has served as Vice President of Human Resources since
September 1999. She was our Director of Human Resources from August 1998 to
September 1999. From December 1996 to July 1998, Ms. Campbell was President of
Search Worldwide, a technology human resources consulting company she founded.
From May 1993 to November 1996, Ms. Campbell was Director of Corporate Human
Resources for Informix Software, a relational database software company.
Michael Makishima has served as Vice President of Finance since December
1999. He was our Controller from July 1997 to December 1999. From March 1989 to
December 1996, Mr. Makishima held several positions at Liant Software
Corporation, a software company, including General Manager of Liant Software
Services, Director of Manufacturing, Director of Corporate Finance and Vice
President of Finance and Administration of Ryan McFarland Corporation, a
subsidiary of Liant.
Tobias Younis has served as Vice President of Marketing since November 1999.
From August 1997 to November 1999, Mr. Younis served as Vice President for META
Group, an information technology research company. From June 1994 to August
1997, Mr. Younis was a Director of Enterprise Systems Consulting for Sybase.
From January 1992 to June 1994, Mr. Younis was founder and President for
Marcomm Associates, a marketing consulting company. Prior to Marcomm, Mr.
Younis served as Vice President of Special Marketing Operations at Oracle
Corporation.
Robert J. Kudis has served as Vice President and General Manager of the
Central Region since May 1999. From January 1997 to May 1999, Mr. Kudis served
as Vice President of Consulting, U.S. Central Region, for the Baan Company, an
enterprise resource software company. From May 1987 to January 1997, Mr. Kudis
was a consultant for Ernst & Young, a public accounting firm. Mr. Kudis holds a
BBA in Information Systems from the University of Wisconsin.
Edward F. Leppert has served as Vice President and General Manager of the
Northeast Region since October 1999. He served as our Vice President and
Managing Director of the Eastern Region from January 1999 to September 1999,
and as our Managing Director of the Eastern Region from November 1997 to
January 1999. From March 1996 to November 1997, Mr. Leppert served as Director
of Operations and General Manager for Cambridge Technology Partners, a systems
integration company. From September 1991 to March
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1996, Mr. Leppert served as Associate Director, Information Management for
Bristol-Myers Squibb Company, a consumer products manufacturing company. Prior
to Bristol-Myers Squibb, Mr. Leppert served as a Senior Manager for Andersen
Consulting, a consulting firm. Mr. Leppert holds a BS degree in systems
planning and management from the Stevens Institute of Technology.
Srikantan Moorthy has served as General Manager of the Southeast Region
since November 1999. Mr. Moorthy served as our Director of Operations from May
1996 to November 1999, as a Practice Director from January 1996 to April 1996,
as a Consulting Practice Manager from August 1994 to January 1996 and as
Technical Staff Manager from August 1993 to August 1994. Mr. Moorthy joined us
as a Principal Software Engineer in January 1993. Mr. Moorthy has a Bachelor of
Engineering degree from Bangalore University, India.
Michael Bealmear has served as a Director since September 1998. Mr. Bealmear
is President and Chief Executive Officer of Spear Technologies, Inc., a
privately held software company. Prior to Spear, he was Executive Vice
President at Cadence Design Systems and Senior Vice President of Worldwide
Services at Sybase. Mr. Bealmear also is a director of several privately owned
companies. Mr. Bealmear has a BS in Electrical Engineering from the University
of Texas and an MS in Mathematics and Computer Science from Rice University.
Todd Dagres has served as a Director since February 1997. Mr. Dagres is a
General Partner with Battery Ventures, a venture capital firm. Mr. Dagres is a
director of Akamai Technologies, an Internet content distribution firm; Qtera
Technologies, a telecommunications equipment provider; Edgix, an internet
content delivery firm; Predictive Networks, a developer of Internet profiling
and content delivery systems; Convergent Networks, a data and voice equipment
company; Equipe Communications, a network equipment firm; River Delta Networks,
a networking solutions company; and InformationView Solutions, a provider of
network cost management solutions. Mr. Dagres is also an Adjunct Professor at
the Sloan School of Management of the Massachusetts Institute of Technology. He
has an MS in Economics from Trinity College and an MBA from Boston University.
Robert Ducommun has served as a Director since June 1994. Mr. Ducommun is a
director of Ducommun Incorporated, a publicly held company that provides
products and services to the aerospace industry, and a director of several
private companies. He has been a private investor in and advisor to emerging
companies since 1992. He was Executive Vice President and Chief Financial
Officer of Aviva Sports, a sports toy marketing company, and chief financial
officer of Microsource, Inc., a manufacturer of microwave components. Mr.
Ducommun has a BA degree from Stanford University and an MBA from Harvard
Business School.
Frank Pinto has served as a Director since May 1998. Mr. Pinto is a Partner
with Boston Millennia Partners, a venture capital firm. He manages Boston
Millennia Partners' investments in Knowledge Impact, a customer relationship
management training firm and in InfoLibria, an Internet infrastructure
solutions firm, and is a director of Quality Packaging Systems, a
pharmaceutical services company. Mr. Pinto holds a BA degree in Economics and
Environmental Studies from Middlebury College and an MBA from the Amos Tuck
School at Dartmouth College.
Jon Q. Reynolds, Jr. has served as a Director since October 1998. He is a
General Partner of Technology Crossover Ventures, a venture capital firm. He
also serves as a director of several private companies. Mr. Reynolds received
an AB degree in Geography from Dartmouth College and an MBA from Columbia
Business School.
Board of Directors
Our board of directors is currently comprised of seven directors. Our
amended and restated bylaws authorize not less than five directors and not more
than seven directors.
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Board Committees
Our board of directors has a compensation committee and an audit committee.
The Compensation Committee is comprised of Jon Q. Reynolds, Jr., its chairman,
Todd Dagres and Frank Pinto. The Compensation Committee is responsible for the
administration of all salary and incentive compensation plans for our officers,
including bonuses and options granted under our option plans.
The Audit Committee is comprised of Robert Ducommun, its chairman, Michael
Bealmear and Frank Pinto. The Audit Committee is responsible for assuring the
integrity of our financial control, audit and reporting functions. It reviews
with our management and our independent accountants the effectiveness of our
financial controls, accounting and reporting practices and procedures. In
addition, the Audit Committee reviews the qualifications of our independent
accountants, makes recommendations to the board of directors regarding the
selection of our auditors and reviews the scope, fees and results of activities
related to audit and non-audit services.
Compensation Committee Interlocks and Insider Participation
Our board of directors did not have a compensation committee until May 1998.
From May 1998 to December 1999, the Compensation Committee was comprised of
Ashok Santhanam, Todd Dagres and Frank Pinto. In December 1999, Jon Q.
Reynolds, Jr. replaced Ashok Santhanam on this committee. During the year ended
December 31, 1999, the Compensation Committee met four times. Prior to May
1998, determinations regarding the compensation of our officers were made by
our board of directors.
Director Compensation
We do not pay fees to directors who are employees for serving on our board
of directors. Directors who are not employees are paid $10,000 per year for
service on our board and $1,500 for each committee meeting they attend, and
they are reimbursed for all reasonable expenses incurred by them in attending
board and committee meetings. Non-employee directors are granted options to
acquire 30,000 shares of our common stock upon their initial appointment to our
board. Upon reelection, they receive additional grants of options to acquire
15,000 shares if elected for a three-year term, 10,000 shares if elected for a
two-year term and 5,000 shares if elected for a one-year term. Directors who
are employees are eligible to receive options under our 1993 Stock Option Plan
and 2000 Stock Plan.
Executive Compensation
The following table summarizes the compensation paid to or earned by our
Chief Executive Officer and our four other most highly compensated executive
officers for the year ended December 31, 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Long-Term
Annual Compensation
Compensation Awards
----------------- ------------
Securities
Underlying
Name and Principal Position(s) Salary Bonus Options
- ----------------------------------------------- -------- -------- ------------
<S> <C> <C> <C>
Ashok Santhanam, Chairman of the Board and
Founder....................................... $175,000 $ 30,000 --
David A. Lavanty, President and Chief Executive
Officer....................................... 250,000 100,000 100,000
Anthony H. Moretto, Senior Vice President...... 147,051 62,500 240,000
Carol C. Halliday, Senior Vice President....... 126,923 30,093 175,000
Michael Makishima, Vice President of Finance... 124,583 36,300 55,000
</TABLE>
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The following table sets forth information with respect to stock options
granted during the year ended December 31, 1999, to our Chief Executive Officer
and our four other most highly compensated executive officers in 1999:
Option Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation
Individual Grants for Option Term(2)
--------------------------------------------- ---------------------
Number of Percent of Weighted
Shares Total Options Average
Underlying Granted to Exercise
Options Employees in Price Expiration
Name Granted(1) Fiscal Year per share Date 5% 10%
- ------------------------ ---------- ------------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ashok Santhanam......... -- -- -- -- -- --
David A. Lavanty........ 100,000 4.0%(3) $ 0.45 8/01/09 $1,505,565 $2,323,791
Anthony H. Moretto...... 240,000 10.0%(4) 0.20 8/01/09 3,695,847 5,686,684
Carol C. Halliday....... 175,000 7.0%(5) 0.20 8/01/09 2,694,544 4,146,084
Michael Makishima....... 55,000 2.0%(6) 0.73 11/23/09 803,607 1,240,644
</TABLE>
- --------
(1) All options were granted under our 1993 Plan. Options granted under the
plan vest over a four-year period with 25% vesting at the first anniversary
date of the grant date and the remaining shares vesting in equal monthly
installments over the next 36 months. The board retains sole discretion to
modify the terms, including the price, of outstanding options.
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date of offer to their expiration date based
upon an initial public offering price of $10.00 per share. These
assumptions are not intended to forecast future appreciation of our stock
price. The potential realizable value computation does not take into
account federal or state income tax consequences of option exercises or
sales of appreciated stock.
(3) Excludes options to purchase 865,000 shares of common stock at an exercise
price of $0.15 per share granted to Mr. Lavanty on December 31, 1998, and
an additional 290,000 shares of common stock to be purchased at a purchase
price of $6.50 per share effective on the date of this offering a grant of
options.
(4) Of the 240,000 options to purchase our common stock granted to Mr. Moretto,
200,000 options granted on June 30, 1999, have an exercise price of $0.15
per share, and the other 40,000 options granted on August 1, 1999, have an
exercise price of $0.45 per share.
(5) Of the 175,000 options to purchase our common stock granted to Ms.
Halliday, 145,000 options granted on June 30, 1999, have an exercise price
of $0.15 per share, and the other 30,000 options granted on August 1, 1999,
have an exercise price of $0.45 per share.
(6) Excludes options to purchase 30,000 shares of our common stock at an
exercise price of $0.15 granted to Mr. Makishima on August 20, 1997. Of the
total grant of 55,000 options to Mr. Makishima, 15,000 options granted on
January 31, 1999, have an exercise price of $0.15 per share, 15,000 options
granted on August 1, 1999, have an exercise price of $0.45 per share, and
25,000 options granted on November 23, 1999, have an exercise price of
$1.25 per share.
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<PAGE>
The following table sets forth information regarding exercised stock options
during the year ended December 31, 1999, and unexercised options held as of
December 31, 1999, by our Chief Executive Officer and our four other most
highly compensated executive officers in 1999:
Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options at In-the-Money Options at
Acquired December 31, 1999 December 31, 1999(1)
On Value ------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
- ------------------------ -------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Ashok Santhanam......... -- -- -- -- -- --
David A. Lavanty........ -- -- 216,250 748,750 $1,373,187 $4,724,562
Anthony H. Moretto...... -- -- 50,000 190,000 317,500 1,194,500
Carol C. Halliday....... -- -- -- 175,000 -- --
Michael Makishima....... -- -- 18,749 66,251 119,056 388,693
</TABLE>
- --------
(1) Calculated on the basis of the fair value of the underlying securities of
$6.50 per share as of December 31, 1999, minus the per share exercise
price, multiplied by the number of shares underlying the option.
Employment Agreements
Ashok Santhanam. We entered into an employment agreement dated May 11, 1998,
with Mr. Santhanam, our founder and Chairman of the Board of Directors. The
term of the agreement shall continue unless we or Mr. Santhanam elects to
terminate the agreement. The employment agreement provides for an annual base
salary of $160,000, to be reviewed annually, and an annual maximum bonus of
$90,000, subject to annual review, payable at the discretion of our board of
directors. Effective January 1, 1999, our board of directors increased
Mr. Santhanam's annual base salary to $175,000. The employment agreement also
provides that, in the event of his termination without cause, we will pay
Mr. Santhanam his accrued compensation to the date of termination and continue
his car lease payments, maintain his health, welfare and retirement benefits,
and provide severance compensation equal to his base salary and bonus for 12
months after his termination date. In addition, any options granted to Mr.
Santhanam would continue to vest during the 12 months following his termination
date. The agreement also provides that Mr. Santhanam will not engage in a
competitive business activity for one year following termination in the event
of his termination without cause, and for two years following termination if he
resigns or is terminated for cause. The agreement further provides that
Mr. Santhanam will not solicit our employees or our clients with respect to a
competitive business activity for two years following his termination for any
reason.
David A. Lavanty. We entered into an employment agreement dated December 31,
1998, with Mr. Lavanty, our President and Chief Executive Officer. The initial
term of three years will automatically be renewed for successive one-year terms
unless we or Mr. Lavanty elects to terminate the agreement at least 30 days
before the end of a term. The employment agreement provides for an annual base
salary of $250,000 and an annual bonus payable at the discretion of our board
of directors. The employment agreement also provides that in the event of his
termination without cause, we will pay Mr. Lavanty severance compensation equal
to his base compensation and maintain his health and retirement benefits for 12
months after his termination date. In addition, any options granted to Mr.
Lavanty will continue to vest during the 12 months following his termination
date and shall vest in full upon a change of control. The agreement also
provides that Mr. Lavanty will not engage in a competitive business activity
for one year following termination in the event of his termination for any
reason. The agreement further provides that Mr. Lavanty will not solicit our
employees or our clients with respect to a competitive business activity for
one year following his termination for any reason. The agreement provides for
the grant of options to Mr. Lavanty to purchase up to 865,000 shares of common
stock subject to vesting over a four-year period, 25% of which vested on
signing and the balance of which will vest in 36 equal monthly installments
beginning on the first anniversary date of the
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<PAGE>
signing of the agreement. Finally, the agreement provides for the purchase by
Mr. Lavanty of up to 290,000 shares of common stock at a purchase price of
$6.50 per share upon completion of this offering.
Michael B. Shahbazian. We entered into an employment agreement dated
February 2, 2000, with Mr. Shahbazian, our Senior Vice President and Chief
Financial Officer, which provides for an annual base salary of $190,000 and a
quarterly performance bonus. The employment agreement also provides that if we
terminate Mr. Shahbazian without cause or within six months following a change
of control, we will (1) continue to pay Mr. Shahbazian his base compensation
and benefits for six months and (2) permit Mr. Shahbazian's unvested options to
continue to vest for six months. The agreement provides for the grant of
options to Mr. Shahbazian to acquire 225,000 shares of common stock, subject to
vesting over four years.
Anthony H. Moretto. We entered into an employment agreement dated March 17,
1999, with Mr. Moretto, a Senior Vice President, which provides for an annual
base salary of $200,000 and a quarterly performance bonus. The employment
agreement also provides that we will pay Mr. Moretto an amount equal to his
base compensation for six months if we terminate Mr. Moretto without cause. In
addition, the employment agreement provides that upon termination without cause
or within six months following a change of control, we will (1) continue to pay
Mr. Moretto his base compensation for 12 months and (2) permit Mr. Morretto's
unvested options to continue to vest for 12 months. The agreement provides for
the grant of options to Mr. Moretto to purchase 200,000 shares of common stock,
subject to vesting over a four-year period, 25% of which vested immediately
upon the execution of the agreement and the balance of which will vest in 36
equal installments beginning on the first anniversary of his employment. Fifty-
percent of Mr. Moretto's unvested options will vest upon the occurrence of a
change of control within his first two years of employment with us. Finally, we
paid a one-time signing bonus to Mr. Moretto of $25,000.
Tobias Younis. We entered into an employment agreement dated October 29,
1999, with Mr. Younis, our Vice President of Marketing, which provides for an
annual base salary of $185,000 and a quarterly performance bonus. The
employment agreement also provides that if we terminate Mr. Younis without
cause or within six months following a change of control, we will (1) continue
to pay Mr. Younis his base compensation for six months and (2) permit Mr.
Younis' unvested options to continue to vest for six months. The agreement
provided for the grant of options to Mr. Younis to acquire 200,000 shares of
common stock, subject to vesting over four years.
Carol C. Halliday. We entered into an employment agreement dated March 12,
1999, with Ms. Halliday, a Senior Vice President, which provides for an annual
base salary of $180,000 and a quarterly performance bonus. The employment
agreement also provides that if we terminate Ms. Halliday without cause, we
will continue to pay Ms. Halliday her base compensation for three months. The
agreement provides for the grant of options to Ms. Halliday to acquire 145,000
shares of common stock, subject to vesting over four years.
Robert J. Kudis. We entered into an employment agreement dated March 30,
1999, with Mr. Kudis, our Vice President and General Manager of Central Region
Operations, which provides for an annual base salary of $175,000 and a
quarterly performance bonus. The employment agreement also provides that if we
terminate Mr. Kudis without cause, we will continue to pay Mr. Kudis his base
compensation for three months. In addition, the agreement provides that if we
terminate Mr. Kudis without cause or within six months following a change of
control, we will (1) continue to pay Mr. Kudis his base compensation for six
months and (2) permit Mr. Kudis' unvested options to continue to vest for six
months. The agreement provides for the grant of options to Mr. Kudis to acquire
90,000 shares of common stock, subject to vesting over four years. Fifty-
percent of Mr. Kudis' unvested options will vest upon the occurrence of a
change of control within his first two years of employment.
Other employment agreements. We entered into employment agreements with
Edward F. Leppert, Michael Makishima, Elizabeth Campbell and Srikantan Moorthy,
which provide for severance payments equal to six months' salary and options
that will continue to vest for six months following termination upon (1) a
change of control and termination without cause or (2) a change of control and
a relocation of the employee beyond a 30-mile radius from their office
locations.
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<PAGE>
Employee Benefit Plans
1993 Stock Option Plan. Our 1993 Stock Option Plan provides for the issuance
to employees, directors and consultants of incentive stock options and non-
qualified stock options to purchase up to a total of 5,355,000 shares of our
common stock. Our board of directors or a committee designated by our board of
directors may serve as administrator of the 1993 Plan. As of February 29, 2000,
options issued under the 1993 Plan to purchase a total of 3,993,653 shares of
common stock at a weighted average exercise price of $1.81 were outstanding, of
which options to purchase 203,603 shares at a weighted average exercise price
of $0.15 were fully vested. As of February 29, 2000, we had 713,184 shares of
common stock available for future grant under this plan.
The terms of options granted under the 1993 Plan are as determined by the
administrator, subject to the following:
. the option price per share for any incentive stock option or non-
qualified stock option may not be less than the fair value and 85% of the
fair value, respectively, of the common stock on the date of the grant
. if an incentive stock option or non-qualified stock option is granted to
a person who owns more than 10% of the total combined voting power of all
our classes of stock, the exercise price shall be not less than 110% of
the fair value of the common stock on the date of the grant
. the term of each stock option may not exceed ten years, and in the case
of a person who owns more than 10% of the total combined voting power of
all our classes of stock, the term of each stock option may not exceed
five years
. payment for the exercise of an option may be in cash or in shares of
common stock already owned by the option holder for more than six months
and which have a fair value equal to the exercise price of the option, by
delivery of a properly executed exercise notice together with irrevocable
instructions to a broker to promptly deliver to us the amount required to
pay the exercise price, or by delivery of an irrevocable subscription
agreement that irrevocably obligates the option holder to pay the
aggregate exercise price not more than 12 months after the date of
delivery of the subscription agreement
The administrator has the power to determine the terms of the options
granted, including the exercise price. The board of directors may amend,
suspend or discontinue the 1993 Plan at any time, provided that any board
action may not affect any rights with respect to options previously granted
under the 1993 Plan.
Options granted under the 1993 Plan are not transferable other than by will
or by the laws of descent or distribution, and each option may be exercised
during the lifetime of the optionee only by the optionee. Options granted under
the 1993 Plan must generally be exercised within three months of the optionee's
separation of service from us, but in no event later than the expiration of the
term of the option.
Our 1993 Plan provides that in the event of our merger with or into another
corporation or a sale of substantially all of our assets, each option or right
shall be assumed or an equivalent option or right substituted by the successor
corporation. If the outstanding options or rights are not assumed or
substituted, the option or stock purchase right will immediately fully vest and
become exercisable. The 1993 Plan also provides that in the event of our
proposed dissolution or liquidation, our board of directors will notify
optionees at least 15 days prior to the proposed action and that the options
will terminate immediately prior to the completion of the proposed action.
2000 Stock Plan. Our 2000 Stock Plan was approved by our board of directors
in February 2000. As of March 1, 2000, we had reserved a total of 7,000,000
shares of our common stock for issuance under the 2000 Stock Plan of which
7,000,000 shares were available for issuance. The 2000 Stock Plan provides for
the granting to our employees of incentive stock options within the meaning of
Section 422 of the United States tax code, and for the granting to employees,
including officers and directors, non-employee directors and consultants, of
non-statutory stock options and stock purchase rights. Unless terminated
sooner, the 2000 Stock Plan will terminate automatically in 2010.
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<PAGE>
Our 2000 Stock Plan is administered by our board of directors. Our board of
directors determines the terms of the options or stock purchase rights granted,
including the exercise price, the number of shares subject to each option or
stock purchase right, the vesting and the form of consideration payable upon
exercise. In addition, the board of directors has the authority to amend,
suspend or terminate the 2000 Stock Plan, provided that no board action may
affect any share of common stock previously issued and sold or any option
previously granted and then outstanding under the 2000 Stock Plan. Our board of
directors has the exclusive authority to interpret and apply the provisions of
the 2000 Stock Plan.
Options and stock purchase rights granted under our 2000 Stock Plan are not
generally transferable by the optionee, and each option and stock purchase
right is exercisable during the lifetime of the optionee only by the optionee.
Options granted under the 2000 Stock Plan must generally be exercised within
three months of the end of the optionee's status as our employee or consultant
or within twelve months after his or her termination by death or disability,
but in no event later than the expiration of the option's ten year term. In the
case of stock purchase rights, unless the board of directors determines
otherwise, the agreement evidencing the grant shall provide that we have a
repurchase option exercisable upon the voluntary or involuntary termination of
his or her employment for any reason, including death or disability. In this
event, the purchase price per share will be equal to the original price and may
be paid by cancellation of his or her outstanding indebtedness to us, if any.
Our repurchase option shall lapse at a rate determined by the board of
directors. The exercise price of any incentive stock options granted under the
2000 Stock Plan and any non-statutory stock options intended to qualify as
"performance-based compensation" within the meaning of Section 162(m) of the
United States tax code must be at least equal to the fair value of our common
stock on the date of grant. With respect to any participant who owns stock
possessing more than 10% of the voting power of all classes of our outstanding
capital stock, the exercise price of any incentive stock option granted must
equal at least 110% of the fair value on the grant date, and the term of this
incentive stock option must not exceed five years. The term of all other
options granted under the 2000 Stock Plan may not exceed ten years.
Our 2000 Stock Plan provides that in the event of our merger with or into
another corporation or a sale of substantially all of our assets, each option
or right shall be assumed or an equivalent option or right substituted by the
successor corporation. If the outstanding options or rights are not assumed or
substituted, the option or stock purchase right will immediately fully vest and
become exercisable.
2000 Employee Stock Purchase Plan Our 2000 Employee Stock Purchase Plan was
adopted by our board of directors in March 2000. A total of 500,000 shares of
common stock have been reserved for issuance under our 2000 Employee Stock
Purchase Plan, plus annual increases equal to the lesser of 1,500,000 shares,
or 5.0% of the outstanding shares on the determination date set by our board of
directors, or a lesser amount determined by our board of directors.
Our 2000 Employee Stock Purchase Plan, which is intended to qualify under
Section 423 of the United States tax code, contains consecutive six month
offering and purchase periods. The offering periods generally start on the
first trading day on or after May 1 and ends on November 1 of each year, except
for the first offering period, which commences on the first trading day on or
after the effective date of this offering and ends on the last trading day on
or before April 30, 2003.
Employees are eligible to participate if they are employed by us or any
participating subsidiary for at least 20 hours per week and more than five
months in any calendar year. However, any employee who immediately after grant
owns 5% or more of the total combined voting power of all classes of our
capital stock, or whose rights to purchase stock under all of our employee
stock purchase plans accrues at a rate which exceeds $25,000 worth of stock for
each calendar year may not be granted an option to purchase stock under this
plan. The 2000 Employee Stock Purchase Plan permits participants to purchase
common stock through payroll deductions of up to 10% of the participant's
compensation. Compensation is defined as the participant's base straight time
gross earnings and commissions but is exclusive of payments for overtime, shift
premium
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payments, incentive compensation, incentive payments, bonuses and other
compensation. The maximum number of shares a participant may purchase during a
single purchase period is 5,000 shares.
Amounts deducted and accumulated by the participant are used to purchase
shares of common stock at the end of each purchase period. The price of stock
purchased under the 2000 Employee Stock Purchase Plan is generally 85% of the
lower of the fair value of the common stock at the beginning of the offering
period or at the end of the purchase period. Participants may end their
participation at any time during an offering period, and they will be paid
their payroll deductions to date. Participation ends automatically upon
termination of employment with us.
Rights granted under the 2000 Employee Stock Purchase Plan are not
transferable by a participant other than by will, the laws of descent and
distribution, or as otherwise provided under the plan. The 2000 Employee Stock
Purchase Plan provides that, in the event of our merger with or into another
corporation or a sale of substantially all our assets, each outstanding option
may be assumed or substituted for by the successor corporation. If the
successor corporation refuses to assume or substitute for the outstanding
options, the offering period then in progress will be shortened and a new
exercise date will be set. The 2000 Employee Stock Purchase Plan will terminate
automatically in 2010, unless terminated earlier. Our board of directors has
the authority to amend or terminate the purchase plan, except that no board
action may adversely affect any outstanding rights to purchase stock under the
2000 Employee Stock Purchase Plan. Our board of directors has the exclusive
authority to interpret and apply the provisions of the 2000 Employee Stock
Purchase Plan.
401(k) Plan. We have a 401(k) savings plan that provides a tax-qualified
employee savings plan for our eligible employees. An employee may elect to
reduce his or her current annual compensation on a pre-tax basis and to have
the amount of the reduction contributed to the 401(k) savings plan. Subject to
the restrictions imposed by the United States tax code on highly compensated
employees, an employee may generally defer up to 25% of his or her pre-tax
earnings or the statutorily prescribed limit, which was $10,000 in calendar
year 1999. Our 401(k) savings plan is intended to qualify under Section 401(k)
of the United States tax code so that contributions by our employees to our
401(k) savings plan and income earned on plan contributions are not taxable to
employees until withdrawn from the 401(k) savings plan. The 401(k) savings plan
permits, but does not require, additional matching contributions by us on
behalf of all participants in the 401(k) savings plan.
Life Insurance Program. We maintain a $2 million key man life insurance
policy on Ashok Santhanam, our Chairman of the Board of Directors, payable to
us in the event of Mr. Santhanam's death. We also maintain a $1 million key man
life insurance policy on David A. Lavanty, our President and Chief Executive
Officer, payable to us in the event of Mr. Lavanty's death.
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On July 8, 1994, we sold an aggregate of 400,000 shares of series A
preferred stock at a price of $1.00 per share. We issued 400,000 shares of our
series A preferred stock pursuant to a two-for-one stock split declared in
January 1997. All share numbers reflect the stock split. On February 14, 1997,
we sold an aggregate of 2,560,000 shares of series B preferred stock at a price
of $1.25 per share. On May 11, 1998, and May 28, 1999, we sold an aggregate of
8,055,511 shares of series C preferred stock at a price of $1.25 per share. On
January 19, 2000, we sold an aggregate of 3,000,000 shares of series D
preferred stock at a price of $7.41 per share. Listed below are the directors,
executive officers, stockholders and their affiliates that beneficially own 5%
or more of our securities.
<TABLE>
<CAPTION>
Shares of Shares of Shares of Shares of
Shares of Series A Series B Series C Series D
Common Preferred Preferred Preferred Preferred
Investor Stock Stock Stock Stock Stock
- ----------------------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
5% Stockholder entity
affiliated with us
Ashok Santhanam(1)......... 4,500,000 -- -- -- --
Other 5% stockholders
Boston Millennia Partners
Limited Partnership(2).... -- -- -- 3,152,000 425,371
Entities affiliated with
Technology Crossover
Ventures(3)............... -- -- -- 3,152,000 425,371
Battery Ventures III,
L.P.(4)................... -- -- 2,286,363 1,576,000 62,672
</TABLE>
- --------
(1) Ashok Santhanam, the Chairman of our Board of Directors, and his wife
Revathi Santhanam are trustees of the Santhanam Family Trust, which holds
3,500,000 shares of common stock. Two irrevocable trusts each hold 500,000
shares of common stock for the benefit of their children. Mr. Santhanam and
Mrs. Santhanam each disclaim any beneficial interest in the shares held by
these irrevocable trusts.
(2) Frank Pinto, one of our directors, is a Partner of Boston Millennia
Partners Limited Partnership. Mr. Pinto disclaims beneficial ownership of
the securities held by this entity except to the extent of his pecuniary
interest therein.
(3) Includes shares purchased by TCV II, V.O.F., Technology Crossover Ventures
II, L.P., TCV II (Q), L.P., TCV II Strategic Partners, L.P., and Technology
Crossover Ventures II, C.V. Mr. Reynolds, one of our directors, is a Member
of Technology Crossover Management II, L.L.C., which is the General Partner
of each of these funds. Mr. Reynolds disclaims beneficial ownership of
these shares except to the extent of his pecuniary interest therein.
(4) Mr. Dagres, one of our directors, is a General Partner of Battery Ventures.
Mr. Dagres disclaims beneficial ownership of the securities held by this
entity except for his proportional interest in the entity.
Mr. Santhanam is a director and a 50% shareholder of Challenger Systems,
Inc., an entity to which we paid $590,000 in 1997 and $485,000 in 1998 for
software programming services.
50
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to the beneficial
ownership of our common stock as of February 29, 2000, as adjusted to reflect
the sale of common stock in this offering, by:
. each person known to us to own beneficially more than 5% of our common
stock
. our Chief Executive Officer and each of our four other most highly
compensated executive officers in 1999
. each of our directors
. all of our executive officers and directors as a group
Except as otherwise noted, the address of each person listed in the table is
c/o Inventa Technologies, Inc., 255 Shoreline Drive, Suite 200, Redwood Shores,
California 94065. The table includes all shares of common stock issuable within
60 days of February 29, 2000, upon the exercise of options and warrants
beneficially owned by the indicated stockholders on that date based on options
and warrants outstanding as of February 29, 2000. Beneficial ownership is
determined in accordance with the rules of the Securities and Exchange
Commission and includes voting and investment power with respect to shares. To
our knowledge, except under applicable community property laws or as otherwise
indicated, the persons named in the table have sole voting and sole investment
control with respect to all shares beneficially owned. The applicable
percentage of ownership for each stockholder is based on 21,113,674 shares of
common stock outstanding as of February 29, 2000, in each case together with
applicable options and warrants for that stockholder. Shares of common stock
issuable upon the exercise of options and warrants beneficially owned are
deemed outstanding for the purpose of computing the percentage of ownership of
the person holding those options and warrants, but are not deemed outstanding
for computing the percentage ownership of any other person.
<TABLE>
<CAPTION>
Shares Shares to be
Beneficially Owned Beneficially Owned
Prior to Offering After Offering(9)
------------------ ------------------
Beneficial Owner Number Percent Number Percent
- ---------------------------------------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C>
Boston Millennia Partners Limited
Partnership(1)......................... 3,577,371 16.9% 3,800,649 15.1%
Frank Pinto............................. 3,577,371 16.9 3,800,649 15.1
Entities associated with Technology
Crossover Ventures(2).................. 3,577,371 16.9 3,730,366 14.8
Jon Q. Reynolds, Jr.(2)................. 3,577,371 16.9 3,730,366 14.8
Battery Ventures III, L.P.(3)........... 3,925,035 18.6 4,001,533 15.9
Todd Dagres(3).......................... 3,925,035 18.6 4,001,533 15.9
Ashok Santhanam(4)...................... 4,500,000 21.3 4,500,000 17.9
David A. Lavanty(5)..................... 288,333 1.4 578,333 2.3
Anthony H. Moretto(6)................... 50,000 * 50,000 *
Carol C. Halliday....................... -- * -- *
Michael Makishima(7).................... 24,896 * 24,896 *
Robert Ducommun(8)...................... 560,200 2.7 566,025 2.2
Michael Bealmear........................ 40,000 * 40,000 *
All executive officers and directors as
a group (ten persons).................. 16,543,206 77.1 17,291,802 68.6
</TABLE>
- --------
* Represents less than one percent of the total.
(1) Principal address is 30 Rowes Wharf, Suite 330, Boston, Massachusetts
02110. Includes shares held by Boston Millennia Associates I Partnership
and various individuals. Mr. Pinto, one of our directors, is a Partner of
Boston Millennia Partners Limited Partnership. Although he shares voting
and investment control over shares held by these entities. Mr. Pinto
disclaims beneficial ownership of the shares held by this entity except to
the extent of his pecuniary interest therein.
51
<PAGE>
(2) Consists of 55,592 shares held by TCV II, V.O.F., 1,711,320 shares held by
Technology Crossover Ventures II, L.P., 1,315,687 shares held by TCV II
(Q), L.P., 233,488 shares held by TCV II Strategic Partners, L.P. and
261,284 shares held by Technology Crossover Ventures II, C.V. Mr. Reynolds,
one of our directors, is a Member of Technology Crossover Management II,
L.L.C., which is the General Partner of each of these funds. Although Mr.
Reynolds shares voting and investment control over these shares held by
these entities, he disclaims beneficial ownership of such shares except to
the extent of his pecuniary interest therein. The address for each of these
persons and entities is c/o Technology Crossover Ventures, 575 High Street,
Suite 400, Palo Alto, California 94301.
(3) Principal address is 20 William Street, Wellesley, Massachusetts 01282. Mr.
Dagres, one of our directors, is a General Partner of Battery Ventures.
Although Mr. Dagres shares voting and investment control over shares held
by this entity, he disclaims beneficial ownership of the shares held by
this entity except to the extent of his proportional interest in the
entity.
(4) Mr. Santhanam, the Chairman of our Board of Directors, and his wife Revathi
Santhanam are trustees of the Santhanam Family Trust, which holds 3,500,000
shares. Two irrevocable trusts each hold 500,000 shares for the benefit of
Mr. Santhanam's two minor children. Mr. and Mrs. Santhanam disclaim
beneficial ownership of the shares held by these irrevocable trusts.
(5) Mr. Lavanty is our President and Chief Executive Officer. Excludes 576,677
shares issuable upon exercise of options, and an additional 290,000 shares
issuable upon consummation of this offering.
(6) Excludes 190,000 shares issuable upon exercise of options.
(7) Excludes 70,104 shares issuable upon exercise of options.
(8) Principal address is 1155 Park Avenue, New York, New York 10128. Mr.
Ducommun, one of our directors, is the Trustee of the Palmer G. and Charles
E. Ducommun Charitable Annuity Trust, which holds 241,700 shares. Mr.
Ducommun, his sister, Electra D. de Peyster, and the Ducommun and Gross
family foundations are the principal beneficiaries of the trust. Ms. de
Peyster is also a shareholder of ours.
(9) Includes 3,500,000 shares to be issued in this offering, 293,255 shares to
be issued in the contemporaneous private placement and 290,000 shares to be
issued to David Lavanty upon closing of this offering.
52
<PAGE>
DESCRIPTION OF CAPITAL STOCK
General
Our amended and restated certificate of incorporation authorizes the
issuance of up to 25,000,000 shares of common stock, par value $0.001 per
share, and 14,779,511 shares of preferred stock, par value $0.001 per share,
the rights and preferences of which may be established from time to time by our
board of directors. As of February 29, 2000, there were outstanding 6,498,163
shares of common stock, and 14,615,511 shares of preferred stock, which are
convertible into 14,615,511 shares of common stock upon the completion of this
offering, were issued and outstanding. As of February 29, 2000, we had 70
holders of record of our common stock and 30 holders of record of our preferred
stock.
Common Stock
Each holder of our common stock is entitled to one vote for each share held
of record on all matters to be voted upon by the stockholders. There are no
cumulative voting rights. Subject to the preferences of preferred stock issued
after the sale of the common stock in this offering, holders of common stock
are entitled to receive ratably any dividends that may be declared from time to
time by the board of directors out of funds legally available for that purpose.
In the event of our liquidation, dissolution or winding up, holders of common
stock would be entitled to share in our assets remaining after the payment of
liabilities and the satisfaction of any liquidation preference granted to the
holders of any outstanding shares of preferred stock. Holders of common stock
have no preemptive or conversion rights or other subscription rights, and there
are no redemption or sinking fund provisions applicable to the common stock.
All outstanding shares of common stock, the shares of common stock to be issued
upon conversion of the outstanding preferred stock, the shares of common stock
to be issued in the contemporaneous private placement and the shares of common
stock offered by us in this offering, when issued and paid for, will be fully
paid and nonassessable. The rights, preferences and privileges of the holders
of common stock are subject to, and may be adversely affected by, the rights of
the holders of shares of any series of preferred stock that we may designate in
the future.
Preferred Stock
Upon the completion of this offering, the board of directors will be
authorized, subject to any limitations prescribed by law, without stockholder
approval, from time to time to issue up to an aggregate of 14,779,511 million
shares of preferred stock, par value $0.001 per share, in one or more series,
with each series to have rights and preferences, including voting rights,
dividend rights, conversion rights, redemption privileges and liquidation
preferences, as shall be determined by the board of directors. The rights of
the holders of common stock will be subject to, and may be adversely affected
by, the rights of holders of any series of preferred stock that may be issued
in the future. Any issuance of preferred stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third party
to acquire, or of discouraging a third party from attempting to acquire, a
majority of our outstanding voting stock. We currently have no plans to issue
any shares of preferred stock.
Warrants
As of February 29, 2000, we had outstanding warrants to purchase 160,000
shares of series C preferred stock at an exercise price of $2.50 per share.
These warrants are exercisable for 160,000 shares of common stock upon the
completion of this offering. Each warrant has a net exercise provision under
which the holder may, in lieu of payment of the exercise price in cash,
surrender the warrant and receive a net amount of shares, based on the fair
value of our stock at the time of the exercise of the warrant, after deducting
the aggregate exercise price. The warrants for 160,000 shares of series C
preferred stock will expire on November 30, 2004.
53
<PAGE>
Limitation of Liability and Indemnification Matters
Our amended and restated certificate of incorporation limits the liability
of directors to the maximum extent permitted by Delaware law. Delaware law
provides that directors of a corporation will not be personally liable for
monetary damages for breach of their fiduciary duties as directors, except
liability for:
. breach of their duty of loyalty to the corporation or its stockholders
. acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law
. unlawful payments of dividends or unlawful stock repurchases or
redemptions
. any transaction from which the director derived an improper personal
benefit
This limitation of liability does not apply to liabilities arising under the
federal or state securities laws and does not affect the availability of
equitable remedies such as injunctive relief or rescission.
Our bylaws provide that we will indemnify our directors, officers, employees
and other agents to the fullest extent permitted by Delaware law. We believe
that indemnification under our bylaws covers at least negligence and gross
negligence on the part of indemnified parties. Our bylaws also permit us to
secure insurance on behalf of any officer, director, employee or other agent
for any liability arising out of his or her actions in such capacity,
regardless of whether the bylaws would permit such indemnification.
We have obtained directors and officers' insurance providing indemnification
for all of our directors and officers. Prior to the completion of this
offering, we will enter into agreements to indemnify our directors and
executive officers, in addition to the indemnification provided for in our
bylaws. These agreements, among other things, will indemnify our directors and
executive officers for certain expenses, including attorneys' fees, judgments,
fines and settlement amounts incurred by any such person in any action or
proceeding, out of such person's services as a director, officer, employee,
agent or fiduciary of ours, any subsidiary of ours or any other company or
enterprise to which the person provides services at our request. We believe
that these provisions and agreements are necessary to attract and retain
qualified persons as directors and executive officers.
At present, there is no litigation or proceeding involving any of our
directors or officers in which indemnification is required or permitted, and we
are not aware of any threatened litigation or proceeding that may result in a
claim for indemnification.
Registration Rights
The holders of 14,615,511 shares of preferred stock and 1,350,000 shares of
common stock issued in connection with the acquisition of XTEND-Tech have been
granted rights to require us to register their shares under the Securities Act
provided under the terms of an investors' registration rights agreement between
the holders of our securities and us. Beginning as soon as practicable after
January 1, 2000, holders of at least 50% of the covered securities may require
on up to two occasions that we register for public resale all or a lesser
amount of their securities. We need not register these shares if the requested
registration would occur after we have effected two registrations, or if the
requested registration would occur within 180 days following the effective date
of any Form S-1 registration statement we have filed. Also, we may defer the
registration of the shares for up to 90 days if, in the good faith judgment of
the board of directors, it would be seriously detrimental to our stockholders
and us for the registration statement to be filed.
In addition, holders of our securities who are parties to the agreement may
require on up to four occasions, but only once in any 12-month period that we
register their shares for public resale on a Form S-3 registration statement;
provided that
. we are eligible to use Form S-3 and the value of the securities to be
included is at least $500,000
54
<PAGE>
. the request for Form S-3 registration does not occur within 180 days
following the effective date of any registration statement registering
shares of common stock
. the request for Form S-3 registration does not occur within 180 days
following the effective date of a registration statement registering
securities required to be registered by the holders of at least 50% of
the outstanding securities
We are not required to maintain the effectiveness of any Form S-3 for more
than 180 days from the effective date of the Form S-3. In view of market
conditions, we may reduce the number of securities to be registered on Form S-3
to not less than 50% of the shares the holders of registrable securities have
requested to be registered. Furthermore, in the event we elect to register any
of our shares of common stock for the purposes of effecting any public offering
other than our initial public offering, the holders of securities who are
parties to the agreement are entitled to include their shares of common stock
in the registration, but in view of market conditions, we may reduce the number
of shares proposed to be registered. All expenses in connection with any
registration will be borne by us.
Antitakeover Provisions
The provisions of our amended and restated certificate of incorporation and
bylaws may have the effect of making it more difficult for a third party to
acquire, or of discouraging a third party from attempting to acquire, control
of us. Such provisions could limit the price that investors might be willing to
pay in the future for shares of our common stock. These provisions allow us to
issue preferred stock without any vote or further action by the stockholders,
eliminate the right of stockholders to act by written consent without a meeting
and eliminate cumulative voting in the election of directors. These provisions
may make it more difficult for stockholders to delay or prevent a change in
control of us.
We are subject to Section 203 of the Delaware General Corporation Law, which
regulates corporate acquisitions. In general, Section 203 prohibits a publicly
held Delaware corporation from engaging in a business combination with an
interested stockholder for a period of three years following the date the
person became an interested stockholder, unless:
. the board of directors approved the transaction in which such stockholder
became an interested stockholder prior to the date the interested
stockholder attained such status
. upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, he or she owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding shares owned by persons who are directors and also
officers
. the business combination is approved by a majority of the board of
directors and by the affirmative vote of at least two-thirds of the
outstanding voting stock that is not owned by the interested stockholder
A business combination generally includes a merger, asset or stock sale, or
other transaction resulting in a financial benefit to the interested
stockholder. In general, an interested stockholder is a person who, together
with affiliates and associates, owns, or within three years prior to the
determination of interested stockholder status, did own, 15% or more of a
corporation's voting stock.
Our amended and restated certificate of incorporation provides that, upon
the completion of this offering, the board of directors will be divided into
three classes of directors with each class serving a staggered three-year term.
The classification system of electing directors may tend to discourage a third
party from making a tender offer or otherwise attempting to obtain control of
us and may maintain the incumbency of the board of directors, as the
classification of the board of directors generally increases the difficulty of
replacing a majority of the directors. Our amended and restated certificate of
incorporation eliminates the right of stockholders to act by written consent
without a meeting, and our bylaws eliminate the right of stockholders to call
special meetings of stockholders. The authorization of undesignated preferred
stock makes it possible for the board of
55
<PAGE>
directors to issue preferred stock with voting or other rights or preferences
that could impede the success of any attempt to change control of us. These
provisions may have the effect of deferring hostile takeovers or delaying
changes in control of our management. The amendment of any of these provisions
would require approval by holders of at least 66 2/3% of the outstanding common
stock.
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is First Union
National Bank.
56
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no market for our common stock.
Future sales of substantial amounts of common stock in the public market
following this offering could cause the prevailing market price of our common
stock to fall and impede our ability to raise equity capital at a time and on
terms favorable to us.
Upon completion of this offering, we will have outstanding an aggregate of
25,196,929 shares of common stock, assuming no exercise of the underwriters'
over-allotment option and no exercise of outstanding options or outstanding
warrants after February 29, 2000. Of these outstanding shares, the 3,500,000
shares sold in this offering will be freely tradable without restriction or
further registration under the Securities Act, unless purchased by our
"affiliates" as that term is defined in Rule 144 under the Securities Act. The
remaining 21,696,929 shares of common stock outstanding upon completion of the
offering and held by existing stockholders will be "restricted securities" as
that term is defined in Rule 144 under the Securities Act. Restricted shares
may be sold in the public market only if registered or if they qualify for an
exemption from registration under Rules 144, 144(k) or 701 promulgated under
the Securities Act, which rules are summarized below, or another exemption.
Sales of the restricted shares in the public market, or the availability of
such shares for sale, could adversely affect the market price of our common
stock. We, our executive officers and directors and stockholders who hold of
more than 100,000 shares of our common stock have entered into contractual
lock-up agreements, providing that they will not offer, sell, contract to sell
or grant any option to purchase or otherwise dispose of shares of common stock
owned by them or that could be purchased by them through the exercise of
options or warrants for a period of 180 days after the date of this prospectus
without the prior written consent of Lehman Brothers Inc. As a result of these
contractual restrictions, notwithstanding possible earlier eligibility for sale
under the provisions of Rules 144, 144(k) and 701, additional shares will be
eligible for sale beginning 181 days after the effective date of the offering,
subject in some cases to volume limitations.
Eligibility of Restricted Shares for Sale in the Public Market
<TABLE>
<S> <C>
At the Effective Date.................................... None
90 Days After Effective Date............................. None
180 Days after Effective Date............................ 22,381,646 Shares
More Than 180 Days After Effective Date.................. 3,178,936 Shares
</TABLE>
In general, under Rule 144 as currently in effect, beginning 91 days after
the date of this prospectus, a person, or persons whose shares are aggregated,
who has beneficially owned restricted shares for at least one year, including
persons who may be deemed to be our affiliates, would be entitled to sell
within any three-month period a number of shares that does not exceed the
greater of:
. 1% of the number of shares of common stock then outstanding, which will
equal approximately 251,969 shares immediately after the offering
. the average weekly trading volume of the common stock as reported through
the Nasdaq National Market during the four calendar weeks preceding the
filing of a Form 144 with respect to such sale
Sales under Rule 144 are also subject to manner of sale provisions and
notice requirements and to the availability of current public information about
us. Under Rule 144(k), a person who is not deemed to have been our affiliate at
any time during the 90 days preceding a sale and who has beneficially owned for
at least two years the restricted shares proposed to be sold, including the
holding period of any prior owner except an affiliate, is entitled to sell such
shares without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144.
Subject to limitations on the aggregate offering price of a transaction and
other conditions, Rule 701 permits resales of shares issued prior to the date
the issuer becomes subject to the reporting requirements of the Securities
Exchange Act of 1934, pursuant to compensatory stock or option plans or
contracts commencing 90 days after the issuer becomes subject to the reporting
requirements of the Exchange Act, in reliance upon
57
<PAGE>
Rule 144 but without compliance with the holding period requirements and other
restrictions. In addition, the Commission has indicated that Rule 701 will
apply to typical stock options granted by an issuer before it becomes subject
to the reporting requirements of the Exchange Act, along with the shares
acquired upon exercise of such options, including exercises after the date the
issuer becomes so subject. Securities issued in reliance on Rule 701 are
restricted securities and, subject to the contractual restrictions described
above, beginning 91 days after the date of this prospectus, may be sold by
persons other than affiliates subject only to the manner of sale provisions of
Rule 144 and by affiliates under Rule 144 without compliance with its one-year
minimum holding period requirements.
We, our executive officers and directors and stockholders who hold more than
100,000 shares of our stock have agreed not to sell or otherwise dispose of any
shares of common stock or any securities convertible into or exercisable or
exchangeable for common stock, or enter into any swap or similar agreement that
transfers, in whole or in part, the economic risk of ownership of the common
stock, for a period of 180 days after the date of this prospectus, without the
prior written consent of Lehman Brothers Inc., subject to limited exceptions.
We intend to file a registration statement under the Securities Act covering
the shares of common stock subject to outstanding options or reserved for
issuance under the 1993 Plan. This registration statement is expected to be
filed within 90 days of effectiveness of the registration statement covering
the shares of common stock in this offering and will automatically become
effective upon filing. Accordingly, shares registered under that registration
statement will, subject to Rule 144 volume limitations applicable to affiliates
and the expiration of a 180-day lock-up period, be available for sale in the
open market, except to the extent that the shares are subject to our vesting
restrictions or the contractual restrictions described above.
58
<PAGE>
UNDERWRITING
Pursuant to the terms of an underwriting agreement, which is filed as an
exhibit to the registration statement relating to this prospectus, the
underwriters of the offering named below, for whom Lehman Brothers Inc., First
Union Securities, Inc. and Friedman, Billings, Ramsey & Co., Inc. are acting as
representatives, have each agreed to purchase from us the respective number of
shares of common stock set forth opposite its name below:
<TABLE>
<CAPTION>
Underwriters Number of shares
------------ ----------------
<S> <C>
Lehman Brothers Inc.......................................
First Union Securities, Inc...............................
Friedman, Billings, Ramsey & Co., Inc. ...................
------
Total...................................................
======
</TABLE>
The underwriting agreement provides that the underwriters' obligations to
purchase shares of common stock depend on the satisfaction of the conditions
contained in the underwriting agreement, and that if any of the shares of
common stock are purchased by the underwriters under the underwriting
agreement, then all of the shares of common stock that the underwriters have
agreed to purchase under the underwriting agreement must be purchased. The
conditions contained in the underwriting agreement include the requirement that
the representations and warranties made by us to the underwriters are true,
that there is no material change in the financial markets and that we deliver
to the underwriters customary closing documents.
The following table shows the per share and total underwriting discounts and
commissions to be paid to the underwriters by us. These amounts are shown
assuming both no exercise and full exercise of the underwriters' option to
purchase 525,000 additional shares described below.
<TABLE>
<CAPTION>
Paid by Us No Exercise Full Exercise
---------- ----------- -------------
<S> <C> <C>
Per share........................................ $ $
Total............................................ $ $
</TABLE>
The representatives have advised us that the underwriters propose to offer
the shares of common stock directly to the public at the initial public
offering price set forth on the cover page of this prospectus, and to dealers,
who may include the underwriters, at the initial public offering price less a
selling concession not in excess of $ per share. The underwriters may
allow, and the dealers may reallow, a concession not in excess of $ per
share to brokers and dealers. After the offering, the underwriters may change
the offering price and other selling terms.
59
<PAGE>
We have granted to the underwriters an option to purchase up to an aggregate
of 525,000 additional shares of common stock, exercisable solely to cover over-
allotments, if any, at the initial public offering price less the underwriting
discounts and commissions shown on the cover page of this prospectus. The
underwriters may exercise this option at any time until 30 days after the date
of the underwriting agreement. If this option is exercised, each underwriter
will be committed, so long as the conditions of the underwriting agreement are
satisfied, to purchase a number of additional shares of common stock
proportionate to the underwriter's initial commitment as indicated in the
preceding table, and we will be obligated under the over-allotment option to
sell the shares of common stock to the underwriters.
We, our executive officers and directors and stockholders who hold more than
100,000 shares of our stock have agreed not to directly or indirectly do any of
the following, whether any transaction described in clause (1) or (2) below is
to be settled by delivery of common stock or other securities, in cash or
otherwise, in each case without the prior written consent of Lehman Brothers
Inc. on behalf of the underwriters, for a period of 180 days after the date of
this prospectus:
(1) offer, sell or otherwise dispose of, or enter into any transaction or
arrangement that is designed or could be expected to, result in the
disposition or purchase by any person at any time in the future of, any
shares of common stock or securities convertible into or exchangeable
for common stock or substantially similar securities, other than any of
the following:
. the common stock sold under this prospectus
. shares of common stock we issue under employee benefit plans,
qualified stock option plans or other employee compensation plans
existing on the date of this prospectus or under currently
outstanding options, warrants or rights
(2) sell or grant options, rights or warrants with respect to any shares of
our common stock or securities convertible into or exchangeable for our
common stock or substantially similar securities, other than the grant
of options under option plans existing on the date hereof
Prior to the offering, there has been no public market for the shares of our
common stock. The initial public offering price will be negotiated between the
representatives and us. In determining the initial public offering price of the
common stock, the representatives will consider, among other things and in
addition to prevailing market conditions, our historical performance and
capital structure, estimates of our business potential and earnings prospects,
an overall assessment of our management and the consideration of the above
factors in relation to market valuation of companies in related businesses.
We have applied for quotation of our common stock on the Nasdaq National
Market under the symbol "INVA."
We have agreed to indemnify the underwriters against liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
the representations and warranties contained in the underwriting agreement, and
to contribute to payments that the underwriters may be required to make for
these liabilities.
We estimate that the total expenses of the offering, excluding underwriting
discounts and commissions, will be approximately $1,560,000.
Until the distribution of the common stock is completed, rules of the
Commission may limit the ability of the underwriters and selling group members
to bid for and purchase shares of common stock. As an exception to these rules,
the representatives are permitted to engage in transactions that stabilize the
price of the common stock. These transactions may consist of bids or purchases
for the purpose of pegging, fixing or maintaining the price of the common
stock.
60
<PAGE>
The underwriters may create a short position in the common stock in
connection with the offering, which means that they may sell more shares than
are set forth on the cover page of this prospectus. If the underwriters create
a short position, then the representatives may reduce that short position by
purchasing common stock in the open market. The representatives also may elect
to reduce any short position by exercising all or part of the over-allotment
option.
The underwriters have informed us that they do not intend to confirm sales
to discretionary accounts that exceed five percent of the total number of
shares of common stock offered by them.
The representatives also may impose a penalty bid on underwriters and
selling group members. This means that if the representatives purchase shares
of common stock in the open market to reduce the underwriters' short position
or to stabilize the price of the common stock, they may reclaim the amount of
the selling concession from the underwriters and selling group members who sold
those shares as part of the offering.
In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of those purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it was to discourage resales of the security by purchasers in
an offering.
Neither we nor any of the underwriters make any representation or prediction
as to the direction or magnitude of any effect that the transactions described
above may have on the price of the common stock. In addition, neither we nor
any of the underwriters make any representation that the representatives will
engage in these transactions or that these transactions, once commenced, will
not be discontinued without notice.
Any offers in Canada will be made only under an exemption from the
requirements to file a prospectus in the relevant province of Canada where the
sale is made.
At our request, the underwriters have reserved up to 12% of the shares of
the common stock offered by this prospectus for sale to our directors, prior
investors and other persons associated with Inventa at the initial public
offering price set forth on the cover page of this prospectus. These persons
must commit to purchase no later than the close of business on the day
following the date of this prospectus. The number of shares available for sale
to the general public will be reduced to the extent these persons purchase the
reserved shares.
Fidelity Capital Markets, a division of National Financial Services
Corporation, will be facilitating a portion of the electronic distribution of
information through the Internet, their intranet and other proprietary
electronic technology. Fidelity Capital Markets will not be acting as an
underwriter of this offering.
fbr.com, a division of FBR Investments Services, Inc., which is an affiliate
of Friedman, Billings, Ramsey & Co., Inc., will be facilitating a portion of
the Internet distribution for this offering. Friedman, Billings, Ramsey & Co.,
Inc. has agreed to allocate a limited number of shares to fbr.com for sale to
its online brokerage account holders. An electronic prospectus is available on
the website maintained by fbr.com. Other than the prospectus in electronic
format, the information on the fbr.com website relating to this offering is not
a part of this prospectus and should not be relied upon by prospective
investors.
The representatives and their affiliates may in the future provide
investment banking, financial advisory and other services to us for which these
representatives may receive customary fees and commissions.
61
<PAGE>
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for us
by Wilson Sonsini Goodrich & Rosati, P.C., Palo Alto, California. The
underwriters in this offering are represented by Simpson Thacher & Bartlett,
New York, New York.
EXPERTS
The financial statements as of December 31, 1997, 1998 and 1999 and for the
three years in the period ended December 31, 1999 included in this prospectus
have been so included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants given on the authority of said firm as experts in
auditing and accounting.
ADDITIONAL INFORMATION
We have filed a registration statement on Form S-1 with the Securities and
Exchange Commission. This prospectus, which forms a part of the registration
statement, does not contain all of the information included in the registration
statement. Certain information is omitted and you should refer to the
registration statement and our exhibits. With respect to references made in
this prospectus to any contract or other document of ours, such references are
not necessarily complete and you should refer to the exhibits attached to the
registration statement for copies of the actual contract or document. You may
review a copy of the registration statement at the Securities and Exchange
Commission's public reference room at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, and at the Securities and
Exchange Commission's regional offices in Chicago, Illinois and New York, New
York. Please call the Securities and Exchange Commission at 1-800-SEC-0330 for
further information on the operation of the public reference rooms. Our
Securities and Exchange Commission filings and the registration statement can
also be reviewed by accessing the Securities and Exchange Commission's Internet
site at http://www.sec.gov.
62
<PAGE>
INVENTA TECHNOLOGIES, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INVENTA CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Accountants........................................ F-2
Consolidated Balance Sheet............................................... F-3
Consolidated Statement of Operations and Comprehensive Losses............ F-4
Consolidated Statement of Stockholders' Equity (Deficit)................. F-5
Consolidated Statement of Cash Flows..................................... F-6
Notes to Consolidated Financial Statements............................... F-7
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Overview................................................................. F-21
Unaudited Pro Forma Combined Balance Sheet............................... F-22
Unaudited Pro Forma Combined Statement of Operations..................... F-23
Notes to Pro Forma Combined Financial Information........................ F-24
XTEND-TECH, INC. FINANCIAL STATEMENTS
Report of Independent Accountants........................................ F-25
Balance Sheet............................................................ F-26
Statement of Operations.................................................. F-27
Statement of Cash Flows.................................................. F-28
Notes to Financial Statements............................................ F-29
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of Inventa Technologies, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations and comprehensive losses, of
stockholders' equity (deficit) and of cash flows present fairly, in all
material respects, the financial position of Inventa Technologies, Inc. and its
subsidiary (the "Company") at December 31, 1997, 1998 and 1999, and the results
of its operations and its cash flows for the years ended December 31, 1997,
1998 and 1999, in conformity with accounting principles generally accepted in
the United States. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with auditing standards generally accepted in the
United States, which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
San Jose, California
February 11, 2000
F-2
<PAGE>
INVENTA TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Pro Forma
Stockholders'
December 31, Equity at
-------------------------- December 31,
1997 1998 1999 1999
------- ------- -------- -------------
(unaudited)
<S> <C> <C> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents.......... $ 671 $ 4,783 $ 3,244
Accounts receivable, net........... 622 637 2,013
Prepaid expenses and other current
assets............................ 37 142 1,675
------- ------- --------
Total current assets.............. 1,330 5,562 6,932
Property and equipment, net.......... 451 661 2,002
Other assets......................... 41 72 288
------- ------- --------
$ 1,822 $ 6,295 $ 9,222
======= ======= ========
LIABILITIES, MANDATORILY REDEEMABLE
CONVERTIBLE
PREFERRED STOCK AND STOCKHOLDERS'
DEFICIT
---------------------------------
Current liabilities:
Borrowings......................... $ 300 $ -- $ 4,000
Accounts payable................... 164 523 1,409
Accrued expenses................... 326 1,125 2,690
Deferred revenue................... -- -- 483
Capital lease obligations.......... 111 112 192
------- ------- --------
Total current liabilities......... 901 1,760 8,774
Borrowings, long-term................ -- 300 --
Capital lease obligations, long-
term................................ 192 73 454
Deferred tax liabilities, long-term.. 25 17 --
------- ------- --------
1,118 2,150 9,228
------- ------- --------
Mandatorily redeemable convertible
preferred stock:
Series B mandatorily redeemable
convertible preferred stock;
$0.001 par value; 2,560,000 shares
authorized, issued and
outstanding....................... 3,200 3,200 4,373 $ --
Series C mandatorily redeemable
convertible preferred stock;
$0.001 par value; 8,220,000 shares
authorized; 0, 4,056,000 and
8,056,000 shares issued and
outstanding, respectively......... -- 5,070 13,759 --
------- ------- -------- --------
3,200 8,270 18,132 --
Commitments and contingencies (Note
6)
Stockholders' deficit:
Series A convertible preferred
stock; $0.001 par value; 1,000,000
shares authorized, issued and
outstanding....................... 1 1 1 --
Common stock; $0.001 par value;
25,000,000 shares authorized;
4,642,000, 4,682,000 and 4,759,000
shares issued and outstanding,
respectively; 16,375,000
(unaudited) shares issued and
outstanding, pro forma............ 5 5 5 16
Additional paid-in capital........... 368 1,357 1,861 19,983
Deferred stock-based compensation.... -- (978) (4,662) (4,662)
Accumulated comprehensive loss....... (111) (93) -- --
Accumulated deficit.................. (2,759) (4,417) (15,343) (15,343)
------- ------- -------- --------
Total stockholders' deficit....... (2,496) (4,125) (18,138) $ (6)
------- ------- -------- ========
$ 1,822 $ 6,295 $ 9,222
======= ======= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
INVENTA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSSES
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------
1997 1998 1999
--------- --------- ----------
<S> <C> <C> <C>
Revenues..................................... $ 5,196 $ 8,016 $ 13,520
--------- --------- ----------
Operating expenses:
Project personnel (exclusive of deferred
stock-based compensation of $621 in
1999)..................................... 2,677 2,799 8,610
Sales and marketing (exclusive of deferred
stock-based compensation of $359 in
1999)..................................... 1,671 1,838 4,230
General and administrative (exclusive of
deferred stock-based compensation of $610
in 1999).................................. 3,456 4,519 9,434
Depreciation............................... 187 252 562
Amortization of deferred stock-based
compensation.............................. -- 50 1,590
Non-recurring expenses on closing of
foreign operations........................ -- 250 --
--------- --------- ----------
Total operating expenses................. 7,991 9,708 24,426
--------- --------- ----------
Loss from operations......................... (2,795) (1,692) (10,906)
Interest and other income.................... 4 92 101
Interest expense............................. (83) (56) (106)
--------- --------- ----------
Loss before income taxes..................... (2,874) (1,656) (10,911)
Income tax expense........................... (90) (2) (15)
--------- --------- ----------
Net loss..................................... (2,964) (1,658) (10,926)
Accretion of mandatorily redeemable
convertible preferred stock to redemption
value....................................... -- -- (4,862)
--------- --------- ----------
Net loss attributable to common
stockholders................................ $ (2,964) $ (1,658) $ (15,788)
Other comprehensive losses:
Foreign currency translation adjustment.... (112) 18 --
--------- --------- ----------
Comprehensive loss........................... $ (3,076) $ (1,640) $ (15,788)
========= ========= ==========
Net loss per share:
Basic and diluted.......................... $ (0.65) $ (0.36) $ (3.36)
========= ========= ==========
Weighted average shares.................... 4,556,893 4,658,735 4,698,483
========= ========= ==========
Pro forma net loss per share (unaudited):
Basic and diluted.......................... $ (0.76)
==========
Weighted average shares.................... 14,447,327
==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
INVENTA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands)
<TABLE>
<CAPTION>
Series A
Convertible Retained Total
Preferred Stock Common Stock Additional Deferred Accumulated Earnings/ Stockholders'
----------------- ------------- Paid-in Stock-Based Comprehensive (Accumulated Equity
Shares Amount Shares Amount Capital Compensation Losses Deficit) (Deficit)
-------- ------- ------ ------ ---------- ------------ ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1996................... 800 $ 1 4,543 $ 5 $ 388 $ -- $ 1 $ 205 $ 600
Stock issuance costs.... -- -- -- -- (25) -- -- -- (25)
Exercise of common stock
options................ -- -- 99 -- 5 -- -- -- 5
Foreign currency
translation
adjustment............. -- -- -- -- -- -- (112) -- (112)
Net loss................ -- -- -- -- -- -- -- (2,964) (2,964)
-------- ------- ----- ---- ------- ------- ----- -------- --------
Balance at December 31,
1997................... 800 1 4,642 5 368 -- (111) (2,759) (2,496)
Stock issuance costs.... -- -- -- -- (42) -- -- -- (42)
Exercise of common stock
options................ -- -- 40 -- 3 -- -- -- 3
Deferred stock-based
compensation........... -- -- -- -- 1,028 (1,028) -- -- --
Amortization of stock-
based compensation..... -- -- -- -- -- 50 -- -- 50
Foreign currency
translation
adjustment............. -- -- -- -- -- -- 18 -- 18
Net loss................ -- -- -- -- -- -- -- (1,658) (1,658)
-------- ------- ----- ---- ------- ------- ----- -------- --------
Balance at December 31,
1998................... 800 1 4,682 5 1,357 (978) (93) (4,417) (4,125)
Stock issuance costs.... -- -- -- -- (16) -- -- -- (16)
Exercise of Series A
convertible preferred
stock warrants......... 200 -- -- -- 100 -- -- -- 100
Exercise of common stock
options................ -- -- 77 -- 8 -- -- -- 8
Accretion of mandatorily
redeemable convertible
preferred stock........ -- -- -- -- (4,862) -- -- -- (4,862)
Deferred stock-based
compensation, net of
cancellations.......... -- -- -- -- 5,274 (5,274) -- -- --
Amortization of stock-
based compensation..... -- -- -- -- -- 1,590 -- -- 1,590
Write off of accumulated
foreign currency
translation
adjustment............. 93 93
Net loss................ -- -- -- -- -- -- -- (10,926) (10,926)
-------- ------- ----- ---- ------- ------- ----- -------- --------
Balance at December 31, $
1999................... 1,000 $ 1 4,759 $ 5 $ 1,861 $(4,662) -- $(15,343) $(18,138)
======== ======= ===== ==== ======= ======= ===== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
INVENTA TECHNOLOGIES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
1997 1998 1999
------- ------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss......................................... $(2,964) $(1,658) $(10,926)
Adjustments to reconcile net loss to net cash
used in operating activities:
Provision for doubtful accounts................ 258 (49) --
Depreciation................................... 192 252 562
Deferred income taxes.......................... 99 -- --
Amortization of deferred stock-based
compensation.................................. -- 50 1,590
Changes in operating assets and liabilities:
Accounts receivable.......................... 250 78 (1,376)
Prepaid expenses and other assets............ 51 (121) (1,533)
Accounts payable............................. (151) 345 886
Accrued expenses............................. 14 797 1,658
Deferred revenue............................. -- -- 483
Income taxes payable......................... 1 (26) --
Deferred tax liabilities..................... 1 (8) (17)
------- ------- --------
Net cash used in operating activities...... (2,249) (340) (8,673)
------- ------- --------
Cash flows from investing activities:
Purchase of property and equipment............... (50) (460) (1,261)
------- ------- --------
Net cash used in investing activities...... (50) (460) (1,261)
------- ------- --------
Cash flows from financing activities:
Proceeds from issuance of mandatorily redeemable
convertible preferred stock, net of issuance
costs........................................... 3,175 5,027 4,984
Proceeds from exercise of warrants............... -- -- 100
Proceeds from issuance of common stock........... 5 3 8
Proceeds from borrowings......................... -- 300 4,092
Repayment of borrowings.......................... (165) (300) (392)
Repayment of capital lease obligations........... (93) (118) (397)
------- ------- --------
Net cash provided by financing activities.. 2,922 4,912 8,395
------- ------- --------
Net increase (decrease) in cash and cash
equivalents....................................... 623 4,112 (1,539)
Cash and cash equivalents, beginning of year....... 48 671 4,783
------- ------- --------
Cash and cash equivalents, end of year............. $ 671 $ 4,783 $ 3,244
======= ======= ========
Supplemental cash flow information:
Cash paid for the period:
Interest....................................... $ 77 $ 56 $ 106
======= ======= ========
Taxes.......................................... $ 49 $ -- $ --
======= ======= ========
Supplemental non-cash investing and financing
activity:
Property and equipment acquired under capital
lease........................................... $ 285 $ -- $ 678
======= ======= ========
Write-off of accumulated foreign currency
translation adjustment against accrued liquidation
costs............................................. $ -- $ -- $ 93
======= ======= ========
</TABLE>
F-6
<PAGE>
INVENTA TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company
Inventa Corporation (the "Company") was incorporated in California on
October 26, 1988. The Company reincorporated in Delaware as Inventa
Technologies, Inc. on March 23, 2000 (unaudited). The Company provides Internet
professional services including business-to-business e-commerce solutions to
companies located primarily in the United States. The Company architects,
engineers, integrates and supports complex business to business electronic
markets and electronic customer relationship management systems. E-markets are
electronic marketplaces that enable businesses to collaborate with trading
partners, conduct e-commerce, manage distribution relationships and enhance
business partnerships. Electronic customer relationship management is an
Internet based approach to coordinating a company's customer relationships
across communications channels, business functions and trading partners.
Basis of Presentation
The accompanying consolidated financial statements include the financial
statements of the Company and its wholly owned foreign subsidiary, ICG Systems
SDN. BHD, located in Malaysia through December 31, 1998. All intercompany
accounts between the Company and its wholly owned subsidiary have been
eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Revenue Recognition
The Company derives its revenues from professional services which are
generally provided to clients on either a fixed-price or a time and materials
basis. Revenue from fixed-price engagements is recognized using the percentage
of completion method (based on the ratio of costs incurred to the total
estimated project costs). Revenue from time and materials engagements is
recognized as services are rendered. Payments received in advance of services
rendered are recorded as deferred revenue. The Company reports revenue net of
reimbursable expenses which are billed to and collected from clients.
Provisions for estimated losses on uncompleted contracts are made on a
contract by contract basis and are recognized in the period in which such
losses become probable and can be reasonably estimated. To date, such losses
have not been significant.
Client billings are generated upon achievement of milestones defined in the
engagement contracts. At December 31, 1997, 1998 and 1999, the Company had
$33,000, $32,000 and $1,183,000 in unbilled accounts receivable relating to
revenue recognized but not billed due to timing of milestone achievement.
Unbilled accounts receivable is included in prepaid expenses and other current
assets on the consolidated balance sheet.
Cash and Cash Equivalents
The Company considers all highly liquid instruments with an original
maturity of three months or less to be cash equivalents. Cash equivalents
consist primarily of deposits in money market funds.
F-7
<PAGE>
INVENTA TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Concentration of Credit Risks
Financial instruments that potentially subject the Company to a
concentration credit risk consist primarily of cash and cash equivalents and
accounts receivable. The Company limits its exposure to credit loss by placing
its cash and cash equivalents with high quality financial institutions. The
Company's accounts receivable are derived from revenue earned from clients
located in the United States. The Company performs ongoing credit evaluations
of its clients and maintains an allowance for potential credit losses based
upon the expected collectability of accounts receivable.
The following table summarizes the revenues from clients in excess of 10% of
total revenues:
<TABLE>
<CAPTION>
Years Ended
December 31,
----------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Company A................................................... 3% 52% 35%
Company B................................................... -- -- 21%
Company C................................................... 17% 8% 6%
Company D................................................... 18% 16% 3%
Company E................................................... 18% 5% --
Company F................................................... 15% -- --
</TABLE>
At December 31, 1997, Company E and F accounted for 15% and 17% of total
accounts receivable, respectively. At December 31, 1998, Company A and D
accounted for 38% and 27% of total accounts receivable, respectively. At
December 31, 1999, Company A and B accounted for 26% and 25% of total accounts
receivable, respectively.
Fair Value of Financial Instruments
The Company's financial instruments, including cash and cash equivalents,
accounts receivable, short-term borrowings and accounts payable are carried at
cost, which approximates their fair value because of the short-term maturity of
these instruments. The carrying value of the Company's capital leases
approximate fair value because the implicit rates for these leases approximates
prevailing market rates. The fair value of long-term borrowings are estimated
based on current interest rates available to the Company for debt instruments
with similar terms, degrees of risk, and remaining maturities. The carrying
values of these obligations approximate their fair values.
Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated using
the straight-line method over the estimated useful lives of the assets,
generally ranging from three to five years. Equipment acquired under capital
leases is amortized on a straight-line basis over the term of the lease or
estimated useful lives, whichever is shorter. Leasehold improvements are
amortized over the shorter of the term of the lease or the life of the asset.
Long-lived Assets
The Company evaluates the recoverability of its long-lived assets in
accordance with Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be disposed of" ("SFAS No. 121"). SFAS No. 121 requires recognition of
impairment of long-lived assets in the event the net book value of such assets
exceeds the future undiscounted cash flows attributable to such assets. In that
event, a loss is recognized based on the amount by which the carrying value
F-8
<PAGE>
INVENTA TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
exceeds the fair value of the long-lived asset. Fair value is determined
primarily using the anticipated cash flows discounted at a rate commensurate
with the risk involved. Losses on long-lived assets to be disposed of are
determined in a similar manner, except that fair values are reduced for the
cost of disposal. No losses from impairment have been recognized in the
financial statements.
Advertising
Advertising is expensed as incurred. Advertising and public relations
expenses for the years ended December 31, 1997, 1998 and 1999, totaled $91,000,
$230,000 and $386,000, respectively.
Stock-based Compensation
The Company accounts for stock-based compensation in accordance with the
provisions of Accounting Principles Board Opinion No. 25 "Accounting for Stock
Issued to Employees," ("APB No. 25") and complies with the disclosure
provisions of Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation" ("SFAS No. 123"). Under APB No. 25, compensation
expense is recognized based on the difference, if any, on the date of grant
between the fair value of the Company's stock and the amount an employee must
pay to acquire the stock. The compensation expense is recognized over the
periods the employee performs the related services, generally the vesting
period of four years, consistent with the multiple option method described in
FASB Interpretation No. 28 ("FIN 28"). Use of this method resulted in
amortization of the deferred compensation at a rate of approximately 60%, 25%,
12%, and 3% over the respective four year period.
The Company accounts for equity instruments issued to non-employees in
accordance with the provisions of SFAS No. 123 and the Emerging Issues Task
Force in Issue No. 96-18, "Accounting for Equity Instruments That Are Issued to
Other Than Employees for Acquiring, or In Conjunction with Selling, Goods or
Services" which require that such equity instruments are recorded at their fair
value on the measurement date, which is typically the date of grant.
Pro Forma Stockholders' Equity (Unaudited)
Effective upon the closing of this offering, the outstanding shares of
Series A Convertible Preferred Stock, Series B and Series C Mandatorily
Redeemable Convertible Preferred Stock will automatically convert into
approximately 1,000,000, 2,560,000 and 8,056,000 shares, respectively, of
Common Stock. The pro forma effects of these transactions are unaudited and
have been reflected in the accompanying pro forma Stockholders' Equity at
December 31, 1999.
Net Loss Per Share
Net loss per share is calculated in accordance with Statement of Financial
Accounting Standards No. 128, "Earnings per Share" (SFAS "No. 128") and SEC
Staff Accounting Bulletin No. 98 ("SAB No. 98"). Under the provisions of SFAS
No. 128 and SAB No. 98, basic net loss per share is computed by dividing the
net loss available to common stockholders for the period by the weighted
average number of common shares outstanding during the period. Diluted net loss
per share is computed by dividing the net loss for the period by the weighted
average number of common and potential common shares outstanding during the
period, if their effect is dilutive. Potential common shares are comprised of
incremental shares of Common Stock issuable upon the exercise of stock options
and warrants and upon the conversion of Convertible Preferred Stock.
F-9
<PAGE>
INVENTA TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The following table sets forth the computation of basic and diluted net loss
per share for the periods indicated, (in thousands, except share and per share
data):
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Historical:
Numerator:
Net loss.................................... $ (2,964) $ (1,658) $ (10,926)
Accretion of series B and C mandatorily
redeemable convertible preferred stock..... -- -- (4,862)
--------- --------- ---------
Net loss attributable to common
stockholders............................... $ (2,964) $ (1,658) $ (15,788)
========= ========= =========
Denominator:
Weighted average shares..................... 4,556,893 4,658,735 4,698,483
========= ========= =========
Net loss per share:
Basic and diluted........................... $ (0.65) $ (0.36) $ (3.36)
========= ========= =========
</TABLE>
The following table sets forth potential common stock that are not included
in the diluted net loss per share calculation above because to do so would be
antidilutive for the period indicated:
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------
1997 1998 1999
--------- --------- ----------
<S> <C> <C> <C>
Effect of potential common stock:
Series A convertible preferred stock.......... 800,000 800,000 1,000,000
Series B mandatorily redeemable convertible
preferred stock.............................. 2,560,000 2,560,000 2,560,000
Series C mandatorily redeemable convertible
preferred stock.............................. -- 4,055,511 8,055,511
Convertible preferred stock warrants.......... 200,000 200,000 160,000
Employee stock options........................ 425,000 1,496,000 3,492,000
--------- --------- ----------
3,985,000 9,111,511 15,267,511
========= ========= ==========
</TABLE>
Pro Forma Net Loss Per Share (Unaudited)
Pro forma net loss per share for the year ended December 31, 1999 is
computed using the weighted average number of common shares outstanding,
including the conversion of the Company's Series A, Series B and Series C
Convertible Preferred Stock into shares of the Company's Common Stock effective
upon the closing of the Company's initial public offering, as if such
conversion occurred on January 1, 1999, or at the date of original issuance, if
later. The resulting pro forma adjustment includes (i) an increase in the
weighted average shares used to compute the basic net loss per share by
9,748,844 shares and (ii) a decrease in the net loss attributable to common
stockholders for the accretion of mandatorily redeemable convertible preferred
stock of $4,862,000. The calculation of diluted net loss per share excludes
potential shares of common stock as the effect of their inclusion would be
antidilutive. Pro forma potential common stock consists of incremental shares
of common stock issuable upon the exercise of stock options.
Foreign Currency Translation Policy
The functional currency of ICG Systems SDN. BHD. is the local currency.
Assets and liabilities are translated at exchange rates prevailing at the
balance sheet dates. Revenues, costs and expenses are translated into United
States dollars at average exchange rates for the period. Gains and losses
resulting from translation are accumulated as a component of stockholders'
equity.
F-10
<PAGE>
INVENTA TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Income Taxes
Income taxes are accounted for using an asset and liability approach.
Deferred income tax assets and liabilities are determined based on the
differences between the financial reporting and tax bases of assets and
liabilities and are measured using the currently enacted tax rates and laws. In
addition, deferred tax assets are recorded for the future benefit of utilizing
net operating loss and research and development credit carryforwards. A
valuation allowance is provided against deferred tax assets unless it is more
likely than not that they will be realized, either through the generation of
future taxable income or through carryback potential.
Comprehensive Income
The Company follows the provisions of Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"). SFAS No.
130 establishes standards for reporting comprehensive income and its components
in financial statements. Comprehensive income, as defined, includes all changes
in equity (net assets) during a period from non-owner sources.
Segment Information
The Company follows the provisions of Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS No. 131"). The Company identifies its operating segments
based on business activities, management responsibility and geographical
location. During the periods presented the Company operated in a single
business segment.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivatives and Hedging Activities" ("SFAS No. 133"). This statement
establishes accounting and reporting standards of derivative instruments,
including certain derivative instruments embedded in other contracts, and for
hedging activities. SFAS No. 133 requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value and will be effective as
of June 15, 2000. The adoption of SFAS No. 133 is not expected to have a
material effect on the Company's results of operations, financial condition or
cash flows.
NOTE 2--BALANCE SHEET COMPONENTS (in thousands):
<TABLE>
<CAPTION>
December 31,
---------------------
1997 1998 1999
----- ------ ------
<S> <C> <C> <C>
Accounts receivable, net:
Accounts receivable................................. $ 955 $ 945 $2,187
Less: Allowance for doubtful accounts............... (333) (308) (174)
----- ------ ------
$ 622 $ 637 $2,013
===== ====== ======
Property and equipment, net:
Furniture and fixtures.............................. $ 144 $ 218 $ 495
Equipment........................................... 702 1,051 2,166
Leasehold improvements.............................. 47 76 407
----- ------ ------
893 1,345 3,068
Less: Accumulated depreciation ....................... (442) (684) (1,066)
----- ------ ------
$ 451 $ 661 $2,002
===== ====== ======
</TABLE>
F-11
<PAGE>
INVENTA TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Property and equipment includes $456,000 of equipment under capital leases
at December 31, 1997 and 1998 and $999,000 at December 31, 1999. Accumulated
depreciation of assets under capital leases totaled $179,000, $234,000 and $
337,000 at December 31, 1997, 1998 and 1999, respectively.
<TABLE>
<CAPTION>
December 31,
------------------
1997 1998 1999
---- ------ ------
<S> <C> <C> <C>
Accrued expenses:
Payroll and related expenses........................... $180 $ 510 $1,896
General and administrative expenses.................... 119 614 770
Income taxes payable................................... 27 1 7
Other.................................................. -- -- 17
---- ------ ------
$326 $1,125 $2,690
==== ====== ======
</TABLE>
NOTE 3--RELATED PARTY TRANSACTIONS:
During 1997 and 1998, the Company obtained contract services from an entity
in which the Chairman, who was the Company's former President, has a
significant investment. The Company paid approximately $590,000 during 1997 and
$485,000 during 1998, which was estimated to approximate the fair market value,
for the services. This relationship was mutually terminated in October 1998.
NOTE 4--INCOME TAXES:
The provision for income taxes consists of the following, (in thousands):
<TABLE>
<CAPTION>
December 31,
---------------
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Current:
Federal.................................................. $ (3) $ -- $ 13
State and local.......................................... 1 2 2
Other.................................................... 29 -- --
---- ---- ----
27 2 15
---- ---- ----
Deferred:
Federal.................................................. 53 -- --
State and local.......................................... 10 -- --
---- ---- ----
63 -- --
---- ---- ----
$ 90 $ 2 $ 15
==== ==== ====
</TABLE>
F-12
<PAGE>
INVENTA TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Deferred tax assets and liabilities consist of the following, (in
thousands):
<TABLE>
<CAPTION>
December 31,
-------------------------
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.............. $ 1,102 $ 1,274 $ 5,088
Accruals and other reserves................... 53 341 316
Fixed assets.................................. -- 107 92
------- ------- -------
Total gross deferred tax assets................. 1,155 1,722 5,496
Less: Valuation allowance....................... (1,155) (1,722) (5,496)
------- ------- -------
-- -- --
------- ------- -------
Deferred tax liabilities:
Fixed assets.................................. (25) (17) --
------- ------- -------
$ (25) $ (17) --
======= ======= =======
</TABLE>
The Company has incurred losses for the years ended December 31, 1997, 1998
and 1999. Management believes that, based on the history of such losses and
projected near-term future losses, the weight of available evidence indicates
that it is more likely than not that the Company will not be able to realize
its deferred tax assets and thus a full valuation reserve has been recorded at
December 31, 1997, 1998 and 1999.
As of December 31, 1999, the Company had approximately $13.0 million of
federal net operating loss carryforwards and approximately $11.0 million of
state net operating loss carryforwards available to offset future taxable
income. The federal net operating loss carryforwards will expire between 2011
and 2019 and the state net operating loss carryforwards will expire between
2004 and 2006, if not utilized.
Under the Tax Reform Act of 1986, the amounts of and the benefit from net
operating losses that can be carried forward may be limited in certain
circumstances including, but not limited to, a cumulative stock ownership
change of more than 50% over a three-year period, as defined. Any unused annual
limitation may be carried forward to future years for the balance of the net
operating loss carryforward period.
NOTE 5--BORROWINGS:
Line of Credit
During November 1999, the Company terminated a line of credit with Silicon
Valley Bank. The line of credit provided for borrowings of up to $1,000,000
which were secured by the Company's assets. The line of credit charged interest
at a rate of 9.00% per annum. Under the line of credit, the Company was
required to maintain certain financial ratios as stipulated in the agreement.
Equipment Lease Line
During November 1999, the Company paid in full the balance outstanding under
an equipment lease financing line with Silicon Valley Bank. The equipment lease
line provides for borrowings of up to $600,000 which are secured by the
Company's assets. The Company's ability to draw on the financing line expires
on June 22, 2000. The lease line bears interest at a rate of 9.75% per annum.
Under the line of credit, the Company is required to maintain certain financial
covenants.
F-13
<PAGE>
INVENTA TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Loan Agreement
On November 17, 1999, the Company entered into a loan agreement with a
financial institution. This agreement provides for borrowings of up to
$4,000,000 under a term loan and $2,000,000 under a revolving line of credit.
Borrowing under the term loan bears interest at prime rate plus 2.00% (10.75%
currently) with accrued interest paid monthly and is due at November 30, 2000.
Borrowing under the line of credit is limited to the lesser of 80% of the
amount of the eligible accounts receivable or $2,000,000, and bears interest at
prime rate plus 2.00% (10.75% currently). The Company borrowed the entire
$4,000,000 available under the term loan on the date of the agreement. Assets
of the Company, including cash and cash equivalents, accounts receivable and
property and equipment, are pledged as collateral for borrowings under this
agreement.
In connection with such debt financing, the Company issued warrants to
purchase 160,000 shares of Series C Mandatorily Redeemable Preferred Stock at
$2.50 per share, which expire in November 2004. The value of the warrants was
determined using the Black-Scholes valuation model. The expense amounting to
$118,000 will be recognized as additional interest expense over the term of the
borrowing arrangement. The warrants became exercisable upon the closing of the
loan agreement.
NOTE 6--COMMITMENTS AND CONTINGENCIES:
From time to time, the Company may have certain contingent liabilities that
arise in the ordinary course of its business activities. The company accrues
contingent liabilities when it is probable that future expenditures will be
made and such expenditures can be reasonably estimated. In the opinion of
management, there are no pending claims of which the outcome is expected to
result in a material adverse effect in the financial position or results of
operations of the company.
Lease Commitments
The Company leases office space, equipment and an automobile under
noncancelable operating and capital leases. Rent expense under the operating
leases was approximately $157,000, $214,000 and $828,000 for the years ended
December 31, 1997, 1998 and 1999, respectively.
Future minimum lease payments under the capital and noncancelable operating
leases at December 31, 1999, are as follows:
<TABLE>
<CAPTION>
Capital Operating
Years Ended December 31, Leases Leases
------------------------ ------- ---------
(in thousands)
<S> <C> <C>
2000...................................................... $ 262 $ 976
2001...................................................... 224 508
2002...................................................... 169 196
2003...................................................... 96 116
2004...................................................... 27 --
------- -------
778 $ 1,796
=======
Less: Amounts representing interest....................... (132)
-------
Present value of minimum capital lease payments........... 646
Less: Current portion..................................... (192)
-------
Capital lease obligations, long-term...................... $ 454
=======
</TABLE>
F-14
<PAGE>
INVENTA TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Employment Agreements
The Company has entered into employment agreements with certain officers of
the Company. Some employment agreements also provide for severance in the event
the individual is terminated without cause.
NOTE 7--CONVERTIBLE PREFERRED STOCK:
Convertible Preferred Stock at December 31, 1999, consists of the following
(in thousands):
<TABLE>
<CAPTION>
Shares
---------------------- Liquidation Redemption
Series Authorized Outstanding Amount Amount
------ ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
A.............................. 1,000 1,000 $ 500 $ --
B.............................. 2,560 2,560 3,200 28,160
C.............................. 8,220 8,056 10,070 88,616
------ ------ ------- --------
11,780 11,616 $13,770 $116,776
====== ====== ======= ========
</TABLE>
The holders of Convertible Preferred Stock have the following rights and
preferences:
Voting
Each share of Series A, Series B and Series C has voting rights equal to an
equivalent number of shares of Common Stock into which it is convertible and
votes together as one class with the Common Stock.
Dividends
Holders of Series A, Series B and Series C are entitled to receive
noncumulative dividends as declared by the Board of Directors at a rate of
$0.03, $0.075 and $0.10 per share, respectively, per annum prior to any
dividends being paid to holders of Common Stock. After payment of such
dividends, declared dividends shall be paid to the holders of Common Stock and
Convertible Preferred Stock in such amounts as they would be entitled to
receive if their shares had been converted into shares of Common Stock. No
dividends were declared by the Board from inception through December 31, 1999.
Liquidation
In the event of any liquidation, dissolution or winding up of the Company,
including merger or sale of substantially all assets, the Series A, Series B
and Series C shareholders are entitled to receive with each series of
Convertible Preferred Stock, on a pro rata basis, a distribution of $0.50,
$1.25 and $1.25 per share, respectively, plus any unpaid but declared dividends
prior to and in preference to any distribution to the holders of Common Stock.
After the payment has been made to the holders of Series A, Series B and Series
C, the holders of Common Stock are entitled to receive $0.40 per share. The
remaining assets, if any, shall be distributed ratably among the holders of the
Common Stock, Series A, Series B and Series C shareholders.
Redemption
The holders of Series C have the right to require the Company to redeem the
then outstanding shares beginning on or after March 31, 2004 in three equal
annual installments which is the fair value of the Series C at the time of
redemption plus unpaid dividends. The holders of Series B have the right to
require the Company to redeem the then outstanding shares any time after March
2004 in three annual installments for a redemption price, which is the fair
value of the Series B at the time of redemption plus unpaid dividends. Fair
values shall
F-15
<PAGE>
INVENTA TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
be determined by the Board of Directors but if it is unacceptable to the
holders of the Series C or Series B, then it shall be determined by an
independent investment banking firm. The Series A has no redemption privileges.
As the future redemption prices of the Series B and Series C shares are
variable in amount, the difference between the Series B and Series C carrying
values and their estimated future redemption value are being accreted ratably
as a charge to additional paid-in capital. The estimated future redemption
value of $11.00 as of December 31, 1999 is based on the mid-point of the range
of share prices anticipated for the proposed initial public offering of the
Company's stock.
During the years ended December 31, 1997 and 1998, the carrying value of
both the Series B and Series C approximated their estimated future redemption
price and as such no accretion charges were recorded. During the year ended
December 31, 1999, the Company recorded accretion charges of $4.1 million.
Conversion
Each share of Series A, Series B and Series C is convertible at the option
of the holder into one share of Common Stock. The conversion ratio of Series B
into Common Stock is subject to certain adjustments to prevent dilution. Series
A, Series B and Series C automatically convert into Common Stock upon the
completion of an underwritten public offering with gross proceeds of at least
$5,000,000, $10,000,000 and $10,000,000 and a public offering price of not less
than $1.75, $4.00 and $4.00 per share, respectively.
Warrants
In connection with the issuance of Series A, each holder was granted a
warrant to purchase one share of preferred stock for every four shares of
Series A owned at an exercise price per share of $0.50. The warrants expire at
the earlier of December 31, 1999, the date of the Company's initial public
offering of securities, or the date of acquisition of the Company. The value of
the warrants at the time of their issuance was not material to the consolidated
financial statements.
During December 1999, warrants for an aggregate of 200,000 shares of Series
A Convertible Preferred Stock were exercised. Gross proceeds from the exercise
were $100,000.
NOTE 8--COMMON STOCK:
The Company's Articles of Incorporation, as amended, authorize the Company
to issue 25,000,000 shares of Common Stock.
At December 31, 1999, the Company had reserved the following number of
shares of Common Stock for future issuance (in thousands):
<TABLE>
<S> <C>
Series A Convertible Preferred Stock.................................. 1,000
Series B Mandatorily Redeemable Convertible Preferred Stock........... 2,560
Series C Mandatorily Redeemable Convertible Preferred Stock........... 8,220
Options under Stock Option Plan....................................... 1,474
------
13,254
======
</TABLE>
NOTE 9--STOCK OPTION PLAN:
In 1993, the Board of Directors and shareholders adopted the 1993 Stock
Option Plan (the "1993 Plan") which provides for granting of incentive stock
options ("ISO's") and nonqualified stock options ("NSO's") for shares of Common
Stock to employees, directors and consultants of the Company. In accordance
with the 1993
F-16
<PAGE>
INVENTA TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Plan, the stated exercise price shall not be less than 100% and 85% of the
estimated fair market value of the Common Stock as determined by the Board of
Directors on the date of grant for ISO's and NSO's, respectively. Stock options
granted to a person owning more than 10% of the combined voting power of all
classes of stock of the Company must be issued at 110% of the fair market value
of the stock on the date of grant. The 1993 Plan provides that the options
shall be exercisable over a period not to exceed ten years and shall generally
vest 25% one year after the date of grant and thereafter vest in equal monthly
installments over the remaining 36 months.
The following tables summarize stock option plan activity under the 1993
Plan (in thousands except per share amounts):
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------
1997 1998 1999
---------------- ---------------- ----------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
------- -------- ------- -------- ------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of period.............. 483 $0.05 425 $0.10 1,496 $0.14
Granted................. 330 0.15 1,259 0.15 2,398 0.58
Exercised............... (99) 0.05 (41) 0.07 (76) 0.11
Canceled................ (289) 0.09 (147) 0.09 (326) 0.35
---- ----- -----
Outstanding at end of
period................. 425 $0.10 1,496 $0.14 3,492 $0.42
==== ===== =====
Options exercisable at
end of period.......... -- 348 487
==== ===== =====
Weighted average fair
value of options
granted during the
period................. $1.13 $1.13 $2.91
===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Options Outstanding at Options Exercisable
December 31, 1999 at December 31, 1999
-------------------------------- --------------------
Weighted
Average Weighted Weighted
Number of Remaining Average Average
Exercise Options Contractual Exercise Number Exercise
Prices Outstanding Life Price Outstanding Price
-------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.050................ 47 5.0 years $0.05 43 $0.05
$0.150................ 2,005 9.0 years 0.15 444 0.15
$0.450................ 599 9.5 years 0.45 -- --
$0.625................ 148 9.6 years 0.63 -- --
$1.000................ 192 9.8 years 1.00 -- --
$1.250................ 501 9.9 years 1.25 -- --
----- ---
3,492 9.2 years $0.42 487 $0.14
===== ===
</TABLE>
F-17
<PAGE>
INVENTA TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Stock-based Compensation
In connection with certain stock option grants during the year ended
December 31, 1999 the Company recorded unearned stock-based compensation
totaling $5,274,000 for the difference between the exercise price of the stock
options and the deemed fair value of the Company's stock at the date of the
grant. Stock-based compensation amortization recognized during the year ended
December 31, 1999 totaled $1,590,000. If the stock-based compensation for the
year ended December 31, 1999 had been allocated across the relevant functional
expense categories within operating expenses, it would be allocated as follows
(in thousands):
<TABLE>
<CAPTION>
Year Ended
December 31,
1999
------------
<S> <C>
Project personnel............................................... $ 621
Sales and marketing............................................. 359
General and administrative...................................... 610
------
$1,590
======
</TABLE>
Fair Value Disclosures
The Company has adopted the disclosure only provision of SFAS No. 123. Had
compensation cost been determined for options issued based on the fair value of
the options at the grant date for awards in 1997 and 1998 consistent with
provisions of SFAS No. 123, the Company's net loss would have been increased to
the pro forma amounts indicated below (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------
1997 1998 1999
------- ------- ---------
<S> <C> <C> <C>
Net loss attributable to common stockholders:
As reported.................................... $(2,964) $(1,658) $(15,788)
======= ======= =========
Pro forma...................................... $(3,045) $(1,865) $ (15,890)
======= ======= =========
Net loss per share--basic and diluted as
reported........................................ $ (0.65) $ (0.36) $ (3.36)
======= ======= =========
Net loss per share--basic and diluted pro forma.. $ (0.67) $ (0.40) $ (3.38)
======= ======= =========
</TABLE>
The Company calculated the fair value of each option on the date of grant
using the Black-Scholes pricing model with the following assumptions used for
grants during the applicable period: annual dividend yield of 0%, risk-free
annual interest rates of 4.47% to 6.31% for options granted during the period
from January 1, 1997 through December 31, 1999 and a weighted average expected
option term of five years.
NOTE 10--EMPLOYEE BENEFIT PLAN
Effective January 1, 1996, and as amended on January 1, 1998, the Company
adopted the Inventa Corporation Retirement Savings Plan (the "Plan") which
qualifies as a thrift plan under Section 401(k) of the Internal Revenue Code.
All full-time employees who are at least 21 years old are eligible to
participate in the Plan. Participants may contribute up to maximum allowed
under the law of their earnings to the Plan. A discretionary matching amount
may be made by the Company. The Company made matching contributions for the
years ended December 31, 1997, 1998 and 1999 of $21,000, $30,000 and $96,000,
respectively.
F-18
<PAGE>
INVENTA TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NOTE 11--MALAYSIAN OPERATIONS:
In November 1998, the Company announced a formal plan to close its
operations in Malaysia and focus its effort in the United States. Accordingly,
in February 1999, the Company engaged the services of a third party to assist
in the orderly liquidation of the Malaysian subsidiary. In conjunction with
this announcement, the Company made a provision of $250,000 in the consolidated
financial statements for costs to be incurred in connection with the
liquidation of the Malaysian subsidiary. This amount consisted of $157,000 for
the write-down from the liquidation of the assets, $47,000 for remaining trade
obligations, and $46,000 for legal and other professional services to be
provided during the liquidation process. Operations ceased during 1998 and all
employee severance related costs were incurred prior to December 31, 1998.
During 1999, the liquidation of the assets and settlement of the obligations
was completed. As of December 31, 1999, $41,000 remains accrued to cover a
pending claim from a former customer of the Malaysian subsidiary. The Company
anticipates that this claim will be settled during 2000.
NOTE 12--SEGMENT AND GEOGRAPHIC INFORMATION:
The Company operates in a single industry segment (as defined by SFAS No.
131) providing consulting and systems integration services.
The following is a summary of service revenue by geographic area (in
thousands):
<TABLE>
<CAPTION>
Years Ended December
31,
---------------------
1997 1998 1999
------ ------ -------
<S> <C> <C> <C>
Malaysia............................................... $ 748 $ 521 $ --
United States.......................................... 4,448 7,495 13,520
------ ------ -------
$5,196 $8,016 $13,520
====== ====== =======
</TABLE>
NOTE 13--SUBSEQUENT EVENTS:
Series D Mandatorily Redeemable Preferred Stock
On January 19, 2000, 3,000,000 shares of Series D Mandatorily Redeemable
Preferred Stock were issued at a price of $7.41 per share for gross proceeds of
approximately $22.2 million. The difference between the deemed fair value of
the series D preferred stock of $11.00 and the price per share of $7.41 was
considered to be a beneficial conversion feature analogous to a dividend to the
preferred stockholders as prescribed under the provisions of EITF 98-5,
Accounting for Convertible Securities with Beneficial Conversion Features or
Contingently Adjustable Conversion Ratios. Due to the conversion rights, the
deemed fair value of the Series D preferred stock was based on the mid-point of
the range of share prices anticipated for the proposed initial public offering
of the Company's common stock. The value of the beneficial conversion feature
of $10.8 million was recognized immediately as a charge to net loss
attributable to common stockholders at the date of issuance as the preferred
stockholders have the right to immediately convert their preferred shares at
their option.
Acquisition
Effective January 26, 2000, the Company acquired all the outstanding shares
of common stock of XTEND-Tech, Inc., a provider of information technology
consulting services. Total consideration paid in connection with this
acquisition was 1,350,000 shares of the Company's common stock with a value of
$14,850,000. The deemed fair value of the Company's common stock on the date
the merger agreement was
F-19
<PAGE>
INVENTA TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
signed was $11.00 per share. The deemed fair value of the common stock was
based on the mid-point of the range of share prices anticipated for the
proposed initial public offering. The consideration consisted of a combination
of the purchase price paid for the outstanding common stock of XTEND-Tech and
consideration to certain employee stockholders of XTEND-Tech for continued
employment with the Company.
The acquisition will be accounted for using the purchase method of
accounting. The amount of the consideration treated as purchase price for this
acquisition was approximately $8,779,000. The purchase price was allocated to
the tangible and intangible assets acquired and liabilities assumed based upon
their respective fair values at the acquisition date. The purchase price
consisted of 798,052 shares of the Company's common stock. The estimated
allocation of the purchase price is as follows:
<TABLE>
<S> <C>
Tangible assets.................................................. $ 775,000
Intangible assets
Workforce...................................................... 5,100,000
Covenants not to compete....................................... 1,000,000
Goodwill....................................................... 2,631,000
Liabilities...................................................... (727,000)
----------
$8,779,000
==========
</TABLE>
The amortization of the intangible assets will occur over the estimated
periods to be benefited. The estimated weighted average period to be benefitted
from the intangible assets for the workforce, covenants not to compete and the
residual goodwill, created as a result of the acquisition of XTEND-Tech, Inc.
is approximately three years.
Additionally, the Company signed restricted stock agreements with certain
employee stockholders of XTEND-Tech, Inc. as consideration for continued
employment. Under these agreements, the stockholders receive 849,150 shares of
the Company's common stock with a fair value of approximately $9,341,000 at the
effective date of the stock purchase agreement. Under the restricted stock
agreement, 297,202 shares vest immediately and therefore constitute part of the
purchase price of the tangible and intangible assets of XTEND-Tech, Inc. The
remaining 551,948 shares are subject to the Company's right to repurchase upon
termination of employment for $0.01 per share. Twenty three percent of these
restricted shares vest and are released from the Company's repurchase right on
the first anniversary of the effective date of the agreement. The remaining
shares vest and are released from the Company's repurchase right evenly over
the two years following the first anniversary. The fair value of the unvested
shares, amounting to $6,071,000 has been recorded as deferred stock-based
compensation which will be amortized over the three year vesting period of the
restricted stock as described above in accordance with FASB Interpretation No.
28.
Letter of Credit
In February 2000, the Company entered into two letters of credit for
approximately $2.8 million and $198,000 to secure lease deposits to expand into
two new office facilities. The letters of credit expire February 2001 and are
collateralized by certificates of deposit in the same amounts.
Reincorporation (unaudited)
On March 23, 2000, the Company reincorporated in Delaware as Inventa
Technologies, Inc.
F-20
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
OVERVIEW
In January 2000, Inventa Technologies, Inc. ("Inventa") entered into a stock
acquisition agreement to acquire all outstanding shares of XTEND-Tech, Inc.
("XTEND-Tech"). Total consideration for the shares of XTEND-Tech was
$14,850,000 consisting of 1,350,000 shares of common stock. The unaudited pro
forma combined balance sheet is based on the individual balance sheets of
Inventa and XTEND-Tech appearing elsewhere in this prospectus and has been
prepared to reflect the acquisition of the common stock of XTEND-Tech by
Inventa as of December 31, 1999. The unaudited pro forma combined statements of
operations are based on individual historical results of operations of Inventa
and XTEND-Tech for the year ended December 31, 1999, after giving effect to the
acquisition of XTEND-Tech as if it had occurred on January 1, 1999.
The unaudited pro forma combined financial statements should be read in
conjunction with the historical financial statements and notes thereto of
Inventa and XTEND-Tech. The unaudited pro forma combined financial statements
are presented for illustrative purposes only and are not necessarily indicative
of results of operations that would have actually occurred had the acquisition
of XTEND-Tech by Inventa been effected on the dates assumed.
F-21
<PAGE>
INVENTA TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1999
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Pro Forma
Inventa XTEND-Tech Adjustments Pro Forma
-------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents....... $ 3,244 $173 $ -- $ 3,417
Accounts receivable, net........ 2,013 504 -- 2,517
Prepaid expenses and other
current assets................. 1,675 22 -- 1,697
-------- ---- ------- --------
Total current assets.......... 6,932 699 -- 7,631
Property and equipment, net...... 2,002 76 -- 2,078
Other assets..................... 288 -- -- 288
Intangible assets................ -- -- 6,100 (1) 6,100
Goodwill......................... -- -- 2,631 (1) 2,631
-------- ---- ------- --------
$ 9,222 $775 $ 8,731 $ 18,728
======== ==== ======= ========
LIABILITIES, MANDATORILY
REDEEMABLE CONVERTIBLE PREFERRED
STOCK AND STOCKHOLDERS' EQUITY
(DEFICIT)
Current liabilities:
Borrowings...................... $ 4,000 $ 30 $ -- $ 4,030
Accounts payable................ 1,409 65 -- 1,474
Advances from related party..... -- 326 -- 326
Accrued expenses................ 2,687 159 -- 2,846
Deferred revenue................ 483 -- -- 483
Income taxes payable............ 3 20 -- 23
Capital lease obligations ...... 192 19 -- 211
-------- ---- ------- --------
Total current liabilities..... 8,774 619 -- 9,393
Capital lease obligations, long-
term............................ 454 48 -- 502
Borrowings, long-term............ -- 60 -- 60
-------- ---- ------- --------
9,228 727 -- 9,955
-------- ---- ------- --------
Mandatorily redeemable
convertible preferred stock:
Series B mandatorily redeemable
convertible preferred stock;
$0.001 par value; 2,560,000
shares authorized, issued and
outstanding ................... 4,929 -- -- 4,929
Series C mandatorily redeemable
convertible preferred stock;
$0.001 par value; 8,220,000
shares authorized; 8,056,000
shares issued and
outstanding.................... 13,203 -- -- 13,203
-------- ---- ------- --------
18,132 -- -- 18,132
Stockholders' equity (deficit):
Series A convertible preferred
stock; $0.001 par value;
1,000,000 shares authorized,
issued and outstanding......... 1 -- -- 1
Common stock; $0.001 par value;
25,000,000 shares authorized;
4,759,000 shares issued and
outstanding .................. 5 -- 1 (2) 6
Additional paid-in capital....... 1,861 -- 14,849 (2) 16,710
Deferred stock-based
compensation.................... (4,662) -- (6,071)(3) (10,733)
Accumulated comprehensive loss... -- -- -- --
Retained earnings (accumulated
deficit)........................ (15,343) 48 (48)(8) (15,343)
-------- ---- ------- --------
Total stockholders' equity
(deficit).................... (18,138) 48 8,731 (9,359)
-------- ---- ------- --------
$ 9,222 $775 $ 8,731 $ 18,728
======== ==== ======= ========
</TABLE>
See accompanying notes to Pro Forma Combined Financial Information.
F-22
<PAGE>
INVENTA TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR YEAR ENDED DECEMBER 31, 1999
(in thousands, except share and per share amounts)
<TABLE>
<CAPTION>
Pro Forma
Inventa XTEND-Tech Adjustments Pro Forma
--------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues..................... $ 13,520 $1,951 $ (317)(6) $ 15,154
--------- ------ ------- ---------
Operating expenses:
Project personnel
(exclusive of deferred
stock-based compensation
of $2,056, pro forma)..... 8,610 1,167 (317)(6) 9,460
Sales and marketing
(exclusive of deferred
stock-based compensation
of $1,793, pro forma)..... 4,230 410 -- 4,640
General and administrative
(exclusive of deferred
stock based compensation
of $1,088, pro forma)..... 9,434 293 -- 9,727
Depreciation............... 562 9 -- 571
Amortization of
intangibles............... -- -- 2,910 (5) 2,910
Amortization of deferred
stock-based compensation.. 1,590 -- 3,347 (4) 4,937
--------- ------ ------- ---------
Total operating
expenses................ 24,426 1,879 5,940 32,245
--------- ------ ------- ---------
Income (loss) from
operations.................. (10,906) 72 (6,257) (17,091)
Interest and other income.... 101 -- -- 101
Interest expense............. (106) (4) -- (110)
--------- ------ ------- ---------
Income (loss) before income
taxes....................... (10,911) 68 (6,257) (17,100)
Income tax expense........... (15) (20) -- (35)
--------- ------ ------- ---------
Net income (loss)............ (10,926) 48 (6,257) (17,135)
Accretion of mandatorily
redeemable convertible
preferred stock to
redemption value............ (4,862) -- -- (4,862)
--------- ------ ------- ---------
Net income (loss)
attributable to common
stockholders................ $ (15,788) $ 48 $(6,257) $ (21,997)
========= ====== ======= =========
Net loss per share:
Basic and diluted.......... $ (3.36) $ (4.00)(7)
========= =========
Weighted average shares.... 4,698,483 798,052 5,496,535 (7)
========= ======= =========
</TABLE>
See accompanying notes to Pro Forma Combined Financial Information.
F-23
<PAGE>
NOTES TO PRO FORMA COMBINED FINANCIAL INFORMATION
(UNAUDITED)
(Continued)
(1) Reflects the preliminary allocation of the purchase price to the intangible
assets and goodwill acquired in the XTEND-Tech acquisition. The preliminary
allocation has resulted in intangible assets, including assembled workforce
estimated at approximately $5,100,000, covenants not to compete, estimated
at approximately $1,000,000 and estimated goodwill of approximately
$2,631,000, which are being amortized over their weighted average life of
three years.
The total estimated purchase price for the XTEND-Tech acquisition has been
allocated on a preliminary basis to assets and liabilities based on
management's best estimates of their fair value with the excess costs over
the net assets acquired allocated to intangible assets and goodwill. This
allocation is subject to change pending a final analysis of the value of the
assets acquired and, liabilities assumed, upon closure of the acquisition.
The impact of such changes could be material.
(2) Reflects the issuance of 1,350,000 shares of Inventa Common Stock with a
fair value of $14,850,000 in connection with the XTEND-Tech acquisition.
(3) Reflects the unearned compensation recorded for restricted stock issued in
connection with the purchase of XTEND-Tech. Of the 1,350,000 shares issued,
798,052 shares with a fair value of $8,779,000 were immediately vested and
as such represent the purchase price. The remaining 551,948 shares which
were issued to XTEND-Tech employee stockholders are subject to the
Company's right to repurchase the shares upon the termination of employment
with Inventa. The fair value of these restricted shares in the amount of
$6,071,000 has been recorded as unearned deferred compensation and will be
amortized over the vesting period of the restricted shares.
(4) Reflects the amortization of the unearned deferred stock-based compensation
referred to in Note 3 above.
(5) Reflects the amortization of the intangible assets and goodwill referred to
in Note 1 above.
(6) Represents elimination of intercompany transactions with XTEND-Tech.
(7) Pro forma net loss reflects the impact of the adjustments above. Basic and
diluted net loss per share (pro forma) is computed using the weighted-
average number of shares of common stock outstanding after the issuance of
Inventa common stock in connection with the XTEND-Tech acquisition,
assuming such stock was issued on January 1, 1999 and excluding the 551,948
shares subject to repurchase.
(8) Reflects elimination of XTEND-Tech stockholders' equity.
F-24
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders of
XTEND-Tech, Inc.
In our opinion, the accompanying balance sheet and the related statements of
operations and of cash flows present fairly, in all material respects, the
financial position of XTEND-Tech, Inc. (the "Company") at December 31, 1999,
and the results of its operations for the period from inception (January 29,
1999) to December 31, 1999, in conformity with accounting principles generally
accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our
audit of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
Florham Park, New Jersey
February 11, 2000
F-25
<PAGE>
XTEND-TECH, INC.
BALANCE SHEET
December 31, 1999
<TABLE>
<S> <C>
ASSETS
------
Current assets:
Cash and cash equivalents........................................... $173,098
Accounts receivable, net............................................ 503,674
Prepaid expenses.................................................... 22,418
--------
Total current assets............................................... 699,190
Property and equipment, net.......................................... 75,641
--------
$774,831
========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable.................................................... $ 64,747
Advances from related party......................................... 326,435
Accrued taxes....................................................... 19,700
Accrued bonuses..................................................... 108,000
Other accrued liabilities........................................... 51,266
Capital lease obligations .......................................... 18,552
Borrowings, current portion of long-term............................ 30,000
--------
Total current liabilities.......................................... 618,700
Capital lease obligations, long-term................................. 47,954
Borrowings, long-term................................................ 60,000
--------
726,654
--------
Stockholders' equity:
Common stock; no par value; 100,000 shares authorized, issued and
outstanding........................................................ --
Retained earnings................................................... 48,177
--------
Total stockholders' equity......................................... 48,177
--------
$774,831
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-26
<PAGE>
XTEND-TECH, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION (JANUARY 29, 1999) TO DECEMBER 31, 1999
<TABLE>
<S> <C>
Revenues:
Revenues from third parties....................................... $1,165,192
Revenues from related parties..................................... 785,805
----------
1,950,997
----------
Operating expenses:
Project personnel................................................. 1,166,800
Sales and marketing............................................... 409,700
General and administrative ....................................... 293,148
Depreciation ..................................................... 9,331
----------
Total operating expenses........................................ 1,878,979
----------
Income from operations.............................................. 72,018
Interest expense.................................................... (3,941)
----------
Income before income taxes.......................................... 68,077
Income tax expense ................................................. (19,900)
----------
Net income.......................................................... $ 48,177
==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-27
<PAGE>
XTEND-TECH, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION (JANUARY 29, 1999) TO DECEMBER 31, 1999
<TABLE>
<S> <C>
Cash flows from operating activities:
Net income........................................................ $ 48,177
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation ................................................... 9,331
Changes in operating assets and liabilities:
Accounts receivable........................................... (503,674)
Prepaid expenses.............................................. (22,418)
Accounts payable.............................................. 64,747
Advances from related party................................... 326,435
Accrued taxes................................................. 19,700
Accrued bonuses............................................... 108,000
Other accrued liabilities..................................... 51,266
---------
Net cash provided by operating activities................... 101,564
---------
Cash flows from investing activities:
Purchase of property and equipment................................ (10,732)
---------
Net cash used in investing activities....................... (10,732)
---------
Cash flows from financing activities:
Repayment of capital lease obligations............................ (7,734)
Long term borrowings.............................................. 90,000
---------
Net cash provided by financing activities................... 82,266
---------
Net increase in cash and cash equivalents........................... 173,098
Cash and cash equivalents, beginning of period...................... --
---------
Cash and cash equivalents, end of period............................ $ 173,098
=========
Supplemental non-cash investing and financing activity:
Property and equipment acquired under capital lease .............. $ 74,240
=========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-28
<PAGE>
XTEND-TECH, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company
XTEND-Tech, Inc. (the "Company") was incorporated in the state of New Jersey
on January 29, 1999. The Company is an information technology consulting
organization providing clients with technology expertise in all phases of
systems engineering and most software development methodologies for the major
industries in the United States.
The Company operations have initially been focused on the New Jersey, New
York, Pennsylvania and Delaware areas, with two offices in New Jersey.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates. Changes in
such estimates could affect reported amounts in future periods.
Financial Instruments
The Company's financial instruments including cash and cash equivalents,
accounts receivable, and accounts payable are carried at cost, which
approximates their fair value because of the short-term maturity of these
instruments. The carrying value of the Company's capital leases and the long
term borrowings approximate fair value because the implicit rates approximate
prevailing market rates.
Accounts Receivable
Bad debts are provided on the allowance method based on management's
evaluation of outstanding accounts receivable. No provision for bad debts was
considered necessary by management at December 31, 1999.
Property and Equipment
Property and equipment, primarily computer hardware, are stated at cost less
accumulated depreciation. Depreciation is calculated using the straight-line
method over the useful lives of the assets. Computer hardware is depreciated
over four years. Maintenance and repairs are charged to expense when incurred,
and the cost of additions and improvements is capitalized.
Revenue Recognition
Revenues are derived from sales of the Company's consulting services to end-
users. Revenue is recognized on a time and material basis when services are
provided.
Income Taxes
The accrual basis of accounting is used for income tax reporting purposes. A
provision of $19,900 was recorded for federal and state income taxes as of
December 31, 1999. The Company, with the consent of its shareholders, has
elected to be taxed as a "C" Corporation for federal and state income tax
purposes.
The Company utilizes the asset and liability method of accounting for income
taxes under which deferred tax assets and liabilities are recognized for the
tax consequences of temporary differences by applying enacted
F-29
<PAGE>
XTEND-TECH, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
statutory tax rates applicable to future years to differences between the
financial statement carrying amounts and the tax bases of existing assets and
liabilities. The effect on deferred tax assets and liabilities of a change in
tax rates is recognized in income in the period when the change in tax rates is
enacted.
Concentration of Credit Risks
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of trade accounts receivable. Concentrations
of credit risk with respect to trade receivables are limited based on
management's evaluation of the relationship with the Company's clients. The
Company's four largest customers accounted for approximately 77% of revenues
for the period from inception (January 29, 1999) to December 31, 1999. IDCS,
Inc. (Note 2) accounted for 40% of revenues during the same period. At December
31, 1999, these four customers accounted for approximately 43% of accounts
receivable. These balances were subsequently collected.
NOTE 2--RELATED PARTY TRANSACTIONS:
Since its incorporation in January 1999, the Company's activities have been
financed on a needs basis through a prepayment note, payable to Intermodal
Database Communication Systems, Inc. ("IDCS"), a related party that owns 14.25%
of the Company. Through this prepayment note, the Company agrees to pay IDCS
the remaining prepayment principal sum that may be due to IDCS at any time upon
IDCS's request. In the event the Company refuses to repay any amount due within
3 days notice of demand, these amounts would accrue interest at a prime rate
plus 5.00%. The total advances from IDCS during the period ended December 31,
1999 amounted to $1,105,000. As of December 31, 1999, the outstanding balance
on these advances amounted to $326,435.
The Company has also entered into a capital lease agreement (Note 7) with
Selecto Flash, Inc., a related party which is represented on the Company's
Board of Directors.
NOTE 3--PROPERTY AND EQUIPMENT:
Property and equipment consist of the following as of December 31, 1999:
<TABLE>
<S> <C>
Computer equipment.................................................. $10,092
Computer equipment under capital lease.............................. 74,240
Furniture and fixtures.............................................. 640
-------
84,972
Less: Accumulated depreciation...................................... (9,331)
-------
$75,641
=======
</TABLE>
NOTE 4--EMPLOYEE BENEFIT PLAN:
The Company participates in a self directed 401(k) Plan (the Plan), covering
all employees, which qualifies under Section 401(k) of the Internal Revenue
Code. The Plan allows eligible employees to make tax deferred contributions of
up to 15% of their compensation, subject to the legal maximum amount. The
Company does not match employees' contributions. Loans to participants are
permitted in an amount not to exceed the lesser of one-half of the
participant's non-forfeitable interest under the Plan or $50,000.
The Company also provides its employees with health, long-term disability
and life insurance programs, for which the Company fully pays the premiums,
except for the life insurance covered only up to $50,000 by the Company.
Expenses incurred for health and life insurance amounted to $81,071 and $3,704,
respectively, for the period from inception (January 29, 1999) to December 31,
1999.
F-30
<PAGE>
XTEND-TECH, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
NOTE 5-- BORROWINGS
On December 30, 1999, the Company signed a collateralized promissory note of
$90,000 with Valley National Bank. The promissory note is to be paid in 36
equal monthly installments of $2,500 and interest is calculated on the basis of
actual days elapsed over a 360-day year at prime plus 1.50%. The promissory
note is collateralized by all property, including all accounts receivable,
goods, inventory, merchandise, machinery, equipment, fixtures, instruments and
general intangibles, and all cash and non-cash proceeds therefrom. The proceeds
from the promissory note are to be used to finance the purchase of office
equipment for a new office location.
NOTE 6--STOCKHOLDERS' EQUITY:
At December 31, 1999, the capital stock of the Company consists of 100,000
shares of common stock, with no par value, that are authorized, issued and
outstanding.
NOTE 7--COMMITMENTS:
The Company entered into two operating leases for computer equipment with
Selecto Flash, Inc. and Dell Financial Services and also for a phone system
with Unistar leasing. The Company has leased, under a six-month operating
lease, office space in New Jersey since November 1999. The aggregate future
minimum lease payments, under the Company's leases are approximately as
follows:
<TABLE>
<CAPTION>
Capital Operating
Years Ended December 31, leases leases
- ------------------------ ------- ---------
<S> <C> <C>
2000......................................................... $26,389 $20,087
2001......................................................... 23,883 12,389
2002......................................................... 21,380 11,311
2003......................................................... 11,494 --
2004......................................................... -- --
------- -------
Total payments............................................. $83,146 $43,787
=======
Less: Amounts representing interest.......................... (16,640)
-------
Present value of minimum capital lease payments.............. 66,506
Less: Current portion........................................ 18,552
-------
Capital lease obligations, long-term......................... $47,954
=======
</TABLE>
NOTE 7--SUBSEQUENT EVENTS:
Stock Purchase Agreement
Effective January 26, 1999, the shareholders of the Company sold all
outstanding shares of the Company's common stock to Inventa Corporation in
exchange for shares of Inventa Corporation common stock.
F-31
<PAGE>
ARTWORK AND DIAGRAMS
[TO BE FILED BY AMENDMENT]
<PAGE>
3,500,000 Shares
[INVENTA LOGO]
Common Stock
-----------------
PROSPECTUS
, 2000
-----------------
Lehman Brothers
First Union Securities, Inc.
Friedman Billings Ramsey
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth all expenses to be paid by the Registrant,
other than the underwriting discounts and commissions payable by the Registrant
in connection with the sale of the common stock being registered. All amounts
shown are estimates except for the registration fee and the NASD filing fee.
<TABLE>
<CAPTION>
Amount to
be Paid
----------
<S> <C>
Registration fee............................................... $ 15,840
NASD filing fee................................................ 6,500
Nasdaq National Market......................................... 95,000
Blue sky qualification fees and expenses....................... 10,000
Printing and engraving expenses................................ 250,000
Legal fees and expenses........................................ 400,000
Accounting fees and expenses................................... 400,000
Director and officer liability insurance....................... 300,000
Transfer agent and registrar fees.............................. 25,000
Miscellaneous expenses......................................... 57,660
----------
Total ......................................................... $1,560,000
==========
</TABLE>
- --------
Item 14. Indemnification of Officers and Directors.
Section 145 of the Delaware General Corporation Law permits indemnification
of officers, directors and other corporate agents under certain circumstances
and subject to certain limitations. The Registrant's certificate of
incorporation and bylaws provide that the Registrant shall indemnify its
directors, officers, employees and agents to the full extent permitted by
Delaware General Corporation Law, including in circumstances in which
indemnification is otherwise discretionary under Delaware law. In addition, the
Registrant intends to enter into separate indemnification agreements with its
directors, officers and certain employees that would require the Registrant,
among other things, to indemnify them against certain liabilities that may
arise by reason of their status or service (other than liabilities arising from
willful misconduct of a culpable nature). The Registrant also intends to
maintain director and officer liability insurance, if available on reasonable
terms.
These indemnification provisions and the indemnification agreements to be
entered into between the Registrant and its officers and directors may be
sufficiently broad to permit indemnification of the Registrant's officers and
directors for liabilities (including reimbursement of expenses incurred)
arising under the Securities Act.
The Registrant intends to obtain in conjunction with the effectiveness of
the Registration Statement a policy of directors' and officers' liability
insurance that insures the Registrant's directors and officers against the cost
of defense, settlement or payment of a judgment under certain circumstances.
The underwriting agreement filed as Exhibit 1.1 to this Registration
Statement provides for indemnification by the underwriters of the Registrant
and its officers and directors for certain liabilities arising under the
Securities Act, or otherwise.
II-1
<PAGE>
Item 15. Recent Sales of Unregistered Securities.
Except as otherwise noted, we have issued and sold the following securities
within the last three years and through February 29, 2000:
On February 14, 1997, we sold an aggregate of 2,560,000 shares of our series
B preferred stock at a price of $1.25 per share to five investors and their
affiliates.
On May 11, 1998, and May 28, 1999, we sold an aggregate of 8,055,511 shares
of our series C preferred stock at a price of $1.25 per share to seven
investors and their affiliates.
On January 19, 2000, we sold an aggregate of 3,000,000 shares of our series
D preferred stock at a price of $7.41 per share to seven investors and their
affiliates.
On January 26, 2000, we issued 1,350,000 shares of common stock to 11
individuals and one institutional investor in connection with our acquisition
of XTEND-Tech. These issuances were deemed to be exempt from registration under
the Securities Act in reliance upon Section 4(2) of the Securities Act, as
transactions by an issuer not involving any public offering.
We issued 200,000 shares of our series A preferred stock, at an exercise
price per share of $0.50, pursuant to the exercise of warrants issued in
connection with our original issuance of our series A preferred stock.
We issued a warrant to acquire 160,000 of series C preferred stock, at an
exercise price of $2.50 per share, in connection with our borrowing of
$4,000,000 under a term loan.
We issued 2,271,000 shares of common stock and 400,000 shares of our series
A preferred stock pursuant to a two-for-one stock split declared on January 29,
1997.
Since our inception, we have granted options to purchase 5,586,220 shares of
our common stock to employees, directors and consultants under our 1993 Plan at
exercise prices ranging from $0.05 to $6.50 per share. Of the 5,586,220 options
granted, 3,993,653 remain outstanding, 648,163 shares of common stock have been
purchased pursuant to exercises of stock options and options to acquire
944,404 shares have been cancelled and are available for grant under our 1993
Plan.
The sales and issuances of securities in the transactions described above
were deemed to be exempt from registration under the Securities Act in reliance
upon Section 4(2) of the Securities Act, Regulation D promulgated thereunder or
Rule 701 promulgated under Section 3(b) of the Securities Act, as transactions
by an issuer not involving any public offering or transactions pursuant to
compensatory benefit plans and contracts relating to compensation as provided
under Rule 701. The recipients of securities in each transaction represented
their intentions to acquire the securities for investment purposes only and not
with a view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the securities issued in such transactions.
All recipients either received adequate information about us or had access,
through their employment or other relationships with us, to adequate
information about us.
There were no underwriters employed in connection with any of the
transactions set forth in Item 15.
II-2
<PAGE>
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement.
2.1 Agreement and Plan of Reorganization among the Registrant, XTEND-Tech,
Inc. and the shareholders of XTEND-Tech, Inc. dated January 26, 2000.
3.1 Form of Amended and Restated Certificate of Incorporation of
Registrant prior to completion of this offering.
3.2 Form of Amended and Restated Certificate of Incorporation of
Registrant to be effective upon completion of this offering.
3.3** Amended and Restated Bylaws of Registrant prior to completion of this
offering (incorporated by reference to Exhibit 3.3 filed as an
exhibit to Amendment No. 1).
3.4 Amended and Restated Bylaws of Registrant to be effective upon
completion of this offering.
4.1* Form of Registrant's Common Stock Certificate.
4.2 Amended and Restated Registration Rights Agreement, between the
Registrant and the parties named therein.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation,
regarding the legality of the securities being issued.
10.1 Series A Preferred Stock Purchase Agreement.
10.2 Series B Preferred Stock Purchase Agreement.
10.3 Series C Preferred Stock Purchase Agreement.
10.4 Series D Preferred Stock Purchase Agreement.
10.5** Amended and Restated Shareholders Agreement between the Registrant and
certain of its shareholders dated January 19, 2000 (incorporated by
reference to Exhibit 10.5 filed as an exhibit to Amendment No. 1).
10.6** Stock Purchase Warrant issued by the Registrant to Greyrock Capital, a
division of Banc of America Commercial Finance Corporation
(incorporated by reference to Exhibit 10.6 filed as an exhibit to
Amendment No. 1).
10.7** 1993 Stock Option Plan (incorporated by reference to Exhibit 10.7
filed as an exhibit to Amendment No. 1).
10.8** Form of Stock Option Agreement (incorporated by reference to Exhibit
10.8 filed as an exhibit to Amendment No. 1).
10.9 2000 Stock Plan and Related form of Stock Option Agreement.
10.10 Employee Stock Purchase Plan.
10.11** 401(K) Plan (incorporated by reference to Exhibit 10.10 filed as an
exhibit to Amendment No. 1).
10.12** Amended and Restated Loan and Security Agreement between Silicon
Valley Bank and the Registrant dated August 19, 1998, and amendments
and exhibits thereto (incorporated by reference to Exhibit 10.11
filed as an exhibit to Amendment No. 1).
10.13** Loan and Security Agreement between the Registrant and Greyrock
Capital, a division of Banc of America Finance Corporation, dated
November 17, 1999, and related Security Agreement in copyrighted
works (incorporated by reference to Exhibit 10.12 filed as an exhibit
to Amendment No. 1).
10.14** Form of Employment, Confidential Information and Invention Assignment
Agreement between the Registrant and certain of its employees
(incorporated by reference to Exhibit 10.13 filed as an exhibit to
Amendment No. 1).
10.15** Employment Agreement between the Registrant and Ashok Santhanam dated
as of May 11, 1998 (incorporated by reference to Exhibit 10.14 filed
as an exhibit to Amendment No. 1).
10.16** Employment Agreement between the Registrant and David A. Lavanty,
dated as of December 31, 1998 (incorporated by reference to Exhibit
10.10 filed as an exhibit to the Form S-1).
10.17** Employment Letter Agreement between the Registrant and Michael B.
Shahbazian dated February 2, 2000 (incorporated by reference to
Exhibit 10.16 filed as an exhibit to Amendment No. 1).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
10.18** Employment Letter Agreement between the Registrant and Carol C.
Halliday, dated March 12, 1999 (incorporated by reference to Exhibit
10.14 filed as an exhibit to the Form S-1).
10.19** Employment Letter Agreement between the Registrant and Anthony H.
Moretto, dated March 17, 1999 (incorporated by reference to Exhibit
10.11 filed as an exhibit to the Form S-1).
10.20** Employment Letter Agreement between the Registrant and Elizabeth J.
Campbell, dated August 5, 1998 (incorporated by reference to Exhibit
10.20 filed as an exhibit to Amendment No. 1).
10.21** Employment Letter Agreement between the Registrant and Michael
Makishima, dated July 14, 1997 (incorporated by reference to Exhibit
10.21 filed as an exhibit to Amendment No. 1).
10.22** Employment Letter Agreement between the Registrant and Tobias Younis,
dated October 29, 1999 (incorporated by reference to Exhibit 10.12
filed as an exhibit to the Form S-1).
10.23** Employment Letter Agreement between the Registrant and Robert J.
Kudis, dated March 30, 1999 (incorporated by reference to Exhibit
10.13 filed as an exhibit to the Form S-1).
10.24** Employment Letter Agreement between the Registrant and Edward F.
Leppert, dated October 27, 1997 (incorporated by reference to Exhibit
10.24 filed as an exhibit to Amendment No. 1).
10.25** Severance Agreement between the Registrant and Ashok Santhanam, dated
January 10, 1998 (incorporated by reference to Exhibit 10.16 filed as
an exhibit to the Form S-1).
10.26** Severance Agreement between the Registrant and Elizabeth J. Campbell,
dated July 14, 1999 (incorporated by reference to Exhibit 10.26 filed
as an exhibit to Amendment No. 1).
10.27** Severance Agreement between the Registrant and Michael Makishima,
dated January 13, 1998 (incorporated by reference to Exhibit 10.18
filed as an exhibit to the Form S-1).
10.28** Severance Agreement between the Registrant and Edward F. Leppert,
dated January 13, 1998 (incorporated by reference to Exhibit 10.17
filed as an exhibit to the Form S-1).
10.29** Severance Agreement between the Registrant and Srikantan Moorthy,
dated January 10, 1998 (incorporated by reference to Exhibit 10.19
filed as an exhibit to the Form S-1).
10.30** Lease Agreement, dated February 1, 2000 between National Rural
Utilities Cooperative Finance Corporation and the Registrant and the
related Letter of Credit (incorporated by reference to Exhibit 10.30
filed as an exhibit to Amendment No. 2).
10.31** Lease Agreement, dated February 2, 2000, between Shorebreeze
Associates, LLC and the Registrant and the related Letter of Credit
(incorporated by reference to Exhibit 10.31 filed as an exhibit to
Amendment No. 2).
10.32** Lease Agreement, dated September 10, 1992, between ShoreBreeze
Associates and the Registrant and Sega Corporation, and amendments
thereto (incorporated by reference to Exhibit 10.6 filed as an
exhibit to the Form S-1).
10.33** Lease Agreement, dated September 8, 1998, between Albany Street Plaza
Real Estate Management Company and the Registrant (incorporated by
reference to Exhibit 10.7 filed as an exhibit to the form S-1).
10.34** Sublease Agreement, dated March 29, 1999, between Sega of America and
the Registrant (incorporated by reference to Exhibit 10.5 filed as an
exhibit to the Form S-1).
10.35** Sublease Agreement, dated September 9, 1999, between Marcam Solutions,
Inc. and the Registrant (incorporated by reference to Exhibit 10.8
filed as an exhibit to the Form S-1).
10.36 Letter Agreement, dated May 11, 1998, regarding the Directed Share
Program between the Registrant and the parties named therein.
10.37 Letter Agreement, dated January 14, 2000, regarding the private
placement of Common Stock between the Registrant and the parties
named therein.
10.38 Letter Agreement, dated as of January 28, 2000, between the Registrant
and the parties named therein.
10.39 Form of Stock Restriction Agreement entered into by
shareholder/employees of XTEND-Tech.
21** Subsidiaries of the Registrant (incorporated by reference to Exhibit
21 filed as an exhibit to Amendment No. 1).
23.1* Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
(included in Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
24.1** Power of Attorney (see signature page) (incorporated by reference to
Exhibit 24.1 filed as an exhibit to the Form S-1).
24.2 Power of Attorney
27.1** Financial Data Schedule (incorporated by reference to Exhibit 27.1
filed as an exhibit to Amendment No. 2).
</TABLE>
- --------
* To be filed by amendment.
** Previously filed.
(b) Financial Statement Schedules.
Valuation and Qualifying Accounts (see page S-2)
Item 17. Undertakings.
The undersigned registrant hereby undertakes to provide to the underwriter
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer, or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered hereunder, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective; and
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at the
time shall be deemed to be the initial bona fide offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 3 to the Registration Statement on Form S-1
to be signed on its behalf by the undersigned, thereunto duly authorized, in
Redwood Shores, California, on the 24th day of March 2000.
INVENTA TECHNOLOGIES, INC.
/s/ David A. Lavanty
By: ____________________________
David A. Lavanty President and
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
No. 3 to the Registration Statement on Form S-1 has been signed by the
following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ David A. Lavanty President and Chief Executive March 24, 2000
_____________________________________ Officer, and Director
David A. Lavanty (Principal Executive Officer)
/s/ Michael B. Shahbazian Senior Vice President and Chief March 24, 2000
_____________________________________ Financial Officer (Principal
Michael B. Shahbazian Financial Officer)
* Vice President of Finance March 24, 2000
_____________________________________ (Principal Accounting Officer)
Michael Makishima
* Director March 24, 2000
_____________________________________
Ashok Santhanam
* Director March 24, 2000
_____________________________________
Michael Bealmear
* Director March 24, 2000
_____________________________________
Todd Dagres
* Director March 24, 2000
_____________________________________
Robert Ducommun
* Director March 24, 2000
_____________________________________
Frank Pinto
* Director March 24, 2000
_____________________________________
Jon Q. Reynolds, Jr.
</TABLE>
/s/ David A. Lavanty
*By: ___________________________
David A. Lavanty
Attorney-in-fact
II-6
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Stockholders of Inventa Technologies, Inc.,
Our audits of the financial statements referred to in our report dated
February 11, 2000 appearing in this Amendment No. 3 to Registration Statement
(No. 333-95813) on Form S-1 also included an audit of the Financial Statement
Schedule listed in the index of this Form S-1. In our opinion, this Financial
Statement Schedule presents fairly, in all material respects, the information
set forth therein when read in conjunction with the related financial
statements.
/s/ PricewaterhouseCoopers LLP
San Jose, California
February 11, 2000
S-1
<PAGE>
INVENTA TECHNOLOGIES, INC.
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
<TABLE>
<CAPTION>
Balance
at the Charged to Deductions Balance at
Allowance for doubtful beginning of costs and the end of
accounts the period and expenses write-offs the period
- ---------------------- ------------ ------------ ---------- ----------
<S> <C> <C> <C> <C>
Year ended December 31,
1997................... 75 258 -- 333
Year ended December 31,
1998................... 333 49 74 308
Year ended December 31,
1999................... 308 -- 134* 174
</TABLE>
- --------
* primarily relates to the liquidation of the assets of the former Malaysian
subsidiary
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
1.1* Form of Underwriting Agreement.
2.1 Agreement and Plan of Reorganization among the Registrant, XTEND-Tech,
Inc. and the shareholders of XTEND-Tech, Inc. dated January 26, 2000.
3.1 Form of Amended and Restated Certificate of Incorporation of
Registrant prior to completion of this offering.
3.2 Form of Amended and Restated Certificate of Incorporation of
Registrant to be effective upon completion of this offering.
3.3** Amended and Restated Bylaws of Registrant prior to completion of this
offering.
3.4 Amended and Restated Bylaws of Registrant to be effective upon
completion of this offering.
4.1* Form of Registrant's Common Stock Certificate.
4.2 Amended and Restated Registration Rights Agreement, between the
Registrant and the parties named therein.
5.1* Opinion of Wilson Sonsini Goodrich & Rosati, Professional Corporation,
regarding the legality of the securities being issued.
10.1 Series A Preferred Stock Purchase Agreement.
10.2 Series B Preferred Stock Purchase Agreement.
10.3 Series C Preferred Stock Purchase Agreement.
10.4 Series D Preferred Stock Purchase Agreement.
10.5** Amended and Restated Shareholders Agreement between the Registrant and
certain of its shareholders dated January 19, 2000.
10.6** Stock Purchase Warrant issued by the Registrant to Greyrock Capital, a
division of Banc of America Commercial Finance Corporation.
10.7** 1993 Stock Option Plan.
10.8** Form of Stock Option Agreement.
10.9 2000 Stock Plan and Related form of Stock Option Agreement.
10.10 Employee Stock Purchase Plan.
10.11** 401(K) Plan.
10.12** Amended and Restated Loan and Security Agreement between Silicon
Valley Bank and the Registrant dated August 19, 1998, and amendments
and exhibits thereto.
10.13** Loan and Security Agreement between the Registrant and Greyrock
Capital, a division of Banc of America Finance Corporation, dated
November 17, 1999, and related Security Agreement in copyrighted
works.
10.14** Form of Employment, Confidential Information and Invention Assignment
Agreement between the Registrant and certain of its employees.
10.15** Employment Agreement between the Registrant and Ashok Santhanam dated
as of May 11, 1998.
10.16** Employment Agreement between the Registrant and David A. Lavanty,
dated as of December 31, 1998.
10.17** Employment Letter Agreement between the Registrant and Michael B.
Shahbazian dated February 2, 2000.
10.18** Employment Letter Agreement between the Registrant and Carol C.
Halliday, dated March 12, 1999.
10.19** Employment Letter Agreement between the Registrant and Anthony H.
Moretto, dated March 17, 1999.
10.20** Employment Letter Agreement between the Registrant and Elizabeth J.
Campbell, dated August 5, 1998.
10.21** Employment Letter Agreement between the Registrant and Michael
Makishima, dated July 14, 1997.
10.22** Employment Letter Agreement between the Registrant and Tobias Younis,
dated October 29, 1999.
10.23** Employment Letter Agreement between the Registrant and Robert J.
Kudis, dated March 30, 1999.
10.24** Employment Letter Agreement between the Registrant and Edward F.
Leppert, dated October 27, 1997.
10.25** Severance Agreement between the Registrant and Ashok Santhanam, dated
January 10, 1998.
10.26** Severance Agreement between the Registrant and Elizabeth J. Campbell,
dated July 14, 1999.
10.27** Severance Agreement between the Registrant and Michael Makishima,
dated January 13, 1998.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
------- -----------------------
<C> <S>
10.28** Severance Agreement between the Registrant and Edward F. Leppert,
dated January 13, 1998.
10.29** Severance Agreement between the Registrant and Srikantan Moorthy,
dated January 10, 1998.
10.30** Lease Agreement dated February 1, 2000 between National Rural
Utilities Cooperative Finance Corporation and the Registrant and the
related Letter of Credit.
10.31** Lease Agreement, dated February 2, 2000, between Shorebreeze
Associates, LLC and the Registrant and the related Letter of Credit.
10.32** Lease Agreement, dated September 10, 1992, between ShoreBreeze
Associates and the Registrant and Sega Corporation, and amendments
thereto.
10.33** Lease Agreement, dated September 8, 1998, between Albany Street Plaza
Real Estate Management Company and the Registrant.
10.34** Sublease Agreement, dated March 29, 1999, between Sega of America and
the Registrant.
10.35** Sublease Agreement, dated September 9, 1999, between Marcam Solutions,
Inc. and the Registrant.
10.36 Letter Agreement, dated May 11, 1998, regarding the Directed Share
Program between the Registrant and the parties named therein.
10.37 Letter Agreement, dated January 14, 2000, regarding the private
placement of Common Stock between the Registrant and the parties
named therein.
10.38 Letter Agreement, dated as of January 28, 2000, between the Registrant
and the parties named therein.
10.39 Form of Stock Restriction Agreement entered into by
shareholder/employees of XTEND-Tech.
10.40 Form of Noncompetition Agreement entered into by shareholder/employees
of XTEND-Tech.
21** Subsidiaries of the Registrant.
23.1* Consent of Wilson Sonsini Goodrich & Rosati, Professional Corporation
(included in Exhibit 5.1).
23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
24.1** Power of Attorney (see signature page).
24.2 Power of Attorney
27.1** Financial Data Schedule.
</TABLE>
- --------
* To be filed by amendment.
** Previously filed.
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
INVENTA CORPORATION,
XTEND-TECH, INC.
AND
THE SHAREHOLDERS OF XTEND-TECH, INC.
January 26, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Plan of Reorganization.................................................... 1
(a) Exchange of Shares............................................... 1
(b) The Closing...................................................... 1
(c) Deliveries at the Closing........................................ 2
(d) Changes in INVENTA"S Capitalization.............................. 2
2. Representations and Warranties Concerning the Transaction................. 2
(a) Representations and Warranties of the Shareholders............... 2
(b) Representations and Warranties of Inventa........................ 3
3. Representations and Warranties Concerning XTEND........................... 4
(a) Organization, Qualification, and Corporate Power................. 4
(b) Capitalization................................................... 4
(c) Noncontravention................................................. 5
(d) Brokers" Fees.................................................... 5
(e) Title to Assets.................................................. 5
(f) Subsidiaries..................................................... 5
(g) Financial Statements............................................. 5
(h) Events Subsequent to September 30, 1999.......................... 6
(i) Undisclosed Liabilities.......................................... 8
(j) Legal Compliance................................................. 8
(k) Tax Matters...................................................... 8
(l) Intellectual Property............................................ 8
(m) Tangible Assets.................................................. 10
(n) Contracts........................................................ 11
(o) Notes and Accounts Receivable.................................... 12
(p) Powers of Attorney............................................... 12
(q) Insurance........................................................ 12
(r) Litigation....................................................... 13
(s) Employees........................................................ 13
(t) Employee Benefits................................................ 13
(u) Guaranties....................................................... 13
(v) Certain Business Relationships with XTEND........................ 14
(w) Disclosure....................................................... 14
4. Pre-Closing Covenants..................................................... 14
(a) General.......................................................... 14
(b) Notices and Consents............................................. 14
(c) Operation of Business............................................ 14
(d) Compensation..................................................... 14
(e) Preservation of Business......................................... 14
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
(f) Full Access...................................................... 14
(g) Notice of Developments........................................... 15
(h) Exclusivity...................................................... 15
(i) Options.......................................................... 15
5. Post-Closing Covenants.................................................... 15
(a) General.......................................................... 15
(b) Transition....................................................... 15
(c) Confidentiality.................................................. 15
6. Conditions to Obligation to Close......................................... 16
(a) Conditions to Obligation of Inventa.............................. 16
(b) Conditions to Obligation of the Shareholders..................... 17
7. Survival of Representations and Warranties................................ 18
8. General Indemnification................................................... 18
(a) Subject to Section 8(c) hereunder, the Shareholders hereby
jointly and..................................................... 18
(b) Losses Net of Insurance and Tax Benefits......................... 18
9. Establishment of Escrow................................................... 19
10. Termination; Remedies..................................................... 19
(a) Termination of Agreement......................................... 19
(b) Effect of Termination............................................ 20
11. Miscellaneous............................................................. 20
(a) Press Releases and Public Announcements.......................... 20
(b) No Third-Party Beneficiaries..................................... 20
(c) Entire Agreement................................................. 20
(d) Succession and Assignment........................................ 20
(e) Counterparts..................................................... 20
(f) Headings......................................................... 20
(g) Notices.......................................................... 20
(h) Governing Law.................................................... 21
(i) Amendments and Waivers........................................... 21
(j) Severability..................................................... 21
(k) Expenses......................................................... 22
(l) Attorneys" Fees.................................................. 22
(m) Construction..................................................... 22
(n) Incorporation of Exhibits and Schedules.......................... 22
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
(o) Specific Performance............................................. 22
(p) Submission to Jurisdiction....................................... 22
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Exhibit A Disclosure Schedule
Exhibit B Financial Statements
Exhibit C Form of Stock Restriction Agreement
Exhibit D Form of Noncompetition Agreement
Exhibit E Form of Opinion of Counsel to the Shareholders
Exhibit F Form of Opinion of Counsel to Inventa
</TABLE>
-iv-
<PAGE>
EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization ("Agreement") is entered into as
of January 26, 2000, AND EFFECTIVE AS OF JANUARY 1, 2000, by and among Inventa
Corporation, a California corporation ("Inventa"), XTEND-Tech, Inc., a New
Jersey corporation ("XTEND") and those persons and parties owning shares of
stock in XTEND, more particularly set forth on Schedule 1 attached hereto
(collectively, the "Shareholders"). Inventa, XTEND and the Shareholders are
referred to collectively herein as the "Parties".
RECITALS
1. The Shareholders are the owners of all of the issued and outstanding
capital stock of XTEND, in the proportions set forth on Schedule 1 attached
hereto.
2. Inventa, XTEND and the Shareholders have agreed upon a corporate
reorganization transaction pursuant to which Inventa will acquire all of the
issued and outstanding capital stock of XTEND from the Shareholders, in exchange
for the issuance by Inventa to the Shareholders, of an aggregate of 1,350,000
shares of Inventa voting common stock.
3. It is the understanding and intention of the Parties that the
transactions provided for in this Agreement will qualify as, and constitute, a
corporate reorganization within the meaning of Section 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows:
1. Plan of Reorganization
(a) Exchange of Shares. On and subject to the terms and conditions of
this Agreement, Inventa hereby agrees to acquire from each of the Shareholders,
and the Shareholders hereby agree to assign, transfer and convey to Inventa, all
of their respective shares of the capital stock of XTEND ("XTEND Shares"), in
exchange for 1,350,000 shares of Inventa voting common stock (the "INVENTA
Stock"), all of which Inventa Stock shall be original issue. The Inventa Stock
shall be allocated among the Shareholders in proportion to their respective
holdings of XTEND Shares, as set forth in the attached Schedule 1.
(b) The Closing. The Closing of the transactions contemplated by this
Agreement (the "Closing") shall take place via mail, courier and facsimile
transmissions between the offices of Wilson Sonsini Goodrich & Rosati, 650 Page
Mill Road, Palo Alto, California 94304, counsel for Inventa, and the offices of
Sills Cummis Radin Tischman Epstein & Gross, P.A., One Riverfront Plaza, Newark,
New Jersey 07102, counsel for XTEND and the Shareholders, on the first business
day following the satisfaction or waiver of all conditions to the obligations of
the Parties to consummate the transactions contemplated hereby (other than
conditions with respect to actions the
<PAGE>
respective Parties will take at the Closing itself), or such other date as
Inventa and the Shareholders may mutually determine (the "Closing Date").
------------
(c) Deliveries at the Closing. At the Closing, (i) the Shareholders
-------------------------
will deliver to Inventa the various certificates, instruments, and documents
referred to in Section 7(a) below, (ii) Inventa will deliver to the Shareholders
the various certificates, instruments and documents referred to in Section 7(b)
below, (iii) each of the Shareholders will deliver to Inventa stock certificates
representing all of his or its XTEND Shares, endorsed in blank or accompanied by
duly executed assignment documents, and (iv) Inventa will deliver to each of the
Shareholders the number of shares of Inventa Stock which, in the aggregate, will
equal 1,350,000 shares of such Inventa Stock, in proportion to the Shareholders'
respective holdings of XTEND Shares set forth in Schedule 1 attached hereto.
(d) Changes in INVENTA'S Capitalization. If between the date of this
-----------------------------------
Agreement and the Closing, the outstanding shares of Inventa common stock are,
without the receipt of new consideration by Inventa, increased, decreased,
changed into, or exchanged for a different number or kind of shares or
securities of Inventa through reorganization, reclassification, stock dividend,
stock split, reverse stock split, or similar change in Inventa's capitalization,
Inventa will issue and deliver to the Shareholders in addition to or in lieu of
the Inventa Stock specified in Section 1(a), voting common stock of Inventa in
equitably adjusted amounts. In the event of any such change in Inventa's
capitalization, all references to the Inventa Stock herein shall refer to the
number of Inventa shares as thus adjusted.
2. Representations and Warranties Concerning the Transaction.
---------------------------------------------------------
(a) Representations and Warranties of the Shareholders. Each of the
--------------------------------------------------
Shareholders represents and warrants to Inventa that the statements contained in
this Section 2(a) are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made then and as
though the Closing Date were substituted for the date of this Agreement
throughout this Section 2(a)), but with respect to himself or itself only.
(i) Organization of Certain Shareholders. If the Shareholder is a
------------------------------------
corporation, the Shareholder is duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation.
(ii) Authorization of Transaction. The Shareholder has full power and
----------------------------
authority (including, if the Shareholder is a corporation, full corporate power
and authority) to execute and deliver this Agreement and to perform his or its
obligations hereunder. This Agreement constitutes the valid and legally binding
obligation of the Shareholder, enforceable in accordance with its terms and
conditions. The Shareholder need not give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions contemplated by this
Agreement.
(iii) Noncontravention. Neither the execution and the delivery of
----------------
this Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any
-2-
<PAGE>
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which the Shareholder is subject or, if the Shareholder is a
corporation, any provision of its charter or bylaws or (B) conflict with, result
in a breach of, constitute a default under, result in the acceleration of,
create in any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license, instrument, or
other arrangement to which the Shareholder is a party or by which he or it is
bound or to which any of his or its assets is subject.
(iv) Brokers' Fees. The Shareholder has no liability or obligation
-------------
to pay any fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement for which Inventa could
become liable or obligated.
(v) Investment. Each of the Shareholders (A) understands that the
----------
shares of Inventa Stock have not been, and will not be, registered under the
Securities Act of 1933, as amended (the "Securities Act"), or under any state
securities laws, and are being offered and sold in reliance upon federal and
state exemptions for transactions not involving any public offering, (B) is
acquiring Inventa Stock solely for his or its own account for investment
purposes, and not with a view to the distribution thereof, (C) is a
sophisticated investor with knowledge and experience in business and financial
matters, (D) has received certain information concerning Inventa and has had the
opportunity to obtain additional information as desired in order to evaluate the
merits and the risks inherent in holding Inventa Stock, and (E) is able to bear
the economic risk and lack of liquidity inherent in holding Inventa Stock.
(vi) XTEND Shares. The Shareholder holds of record and owns
------------
beneficially the number of XTEND Shares set forth next to his or its name in
Section 2(a) of the Disclosure Schedule, free and clear of any restrictions on
transfer (other than any restrictions under the Securities Act and state
securities laws), taxes, liens, claims, encumbrances, security interests,
options, warrants, purchase or exchange rights, contracts, commitments,
equitable rights and demands (collectively "Security Interests"). The
Shareholder is not a party to any option, warrant, exchange right, or other
contract or commitment that could require the Shareholder to sell, transfer, or
otherwise dispose of any capital stock of XTEND (other than this Agreement). The
Shareholder is not a party to any voting trust, proxy, or other agreement or
understanding with respect to the voting of any capital stock of XTEND.
(b) Representations and Warranties of Inventa. Inventa represents and
-----------------------------------------
warrants to the Shareholders that the statements contained in this Section 2(b)
are correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
Section 2(b)).
(i) Organization of Inventa. Inventa is a corporation duly
-----------------------
organized, validly existing, and in good standing under the laws of the State of
California.
(ii) Authorization of Transaction. Inventa has full power and
----------------------------
authority (including full corporate power and authority) to execute and deliver
this Agreement and to perform
-3-
<PAGE>
its obligations hereunder. This Agreement constitutes the valid and legally
binding obligation of Inventa, enforceable in accordance with its terms and
conditions. Inventa need not give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions contemplated by
this Agreement.
(iii) Noncontravention. Neither the execution and the delivery of
----------------
this Agreement, nor the consummation of the transactions contemplated hereby,
will (A) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Inventa is subject or any provision of
its charter or bylaws or (B) conflict with, result in a breach of, constitute a
default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
Inventa is a party or by which it is bound or to which any of its assets is
subject.
(iv) Brokers' Fees. Inventa has no liability or obligation to pay
-------------
any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement for which any Shareholder could
become liable or obligated.
(v) Investment. Inventa is not acquiring XTEND Shares with a view
----------
to or for sale or exchange in connection with any distribution thereof within
the meaning of the Securities Act.
3. Representations and Warranties Concerning XTEND. The Shareholders
-----------------------------------------------
represent and warrant to Inventa that the statements contained in this Section 3
are correct and complete as of the date of this Agreement and will be correct
and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this
Section 3), except as set forth in the disclosure schedule delivered by the
Shareholders to Inventa on the date hereof and attached hereto as Exhibit A (the
"Disclosure Schedule").
-------------------
(a) Organization, Qualification, and Corporate Power. XTEND is a
------------------------------------------------
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation. XTEND is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required. XTEND has full corporate power and
authority and all licenses, permits, and authorizations necessary to carry on
the businesses in which it is engaged and in which it presently proposes to
engage and to own and use the properties owned and used by it. Section 3(a) of
the Disclosure Schedule lists the directors and officers of XTEND. The
Shareholders have delivered to Inventa correct and complete copies of the
charter and bylaws of XTEND (as amended to date). The minute books (containing
the records of meetings of the stockholders, the board of directors, and any
committees of the board of directors), the stock certificate books, and the
stock record books of XTEND are correct and complete. XTEND is not in default
under or in violation of any provision of its charter or bylaws.
(b) Capitalization. The entire authorized capital stock of XTEND
--------------
consists of 100,000 shares of Common Stock, of which 100,000 shares are issued
and outstanding. All of the
-4-
<PAGE>
issued and outstanding shares of capital stock, have been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of record by the
respective Shareholders as set forth in Section 3(b) of the Disclosure Schedule.
No other shares of capital stock are issued or outstanding. There are no
outstanding or authorized options, warrants, purchase or exchange rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require XTEND to issue, sell, or otherwise cause to
become outstanding any of its capital stock. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or similar
rights with respect to XTEND. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of the capital stock of
XTEND.
(c) Noncontravention. Neither the execution and the delivery of this
----------------
Agreement, nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which XTEND is subject or any provision of the
charter or bylaws of XTEND or (ii) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument, or other arrangement
to which XTEND is a party or by which it is bound or to which any of its assets
is subject (or result in the imposition of any Security Interest upon any of its
assets). XTEND does not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or governmental
agency in order for the Parties to consummate the transactions contemplated by
this Agreement.
(d) Brokers' Fees. XTEND has no liability or obligation to pay any
-------------
fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement.
(e) Title to Assets. XTEND has good and marketable title to, or a
---------------
valid leasehold or lessee interest in, the properties and assets used by it,
located on its premises, or shown on the most recent balance sheet or acquired
after the date thereof, free and clear of all Security Interests, except for
properties and assets disposed of in the ordinary course of business since the
date of the most recent balance sheet.
(f) Subsidiaries. XTEND has no subsidiaries.
------------
(g) Financial Statements. Attached hereto as Exhibit B are the
-------------------- ---------
following financial statements (collectively the "Financial Statements"): (i)
--------------------
audited balance sheet and statement of income, changes in stockholders' equity,
and cash flow as of and for the seven month period March 1 - September 30, 1999
for XTEND; and (ii) unaudited balance sheet and statement of income, changes in
stockholders' equity, and cash flow (the "Most Recent Financial Statements") as
--------------------------------
of and for the three months ended December 31, 1999 (the "Most Recent Fiscal
------------------
Month End") for XTEND (collectively, the "Financial Statements"). The Financial
- ---------
Statements (including the notes thereto) have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods covered thereby, present fairly the financial condition
of XTEND as of such dates and the results of operations of XTEND for such
periods, are correct and
-5-
<PAGE>
complete, and are consistent with the books and records of XTEND (which books
and records are correct and complete); provided, however, that the Most Recent
Financial Statements are subject to normal year-end adjustments (which will not
be material individually or in the aggregate) and lack footnotes and other
presentation items.
(h) Events Subsequent to September 30, 1999. Since September 30, 1999,
---------------------------------------
there has not been any material adverse change in the business, financial
condition, operations, or results of operations, of XTEND. Without limiting the
generality of the foregoing except as set forth in Section 3(h) of the
Disclosure Schedule, since that date:
(i) XTEND has not sold, leased, transferred, or assigned any of its
assets, tangible or intangible, other than for a fair consideration in the
ordinary course of business;
(ii) XTEND has not entered into any agreement, contract, lease, or
license (or series of related agreements, contracts, leases, and licenses)
either involving more than $10,000 or outside the ordinary course of business;
(iii) no party (including XTEND) has accelerated, terminated,
modified, or cancelled any agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses) involving more than $10,000
to which XTEND is a party or by which XTEND is bound;
(iv) XTEND has not imposed any Security Interest upon any of its
assets, tangible or intangible;
(v) XTEND has not made any capital expenditure (or series of
related capital expenditures) either involving more than $10,000 or outside the
ordinary course of business;
(vi) XTEND has not made any capital investment in, any loan to, or
any acquisition of the securities or assets of, any other person (or series of
related capital investments, loans, and acquisitions) either involving more than
$10,000 or outside the ordinary course of business;
(vii) XTEND has not issued any note, bond, or other debt security or
created, incurred, assumed, or guaranteed any indebtedness for borrowed money or
capitalized lease obligation either involving more than $10,000 singly or
$25,000 in the aggregate;
(viii) XTEND has not delayed or postponed the payment of accounts
payable and other liabilities outside the ordinary course of business;
(ix) XTEND has not cancelled, compromised, waived, or released any
right or claim (or series of related rights and claims) either involving more
than $10,000 or outside the ordinary course of business;
-6-
<PAGE>
(x) XTEND has not granted any license or sublicense of any rights
under or with respect to any Intellectual Property;
(xi) there has been no change made or authorized in the charter or
bylaws of XTEND;
(xii) XTEND has not issued, sold, or otherwise disposed of any of
its capital stock, or granted any options, warrants, or other rights to purchase
or exchange or obtain (including upon conversion, exchange, or exercise) any of
its capital stock;
(xiii) XTEND has not declared, set aside, or paid any dividend or
made any distribution with respect to its capital stock (whether in cash or in
kind) or redeemed, exchanged, or otherwise acquired any of its capital stock;
(xiv) XTEND has not experienced any damage, destruction, or loss
(whether or not covered by insurance) to its property;
(xv) XTEND has not made any loan to, or entered into any other
transaction with, any of its directors, officers, and employees outside the
ordinary course of business;
(xvi) XTEND has not entered into any employment contract or
collective bargaining agreement, written or oral, or modified the terms of any
existing such contract or agreement;
(xvii) XTEND has not granted any increase in the base compensation of
any of its directors, officers, and employees outside the ordinary course of
business, or paid any bonus to any such individual;
(xviii) XTEND has not adopted, amended, modified, or terminated any
bonus, profit-sharing, incentive, severance, or other plan, contract, or
commitment for the benefit of any of its directors, officers, and employees (or
taken any such action with respect to any other Employee Benefit Plan);
(xix) XTEND has not made any other change in employment terms for
any of its directors, officers, and employees;
(xx) XTEND has not made or pledged to make any charitable or other
capital contribution;
(xxi) there has not been any other material occurrence, event,
incident, action, failure to act, or transaction outside the ordinary course of
business involving XTEND; and
(xxii) XTEND has not committed to any of the foregoing.
-7-
<PAGE>
(i) Undisclosed Liabilities. XTEND has no liability (and there is no
-----------------------
threat of, nor to the Company's knowledge any basis for any present or future
action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand against it giving rise to any liability), except for (i) liabilities set
forth in the Most Recent Balance Sheet (or in any notes thereto) and (ii)
liabilities which have arisen after the Most Recent Fiscal Month End in the
ordinary course of business (none of which results from, arises out of, relates
to, is in the nature of, or was caused by any breach of contract, breach of
warranty, tort, infringement, or violation of law).
(j) Legal Compliance. XTEND and its predecessors and affiliates have
----------------
complied with all applicable laws (including rules, regulations, codes, plans,
injunctions, judgments, orders, decrees, rulings, and charges thereunder) of
federal, state, local, and foreign governments (and all agencies thereof), and
no action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them alleging any
failure so to comply.
(k) Tax Matters.
-----------
(i) XTEND has filed all tax returns that it was required to
file, if any. Any such tax returns are correct and complete in all respects. All
taxes due and owing by XTEND, if any (whether or not shown on any tax return)
have been paid. XTEND is not currently the beneficiary of any extension of time
within which to file any tax return. No claim has ever been made by an authority
in a jurisdiction where XTEND does not file tax returns that it is or may be
subject to taxation by that jurisdiction. There are no Security Interests on any
of the assets of XTEND that arose in connection with any failure (or alleged
failure) to pay any tax .
(ii) XTEND has withheld and paid all taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
independent contractor, creditor, stockholder, or other third party.
(iii) No Shareholder or director or officer of XTEND is aware
that any authority may assess any additional taxes for any period for which tax
returns have been filed. There is no dispute or claim concerning any tax
liability of XTEND (A) claimed or raised by any authority in writing, or (B) as
to which any of the Shareholders and the directors and officers of XTEND has
knowledge based upon personal contact with any agent of such authority. Section
3(k)(iii) of the Disclosure Schedule lists all federal, state, local, and
foreign income tax returns filed with respect to XTEND since inception,
indicates those tax returns that have been audited, and indicates those tax
returns that currently are the subject of audit. The Shareholders have delivered
to Inventa correct and complete copies of all federal income tax returns,
examination reports, and statements of deficiencies assessed against or agreed
to by XTEND since inception, if any.
(iv) XTEND has not waived any statute of limitations in respect
of taxes or agreed to any extension of time with respect to a tax assessment or
deficiency.
(l) Intellectual Property.
---------------------
-8-
<PAGE>
(i) XTEND owns or has the right to use pursuant to license,
sublicense, agreement, or permission all patent applications, patents,
copyrights, trademarks, tradenames, service marks, and other intellectual
property rights, if any ("Intellectual Property") necessary for the operation of
the business of XTEND as currently conducted. Each item of Intellectual Property
owned or used by XTEND immediately prior to the Closing hereunder will be owned
or available for use by XTEND on identical terms and conditions immediately
subsequent to the Closing hereunder. XTEND has taken all necessary and desirable
action to maintain and protect each item of Intellectual Property that it owns
or uses, if any.
(ii) XTEND has not interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property
rights of third parties, and none of the Shareholders or the directors and
officers of XTEND has ever received any charge, complaint, claim, demand, or
notice alleging any such interference, infringement, misappropriation, or
violation (including any claim XTEND must license or refrain from using any
Intellectual Property rights of any third party). To the knowledge of each of
the Shareholders and the directors and officers of XTEND, no third party has
interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of XTEND.
(iii) Section 3(l)(iii) of the Disclosure Schedule identifies
each patent or registration that has been issued to XTEND with respect to any of
its Intellectual Property, identifies each pending patent application or
application for registration that XTEND has made with respect to any of its
Intellectual Property, and identifies each license, agreement, or other
permission that XTEND has granted to any third party with respect to any of its
Intellectual Property (together with any exceptions), if any. The Shareholders
have delivered to Inventa correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as amended
to date), if any and have made available to Inventa correct and complete copies
of all other written documentation evidencing ownership and prosecution (if
applicable) of each such item, if any. Section 3(l)(iii) of the Disclosure
Schedule also identifies each trade name or unregistered trademark used by XTEND
in connection with any of its business, if any. With respect to each item of
Intellectual Property required to be identified in Section 3(l)(iii) of the
Disclosure Schedule:
(A) XTEND possesses all right, title, and interest in and
to the item, free and clear of any Security Interest, license, or other
restriction;
(B) the item is not subject to any outstanding injunction,
judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or is threatened which challenges
the legality, validity, enforceability, use, or ownership of the item; and
(D) XTEND has never agreed to indemnify any Person for or
against any interference, infringement, misappropriation, or other conflict with
respect to the item.
-9-
<PAGE>
(iv) Section 3(l)(iv) of the Disclosure Schedule identifies each
item of Intellectual Property that any third party owns and that XTEND uses
pursuant to license, sublicense, agreement, or permission (other than readily
available end user software) in the ordinary course of business. The
Shareholders have delivered to Inventa correct and complete copies of all such
licenses, sublicenses, agreements, and permissions (as amended to date). With
respect to each item of Intellectual Property required to be identified in
Section 3(l)(iv) of the Disclosure Schedule:
(A) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and in full force and
effect;
(B) the license, sublicense, agreement, or permission will
continue to be legal, valid, binding, enforceable, and in full force and effect
on identical terms following the consummation of the transactions contemplated
hereby;
(C) no party to the license, sublicense, agreement, or
permission is in breach or default, and no event has occurred which with notice
or lapse of time would constitute a breach or default or permit termination,
modification, or acceleration thereunder;
(D) no party to the license, sublicense, agreement, or
permission has repudiated any provision thereof;
(E) with respect to each sublicense, the representations
and warranties set forth in subsections (A) through (D) above are true and
correct with respect to the underlying license;
(F) the underlying item of Intellectual Property is not
subject to any outstanding injunction, judgment, order, decree, ruling, or
charge;
(G) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or is threatened which challenges
the legality, validity, or enforceability of the underlying item of Intellectual
Property; and
(H) XTEND has not granted any sublicense or similar right
with respect to the license, sublicense, agreement, or permission.
(v) To the knowledge of each of the Shareholders and the
directors and officers of XTEND, XTEND will not interfere with, infringe upon,
misappropriate, or otherwise come into conflict with, any Intellectual Property
rights of third parties as a result of the continued operation of its business
as presently conducted and as presently proposed to be conducted.
(m) Tangible Assets. XTEND owns or leases and has good and
---------------
marketable title to and full power of disposition over all owned tangible assets
necessary for the conduct of its business as presently conducted. Each such
owned tangible asset is free and clear of all liens, mortgages, etc. and is
suitable for the purposes for which it presently is used.
-10-
<PAGE>
(n) Contracts. Section 3(n) of the Disclosure Schedule lists the
---------
following contracts and other agreements to which XTEND is a party:
(i) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease payments in
excess of $10,000 per annum;
(ii) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the performance
of which will extend over a period of more than one year, result in a material
loss to XTEND, or involve consideration in excess of $10,000;
(iii) any agreement concerning a partnership or joint venture;
(iv) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of $10,000 or under which
it has imposed a Security Interest on any of its assets, tangible or intangible;
(v) any agreement concerning confidentiality or
noncompetition;
(vi) any agreement with any of the Shareholders and their
affiliates;
(vii) any profit sharing, stock option, stock purchase or
exchange, stock appreciation, deferred compensation, severance, or other plan or
arrangement for the benefit of its current or former directors, officers, and
employees;
(viii) any collective bargaining agreement;
(ix) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual compensation
in excess of $10,000 or providing severance benefits;
(x) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the ordinary
course of business;
(xi) any agreement under which the consequences of a default or
termination could have a material adverse effect on the business, financial
condition, operations, or results of operations of XTEND; or
(xii) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $10,000.
The Shareholders have delivered to Inventa a correct and complete copy of
each written agreement listed in Section 3(n) of the Disclosure Schedule (as
amended to date) and a written summary setting forth the terms and conditions of
each oral agreement referred to in Section 3(n) of
-11-
<PAGE>
the Disclosure Schedule, if any. With respect to each such agreement: (A) the
agreement is legal, valid, binding, enforceable, and in full force and effect;
(B) the agreement will continue to be legal, valid, binding, enforceable, and in
full force and effect on identical terms following the consummation of the
transactions contemplated hereby; (C) no party is in breach or default, and no
event has occurred which with notice or lapse of time would constitute a breach
or default, or permit termination, modification, or acceleration, under the
agreement; and (D) no party has repudiated any provision of the agreement.
(o) Notes and Accounts Receivable. All notes and accounts receivable
-----------------------------
of XTEND are reflected properly on its books and records, and are valid
receivables subject to no setoffs or counterclaims, are current and collectible,
and will be collected in accordance with the terms at their recorded amounts,
subject only to reserve for bad debts set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto) as adjusted for the passage of
time through the Closing Date in accordance with the past custom and practice of
the Company.
(p) Powers of Attorney. There are no outstanding powers of attorney
------------------
executed on behalf of XTEND.
(q) Insurance. Section 3(q) of the Disclosure Schedule sets forth a
---------
true copy of each insurance policy (including policies providing property,
casualty, liability, and workers' compensation coverage and bond and surety
arrangements) to which XTEND has been a party, at any time since the date of its
incorporation.
(i) the name, address, and telephone number of the insurance
agent;
(ii) the name of the insurer, the name of the policyholder, and
the name of each covered insured;
(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the coverage
was on a claims made, occurrence, or other basis) and amount (including a
description of how deductibles and ceilings are calculated and operate) of
coverage; and
(v) a description of any retroactive premium adjustments or
other loss-sharing arrangements.
With respect to each such insurance policy: (A) the policy will continue to
be in full force and effect on identical terms following the consummation of the
transactions contemplated hereby; and (B) neither the Company nor any other
party to the policy is in breach or default (including with respect to the
payment of premiums or the giving of notices), and no event has occurred which,
with notice or the lapse of time, would constitute such a breach or default, or
permit termination, modification, or acceleration, under the policy; and (C) no
party to the policy has repudiated any provision thereof. XTEND has been covered
since the date of its incorporation by insurance similar
-12-
<PAGE>
in scope and amount. Section 3(q) of the Disclosure Schedule describes any self-
insurance arrangements affecting XTEND.
(r) Litigation. Section 3(r) of the Disclosure Schedule sets forth
----------
each instance in which XTEND (i) is subject to any outstanding injunction,
judgment, order, decree, ruling, or charge or (ii) is a party or is threatened
to be made a party to any action, suit, proceeding, hearing, or investigation
of, in, or before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator. None of
the actions, suits, proceedings, hearings, and investigations set forth in
Section 3(r) of the Disclosure Schedule is likely to result in any material
adverse change in the business, financial condition, operations, results of
operations, of XTEND. To the knowledge of the Shareholders and the directors and
officers of XTEND no such action, suit, proceeding, hearing, or investigation
will be brought against XTEND.
(s) Employees. To the knowledge of each of the Shareholders and the
---------
directors and officers of XTEND, no executive, key employee, or group of
employees has any plans to terminate employment with XTEND. No employee of XTEND
is in violation of any term of any employment contract, patent disclosure
agreement or any other contract or agreement relating to the relationship of
such employee with XTEND or any other party because of the nature of the
business conducted by XTEND. All employees of XTEND whose employment
responsibility requires access to confidential or proprietary information of
XTEND have executed and delivered certain "Employment Agreements" substantially
in the form Section 3(s) of the Disclosure Schedule) and all such Employment
Agreements are in full force and effect, and enforceable in accordance with
their terms, and shall be and remain applicable for any and all acts by
employees of XTEND occurring prior to Closing, but shall not be applicable to
acts occurring after the Closing. Upon Closing, all employees of XTEND shall
execute and deliver to Inventa the Inventa Confidential Information and
Invention Agreement, which Agreements shall supersede any and all prior XTEND
employees employment and confidentiality agreements, including the "Employment
Agreements" referenced herein, and shall apply to any and all actions by
employees occurring subsequent to Closing. XTEND is not a party to any labor
agreement with respect to its employees with any labor organization, union,
group or association. XTEND has not experienced any attempt by organized labor
or its representatives to make XTEND conform to demands of organized labor
relating to its employees or to enter into a binding agreement with organized
labor that would cover the employees of XTEND. There is no labor strike or labor
disturbance pending or threatened against XTEND nor is any grievance currently
being asserted, and XTEND has not experienced a work stoppage or other labor
difficulty.
(t) Employee Benefits.
-----------------
(i) Except as set forth in Section 3(t) of the Disclosure
Schedule, the XTEND does not maintain, contribute to or have any liability with
respect to any Employee Benefit Plan as defined in the Employee Retirement
Income Security Act of 1974, as amended ("ERISA").
(u) Guaranties. XTEND is not a guarantor or otherwise liable for any
----------
liability or obligation (including indebtedness) of any other person.
-13-
<PAGE>
(v) Certain Business Relationships with XTEND. Except as set forth
-----------------------------------------
in Section 3(v) of the Disclosure Schedule, none of the Shareholders, officers
or directors of XTEND or their respective affiliates has been involved in any
business arrangement or relationship with XTEND within the past 12 months, and
none of the Shareholders or their respective affiliates owns any asset, tangible
or intangible, that is used in the business of XTEND.
(w) Disclosure. The representations and warranties contained in this
----------
Section 3 do not contain any untrue statement of a material fact or omit to
state any material fact necessary in order to make the statements and
information contained in this Section 3 not misleading.
4. Pre-Closing Covenants. The Parties agree as follows with respect to
---------------------
the period between the execution of this Agreement and the Closing:
(a) General. Each of the Parties will use his or its best efforts to
-------
take all action and to do all things necessary, proper, or advisable in order to
consummate and make effective the transactions contemplated by this Agreement
(including satisfaction, but not waiver, of the closing conditions set forth in
Section 6 below).
(b) Notices and Consents. The Shareholders will cause XTEND to give
--------------------
any notices to third parties, and will cause XTEND to use its best efforts to
obtain any third party consents that Inventa may request in connection with the
matters referred to in Section 3(c) above. Each of the Parties will (and the
Shareholders will cause XTEND to) give any notices to, make any filings with,
and use its best efforts to obtain any authorizations, consents, and approvals
of governments and governmental agencies in connection with the matters referred
to in Section 2(a)(ii), Section 2(b)(ii), and Section 3(c) above.
(c) Operation of Business. The Shareholders will not cause or permit
---------------------
XTEND to engage in any practice, take any action, or enter into any transaction
outside the ordinary course of business. Without limiting the generality of the
foregoing, the Shareholders will not cause or permit XTEND to (i) declare, set
aside, or pay any dividend or make any distribution with respect to its capital
stock or redeem, exchange, or otherwise acquire any of its capital stock, or
(ii) otherwise engage in any practice, take any action, or enter into any
transaction of the sort described in Section 3(h) above.
(d) Compensation. XTEND will not increase compensation or pay
------------
bonuses or similar payments to any officer, director, employee or consultant
prior to the Closing.
(e) Preservation of Business. The Shareholders will cause XTEND to
------------------------
keep its business and properties substantially intact, including its present
operations, physical facilities, working conditions, and relationships with
lessors, licensors, suppliers, customers, and employees.
(f) Full Access. Each of the Shareholders will permit, and the
-----------
Shareholders will cause XTEND to permit, representatives of Inventa to have full
access to all premises, properties, personnel, books, records (including tax
records), contracts, and documents of or pertaining to XTEND.
-14-
<PAGE>
(g) Notice of Developments. The Shareholders will give prompt
written notice to Inventa of any material adverse development causing a breach
of any of the representations and warranties in Section 3 above. Each Party will
give prompt written notice to the others of any material adverse development
causing a breach of any of his or its own representations and warranties in
Section 2 above. No disclosure by any Party pursuant to this Section 4(g),
however, shall be deemed to amend or supplement the Disclosure Schedule or to
prevent or cure any misrepresentation, breach of warranty, or breach of
covenant.
(h) Exclusivity. Neither XTEND nor any of the Shareholders will (and
-----------
the Shareholders will not cause or permit XTEND to) (i) solicit, initiate, or
encourage the submission of any proposal or offer from any third party relating
to the acquisition of any capital stock or other voting securities, or any
substantial portion of the assets, of XTEND (including any acquisition
structured as a merger, consolidation, or share exchange) or (ii) participate in
any discussions or negotiations regarding, furnish any information with respect
to, assist or participate in, or facilitate in any other manner any effort or
attempt to do or seek any of the foregoing. None of the Shareholders will vote
their XTEND Shares in favor of any such acquisition structured as a merger,
consolidation, or share exchange. The Shareholders will notify Inventa promptly
if any third party makes any proposal, offer, inquiry, or contact with respect
to any of the foregoing.
(i) Options. Inventa agrees to reserve 170,000 shares of Common
-------
Stock in its current 1993 Stock Option Plan for grant as employee stock options
(the "Options") to Company non-Shareholder Employees (the "Employees') of record
on the Closing Date. Immediately upon Closing, the Options shall be granted to
the Employees at an exercise price to be determined at then current fair market
value by INVENTA's Board of Directors at its next meeting.
5. Post-Closing Covenants. The Parties agree as follows with respect to
----------------------
the period following the Closing:
(a) General. In case at any time after the Closing any further
-------
action is necessary or desirable to carry out the purposes of this Agreement,
each of the Parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other Party
reasonably may request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under
Section 8 below). The Shareholders acknowledge and agree that from and after the
Closing Inventa will be entitled to possession of all documents, books, records
(including Tax records), agreements, and financial data of any sort relating to
XTEND.
(b) Transition. None of the Shareholders will take any action that
----------
is designed or intended to have the effect of discouraging any lessor, licensor,
customer, supplier, or other business associate of XTEND from maintaining the
same business relationships with XTEND after the Closing as it maintained with
XTEND prior to the Closing. Each of the Shareholders will refer all customer
inquiries relating to the business of XTEND to Inventa from and after the
Closing.
(c) Confidentiality. Each of the Shareholders will treat and hold as
---------------
such all of the Confidential Information, refrain from using any of the
Confidential Information except in
-15-
<PAGE>
connection with this Agreement, and deliver promptly to Inventa or destroy, at
the request and option of Inventa, all tangible embodiments (and all copies) of
the Confidential Information which are in his or its possession. In the event
that any of the Shareholders is requested or required (by oral question or
request for information or documents in any legal proceeding, interrogatory,
subpoena, civil investigative demand, or similar process) to disclose any
Confidential Information, that Shareholder will notify Inventa promptly of the
request or requirement so that Inventa may seek an appropriate protective order
or waive compliance with the provisions of this Section 5(c). If, in the absence
of a protective order or the receipt of a waiver hereunder, any of the
Shareholders is, on the advice of counsel, compelled to disclose any
Confidential Information to any tribunal or else stand liable for contempt, that
Shareholder may disclose the Confidential Information to the tribunal; provided,
---------
however, that the disclosing Shareholder shall use his or its best efforts to
- -------
obtain, at the request of Inventa, an order or other assurance that confidential
treatment will be accorded to such portion of the Confidential Information
required to be disclosed as Inventa shall designate. The foregoing provisions
shall not apply to any Confidential Information which is generally available to
the public immediately prior to the time of disclosure.
6. Conditions to Obligation to Close.
---------------------------------
(a) Conditions to Obligation of Inventa. The obligation of Inventa
-----------------------------------
to consummate the transactions to be performed by it in connection with the
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Section
2(a) and Section 3 above shall be true and correct in all material respects at
and as of the Closing Date;
(ii) the Shareholders shall have performed and complied with all
of their covenants hereunder in all material respects through the Closing;
(iii) each individual Employee Shareholder listed in Section
6(a)(iii) of the Disclosure Schedule shall have executed a Stock Restriction
Agreement and a "Noncompetition Agreement" in the form and substance as set
forth in Exhibit C and D;
(iv) XTEND shall have procured all requisite third party
consents specified in Section 3(c) above;
(v) no action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (A)
prevent consummation of any of the transactions contemplated by this Agreement,
(B) cause any of the transactions contemplated by this Agreement to be rescinded
following consummation, (C) affect adversely the right of Inventa to own XTEND
Shares free and clear of any Security Interests and to control XTEND, or (D)
affect adversely the right of XTEND to own its assets and to operate its
business (and no such injunction, judgment, order, decree, ruling, or charge
shall be in effect);
-16-
<PAGE>
(vi) the Shareholder execution of this Agreement shall be a
representation to the effect that each of the conditions specified above in
Section 6(a)(i)-(v) is satisfied in all respects; and
(vii) Inventa shall have received from counsel to the
Shareholders an opinion in form and substance as set forth in Exhibit D attached
hereto, addressed to Inventa, and dated as of the Closing Date.
(viii) all actions to be taken by the Shareholders in connection
with consummation of the transactions contemplated hereby and all certificates,
opinions, instruments, and other documents required to effect the transactions
contemplated hereby will be satisfactory in form and substance to Inventa;
(ix) The approval of this Agreement by the respective Board of
Directors of Inventa and XTEND;
(x) The completion of Inventa's due diligence investigation to
its satisfaction in its sole discretion;
Inventa may waive any condition specified in this Section 6(a) if it
executes a writing so stating at or prior to the Closing.
(b) Conditions to Obligation of the Shareholders. The obligation of
--------------------------------------------
the Shareholders to consummate the transactions to be performed by them in
connection with the Closing is subject to satisfaction of the following
conditions:
(i) the representations and warranties set forth in Section
2(b) above shall be true and correct in all material respects at and as of the
Closing Date;
(ii) Inventa shall have performed and complied with all of its
covenants hereunder in all material respects through the Closing;
(iii) no action, suit, or proceeding shall be pending before any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction wherein an unfavorable injunction, judgment, order,
decree, ruling, or charge would (A) prevent consummation of any of the
transactions contemplated by this Agreement or (B) cause any of the transactions
contemplated by this Agreement to be rescinded following consummation (and no
such injunction, judgment, order, decree, ruling, or charge shall be in effect);
(iv) Inventa's execution of this Agreement shall be a
representation to the effect that each of the conditions specified above in
Section 6(b)(i)-(iii) is satisfied in all respects; and
-17-
<PAGE>
(v) the Shareholders shall have received from counsel to Inventa
an opinion in form and substance as set forth in Exhibit E attached hereto,
addressed to the Shareholders and dated as of the Closing Date.
The Shareholders may waive any condition specified in this Section 6(b) if
they execute a writing so stating at or prior to the Closing.
7. Survival of Representations and Warranties. All of the
representations and warranties of the Parties contained hereinabove shall
survive the Closing hereunder (even if Inventa knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and continue in
full force and effect for a period of twenty-four (24) months thereafter, except
that those set forth in Section 3(k) ("Tax Matters") shall survive until the
expiration of the applicable Statute of Limitations.
8. General Indemnification.
-----------------------
(a) Subject to Section 8(c) hereunder, the Shareholders hereby
jointly and severally indemnify and agree to hold harmless Inventa (at and after
the Closing Date) in respect of any claims, costs, demands, liabilities, losses
and expenses (including, without limitation, reasonable legal and other out-of-
pocket fees and expenses for investigating, defending or settling any actions or
threatened actions) (all of which are referred to herein individually as a
"Deficiency" and collectively as "Deficiencies") incurred or suffered by Inventa
in connection with any misrepresentation or breach of any representation,
warranty, covenant or agreement made by XTEND or any Shareholder in this
Agreement (including but not limited to representations made by the other
Shareholders pursuant to Section 2(a), or in any certificate, instrument,
schedule or document given by XTEND or any Shareholder pursuant to this
Agreement or the Escrow Agreement.
(b) Notwithstanding the foregoing, neither the Shareholders nor
Inventa shall have any obligation to indemnify and/or hold the other harmless in
respect of any claims, costs, demands, liabilities, losses, and expenses of any
kind (including, without limitation, reasonable legal and other out-of-pocket
fees and expenses for investigating, defending, or settling any actions or
threatened actions) made by Sybase, Inc. relating to violations by any
Shareholder or any employee of XTEND or Inventa of any non-competition, and/or
non-solicitation and/or any other hiring agreements entered into by such
Shareholder or employee with Sybase, Inc.
(c) Shareholders shall not be liable to Inventa under this Article 8
or otherwise under this Agreement for any claims, costs, demands, liabilities,
losses and expenses of any kind (including without limitation, reasonable legal
and other out-of-pocket fees and expenses for investigating, defending, or
settling any actions or threatened actions arising out of claims made by third
party(s) relating to Shareholders violation of any term(s) of this Agreement,
until the amount otherwise due Inventa for indemnification as provided herein
exceeds Seventy-Five Thousand Dollars ($75,000) in the aggregate, in which case,
Shareholders shall be liable to Inventa for all such amounts, including without
limitation, the first Seventy-Five Thousand Dollars ($75,000) thereof;
-18-
<PAGE>
provided, however, that Shareholders indemnification obligations under Section
8(a), and otherwise, shall in no event exceed an aggregate of $2,500,000.
(d) Losses Net of Insurance and Tax Benefits. In calculating any
----------------------------------------
Deficiency suffered by the Company, Inventa or any affiliate of any of them,
arising out of this Agreement, there shall be deducted any insurance recovery in
respect of such Deficiency. Further, any indemnity payment hereunder with
respect to any Deficiency shall be calculated on an "after-tax basis", meaning
that amount which is sufficient to compensate the indemnified party for the
event giving rise to such Deficiency determined after taking into account all
reduction in federal, state, local and foreign taxes (including estimated taxes)
payable by the indemnified party as a result of the event giving rise to such
Deficiency.
9. Establishment of Escrow. In order to provide protection for Inventa
-----------------------
from and after the Closing, an escrow account ("Escrow") shall be established on
behalf of Inventa, which Escrow shall, (i) be subject to the provisions of the
Escrow Agreement, attached hereto as Exhibit C, and (ii) provide the first funds
from which claims under the indemnification provisions set forth herein shall be
paid. The Escrow shall be funded, as of Closing, with 551,948 shares of Inventa
Common Stock otherwise issuable hereunder (the "Escrow Shares") to those
Shareholders who enter into the Shareholders Restricted Stock Agreements
referenced in Section 6(a)(iii) hereunder (the "Stock Agreements") to be
available for repurchase pursuant to the Inventa Repurchase Option provision
delineated in the Shareholders Restricted Stock Agreements, of which Escrow
Shares 337,500 shall also be held to provide a fund (to the extent that the
value of said 337,500 Escrow Shares satisfies the $2,500,000 Shareholders
Indemnification obligation set forth in Section 8(c)) for the Shareholders
indemnification of Inventa, hereunder. For purposes of this Section 9, the per
share value of said 337,500 Escrow Shares shall be, (i) if Inventa is then a
public company, the average of the Closing prices of Inventa common stock for
the thirty (30) trading days immediately preceding the Shareholders deemed
receipt of notice of a claim, delivered pursuant to Section 11 (g) or (ii) if
Inventa is then not a public Company, $7.41. If Inventa is a public company but
its shares are not then being traded, such per share value shall be determined
by an appraiser mutually acceptable to the Parties.
10. Termination; Remedies.
---------------------
(a) Termination of Agreement. Certain of the Parties may terminate
this Agreement as provided below:
(i) Inventa and the Shareholders may terminate this Agreement by
mutual written consent at any time prior to the Closing;
(ii) Inventa may terminate this Agreement by giving written notice
to the Shareholders at any time prior to the Closing (A) in the event any of the
Shareholders has breached any representation, warranty, or covenant contained in
this Agreement in any material respect, and if such breach is capable of being
cured, Inventa shall notify the Shareholders of the breach, and the breach has
continued without cure for a period of ten days after the notice of breach or
(B) if the Closing shall not have occurred on or before January 31, 2000, by
reason of the failure of any
-19-
<PAGE>
condition precedent under Section 6(a) hereof (unless the failure results
primarily from Inventa itself breaching any representation, warranty, or
covenant contained in this Agreement); and
(iii) the Shareholders may terminate this Agreement by giving
written notice to Inventa at any time prior to the Closing (A) in the event
Inventa has breached any representation, warranty, or covenant contained in this
Agreement in any material respect, if such breach is capable of being cured, the
Shareholders shall notify Inventa of the breach, and the breach has continued
without cure for a period of ten days after the notice of breach or (B) if the
Closing shall not have occurred on or before January 31, 2000, by reason of the
failure of any condition precedent under Section 6(b) hereof (unless the failure
results primarily from any of the Shareholders themselves breaching any
representation, warranty, or covenant contained in this Agreement).
(b) Effect of Termination. If any Party terminates this Agreement
---------------------
pursuant to Section 10(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach).
11. Miscellaneous.
-------------
(a) Press Releases and Public Announcements. No Party shall issue any
---------------------------------------
press release or make any public announcement relating to the subject matter of
this Agreement without the prior written approval of Inventa and the
Shareholders; provided, however, that any Party may make any public disclosure
-------- -------
it believes in good faith is required by applicable law or any listing or
trading agreement concerning its publicly-traded securities (in which case the
disclosing Party will use its reasonable best efforts to advise the other
Parties prior to making the disclosure).
(b) No Third-Party Beneficiaries. This Agreement shall not confer any
----------------------------
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
(c) Entire Agreement. This Agreement (including the documents
----------------
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
(d) Succession and Assignment. This Agreement shall be binding upon
-------------------------
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of Inventa and the affected Shareholders; provided, however,
-------- -------
that Inventa may (i) assign any or all of its rights and interests hereunder to
one or more of its affiliates and (ii) designate one or more of its affiliates
to perform its obligations hereunder (in any or all of which cases Inventa
nonetheless shall remain responsible for the performance of all of its
obligations hereunder).
-20-
<PAGE>
(e) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
(f) Headings. The Section headings contained in this Agreement are
--------
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(g) Notices. All notices, requests, demands, claims, and other
-------
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given if (and then two
business days after) it is sent by registered or certified mail, return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:
If to the Shareholders: Simultaneous Copy to:
---------------------- --------------------
Sills Cummis Radin Tischman
Epstein & Gross, P.A.
At the respective addresses
shown on Schedule 1 hereto One Riverfront Plaza
Newark, NJ 07102-5400
Attn: Victor H. Boyajian, Esq.
If to Inventa: Simultaneous Copy to:
------------- --------------------
Inventa Corporation Wilson Sonsini Goodrich & Rosati
255 Shoreline Drive, Suite 200 650 Page Mill Road
Redwood Shores, CA 94065 Palo Alto, CA 94304-1050
Attn: Michael J. O'Donnell, Esq.
Any Party may send any notice, request, demand, claim, or other
communication hereunder to the intended recipient at the address set forth above
using any other means (including personal delivery, expedited courier, messenger
service, telecopy, telex, ordinary mail, or electronic mail), but no such
notice, request, demand, claim, or other communication shall be deemed to have
been duly given unless and until it actually is received by the intended
recipient. Any Party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other Parties notice in the manner herein set forth.
(h) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the domestic laws of the State of California without giving
effect to any choice or conflict of law provision or rule (whether of the State
of California or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of California.
(i) Amendments and Waivers. No amendment of any provision of this
----------------------
Agreement shall be valid unless the same shall be in writing and signed by
Inventa and the
-21-
<PAGE>
Shareholders. No waiver by any Party of any default, misrepresentation, or
breach of warranty or covenant hereunder, whether intentional or not, shall be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(j) Severability. Any term or provision of this Agreement that is
------------
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
(k) Attorneys' Fees. If any litigation or any other proceeding is
---------------
commenced in connection with or related to this Agreement, the losing party
shall pay the expenses, including but not limited to, the reasonable attorneys'
fees and expenses, including costs, and costs of attorney travel, of the
prevailing party. The court shall be entitled to prorate said fees and expenses
between the parties in the event that a suit or proceeding is successful only in
part.
(l) Construction. The Parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean including without limitation. The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) that the Party
has not breached shall not detract from or mitigate the fact that the Party is
in breach of the first representation, warranty, or covenant.
(m) Incorporation of Exhibits and Schedules. The Exhibits and
---------------------------------------
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
(n) Specific Performance. Each of the Parties acknowledges and
--------------------
agrees that the other Parties could be damaged irreparably in the event any of
the provisions of this Agreement are not performed in accordance with their
specific terms or otherwise are breached. Accordingly, each of the Parties
agrees that the other Parties may be entitled to an injunction or injunctions to
prevent breaches of the provisions of this Agreement and to enforce specifically
this Agreement and the terms and provisions hereof in any action instituted in
any court of the United States or any state thereof having jurisdiction over the
Parties and the matter in addition to any other remedy to which they may be
entitled, at law or in equity.
(o) Submission to Jurisdiction. Each of the Parties submits to the
--------------------------
jurisdiction of any state or federal court sitting in Santa Clara County,
California, in any action or proceeding arising out of or relating to this
Agreement and agrees that all claims in respect of the action or
-22-
<PAGE>
proceeding may be heard and determined in any such court. Each Party also agrees
not to bring any action or proceeding arising out of or relating to this
Agreement in any other court. Each of the Parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety, or other security that might be required of any other
Party with respect thereto. Each Party agrees that a final judgment in any
action or proceeding so brought shall be conclusive and may be enforced by suit
on the judgment or in any other manner provided by law or at equity.
-23-
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of
the date first above written.
INVENTA: SHAREHOLDERS:
INVENTA CORPORATION
/s/ Richard M. Cerwonka
--------------------------------
Richard M. Cerwonka
By: /s/ DAVID A. LAVANTY
------------------------------
Title: President & CEO /s/ Mark Breznak
--------------------------- --------------------------------
Mark Breznak
COMPANY:
/s/ John Pike
--------------------------------
John Pike
XTEND-Tech, INC.
By: /s/ RICHARD M. CERWONKA /s/ Scott Gray
------------------------------ --------------------------------
Scott Gray
Title: PRESIDENT & CEO
/s/ John P. McViker
--------------------------------
John McVicker
/s/ Michael Swafford
--------------------------------
Michael Swafford
/s/ Derek Nash
--------------------------------
Derek Nash
(Shareholder Signatures Continued
Next Page)
Signature Page to Agreement and Plan of Reorganization Agreement
<PAGE>
/s/ James Z. Peepas
--------------------------------
James Z. Peepas
/s/ Frank Russin
--------------------------------
Frank Russin
/s/ Joseph A. DeCapuq
--------------------------------
Joseph A.DeCapuq
/s/ Gordon Kulth
--------------------------------
Gordon Kulth
International Database Communication
Systems, Inc./IDCS
By: /s/ James Z. Peepas
-----------------------------
James Z. Peepas
Chairman/CEO
Signature Page to Agreement and Plan of Reorganization Agreement
<PAGE>
Exhibit 3.1
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
INVENTA TECHNOLOGIES, INC.
I.
The name of this corporation is Inventa Technologies, Inc. (the
"Corporation").
II.
The address of the corporation's registered office in the State of
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle, Zip Code 19801. The name of its registered
agent at such address is The Corporation Trust Company.
III.
The purpose of this Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
Delaware.
IV.
This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the Corporation is authorized to issue is 39,779,511 shares, of
which 25,000,000 shares shall be Common Stock with a par value of $0.001 per
share and of which 14,779,511 shares shall be Preferred Stock, 1,000,000 of
which are designated Series A Preferred Stock with a par value of $0.001 per
share, 2,560,000 of which are designated Series B Preferred Stock with a par
value of $0.001 per share, 8,219,511 of which are designated Series C Preferred
Stock with a par value of $0.001 per share and 3,000,000 of which are designated
Series D Preferred Stock with a par value of $0.001 per share. The Board of
Directors is authorized to fix the number of shares of any series of Preferred
Stock and to determine or alter the rights, preferences, privileges, and
restrictions granted to or imposed upon any wholly unissued series of Preferred
Stock and, within the limits and restrictions stated in any resolution or
resolutions of the Board of Directors originally fixing the number of shares
constituting any series of Preferred Stock, to increase or decrease (but not
below the number of shares of any such series then outstanding) the number of
shares of any such series subsequent to the issue of shares of that series.
<PAGE>
V.
The rights, preferences, privileges and restrictions granted to or imposed
upon the Common Stock and Preferred Stock are as follows:
1. Dividend Provisions. The holders of shares of Series A Preferred Stock
("Series A Preferred"), Series B Preferred Stock ("Series B Preferred"), Series
C Preferred Stock ("Series C Preferred") and Series D Preferred Stock ("Series D
Preferred") 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 $0.03 per annum per share of Series A
Preferred (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares), $0.075 per annum
per share of Series B Preferred (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares), $0.10 per annum per share of Series C Preferred (as adjusted for any
stock dividends, combinations, splits, recapitalizations and the like with
respect to such shares) and $0.59 per annum per share of Series D Preferred (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares) or, if greater (as determined on a per
annum basis and on an as converted basis for the Preferred Stock), an amount
equal to that paid on the Common Stock. Such dividends shall be payable when,
as, and if declared by the Board of Directors, and shall not be cumulative, and
no right shall accrue to holders of Common Stock or Preferred Stock by reason of
the fact that dividends on said shares are not declared in any prior period.
After payment has been made to the holders of Preferred Stock of the full
amounts to which they shall be entitled as set forth in this Section 1, the
holders of Preferred Stock and Common Stock shall be entitled to receive ratably
on an as-converted basis any remaining funds declared as dividends.
2. Liquidation Preference.
(a) Preferred Preference. In the event of any liquidation,
dissolution, or winding up of the Corporation, either voluntary or involuntary,
the holders of the Series C Preferred and Series D Preferred shall be entitled
to receive on a pro rata basis, prior and in preference to any distribution of
any of the assets or surplus funds of the Corporation to the holders of the
Series A Preferred, Series B Preferred and Common Stock, by reason of their
ownership of such stock, an amount per share equal to the sum of $1.25 per share
of Series C Preferred and $7.41 per share of Series D Preferred (in each case as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares) plus declared and unpaid dividends, for
each share of Series C Preferred or Series D Preferred then held by them. If
upon the occurrence of such event, the assets and funds thus distributed among
the holders of the Series C Preferred and Series D Preferred 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 among the holders of the
Series C Preferred and Series D Preferred in proportion to the aggregate
liquidation preference of the shares held by each such holder.
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(b) After payment has been made to the holders of the Series C
Preferred and Series D Preferred of the full amounts to which they shall be
entitled as set forth in paragraph 2(a) above, the holders of Series A Preferred
and Series B Preferred 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
$0.50 for each outstanding share of Series A Preferred (as adjusted for any
stock dividends, combinations, splits, recapitalizations and the like with
respect to such shares), and $1.25 for each outstanding share of Series B
Preferred (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares), plus an amount
equal to any declared but unpaid dividends for each share of Series A Preferred
and Series B Preferred then held by them. If upon the occurrence of such event,
the assets and funds thus distributed among the holders of Series A Preferred
and Series B Preferred shall be insufficient to permit the payment to such
holders of the full aforesaid preferential amounts, then the entire assets and
funds of this Corporation legally available for distribution shall be
distributed ratably among the holders of the Series A Preferred and Series B
Preferred in proportion to the aggregate Series A Preferred liquidation
preference and the Series B Preferred liquidation preference.
(c) After payment has been made to the holders of the Preferred
Stock of the full amounts to which they shall be entitled to as set forth in
paragraphs 2(a) and 2(b) above, the holders of the Common Stock shall then be
entitled to receive the amount of $0.40 per share for each share of Common Stock
then held by them (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares), plus an amount
equal to all declared but unpaid dividends for each share of Common Stock then
held by them. If the assets and funds thus distributed among the holders of the
Common Stock shall be insufficient to permit the payment to such holders of the
full aforesaid amount, then the entire assets and funds of the Corporation
legally available for distribution, shall be distributed among the holders of
the Common Stock ratably on a per-share basis.
(d) After payment has been made to the holders of the Preferred
Stock and the Common Stock of the full amount to which they shall be entitled as
set forth in paragraphs 2(a), 2(b) and 2(c) above, the holders of the Preferred
Stock and Common Stock shall be entitled to receive ratably on a per-share basis
all the remaining assets based upon the number of shares of Common Stock into
which each share of Preferred Stock is then convertible; provided, however, that
the holders of Preferred Stock shall not be entitled to receive pursuant to this
paragraph (d) (including amounts received pursuant to paragraphs 2 (a) and 2(b)
above) more than a total of $1.00 per share of Series A Preferred, $2.50 per
share of Series B Preferred, $2.50 per share of Series C Preferred and $14.82
per share of Series D Preferred then held by them (as adjusted for any stock
dividends, combinations, splits, recapitalizations and the like with respect to
such shares) plus declared and unpaid dividends.
(e) After payment has been made to the holders of the Preferred
Stock and the Common Stock of the full amounts to which they shall be entitled
as set forth in paragraphs 2(a), 2(b), 2(c) and 2(d) above, the holders of the
Common Stock shall be entitled to receive ratably on a per-share basis all the
remaining assets.
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(f) Mergers. Unless waived by the approval (by vote or written
consent, as provided by law) of the holders of 66 2/3% of the then outstanding
Series C Preferred and holders of 66 2/3% of the then outstanding Series D
Preferred, for purposes of this Section 2, a merger or consolidation of the
Corporation with or into any other corporation or corporations, or the merger of
any other corporation or corporations into the Corporation, in which the
shareholders of the Corporation receive distributions in cash or securities of
another corporation or corporations as a result of such consolidation or merger,
a reorganization, including a sale of the capital stock of the Corporation,
where the shareholders of the Corporation immediately prior to the transaction
possess less than 50% of the voting power of the surviving entity (or its
parent) immediately after the transaction, or a sale of all or substantially all
of the assets of the Corporation, shall be treated as a liquidation, dissolution
or winding up of the Corporation; provided that the holders of the Preferred
Stock and the Common Stock shall each be paid the liquidation preference in cash
or in the securities received or in a combination thereof (which combination
shall be in the same proportions as the consideration received in the
transaction). Any securities to be delivered to the holders of the Preferred
Stock and Common Stock upon merger, reorganization or sale of substantially all
the assets of the Corporation shall be valued as follows:
(i) if traded on a securities exchange, the value shall be
deemed to be the average of the closing prices of the securities on such
exchange over the 30-day period ending three (3) business days prior to the
closing;
(ii) if actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid prices over the 30-day period ending
three (3) business days prior to the closing; and
(iii) if there is no active public market, the value shall be
the fair market value thereof as mutually determined by the Corporation and the
holders of not less than a majority of the outstanding shares of the Preferred
Stock, provided that if the Corporation and the holders of a majority of the
outstanding shares of the Preferred Stock are unable to reach agreement, then by
independent appraisal by an investment banker hired and paid by the Corporation,
but acceptable to the holders of a majority of the outstanding shares of
Preferred Stock.
3. Conversion. The holders of Preferred Stock shall have conversion rights
as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Preferred Stock shall be
convertible into share(s) of Common Stock without the payment of any additional
consideration by the holder thereof and, at the option of the holder thereof, at
any time after the date of issuance of such share, at the office of the
Corporation or any transfer agent for the Preferred Stock. Each share of
Preferred Stock shall be convertible into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the applicable
Original Issue Price of such share of Preferred Stock by the Conversion Price
(the "Conversion Price") at the time in effect for a share of such series of
Preferred Stock. The Original Issue Price per share of Series A Preferred is
$0.50, and the Conversion Price per share of Series A Preferred initially shall
be $0.50. The Original Issue Price per share of
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Series B Preferred is $1.25, and the Conversion Price per share of Series B
Preferred initially shall be $1.25. The Original Issue Price per share of Series
C Preferred is $1.25, and the Conversion Price per share of Series C Preferred
initially shall be $1.25. The Original Issue Price per share of Series D
Preferred is $7.41, and the Conversion Price per share of Series D Preferred
initially shall be $7.41. The Conversion Price of each series of Preferred Stock
shall be subject to adjustment from time to time as provided below. The number
of shares of Common Stock into which a share of Preferred Stock is convertible
is hereinafter referred to as the "Conversion Rate" of such series.
(b) Automatic Conversion. Each share of Preferred Stock shall
automatically be converted into shares of Common Stock at the then effective
Conversion Rate immediately upon the closing of a firm commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale of Common Stock
in which the aggregate proceeds raised equals or exceeds $20,000,000 (a
"Qualified Public Offering").
Notwithstanding the foregoing, each share of Series A Preferred, Series B
Preferred and Series C Preferred shall automatically be converted into shares of
Common Stock at the applicable effective Conversion Rate upon the approval (by
vote or written consent, as provided by law) of (i) the holders of at least 2/3
of the then outstanding shares of Series A Preferred, Series B Preferred and
Series C Preferred (voting together as a separate class) and (ii) the holders of
at least 2/3 of the then outstanding shares of Series C Preferred.
Notwithstanding the foregoing, each share of Series D Preferred shall
automatically be converted into shares of Common Stock at the applicable
effective Conversion Rate upon the approval (by vote or written consent, as
provided by law) of the holders of at least 2/3 of the then outstanding shares
of Series D Preferred.
(c) Mechanics of Conversion. Before any holder of the 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 the Corporation or of any transfer agent for the Preferred Stock and
shall give written notice to the Corporation at such office that he elects to
convert the same (except that no such written notice of election to convert
shall be necessary in the event of an automatic conversion pursuant to Section
3(b) hereof). The Corporation shall, as soon as practicable thereafter, issue
and deliver at such office to such holder of Preferred Stock a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such surrender of the shares of
Preferred Stock to be converted (except that in the case of an automatic
conversion pursuant to Section 3(b) hereof such conversion shall be deemed to
have been made immediately prior to the closing of the offering referred to in
Section 3(b)) 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 on such date.
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(d) Fractional Shares. In lieu of any fractional shares to which the
holder of Preferred Stock would otherwise be entitled, the Corporation shall pay
cash equal to such fraction multiplied by the fair market value of one share of
each such series of Preferred Stock as determined by the Board of Directors of
the Corporation. Whether or not fractional shares are issuable upon such
conversion shall be determined on the basis of the total number of shares of
Preferred Stock of each holder to be converted at such time into Common Stock
and the number of shares of Common Stock issuable upon such aggregate
conversion.
(e) Adjustment of Conversion Price. The Conversion Price of each
series of Preferred Stock shall be subject to adjustment from time to time as
follows:
(i) If the Corporation shall issue any Common Stock other than
"Excluded Stock", as defined below, without consideration or for consideration
per share less than the applicable Conversion Price for such series in effect on
the date of and immediately prior to such issuance, then and in such event, the
Conversion Price in effect for such series shall be reduced, concurrently with
such issuance, to a price determined by multiplying such Conversion Price by a
fraction, the numerator of which shall be the total number of shares of Common
Stock outstanding (including any shares of Common Stock issuable upon conversion
of the Preferred Stock, or deemed to have been issued pursuant to subdivision
(3) of this clause (i) and to clause (ii) below) immediately prior to such
issuance plus the number of shares of Common Stock which the aggregate
consideration received by the Corporation for the total number of shares of
Common Stock so issued would purchase at such Conversion Price; and the
denominator of which shall be the total number of shares of Common Stock
outstanding (including any shares of Common Stock issuable upon conversion of
the Preferred Stock or deemed to have been issued pursuant to subdivision (3) of
this clause (i) and to clause (ii) below) immediately prior to such issuance
plus the additional shares of Common Stock issued in such issuance (but not
including any additional shares of Common Stock deemed to be issued as a result
of any adjustment in the Conversion Price resulting from such issuance).
For purposes of any adjustment of the Conversion Price pursuant to
this clause (i), the following provisions shall be applicable:
(1) In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
after deducting any discounts or commissions paid or incurred by the Corporation
in connection with the issuance and sale thereof.
(2) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair market value thereof as determined by the
Board of Directors of the Corporation, in accordance with generally accepted
accounting treatment; provided, however, that if, at the time of such
determination, the Corporation's Common Stock is traded in the over-the-counter
market or on a national or regional securities exchange, such fair market value
as determined by the board of directors of the Corporation shall not exceed the
aggregate "Current Market Price" (as defined below) of the shares of Common
Stock being issued.
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(3) In the case of the issuance of (i) options to
purchase or rights to subscribe for Common Stock (other than Excluded Stock),
(ii) securities by their terms convertible into or exchangeable for Common Stock
(other than Excluded Stock), or (iii) options to purchase or rights to subscribe
for such convertible or exchangeable securities:
(A) 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 subdivisions (1) and (2) above), if any,
received by the Corporation upon the issuance of such options or rights plus the
minimum purchase price provided in such options or rights for the Common Stock
covered thereby;
(B) 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 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 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 subdivisions (1) and (2) above);
(C) on any change in the number of shares of
Common Stock deliverable upon exercise of any such options or rights or
conversion of or exchange for such convertible or exchangeable securities, or on
any change in the minimum purchase price of such options, rights or securities,
other than a change resulting from the antidilution provisions of such options,
rights or securities, the Conversion Price shall forthwith be readjusted to such
Conversion Price as would have been obtained had the adjustment made upon (x)
the issuance of such options, rights or securities not exercised, converted or
exchanged prior to such change, as the case may be, been made upon the basis of
such change or (y) the options or rights related to such securities not
converted or exchanged prior to such change, as the case may be, been made upon
the basis of such change; and
(D) on 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 shall forthwith be readjusted to such
Conversion Price as would have been obtained had the adjustment made upon the
issuance of such options, rights, convertible or exchangeable securities or
options or rights related to such convertible or exchangeable securities, as the
case may be, been made upon the basis of the issuance of only the number of
shares of Common Stock actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such convertible or exchangeable
securities or
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upon the exercise of the options or rights related to such
convertible or exchangeable securities, as the case may be.
(ii) "Excluded Stock" shall mean:
(1) all shares of Common Stock issued and
outstanding on the date this document is filed with the California Secretary of
State and all shares issuable upon exercise of options or warrants outstanding
on the date this document is filed with the California Secretary of State;
(2) all shares of Series A Preferred, Series B
Preferred, Series C Preferred and Series D Preferred and the Common Stock into
which such shares are convertible;
(3) up to 1,562,808 shares of Common Stock,
warrants or options to purchase Common Stock or other securities issued to
officers, directors, consultants or employees of the Corporation pursuant to any
plan or arrangement approved by the Board of Directors of the Corporation; and
(4) shares of Common Stock, warrants or options to
purchase Common Stock or other securities issued to officers, directors,
consultants or employees of the Corporation pursuant to any plan or arrangement
approved by a 2/3 vote of the Board of Directors of the Corporation.
All outstanding shares of Excluded Stock (including any shares issuable
upon conversion of the Preferred Stock) shall be deemed to be outstanding for
all purposes of the computations of Section 3(e)(i) above.
(iii) If the number of shares of Common Stock
outstanding at any time after the date hereof is increased by a stock dividend
payable in shares of Common Stock or by a subdivision or split-up of shares of
Common Stock, then, on the date such payment is made or such change is
effective, the respective Conversion Prices of Series A Preferred, Series B
Preferred, Series C Preferred and Series D Preferred shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion of
any shares of such series of Preferred Stock shall be increased in proportion to
such increase of outstanding shares of Common Stock.
(iv) If the number of shares of Common Stock outstanding
at any time after the date hereof is decreased by a combination of the
outstanding shares of Common Stock, then, on the effective date of such
combination, the respective Conversion Prices of Series A Preferred, Series B
Preferred, Series C Preferred and Series D Preferred shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion of
any shares of a series of Preferred Stock shall be decreased in proportion to
such decrease in outstanding shares of Common Stock.
(v) In case the Corporation shall declare a cash
dividend upon its Common Stock payable otherwise than out of retained earnings
or shall distribute to holders of its Common
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Stock shares of its capital stock (other than Common Stock), stock or other
securities of other persons, evidences of indebtedness issued by the Corporation
or other persons, assets (excluding cash dividends) or options or rights
(excluding options to purchase and rights to subscribe for Common Stock or other
securities of the Corporation convertible into or exchangeable for Common
Stock), then, in each such case, the holders of shares of Preferred Stock shall,
concurrent with the distribution to holders of Common Stock, receive a like
distribution based upon the number of shares of Common Stock into which such
shares of Preferred Stock are convertible.
(vi) In case, at any time after the date hereof, of any
capital reorganization, or any reclassification of the stock of the Corporation
(other than as a result of a stock dividend or subdivision, split-up or
combination of shares), or the consolidation or merger of the Corporation with
or into another person (other than a consolidation or merger in which the
Corporation is the continuing entity and which does not result in any change in
the Common Stock), or of the sale or other disposition of all or substantially
all the properties and assets of the Corporation, the shares of Preferred Stock
shall, after such reorganization, reclassification, consolidation, merger, sale
or other disposition, be convertible into the kind and number of shares of stock
or other securities or property of the Corporation or otherwise to which such
holder would have been entitled if immediately prior to such reorganization,
reclassification, consolidation, merger, sale or other disposition he had
converted his shares of Preferred Stock into Common Stock. The provisions of
this clause (vi) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, sales or other dispositions.
(vii) All calculations under this Section 3 shall be
made to the nearest cent or to the nearest one hundredth (1/100) of a share, as
the case may be.
(viii) For the purpose of any computation pursuant to
this Section 3(e), the "Current Market Price" at any date of one share of Common
Stock, shall be deemed to be the average of the highest reported bid and the
lowest reported offer prices on the preceding business day as furnished by the
National Quotation Bureau, Incorporated (or equivalent recognized source of
quotations); provided, however, that if the Common Stock is not traded in such
manner that the quotations referred to in this clause (viii) are available for
the period required hereunder, Current Market Price shall be determined in good
faith by the Board of Directors of the Corporation, but if challenged by the
holders of more than 50% of the outstanding Series A Preferred, Series B
Preferred, Series C Preferred and Series D Preferred, voting as separate
classes, then as determined by an independent appraiser selected by the Board of
Directors of the Corporation, the cost of such appraisal to be borne equally by
the Corporation and the challenging parties.
(f) Minimal Adjustments. No adjustment in the Conversion Price need
be made if such adjustment would result in a change in the Conversion Price of
less than $0.01. Any adjustment of less than $0.01 which is not made shall be
carried forward and shall be made at the time of and together with any
subsequent adjustment which, on a cumulative basis, amounts to an adjustment of
$0.01 or more in the Conversion Price.
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(g) No Impairment. Without the consent of the majority of the
outstanding shares of Preferred Stock, the Corporation will not 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 the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 3 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of Preferred Stock against impairment.
(h) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Rate pursuant to this Section 3,
the 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 Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon written request at any time
of any holder of Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (i) such adjustments and readjustments,
(ii) the Conversion Rate of such series at the time in effect, and (iii) the
number of shares of Common Stock and the amount, if any, of other property which
at the time would be received upon the conversions of such holder's shares of
Preferred Stock.
(i) Notices of Record Date. In the event of any taking by the
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, the Corporation
shall mail to each holder of Preferred Stock at least ten (10) days prior to
such record date, a notice specifying the date on which any such record is to be
taken for the purpose of such dividend or distribution or right, and the amount
and character of such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of Preferred Stock such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of Preferred Stock; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of all then outstanding shares of Preferred Stock, the 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 purpose.
(k) Notices. Any notice required by the provisions of this Section 3
to be given to the holder of shares of Preferred Stock shall be deemed given if
deposited in the United States mail, postage prepaid, and addressed to each
holder of record at his address appearing on the books of the Corporation.
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(l) Reissuance of Converted Shares. No shares of Preferred Stock
which have been converted into Common Stock after the original issuance thereof
shall ever again be reissued and all such shares so converted shall upon such
conversion cease to be a part of the authorized shares of the Corporation.
(m) Special Adjustment of Conversion Price for Qualified Public
Offering. Notwithstanding Section 3(a) above, in the event the Series D
Preferred is automatically converted into Common Stock by reason of a Qualified
Public Offering as set forth in Section 3(b) hereof, and the initial public
offering price per share (the "IPO Price") is less than 125% of the Original
Issue Price of the Series D Preferred (adjusted for stock splits and the like),
then the Conversion Price per share of Series D Preferred shall be reduced to a
number equal to the quotient of (i) the Conversion Price of the Series D
Preferred in effect immediately prior to such offering divided by (ii) a
fraction, the numerator of which is the Original Issue Price of the Series D
Preferred multiplied by 1.25 and the denominator of which is the IPO Price.
4. Voting Rights. The holder of each share of Preferred Stock shall be
entitled to the number of votes equal to the number of shares of Common Stock
into which each share of Preferred Stock could be converted on the record date
for the vote or consent of shareholders written consent and, except as otherwise
required by law or provided for herein, shall have voting rights and powers
equal to the voting rights and powers of the Common Stock. The holder of each
share of Preferred Stock shall be entitled to notice of any shareholders'
meeting in accordance with the bylaws of the Corporation and shall vote with
holders of the Common Stock upon the election of directors, except as provided
in Section 5 herein, and upon any other matter submitted to a vote of
shareholders, except those matters required by law to be submitted to a class
vote. Fractional votes shall not, however, be permitted and any fractional
voting rights resulting from the above formula (after aggregating all shares of
Common Stock into which shares of Preferred Stock held by each holder could be
converted) shall be rounded to the nearest whole number (with one-half rounded
upward to one).
5. Election of Directors. At each election of the Corporation's directors,
(i) the holders of the Corporation's Series A Preferred shall have the right,
voting as a separate class (with cumulative voting rights as among themselves)
to elect one (1) member of the Board of Directors, (ii) the holders of the
Corporation's Series B Preferred shall have the right, voting as a separate
class (with cumulative voting rights as among themselves) to elect one (1)
member of the Board of Directors, (iii) the holders of the Corporation's Series
C Preferred shall have the right, voting as a separate class (with cumulative
voting rights as among themselves) to elect two (2) members of the Board of
Directors, and (iv) the holders of the Corporation's Common Stock shall have the
right, voting as a separate class (with cumulative voting rights as among
themselves) to elect two (2) members of the Board of Directors. Any additional
directors shall be elected by all of the holders of Common Stock and Preferred
Stock, voting as a single class.
6. Protective Provisions.
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(a) In addition to any other class vote that may be required by law,
this Corporation shall not without first obtaining the approval (by vote or
written consent, as provided by law) of the holders of at least a majority of
the then outstanding shares of Preferred Stock:
(i) sell, convey or otherwise dispose of all or substantially
all of its property or business, or merge into or effect a reorganization with
any other corporation (other than a wholly owned subsidiary corporation) in
which the shareholders of this Corporation immediately prior to the transaction
possess less than 50% of the voting power of the surviving entity (or its
parent) immediately after the transaction, or sell the capital stock of the
Corporation where the shareholders of this Corporation immediately prior to the
transaction possess less than 50% of the voting power of the Corporation
immediately after the transaction;
(ii) change the rights, preferences, privileges or
restrictions of the Preferred Stock;
(iii) increase or decrease the aggregate number of authorized
shares of Preferred Stock;
(iv) create a new class or series of shares having rights,
preferences or privileges or increase the number of authorized shares of any
class or shares having rights, preferences or privileges equal to or senior to
any outstanding class or series;
(v) pay any dividend on or purchase, redeem or otherwise
acquire any security junior to the Preferred Stock other than repurchases at
cost from employees, consultants, lessors or suppliers upon termination of
employment, consulting, lessor-lessee, or supplier-purchaser relationship,
respectively; or
(vi) voluntarily dissolve or liquidate the Corporation.
(b) Notwithstanding the foregoing Section 6(a), in addition to any
other series vote that may be required by law, so long as 40% of the originally
issued shares of Series C Preferred are outstanding, this Corporation shall not
without first obtaining the approval (by vote or written consent, as provided by
law) of the holders of at least a majority of the then outstanding shares of
Series C Preferred:
(i) materially adversely change the rights, preferences,
privileges or restrictions of the Series C Preferred;
(ii) increase or decrease the aggregate number of authorized
shares of Series C Preferred; or
(iii) create a new class or series of shares having rights,
preferences or privileges senior to the Series C Preferred.
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(c) Notwithstanding the foregoing Sections 6(a) and 6(b), in
addition to any other series vote that may be required by law, so long as 40% of
the originally issued shares of Series C Preferred are outstanding, this
Corporation shall not without first obtaining the approval (by vote or written
consent, as provided by law) of the holders of 66 2/3% of the then outstanding
shares of Series C Preferred, voluntarily dissolve or liquidate, sell, convey or
otherwise dispose of all or substantially all of its property or business, or
merge into or effect a reorganization with any other corporation (other than a
wholly owned subsidiary corporation) in which the shareholders of this
Corporation immediately prior to the transaction possess less than 50% of the
voting power of the surviving entity (or its parent) immediately after the
transaction if the consideration received by the holders of the Series C
Preferred as a result of any such liquidation, dissolution, merger or sale of
all or substantially all of the assets of the Corporation is less than $2.50 per
share (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares).
(d) Notwithstanding the foregoing Section 6(a), in addition to any
other series vote that may be required by law, so long as 40% of the originally
issued shares of Series D Preferred are outstanding, this Corporation shall not
without first obtaining the approval (by vote or written consent, as provided by
law) of the holders of 66 2/3% of the then outstanding shares of Series D
Preferred, materially adversely change the rights, preferences, privileges or
restrictions of the Series D Preferred.
(e) Unless otherwise required by Delaware law or except as provided
herein, the holders of Common Stock will not have the right to vote as a
separate class on any matter.
7. Series B Preferred - Right of Redemption.
(a) Subject to Section 8(e) herein, the Corporation shall be
obligated to redeem the Series B Preferred as follows:
(i) At any time after March 31, 2004, the holders of a
majority of the then outstanding shares of Series B Preferred (the "Series B
Initiating Holders") may require the Corporation to the extent it may lawfully
do so, to redeem all of the outstanding Series B Preferred in three (3) equal
annual installments with the first installment date being the date forty-five
(45) days after receipt by the Corporation of the Series B Exercise Notice (as
defined below), the second installment being the date one (1) year from the
first installment date and the last installment date being a date two (2) years
from such first installment date (each a "Series B Redemption Date"). The
Corporation shall effect such redemptions on the applicable Series B Redemption
Date by paying in cash in exchange for each share of Series B Preferred to be
redeemed on each applicable Series B Redemption Date a sum equal to the fair
market value per share of Series B Preferred as of the date of receipt by the
Corporation of the Series B Exercise Notice plus all accrued and unpaid
dividends thereon. The fair market value per share of Series B Preferred for the
purposes of this Section 8, shall be determined by the Board of Directors of the
Corporation. If such determination is unacceptable to the holders of a majority
of the Series B Preferred, then the fair market value per share of Series B
Preferred shall be determined by an investment banking firm mutually acceptable
to the Corporation and the holders of a majority of the Series B Preferred. The
Series B Initiating
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<PAGE>
Holders shall have the right to revoke a Series B Exercise Notice by giving
written notice to the Corporation within fifteen (15) days after their receipt
of the Series B Redemption Notice (as defined below). The total amount to be
paid for the Series B Preferred is hereinafter referred to as the "Series B
Redemption Price." The number of shares of Series B Preferred that the
Corporation shall be required to redeem on any one Series B Redemption Date
shall be equal to the amount determined by dividing (i) the aggregate number of
shares of Series B Preferred outstanding immediately prior to the Series B
Redemption Date by (ii) the number of remaining Series B Redemption Dates
(including the Series B Redemption Date to which such calculation applies).
Shares subject to redemption pursuant to this Section 8(a) shall be redeemed
from each holder of Series B Preferred on a pro rata basis.
(ii) At any time after March 31, 2004, the Series B Initiating
Holders can elect to exercise the right of first redemption pursuant to this
Section 8(a) by providing written notice (the "Series B Exercise Notice") to the
Corporation. Within fifteen (15) days after the receipt of the Series B Exercise
Notice, the Corporation shall (i) send a notice (a "Series B Redemption Notice")
to each holder of record of the Series B Preferred to be redeemed at the address
of such holder appearing on the books of the Corporation setting forth (a) the
Series B Redemption Price for the shares to be redeemed and (b) the place at
which such holders may obtain payment of the Series B Redemption Price upon
surrender of their share certificates, and (ii) send a notice to each holder of
record of the Series C Preferred at the address of such holder appearing on the
books of the Corporation notifying such holders of the election of the holders
of the Series B Preferred to exercise the right of redemption of the Series B
Preferred. If the Corporation does not have sufficient funds legally available
to redeem all shares to be redeemed at any Series B Redemption Date (including,
if applicable, those to be redeemed at the option of the Corporation), then it
shall redeem such shares pro rata (based on the portion of the aggregate Series
B Redemption Price payable to them) to the extent possible and shall redeem the
remaining shares to be redeemed as soon as sufficient funds are legally
available.
(b) On each Series B Redemption Date, the Corporation shall deposit
the portion of the Series B Redemption Price sufficient to redeem the shares to
be redeemed upon such Series B Redemption Date with a bank or trust corporation
having aggregate capital and surplus in excess of $100,000,000, as a trust fund,
with irrevocable instructions and authority to the bank or trust corporation to
pay, on and after such Series B Redemption Date, the applicable portion of the
Series B Redemption Price to their respective holders upon the surrender of
their share certificates. Any monies deposited by the Corporation pursuant to
this Section 8(b) for the redemption of shares thereafter converted into shares
of Common Stock pursuant to Section 3 hereof no later than the fifth (5th) day
preceding the applicable Series B Redemption Date shall be returned to the
Corporation forthwith upon such conversion. The balance of any funds deposited
by the Corporation pursuant to this Section 8(b) remaining unclaimed at the
expiration of one (1) year following such Series B Redemption Date shall be
returned to the Corporation.
(c) On or after such Series B Redemption Date, each holder of shares
of Series B Preferred to be redeemed shall surrender such holder's certificates
representing such shares to the Corporation in the manner and at the place
designated in the Redemption Notice, and thereupon the
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<PAGE>
applicable portion of the Series B 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
canceled. In the event less than all the shares represented by such certificates
are redeemed, a new certificate shall be issued representing the unredeemed
shares. From and after the date the Corporation deposits funds pursuant to
Section 8(b) hereof with respect to shares to be redeemed on such Series B
Redemption Date, unless there shall have been a default in payment of the
applicable portion of the Series B Redemption Price or the Corporation is unable
to pay the applicable portion of the Series B Redemption Price due to not having
sufficient legally available funds, all rights of the holders of such shares as
holders of Series B Preferred (except the right to receive the Series B
Redemption Price without interest upon surrender of their certificates), shall
cease and terminate with respect to such shares, provided that in the event that
shares of Series B Preferred are not redeemed due to a default in payment by the
Corporation or because the Corporation does not have sufficient legally
available funds, such shares of Series B Preferred shall remain outstanding and
shall be entitled to all of the rights and preferences provided herein.
(d) In the event of a call for redemption of any shares of Series B
Preferred, the Conversion Rights (as defined in Section 3) for the shares of
Series B Preferred to be redeemed on a particular Series B Redemption Date shall
terminate at the close of business on the fifth (5th) day preceding such Series
B Redemption Date, unless default is made in payment of the Series B Redemption
Price.
(e) In the event that the Series B Initiating Holders have elected
to exercise their right of redemption pursuant to this Section 8 and to the
extent that the Company receives the Series C Exercise Notice (as defined below)
from the Series C Initiating Holders (as defined below) or the Series D Exercise
Notice (as defined below) from the Series D Initiating Holders (as defined
below) prior to the deposit by the Company of funds pursuant to Section 8(b)
hereof with respect to any applicable Series B Redemption Date, the right of
redemption of the Series C Preferred and the Series D Preferred shall be
superior and in preference to the right of redemption of the Series B Preferred
and the holders of the Series C Preferred and Series D Preferred shall be
entitled to receive the full amount of the Series C Redemption Price and the
Series D Redemption Price out of legally available funds of the Corporation
prior to the payment of any portion of the Series B Redemption Price not
previously deposited by the Company pursuant to Section 8(b) or required to be
paid to the holders of the Series B Preferred pursuant to the last sentence of
Section 8(a)(ii) hereof. In such event, after the full amount of the Series C
Redemption Price and the Series D Redemption Price has been deposited pursuant
to Sections 9(b) and 10(b) below, the holders of the Series B Preferred shall be
entitled to receive the full amount of the Series B Redemption Price of the
Series B Preferred. If the funds of the Corporation legally available for
redemption of shares of the Series B Preferred, Series C Preferred or Series D
Preferred are insufficient to redeem the total number of shares of Series B
Preferred, Series C Preferred or Series D Preferred to be redeemed on a Series B
Redemption Date, Series C Redemption Date or Series D Redemption Date, those
funds which are legally available will be used to redeem the maximum possible
number of such shares from first the holders of the Series C Preferred and
Series D Preferred to the extent of the full amount of the Series C Redemption
Price and Series D Redemption Price pro rata based on the relative redemption
price of such series and next to the holders of the Series B Preferred to the
extent of the full amount
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<PAGE>
of the Series B Redemption Price. The shares of Series B Preferred, Series C
Preferred or Series D Preferred not redeemed, as the case may be, shall remain
outstanding and entitled to all the rights and preferences provided herein,
including the rights of conversion set forth in Section 3. At any time
thereafter when additional funds of the Corporation are legally available for
the redemption of shares of Series B Preferred, Series C Preferred or Series D
Preferred, as the case may be, such funds will immediately be used to redeem the
balance of the shares which the Corporation has become obliged to redeem on any
Redemption Date but which it has not redeemed.
8. Series C Preferred - Right of Redemption.
(a) Subject to Section 8(e) above, the Corporation shall be
obligated to redeem the Series C Preferred as follows:
(i) Beginning on or after March 31, 2004, the holders of 66
2/3% of the then outstanding shares of Series C Preferred (the "Series C
Initiating Holders") may require the Corporation to the extent it may lawfully
do so, to redeem all of the outstanding Series C Preferred. Such redemption
shall occur on the 45th day following the Corporation's receipt of the Series C
Exercise Notice (as defined below) (such date being herein referred to as the
"Initial Series C Redemption Date"), provided that the Series C Initiating
Holders shall have the right to revoke a Series C Exercise Notice by giving
written notice to the Corporation within fifteen (15) days after their receipt
of the Series C Redemption Notice, and provided further that in lieu of
redeeming all of the Series C Preferred on the Initial Series C Redemption Date
the Corporation shall have the right to redeem the Series C Preferred in three
(3) equal installments, with the first installment date being the Initial Series
C Redemption Date, the second installment being the first anniversary of the
Initial Series C Redemption Date and the last installment being the second
anniversary of the Initial Series C Redemption Date (the Initial Series C
Redemption Date and each of such other redemption dates being herein referred to
as a "Series C Redemption Date"). The Corporation shall effect such redemptions
on the applicable Series C Redemption Date by paying in cash in exchange for
each share of Series C Preferred to be redeemed on each applicable Series C
Redemption Date, a sum equal to the fair market value per share of Series C
Preferred as of the date of receipt by the Corporation of the Series C Exercise
Notice plus all accrued and unpaid dividends with respect to such shares thereon
plus interest at the rate of 10% per annum payable on the amount of the unpaid
Series C Redemption Price (as hereinafter defined) accruing from the Initial
Series C Redemption Date until paid. The fair market value per share of Series C
Preferred for the purposes of this Section 9, shall be determined by the Board
of Directors of the Corporation. If such determination is unacceptable to the
holders of a majority of the Series C Preferred, then the fair market value per
share of Series C Preferred shall be determined by an investment banking firm
mutually acceptable to the Corporation and the holders of a majority of the
Series C Preferred. The total amount to be paid for the Series C Preferred is
hereinafter referred to as the "Series C Redemption Price." The number of shares
of Series C Preferred that the Corporation shall be required to redeem on any
one Series C Redemption Date shall be equal to the amount determined by dividing
(i) the aggregate number of shares of Series C Preferred outstanding immediately
prior to the Series C Redemption Date by (ii) the number of remaining Series C
Redemption Dates (including the Series C
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<PAGE>
Redemption Date to which such calculation applies). Shares subject to redemption
pursuant to this Section 9(a) shall be redeemed from each holder of Series C
Preferred on a pro rata basis.
(ii) At any time after March 31, 2004, the Series C Initiating
Holders can elect to exercise the right of first redemption pursuant to this
Section 9(a) by providing written notice (the "Series C Exercise Notice") to the
Corporation. Within fifteen (15) days after the receipt of the Series C Exercise
Notice, the Corporation shall (i) send a notice (a Series C "Redemption Notice")
to each holder of record of the Series C Preferred to be redeemed at the address
of such holder appearing on the books of the Corporation setting forth (a) the
Series C Redemption Price for the shares to be redeemed and (b) the place at
which such holders may obtain payment of the Series C Redemption Price upon
surrender of their share certificates. If the Corporation does not have
sufficient funds legally available to redeem all shares to be redeemed at the
Series C Redemption Date (including, if applicable, those to be redeemed at the
option of the Corporation), then it shall redeem such shares pro rata (based on
the portion of the aggregate Series C Redemption Price payable to them) to the
extent possible and shall redeem the remaining shares to be redeemed as soon as
sufficient funds are legally available.
(b) On or prior to the Series C Redemption Date, the Corporation
shall deposit the applicable portion of the Series C Redemption Price of the
shares to be redeemed on such Series C Redemption Date with a bank or trust
corporation having aggregate capital and surplus in excess of $100,000,000, as a
trust fund, with irrevocable instructions and authority to the bank or trust
corporation to pay, on and after such Series C Redemption Date, the applicable
portion of the Series C Redemption Price of the shares to their respective
holders upon the surrender of their share certificates. Any monies deposited by
the Corporation pursuant to this Section 9(b) for the redemption of shares
thereafter converted into shares of Common Stock pursuant to Section 3 hereof no
later than the fifth (5th) day preceding the Series C Redemption Date shall be
returned to the Corporation forthwith upon such conversion. The balance of any
funds deposited by the Corporation pursuant to this Section 9(b) remaining
unclaimed at the expiration of one (1) year following such Series C Redemption
Date shall be returned to the Corporation.
(c) On or after such Series C Redemption Date, each holder of shares
of Series C Preferred to be redeemed shall surrender such holder's certificates
representing such shares to the Corporation in the manner and at the place
designated in the Series C Redemption Notice, and thereupon the applicable
portion of the Series C 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 canceled. In the
event less than all the shares represented by such certificates are redeemed, a
new certificate shall be issued representing the unredeemed shares. >From and
after the date the Corporation deposits funds pursuant to Section 9(b) hereof
with respect to shares to be redeemed on such Series C Redemption Date, unless
there shall have been a default in payment of the applicable portion of the
Series C Redemption Price or the Corporation is unable to pay the applicable
portion of the Series C Redemption Price due to not having sufficient legally
available funds, all rights of the holders of such shares as holders of Series C
Preferred (except the right to receive the Series C Redemption Price without
interest upon surrender of their certificates), shall cease and terminate with
respect to such shares, provided that in the event that shares of
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<PAGE>
Series C Preferred are not redeemed due to a default in payment by the
Corporation or because the Corporation does not have sufficient legally
available funds, such shares of Series C Preferred shall remain outstanding and
shall be entitled to all of the rights and preferences provided herein.
(d) In the event of a call for redemption of any shares of Series C
Preferred, the Conversion Rights (as defined in Section 3) for the shares of
Series C Preferred to be redeemed on a particular Series C Redemption Date shall
terminate at the close of business on the fifth (5th) day preceding such Series
C Redemption Date, unless default is made in payment of the Series C Redemption
Price.
9. Series D Preferred - Right of Redemption.
(a) Subject to Section 8(e) above, the Corporation shall be
obligated to redeem the Series D Preferred as follows:
(i) Beginning on or after March 31, 2004, the holders of 66
2/3% of the then outstanding shares of Series D Preferred (the "Series D
Initiating Holders") may require the Corporation to the extent it may lawfully
do so, to redeem all of the outstanding Series D Preferred. Such redemption
shall occur on the 45th day following the Corporation's receipt of the Series D
Exercise Notice (as defined below) (such date being herein referred to as the
"Initial Series D Redemption Date"), provided that the Series D Initiating
Holders shall have the right to revoke a Series D Exercise Notice by giving
written notice to the Corporation within fifteen (15) days after their receipt
of the Series D Redemption Notice, and provided further that in lieu of
redeeming all of the Series D Preferred on the Initial Series D Redemption Date
the Corporation shall have the right to redeem the Series D Preferred in three
(3) equal installments, with the first installment date being the Initial Series
D Redemption Date, the second installment being the first anniversary of the
Initial Series D Redemption Date and the last installment being the second
anniversary of the Initial Series D Redemption Date (the Initial Series D
Redemption Date and each of such other redemption dates being herein referred to
as a "Series D Redemption Date"). The Corporation shall effect such redemptions
on the applicable Series D Redemption Date by paying in cash in exchange for
each share of Series D Preferred to be redeemed on each applicable Series D
Redemption Date, a sum equal to the fair market value per share of Series D
Preferred as of the date of receipt by the Corporation of the Series D Exercise
Notice plus all accrued and unpaid dividends with respect to such shares thereon
plus interest at the rate of 10% per annum payable on the amount of the unpaid
Series D Redemption Price (as hereinafter defined) accruing from the Initial
Series D Redemption Date until paid. The fair market value per share of Series D
Preferred for the purposes of this Section 10, shall be determined by the Board
of Directors of the Corporation. If such determination is unacceptable to the
holders of a majority of the Series D Preferred, then the fair market value per
share of Series D Preferred shall be determined by an investment banking firm
mutually acceptable to the Corporation and the holders of a majority of the
Series D Preferred. The total amount to be paid for the Series D Preferred is
hereinafter referred to as the "Series D Redemption Price." The number of shares
of Series D Preferred that the Corporation shall be required to redeem on any
one Series D Redemption Date shall be equal to the amount determined by dividing
(i) the aggregate number of shares of Series D Preferred outstanding immediately
prior to the Series D Redemption
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<PAGE>
Date by (ii) the number of remaining Series D Redemption Dates (including the
Series D Redemption Date to which such calculation applies). Shares subject to
redemption pursuant to this Section 10(a) shall be redeemed from each holder of
Series D Preferred on a pro rata basis.
(ii) At any time after March 31, 2004, the Series D Initiating
Holders can elect to exercise the right of first redemption pursuant to this
Section 10(a) by providing written notice (the "Series D Exercise Notice") to
the Corporation. Within fifteen (15) days after the receipt of the Series D
Exercise Notice, the Corporation shall (i) send a notice (a Series D "Redemption
Notice") to each holder of record of the Series D Preferred to be redeemed at
the address of such holder appearing on the books of the Corporation setting
forth (a) the Series D Redemption Price for the shares to be redeemed and (b)
the place at which such holders may obtain payment of the Series D Redemption
Price upon surrender of their share certificates. If the Corporation does not
have sufficient funds legally available to redeem all shares to be redeemed at
the Series D Redemption Date (including, if applicable, those to be redeemed at
the option of the Corporation), then it shall redeem such shares pro rata (based
on the portion of the aggregate Series D Redemption Price payable to them) to
the extent possible and shall redeem the remaining shares to be redeemed as soon
as sufficient funds are legally available.
(b) On or prior to the Series D Redemption Date, the Corporation
shall deposit the applicable portion of the Series D Redemption Price of the
shares to be redeemed on such Series D Redemption Date with a bank or trust
corporation having aggregate capital and surplus in excess of $100,000,000, as a
trust fund, with irrevocable instructions and authority to the bank or trust
corporation to pay, on and after such Series D Redemption Date, the applicable
portion of the Series D Redemption Price of the shares to their respective
holders upon the surrender of their share certificates. Any monies deposited by
the Corporation pursuant to this Section 10(b) for the redemption of shares
thereafter converted into shares of Common Stock pursuant to Section 3 hereof no
later than the fifth (5th) day preceding the Series D Redemption Date shall be
returned to the Corporation forthwith upon such conversion. The balance of any
funds deposited by the Corporation pursuant to this Section 10(b) remaining
unclaimed at the expiration of one (1) year following such Series D Redemption
Date shall be returned to the Corporation.
(c) On or after such Series D Redemption Date, each holder of shares
of Series D Preferred to be redeemed shall surrender such holder's certificates
representing such shares to the Corporation in the manner and at the place
designated in the Series D Redemption Notice, and thereupon the applicable
portion of the Series D 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 canceled. In the
event less than all the shares represented by such certificates are redeemed, a
new certificate shall be issued representing the unredeemed shares. >From and
after the date the Corporation deposits funds pursuant to Section 10(b) hereof
with respect to shares to be redeemed on such Series D Redemption Date, unless
there shall have been a default in payment of the applicable portion of the
Series D Redemption Price or the Corporation is unable to pay the applicable
portion of the Series D Redemption Price due to not having sufficient legally
available funds, all rights of the holders of such shares as holders of Series D
Preferred (except the right to receive the Series D Redemption Price without
interest upon surrender of their certificates),
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<PAGE>
shall cease and terminate with respect to such shares, provided that in the
event that shares of Series D Preferred are not redeemed due to a default in
payment by the Corporation or because the Corporation does not have sufficient
legally available funds, such shares of Series D Preferred shall remain
outstanding and shall be entitled to all of the rights and preferences provided
herein.
(d) In the event of a call for redemption of any shares of
Series D Preferred, the Conversion Rights (as defined in Section 3) for the
shares of Series D Preferred to be redeemed on a particular Series D Redemption
Date shall terminate at the close of business on the fifth (5th) day preceding
such Series D Redemption Date, unless default is made in payment of the Series D
Redemption Price.
VI.
1. Limitation of Directors' Liability. The liability of the directors of
this Corporation for monetary damages shall be eliminated to the fullest extent
permissible under Delaware General Coporation law.
2. Indemnification of Corporate Agents. This Corporation is authorized to
indemnify its agents to the fullest extent permissible under Delaware General
Corporation law.
3. Repeal or Modification. Any repeal or modification of the foregoing
provisions of this Article VI shall not adversely affect any right of
indemnification or limitation of liability of an agent of this Corporation
relating to acts or omissions occurring prior to such repeal or modification.
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<PAGE>
Exhibit 3.2
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
INVENTA TECHNOLOGIES, INC.
Inventa Technologies, Inc., a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
A. The name of the corporation is Inventa Technologies, Inc. The
corporation was originally incorporated under the same name, and the original
Certificate of Incorporation was filed with the Secretary of State of the State
of Delaware on January 12, 2000.
B. Pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, this Restated Certificate of Incorporation restates and
amends the provisions of the Certificate of Incorporation of the corporation.
C. The text of the Certificate of Incorporation is hereby amended and
restated in its entirety to read as follows:
ARTICLE I
The name of this corporation is Inventa Technologies, Inc.
ARTICLE II
The address of the corporation's registered office in the State of Delaware
is 1209 Orange Street, City of Wilmington, County of New Castle, Delaware 19801.
The name of its registered agent at such address is The Corporation Trust
Company.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
The corporation is authorized to issue two classes of shares of stock to be
designated, respectively, Common Stock, $0.001 par value, and Preferred Stock,
$0.001 par value. The total number of shares that the corporation is authorized
to issue is 49,779,511 shares. The number of
<PAGE>
shares of Common Stock authorized is 30,000,000. The number of shares of
Preferred authorized is 19,779,511.
The Preferred Stock may be issued from time to time in one or more
series pursuant to a resolution or resolutions providing for such issue duly
adopted by the board of directors (authority to do so being hereby expressly
vested in the board). The board of directors is further authorized to determine
or alter the rights, preferences, privileges and restrictions granted to or
imposed upon any wholly unissued series of Preferred Stock and to fix the number
of shares of any series of Preferred Stock and the designation of any such
series of Preferred Stock. The board of directors, within the limits and
restrictions stated in any resolution or resolutions of the board of directors
originally fixing the number of shares constituting any series, may increase or
decrease (but not below the number of shares of any such series then
outstanding) the number of shares of any series subsequent to the issue of
shares of that series.
The authority of the board of directors with respect to each such class or
series shall include, without limitation of the foregoing, the right to
determine and fix:
(a) the distinctive designation of such class or series and the
number of shares to constitute such class or series;
(b) the rate at which dividends on the shares of such class or series
shall be declared and paid, or set aside for payment, whether dividends at the
rate so determined shall be cumulative or accruing, and whether the shares of
such class or series shall be entitled to any participating or other dividends
in addition to dividends at the rate so determined, and if so, on what terms;
(c) the right or obligation, if any, of the corporation to redeem
shares of the particular class or series of Preferred Stock and, if redeemable,
the price, terms and manner of such redemption;
(d) the special and relative rights and preferences, if any, and the
amount or amounts per share that the shares of such class or series of Preferred
Stock shall be entitled to receive upon any voluntary or involuntary
liquidation, dissolution or winding up of the corporation;
(e) the terms and conditions, if any, upon which shares of such class
or series shall be convertible into, or exchangeable for, shares of capital
stock of any other class or series, including the price or prices or the rate or
rates of conversion or exchange and the terms of adjustment, if any;
(f) the obligation, if any, of the corporation to retire, redeem or
purchase shares of such class or series pursuant to a sinking fund or fund of a
similar nature or otherwise, and the terms and conditions of such obligation;
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<PAGE>
(g) voting rights, if any, on the issuance of additional shares of
such class or series or any shares of any other class or series of Preferred
Stock;
(h) limitations, if any, on the issuance of additional shares of such
class or series or any shares of any other class or series of Preferred Stock;
and
(i) such other preferences, powers, qualifications, special or
relative rights and privileges thereof as the board of directors of the
corporation, acting in accordance with this Restated Certificate of
Incorporation, may deem advisable and are not inconsistent with law and the
provisions of this Restated Certificate of Incorporation.
ARTICLE V
The corporation reserves the right to amend, alter, change, or repeal any
provision contained in this Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon the stockholders
herein are granted subject to this right.
ARTICLE VI
The corporation is to have perpetual existence.
ARTICLE VII
1. Limitation of Liability. To the fullest extent permitted by the
-----------------------
General Corporation Law of the State of Delaware as the same exists or as may
hereafter be amended, 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.
2. Indemnification. The corporation shall indemnify to the fullest
---------------
extent permitted by law any person made or threatened to be made a party to an
action or proceeding, whether criminal, civil, administrative or investigative,
by reason of the fact that such person or his or her testator or intestate is or
was a director or officer of the corporation, or any predecessor of the
corporation, or serves or served at any other enterprise as a director, officer
or employee at the request of the corporation or any predecessor to the
corporation and may indemnify to the fullest extent permitted by law any person
made or threatened to be made a party to an action or proceeding, whether
criminal, civil, administrative or investigative, by reason of the fact that
such person or his or her testator or intestate is or was an employee of the
corporation, or any predecessor of the corporation, or serves or served at any
other enterprise as a director, officer or employee at the request of the
corporation or any predecessor to the corporation.
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<PAGE>
3. Amendments. Neither any amendment nor repeal of this Article VII, nor
----------
the adoption of any provision of the corporation's Certificate of Incorporation
inconsistent with this Article VII, shall eliminate or reduce the effect of this
Article VII, in respect of any matter occurring, or any action or proceeding
accruing or arising or that, but for this Article VII, would accrue or arise,
prior to such amendment, repeal, or adoption of an inconsistent provision.
ARTICLE VIII
In the event any shares of Preferred Stock shall be redeemed or converted
pursuant to the terms hereof, the shares so converted or redeemed shall not
revert to the status of authorized but unissued shares, but instead shall be
canceled and shall not be re-issuable by the corporation.
ARTICLE IX
Holders of stock of any class or series of the corporation shall not be
entitled to cumulate their votes for the election of directors or any other
matter submitted to a vote of the stockholders, unless such cumulative voting is
required pursuant to Sections 214 of the Delaware General Corporation Law, in
which event each such holder shall be entitled to as many votes as shall equal
the number of votes which (except for this provision as to cumulative voting)
such holder would be entitled to cast for the election of directors with respect
to his shares of stock multiplied by the number of directors to be elected by
him, and the holder may cast all of such votes for a single director or may
distribute them among the number of directors to be voted for, or for any two or
more of them as such holder may see fit, so long as the name of the candidate
for director shall have been placed in nomination prior to the voting and the
stockholder, or any other holder of the same class or series of stock, has given
notice at the meeting prior to the voting of the intention to cumulate votes.
1. Number of Directors. The number of directors which constitutes the
-------------------
whole Board of Directors of the corporation shall be designated in the Amended
and Restated Bylaws of the corporation. The directors shall be divided into
three classes with the term of office of the first class (Class I) to expire at
the annual meeting of stockholders held in 2001; the term of office of the
second class (Class II) to expire at the annual meeting of stockholders held in
2002; the term of office of the third class (Class III) to expire at the annual
meeting of stockholders held in 2003; and thereafter for each such term to
expire at each third succeeding annual meeting of stockholders after such
election.
2. Election of Directors. Elections of directors need not be by written
---------------------
ballot unless the Amended and Restated Bylaws of the corporation shall so
provide.
ARTICLE X
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<PAGE>
In furtherance and not in limitation of the powers conferred by statute,
the Board of Directors is expressly authorized to make, alter, amend or repeal
the Amended and Restated Bylaws of the corporation.
ARTICLE XI
No action shall be taken by the stockholders of the corporation except at
an annual or special meeting of the stockholders called in accordance with the
Amended and Restated Bylaws, no special meetings of the stockholders shall be
called by stockholders without approval of the Board of Directors, and no
action, including the removal of directors without cause shall be taken by the
stockholders by written consent. The affirmative vote of sixty-six and two-
thirds percent (66 2/3%) of the then outstanding voting securities of the
corporation, voting together as a single class, shall be required for the
amendment, repeal or modification of the provisions of Article IX, Article X or
Article XII of this Amended and Restated Certificate of Incorporation or
Sections 2.3 (Special Meeting), 2.4 (Notice of Stockholders' Meeting), 2.4
(Advanced Notice of Stockholder Nominees and Stockholder Business), 2.8
(Voting), or 2.10 (Stockholder Action by Written Consent Without a Meeting), or
3.2 (Number of Directors) of the corporation's Amended and Restated Bylaws.
ARTICLE XII
Meetings of stockholders may be held within or without the State of
Delaware, as the Amended and Restated Bylaws may provide. The books of the
corporation may be kept (subject to any provision contained in the statutes)
outside of the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the Amended and Restated
Bylaws of the corporation.
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<PAGE>
IN WITNESS WHEREOF, Inventa Technologies, Inc. has caused this certificate
to be signed by David A. Lavanty, its Chief Executive Officer, this ____ day of
February, 2000.
_____________________________________________
David A. Lavanty, Chief Executive Officer
<PAGE>
Exhibit 3.4
BYLAWS
OF
INVENTA TECHNOLOGIES, INC.
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I.....................................................................1
1.1 REGISTERED OFFICE.................................................1
1.2 OTHER OFFICES.....................................................1
ARTICLE II....................................................................1
2.1 PLACE OF MEETINGS.................................................1
2.2 ANNUAL MEETING....................................................1
2.3 SPECIAL MEETING...................................................2
2.4 NOTICE OF STOCKHOLDERS' MEETINGS..................................2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE......................2
2.6 QUORUM............................................................2
2.7 ADJOURNED MEETING; NOTICE.........................................2
2.8 VOTING............................................................3
2.9 WAIVER OF NOTICE..................................................3
2.10 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS.......3
2.11 PROXIES...........................................................4
2.12 LIST OF STOCKHOLDERS ENTITLED TO VOTE.............................4
ARTICLE III...................................................................4
3.1 POWERS............................................................4
3.2 NUMBER OF DIRECTORS...............................................5
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS...........5
3.4 RESIGNATION AND VACANCIES.........................................5
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE..........................6
3.6 FIRST MEETINGS....................................................6
3.7 REGULAR MEETINGS..................................................7
3.8 SPECIAL MEETINGS; NOTICE..........................................7
3.9 QUORUM............................................................7
3.10 WAIVER OF NOTICE..................................................7
3.11 ADJOURNED MEETING; NOTICE.........................................7
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING.................8
3.13 FEES AND COMPENSATION OF DIRECTORS................................8
3.14 APPROVAL OF LOANS TO OFFICERS.....................................8
3.15 REMOVAL OF DIRECTORS..............................................8
ARTICLE IV....................................................................8
4.1 COMMITTEES OF DIRECTORS...........................................8
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<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
4.2 COMMITTEE MINUTES.................................................9
4.3 MEETINGS AND ACTION OF COMMITTEES.................................9
ARTICLE V.....................................................................9
5.1 OFFICERS.........................................................10
5.2 ELECTION OF OFFICERS.............................................10
5.3 SUBORDINATE OFFICERS.............................................10
5.4 REMOVAL AND RESIGNATION OF OFFICERS..............................10
5.5 VACANCIES IN OFFICES.............................................10
5.6 CHAIRMAN OF THE BOARD............................................10
5.7 PRESIDENT........................................................11
5.8 VICE PRESIDENT...................................................11
5.9 SECRETARY........................................................11
5.10 TREASURER........................................................12
5.11 ASSISTANT SECRETARY..............................................12
5.12 ASSISTANT TREASURER..............................................12
5.13 AUTHORITY AND DUTIES OF OFFICERS.................................12
ARTICLE VI...................................................................13
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS........................13
6.2 INDEMNIFICATION OF OTHERS........................................13
6.3 INSURANCE........................................................13
ARTICLE VII..................................................................13
7.1 MAINTENANCE AND INSPECTION OF RECORDS............................14
7.2 INSPECTION BY DIRECTORS..........................................14
7.3 ANNUAL STATEMENT TO STOCKHOLDERS.................................14
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS...................15
ARTICLE VIII.................................................................15
8.1 CHECKS...........................................................15
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS.................15
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES...........................15
8.4 SPECIAL DESIGNATION ON CERTIFICATES..............................16
8.5 LOST CERTIFICATES................................................16
8.6 CONSTRUCTION; DEFINITIONS........................................16
8.7 DIVIDENDS........................................................17
8.8 FISCAL YEAR......................................................17
8.9 SEAL.............................................................17
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<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
8.10 TRANSFER OF STOCK................................................17
8.11 STOCK TRANSFER AGREEMENTS........................................17
8.12 REGISTERED STOCKHOLDERS..........................................17
ARTICLE IX...................................................................18
ARTICLE X....................................................................18
ARTICLE XI...................................................................19
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES......................19
11.2 DUTIES OF CUSTODIAN..............................................19
-iii-
<PAGE>
BYLAWS
OF
INVENTA TECHNOLOGIES, INC.
ARTICLE I
CORPORATE OFFICES
1.1 REGISTERED OFFICE
The registered office of the corporation shall be in the City of
Wilmington, County of New Castle, State of Delaware. The name of the registered
agent of the corporation at such location is Corporation Trust Company.
1.2 OTHER OFFICES
The board of directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
2.1 PLACE OF MEETINGS
Meetings of stockholders shall be held at any place, within or outside the
State of Delaware, designated by the board of directors. In the absence of any
such designation, stockholders' meetings shall be held at the registered office
of the corporation.
2.2 ANNUAL MEETING
The annual meeting of stockholders shall be held each year on a date and
at a time designated by the board of directors. In the absence of such
designation, the annual meeting of stockholders shall be held on the Second
Tuesday of May in each year at 10:00 a.m. However, if such day falls on a legal
holiday, then the meeting shall be held at the same time and place on the next
succeeding full business day. At the meeting, directors shall be elected and any
other proper business may be transacted.
<PAGE>
2.3 SPECIAL MEETING
A special meeting of the stockholders may be called, at any time for any
purpose or purposes, by the board of directors.
2.4 NOTICE OF STOCKHOLDERS' MEETINGS
All notices of meetings with stockholders shall be in writing and shall be
sent or otherwise given in accordance with Section 2.5 of these bylaws not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder entitled to vote at such meeting. The notice shall specify the
place, date, and hour of the meeting, and, in the case of a special meeting, the
purpose or purposes for which the meeting is called.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
Written notice of any meeting of stockholders, if mailed, is given when
deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the corporation. An
affidavit of the secretary or an assistant secretary or of the transfer agent of
the corporation that the notice has been given shall, in the absence of fraud,
be prima facie evidence of the facts stated therein.
2.6 QUORUM
The holders of a majority of the stock issued and outstanding and entitled
to vote thereat, present in person or represented by proxy, shall constitute a
quorum at all meetings of the stockholders for the transaction of business
except as otherwise provided by statute or by the certificate of incorporation.
If, however, such quorum is not present or represented at any meeting of the
stockholders, then the stockholders entitled to vote thereat, present in person
or represented by proxy, shall have power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum is
present or represented. At such adjourned meeting at which a quorum is present
or represented, any business may be transacted that might have been transacted
at the meeting as originally noticed.
2.7 ADJOURNED MEETING; NOTICE
When a meeting is adjourned to another time or place, unless these bylaws
otherwise require, notice need not be given of the adjourned meeting if the time
and place thereof are announced at the meeting at which the adjournment is
taken. At the adjourned meeting the corporation may transact any business that
might have been transacted at the original meeting. If the adjournment is for
more than thirty (30) days, or if after the adjournment a new record date is
fixed for the adjourned meeting, a notice of the adjourned meeting shall be
given to each stockholder of record entitled to vote at the meeting.
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<PAGE>
2.8 VOTING
The stockholders entitled to vote at any meeting of stockholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners
of stock and to voting trusts and other voting agreements).
Except as may be otherwise provided in the Certificate of Incorporation,
each stockholder shall be entitled to one vote for each share of capital stock
held by such stockholder.
2.9 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these bylaws.
2.10 RECORD DATE FOR STOCKHOLDER NOTICE; VOTING; GIVING CONSENTS
In order that the corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the board of directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
If the board of directors does not so fix a record date:
(a) The record date for determining stockholders entitled to notice
of or to vote at a meeting of stockholders shall be at the close of business on
the day next preceding the day on which notice is given, or, if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held.
(b) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the board of directors is necessary, shall be the day on which the first
written consent is expressed.
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<PAGE>
(c) The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the board of
directors adopts the resolution relating thereto.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the board of directors may fix a new record date for the
adjourned meeting.
2.11 PROXIES
Each stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent to corporate action may authorize another person or
persons to act for him by a written proxy, signed by the stockholder and filed
with the secretary of the corporation, but no such proxy shall be voted or acted
upon after three (3) years from its date, unless the proxy provides for a longer
period. A proxy shall be deemed signed if the stockholder's name is placed on
the proxy (whether by manual signature, typewriting, telegraphic transmission or
otherwise) by the stockholder or the stockholder's attorney-in-fact. The
revocability of a proxy that states on its face that it is irrevocable shall be
governed by the provisions of Section 212(c) of the General Corporation Law of
Delaware.
2.12 LIST OF STOCKHOLDERS ENTITLED TO VOTE
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
ARTICLE III
DIRECTORS
3.1 POWERS
Subject to the provisions of the General Corporation Law of Delaware and
any limitations in the certificate of incorporation or these bylaws relating to
action required to be approved by the stockholders or by the outstanding shares,
the business and affairs of the corporation shall be managed and all corporate
powers shall be exercised by or under the direction of the board of directors.
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<PAGE>
3.2 NUMBER OF DIRECTORS
The board of directors shall consist of seven (7) members. The number of
directors may be changed by an amendment to this bylaw, duly adopted by the
board of directors or by the stockholders, or by a duly adopted amendment to the
certificate of incorporation. Upon the closing of the first sale of the
corporation's common stock pursuant to a firmly underwritten registered public
offering (the "IPO"), the directors shall be divided into three classes, with
the term of office of the first class, which class shall initially consist of
_____ directors, to expire at the first annual meeting of stockholders held
after the IPO; the term of office of the second class, which shall initially
consist of _____ directors, to expire at the second annual meeting of
stockholders held after the IPO; the term of office of the third class, which
class shall initially consist of ____ directors, to expire at the third annual
meeting of stockholders held after the IPO; and thereafter for each such term to
expire at each third succeeding annual meeting of stockholders held after such
election.
No reduction of the authorized number of directors shall have the effect
of removing any director before that director's term of office expires.
3.3 ELECTION, QUALIFICATION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to fill
a vacancy, shall hold office until his successor is elected and qualified or
until his earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 RESIGNATION AND VACANCIES
Any director may resign at any time upon written notice to the
corporation. When one or more directors so resigns and the resignation is
effective at a future date, a majority of the directors then in office,
including those who have so resigned, shall have power to fill such vacancy or
vacancies, the vote thereon to take effect when such resignation or resignations
shall become effective, and each director so chosen shall hold office as
provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these
bylaws:
(a) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
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<PAGE>
(b) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship,
the directors then in office constitute less than a majority of the whole board
(as constituted immediately prior to any such increase), then the Court of
Chancery may, upon application of any stockholder or stockholders holding at
least ten (10) percent of the total number of the shares at the time outstanding
having the right to vote for such directors, summarily order an election to be
held to fill any such vacancies or newly created directorships, or to replace
the directors chosen by the directors then in office as aforesaid, which
election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
The board of directors of the corporation may hold meetings, both regular
and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or these
bylaws, members of the board of directors, or any committee designated by the
board of directors, may participate in a meeting of the board of directors, or
any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 FIRST MEETINGS
The first meeting of each newly elected board of directors shall be held
at such time and place as shall be fixed by the vote of the stockholders at the
annual meeting and no notice of such meeting shall be necessary to the newly
elected directors in order legally to constitute the meeting, provided a quorum
shall be present. In the event of the failure of the stockholders to fix the
time or place of such first meeting of the newly elected board of directors, or
in the event such meeting is not held at the time and place so fixed by the
stockholders, the meeting may be held at such time and
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<PAGE>
place as shall be specified in a notice given as hereinafter provided for
special meetings of the board of directors, or as shall be specified in a
written waiver signed by all of the directors.
3.7 REGULAR MEETINGS
Regular meetings of the board of directors may be held without notice at
such time and at such place as shall from time to time be determined by the
board.
3.8 SPECIAL MEETINGS; NOTICE
Special meetings of the board may be called by the president on three (3)
days' notice to each director, either personally or by mail, telegram, telex, or
telephone; special meetings shall be called by the president or secretary in
like manner and on like notice on the written request of two (2) directors
unless the board consists of only one (1) director, in which case special
meetings shall be called by the president or secretary in like manner and on
like notice on the written request of the sole director.
3.9 QUORUM
At all meetings of the board of directors, a majority of the authorized
number of directors shall constitute a quorum for the transaction of business
and the act of a majority of the directors present at any meeting at which there
is a quorum shall be the act of the board of directors, except as may be
otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the board of
directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
3.10 WAIVER OF NOTICE
Whenever notice is required to be given under any provision of the General
Corporation Law of Delaware or of the certificate of incorporation or these
bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these bylaws.
3.11 ADJOURNED MEETING; NOTICE
If a quorum is not present at any meeting of the board of directors, then
the directors present thereat may adjourn the meeting from time to time, without
notice other than announcement at the meeting, until a quorum is present.
-7-
<PAGE>
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Unless otherwise restricted by the certificate of incorporation or these
bylaws, any action required or permitted to be taken at any meeting of the board
of directors, or of any committee thereof, may be taken without a meeting if all
members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee.
3.13 FEES AND COMPENSATION OF DIRECTORS
Unless otherwise restricted by the certificate of incorporation or these
bylaws, the board of directors shall have the authority to fix the compensation
of directors.
3.14 APPROVAL OF LOANS TO OFFICERS
The corporation may lend money to, or guarantee any obligation of, or
otherwise assist any officer or other employee of the corporation or of its
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the board of
directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing contained in this section shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.15 REMOVAL OF DIRECTORS
Unless otherwise restricted by statute, by the certificate of
incorporation or by these bylaws, any director or the entire board of directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors.
No reduction of the authorized number of directors shall have the effect
of removing any director prior to the expiration of such director's term of
office.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES OF DIRECTORS
The board of directors may, by resolution passed by a majority of the
whole board, designate one or more committees, with each committee to consist of
one or more of the directors of the corporation. The board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members thereof
present at any
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<PAGE>
meeting and not disqualified from voting, whether or not he or they constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the board of directors or
in the bylaws of the corporation, shall have and may exercise all the powers and
authority of the board of directors in the management of the business and
affairs of the corporation, and may authorize the seal of the corporation to be
affixed to all papers that may require it; but no such committee shall have the
power or authority to (i) amend the certificate of incorporation (except that a
committee may, to the extent authorized in the resolution or resolutions
providing for the issuance of shares of stock adopted by the board of directors
as provided in Section 151(a) of the General Corporation Law of Delaware, fix
any of the preferences or rights of such shares relating to dividends,
redemption, dissolution, any distribution of assets of the corporation or the
conversion into, or the exchange of such shares for, shares of any other class
or classes or any other series of the same or any other class or classes of
stock of the corporation), (ii) adopt an agreement of merger or consolidation
under Sections 251 or 252 of the General Corporation Law of Delaware, (iii)
recommend to the stockholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, (iv) recommend to
the stockholders a dissolution of the corporation or a revocation of a
dissolution, or (v) amend the bylaws of the corporation; and, unless the board
resolution establishing the committee, the bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 COMMITTEE MINUTES
Each committee shall keep regular minutes of its meetings and report the
same to the board of directors when required.
4.3 MEETINGS AND ACTION OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Article III of these bylaws, Section
3.5 (place of meetings and meetings by telephone), Section 3.7 (regular
meetings), Section 3.8 (special meetings and notice), Section 3.9 (quorum),
Section 3.10 (waiver of notice), Section 3.11 (adjournment and notice of
adjournment), and Section 3.12 (action without a meeting), with such changes in
the context of those bylaws as are necessary to substitute the committee and its
members for the board of directors and its members; provided, however, that the
time of regular meetings of committees may also be called by resolution of the
board of directors and that notice of special meetings of committees shall also
be given to all alternate members, who shall have the right to attend all
meetings of the committee. The board of directors may adopt rules for the
government of any committee not inconsistent with the provisions of these
bylaws.
ARTICLE V
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OFFICERS
5.1 OFFICERS
The officers of the corporation shall be a president, one or more vice
presidents, a secretary, and a treasurer. The corporation may also have, at the
discretion of the board of directors, a chairman of the board, one or more
assistant vice presidents, assistant secretaries, assistant treasurers, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.3 of these bylaws. Any number of offices may be held by the same
person.
5.2 ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Sections 5.3 or 5.5 of these bylaws, shall
be chosen by the board of directors, subject to the rights, if any, of an
officer under any contract of employment.
5.3 SUBORDINATE OFFICERS
The board of directors may appoint, or empower the president to appoint,
such other officers and agents as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the board of directors may
from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the board of directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
board of directors, by any officer upon whom such power of removal may be
conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
Any vacancy occurring in any office of the corporation shall be filled by
the board of directors.
5.6 CHAIRMAN OF THE BOARD
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The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
Subject to such supervisory powers, if any, as may be given by the board
of directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the stockholders and, in the absence or
nonexistence of a chairman of the board, at all meetings of the board of
directors. He shall have the general powers and duties of management usually
vested in the office of president of a corporation and shall have such other
powers and duties as may be prescribed by the board of directors or these
bylaws.
5.8 VICE PRESIDENT
In the absence or disability of the president, the vice presidents, if
any, in order of their rank as fixed by the board of directors or, if not
ranked, a vice president designated by the board of directors, shall perform all
the duties of the president and when so acting shall have all the powers of, and
be subject to all the restrictions upon, the president. The vice presidents
shall have such other powers and perform such other duties as from time to time
may be prescribed for them respectively by the board of directors, these bylaws,
the president or the chairman of the board.
5.9 SECRETARY
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors, and stockholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at stockholders'
meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all stockholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
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The secretary shall give, or cause to be given, notice of all meetings of
the stockholders and of the board of directors required to be given by law or by
these bylaws. He shall keep the seal of the corporation, if one be adopted, in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or by these bylaws.
5.10 TREASURER
The treasurer shall keep and maintain, or cause to be kept and maintained,
adequate and correct books and records of accounts of the properties and
business transactions of the corporation, including accounts of its assets,
liabilities, receipts, disbursements, gains, losses, capital, retained earnings,
and shares. The books of account shall at all reasonable times be open to
inspection by any director.
The treasurer shall deposit all money and other valuables in the name and
to the credit of the corporation with such depositaries as may be designated by
the board of directors. He shall disburse the funds of the corporation as may be
ordered by the board of directors, shall render to the president and directors,
whenever they request it, an account of all of his transactions as treasurer and
of the financial condition of the corporation, and shall have such other powers
and perform such other duties as may be prescribed by the board of directors or
these bylaws.
5.11 ASSISTANT SECRETARY
The assistant secretary, or, if there is more than one, the assistant
secretaries in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election)
shall, in the absence of the secretary or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the secretary
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.12 ASSISTANT TREASURER
The assistant treasurer, or, if there is more than one, the assistant
treasurers, in the order determined by the stockholders or board of directors
(or if there be no such determination, then in the order of their election),
shall, in the absence of the treasurer or in the event of his or her inability
or refusal to act, perform the duties and exercise the powers of the treasurer
and shall perform such other duties and have such other powers as the board of
directors or the stockholders may from time to time prescribe.
5.13 AUTHORITY AND DUTIES OF OFFICERS
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the board of directors or the stockholders.
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ARTICLE VI
INDEMNITY
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner permitted
by the General Corporation Law of Delaware, indemnify each of its directors and
officers against expenses (including attorneys' fees), judgments, fines,
settlements, and other amounts actually and reasonably incurred in connection
with any proceeding, arising by reason of the fact that such person is or was an
agent of the corporation. For purposes of this Section 6.1, a "director" or
"officer" of the corporation includes any person (i) who is or was a director or
officer of the corporation, (ii) who is or was serving at the request of the
corporation as a director or officer of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was a director or officer of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
6.2 INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the extent and in the manner
permitted by the General Corporation Law of Delaware, to indemnify each of its
employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements, and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation (other
than a director or officer) includes any person (i) who is or was an employee or
agent of the corporation, (ii) who is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (iii) who was an employee or agent of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
6.3 INSURANCE
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of the General Corporation Law of Delaware.
ARTICLE VII
RECORDS AND REPORTS
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7.1 MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at such
place or places as designated by the board of directors, keep a record of its
stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these bylaws as amended to date,
accounting books, and other records.
Any stockholder of record, in person or by attorney or other agent, shall,
upon written demand under oath stating the purpose thereof, have the right
during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
The officer who has charge of the stock ledger of a corporation shall
prepare and make, at least ten (10) days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
7.2 INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his position as a director. The Court of Chancery
is hereby vested with the exclusive jurisdiction to determine whether a director
is entitled to the inspection sought. The Court may summarily order the
corporation to permit the director to inspect any and all books and records, the
stock ledger, and the stock list and to make copies or extracts therefrom. The
Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 ANNUAL STATEMENT TO STOCKHOLDERS
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The board of directors shall present at each annual meeting, and at any
special meeting of the stockholders when called for by vote of the stockholders,
a full and clear statement of the business and condition of the corporation.
7.4 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the
treasurer, the secretary or assistant secretary of this corporation, or any
other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority granted
herein may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
ARTICLE VIII
GENERAL MATTERS
8.1 CHECKS
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.2 EXECUTION OF CORPORATE CONTRACTS AND INSTRUMENTS
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
8.3 STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of a corporation shall be represented by certificates, provided
that the board of directors of the corporation may provide by resolution or
resolutions that some or all of any or all classes or series of its stock shall
be uncertificated shares. Any such resolution shall not apply to shares
represented by a certificate until such certificate is surrendered to the
corporation. Notwithstanding the adoption of such a resolution by the board of
directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
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the board of directors, or the president or vice-president, and by the treasurer
or an assistant treasurer, or the secretary or an assistant secretary of such
corporation representing the number of shares registered in certificate form.
Any or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature
has been placed upon a certificate has ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
corporation with the same effect as if he were such officer, transfer agent or
registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly
paid and subject to call for the remainder of the consideration to be paid
therefor. Upon the face or back of each stock certificate issued to represent
any such partly paid shares, upon the books and records of the corporation in
the case of uncertificated partly paid shares, the total amount of the
consideration to be paid therefor and the amount paid thereon shall be stated.
Upon the declaration of any dividend on fully paid shares, the corporation shall
declare a dividend upon partly paid shares of the same class, but only upon the
basis of the percentage of the consideration actually paid thereon.
8.4 SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
8.5 LOST CERTIFICATES
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate theretofore issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate or uncertificated shares.
8.6 CONSTRUCTION; DEFINITIONS
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Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these bylaws. Without limiting the generality of this
provision, the singular number includes the plural, the plural number includes
the singular, and the term "person" includes both a corporation and a natural
person.
8.7 DIVIDENDS
The directors of the corporation, subject to any restrictions contained in
the certificate of incorporation, may declare and pay dividends upon the shares
of its capital stock pursuant to the General Corporation Law of Delaware.
Dividends may be paid in cash, in property, or in shares of the corporation's
capital stock.
The directors of the corporation may set apart out of any of the funds of
the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 FISCAL YEAR
The fiscal year of the corporation shall be fixed by resolution of the
board of directors and may be changed by the board of directors.
8.9 SEAL
The seal of the corporation shall be such as from time to time may be
approved by the board of directors.
8.10 TRANSFER OF STOCK
Upon surrender to the corporation or the transfer agent of the corporation
of a certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignation or authority to transfer, it shall be the duty of the
corporation to issue a new certificate to the person entitled thereto, cancel
the old certificate, and record the transaction in its books.
8.11 STOCK TRANSFER AGREEMENTS
The corporation shall have power to enter into and perform any agreement
with any number of stockholders of any one or more classes of stock of the
corporation to restrict the transfer of shares of stock of the corporation of
any one or more classes owned by such stockholders in any manner not prohibited
by the General Corporation Law of Delaware.
8.12 REGISTERED STOCKHOLDERS
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The corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends and
to vote as such owner, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
The original or other bylaws of the corporation may be adopted, amended or
repealed by the stockholders entitled to vote; provided, however, that the
corporation may, in its certificate of incorporation, confer the power to adopt,
amend or repeal bylaws upon the directors. The fact that such power has been so
conferred upon the directors shall not divest the stockholders of the power, nor
limit their power to adopt, amend or repeal bylaws.
ARTICLE X
DISSOLUTION
If it should be deemed advisable in the judgment of the board of directors
of the corporation that the corporation should be dissolved, the board, after
the adoption of a resolution to that effect by a majority of the whole board at
any meeting called for that purpose, shall cause notice to be mailed to each
stockholder entitled to vote thereon of the adoption of the resolution and of a
meeting of stockholders to take action upon the resolution.
At the meeting a vote shall be taken for and against the proposed
dissolution. If a majority of the outstanding stock of the corporation entitled
to vote thereon votes for the proposed dissolution, then a certificate stating
that the dissolution has been authorized in accordance with the provisions of
Section 275 of the General Corporation Law of Delaware and setting forth the
names and residences of the directors and officers shall be executed,
acknowledged, and filed and shall become effective in accordance with Section
103 of the General Corporation Law of Delaware. Upon such certificate's becoming
effective in accordance with Section 103 of the General Corporation Law of
Delaware, the corporation shall be dissolved.
Whenever all the stockholders entitled to vote on a dissolution consent in
writing, either in person or by duly authorized attorney, to a dissolution, no
meeting of directors or stockholders shall be necessary. The consent shall be
filed and shall become effective in accordance with Section 103 of the General
Corporation Law of Delaware. Upon such consent's becoming effective in
accordance with Section 103 of the General Corporation Law of Delaware, the
corporation shall be dissolved. If the consent is signed by an attorney, then
the original power of attorney or a photocopy thereof shall be attached to and
filed with the consent. The consent filed with the Secretary of State
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shall have attached to it the affidavit of the secretary or some other officer
of the corporation stating that the consent has been signed by or on behalf of
all the stockholders entitled to vote on a dissolution; in addition, there shall
be attached to the consent a certification by the secretary or some other
officer of the corporation setting forth the names and residences of the
directors and officers of the corporation.
ARTICLE XI
CUSTODIAN
11.1 APPOINTMENT OF A CUSTODIAN IN CERTAIN CASES
The Court of Chancery, upon application of any stockholder, may appoint
one or more persons to be custodians and, if the corporation is insolvent, to be
receivers, of and for the corporation when:
(a) at any meeting held for the election of directors the
stockholders are so divided that they have failed to elect successors to
directors whose terms have expired or would have expired upon qualification of
their successors; or
(b) the business of the corporation is suffering or is threatened
with irreparable injury because the directors are so divided respecting the
management of the affairs of the corporation that the required vote for action
by the board of directors cannot be obtained and the stockholders are unable to
terminate this division; or
(c) the corporation has abandoned its business and has failed within
a reasonable time to take steps to dissolve, liquidate or distribute its assets.
11.2 DUTIES OF CUSTODIAN
The custodian shall have all the powers and title of a receiver appointed
under Section 291 of the General Corporation Law of Delaware, but the authority
of the custodian shall be to continue the business of the corporation and not to
liquidate its affairs and distribute its assets, except when the Court of
Chancery otherwise orders and except in cases arising under Sections 226(a)(3)
or 352(a)(2) of the General Corporation Law of Delaware.
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CERTIFICATE OF ADOPTION OF BYLAWS
OF
INVENTA TECHNOLOGIES, INC.
Adoption by Incorporator
The undersigned person appointed in the Certificate of Incorporation to
act as the Incorporator of Inventa Technologies, Inc. hereby adopts the
foregoing bylaws, comprising 20 pages, as the Bylaws of the corporation.
Executed as of _______________, 19__.
____________________________________________
_______________, Incorporator
Certificate by Secretary of Adoption by Incorporator
The undersigned hereby certifies that he is the duly elected, qualified,
and acting Secretary of Inventa Technologies, Inc. and that the foregoing
Bylaws, comprising 20 pages, were adopted as the Bylaws of the corporation on
_______________, 19__, by the person appointed in the Certificate of
Incorporation to act as the Incorporator of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed
the corporate seal this _____ day of __________, 19__.
____________________________________________
_______________, Secretary
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(ALTERNATIVE)
CERTIFICATE OF ADOPTION OF BYLAWS
OF
INVENTA TECHNOLOGIES, INC.
Certificate by Secretary of Adoption by Stockholders' Vote
The undersigned hereby certifies that he is the duly elected, qualified,
and acting Secretary of Inventa Technologies, Inc. and that the foregoing
Bylaws, comprising 20 pages, were submitted to the stockholders at their first
meeting held on _______________, 19__, and recorded in the minutes thereof and
were ratified by the vote of stockholders entitled to exercise the majority of
the voting power of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed
the corporate seal this ____ day of ____________ 19__.
____________________________________________
_______________, Secretary
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EXHIBIT 4.2
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
This Amended and Restated Registration Rights Agreement (the "Agreement"),
dated as of January 26, 2000 is entered into by and among Inventa Corporation, a
California corporation (the "Company") and the holders of the Company's Series A
Preferred Stock listed on Exhibit A attached hereto (collectively, the "Series A
---------
Holders"), the holders of the Company's Series B Preferred Stock listed on
Exhibit B attached hereto (collectively, the "Series B Holders"), the holders of
- ---------
the Company's Series C Preferred Stock listed on Exhibit C attached hereto
---------
(collectively, the "Series C Holders") the holders of the Company's Series D
Preferred Stock listed on Exhibit D attached hereto (collectively, the "Series D
---------
Holders")and the Xtend-Tech Shareholders listed on Exhibit E attached hereto
---------
(collectively, the "Xtend-Tech Holders") (the Series A Holders, the Series B
Holders, the Series C Holders, the Series D Holders and the Xtend-Tech Holders
shall collectively be referred to as "Shareholders").
R E C I T A L S
---------------
A. The Series A Holders, the Series B Holders, the Series C Holders, the
Series D Holders and the Company are parties to the Restated Registration Rights
Agreement dated January 19, 2000.
B. The Xtend-Tech Holders and the Company are parties to the Agreement
and Plan of Reorganization as of the date hereof (the "Reorganization
Agreement").
C. The execution of this Agreement is in connection with the closing of
the transactions contemplated by the Reorganization Agreement.
D. The Shareholders and the Company desire that the transactions
contemplated by the Reorganization Agreement be consummated.
E. The Series A Holders, the Series B Holders, the Series C Holders, the
Series D Holders and the Company desire that this Agreement supersede the
Restated Registration Rights Agreement dated January 19, 2000 in its entirety.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
-------------------
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the common stock of the Company.
<PAGE>
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Holder" shall mean any holder, or an assignee under Section 15
hereof, of outstanding Registrable Securities.
"Initiating Holders" shall mean any Holders who in the aggregate are
Holders of more than fifty percent (50%) of the outstanding Registrable
Securities.
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering of the
effectiveness of such registration statement.
"Registrable Securities", subject to Sections 5(b) and 6(b) hereof,
shall mean shares of Common Stock (i) issued or issuable pursuant to the
conversion of the Shares, and (ii) issued in respect of securities issued
pursuant to the conversion of the Shares upon any stock split, stock dividend,
recapitalization, substitution, or similar event, and (iii) issued in respect to
securities issued to Xtend-Tech Holders pursuant to the stock exchange
transaction consummated in the Reorganization Agreement; provided, however, that
Registrable Securities shall not include any (a) shares of Common Stock which
have previously been registered, (b) shares of Common Stock which have
previously been sold to the public, or (c) securities which would otherwise be
Registrable Securities held by a Holder who is then permitted to sell all of
such securities within any three (3) month period following the Company's
initial public offering pursuant to Rule 144 if such securities then held by
such Holder constitute less than one percent of the Company's outstanding equity
securities.
"Registration Expenses" shall mean all expenses (excluding
underwriting discounts and selling commissions) incurred in connection with a
registration under Sections 5, 6 and 8 hereof, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration, and the
reasonable fees and expenses of one counsel for the selling Shareholders (but
excluding the compensation of regular employees of the Company, which shall be
paid in any event by the Company).
"Restricted Securities" shall mean the securities of the Company
required to bear or bearing the legend set forth in Section 3 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities.
"Shares" shall mean shares of the Company's Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and
shares of the Company's Common Stock held by Xtend-Tech Holders.
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<PAGE>
2. Restrictions on Transferability. The Restricted Securities held by
-------------------------------
the Shareholders shall not be transferred except upon the conditions specified
in this Agreement, which conditions are intended to insure compliance with the
provisions of the Securities Act or, in the case of Section 16 hereof, to assist
in an orderly distribution. Each Shareholder will cause any proposed transferee
of Restricted Securities held by that Shareholder to agree to take and hold
those securities subject to the provisions and upon the conditions specified in
this Agreement.
3. Restrictive Legend. Each certificate representing (i) the Shares,
------------------
and (ii) shares of the Company's Common Stock issued upon conversion of the
Shares, and (iii) any other securities issued in respect of the Shares, or the
Common Stock issued upon conversion of the Shares, upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event, shall
(unless otherwise permitted or unless the securities evidenced by such
certificate shall have been registered under the Securities Act) be stamped or
otherwise imprinted with a legend substantially in the following form (in
addition to any legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, (THE "ACT") OR ANY STATE SECURITIES LAWS. SUCH
SHARES MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF SUCH
REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND
ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT.
COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND
RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICE OF THE
CORPORATION.
Upon request of a holder of such a certificate, the Company shall
remove the foregoing legend from the certificate or issue to such holder a new
certificate therefor free of any transfer legend, if, with such request, the
Company shall have received either the opinion referred to in Section 4(i) or
the "no-action" letter referred to in Section 4(ii) to the effect that any
transfer by such holder of the securities evidenced by such certificate will not
violate the Securities Act and applicable state securities laws, unless any such
transfer legend may be removed pursuant to Rule 144(k), in which case no such
opinion or "no-action" letter shall be required, and provided that the Company
shall not be obligated to remove any such legends prior to the date of the
initial public offering of the Company's Common Stock under the Securities Act.
4. Notice of Proposed Transfers. The holder of each certificate
----------------------------
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 4. Prior to any proposed transfer
of any Restricted Securities (other than under circumstances described in
Sections 5, 6 and 8 hereof), the holder thereof shall give written notice to the
Company of such holder's intention to effect such transfer. Each such notice
shall describe the manner and circumstances of the proposed transfer in
sufficient detail, and shall be accompanied (except in transactions in
compliance with Rule 144 promulgated under the Securities Act or for a transfer
to a holder's spouse, ancestors, descendants or a trust for any of their
benefit, or in
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transactions involving the distribution without consideration of Restricted
Securities by a holder that is a partnership to any of its partners or retired
partners or to the estate of any of its partners or retired partners, or by a
holder that is a trust to any successor trust or successor trustee) by either
(i) a written opinion of legal counsel to the holder who shall be reasonably
satisfactory to the Company, addressed to the Company and reasonably
satisfactory in form and substance to the Company's counsel, to the effect that
the proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act or (ii) a "no-action" letter from the
Commission to the effect that the distribution of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by such holder to the
Company. Each certificate evidencing the Restricted Securities transferred as
above provided shall bear the restrictive legend set forth in Section 3 above,
except that such certificate shall not bear such restrictive legend after the
date of the Company's initial public offering under the Securities Act if the
opinion of counsel or "no-action" letter referred to above expressly indicates
that such legend is not required in order to establish compliance with the
Securities Act or if such legend is no longer required pursuant to Rule 144(k).
5. Demand Registration.
-------------------
(a) Request for Registration. If the Company shall receive from
------------------------
Initiating Holders a written request that the Company effect any registration
with respect to the Registrable Securities, the Company will:
(i) promptly given written notice of the proposed registration
to all other Holders; and
(ii) as soon as practicable, use its diligent best efforts to
effect such registration after January 1, 2000 (including, without limitation,
the execution of an undertaking to file post effective amendments, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act) as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified in
a written request delivered to the Company within fifteen (15) days after
receipt of such written notice from the Company; provided that the Company shall
not be obligated to effect, or to take any action to effect, any such
registration pursuant to this Section 5:
(A) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(B) After the Company has effected two (2) such
registrations pursuant to this Section 5(a) and such registrations have been
declared or ordered effective, or withdrawn at the request of the majority of
the Initiating Holders, and the sales of such Registrable Securities have
closed; or
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<PAGE>
(C) Within one hundred eighty (180) days of the effective
date of any other registration statement on Form S-1.
Subject to the foregoing clauses (A), (B) and (C), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable, after receipt of the request or
requests of the Initiating Holders; provided, however, that if the Company shall
furnish to such Holders a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such registration statement to be filed on or before the time filing would
be required and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
(but not more than once during any twelve month period) for a period of not more
than ninety (90) days after receipt of the request of the Initiating Holders.
The registration statement filed pursuant to the request of the
Initiating Holders, may, subject to the provisions of Section 5(b) below,
include other securities of the Company which are held by officers or directors
of the Company or which are held by persons who, by virtue of agreements with
the Company, are entitled to include their securities in any such registration,
but the Company shall have no right to include any of its securities in any such
registration except as provided in Section 5(b) below.
(b) Underwriting. If the 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
Section 5, and the Company shall include such information in the written notice
referred to in Section 5(a)(i) above. The right of any Holder to registration
pursuant to Section 5 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 with respect to such participation and
inclusion) to the extent provided herein. A Holder may elect to include in such
underwriting all or a part of the Registrable Securities he holds.
If officers or directors of the Company shall request inclusion of
securities of the Company other than Registrable Securities in any registration
pursuant to Section 5, or if holders of securities of the Company who are
entitled by contract with the Company to have securities included in such a
registration (such officers, directors, and other shareholders being
collectively referred to as the "Other Shareholders") request such inclusion,
the Initiating Holders shall, on behalf of all Holders, offer to include the
securities of such Other Shareholders in the underwriting and may condition such
offer on their acceptance of the further applicable provisions of this
Agreement. The Company shall (together with all Holders and Other Shareholders
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form with the representative of the
underwriter or underwriters (the "Underwriter") selected for such underwriting
by more than fifty percent (50%) of the Initiating Holders and reasonably
acceptable to the Company. Notwithstanding any other provision of this Section
5, if the Underwriter determines that marketing factors require a limitation on
the number of shares to be underwritten, the Underwriter may (subject to the
allocation priority set forth below) limit the number of Registrable Securities
to be included in the registration and underwriting to not less than fifty
percent (50%) of
5
<PAGE>
the securities which Holders have requested be included therein. The Company
shall so advise all holders of securities requesting registration, and the
number of shares of securities that are entitled to be included in the
registration and underwriting shall be allocated in the following priority:
first, among all Holders of Registrable Securities requesting inclusion (and pro
rata among such holders on the basis of all Registrable Securities then held by
such holders); and second, among all Other Shareholders in proportion, as nearly
as practicable, to the respective amounts of securities which they had requested
to be included in such registration at the time of filing the registration
statement. If any Holder or Other Shareholder disapproves of the terms of any
such underwriting, such holder may elect to withdraw therefrom by written notice
to the Company and the Underwriter. Any Registrable Securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration. If
the Underwriter has not limited the number of Registrable Securities or other
securities to be underwritten, the Company may include its securities for its
own account in such registration if the underwriter so agrees and if the number
of Registrable Securities and other securities which would otherwise have been
included in such registration and underwriting will not thereby be limited.
6. Company Registration.
--------------------
(a) If the Company shall determine to register any of its securities
either for its own account or for the account of a security holder or holders
exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans or a registration
relating solely to a Commission Rule 145 transaction or a registration on any
registration form which does not permit secondary sales or does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of Registrable Securities, the Company
will:
(i) promptly give to each Holder written notice thereof (which,
to the extent then known, shall include a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under the applicable blue
sky or other state securities laws); and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all of the Registrable Securities specified in a written request or
requests made by any Holder within fifteen (15) days after receipt of the
written notice from the Company described in clause (i) above, except as set
forth in Section 6(b) below. Such written request may specify all or a part of a
Holder's Registrable Securities.
(b) Underwriting. If the registration of which the Company gives
------------
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 6(a)(i). In such event the right of any Holder to
registration pursuant to Section 6 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the Other Shareholders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the Underwriter selected for underwriting by the Company.
Notwithstanding any other provision of
6
<PAGE>
this Section 6, if the Underwriter determines that marketing factors require a
limitation on the number of shares to be underwritten, and (a) if such
registration is the first registered offering of the Company's securities to the
public, the Underwriter may (subject to the allocation priority set forth below)
exclude from such registration and underwriting some or all of the Registrable
Securities which would otherwise be underwritten pursuant hereto, and (b) if
such registration is other than the first registered offering of the sale of the
Company's securities to the public, the Underwriter may (subject to the
allocation priority set forth below) limit the number of Registrable Securities
to be included in the secondary portion of the registration and underwriting to
not less than fifty percent (50%) of the securities which Holders have requested
be included therein. The Company shall so advise all holders of securities
requesting registration, and the number of shares of securities that are
entitled to be included in the registration and underwriting by persons other
than the Company shall be allocated in the following priority: first, to Holders
of Registrable Securities (and pro rata among such holders on the basis of all
Registrable Securities then held by such holders); and second, among all Other
Shareholders in proportion, as nearly as practicable, to the respective amounts
of securities which they had requested to be included in such registration at
the time of filing the registration statement. If any Holder or Other
Shareholder disapproves of the terms of any such underwriting, he may elect to
withdraw therefrom by written notice to the Company and the Underwriter. Any
Registrable Securities or other securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration.
7. Expenses of Registration. All Registration Expenses incurred in
------------------------
connection with any registration, qualification or compliance pursuant to this
Agreement shall be borne by the Company, and all Selling Expenses shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of their shares so registered; provided, however, that the Company shall
not be required to pay any Registration Expenses if, as a result of the
withdrawal of a request for registration by Initiating Holders, the registration
statement does not become effective, unless such withdrawal is caused by a
material adverse change in the business or operations of the Company after such
request for registration, or unless the Initiating Holders agree to have such
registration considered a registration pursuant to Section 5(a)(ii)(B). If the
Company is not required to pay any Registration Expenses, then the Holders and
Other Shareholders requesting registration shall bear such Registration Expenses
pro rata on the basis of the number of their shares so included in the
registration request, and such registration shall not be considered a
registration for purposes of Section 5(a)(ii)(B).
8. Registration on Form S-3. The Company shall use its best efforts to
------------------------
qualify for registration on Form S-3, and to that end, the Company shall comply
with the reporting requirements of the Exchange Act following the effective date
of the first registration of any securities of the Company for a registered
public offering. After the Company has qualified for the use of Form S-3,
Initiating Holders shall have the right to request four (4) registrations on
Form S-3 (such requests shall be in writing and shall state the number of shares
of Registrable Securities to be disposed of and the intended method of
disposition of such shares by each such holder), subject only to the following
limitations:
(a) The Company shall not be obligated to cause a registration on
Form S-3 to become effective prior to one hundred eighty (180) days following
the effective date of a Company-
7
<PAGE>
initiated registration (other than a registration effected solely to qualify an
employee benefit plan or to effect a business combination pursuant to Rule 145),
provided that notice of such Company-initiated registration is given to Holders
prior to receipt of a request from a holder of Registrable Securities for
registration on Form S-3, and provided that the Company shall use its best
efforts to achieve such effectiveness promptly following such one hundred eighty
(180) day period;
(b) The Company shall not be obligated to cause a registration on
Form S-3 to become effective prior to expiration of one hundred eighty (180)
days following the effective date of the most recent registration pursuant to a
request by a holder of Registrable Securities under this Agreement or pursuant
to a request by a holder of registration rights under any other agreement of the
Company granting Form S-3 demand registration rights; provided, however, that
the Company shall use its best efforts to achieve such effectiveness promptly
following such one hundred eighty (180) day period;
(c) The Company shall not be required to effect a registration
pursuant to this Section 8 more than once in any twelve (12) month period;
(d) The Company shall not be required to maintain and keep any such
registration on Form S-3 effective for a period exceeding one hundred eighty
(180) days from the effective date thereof. The Company shall give notice to all
Holders and all holders of registration rights under any other agreement of the
Company granting Form S-3 or similar demand registration rights of the receipt
of a request for registration pursuant to this Section 8 and shall provide a
reasonable opportunity for all such other holders to participate in the
registration. Subject to the foregoing, the Company will use its best efforts to
effect promptly the registration of all shares of Registrable Securities on Form
S-3 to the extent requested by the Holder or Holders thereof for purposes of
disposition. In the event the Underwriter, in the case of an underwritten
offering, determines that market factors require a limitation on the number of
shares to be underwritten, then shares shall be excluded from such registration
and underwriting pursuant to the method described in Section 6(b); and
(e) The value of the aggregate shares of Registrable Securities to be
registered on Form S-3 for each such right of registration shall be at least
$500,000.
9. Registration Procedures. In the case of each registration effected by
-----------------------
the Company pursuant to this Agreement, the Company will keep each Holder
advised in writing as to the initiation of such registration and as to the
completion thereof. At its expense, the Company will:
(a) Keep such registration effective for a period of ninety (90) days
(except as set forth in Section 8(d)) or until the Holder or Holders have
completed the distribution described in the registration statement relating
thereto, whichever first occurs; and
(b) Furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request; and
(c) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 5 or 8 hereof, the Company will
enter into any underwriting
8
<PAGE>
agreement reasonably necessary to effect the offer and sale of Common Stock,
provided such underwriting agreement contains customary underwriting provisions,
and provided further that if the underwriter so requests the underwriting
agreement will contain customary indemnification and contribution provisions,
and provided further that the Underwriter is reasonably acceptable to the
Company.
10. Indemnification.
---------------
(a) The Company will indemnify each Holder, each of its officers,
directors and partners, and each person controlling such Holder, if Registrable
Securities held by such Holder are included in the securities with respect to
which registration, qualification or compliance has been effected pursuant to
this Agreement, and each underwriter, if any, and each person who controls any
underwriter, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
or any violation by the Company of the Securities Act including any rule or
regulation thereunder applicable to the Company relating to action or inaction
required of the Company in connection with any such registration, qualification
or compliance, and will reimburse each such Holder, each of its officers,
directors and partners, and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter, for any legal and
any other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement (or alleged untrue statement) or omission (or alleged omission) based
upon written information furnished to the Company by such Holder or underwriter
and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities or other securities
held by such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify the
Company, each of its directors, officers and agents and each underwriter, if
any, of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of the
Securities Act and the rules and regulations thereunder, each other such Holder
and each of their officers, directors and partners, and each person controlling
such Holder, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, and will reimburse the Company and such
Holders, directors, officers, agents, partners, persons, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such
9
<PAGE>
untrue statement (or alleged untrue statement) or omission (or alleged omission)
is made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by such Holder and stated to be specifically for use therein;
provided, however, that the obligations of such Holders hereunder shall be
limited to an amount equal to the net proceeds to each such Holder of securities
sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 10 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement. An indemnified party
shall have the right to retain its own 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. No Indemnifying
Party in the defense of any such claim or litigation shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation. Each Indemnified Party
shall furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with defense of such claim and litigation resulting
therefrom.
(d) If the indemnification provided for in this Section 10 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any losses, claims, damages or liabilities referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability 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 any untrue or alleged untrue statement of a material fact or
the omission to state a material fact that resulted in such loss, claim, damage
or liability, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by a court of law 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;
provided, that in no event shall any contribution by a Holder thereunder exceed
the proceeds from the offering received by such Holder.
10
<PAGE>
(e) The obligations of the Company and Holders under this Section 10
shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this agreement.
11. Information by Holder. Each Holder holding securities included in any
---------------------
registration shall furnish to the Company such information regarding such Holder
as the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Agreement.
12. Limitations on Registration of Issues of Securities. From and
---------------------------------------------------
after the date of this Agreement, the Company shall not enter into any agreement
with any holder or prospective holder of any securities of the Company giving
such holder or prospective holder the right to require the Company to initiate
any registration of any securities of the Company, provided that this Section 12
shall not limit the right of the Company to enter any agreements with any holder
or prospective holder of any securities of the Company giving such holder or
prospective holder the right to require the Company, upon any registration of
any of its securities, to include, among the securities which the Company is
then registering, securities owned by such holder. Any right given by the
Company to any holder or prospective holder of the Company's securities in
connection with the registration of securities shall be conditioned such that it
shall be consistent with the provisions of this Agreement and with the rights of
the Holders provided in this Agreement.
13. Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission which may permit the sale of the
Restricted Securities to the public without registration, the Company agrees to:
(a) Make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act, at all times from
and after ninety (90) days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;
(b) Use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act at any time after it has become subject to
such reporting requirements;
(c) So long as a Shareholder owns any Restricted Securities, furnish
to the Shareholder forthwith upon request a written statement by the Company as
to its compliance with the reporting requirements of Rule 144 (at any time from
and after ninety (90) days following the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents so filed as a Shareholder may reasonably request in availing itself of
any rule or regulation of the Commission allowing a Shareholder to sell any such
securities without registration.
14. No-Action Letter or Opinion of Counsel in Lieu of Registration.
--------------------------------------------------------------
Notwithstanding anything in this Agreement to the contrary, if at any time after
the date of the Company's initial
11
<PAGE>
public offering of its securities under the Securities Act the Company shall
have obtained from the Commission a "no-action" letter in which the Commission
has indicated that it will take no action if, without registration under the
Securities Act, any Holder disposes of Registrable Securities covered by any
request for registration made under this Agreement in the manner in which such
Holder proposes to dispose of the Registrable Securities included in such
request, or if in the opinion of counsel for the Company concurred in by counsel
for such Holder no registration under the Securities Act is required in
connection with such disposition, the Registrable Securities included in such
request shall not be eligible for registration under this Agreement; provided,
however, with respect to any Holder who may deemed to be an "affiliate," as that
term is defined under Rule 144, if, notwithstanding the opinion of such counsel,
the Holder is unable to dispose of all of the Registrable Securities included in
his request in the manner in which such Holder so proposes without registration,
the Registrable Securities included in such request shall be eligible for
registration under this Agreement.
15. Transfer or Assignment of Registration Rights. The rights to cause
---------------------------------------------
the Company to register a Shareholder's securities granted to such Shareholder
by the Company under Sections 5, 6 and 8 hereof may be transferred or assigned
by the Shareholder to a transferee or assignee of at least 100,000 shares of the
Restricted Securities; provided, however, that a Shareholder may transfer or
assign such rights to a partner or shareholder of Shareholder or to a successor
trust or successor trustee without restriction as to minimum shareholding. The
Company shall be given written notice by Shareholder at the time of said
transfer or assignment, stating the name and address of said transferee or
assignee and identifying the securities with respect to which such registration
rights are being transferred or assigned, and provided further that the
transferee or assignee of such rights is not deemed by the Board of Directors of
the Company, in its reasonable judgment, to be a competitor of the Company; and
provided further that the transferee or assignee of such rights assumes the
obligations of a Shareholder under this Agreement.
16. "Market Stand-off" Agreement. Each Shareholder agrees, if requested
----------------------------
by the Company and an underwriter of Common Stock (or other securities) of the
Company, not to sell or otherwise transfer or dispose of any Common Stock (or
other securities) of the Company held by Shareholder during a period of time
determined by the Company and its underwriters (not to exceed 180 days)
following the effective date of the Company's initial public offering of its
capital stock, provided that all officers, directors and employees of the
Company holding stock or stock options of at least one (1%) percent of the
Company's outstanding stock prior to the initial public offering of the Company
enter into similar agreements; provided, further, that with respect to the
Series C Holders and Series D Holders, the prohibition against the sale,
transfer or other dispostions of any Common Stock (or other securities) of the
Company held by them pursuant to this Section 16 shall not prohibit (i) the sale
of any shares of Common Stock purchased by such Series C Holder or Series D
Holder pursuant to a directed share program or otherwise in the Company's
initial public offering, or (ii) the sale, in the open market, of any shares of
Common Stock by such Series C Holder or Series D Holder provided that such
shares are purchased in the open market after the completion of the Company's
initial public offering.
12
<PAGE>
Such agreement shall be in writing in a form satisfactory to the
Company and such underwriter. The Company may impose stop-transfer instructions
with respect to the Shares (or securities) subject to the foregoing restriction
until the end of said period.
17. Governing Law. This Agreement and the legal relations between the
-------------
parties arising hereunder shall be governed by and interpreted in accordance
with the laws of the State of California. The parties hereto agree to submit to
the jurisdiction of the federal and state courts of the State of California with
respect to the breach or interpretation of this Agreement or the enforcement of
any and all rights, duties, liabilities, obligations, powers, and other
relations between the parties arising under this Agreement.
18. Entire Agreement. This Agreement constitutes the full and entire
----------------
understanding and agreement between the parties regarding rights to
registration. Except as otherwise expressly provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon, the successors,
assigns, heirs, executors and administrators of the parties hereto.
19. Notices, Etc. All notices and other communications required or
-------------
permitted hereunder shall be in writing and shall be mailed by first-class mail,
postage prepaid, or otherwise delivered by hand or by messenger, addressed (a)
if to a Shareholder, at the address or addresses set forth on Exhibit A, Exhibit
--------- -------
B, Exhibit C, Exhibit D or Exhibit E attached hereto, or at such other address
- - --------- --------- ---------
or addresses as the Shareholder shall have furnished to the other parties hereto
in writing, or (b) if to any other holder of any securities, at such address as
such holder shall have furnished the other parties hereto in writing, or, until
any such holder so furnishes an address to the Company, then to and at the
address of the last holder of such Shares who has so furnished an address to the
Company, or (c) if to the Company, at the address of its principal offices set
forth on the signature page of this Agreement, or at such other address as the
Company shall have furnished to the other parties hereto in writing.
20. Other Registration Rights. This Agreement supersedes any previous
-------------------------
agreement between the Company and any party with respect to the grant by the
Company of registration rights, including but not limited to Registration Rights
Agreement dated February 14, 1997.
21. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
22. Amendments. Any provision of this Agreement may be amended, waived or
----------
modified upon the written consent of the Company, and the Shareholders (or their
assignees to whom Shareholders have expressly assigned their rights in
compliance with Section 15 hereof) who then hold more than fifty percent (50%)
of the Registrable Securities then held by persons entitled to registration
rights hereunder, provided further, any such amendment, waiver or modification
applies by its terms to each applicable Shareholder and each such assignee and,
provided further, that a Shareholder or such assignee hereunder may waive any of
such Holder's rights or the Company's obligations hereunder without obtaining
the consent of any other Shareholder or assignee.
(Remainder of this page left intentionally blank)
13
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amended and Restated
Registration Rights Agreement as of the date first above written.
"INVENTA CORPORATION"
By:_____________________________________
David A. Lavanty, President
[Signature Page to Amended and Restated Registration Rights Agreement]
<PAGE>
"SHAREHOLDERS"
________________________________________
Stephen T. Barry
BANCBOSTON VENTURES INC.
By:_____________________________________
Name: Maia D. Heymann
Title: Director
BATTERY VENTURES III, L.P.
By: Battery Partners III, L.P.
By:_____________________________________
Name:
Title:
BOSTON MILLENNIA PARTNERS
LIMITED PARTNERSHIP
By: Glen Partners Limited Partnership,
its General Partner
By:_____________________________________
General Partner
________________________________________
Dana Callow, Jr.
________________________________________
Harry A. Caunter
[Signature Page to Amended and Restated Registration Rights Agreement]
<PAGE>
THE CHASE MANHATTAN BANK AS TRUSTEE FOR
FIRST PLAZA GROUP TRUST
By:_____________________________________
Title:__________________________________
________________________________________
Electra D. DePeyster
________________________________________
Robert Ducommun
Palmer G. and Charles E. Ducommun
Charitable Annuity Trust, u/d/t
________________________________________
Robert Ducommun, Trustee
________________________________________
Christian Dubiel
ESSEX PRIVATE PLACEMENT FUND II, LIMITED PARTNERSHIP
By: Essex Investment Mgt. Company LLC
Its General Partner
By:_____________________________________
Its:____________________________________
________________________________________
Maya S. Hattangady
[Signature Page to Amended and Restated Registration Rights Agreement]
2
<PAGE>
________________________________________
Martin J. Hernon
________________________________________
Robert W. Jevon
________________________________________
Frank P. Pinto
________________________________________
Andrew Potter
PRIVATE EQUITY PORTFOLIO II, LLC
By:_____________________________________
Name: Glen Holland
Title: Vice President
________________________________________
Suresh Shanmugham
________________________________________
Santhanam C. Shekar
________________________________________
Bruce R. Tiedemann
TCV II (Q), L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By:_____________________________________
Name: Robert C. Bensky
Title: Chief Financial Officer
[Signature Page to Amended and Restated Registration Rights Agreement]
3
<PAGE>
TCV II STRATEGIC PARTNERS, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By:_____________________________________
Name: Robert C. Bensky
Title: Chief Financial Officer
TCV II, V.O.F.
a Netherlands Antilles General Partnership
By: Technology Crossover Management II, L.L.C.,
Its: Investment General Partner
By:_____________________________________
Name: Robert C. Bensky
Title: Chief Financial Officer
TECHNOLOGY CROSSOVER VENTURES II, C.V.
a Netherlands Antilles Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: Investment General Partner
By:_____________________________________
Name: Robert C. Bensky
Title: Chief Financial Officer
TECHNOLOGY CROSSOVER VENTURES II, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.
Its: General Partner
By:_____________________________________
Name: Robert C. Bensky
Title: Chief Financial Officer
[Signature Page to Amended and Restated Registration Rights Agreement]
4
<PAGE>
________________________________________
Ramesh Vasudevan
________________________________________
Gomati Venkateswaran
________________________________________
Usha Vijayarajan
[Signature Page to Amended and Restated Registration Rights Agreement]
5
<PAGE>
IN WITNESS WHEREOF, the Parties hereto have executed this Amended and
Restated Registration Rights Agreement as of the date first above written.
INVENTA: SHAREHOLDERS:
INVENTA CORPORATION
____________________________
Richard M. Cerwonka
By:______________________________
Title:___________________________ ____________________________
Mark Breznak
____________________________
John Pike
____________________________
Scott Gray
____________________________
John McVicker
____________________________
Michael Swafford
____________________________
Derek Nash
(Shareholder Signatures Continued
Next Page)
[Signature Page to Amended and Restated Registration Rights Agreement]
<PAGE>
___________________________________
James Z. Peepas
___________________________________
Frank Russin
___________________________________
Joseph A.DeCapuq
___________________________________
Gordon Kuhn
International Database Communication
Systems, Inc./IDCS
By:________________________________
James Z. Peepas
Chairman/CEO
[Signature Page to Amended and Restated Registration Rights Agreement]
<PAGE>
INVENTA CORPORATION
______________________________
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
______________________________
January 26, 2000
<PAGE>
EXHIBIT A
---------
SCHEDULE OF HOLDERS
OF SERIES A PREFERRED STOCK
Name and Address
- --------------------------------------------------------------------------------
Harry A. Caunter Ramesh Vasudevan
675 North Court 1369 Camwell Drive
Suites 225 & 230 West Vancouver, BC, V7S2M6
Palatine, IL 60067 Canada
Electra D. De Peyster Gomati Venkateswaran
2000 Redwood Hill Court 26 South Baog Road
Santa Rosa, CA 95404 A2 Anand Bhavan
Madras, 600017
INDIA
Robert Ducommun Usha Vijayarajan
1155 Park Ave. 2/7 12th Cross
Apt. 1 SW Rajmahal Extension
New York, NY 10128 Bangalore, 560080
INDIA
Maya S. Hattangady
414 E. Lansing Way
Fresno, CA 93704
Palmer G. and Charles E. Ducommun
Charitable Annuity Trust, u/d/t
Robert Ducommun, trustee
1155 Park Ave.
Apt. 1 SW
New York, N.Y. 10128
Andrew Potter
401 Vine Street
Menlo Park, CA 94025
Santhanam C. Shekar
349 G Street
San Rafael, CA 94901
<PAGE>
EXHIBIT B
---------
SCHEDULE OF HOLDERS
OF SERIES B PREFERRED STOCK
Name and Address
- --------------------------------------------------------------------------------
Battery Ventures L.P.
20 William Street
Wellesley, MA 01282
Harry A. Caunter
675 North Court
Suites 225 & 230
Palatine, IL 60067
Robert Ducommun
1155 Park Ave.
Apt. 1 SW
New York, N.Y. 10128
Palmer G. and Charles E. Ducommun
Charitable Annuity Trust, u/d/t
Robert Ducommun, trustee
1155 Park Ave.
Apt. 1 SW
New York, N.Y. 10128
Andrew Potter
401 Vine Street
Menlo Park, CA 94025
Ramesh Vasudevan
1369 Camwell Drive
West Vancouver, BC, V7S2M6
Canada
<PAGE>
EXHIBIT C
---------
SCHEDULE OF HOLDERS
OF SERIES C PREFERRED STOCK
Name and Address
- --------------------------------------------------------------------------------
Battery Ventures III, L.P. Suresh Shanmugham
20 William Street c/o Boston Millennia Partners
Wellesley, MA 0128230 Rose Wharf, Ste. 330
Boston, MA 02110
Boston Millennia Partners Bruce R. Tiedemann
30 Rose Wharf, Ste. 330 c/o Boston Millennia Partners
Boston, MA 02110 30 Rose Wharf, Ste. 330
Boston, MA 02110
Stephen T. Barry Harry A. Caunter
c/o Boston Millennia Partners 675 North Court
30 Rose Wharf, Ste. 330 Suites 225 & 230
Boston, MA 02110 Palatine, IL 60067
A. Dana Callow, Jr. Maya S. Hattangady
c/o Boston Millennia Partners 414 E. Lansing Way
30 Rose Wharf, Ste. 330 Fresno, CA 93704
Boston, MA 02110
Christian Dubiel Santhanam C. Shekar
c/o Boston Millennia Partners 349 G Street
30 Rose Wharf, Ste. 330 San Rafael, CA 94901
Boston, MA 02110
Martin J. Hernon TCV II (Q), L.P.
c/o Boston Millennia Partners c/o Technology Crossover Ventures
30 Rose Wharf, Ste. 330 56 Main Street, Suite 210
Boston, MA 02110 Millburn, NJ 07041
Attention: Robert C. Bensky
Robert W. Jevon
c/o Boston Millennia Partners with a copy to:
30 Rose Wharf, Ste. 330 c/o Technology Crossover Ventures
Boston, MA 02110 575 High Street, Suite 400
Palo Alto, CA 94301
Attention: Jay C. Hoag
<PAGE>
Frank P. Pinto
c/o Boston Millennia Partners
30 Rose Wharf, Ste. 330
Boston, MA 02110
TCV II Strategic Partners, L.P. TCV II, V.O.F.
c/o Technology Crossover Ventures c/o Technology Crossover Ventures
56 Main Street, Suite 210 56 Main Street, Suite 210
Millburn, NJ 07041 Millburn, NJ 07041
Attention: Robert C. Bensky Attention: Robert C. Bensky
with a copy to: with a copy to:
c/o Technology Crossover Ventures c/o Technology Crossover Ventures
575 High Street, Suite 400 575 High Street, Suite 400
Palo Alto, CA 94301 Palo Alto, CA 94301
Attention: Jay C. Hoag Attention: Jay C. Hoag.
Technology Crossover Ventures II, C.V. Technology Crossover Ventures II, C.V.
c/o Technology Crossover Ventures c/o Technology Crossover Ventures
56 Main Street, Suite 210 56 Main Street, Suite 210
Millburn, NJ 07041 Millburn, NJ 07041
Attention: Robert C. Bensky Attention: Robert C. Bensky
with a copy to: with a copy to:
c/o Technology Crossover Ventures c/o Technology Crossover Ventures
575 High Street, Suite 400 575 High Street, Suite 400
Palo Alto, CA 94301 Palo Alto, CA 94301
Attention: Jay C. Hoag Attention: Jay C. Hoag.
<PAGE>
EXHIBIT D
---------
SCHEDULE OF HOLDERS
OF SERIES D PREFERRED STOCK
<TABLE>
<CAPTION>
Name and Address
- -----------------------------------------------------------------------------------------
<S> <C>
BancBoston Ventures Inc. The Chase Manhattan Bank,
435 Tasso Street, Suite 250 As Trustee for First Plaza Group Trust
Palo Alto, CA 94301 Global Investor Services
Attn: Maia Heymann 4 Chase Metro Tech Center, 18/th/ Floor
Brooklyn, NY 11245
Attn: John F. Weeda
Private Equity Portfolio II, LLC Technology Crossover Ventures II, L.P.
175 Federal Street, 10/th/ Floor 56 Main Street, Suite 210
Boston, MA 02110 Millburn, NJ 07041
Attn: Glen Holland Attn: Robert C. Bensky
Battery Ventures III, L.P. TCV II (Q), L.P.
20 William Street 56 Main Street, Suite 210
Wellesley, MA 01282 Millburn, NJ 07041
Attn: Rick Frisbie Attn: Robert C. Bensky
Boston Millennia Partners Limited Partnership Technology Crossover Ventures II, C.V.
30 Rowes Wharf 56 Main Street, Suite 210
Boston, MA 02110 Millburn, NJ 07041
Attn: Martin J. Hernon Attn: Robert C. Bensky
Robert Ducommun TCV II Strategic Partners L.P.
1155 Park Avenue, Apt. 1 SW 56 Main Street, Suite 210
New York, NY 10128 Millburn, NJ 07041
Attn: Robert C. Bensky
Palmer G. & Charles E. Ducommun TCV II, V.O.F.
Charitable Annuity Trust 56 Main Street, Suite 210
1155 Park Avenue, Apt. 1 SW Millburn, NJ 07041
New York, NY 10128 Attn: Robert C. Bensky
Essex Private Placement Fund II,
Limited Partnership Boston Millennia Associates I, Limited
c/o Essex Investment Mgt. Company Partnership
125 High Street 30 Rowes Wharf
Boston, MA 02110 Boston, MA 02110
Attn: Susan Stickells Attn: Martin J. Hernon
</TABLE>
<PAGE>
EXHIBIT E
SCHEDULE OF XTEND-TECH HOLDERS
<PAGE>
EXHIBIT E
to
EXHIBIT 4.2
SCHEDULE 1 - LIST OF SHAREHOLDERS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
SHAREHOLDER NUMBER TOTAL NO. SHARES OF NO. OF
OF OF SHARES INVENTA SHARES
SHARES OF INVENTA TO BE IN
OF TO BE RECEIVED ESCROW
XTEND- RECEIVED AT AT
TECH CLOSING CLOSING
HELD
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RICHARD M. CERWONKA* 20,100 271,350 94,972 176,378
- -----------------------------------------------------------------------------------------------
MARK BREZNAK* 13,800 186,300 65,205 121,095
- -----------------------------------------------------------------------------------------------
JOHN E. PIKE* 12,000 162,000 56,700 105,300
- -----------------------------------------------------------------------------------------------
SCOTT GRAY* 10,000 135,000 47,250 87,750
- -----------------------------------------------------------------------------------------------
JOHN MCVICKER* 2,000 27,000 9450 17,550
- -----------------------------------------------------------------------------------------------
MICHAEL SWAFFORD* 2,000 27,000 9450 17,550
- -----------------------------------------------------------------------------------------------
DEREK NASH* 3,000 40,500 14,175 26,325
- -----------------------------------------------------------------------------------------------
JAMES Z. PEEPAS(1) 7,800 105,300 105,300
- -----------------------------------------------------------------------------------------------
FRANK RUSSIN 800 10,800 10,800
- -----------------------------------------------------------------------------------------------
INTERMODAL DATABASE 14,250 192,375 192,375
COMMUNICATION
SYSTEMS, INC. (IDCS)
- -----------------------------------------------------------------------------------------------
JAMES Z. PEEPAS(1) 5,700 76,950 76,950
- -----------------------------------------------------------------------------------------------
JOSEPH A. DE CAPUA 2,850 38,475 38,475
- -----------------------------------------------------------------------------------------------
GORDON KUHN 5,700 76,950 76,950
- -----------------------------------------------------------------------------------------------
TOTALS 100,000 1,350,000 500,850 for 551,948
Investors;
297,202 for
Employee
Shareholders
- -----------------------------------------------------------------------------------------------
</TABLE>
(1) Same Individual
*Indicates Employee Shareholders
<PAGE>
EXHIBIT 10.1
INVENTA CORPORATION
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
-------------------------------------------
July 8, 1994
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Purchase and Sale of Series A Preferred Stock .......... 1
1.1 Sale and Issuance of Common Stock .............. 1
1.2 Closing ........................................ 1
1.3 Warrants ....................................... 1
2. Representations and Warranties of the Company .......... 1
2.1 Organization, Good Standing and Qualification .. 2
2.2 Capitalization ................................. 2
2.3 Subsidiaries ................................... 2
2.4 Authorization .................................. 2
2.5 Valid Issuance of Securities ................... 2
2.6 Governmental Consents .......................... 3
2.7 Litigation ..................................... 3
2.8 Intangible Property ............................ 3
2.9 Compliance with Other Instruments .............. 4
2.10 Disclosure ..................................... 4
2.11 Registration Rights ............................ 4
2.12 Title to Property and Assets ................... 4
2.13 Financial Statements ........................... 5
2.14 Changes ........................................ 5
2.15 Minute Books ................................... 6
2.16 Labor Agreements and Actions ................... 6
3. Representations and Warranties of the Investors ........ 7
3.1 Authorization .................................. 7
3.2 Purchase Entirely for Own Account .............. 7
3.3 Disclosure of Information ...................... 7
3.4 Economic Risk .................................. 7
3.5 Restricted Securities .......................... 8
3.6 Further Limitations on Disposition ............. 8
3.7 Legends ........................................ 8
4. California Commissioner of Corporations ................ 9
4.1 Corporate Securities Law ....................... 9
5. Conditions of Investor's Obligations at Closing ........ 9
5.1 Representations and Warranties ................. 9
5.2 Performance .................................... 9
5.3 Articles of Incorporation ...................... 9
5.4 Compliance Certificate ......................... 9
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
6. Conditions of the Company's Obligations at Closing ..... 9
6.1 Representations and Warranties ................. 9
6.2 Payment of Purchase Price ...................... 10
6.3 Legal Matters .................................. 10
7. Registration Rights .................................... 10
7.1 Definitions .................................... 10
7.2 Restrictive Legend ............................. 11
7.3 Notice of Proposed Transfers ................... 11
7.4 Demand Registration ............................ 12
7.5 Piggyback Registration ......................... 12
7.6 Underwriting ................................... 13
7.7 Blue Sky ....................................... 14
7.8 Expenses of Registration ....................... 15
7.9 Registration Procedures ........................ 15
7.10 Information Furnished by Holder ................ 15
7.11 Indemnification ................................ 15
7.12 Rule 144 Reporting ............................. 17
7.13 Transfer of Registration Rights ................ 18
8. Right of First Refusal ................................. 18
8.1 Grant of Right ................................. 18
8.2 New Securities ................................. 18
8.3 Notice ......................................... 19
8.4 Sale after Notice .............................. 19
8.5 Expiration ..................................... 19
8.6 Assignment ..................................... 20
9. Covenants of the Company ............................... 20
9.1 Delivery of Financial Statements ............... 20
9.2 Termination of Information Covenant ............ 21
9.3 Key Man Life Insurance ......................... 21
9.4 Board of Directors ............................. 21
10. Miscellaneous .......................................... 21
10.1 Survival of Warranties ......................... 21
10.2 Transfer; Successors and Assigns ............... 21
10.3 Governing Law .................................. 22
10.4 Counterparts ................................... 22
10.5 Titles and Subtitles ........................... 22
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
10.6 Notices ........................................ 22
10.7 Finder's Fee ................................... 22
10.8 Expenses ....................................... 22
10.9 Amendments and Waivers ......................... 22
10.10 Severability ................................... 23
10.11 Aggregation of Stock ........................... 23
10.12 Entire Agreement ............................... 23
EXHIBIT A Schedule of Investors
EXHIBIT B Amended and Restated Articles of Incorporation
EXHIBIT C Schedule of Exceptions to Representations and Warranties
EXHIBIT D Form of Warrant
EXHIBIT E List of Registrable Securities
EXHIBIT F Form of Proprietary Information Agreement
</TABLE>
-iii-
<PAGE>
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
-------------------------------------------
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT ("Agreement") is made as
of the 8th day of July 1994 by and between Inventa Corporation, a California
corporation (the "Company"), and the persons and entities listed on the Schedule
of Investors attached hereto as Exhibit A (the "Investors").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Series A Preferred Stock
---------------------------------------------
1.1. Sale and Issuance of Common Stock.
---------------------------------
(a) The Company shall adopt and file with the Secretary of
State of California on or before the Closing (as defined below) the Amended and
Restated Articles of Incorporation in the form attached hereto as Exhibit B.
(b) Subject to the terms and conditions of this Agreement,
the Investors agree to purchase at the Closing and the Company agrees to sell
and issue to the Investors at the Closing that number of shares of the Company's
Series A Preferred Stock (the "Stock") for the aggregate purchase price set
forth opposite each Investor's name on Exhibit A attached hereto, at a purchase
price of $1.00 per share.
1.2 Closing Date; Delivery. The purchase and sale of the Stock
------------------------
shall take place at the offices of Wilson, Sonsini, Goodrich & Rosati, 650 Page
Mill Road, Palo Alto, California, at 9:00 a.m., on July 8, 1994, or at such
other time and place as the Company and the Investors 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 Stock which such Investor is purchasing against delivery to the
Company by such Investor of a check made payable to the Company or wire transfer
of the aggregate purchase price therefor.
1.3. Warrants. At the Closing, the Company shall issue to each
--------
Investor a Warrant ("Warrant") in the form attached hereto as Exhibit D. Each
Warrant shall be exercisable at the Investor's option for that number of shares
of Series A Preferred Stock of the Company equal to one-fourth of the number of
shares of Stock purchased by such Investor at the Closing, at an exercise price
of $1.00 per share. The Warrants shall expire at the earlier of (i) December 31,
1999, (ii) a registered public offering of the Company's securities, or (iii) a
merger, reorganization or sale of all or substantially all of the Company's
assets.
2. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to the Investors that,
<PAGE>
except as set forth on a Schedule of Exceptions attached hereto as Exhibit C,
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 corporation duly organized, validly existing and in good standing under the
laws of the State of California and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
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.
--------------
(a) The authorized capital of the Company will consist,
immediately prior to the Closing, of (i) 500,000 shares of Preferred Stock, all
of which are designated Series A Preferred Stock, and none of which are issued
and outstanding, and (ii) 10,000,000 shares of Common Stock, of which 2,250,000
shares are issued and outstanding. The Company has reserved 675,000 shares of
its Common Stock for issuance pursuant to its 1993 Stock Option Plan. Except as
set forth in the Schedule of Exceptions attached as Exhibit C hereto, there are
no outstanding options, warrants, rights (including conversion or preemptive
rights) or agreements, orally or in writing, for the purchase or acquisition
from the Company of any shares of its capital stock.
2.3 Subsidiaries. The Company does not presently own or control,
------------
directly or indirectly, any interest in any other corporation, association, or
other business entity.
2.4 Authorization. All corporate action on the part of the
-------------
Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement, the performance of all
obligations of the Company hereunder and the authorization, issuance and
delivery of the Stock has been taken or will be taken prior to the Closing, and
this Agreement constitutes a valid and legally binding obligation of the
Company, enforceable in accordance with its terms.
2.5 Valid Issuance of Securities.
----------------------------
(a) The Stock that is being issued to 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. Based in part upon the representations of the Investors
in this Agreement, the Stock will be issued in compliance with all applicable
federal and state securities laws.
-2-
<PAGE>
(b) The shares of Common Stock outstanding prior to the
Closing are all duly and validly authorized and issued, fully paid and
nonassessable, and were issued in compliance with all applicable federal and
state securities laws.
(c) The Warrants to be issued to the Investors in
connection with the transactions contemplated by this Agreement will be duly and
validly authorized and issued, fully paid and nonassessable, and will be issued
in compliance with all applicable federal and state securities laws.
2.6 Governmental Consents. No consent, approval, order or
---------------------
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for (a) 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 in accordance with such section,
and (b) compliance with the Blue Sky Laws of the various states in which the
Investors may reside, which compliance will be effected in accordance with such
laws. The Company currently holds all licenses, permits, franchises,
registrations and qualifications which may be required to conduct its business,
and all such licenses, permits, franchises, registrations and qualifications are
valid and in full force and effect.
2.7 Litigation. There is no action, suit, proceeding or
----------
investigation pending or currently threatened against the Company that questions
the validity of this Agreement or the right of the Company to enter into it, or
to consummate the transactions contemplated hereby, or that might result, either
individually or in the aggregate, in any material adverse changes in the assets,
condition, affairs or prospects of the Company, financially or otherwise, or any
change in the current equity ownership of the Company, nor is the Company aware
that there is any basis for the foregoing. The foregoing includes, without
limitation, actions pending or threatened (or any basis therefor known to the
Company) involving the prior employment of any of the Company's employees, their
use in connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers. The Company is not a party or subject
to the provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
2.8 Intangible Property. The Company, to its knowledge after due
-------------------
inquiry, and that of its officers after due inquiry, has all right, title and
interest in and to all intangible property and
-3-
<PAGE>
technology or is able to obtain on reasonable terms, all permits, licenses and
other authority necessary to conduct its business as presently conducted. The
Company, and, to the knowledge of the Company, its officers and employees, have
not improperly used and are not making improper use of any confidential
information or trade secrets of others, including those of any former employer
of an officer or employee.
2.9 Compliance with Other Instruments.
---------------------------------
(a) The Company is not in violation or default of any
provisions of its Amended and Restated Articles 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 and the consummation of the
transactions contemplated hereby 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, contract, rule, or statute, or of the Company's Restated Articles
of Incorporation or Bylaws, or an event which results in the creation of any
lien, charge or encumbrance upon any assets of the Company.
(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.
2.10 Disclosure. The Company has fully provided the Investors with
----------
all the information which the Investors have requested for deciding whether to
acquire the Stock and all information which the Company believes is reasonably
necessary to enable the Investors to make such decision. Neither this Agreement
nor any other statements or certificates made or delivered in connection
herewith 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,
except that, with respect to financial projections, the Company represents only
that such projections were prepared in good faith and that the Company believes
there is a reasonable basis for such projections.
2.11 Registration Rights. Except as provided in Section 7 of this
-------------------
Agreement, the Company has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity.
2.12 Title to Property and Assets. The Company owns its property
----------------------------
and assets free and clear of all mortgages, liens, loans
-4-
<PAGE>
and encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair the Company's ownership or use
of such property or assets. With respect to the property and assets it leases,
the Company is in compliance with such leases and, to the best of its knowledge,
holds a valid leasehold interest free of any liens, claims or encumbrances.
2.13 Financial Statements. The Company has delivered to the
--------------------
Investor its financial statements (balance sheet and profit and loss statement
and statement of shareholders equity) (i) at April 30, 1994 and the four (4)
month period then ended and (ii) at December 31, 1993 and for the fiscal year
then ended (collectively, the "Financial Statements"). The Financial Statements
are complete and correct in all material respects and have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated and with each other. The Financial
Statements accurately set out and describe the financial condition and operating
results of the Company as of the dates, and for the periods, indicated therein.
Except as set forth in the Financial Statements, the Company has no liabilities,
contingent or otherwise, of a nature required by generally accepted accounting
principles to be reflected in a balance sheet or disclosed in the notes thereto,
other than liabilities incurred in the ordinary course of business subsequent to
April 30, 1994.
2.14 Changes. Since April 30, 1994 there has not been:
-------
(a) any change in the assets, liabilities, financial
condition or operating results of the Company from that reflected in the
Financial Statements, except changes in the ordinary course of business which
have not been, in the aggregate, materially adverse.
(b) any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the assets, properties,
financial condition, operating results, prospects or business of the Company (as
such business is presently conducted and as it is proposed to be conducted);
(c) any waiver by the Company of a valuable right or of a
material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and which is not material to 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);
-5-
<PAGE>
(e) any change or amendment to a material contract or
arrangement by which the Company or any of its assets or properties is bound or
to which the Company or any of such assets or properties is subject;
(f) any material change in any compensation arrangement or
agreement with any employee; or
(g) to the Company's knowledge, any other event or condition
of any character which might materially and adversely affect 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).
2.15 Minute Books. The Company has offered to provide to the
------------
Investors the minute books of the Company, which contain a complete summary of
all meetings of directors and shareholders since the time of incorporation and
reflect all transactions referred to in such minutes accurately in all material
respects.
2.16 Labor Agreements and Actions. The Company is not bound by or
----------------------------
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.
The employment of each officer and employee of the Company is terminable at the
will of the Company.
2.17 Employee Plans. The Company has no "employee welfare benefit
--------------
plans" as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974 ("ERISA"). The Company (i) has not been required to contribute to, (ii)
has not terminated or withdrawn from, and (iii) is not aware of any withdrawal
liability assessed against the Company with respect to any defined benefit plan
as defined in Section 3(35) of ERISA or multiemployer plan as defined in Section
4001 of ERISA in which employees or former employees of the Company have
participated.
-6-
<PAGE>
2.18 Employees. The Company has not knowingly violated any
---------
employment-related laws, including, without limitation, laws relating to equal
employment opportunity, overtime pay and collective bargaining. To the
Company's knowledge, no key employee or sales representative of the Company, and
no group of employees, has any plans to terminate his or her employment with the
Company. Each United States employee of the Company with access to confidential
or proprietary information has executed a Proprietary Information Agreement, the
form of which is attached hereto as Exhibit F.
3. Representations and Warranties of the Investors. Each Investor for
-----------------------------------------------
itself hereby represents and warrants to the Company 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 the Investor in reliance upon the Investor's representation to the Company,
which by the Investor's execution of this Agreement the Investor hereby
confirms, that the Stock will be acquired for investment for the 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 the Investor has no present intention
of selling, granting any participation in, or otherwise distributing the same.
By executing this Agreement, the Investor further represents that the Investor
does not presently 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 Stock. The Investor represents that it
has full power and authority to enter into this Agreement.
3.3 Disclosure of Information. The Investor believes it has
-------------------------
received information that it considers necessary or appropriate for deciding
whether to acquire the Stock. The 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 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 Investor to rely thereon.
3.4 Economic Risk. The Investor has the capacity to protect his
-------------
own interests in connection with the purchase of the Stock, is capable of
evaluating the merits and risks of investment in the Company, can make an
informed investment decision by reason of (i) his preexisting personal or
business relationship with the Company or any of its officers, directors, or
control persons, or (ii) his business and financial knowledge and experience or
the
-7-
<PAGE>
business and financial knowledge and experience of my professional advisers,
and is able to bear the substantial economic risks of an investment in the Stock
for an indefinite period of time.
3.5 Restricted Securities. It understands that the shares of
---------------------
Common Stock sold hereunder 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 shares may be resold without registration under the
Securities Act of 1933, as amended (the "Act"), only in certain limited
circumstances. In this connection, the Investor represents that it is familiar
with SEC Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Act.
3.6 Further Limitations on Disposition. Without in any way
----------------------------------
limiting the representations set forth above, the Investor further agrees not to
make any disposition of all or any portion of the Stock unless and until:
(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) The 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, the Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration under the Act.
(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 the Investor to a shareholder, partner or other
affiliate of the Investor, if the transferee or transferees agree in writing to
be subject to the terms hereof to the same extent as if they were the Investor
hereunder.
3.7 Legends. It is understood that the Stock, and the shares of
-------
Common Stock issuable upon conversion thereof and any securities issued in
respect thereof or exchange therefor may bear one or all of the following
legends:
(a) The legend set forth in Section 7.2 hereof.
(b) Any legend required by the laws of the State of
California, including any legend required by the California Department of
Corporations.
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<PAGE>
(c) Any legend required by the Blue Sky laws of any other state
to the extent such laws are applicable to the shares represented by the
certificate so legended.
4. California Commissioner of Corporations.
---------------------------------------
4.1 Corporate Securities Law. THE SALE OF THE SECURITIES THAT IS
------------------------
THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA, 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 THE
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
-----------------------------------------------
the Investors under Section 1.1 of this Agreement are subject to the
fulfillment, on or before the First Closing, of each of the following
conditions:
5.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 2 shall be true and correct in
all material respects as of the 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 Articles of Incorporation. The Company shall have filed with,
-------------------------
and have had accepted for filing by, the California Secretary of State the
Amended and Restated Articles of Incorporation of the Company attached as
Exhibit B hereto.
5.4 Compliance Certificate. The President of the Company shall
----------------------
deliver to the Investors at the Closing a certificate certifying that the
conditions specified in Sections 5.1 and 5.2 have been fulfilled.
6. Conditions of the Company's Obligations at Closing. The
--------------------------------------------------
obligations of the Company to the Investors under this Agreement are subject to
the fulfillment, on or before the Closing, of each of the following conditions
by the Investor:
6.1 Representations and Warranties. The representations and
------------------------------
warranties of the Investors contained in Section 3 shall be true and correct in
all material respects as of the Closing.
-9-
<PAGE>
6.2 Payment of Purchase Price. The Investors shall have delivered
-------------------------
to the Company the purchase price specified in Section 1.1 hereof.
6.3 Legal Matters. All material matters of a legal nature which
-------------
pertain to this Agreement, and the transactions contemplated hereby, shall have
been reasonably approved by counsel to the Company.
7. Registration Rights. The Company covenants and agrees as follows:
-------------------
7.1 Definitions. For purposes of this Section 7:
-----------
(a) "Commission" shall mean the Securities and Exchange
----------
Commission or any other federal agency at the time administering the Securities
Act.
(b) "Holder" shall mean any holder of outstanding
------
Registrable Securities which have not been sold to the public or an assignee or
transferee of Registration rights as permitted by Section 7.13.
(c) "Initiating Holders" shall mean Holders who in the
------------------
aggregate hold at least forty percent (40%) of the Registrable Securities.
(d) The terms "Register", "Registered" and "Registration"
-------- ---------- ------------
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act ("Registration Statement"), and
the declaration or ordering of the effectiveness of such Registration Statement.
(e) "Registrable Securities" shall mean any Common Stock
----------------------
held by the Holder as set forth on Exhibit E attached hereto, or other
securities issued as a dividend or other distribution with respect to, in
exchange for or in replacement of Registrable Securities.
(f) "Registration Expenses" shall mean all expenses incurred
---------------------
by the Company in complying with Section 7.4 or 7.5 of this Agreement,
including, without limitation, all federal and state registration, qualification
and filing fees, printing expenses, fees and disbursements of counsel for the
Company and of special counsel for the Holders (if different from the Company),
blue sky fees and expenses, and the expense of any special audits incident to or
required by any such registration and excluding any Selling Expenses.
(g) "Securities Act" shall mean the Securities Act of 1933,
--------------
as amended, or any similar federal statute, and the
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<PAGE>
rules and regulations of the Commission thereunder, all as the same shall be in
effect at the time.
(h) "Selling Expenses" shall mean all underwriting discounts
----------------
and selling commissions applicable to the sale of Registrable Securities
pursuant to this Agreement.
7.2 Restrictive Legend . Each certificate representing (i)
------------------
the Registrable Securities and (ii) any other securities issued in respect of
the Registrable Securities upon any stock split, stock dividend,
recapitalization, merger, consolidation or similar event, shall (unless
otherwise permitted by the provisions of Section 7.3 below) be stamped or
otherwise imprinted with a legend in the following form (in addition to any
legend under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT
FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND
RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST
MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICES OF THE CORPORATION.
The Investor and each Holder consents to the Company making a notation
on its records and giving instructions to any transfer agent of the Common Stock
in order to implement the restrictions on transfer established in this Section
7.
7.3 Notice of Proposed Transfers . The holder of each
----------------------------
certificate representing restricted securities as that term is defined in Rule
144 by acceptance thereof agrees to comply in all respects with the provisions
of this Section 7.3. Prior to any proposed sale, assignment, transfer or pledge
of any restricted securities (other than (i) a transfer not involving a change
in beneficial ownership or (ii) in transactions involving the distribution
without consideration of restricted securities by any of the Holders to any of
its partners, retired partners) unless there is in effect a registration
statement under the Securities Act covering the proposed transfer, the holder
thereof shall give written notice to the Company of such holder's intention to
effect such transfer, sale, assignment or pledge. Each such notice shall
describe the manner and circumstances of the proposed transfer, sale, assignment
or pledge in sufficient detail, and shall be accompanied, at such holder's
expense by either (i) a written opinion, addressed to the Company, of legal
counsel who shall be,
-11-
<PAGE>
and whose legal opinion shall be, reasonably satisfactory to the Company
(provided that no such opinion shall be required for transfers pursuant to Rule
144), to the effect that the proposed transfer of the restricted securities may
be effected without registration under the Securities Act, or (ii) a "no action"
letter from the Commission to the effect that the transfer of such securities
without registration will not result in a recommendation by the staff of the
Commission that action be taken with respect thereto, whereupon the holder of
such restricted securities shall be entitled to transfer such restricted
securities in accordance with the terms of the notice delivered by the holder to
the Company. Each certificate evidencing the restricted securities transferred
as above provided shall bear, except if such transfer is made pursuant to Rule
144, the appropriate restrictive legend set forth in Section 7.2 above, except
that such certificate shall not bear such restrictive legend if in the opinion
of counsel for such holder and the Company such legend, is not required in order
to establish compliance with any provision of the Securities Act.
7.4 Demand Registration.
-------------------
(a) Request for Registration on Form S-3. Subject to the
------------------------------------
terms of this Agreement, in the event that the Company shall receive from the
Initiating Holders a written request that the Company effect any Registration on
Form S-3 (or any successor form to Form S-3 regardless of its designation) for
an offering of Registrable Securities the reasonably anticipated aggregate
offering price to the public of which would exceed $1,000,000, the Company
shall: (i) promptly give written notice of the proposed Registration to all
other Holders; and (ii) as soon as practicable, use its best efforts to effect
Registration of the Registrable Securities specified in such request, together
with any Registrable Securities of any Holder joining in such request as are
specified in a written request made within twenty (20) days after the written
notice from the Company. The Company shall not be obligated to effect more than
four such Registrations under this Section 7.4(a), nor more than one such
Registration in any twelve-month period.
(b) Registration of Other Securities. Any Registration
--------------------------------
Statement filed pursuant to the request of the Initiating Holders under this
Section 7.4 shall only include Registrable Securities.
7.5 Piggyback Registration. Subject to the terms of this
----------------------
Agreement, if at any time or from time-to-time, the Company shall determine to
register any of its securities, either for its own account or the account of a
security holder or holders, other than a registration on Form S-8 relating
solely to employee stock option or purchase plans, a registration on Form S-4
relating solely to an SEC Rule 145 transaction, a registration on any other
-12-
<PAGE>
form (other than Form S-1 or S-3) which does not include substantially the same
information as would be required to be included in a Registration Statement
covering the sale of Registrable Securities, the Company will: (i) promptly give
each Holder written notice thereof (which shall include a list of the
jurisdictions in which the Company intends to attempt to qualify such securities
under the applicable Blue Sky or other state securities laws) and (ii) include
in such Registration (and any related registration and/or qualification under
Blue Sky laws or other compliance), and in any underwriting involved therein,
all the Registrable Securities specified in a written request delivered to the
Company by any Holder within 30 days after delivery of such written notice from
the Company.
7.6 Underwriting.
------------
(a) Notice of Underwriting. If a Registration of which the
----------------------
Company gives notice is for a Registered public offering involving an
underwriting, the Company shall so advise the Holders as a part of the written
notice given pursuant to Section 7.4(a) or 7.5. In such event, the right of any
Holder to Registration shall be conditioned upon such underwriting and the
inclusion of such Holder's Registrable Securities in such underwriting to the
extent provided in this Section 7.6. All Holders proposing to distribute their
securities through such underwriting shall (together with the Company and any
other holders distributing their securities through such underwriting) enter
into an underwriting agreement with the Underwriter's Representative for such
offering. The Holders shall have no right to participate in the selection of the
underwriters for an offering pursuant to this Section 7.6.
(b) Marketing Limitation. In the event the Underwriter's
--------------------
Representative advises the Holders seeking Registration of Registrable
Securities in writing that market factors (including, without limitation, the
aggregate number of shares of Common Stock requested to be Registered, the
general condition of the market, and the status of the persons proposing to sell
securities pursuant to the Registration) require a limitation of the number of
shares to be underwritten, the Underwriter's Representative may limit, but not
to less than 10% of the total number of shares proposed to be registered under
this Section 7.6 (unless such Registration is the Company's initial public
offering, in which case no limitation on reduction shall be imposed), the number
of shares of Registrable Securities to be included in such Registration and
underwriting; provided however, that any Registrable Securities so excluded
shall retain any and all Registration rights set forth in this Section.
(c) Allocation of Shares. In the event that the
--------------------
Underwriter's Representative limits the number of shares to be included in a
Registration pursuant to Section 7.4(b), the number
-13-
<PAGE>
of shares to be included in such Registration shall be allocated in the
following manner:
(i) in the case of a Registration pursuant to
Section 7.5, shares held by persons who are not legally entitled to include
shares in such Registration shall first be excluded from such Registration and
underwriting to the extent required by such limitation. If a limitation of the
number of shares is still required after such exclusion, shares of Registrable
Securities shall next be excluded from such Registration and underwriting to the
extent required by such limitation, all prior to any limitation on the shares to
be Registered by the Company.
The number of shares that may be included in the
Registration and underwriting by selling shareholders shall be allocated among
all Holders thereof and other holders of securities other than Registrable
Securities requesting and legally entitled to include shares in such
Registration, in proportion, as nearly as practicable, to the respective amounts
of securities (including Registrable Securities) which such Holders and such
other holders would otherwise be entitled to include in such Registration. No
Registrable Securities or other securities excluded from the underwriting by
reason of this Section 7.6(c) shall be included in the Registration Statement.
(d) Withdrawal. If any Holder disapproves of the terms of
----------
any such underwriting, he may elect to withdraw therefrom by written notice to
the Company and the underwriter delivered at least seven days prior to the
effective date of the Registration Statement. Any Registrable Securities or
other securities excluded or withdrawn from such underwriting shall be withdrawn
from such Registration.
7.7 Blue Sky. In the event of any Registration of Registrable
--------
Securities pursuant to Section 7.4 or 7.5, the Company will exercise its best
efforts to register and/or qualify the securities covered by the Registration
Statement under such other securities or Blue Sky laws of such jurisdictions
(not exceeding 20 unless otherwise agreed to by the Company) as shall be
reasonably appropriate for the distribution of such securities; provided,
however, that (i) the Company shall not be required to qualify to do business or
to file a general consent to service of process in any such states or
jurisdictions, and (ii) notwithstanding anything in this Agreement to the
contrary, in the event any jurisdiction in which the securities shall be
qualified imposes a non-waivable requirement that expenses incurred in
connection with the qualification of the securities be borne by selling
shareholders, such expenses shall be payable pro rata by selling shareholders.
-14-
<PAGE>
7.8 Expenses of Registration. Registration expenses incurred with
------------------------
no more than two Registrations pursuant to Section 7.4, and all Registration
Expenses incurred in connection with Registrations pursuant to Section 7.5,
shall be borne by the Company, excluding underwriting discounts and commissions.
All Selling Expenses shall be borne by the holders of the securities Registered
pro rata on the basis of the number of shares registered.
7.9 Registration Procedures. The Company will keep each Holder
-----------------------
whose Registrable Securities are included in any Registration pursuant to this
Agreement advised as to the initiation and completion of such Registration. The
Company shall: (a) keep such Registration effective for a period of 120 days or
until the Holder or Holders have completed the distribution described in the
Registration Statement relating thereto, whichever first occurs; and (b) furnish
such number of prospectuses (including preliminary prospectuses) and other
documents as a Holder from time to time reasonably may request.
7.10 Information Furnished by Holder. It shall be a condition
-------------------------------
precedent of the Company's obligations under this Section that each Holder of
Registrable Securities included in any Registration furnish to the Company such
information regarding such Holder and the distribution proposed by such Holder
or Holders as the Company may reasonably request.
7.11 Indemnification.
---------------
(a) Company's Indemnification of Holders. To the extent
------------------------------------
permitted by law, the Company shall indemnify each Holder, each of its officers,
directors and constituent partners, legal counsel for the Holders, and each
person controlling such Holder, with respect to which Registration,
qualification or compliance of Registrable Securities has been effected pursuant
to this Agreement against all claims, losses, damages or liabilities (or actions
in respect thereof) to the extent such claims, losses, damages or liabilities
arise out of or are based upon any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus or other document
(including any related Registration Statement) incident to any such
Registration, qualification or compliance, or are based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
the Company of any rule or regulation promulgated under the Securities Act
applicable to the Company and relating to action or inaction required of the
Company in connection with any such Registration, qualification or compliance;
and the Company will reimburse each such Holder, such directors, officers,
partners or law firm, each such underwriter and each person who controls any
such Holder or underwriter, for any legal and any other expenses
-15-
<PAGE>
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action; provided, however, that the indemnity
contained in this Section 7.11 shall not apply to amounts paid in settlement of
any such claim, loss, damage, liability or action if settlement is effected
without the consent of the Company (which consent shall not unreasonably be
withheld); and provided, further, that the Company will not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based upon any untrue statement or omission based upon
written information furnished to the Company by such Holder, officer, director,
partner, counsel or controlling person and stated to be specifically for use in
connection with the Registration and offering of securities of the Company.
(b) Holder's Indemnification of Company. To the extent permitted
-----------------------------------
by law, each Holder shall, if Registrable Securities held by such Holder are
included in the securities as to which such Registration, qualification or
compliance is being effected pursuant to this Agreement, indemnify the Company,
each of its directors and officers, each legal counsel and independent
accountant of the Company, each underwriter, if any, of the Company's securities
covered by such a Registration Statement, each person who controls the Company
or such underwriter within the meaning of the Securities Act, and each other
such Holder, each of its officers, directors and constituent partners and each
person controlling such other Holder, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based upon any
untrue statement (or alleged untrue statement) of a material fact contained in
any such Registration Statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, or any violation by such Holder of any rule or regulation
promulgated under the Securities Act applicable to such Holder and relating to
action or inaction required of such Holder in connection with any such
Registration, qualification or compliance; and will reimburse the Company, such
Holders, such directors, officers, partners, persons, law and accounting firms,
underwriters and control persons for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such Registration Statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by such Holder, or an officer, director, constituent
partner, counsel or controlling persons of such Holder, and stated to be
specifically for use in connection with the Registration and offering of
securities of the Company.
-16-
<PAGE>
(c) Indemnification Procedure. Promptly after receipt by
-------------------------
an indemnified party under this Section 7.11 of notice of the commencement of
any action, such indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party under this Section 7.11 notify the
indemnifying party in writing of the commencement thereof and generally
summarize such action. The indemnifying party shall have the right to
participate in and to assume the defense of such claim; provided, however, that
the indemnifying party shall be entitled to select counsel for the defense of
such claim with the approval of any parties entitled to indemnification, which
approval shall not be unreasonably withheld; provided further, however, that if
either party reasonably determines that there may be a conflict between the
position of the Company and the Holders in conducting the defense of such
action, suit or proceeding by reason of recognized claims for indemnity under
this Section 7.11 then counsel for such party shall be entitled to conduct the
defense to the extent reasonably determined by such counsel to be necessary to
protect the interest of such party. The failure to notify an indemnifying party
promptly of the commencement of any such action, if prejudicial to the ability
of the indemnifying party to defend such action, shall relieve such indemnifying
party, to the extent so prejudiced, of any liability to the indemnified party
under this Section 7.11 but the omission so to notify the indemnifying party
will not relieve such party of any liability that such party may have to any
indemnified party otherwise other than under this Section 7.11.
7.12 Rule 144 Reporting. With a view to making available the
------------------
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the restricted securities to the public without
registration, after such time as a public market exists for the Common Stock of
the Company, the Company agrees to use its best efforts to:
(a) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act, at all
times after the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Securities Exchange Act of 1934, as
amended.
(b) Use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Securities Exchange Act of 1934, as amended (at any time
after it has become subject to such reporting requirements);
(c) So long as a Purchaser owns any restricted securities
to furnish to the Purchaser forthwith upon request a written statement by the
Company as to its compliance with the reporting requirements of said Rule 144
(at any time after 90 days after the effective date of the first registration
statement filed
-17-
<PAGE>
by the Company for an offering of its securities to the general public), and of
the Securities Act and the Securities Exchange Act of 1934 (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
of the Company and other information in the possession of or reasonably
obtainable by the Company as a Purchaser may reasonably request in availing
itself of any rule or regulation of the Commission allowing a Purchaser to sell
any such securities without registration.
7.13 Transfer of Registration Rights. The rights to cause the
-------------------------------
Company to register securities granted Holders under Sections 7.4 and 7.5 may be
assigned to a transferee or assignee reasonably acceptable to the Company in
connection with any transfer or assignment of Registrable Securities by a Holder
provided that (i) such transfer may otherwise be effected in accordance with
applicable securities laws, and (ii) such assignee or transferee acquires either
(A) at least 50,000 shares of Registrable Securities or (B) all Registrable
Securities held by such transferring or assigning Holder. Notwithstanding the
foregoing, the rights to cause the Company to register securities may be
assigned to any constituent partner of a Holder, without compliance with item
(ii) above, provided written notice thereof is promptly given to the Company.
8. Right of First Refusal.
----------------------
8.1 Grant of Right. Except as set forth in Section 8.5, the
--------------
Company hereby grants to each Investor who continues to hold Stock the right of
first refusal to purchase all or any part of such Investor's Pro Rata Share (as
hereinafter defined) of the New Securities (as defined in Section 8.2) which the
Company may, from time to time, propose to sell and issue. The Investors may
purchase said New Securities on the same terms and at the same price at which
the Company proposes to sell the New Securities. The "Pro Rata Share" of each
Investor, for purposes of this right of first refusal, is the ratio of the total
number of shares of Common Stock held by such Investor, including (i) any shares
of Common Stock into which shares of Preferred Stock held by such Investor are
convertible, and (ii) any shares deliverable upon the exercise of options of
other rights to purchase Common Stock held by such Investor, to the total number
of shares of Common Stock outstanding immediately prior to the issuance of the
New Securities (including (i) any shares of Common Stock into which outstanding
shares of Preferred Stock are convertible and (ii) any shares deliverable upon
the exercise of options of other rights to purchase Common Stock held by such
Investor).
8.2 New Securities. "New Securities" shall mean any capital
--------------
stock of the Company, whether now authorized or not, and any rights, options or
warrants to purchase said capital stock, and
-18-
<PAGE>
securities of any type whatsoever that are, or may become, convertible into said
capital stock; provided, however, that "New Securities" does not include (i) the
-------- -------
shares of Stock purchased pursuant to this Agreement or other securities issued
or issuable upon conversion of the Stock ("Conversion Shares"), (ii) securities
offered pursuant to a registration statement filed under the Securities Act of
1933 ("Securities Act"), (iii) securities issued pursuant to the acquisition of
another corporation by the Company by merger, purchase of substantially all of
the assets or other reorganization, (iv) shares offered pursuant to lease
financing transactions or bank or lending institution financing transactions,
and (v) all securities hereafter issued or issuable to officers, directors,
employees or consultants of the Company (for the primary purpose of soliciting
or retaining their employment or services) pursuant to any employee or
consultant stock offering, plan or arrangement approved by the Board of
Directors.
8.3 Notice. In the event the Company proposes to undertake
------
an issuance of New Securities, it shall give to the Investors written notice
(the "Notice") of its intention, describing the type of New Securities, number
of shares, the price, the terms upon which the Company proposes to issue the
same, and notice to the effect that each Investor must respond to such Notice
within thirty (30) days after the date thereof. The Investors shall have thirty
(30) days from the date of such Notice to purchase any or all of the New
Securities for the price and upon the terms specified in the Notice by giving
written notice to the Company and stating therein the quantity of New Securities
to be purchased and forwarding payment for such New Securities to the Company if
immediate payment is required by such terms, or in any event no later than
forty-five (45) days after the date of the Notice.
8.4 Sale after Notice. In the event any Investor fails to
-----------------
exercise in full the right of first refusal within said thirty (30) day period,
the Company shall have ninety (90) days thereafter to sell or enter into an
agreement (pursuant to which the sale of New Securities covered thereby shall be
closed, if at all, within thirty (30) days from the date of said agreement) to
sell the New Securities respecting which such Investor's rights were not
exercised, at a price and upon general terms no more favorable to the Investors
thereof than specified in the Notice. In the event the Company has not sold the
New Securities within said ninety (90) day period (or sold and issued New
Securities in accordance with the foregoing within thirty (30) days from the
date of said agreement), the Company shall not thereafter issue or sell any New
Securities without first offering such securities to the Investors in the manner
provided above.
8.5 Expiration. The right of first refusal granted under this
----------
Section 8 shall expire upon the earlier of:
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<PAGE>
(a) The closing of the Company's sale of its Common Stock in a
bona fide, firm commitment underwritten public offering pursuant to a
registration statement declared effective by the Securities and Exchange
Commission under the Securities Act of 1933.; or
(b) The date on which the Company is acquired by another entity by
merger, purchase of substantially all of its assets or other reorganization.
8.6 Assignment. The right of first refusal granted under this
----------
Section 8 is assignable by the Investors to any transferee of a minimum of Fifty
Thousand (50,000) shares of Preferred Stock or the Common Stock into which it
has been converted.
9. Covenants of the Company.
------------------------
9.1 Delivery of Financial Statements. The Company shall deliver to
--------------------------------
the Investors:
(a) as soon as practicable after the end of each fiscal year of
the Company an income statement for such fiscal year, a balance sheet of the
Company 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
audited and in reasonable detail, prepared in accordance with generally accepted
accounting principles ("GAAP");
(b) as soon as practicable after the end of each month of each
fiscal quarter of the Company an unaudited profit or loss statement and schedule
as to the sources and application of funds for each quarterly reporting period
and an unaudited balance sheet as of the end of such quarter in reasonable
detail;
(c) within ten (10) days of the end of each month, an unaudited
balance sheet as of the end of such month, including a comparison to plan, in
reasonable detail; provided, however, that the Company shall be required to
deliver such documents as required under this Section 9.1(c) only to Investors
(and affiliates of each Investor whose shares shall be aggregated with each such
Investor for purposes of this section), continuing to hold at least 100,000
shares of Series A Preferred Stock or Common Stock of the Company; and
(d) as soon as practicable after the end of each fiscal year of
the Company an annual business plan and budget; provided, however, that the
Company shall be required to deliver such documents as required under this
Section 9.1(d) only to Investors (and affiliates of each Investor whose shares
shall be aggregated with each such Investor for purposes of this section)
-20-
<PAGE>
continuing to hold at least 100,000 shares of Series A Preferred Stock or Common
Stock of the Company.
9.2 Termination of Information Covenant. The covenant set forth in
-----------------------------------
Section 9.1 shall terminate as to the Investors and be of no further force or
effect upon the initial sale of securities pursuant to a registration statement
filed by the Company under the Securities Act in connection with the firm
commitment underwritten offering of its securities to the general public is
consummated.
9.3 Key Man Life Insurance. Within thirty (30) days after the date of
----------------------
the Closing the Company shall obtain key man life insurance in an amount not
less than $2,000,000, with proceeds payable to the Company, on the life of Ashok
Santhanam.
9.4 Board of Directors.
------------------
(a) If upon the Closing, the number of authorized directors of
the Company is three, then as soon as practicable after the Closing, the Company
shall cause to be elected to its Board of Directors (i) one representative
elected by the Investors, and (ii) two representatives elected by the holders of
Common Stock of the Company, at least one of which shall be reasonably
acceptable to the Investors.
(b) If upon the Closing, the number of authorized directors of
the Company is five, then as soon as practicable after the Closing, the Company
shall cause to be elected to its Board of Directors (i) one representative
elected by the Investors, (ii) two representatives elected by the holders of
Common Stock of the Company, at least one of which shall be reasonably
acceptable to the Investors, and (iii) two representatives elected by the
Investors and the holders of Common Stock of the Company voting together as a
single class.
10. Miscellaneous.
-------------
10.1 Survival of Warranties. The warranties, representations and
----------------------
covenants of the Company and the 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.
10.2 Transfer; Successors and Assigns. 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. 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, obliga-
-21-
<PAGE>
tions, or liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement.
10.3 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.
10.4 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.
10.5 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.
10.6 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.
10.7 Finder's Fee. Except as elsewhere disclosed in this Agreement,
------------
or in Exhibit C hereto, each party represents that it neither is nor will be
obligated for any finder's fee or commission in connection with this
transaction. The Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, employees, or
representatives are responsible.
The Company agrees to indemnify and hold harmless the Investor from
any liability for any commission or compensation in the nature of a finder's 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.
10.8 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 attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
-22-
<PAGE>
10.9 Amendments and Waivers. Other than as provided in Section 7
----------------------
hereof, 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 a majority of the Investors, provided that any term of Section 7 may
be amended and the observance of any term of Section 7 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 then-outstanding Registrable Securities. Any amendment or waiver effected in
accordance with this Section shall be binding upon each transferee of any Stock
or Registrable Securities, each future holder of all such securities, and the
Company.
10.10 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.
10.11 Aggregation of Stock. All shares of Common Stock held or
--------------------
acquired by affiliated entities or person shall be aggregated for the purpose of
determining the availability of any rights under Section 7 of this Agreement.
10.12 Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the parties hereto pertaining to the subject matter hereof,
and any and all other written or oral agreements existing between the parties
hereto are expressly canceled.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
INVENTA CORPORATION
By: /s/ Ashok K. Santhanam
--------------------------------
Ashok K. Santhanam,
President
Address: 2620 Augustine Drive, Suite 225
Santa Clara, CA 95054
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<PAGE>
INVESTORS:
/s/ Robert Ducommun /s/ Harry A. Caunter
- --------------------------- ---------------------------
ROBERT DUCOMMUN HARRY A. CAUNTER
/s/ Ramesh Vasudevan /s/ Santhanam C. Shekar
- --------------------------- ---------------------------
RAMESH VASUDEVAN SANTHANAM C. SHEKAR
/s/ Gomati Venkateswaran /s/ Usha Vijayarajan
- --------------------------- ---------------------------
GOMATI VENKATESWARAN USHA VIJAYARAJAN
/s/ Maya S. Hattangady /s/ Andrew Potter
- --------------------------- ---------------------------
MAYA S. HATTANGADY ANDREW POTTER
/s/ Electra D. de Peyster PALMER G. AND CHARLES E.
- --------------------------- DUCOMMUN CHARITABLE ANNUITY
ELECTRA D. de PEYSTER TRUST, u/d/t dated 7/21/83
By: /s/ Robert Ducommun
-----------------------
Title: Trustee
--------------------
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<PAGE>
EXHIBIT A
---------
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
Name and Address Shares Amount
---------------------------- -------------- ------------
<S> <C> <C>
Robert Ducommun................................... 60,000 $ 60,000
P. O. Box 1042
Ross, CA 94957
Palmer G. and Charles E. Ducommun Charitable
Annuity Trust, u/d/t 7/21/83..................... 60,000 60,000
P.O. Box 1562
Ross, CA 94957
Attn: Robert Ducommun
Electra D. de Peyster............................. 60,000 60,000
2000 Redwood Hill Court
Santa Rosa, CA 95404
Harry A. Caunter.................................. 25,000 25,000
162 Fincharn Lane
Inverness, IL 60067
Ramesh Vasudevan.................................. 100,000 100,000
10 Tangreen Court #2105
Willowdale, Ontario
CANADA
Santhanam C. Shekar............................... 25,000 25,000
331 Blackfield Drive
Tiburon, CA 94920
Gomati Venkateswaran.............................. 15,000 15,000
A-1 Anand Bhavan
Alacrity Flats
South Bhog Road
T. Nagar Madras 600017
INDIA
Usha Vijayarajan.................................. 25,000 25,000
2/7 12th Cross
Rajmahal Extension
Bangalore 560080
INDIA
Maya S. Hattangady................................ 10,000 10,000
414 E. Lansing Way
Fresno, CA 93704
Andrew Potter..................................... 20,000 20,000
923 Cowper ------- --------
Palo Alto, CA 94301
TOTAL.................... 400,000 $400,000
</TABLE>
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<PAGE>
EXHIBIT B
Restated Articles
<PAGE>
[Logo of State of California]
================================================================================
CORPORATION DIVISION
I TONY MILLER, Acting Secretary of State of the State of California,
hereby certify:
That the annexed transcript has been compared with the corporate record on
file in this office, of which it purports to be a copy, and that same is full,
true and correct.
IN WITNESS WHEREOF, I execute
this certificate and affix
the Great Seal of the
State of California this
JUL 5 1994
------------------------
[Seal of the State of California]
/s/ Tony Miller
Acting Secretary of State
================================================================================
<PAGE>
RESTATED ARTICLES OF INCORPORATION
OF
INVENTA CORPORATION
Ashok K. Santhanam and Michael J. O'Donnell certify that:
1. They are the duly elected and acting President and Assistant Secretary,
respectively, of Inventa Corporation, a California corporation (the
"Corporation").
2. The Articles of Incorporation of this Corporation are hereby amended
and restated in full to read as set forth in Exhibit A attached hereto.
3. The attached amendment and restatement of the Articles of Incorporation
of this Corporation has been duly approved by the Board of Directors of this
Corporation.
4. The attached amendment and restatement of the Articles of Incorporation
of this Corporation has been approved by the holders of the requisite number of
shares of this Corporation in accordance with Sections 902 and 903 of the
California Corporations Code. The total number of outstanding shares of each
class entitled to vote with respect to the attached amendment and restatement
was 2,250,000 shares of Common Stock. The number of shares voting in favor of
the attached amendment and restatement equalled or exceeded the vote required,
such required vote being a majority of the outstanding shares of Common Stock.
<PAGE>
The undersigned further declare under penalty of perjury that the matters
set forth in this Certificate are true and correct of their own knowledge.
Executed at Santa Clara, California on June 27, 1994.
/s/ Ashok K. Santhanam,
-----------------------------------
Ashok K. Santhanam,
President
/s/ Michael J. O'Donnell,
-----------------------------------
Michael J. O'Donnell,
Assistant Secretary
-2-
<PAGE>
EXHIBIT A
RESTATED ARTICLES OF INCORPORATION
OF
INVENTA CORPORATION
I.
The name of this corporation is Inventa Corporation.
II.
The purpose of this corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the corporation is authorized to issue is 10,500,000 shares, of
which 10,000,000 shares shall be Common Stock with a par value of $0.001 per
share and of which 500,000 shares shall be Preferred Stock, all of which are
designated Series A Preferred Stock with a par value of $0.001 per share.
IV.
The rights, preferences, privileges and restrictions granted to or imposed
upon the Common Stock and Preferred Stock are as follows:
1. Dividend Provisions. 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 $0.06 per share
-3-
<PAGE>
per annum or, if greater (as determined on a per annum basis and on an as
converted basis for the Series A Preferred Stock), an amount equal to that paid
on the Common Stock. Such dividends shall be payable when, as, and if declared
by the Board of Directors, and shall not be cumulative, and no right shall
accrue to holders of Common Stock or Preferred Stock by reason of the fact that
dividends on said shares are not declared in any prior period.
2. Liquidation Preference.
(a) Preferred Preference. 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 $1.00 for each outstanding share of Series A Preferred Stock plus
an amount equal to any declared but unpaid dividends on such share up to the
date fixed for distribution. 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 this
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 Series A Preferred Stock owned by each such holder.
(b) After payment has been made to the holders of the Series A
Preferred Stock of the full amount to which they shall be entitled as set forth
in paragraph 2(a) above, the holders of the Common Stock shall then be entitled
to receive the amount of $.15 per share for each share of Common Stock then held
by them, adjusted for any combinations, consolidations, subdivisions, or stock
dividends with respect to such shares and, in addition, an amount equal to all
declared but unpaid dividends on the Common Stock. If the assets and funds thus
distributed among the holders of the Common Stock shall be insufficient to
permit the payment to such holders of the full aforesaid amount, then the entire
assets and funds of the Corporation legally available for distribution, after
payment has been made to the holders of the Series A Preferred Stock of the full
amount to which they shall be entitled as set forth in paragraph 2(a) above,
shall be distributed among the holders of the Common Stock in proportion to the
full amount each such holder is otherwise entitled to receive.
(c) After payment has been made to the holders of the Series A
Preferred Stock and the Common Stock of the full amount to which they shall be
entitled as set forth in paragraphs 2(a) and 2(b) above, the holders of the
Series A Preferred Stock and Common Stock shall be entitled to receive ratably
on a per-share basis all
-4-
<PAGE>
the remaining assets based upon the number of shares of Common Stock into which
each share of Preferred is then convertible; provided, however, that the holders
of Series A Preferred Stock shall not be entitled to receive pursuant to this
paragraph (c) (including amounts received pursuant to paragraphs (a) and (b)
above) more than a total of $2.00 per share of Series A Preferred Stock then
held by them, adjusted for any combinations, consolidations, or stock splits
with respect to such shares. If the assets and funds thus distributed among the
holders of each series of Preferred and Common Stock shall be insufficient to
permit the payment of the full aforesaid preferential amounts as provided in
this paragraph (c), the remaining funds and assets of the Corporation available
for distribution shall be distributed among the holders of each series of
Preferred and Common Stock in proportion to the amount each such holder is
otherwise entitled to receive pursuant to this paragraph (c).
(d) After payment has been made to the holders of the Series A
Preferred Stock and the Common Stock of the full amounts to which they shall be
entitled as set forth in paragraphs 2(a), 2(b) and 2(c) above, the holders of
the Common Stock shall be entitled to receive ratably on a per-share basis all
the remaining assets.
(e) Mergers. For purposes of this Section 2, a merger or
consolidation of the Corporation with or into any other corporation or
corporations, the merger of any other corporation or corporations into the
Corporation, in which the shareholders of the Corporation receive distributions
in cash or securities of another corporation or corporations as a result of such
consolidation or merger, a reorganization where the shareholders of the Company
immediately prior to the transaction possess less than 50% of the voting power
of the surviving entity (or its parent) immediately after the transaction, or a
sale of all or substantially all of the assets of the corporation, shall be
treated as a liquidation, dissolution or winding up of the Corporation; provided
that the holders of Preferred Stock and Common Stock shall each be paid in cash
or in the securities received or in a combination thereof (which combination
shall be in the same proportions as the consideration received in the
transaction). Any securities to be delivered to the holders of the Series A
Preferred Stock and Common Stock upon merger, reorganization or sale of
substantially all the assets of the corporation shall be valued as follows:
(i) if actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid prices over
-5-
<PAGE>
the 30-day period ending three (3) business days prior to the closing; and
(ii) if there is no active public market, the value shall be
the fair market value thereof as mutually determined by the corporation and the
holders of not less than a majority of the outstanding shares of Series A
Preferred Stock, provided that if the corporation and the holders of a majority
of the outstanding shares of Series A Preferred Stock are unable to reach
agreement, then by independent appraisal by an investment banker hired and paid
by the corporation, but acceptable to the holders of a majority of the
outstanding shares of Series A Preferred Stock.
(f) As authorized by Section 402.5(c) of the California Corporations
Code, the provisions of Sections 502 and 503 of the California Corporations Code
shall not apply with respect to repurchase by the Corporation of shares of
Common Stock issued to or held by employees or consultants of the Corporation or
its subsidiaries upon termination of their employment or services pursuant to
agreement providing for the right of said repurchase.
3. Conversion. The holders of the Series A Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred Stock shall
be convertible into share(s) of Common Stock without the payment of any
additional consideration by the holder thereof and, at the option of the holder
thereof, at any time after the date of issuance of such share, at the office of
the corporation or any transfer agent for the Series A Preferred Stock. Each
share of Series A Preferred Stock shall be convertible into the number of fully
paid and nonassessable shares of Common Stock which results from dividing the
Conversion Price (as hereinafter defined) per share in effect for the Series A
Preferred Stock at the time of conversion into the per share Conversion Value
(as hereinafter defined) of such series. The initial Conversion Price per share
of Series A Preferred Stock shall be $1.00, and the Conversion Value per share
of the Series A Preferred Stock shall be $1.00. The initial Conversion Price of
Series A Preferred Stock shall be subject to adjustment from time to time as
provided below. The number of shares of Common Stock into which a share of
Series A Preferred Stock is convertible is hereinafter referred to as the
"Conversion Rate" of such series.
(b) Automatic Conversion. Each share of Series A Preferred Stock
shall automatically be converted into shares of Common Stock at its then
effective Conversion Rate immediately upon the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock in which (a) the public offering price equals or exceeds $3.00 per
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share (adjusted to reflect subsequent stock dividends, stock splits or
recapitalization) and (b) the aggregate proceeds raised equals or exceeds
$5,000,000.
(c) 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 the corporation or of any transfer agent for the Series A Preferred
Stock and shall give written notice to the corporation at such office that he
elects to convert the same (except that no such written notice of election to
convert shall be necessary in the event of an automatic conversion pursuant to
Section 3(b) hereof). The corporation shall, as soon as practicable thereafter,
issue and deliver at such office to such holder of Series A Preferred Stock 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 (except that
in the case of an automatic conversion pursuant to Section 3(b) hereof such
conversion shall be deemed to have been made immediately prior to the closing of
the offering referred to in Section 3(b)) 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 on such date.
(d) Fractional Shares. In lieu of any fractional shares to which the
holder of Series A Preferred Stock would otherwise be entitled, the corporation
shall pay cash equal to such fraction multiplied by the fair market value of one
share of such series of Preferred Stock as determined by the board of directors
of the corporation. 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 of each holder to be converted at such time into Common
Stock and the number of shares of Common Stock issuable upon such aggregate
conversion.
(e) Adjustment of Conversion Price. The Conversion Price of Series A
Preferred Stock shall be subject to adjustment from time to time as follows:
(i) If the corporation shall issue any Common Stock other than
"Excluded Stock", as defined below, for a consideration per share less than the
Conversion Price in effect immediately prior to the issuance of such Common
Stock (excluding Stock dividends, subdivisions, split-ups, combinations,
dividends or recapitalizations which are covered by Section 3(e)(iii), (iv), (v)
and (vi)), the Conversion Price in effect immediately after each such issuance
shall forthwith (except as provided in this Section 3(e)) be adjusted to a price
equal to the quotient obtained by dividing:
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(1) an amount equal to the sum of
(x) the total number of shares of Common Stock
outstanding (including any shares of Common Stock issuable upon conversion of
the Series A Preferred Stock, or deemed to have been issued pursuant to
subdivision (3) of this clause (i) and to clause (ii) below) immediately prior
to such issuance multiplied by the Conversion Price in effect immediately prior
to such issuance, plus
(y) the consideration received by the corporation
upon such issuance, by
(2) the total number of shares of Common Stock
outstanding (including any shares of Common Stock issuable upon conversion of
the Series A Preferred Stock or deemed to have been issued pursuant to
subdivision (3) of this clause (i) and to clause (ii) below) immediately prior
to such issuance plus the additional shares of Common Stock issued in such
issuance (but not including any additional shares of Common Stock deemed to be
issued as a result of any adjustment in the Conversion Price resulting from such
issuance).
For purposes of any adjustment of the Conversion Price
pursuant to this clause (i), the following provisions shall be applicable:
(1) In the case of the issuance of Common Stock
for cash, the consideration shall be deemed to be the amount of cash paid
therefor after deducting any discounts or commissions paid or incurred by the
corporation in connection with the issuance and sale thereof.
(2) In the case of the issuance of Common Stock
for a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value thereof as determined by
the board of directors of the corporation, in accordance with generally accepted
accounting treatment; provided, however, that if, at the time of such
determination, the corporation's Common Stock is traded in the over-the-counter
market or on a national or regional securities exchange, such fair market value
as determined by the board of directors of the corporation shall not exceed the
aggregate "Current Market Price" (as defined below) of the shares of Common
Stock being issued.
(3) In the case of the issuance of (i) options to
purchase or rights to subscribe for Common Stock (other than Excluded Stock),
(ii) securities by their terms convertible into or exchangeable for Common Stock
(other than Excluded
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Stock), or (iii) options to purchase or rights to subscribe for such convertible
or exchangeable securities:
(A) 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 subdivisions (1) and (2)
above), if any, received by the corporation upon the issuance of such options or
rights plus the minimum purchase price provided in such options or rights for
the Common Stock covered thereby;
(B) 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 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 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 subdivisions (1) and (2) above);
(C) on any change in the number of shares of
Common Stock deliverable upon exercise of any such options or rights or
conversion of or exchange for such convertible or exchangeable securities, or on
any change in the minimum purchase price of such options, rights or securities,
other than a change resulting from the antidilution provisions of such options,
rights or securities, the Conversion Price shall forthwith be readjusted to such
Conversion Price as would have obtained had the adjustment made upon (x) the
issuance of such options, rights or securities not exercised, converted or
exchanged prior to such change, as the case may be, been made upon the basis of
such change or (y) the options or rights related to such securities not
converted or exchanged prior to such change, as the case may be, been made upon
the basis of such change; and
(D) on 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 shall forthwith be readjusted to such
Conversion Price as would have obtained had the adjustment made upon the
issuance of such options, rights, convertible or exchangeable securities or
options or rights
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<PAGE>
related to such convertible or exchangeable securities, as the case may be, been
made upon the basis of the issuance of only the number of shares of Common Stock
actually issued upon the exercise of such options or rights, upon the conversion
or exchange of such convertible or exchangeable securities or upon the exercise
of the options or rights related to such convertible or exchangeable securities,
as the case may be.
(ii) "Excluded Stock" shall mean:
(1) all shares of Common Stock issued and outstanding on
the date this document is filed with the California Secretary of State and all
shares issuable upon exercise of options or warrants outstanding on the date
this document is filed with the California Secretary of State;
(2) all shares of Series A Preferred Stock and the
Common Stock into which the shares of Series A Preferred Stock are convertible;
and
(3) all shares of Common Stock, warrants or options to
purchase Common Stock or other securities issued to officers, directors,
consultants or employees of the corporation pursuant to any plan or arrangement
approved by the board of directors of the corporation.
All outstanding shares of Excluded Stock (including any
shares issuable upon conversion of the Preferred Stock) shall be deemed to be
outstanding for all purposes of the computations of Section 3(e)(i) above.
(iii) If the number of shares of Common Stock outstanding at
any time after the date hereof is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, on the date such payment is made or such change is effective, the
Conversion Price of Series A Preferred Stock shall be appropriately decreased so
that the number of shares of Common Stock issuable on conversion of any shares
of such series of Series A Preferred Stock shall be increased in proportion to
such increase of outstanding shares.
(iv) If the number of shares of Common Stock outstanding at
any time after the date hereof is decreased by a combination of the outstanding
shares of Common Stock, then, on the effective date of such combination, the
Conversion Price of Series A Preferred Stock shall be appropriately increased so
that the number of shares of Common Stock issuable on conversion of any shares
of a series of Series A Preferred Stock shall be decreased in proportion to such
decrease in outstanding shares.
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<PAGE>
(v) In case the corporation shall declare a cash dividend upon
its Common Stock payable otherwise than out of retained earnings or shall
distribute to holders of its Common Stock shares of this capital stock (other
than Common Stock), stock or other securities of other persons, evidences of
indebtedness issued by the corporation or other persons, assets (excluding cash
dividends) or options or rights (excluding options to purchase and rights to
subscribe for Common Stock or other securities of the corporation convertible
into or exchangeable for Common Stock), then, in each such case, the holders of
shares of Series A Preferred Stock shall, concurrent with the distribution to
holders of Common Stock, receive a like distribution based upon the number of
shares of Common Stock into which Series A Preferred Stock is convertible.
(vi) In case, at any time after the date hereof, of any capital
reorganization, or any reclassification of the stock of the corporation (other
than as a result of a stock dividend or subdivision, split-up or combination of
shares), or the consolidation or merger of the corporation with or into another
person (other than a consolidation or merger in which the corporation is the
continuing entity and which does not result in any change in the Common Stock),
or of the sale or other disposition of all or substantially all the properties
and assets of the corporation, the shares of Series A Preferred Stock shall,
after such reorganization, reclassification, consolidation, merger, sale or
other disposition, be convertible into the kind and number of shares of stock or
other securities or property of the corporation or otherwise to which such
holder would have been entitled if immediately prior to such reorganization,
reclassification, consolidation, merger, sale or other disposition he had
converted his shares of Series A Preferred Stock into Common Stock. The
provisions of this clause (vi) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, sales or other
dispositions.
(vii) All calculations under this Section 3 shall be made to
the nearest cent or to the nearest one hundredth (1/100) of a share, as the case
may be.
(viii) For the purpose of any computation pursuant to this
Section 3(e), the "Current Market Price" at any date of one share of Common
Stock, shall be deemed to be the average of the highest reported bid and the
lowest reported offer prices on the preceding business day as furnished by the
National Quotation Bureau, Incorporated (or equivalent recognized source of
quotations); provided, however, that if the Common Stock is not traded in such
manner that the quotations referred to in this clause (viii) are available for
the period required hereunder, Current Market Price shall be determined in good
faith by the board of directors of the corporation, but if challenged by the
holders of more than 50%
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of the outstanding Series A Preferred Stock, then as determined by an
independent appraiser selected by the board of directors of the corporation, the
cost of such appraisal to be borne by the challenging parties.
(f) Minimal Adjustments. No adjustment in the Conversion Price need
be made if such adjustment would result in a change in the Conversion Price of
less than $0.01. Any adjustment of less than $0.01 which is not made shall be
carried forward and shall be made at the time of and together with any
subsequent adjustment which, on a cumulative basis, amounts to an adjustment of
$0.01 or more in the Conversion Price.
(g) No Impairment. With the consent of the majority of the
outstanding shares of Preferred Stock, the corporation will not 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 the corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 3 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 Series A Preferred Stock against
impairment.
(h) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Rate pursuant to this Section 3,
the 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 Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The corporation shall, upon 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 (i) such adjustments and
readjustments, (ii) the Conversion Rate of such series at the time in effect,
and (iii) the number of shares of Common Stock and the amount, if any, of other
property which at the time would be received upon the conversions of such
holder's shares of Series A Preferred Stock.
(i) Notices of Record Date. In the event of any taking by the
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, the corporation
shall mail to each holder of Series A Preferred Stock at least ten (10) days
prior to such record date, a notice specifying the date on which any such record
is to be taken for the purpose of such
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dividend or distribution or right, and the amount and character of such
dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. The corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of 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 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 Series A Preferred Stock, the
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 purpose.
(k) Notices. Any notice required by the provisions of this Section 3
to be given to the holder 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 the corporation.
(l) Reissuance of Converted Shares. No shares of Series A Preferred
Stock which have been converted into Common Stock after the original issuance
thereof shall ever again be reissued and all such shares so converted shall upon
such conversion cease to be a part of the authorized shares of the corporation.
4. Voting Rights. The holder of each share of Series A Preferred Stock
shall be entitled to the number of votes equal to the number of shares of Common
Stock into which each share of Series A Preferred Stock could be converted on
the record date for the vote or consent of shareholders written consent and,
except as otherwise required by law, shall have voting rights and powers equal
to the voting rights and powers of the Common Stock. The holder of each share of
Series A Preferred Stock shall be entitled to notice of any shareholders'
meeting in accordance with the bylaws of the corporation and shall vote with
holders of the Common Stock upon the election of directors and upon any other
matter submitted to a vote of shareholders, except those matters required by law
to be submitted to a class vote. Fractional votes shall not, however, be
permitted and any fractional voting rights resulting from the above formula
(after aggregating all shares of Common Stock into which shares of Series A
Preferred Stock held by each holder could be converted) shall be rounded to the
nearest whole number (with one-half rounded upward to one).
5. Protective Provisions. In addition to any other class vote that may be
required by law, so long as any shares of
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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 at least a majority of the then outstanding shares of Preferred
Stock:
(a) sell, convey or otherwise dispose of all or substantially all of
its property or business, or merge into or effect a reorganization with any
other corporation (other than a wholly owned subsidiary corporation) in which
the shareholders of this corporation immediately prior to the transaction
possess less than 50% of the voting power of the surviving entity (or its
parent) immediately after the transaction;
(b) change the rights, preferences, privileges or restrictions of
the Preferred Stock;
(c) increase or decrease the aggregate number of authorized shares
of Preferred Stock, other than as provided in either subdivision (b) of Section
405 or subdivision (c) of Section 902 of the California Corporations Code;
(d) create a new class or series of shares having rights,
preferences or privileges or increase the number of authorized shares of any
class or shares having rights, preferences or privileges prior to any
outstanding class or series;
(e) repurchase from any shareholder any of the corporation's Common
Stock other than repurchases at cost from employees, consultants, lessors or
suppliers upon termination of employment, consulting, lessor-lessee, or
supplier-purchaser relationship, respectively; or
(f) increase the authorized number of directors of the corporation
above five (5).
6. Repurchase of Shares. In connection with repurchases by this
corporation of its Common Stock, pursuant to its agreements with certain of the
holders thereof, Sections 502 and 503 of the California General Corporation Law
shall not apply in whole or in part with respect to such repurchases.
V.
1. Limitation of Directors' Liability. The liability of the directors of
this corporation for monetary damages shall be eliminated to the fullest extent
permissible under California law.
2. Indemnification of Corporate Agents. This corporation is authorized to
indemnify its agents to the fullest extent permissible under California law. For
purposes of this provision the
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term "agent" has the meaning set forth in Section 317 of the California
Corporations Code.
3. Repeal or Modification. Any repeal or modification of the foregoing
provisions of this Article V shall not adversely affect any right of
indemnification or limitation of liability of an agent of this corporation
relating to acts or omissions occurring prior to such repeal or modification.
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EXHIBIT C
SCHEDULE OF EXCEPTIONS
This Schedule of Exceptions, dated as of the Closing Date, is made and
given pursuant to Section 2 of the Inventa Corporation Series A Preferred Stock
Purchase Agreement dated July 8, 1994 (the "Agreement").
The section numbers in this Schedule of Exceptions correspond to the
section numbers in the Agreement; however, any information disclosed herein
under any section number shall be deemed to be disclosed and incorporated into
any other section number under the Agreement where such disclosure would be
appropriate. Unless the context otherwise requires, all capitalized terms shall
have the same meanings assigned to them in the Agreement.
2.1 Organization and Standing; Certificate and Bylaws.
The Company is not qualified to do business in any state other than
California, its jurisdiction of incorporation.
2.2 Capitalization.
The Company has granted a warrant to purchase 7,502 shares of common stock
of the Company (after taking into account the Company's October 22, 1993
4.5-for-1 stock split). The warrant, with a post-split exercise price of $1.33
per share, is subject to antidilution adjustment.
2.3 Subsidiaries.
The Company has a wholly-owned subsidiary in Malaysia called ICG Systems
SDN.BHD. The Company also has a subsidiary in India called Inventa Software
India Pvt. Ltd. ("Inventa India"). Of the outstanding shares of capital stock of
Inventa India, the Company owns approximately 22%, the Company's President Ashok
Santhanam owns approximately 30.5%, and the balance is owned by Indian
investors. Subsequent to the Closing, the Company will purchase Mr. Santhanam's
interest in Inventa India at par value, equal to approximately $32,000.00.
2.7 Litigation.
The California Employment Development Department has entered a judgment of
approximately $15,000 against the Company for the period ending December 31,
1992 based on the Company's payment of certain expenses (the "Disputed
Payments") for work done for the Company in the United States by employees of
Inventa India. The Company has appealed the judgment. Should the Company's
appeal be unsuccessful, the Company expects that the judgment against the
Company for disputed payments through December 31, 1993 will not exceed $25,000.
<PAGE>
The Internal Revenue Service is currently conducting an examination of the
Company with respect to federal tax returns filed by the Company for tax years
1990, 1991 and 1992 which included the Disputed Payments. No determination has
yet been made by the IRS.
The Company is contemplating filing a claim in Malaysia for trademark
infringement with respect to the name "Inventa" and also is contemplating
seeking a name change for or the dissolution of the Malaysian company Inventa
Software (M) SDN.BHD.
2.9 Compliance with Other Instruments.
(a) See Section 2.7 above regarding a judgment by the California
Employment Development Department against the Company.
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EXHIBIT D
THE SECURITIES REPRESENTED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED,
PLEDGED, ASSIGNED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO SUCH SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
WARRANT TO PURCHASE SERIES A PREFERRED STOCK OF
INVENTA CORPORATION
July 8, 1994
THIS CERTIFIES that, for value received, and subject to all of the
provisions and upon the terms and conditions hereinafter set forth, 1~ (the
"Holder"), is entitled to subscribe for and purchase 2~ shares of Series A
Preferred Stock (the "Shares") of Inventa Corporation, a California corporation,
with its principal office at 2620 Augustine Drive, Suite 225, Santa Clara,
California 95054 (the "Corporation"). This Warrant is being originally delivered
pursuant to that certain Series A Preferred Stock Purchase Agreement between the
Corporation and the Holder (the "Agreement").
SECTION 1. Exercise of Warrant. The rights represented by this Warrant may
be exercised in whole or in part at any time during the period commencing at the
date of issuance of this Warrant (the "Issuance Date") and ending at the earlier
of (i) December 31, 1999, (ii) the date of the Corporation's initial public
offering of its securities at a price per share of at least $3.00 and for a
total offering price of at least $5,000,000, or (iii) the date of closing of the
sale of all or substantially all of the assets or the outstanding capital stock
of the Corporation, or the merger of the Corporation if the shareholders of the
Corporation shall own less than fifty percent of the outstanding voting
securities of the surviving corporation immediately following such merger (the
"Exercise Period"), by delivery of the following to the Corporation at its
address set forth above (or at such other address as it may designate by notice
in writing to the Holder):
(a) An executed Notice of Exercise in the form attached hereto;
(b) Payment of the exercise price of $1.00 per Share (the "Exercise
Price") in cash or by check; and
(c) This Warrant.
<PAGE>
In the event of exercise of the rights represented by this Warrant, a
certificate or certificates for the Shares issuable pursuant to such exercise
(the "Exercise Shares") registered in the name of the Holder or persons
affiliated with the Holder, if the Holder so designates, shall be issued and
delivered to the Holder within a reasonable time after such exercise but in any
event within thirty days.
The person in whose name any certificate or certificates for Exercise
Shares are to be issued upon exercise of this Warrant shall be deemed to have
become the holder of record of such shares on the date on which this Warrant was
surrendered and payment of the Exercise Price was made, irrespective of the date
of delivery of such certificate or certificates, except that, if the date of
such surrender and payment is a date when the stock transfer books of the
Corporation are closed, such person shall be deemed to have become the holder of
such shares at the close of business on the next succeeding date on which the
stock transfer books are open.
SECTION 2. Covenants of the Corporation.
2.1 Covenants as to Exercise Shares. The Corporation agrees that all
Exercise Shares that may be issued upon the exercise of the rights represented
by this Warrant will, upon issuance, be validly issued and outstanding, fully
paid and nonassessable, and free from all taxes, liens and charges with respect
to the issuance thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue). The Corporation further agrees that the
Corporation will at all times beginning on the Issuance Date and thereafter
during the Exercise Period, have authorized and reserved, free from preemptive
rights, a sufficient number of shares of its stock to provide for the exercise
of the rights represented by this Warrant. If at any time during the Exercise
Period the number of authorized but unissued shares of stock shall not be
sufficient to permit exercise of this Warrant, the Corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of stock to such number of shares as shall be
sufficient for such purposes.
2.2 Notices of Record Date. In the event of any taking by the
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 which is the same as cash dividends paid in
previous quarters) or other distribution, the Corporation shall mail to the
Holder, at least ten (10) days prior to the date specified herein, a notice
specifying the date on which any such record is to be taken for the purpose of
such dividend or distribution.
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SECTION 3. Adjustment Provisions.
3.1 Adjustment of Number of Exercise Shares. The number of Exercise
Shares shall be subject to adjustment from time to time as follows:
(a) If, at any time during the Exercise Period, the number of
outstanding shares of stock of the Corporation of the class and series covered
by this Warrant is increased by a subdivision or split-up of such outstanding
shares, then, concurrently with the effectiveness of such subdivision or
split-up, the number of Exercise Shares shall be proportionately increased and
the Exercise Price proportionately decreased.
(b) If, at any time during the Exercise Period, the number of
outstanding shares of stock of the Corporation of the class and series covered
by this Warrant is decreased by a combination of such outstanding shares, then,
concurrently with the effectiveness of such combination, the number of Exercise
Shares shall be proportionately decreased and the Exercise Price proportionately
increased.
3.2 Certificate as to Adjustments. Upon the occurrence of any
adjustment or readjustment of the number of securities issuable upon exercise of
this Warrant in accordance with paragraph 3.1, the Corporation shall compute
such adjustment or readjustment in accordance with the terms hereof and furnish
to the Holder a written statement setting forth each adjustment or readjustment
and the facts upon which such adjustment or readjustment is based. The form of
this Warrant need not be changed because of any adjustment in the number of
securities subject to this Warrant.
3.3 Fractional Shares. No fractional shares shall be issued upon the
exercise of this Warrant as a consequence of any adjustment pursuant to
paragraph 3.1 or otherwise. All Exercise Shares (including fractions) issuable
upon exercise of this Warrant may be aggregated for purposes of determining
whether such exercise would otherwise result in the issuance of any fractional
share. If, after aggregation, such exercise would otherwise result in the
issuance of a fractional share, the Corporation shall, in lieu of such issuance
of any such fractional share, pay the Holder a sum in cash equal to the product
resulting from multiplying the then current fair market value of an Exercise
Share by such fraction.
SECTION 4. No Shareholder Rights. This Warrant in and of itself shall not
entitle the Holder to any voting rights or other rights as a shareholder of the
Corporation.
SECTION 5. Transfer of Warrant. Subject to applicable laws and to the
restriction on transfer set forth on the first page of this Warrant, this
Warrant and all rights hereunder are
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transferable, by the Holder in person or by duly authorized attorney, upon
delivery of this Warrant and the form of assignment attached hereto to any
transferee designated by Holder, so long as such transferee executes an
investment letter in form and substance satisfactory to the Corporation. Upon
any such transfer, the transferee shall thereafter be deemed the Holder for
purposes of this Warrant.
SECTION 6. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt
by the Corporation of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Corporation of all reasonable expenses incidental thereto,
and upon surrender and cancellation of this Warrant if mutilated, the
Corporation will make and deliver a new Warrant of like tenor and dated as of
such cancellation, in lieu of this Warrant.
SECTION 7. Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be sent by telex, telegram,
express mail or other form of rapid communications, if possible, and if not then
such notice or communication shall be mailed by first-class mail, postage
prepaid, addressed to the Holder and the Corporation at their addresses set
forth herein, or at such other address as one party may furnish to the other in
writing. Notice shall be deemed effective on the date dispatched if by personal
delivery, telex or telegram, two days after mailing if by express mail, or three
days after mailing if by first-class mail.
SECTION 8. Acceptance. Receipt of this Warrant by the Holder shall
constitute acceptance of and agreement to all of the terms and conditions
contained herein.
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be executed
by its duly authorized officer as of the 8th day of July, 1994.
INVENTA CORPORATION
By:___________________________________
Ashok K. Santhanam,
President
-4-
<PAGE>
NOTICE OF EXERCISE
TO: Inventa Corporation
(1) The undersigned hereby elects to purchase shares of Series A Preferred
Stock of Inventa Corporation pursuant to the terms of the attached Warrant, and
tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any.
(2) Please issue certificate or certificates representing said shares of
Series A Preferred Stock in the name of the undersigned or in such other name as
is specified below:
____________________________________
(Name)
____________________________________
(Address)
(3) The undersigned represents that the aforesaid shares of Series A
Preferred Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale in connection with, the
distribution thereof and that the undersigned has no present intention of
distributing or reselling such shares.
___________________________ ____________________________________
(Date) (Signature)
____________________________________
(Title)
-5-
<PAGE>
ASSIGNMENT FORM
(To assign the foregoing Warrant, execute this form and supply
required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby
are hereby assigned to
________________________________________________________________________________
(Please Print)
whose address is _______________________________________________________________
(Please Print)
Dated: _________________________, 19_____
Holder's Signature: __________________________________
Holder's Address: __________________________________
__________________________________
Signature Guaranteed: __________________________________________________________
NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatever, and must be guaranteed by a bank or trust company. Officers of
corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.
-6-
<PAGE>
EXHIBIT E
LIST OF REGISTRABLE SECURITIES
Name Registrable Securities
---- ----------------------
Robert Ducommun ................................... 60,000 Shares Series A
Palmer G. and Charles E. Ducommun
Charitable Annuity Trust, u/d/t 7/21/83 .......... 60,000 Shares Series A
Electra D. de Peyster ............................. 60,000 Shares Series A
Harry A. Caunter .................................. 25,000 Shares Series A
Ramesh Vasudevan .................................. 100,000 Shares Series A
Santhanam C. Shekar ............................... 25,000 Shares Series A
Gomati Venkateswaran .............................. 15,000 Shares Series A
Usha Vijayarajan .................................. 25,000 Shares Series A
Maya S. Hattangady ................................ 10,000 Shares Series A
Andrew Potter ..................................... 20,000 Shares Series A
------------------------
TOTAL ............... 400,000 Shares Series A
<PAGE>
EXHIBIT F
INVENTA CORPORATION
EMPLOYMENT, CONFIDENTIAL INFORMATION AND
INVENTION ASSIGNMENT AGREEMENT
As a condition of my employment with Inventa Corporation, its
subsidiaries, affiliates, successors or assigns (the "Company"), and in
consideration of my employment with the Company and my receipt of the
compensation now and hereafter paid to me by the Company, I agree to the
following:
1. At-Will Employment. I understand and acknowledge that my employment
with the Company is for an unspecified duration and constitutes "at-will"
employment. I acknowledge that this employment relationship may be terminated at
any time, with or without good cause or for any or no cause, at the option
either of the Company or myself, with or without notice.
2. Confidential Information.
(a) Company Information. I agree at all times during the term of my
employment and thereafter, to hold in strictest confidence, and not to use,
except for the benefit of the Company, or to disclose to any person, firm or
corporation without written authorization of the Board of Directors of the
Company, any Confidential Information of the Company. I understand that
"Confidential Information" means any of the Company's proprietary information,
technical data, trade secrets or know-how, including, but not limited to,
research, product plans, products, services, customer lists and customers
(including, but not limited to, customers of the Company on whom I called or
with whom I became acquainted during the term of my employment), markets,
software, developments, inventions, processes, formulas, technology, designs,
drawings, engineering, hardware configuration information, marketing, finances
or other business information disclosed to me by the Company either directly or
indirectly in writing, orally or by drawings or observation of parts or
equipment. I further understand that Confidential Information does not include
any of the foregoing items which has become publicly known and made generally
available through no wrongful act of mine or of others who were under
confidentiality obligations as to the item or items involved.
(b) Former Employer Information. I agree that I will not, during my
employment with the Company, improperly use or disclose any proprietary
information or trade secrets of any former or concurrent employer or other
person or entity and that I will not bring onto the premises of the Company any
unpublished document or proprietary information belonging to any such employer,
person or entity unless consented to in writing by such employer, person or
entity.
<PAGE>
(c) Third Party Information. I recognize that the Company has
received and in the future will receive from third parties their confidential or
proprietary information subject to a duty on the Company's part to maintain the
confidentiality of such information and to use it only for certain limited
purposes. I agree to hold all such confidential or proprietary information in
the strictest confidence and not to disclose it to any person, firm or
corporation or to use it except as necessary in carrying out my work for the
Company consistent with the Company's agreement with such third party.
3. Inventions.
(a) Inventions Retained and Licensed. I have attached hereto, as
Exhibit A, a list describing all inventions, original works of authorship,
developments, improvements, and trade secrets which were made by me prior to my
employment with the Company (collectively referred to as "Prior Inventions"),
which belong to me, which relate to the Company's proposed business, products or
research and development, and which are not assigned to the Company hereunder;
or, if no such list is attached, I represent that there are no such Prior
Inventions. If in the course of my employment with the Company, I incorporate
into a the Company product, process or machine a Prior Invention owned by me or
in which I have an interest, the Company is hereby granted and shall have a
nonexclusive, royalty-free, irrevocable, perpetual, worldwide license to make,
have made, modify, use and sell such Prior Invention as part of or in connection
with such product, process or machine.
(b) Assignment of Inventions. I agree that I will promptly make full
written disclosure to the Company, will hold in trust for the sole right and
benefit of the Company, and hereby assign to the Company, or its designee, all
my right, title, and interest in and to any and all inventions, original works
of authorship, developments, concepts, improvements or trade secrets, whether or
not patentable or registrable under copyright or similar laws, which I may
solely or jointly conceive or develop or reduce to practice, or cause to be
conceived or developed or reduced to practice, during the period of time I am in
the employ of the Company (collectively referred to as "Inventions"), except as
provided in Section 3(f) below. I further acknowledge that all original works of
authorship which are made by me (solely or jointly with others) within the scope
of and during the period of my employment with the Company and which are
protectible by copyright are "works made for hire," as that term is defined in
the United States Copyright Act.
(c) Inventions Assigned to the United States. I agree to assign to
the United States government all my right, title, and interest in and to any and
all Inventions whenever such full title
-2-
<PAGE>
is required to be in the United States by a contract between the Company and the
United States or any of its agencies.
(d) Maintenance of Records. I agree to keep and maintain adequate
and current written records of all Inventions made by me (solely or jointly with
others) during the term of my employment with the Company. The records will be
in the form of notes, sketches, drawings, and any other format that may be
specified by the Company. The records will be available to and remain the sole
property of the Company at all times.
(e) Patent and Copyright Registrations. I agree to assist the
Company, or its designee, at the Company's expense, in every proper way to
secure the Company's rights in the Inventions and any copyrights, patents, mask
work rights or other intellectual property rights relating thereto in any and
all countries, including the disclosure to the Company of all pertinent
information and data with respect thereto, the execution of all applications,
specifications, oaths, assignments and all other instruments which the Company
shall deem necessary in order to apply for and obtain such rights and in order
to assign and convey to the Company, its successors, assigns, and nominees the
sole and exclusive rights, title and interest in and to such Inventions, and any
copyrights, patents, mask work rights or other intellectual property rights
relating thereto. I further agree that my obligation to execute or cause to be
executed, when it is in my power to do so, any such instrument or papers shall
continue after the termination of this Agreement. If the Company is unable
because of my mental or physical incapacity or for any other reason to secure my
signature to apply for or to pursue any application for any United States or
foreign patents or copyright registrations covering Inventions or original works
of authorship assigned to the Company as above, then I hereby irrevocably
designate and appoint the Company and its duly authorized officers and agents as
my agent and attorney in fact, to act for and in my behalf and stead to execute
and file any such applications and to do all other lawfully permitted acts to
further the prosecution and issuance of letters patent or copyright
registrations thereon with the same legal force and effect as if executed by me.
(f) Exception to Assignments. I understand that the provisions of
this Agreement requiring assignment of Inventions to the Company do not apply to
any invention which qualifies fully under the provisions of California Labor
Code Section 2870 (attached hereto as Exhibit B). I will advise the Company
promptly in writing of any inventions that I believe meet the criteria in
California Labor Code Section 2870 and not otherwise disclosed on Exhibit A.
4. Conflicting Employment. I agree that, during the term of my employment
with the Company, I will not engage in any other
-3-
<PAGE>
employment, occupation, consulting or other business activity directly related
to the business in which the Company is now involved or becomes involved during
the term of my employment, nor will I engage in any other activities that
conflict with my obligations to the Company.
5. Returning the Company Documents. I agree that, at the time of leaving
the employ of the Company, I will deliver to the Company (and will not keep in
my possession, recreate or deliver to anyone else) any and all devices, records,
data, notes, reports, proposals, lists, correspondence, specifications, drawings
blueprints, sketches, materials, equipment, other documents or property, or
reproductions of any aforementioned items developed by me pursuant to my
employment with the Company or otherwise belonging to the Company, its
successors or assigns. In the event of the termination of my employment, I agree
to sign and deliver the "Termination Certification" attached hereto as Exhibit
C.
6. Notification of New Employer. In the event that I leave the employ of
the Company, I hereby grant consent to notification by the Company to my new
employer about my rights and obligations under this Agreement.
7. Solicitation of Employees. I agree that for a period of twelve (12)
months immediately following the termination of my relationship with the Company
for any reason, whether with or without cause, I shall not either directly or
indirectly solicit, induce, recruit or encourage any of the Company's employees
to leave their employment, or take away such employees, or attempt to solicit,
induce, recruit, encourage or take away employees of the Company, either for
myself or for any other person or entity.
8. Conflict of Interest Guidelines. I agree to diligently adhere to the
Conflict of Interest Guidelines attached as Exhibit D hereto.
9. Representations. I agree to execute any proper oath or verify any
proper document required to carry out the terms of this Agreement. I represent
that my performance of all the terms of this Agreement will not breach any
agreement to keep in confidence proprietary information acquired by me in
confidence or in trust prior to my employment by the Company. I have not entered
into, and I agree I will not enter into, any oral or written agreement in
conflict herewith.
10. Arbitration and Equitable Relief.
(a) Arbitration. Except as provided in Section 10(b) below, I agree
that any dispute or controversy arising out of or relating to any
interpretation, construction, performance or breach of this Agreement, shall be
settled by arbitration to be held in
-4-
<PAGE>
San Francisco County, California, in accordance with the rules then in effect of
the American Arbitration Association. The arbitrator may grant injunctions or
other relief in such dispute or controversy. The decision of the arbitrator
shall be final, conclusive and binding on the parties to the arbitration.
Judgment may be entered on the arbitrator's decision in any court having
jurisdiction. The Company and I shall each pay one-half of the costs and
expenses of such arbitration, and each of us shall separately pay our counsel
fees and expenses.
(b) Equitable Remedies. I agree that it would be impossible or
inadequate to measure and calculate the Company's damages from any breach of the
covenants set forth in Sections 2, 3, and 5 herein. Accordingly, I agree that if
I breach any of such Sections, the Company will have available, in addition to
any other right or remedy available, the right to obtain an injunction from a
court of competent jurisdiction restraining such breach or threatened breach and
to specific performance of any such provision of this Agreement. I further agree
that no bond or other security shall be required in obtaining such equitable
relief and I hereby consent to the issuance of such injunction and to the
ordering of specific performance.
11. General Provisions.
(a) Governing Law; Consent to Personal Jurisdiction. This Agreement
will be governed by the laws of the State of California. I hereby expressly
consent to the personal jurisdiction of the state and federal courts located in
California for any lawsuit filed there against me by the Company arising from or
relating to this Agreement.
(b) Entire Agreement. This Agreement sets forth the entire agreement
and understanding between the Company and me relating to the subject matter
herein and merges all prior discussions between us. No modification of or
amendment to this Agreement, nor any waiver of any rights under this agreement,
will be effective unless in writing signed by the party to be charged. Any
subsequent change or changes in my duties, salary or compensation will not
affect the validity or scope of this Agreement.
(c) Severability. If one or more of the provisions in this Agreement
are deemed void by law, then the remaining provisions will continue in full
force and effect.
(d) Successors and Assigns. This Agreement will be binding upon my
heirs, executors, administrators and other legal representatives and will be for
the benefit of the Company, its successors, and its assigns.
-5-
<PAGE>
Date: _________________________
___________________________________
Signature
___________________________________
Name of Employee (typed or printed)
________________________________
Witness
-6-
<PAGE>
EXHIBIT A
LIST OF PRIOR INVENTIONS
AND ORIGINAL WORKS OF AUTHORSHIP
Identifying Number
Title Date or Brief Description
----- ---- --------------------
_______ No inventions or improvements
_______ Additional Sheets Attached
Signature of Employee: _________________________
Print Name of Employee: _________________________
Date: ________________
<PAGE>
EXHIBIT B
CALIFORNIA LABOR CODE SECTION 2870
EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RIGHTS
"(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer.
(2) Result from any work performed by the employee for the employer.
(b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable."
<PAGE>
EXHIBIT C
INVENTA CORPORATION
TERMINATION CERTIFICATION
This is to certify that I do not have in my possession, nor have I failed
to return, any devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches, materials,
equipment, other documents or property, or reproductions of any aforementioned
items belonging to the Company, its subsidiaries, affiliates, successors or
assigns (the "Company").
I further certify that I have complied with all the terms of the Company's
Employment Confidential Information and Invention Assignment Agreement signed by
me, including the reporting of any inventions and original works of authorship
(as defined therein), conceived or made by me (solely or jointly with others)
covered by that agreement.
I further agree that, in compliance with the Employment, Confidential
Information and Invention Assignment Agreement, I will preserve as confidential
all trade secrets, confidential knowledge, data or other proprietary information
relating to products, processes, know-how, designs, formulas, developmental or
experimental work, computer programs, data bases, other original works of
authorship, customer lists, business plans, financial information or other
subject matter pertaining to any business of the Company or any of its
employees, clients, consultants or licensees.
I further agree that for twelve (12) months from this date, I will not
hire any employees of the Company and I will not solicit, induce, recruit or
encourage any of the Company's employees to leave their employment.
Date: ______________________
_____________________________________
(Employee's Signature)
_____________________________________
(Type/Print Employee's Name)
<PAGE>
EXHIBIT D
INVENTA CORPORATION
CONFLICT OF INTEREST GUIDELINES
It is the policy of the Company to conduct its affairs in strict
compliance with the letter and spirit of the law and to adhere to the highest
principles of business ethics. Accordingly, all officers, employees and
independent contractors must avoid activities which are in conflict, or give the
appearance of being in conflict, with these principles and with the interests of
the Company. The following are potentially compromising situations which must be
avoided. Any exceptions must be reported to the President and written approval
for continuation must be obtained.
1. Revealing confidential information to outsiders or misusing
confidential information. Unauthorized divulging of information is a violation
of this policy whether or not for personal gain and whether or not harm to the
Company is intended. (The Employment, Confidential Information and Invention
Assignment Agreement elaborates on this principle and is a binding agreement.)
2. Accepting or offering substantial gifts, excessive entertainment,
favors or payments which may be deemed to constitute undue influence or
otherwise be improper or embarrassing to the Company.
3. Participating in civic or professional organizations that might involve
divulging confidential information of the Company.
4. Initiating or approving personnel actions affecting reward or
punishment of employees or applicants where there is a family relationship or is
or appears to be a personal or social involvement.
5. Initiating or approving any form of personal or social harassment of
employees.
6. Investing or holding outside directorship in suppliers, customers, or
competing companies, including financial speculations, where such investment or
directorship might influence in any manner a decision or course of action of the
Company.
7. Borrowing from or lending to employees, customers or suppliers.
8. Acquiring real estate of interest to the Company.
9. Improperly using or disclosing to the Company any proprietary
information or trade secrets of any former or
<PAGE>
concurrent employer or other person or entity with whom obligations of
confidentiality exist.
10. Unlawfully discussing prices, costs, customers, sales or markets with
competing companies or their employees.
11. Making any unlawful agreement with distributors with respect to
prices.
12. Improperly using or authorizing the use of any inventions which are
the subject of patent claims of any other person or entity.
13. Engaging in any conduct which is not in the best interest of the
Company.
Each officer, employee and independent contractor must take every
necessary action to ensure compliance with these guidelines and to bring problem
areas to the attention of higher management for review. Violations of this
conflict of interest policy may result in discharge without warning.
<PAGE>
INVENTA CORPORATION
COMPLIANCE CERTIFICATE
Pursuant to paragraph 5.4 of the Series A Preferred Stock Purchase
Agreement dated as of July 8, 1994 (the "Agreement"), the undersigned, Ashok K.
Santhanam, hereby certifies that:
1. He is the duly elected and acting President of Inventa Corporation, a
California corporation (the "Company").
2. The representations and warranties made by the Company in Section 2 of
the Agreement are true and correct as of the date of this certificate with the
same effect as if made on such date.
3. The Company has performed and complied with all agreements, obligations
and conditions contained in the Agreement that are required to be performed or
complied with by it on or before the date of this certificate.
4. There has been no adverse change in the business, affairs, prospects,
operations, properties, assets or condition of the Company since April 30, 1994.
Dated effective as of: July 8, 1994
/s/ Ashok K. Santhanam
----------------------------
Ashok K. Santhanam
President
<PAGE>
EXHIBIT 10.2
INVENTA CORPORATION
____________________________
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
____________________________
February 14, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Purchase and Sale of Series B Preferred Stock.................... 1
1.1 Sale and Issuance of Series B Preferred Stock.............. 1
1.2 Closing Date; Delivery..................................... 1
2. Representations and Warranties of the Company.................... 1
2.1 Organization, Good Standing and Qualification.............. 1
2.2 Capitalization............................................. 2
2.3 Subsidiaries............................................... 2
2.4 Authorization.............................................. 2
2.5 Valid Issuance of Securities............................... 2
2.6 Governmental Consents...................................... 2
2.7 Litigation................................................. 3
2.8 Patent and Trademarks...................................... 3
2.9 Compliance with Other Instruments.......................... 4
2.10 Disclosure................................................. 4
2.11 Registration Rights........................................ 4
2.12 Title to Property and Assets............................... 4
2.13 Financial Statements....................................... 5
2.14 Changes.................................................... 5
2.15 Minute Books............................................... 6
2.16 Labor Agreements and Actions............................... 6
2.17 Employee Plans............................................. 7
2.18 Employees.................................................. 7
2.19 Tax Returns and Payments................................... 7
2.20 Agreements; Action......................................... 7
2.21 Obligations to Related Parties............................. 8
2.22 Qualified Small Business................................... 9
2.23 Real Property Holding Corporation.......................... 9
2.24 Insurance.................................................. 9
2.25 Investment Company Act..................................... 9
3. Representations and Warranties of the Investors.................. 9
3.1 Authorization.............................................. 9
3.2 Purchase Entirely for Own Account.......................... 9
3.3 Disclosure of Information.................................. 10
3.4 Economic Risk.............................................. 10
3.5 Restricted Securities...................................... 10
3.6 Further Limitations on Disposition......................... 10
3.7 Legends.................................................... 11
4. California Commissioner of Corporations.......................... 11
4.1 Corporate Securities Law................................... 11
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(Continued)
<TABLE>
<S> <C>
5. Conditions of Investor's Obligations at Closing.................. 11
5.1 Representations and Warranties.............................. 11
5.2 Performance................................................. 12
5.3 Articles of Incorporation................................... 12
5.4 Compliance Certificate...................................... 12
5.5 Shareholders Agreement...................................... 12
5.6 Opinion of Company's Counsel................................ 12
6. Conditions of the Company's Obligations at Closing............... 12
6.1 Representations and Warranties.............................. 12
6.2 Payment of Purchase Price................................... 12
6.3 Legal Matters............................................... 12
7. Covenants of the Company......................................... 12
7.1 Delivery of Financial Statements............................ 12
7.2 Inspection Rights........................................... 13
7.3 Reservation of Common Stock................................. 13
7.4 Proprietary Information Agreement........................... 13
7.5 Termination of Information Covenant......................... 13
7.6 Board of Directors.......................................... 13
8. Miscellaneous.................................................... 13
8.1 Survival of Warranties...................................... 13
8.2 Transfer; Successors and Assigns............................ 14
8.3 Governing Law............................................... 14
8.4 Counterparts................................................ 14
8.5 Titles and Subtitles........................................ 14
8.6 Notices..................................................... 14
8.7 Finder's Fee................................................ 14
8.8 Expenses.................................................... 14
8.9 Amendments and Waivers...................................... 14
8.10 Severability................................................ 15
8.11 Entire Agreement............................................ 15
8.12 Exculpation Among Investors................................. 15
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
(Continued)
EXHIBITS
--------
EXHIBIT A Schedule of Investors
EXHIBIT B Amended and Restated Articles of Incorporation
EXHIBIT C Schedule of Exceptions to Representations and Warranties
EXHIBIT D Form of Proprietary Information Agreement
EXHIBIT E Shareholders Agreement
EXHIBIT F Opinion of Wilson Sonsini Goodrich & Rosati
-iii-
<PAGE>
SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
-------------------------------------------------------
THIS SERIES B CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT ("Agreement")
is made as of the 14th day of February 1997 by and between Inventa Corporation,
a California corporation (the "Company"), and the persons and entities listed on
the Schedule of Investors attached hereto as Exhibit A (the "Investors").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Series B Preferred Stock
---------------------------------------------
1.1 Sale and Issuance of Series B Preferred Stock.
---------------------------------------------
(a) The Company shall adopt and file with the Secretary of
State of California on or before the Closing (as defined below) the Amended and
Restated Articles of Incorporation in the form attached hereto as Exhibit B.
(b) Subject to the terms and conditions of this Agreement,
the Investors agree to purchase at the Closing and the Company agrees to sell
and issue to the Investors at the Closing that number of shares of the Company's
Series B Preferred Stock (the "Shares") for the aggregate purchase price set
forth opposite each Investor's name on Exhibit A attached hereto, at a purchase
price equal to $1.25 per share of Series B Preferred Stock.
1.2 Closing Date; Delivery. The purchase and sale of the Shares
----------------------
shall take place at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page
Mill Road, Palo Alto, California, at 9:00 a.m., on February 14, 1997, or at such
other time and place as the Company and the Investors 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 Shares which such Investor is purchasing against delivery to
the Company by such Investor of a check made payable to the Company or wire
transfer of the aggregate purchase price therefor.
2. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to the Investors that, except as set forth on a Schedule
of Exceptions attached hereto as Exhibit C, 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
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of California and has all requisite corporate power and authority
to carry on its business as now conducted and as proposed to be 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.
<PAGE>
2.2 Capitalization. The authorized capital of the Company will
--------------
consist, immediately prior to the Closing, of (i) 3,560,000 shares of Preferred
Stock, 1,000,000 shares of which are designated Series A Preferred Stock and of
which 800,000 are issued and outstanding, and 2,560,000 shares of which are
designated Series B Preferred and of which none are issued and outstanding, and
(ii) 20,000,000 shares of Common Stock, of which 4,542,696 shares are issued and
outstanding. The Company has reserved 1,350,000 shares of its Common Stock for
issuance pursuant to its 1993 Stock Option Plan. Except as set forth in the
Schedule of Exceptions attached as Exhibit C hereto, there are no outstanding
options, warrants, rights (including conversion or preemptive rights) or
agreements, orally or in writing, for the purchase or acquisition from the
Company of any shares of its capital stock.
2.3 Subsidiaries. Except as set forth in the Schedule of
------------
Exceptions,Company does not presently own or control, directly or indirectly,
any interest in any other corporation, association, or other business entity.
2.4 Authorization. All corporate action on the part of the Company,
-------------
its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement, the performance of all obligations of
the Company hereunder and the authorization, issuance and delivery of the Shares
has been taken or will be taken prior to the Closing, and this Agreement
constitutes a valid and legally binding obligation of the Company, enforceable
in accordance with its terms. The Agreement, the Shareholders Agreement and the
Registration Rights Agreement, when executed and delivered, will be valid and
binding obligations of the Company enforceable in accordance with their terms,
except (i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights; (ii) general principles of equity that restrict the
availability of equitable remedies; and (iii) to the extent that the
enforceability of the indemnification provisions in Section 10 of the
Registration Rights Agreement may be limited by applicable laws. The sale of the
Shares and the subsequent conversion of the Shares into Common Stock are not and
will not be subject to any preemptive rights or rights of first refusal that
have not been properly waived or complied with.
2.5 Valid Issuance of Securities.
----------------------------
(a) The Shares that are being issued to 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. The shares of Common Stock issuable upon conversion of
the Shares have been duly and validly reserved for issuance.
(b) The shares of Common Stock and Preferred Stock
outstanding prior to the Closing are all duly and validly authorized and issued,
fully paid and nonassessable and were issued in compliance with all applicable
state and federal laws concerning the issuance of securities.
2.6 Governmental Consents. No consent, approval, order or
---------------------
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation
-2-
<PAGE>
of the transactions contemplated by this Agreement, except for (a) 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 in
accordance with such section, and (b) compliance with the Blue Sky Laws of the
various states in which the Investors may reside, which compliance will be
effected in accordance with such laws. The Company currently holds all licenses,
permits, franchises, registrations and qualifications which may be required to
conduct its business, and all such licenses, permits, franchises, registrations
and qualifications are valid and in full force and effect.
2.7 Litigation. Except as set forth in the Schedule of Exceptions,
----------
there is no action, suit, proceeding or investigation pending or currently
threatened against the Company that questions the validity of this Agreement or
the right of the Company to enter into it, or to consummate the transactions
contemplated hereby, or that might result, either individually or in the
aggregate, in any material adverse changes in the assets, condition, affairs or
prospects of the Company, financially or otherwise, or any change in the current
equity ownership of the Company, nor is the Company aware that there is any
basis for the foregoing. The foregoing includes, without limitation, actions
pending or threatened (or any basis therefor known to the Company) involving the
prior employment of any of the Company's employees, their use in connection with
the Company's business of any information or techniques allegedly proprietary to
any of their former employers, or their obligations under any agreements with
prior employers. The Company is not a party or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
2.8 Patent and Trademarks. To its knowledge, the Company owns or
---------------------
possesses sufficient legal rights to all patents, trademarks, service marks,
trade names, copyrights, trade secrets, information and other proprietary rights
and processes necessary for its business as now conducted and as proposed to be
conducted, without any known infringement of the rights of others. There are no
outstanding options, licenses or agreements of any kind relating to the
foregoing, nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information and other
proprietary rights and processes of any other person or entity other than such
licenses or agreements arising from the purchase or sale of "off the shelf" or
standard products. The Company has not received any communications alleging that
the Company has violated or, by conducting its business as proposed, would
violate any of the patents, trademarks, service marks, trade names, copyrights
or trade secrets or other proprietary rights of any other person or entity. The
Company is not aware that any of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere with their duties to the Company or that would
conflict with the Company's business as proposed to be conducted. Neither the
execution nor delivery of this Agreement, nor the carrying on of the Company's
business by the employees of the Company, nor the conduct of the Company's
business as proposed, will, to the Company's knowledge, conflict with or result
in a breach of the terms, conditions or provisions of, or constitute a default
under, any contract, covenant or instrument under which any employee is now
obligated. The Company does not believe it is or will be necessary to utilize
any inventions, trade secrets or
-3-
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proprietary information of any of its employees made prior to their employment
by the Company, except for inventions, trade secrets or proprietary information
that have been assigned to the Company.
2.9 Compliance with Other Instruments.
---------------------------------
(a) The Company is not in violation or default of any
provisions of its Amended and Restated Articles 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 and the consummation of the
transactions contemplated hereby 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, contract, rule, or statute, or of the Company's Restated Articles
of Incorporation or Bylaws, or an event which results in the creation of any
lien, charge or encumbrance upon any assets of the Company.
(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.
2.10 Disclosure. The Company has fully provided the Investors with
----------
all the information which the Investors have requested for deciding whether to
acquire the Shares and all information which the Company believes is reasonably
necessary to enable the Investors to make such decision. To the Company's
knowledge, there is no material information which materially adversely affects
the business or operations of the Company which has not been disclosed to the
Investors. Neither this Agreement nor any other statements or certificates made
or delivered in connection herewith 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, except that, with respect to financial projections,
the Company represents only that such projections were prepared in good faith
and that the Company believes there is a reasonable basis for such projections.
2.12 Registration Rights. Except as set forth in the Registration
-------------------
Rights Agreement between the Company and the holders of the Preferred Stock of
the Company, the Company has not granted or agreed to grant any registration
rights, including piggyback rights, to any person or entity.
2.12 Title to Property and Assets. The Company owns its property and
----------------------------
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens which arise in the ordinary course of business and
do not materially impair the Company's ownership or use of such property or
assets. With respect to the property and assets it leases, the Company is in
compliance with such leases and, to the best of its knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances. All facilities,
machinery, equipment, fixtures, vehicles and other
-4-
<PAGE>
properties owned, leased or used by the Company are in good operating condition
and repair (normal wear and tear accepted) and are reasonably fit and usable for
the purposes for which they are being used.
2.13 Financial Statements. The Company has delivered to the Investor
--------------------
(i) its unaudited financial statements (balance sheet and profit and loss
statement and statement of shareholders equity) at November 30, 1996 and the 11
month period then ended and (ii) its reviewed financial statements (balance
sheet and profit and loss statement and statement of shareholders equity) at
December 31, 1995 and for the fiscal year then ended (collectively, the
"Financial Statements"). The Financial Statements are complete and correct in
all material respects and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated and with each other. The Financial Statements accurately set
out and describe the financial condition and operating results of the Company as
of the dates, and for the periods, indicated therein. Except as set forth in the
Financial Statements, the Company has no liabilities, contingent or otherwise,
of a nature required by generally accepted accounting principles to be reflected
in a balance sheet or disclosed in the notes thereto, other than liabilities
incurred in the ordinary course of business subsequent to November 30, 1996.
2.14 Changes. Since November 30, 1996 there has not been:
-------
(a) any change in the assets, liabilities, financial
condition or operating results of the Company from that reflected in the
Financial Statements, except changes in the ordinary course of business which
have not been, in the aggregate, materially adverse.
(b) any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the assets, properties,
financial condition, operating results, prospects or business of the Company (as
such business is presently conducted and as it is proposed to be conducted);
(c) any waiver by the Company of a valuable right or of a
material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and which is not material to 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);
(e) any change or amendment to a material contract or
arrangement by which the Company or any of its assets or properties is bound or
to which the Company or any of such assets or properties is subject;
(f) any material change in any compensation arrangement or
agreement with any employee;
-5-
<PAGE>
(g) any resignation or termination of any key officers of
the Company; and the Company, to its knowledge, does not know of the impending
resignation or termination of employment of any such officer;
(h) to the knowledge of the Company any material change,
except in the ordinary course of business, in the contingent obligations of the
Company by way of guaranty, endorsement, indemnity, warranty or otherwise;
(i) any direct or indirect loans made by the Company to any
shareholder, employee, officer or director of the Company, other than advances
made in the ordinary course of business or loans to purchase Common Stock;
(j) any material change in any compensation arrangement or
agreement with any employee, officer, director or shareholder other than in the
ordinary course of business;
(k) any declaration or payment of any dividend or other
distribution of the assets of the Company;
(l) any labor organization activity;
(m) any debt, obligation or liability incurred, assumed or
guaranteed by the Company, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;
(n) any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets; or
(o) to the Company's knowledge, any other event or condition
of any character which might materially and adversely affect 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).
2.15 Minute Books. The Company has offered to provide to the
------------
Investors the minute books of the Company, which contain a complete summary of
all meetings of directors and shareholders since the time of incorporation and
reflect all transactions referred to in such minutes accurately in all material
respects.
2.16 Labor Agreements and Actions. The Company is not bound by or
----------------------------
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
-6-
<PAGE>
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. The employment of each officer and employee of the Company is
terminable at the will of the Company.
2.17 Employee Plans. The Company has no "employee welfare benefit
--------------
plans" as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974 ("ERISA"). The Company (i) has not been required to contribute to, (ii)
has not terminated or withdrawn from, and (iii) is not aware of any withdrawal
liability assessed against the Company with respect to any defined benefit plan
as defined in Section 3(35) of ERISA or multiemployer plan as defined in Section
4001 of ERISA in which employees or former employees of the Company have
participated.
2.18 Employees. The Company has not knowingly violated any
---------
employment-related laws, including, without limitation, laws relating to equal
employment opportunity, overtime pay and collective bargaining. To the Company's
knowledge, no key employee or sales representative of the Company, and no group
of employees, has any plans to terminate his or her employment with the Company.
Each former and current United States employee and consultant of the Company
with access to confidential or proprietary information has executed a
Proprietary Information Agreement, the form of which is attached hereto as
Exhibit D. To the Company's knowledge, no employee of the Company, nor any
consultant with whom the Company has contracted, is in violation of any term of
any employment contract, proprietary information agreement or any other
agreement relating to the right of any such individual to be employed by, or to
contract with, the Company because of the nature of the business to be conducted
by the Company; and to the Company's knowledge the continued employment by the
Company of its present employees, and the performance of the Company's contracts
with its independent contractors, will not result in any such violation. The
Company has not received any notice alleging that any such violation has
occurred.
2.19 Tax Returns and Payments. The Company has timely filed all tax
------------------------
returns (federal, state and local) required to be filed by it. All taxes shown
to be due and payable on such returns, any assessments imposed, and to the
Company's knowledge all other taxes due and payable by the Company on or before
the Closing have been paid or will be paid prior to the time they become
delinquent. The Company has not been advised except as set forth in the Schedule
of Exceptions (i) that any of its returns, federal, state or other, have been or
are being audited as of the date hereof, or (ii) of any deficiency in assessment
or proposed judgment to its federal, state or other taxes. The Company has no
knowledge of any liability of any tax to be imposed upon its properties or
assets as of the date of this Agreement that is not adequately provided for.
2.20 Agreements; Action.
------------------
(a) Except for agreements explicitly contemplated hereby
including proprietary agreements and agreements between the Company and its
employees with respect to the sale of the Company's Common Stock, and agreements
between the Company and the Holders with
-7-
<PAGE>
respect to their investment, 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 to its knowledge by which it is bound which may
involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $25,000 (other than obligations of, or payments to, the
Company arising from purchase or sale agreements entered into in the ordinary
course of business), or (ii) the license of any patent, copyright, trade secret
or other proprietary right to or from the Company (other than licenses arising
from the purchase or sale of "off the shelf" or other standard products), 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 (other than
indemnification obligations arising from purchase or sale agreements entered
into in the ordinary course of business).
(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 except as set forth in the Schedule of Exceptions
(other than with respect to dividend obligations, distributions, indebtedness
and other obligations incurred in the ordinary course of business or as
disclosed in the Financial Statements) individually in excess of $25,000 or, in
the case of indebtedness and/or liabilities individually less than $25,000, in
excess of $50,000 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 material amount 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 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, or 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.
2.21 Obligations to Related Parties. There are no obligations of the
------------------------------
Company to officers, directors, shareholders or employees of the Company other
than (a) for payment of salary for services rendered, (b) reimbursement for
reasonable expenses incurred on behalf of the Company and
-8-
<PAGE>
(c) for other standard employee benefits made generally available to all
employees (including stock option agreements outstanding under any stock option
plan approved by the Board of Directors of the Company). Except as set forth in
the Schedule of Exceptions none of the officers, directors or shareholders of
the Company, or any members of their immediate families, are indebted to the
Company or have 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 which competes with the
Company, except that officers, directors and/or shareholders of the Company may
own stock in publicly traded companies which may compete with the Company. No
officer, director or shareholder, or any member of their immediate families, is,
directly or indirectly, interested in any material contract with the Company
(other than such contracts as relate to any such person's ownership of capital
stock or other securities of the Company). Except as may be disclosed in the
Financial Statements, the Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation.
2.22 Qualified Small Business. The Company represents and warrants
------------------------
to the Investors that, to its knowledge, the Shares should qualify as "Qualified
Small Business Stock" as defined in Section 1202(c) of the Internal Revenue Code
of 1986, as amended (the "Code") as of the date hereof.
22.3 Real Property Holding Corporation. The Company is not a real
---------------------------------
property holding corporation within the meaning of Internal Revenue Code Section
897(c)(2) and any regulations promulgated thereunder.
22.4 Insurance. The Company has or will obtain promptly following
---------
Closing fire and casualty insurance policies with coverage customary for
companies similarly situated to the Company.
22.5 Investment Company Act. The Company is not an "investment
----------------------
company," or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
3. Representations and Warranties of the Investors. Each Investor for
-----------------------------------------------
itself hereby represents and warrants to the Company 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
---------------------------------
the Investor in reliance upon the Investor's representation to the Company,
which by the Investor's execution of this Agreement the Investor hereby
confirms, that the Shares will be acquired for investment for the 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 the Investor has no present intention
of selling, granting any participation in, or otherwise distributing the same.
By executing this Agreement, the Investor further represents that the Investor
does not presently have any contract, undertaking, agreement or arrangement with
any person to sell, transfer or grant participations to such person or to
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<PAGE>
any third person, with respect to any of the Shares. The Investor represents
that it has full power and authority to enter into this Agreement.
3.3 Disclosure of Information. The Investor believes it has
-------------------------
received information that it considers necessary or appropriate for deciding
whether to acquire the Shares. The 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 Shares. 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 Investor to rely thereon.
3.4 Economic Risk. The Investor has the capacity to protect his own
-------------
interests in connection with the purchase of the Shares, is capable of
evaluating the merits and risks of investment in the Company, can make an
informed investment decision by reason of (i) his preexisting personal or
business relationship with the Company or any of its officers, directors, or
control persons, or (ii) his business and financial knowledge and experience or
the business and financial knowledge and experience of my professional advisers,
and is able to bear the substantial economic risks of an investment in the
Shares for an indefinite period of time.
3.5 Restricted Securities. It understands that the shares of Common
---------------------
Stock sold hereunder 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 shares may be resold without registration under the
Securities Act of 1933, as amended (the "Act"), only in certain limited
circumstances. In this connection, the Investor represents that he is familiar
with SEC Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Act.
3.6 Further Limitations on Disposition. Without in any way limiting
----------------------------------
the representations set forth above, the Investor further agrees not to make any
disposition of all or any portion of the Shares unless and until:
(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) The 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, the Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration under the Act.
(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 the Investor to a shareholder, partner or other
affiliate of the Investor, if the transferee or transferees agree in writing to
be subject to the terms hereof to the same extent as if they were the Investor
hereunder.
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<PAGE>
3.7 Legends. It is understood that the Shares, and the shares of
-------
Common Stock issuable upon conversion thereof and any securities issued in
respect thereof or exchange therefor may bear one or all of the following
legends:
(a) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT. COPIES OF THE
AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER
MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE
OFFICES OF THE CORPORATION.
(b) Any legend required by the laws of the State of
California, including any legend required by the California Department of
Corporations.
(c) Any legend required by the Blue Sky laws of any other
state to the extent such laws are applicable to the shares represented by the
certificate so legended.
4. California Commissioner of Corporations.
---------------------------------------
4.1 Corporate Securities Law. THE SALE OF THE SECURITIES THAT
------------------------
IS THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA, 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 THE
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
-----------------------------------------------
the Investors under Section 1.1 of this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions:
5.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 2 shall be true and correct in
all material respects as of the 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.
-11-
<PAGE>
5.3 Articles of Incorporation. The Company shall have filed with,
-------------------------
and have had accepted for filing by, the California Secretary of State the
Amended and Restated Articles of Incorporation of the Company attached as
Exhibit B hereto.
5.4 Compliance Certificate. The President of the Company shall
----------------------
deliver to the Investors at the Closing a certificate certifying that the
conditions specified in Sections 5.1 and 5.2 have been fulfilled.
5.5 Shareholders Agreement. Each key employee of the Company who
----------------------
holds 100,000 shares of the capital stock of the company (on an as-converted
basis and as adjusted for any stock split, stock dividends, combinations,
recapitulations and the like with respect to such Shares) shall have entered
into a Shareholders Agreement with the Company, in substantially the form
attached hereto as Exhibit E.
5.6 Opinion of Company's Counsel. The Purchasers shall have
----------------------------
received from Wilson Sonsini Goodrich & Rosati, counsel to the Company, an
opinion addressed to them, dated the Closing Date, in substantially the form of
Exhibit F.
6. Conditions of the Company's Obligations at Closing. The obligations
--------------------------------------------------
of the Company to the Investors under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions by
the Investor:
6.1 Representations and Warranties. The representations and
------------------------------
warranties of the Investors contained in Section 3 shall be true and correct in
all material respects as of the Closing.
6.2 Payment of Purchase Price. The Investors shall have delivered
-------------------------
to the Company the purchase price specified in Section 1.1 hereof.
6.3 Legal Matters. All material matters of a legal nature which
-------------
pertain to this Agreement, and the transactions contemplated hereby, shall have
been reasonably approved by counsel to the Company.
7. Covenants of the Company.
------------------------
7.1 Delivery of Financial Statements. The Company shall deliver
--------------------------------
to each Investor who continues to hold at least 50,000 Shares (or the Common
Stock into which the Shares have been converted) (as adjusted for any stock
split, stock dividends, combinations, recapitalizations and the like with
respect to such Shares), and as long as such Investor or a principal, partner or
manager of such Investor, is not employed by or associated with a competitor of
the Company:
(a) as soon as practicable after the end of each fiscal year
of the Company an income statement for such fiscal year, a balance sheet of the
Company as of the end of such year and in any event within 120 days thereafter,
and a schedule as to the sources and applications of funds for such year, such
year-end financial reports to be audited and in reasonable detail, prepared in
accordance with generally accepted accounting principles ("GAAP");
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<PAGE>
(b) as soon as practicable after the end of each fiscal
quarter of the Company, and in any event within 30 days thereafter, an unaudited
profit or loss statement and schedule as to the sources and application of funds
for each quarterly reporting period; and
(c) within ten (10) days of the end of each month, an
unaudited balance sheet as of the end of such month.
7.2 Inspection Rights. Each Investor shall have the right to visit
-----------------
and inspect any of the properties of the Company or any of its subsidiaries, and
to discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested all at such reasonable times and as often as may be reasonably
requested; provided, however, that the Company shall not be obligated under this
Section 7.2 with respect to a competitor of the Company or with respect to
information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed.
7.3 Reservation of Common Stock. The Company will at all times
---------------------------
reserve and keep available, solely for issuance and delivery upon the conversion
of the Preferred Stock, all Common Stock issuable from time to time upon such
conversion (the "Conversion Stock").
7.4 Proprietary Information Agreement. The Company shall require
---------------------------------
all employees and consultants to execute and deliver a Proprietary Information
Agreement in the form attached hereto as Exhibit D.
7.5 Termination of Information Covenant. The covenant set forth in
-----------------------------------
Section 7.1 shall terminate as to the Investors and be of no further force or
effect upon the initial sale of securities pursuant to a registration statement
filed by the Company under the Securities Act in connection with the firm
commitment underwritten offering of its securities to the general public is
consummated.
7.6 Board of Directors. As soon as practicable after the Closing,
------------------
the Company shall cause to be elected to its Board of Directors (1)
representative elected by the holders of Series A Preferred Stock, (ii) two
representatives elected by the Investors, and (iii) one representative elected
by the holders of Common Stock of the Company. Any additional directors shall be
elected by all the holders of Common Stock and Preferred Stock, voting as a
single class. The Company shall pay the reasonable out-of-pocket expenses of
non-employee members of the Company's Board of Directors in connection with
attending Board of Directors meeting.
8. Miscellaneous.
-------------
8.1 Survival of Warranties. The warranties, representations and
----------------------
covenants of the Company and the 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.
8.2 Transfer; Successors and Assigns. 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.
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<PAGE>
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.
8.3 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.
8.4 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.
8.5 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.
8.6 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.
8.7 Finder's Fee. Except as elsewhere disclosed in this Agreement,
------------
or in Exhibit C hereto, each party represents that it neither is nor will be
obligated for any finder's fee or commission in connection with this
transaction. The Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, employees, or
representatives are responsible.
The Company agrees to indemnify and hold harmless the Investor from
any liability for any commission or compensation in the nature of a finder's 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.
8.8 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 attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
8.9 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 a majority-in-
interest of the Investors.
8.10 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
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<PAGE>
balance of the Agreement shall be interpreted as if such provision were so
excluded and shall be enforceable in accordance with its terms.
8.11 Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the parties hereto pertaining to the subject matter hereof,
and any and all other written or oral agreements existing between the parties
hereto are expressly canceled.
8.12 Exculpation Among Investors. Each Investor acknowledges that
---------------------------
it is not relying upon any person, firm or corporation, other than the Company
and its officers and directors, in making its investment or decision to invest
in the Company. Each investor agrees that no Investor nor the respective
controlling persons, officers, directors, partners, agents or employees of any
Investor shall be liable for any action heretofore or hereafter taken or omitted
to be taken by any of them in connection with the Shares.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
INVENTA CORPORATION
By: /s/ [SIGNATURE ILLEGIBLE]
------------------------------------
Title: President
----------------------------------
Address:
2620 Augustine Drive, Suite 225
Santa Clara, CA 95054
INVESTORS:
BATTERY VENTURES ANDREW POTTER
By: /s/ Todd A. Dagres /s/ Andrew Potter
----------------------------------- ------------------------------
Todd A. Dagres
Title: General Partner
--------------------------------
ROBERT DUCOMMUN RAMESH VASUDEVAN
/s/ Robert Ducommun /s/ Ramesh Vasudevan
- -------------------------------------- ------------------------------
PALMER G. AND CHARLES E. DUCOMMUN HARRY A. CAUNTER
CHARITABLE ANNUITY TRUST, u/d/t
By: /s/ Robert Ducommun /s/ Harry A. Caunter
----------------------------------- ------------------------------
Title: Trustee
-------------------------------
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<PAGE>
EXHIBIT A
---------
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
Name and Address Shares Amount
- - ----------------------------------------------- --------------------------------------- ------------------------------------
<S> <C> <C>
Battery Ventures 2,286,363 $ 2,857,953.75
20 William Street
Welllesley, MA 01282
Robert Ducommun 80,000 $ 100,000.00
1155 Park Ave.
Apt. 1 SW
New York, N.Y. 10128
Palmer G. and Charles E. Ducommun 40,000 $ 50,000.00
Charitable Annuity Trust, u/d/t
Robert Ducommun, trustee
1155 Park Ave.
Apt. 1 SW
New York, N.Y. 10128
Andrew Potter 21,191 $ 26,488.75
923 Cowper
Palo Alto, CA 94301
Ramesh Vasudevan 105,957 $ 132,446.25
5615 Sumac Place
North Vancouver, BC, V7R4T6
Canada
Harry A. Caunter 26,489 $ 33,111.25
675 North Court
Suites 225 & 230
Palatine, IL 60067
TOTAL 2,560,000 $ 3,200,000.00
</TABLE>
-17-
<PAGE>
EXHIBIT B
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
INVENTA CORPORATION
I.
The name of this corporation is Inventa Corporation (the "Corporation").
I.
The purpose of this Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
I.
This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the Corporation is authorized to issue is 23,560,000 shares, of
which 20,000,000 shares shall be Common Stock with a par value of $0.001 per
share and of which 3,560,000 shares shall be Preferred Stock, 1,000,000 of which
are designated Series A Preferred Stock with a par value of $0.001 per share and
2,560,000 of which are designated Series B Preferred Stock with a par value of
$0.001 per share.
Upon the filing of these Amended and Restated Articles of Incorporation,
each outstanding share of Common Stock and and each outstanding share of
Preferred Stock shall be split up and reconstituted as two shares of Common
Stock and Preferred Stock, respectively. The numbers in these Amended and
Restated Articles of Incorporation have been adjusted to reflect the foregoing
stock split, and consequently no further adjustment, including any adjustment
with respect to the Conversion Prices of any series of Preferred Stock pursuant
to Section IV.3(e)(iii), shall be made with respect to the foregoing stock
split.
<PAGE>
I.
The rights, preferences, privileges and restrictions granted to or imposed
upon the Common Stock and Preferred Stock are as follows:
A. Dividend Provisions. The holders of shares of Series A Preferred Stock
("Series A Preferred") and Series B Preferred Stock ("Series B Preferred") 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 $0.03 per annum per share of Series A Preferred (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares) and $0.075 per annum per share of Series B
Preferred (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares) or, if greater (as
determined on a per annum basis and on an as converted basis for the Series A
Preferred and Series B Preferred), an amount equal to that paid on the Common
Stock. Such dividends shall be payable when, as, and if declared by the Board of
Directors, and shall not be cumulative, and no right shall accrue to holders of
Common Stock or Preferred Stock by reason of the fact that dividends on said
shares are not declared in any prior period.
A. Liquidation Preference.
1. Preferred Preference. In the event of any liquidation,
dissolution or winding up of this Corporation, either voluntary or involuntary,
the holders of Series A Preferred and Series B Preferred 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 $.50 for each outstanding share of Series
A Preferred (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares) and $1.25 for each
outstanding share of Series B Preferred (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares), plus an amount equal to any declared but unpaid dividends on each such
share up to the date fixed for distribution. If upon the occurrence of such
event, the assets and funds thus distributed among the holders of Preferred
Stock shall be insufficient to permit the payment to such holders of the full
aforesaid preferential amounts, then the entire assets and funds of this
Corporation legally available for distribution shall be distributed, in
proportion to the preferential amount each such holder is otherwise entitled to
receive pursuant to this paragraph (a), among the holders of the Preferred Stock
in proportion to the amount of such Series A Preferred and Series B Preferred
owned by each such holder.
1. After payment has been made to the holders of the Preferred Stock
of the full amount to which they shall be entitled as set forth in paragraph
2(a) above, the holders of the Common Stock shall then be entitled to receive
the amount of $0.20 per share for each share of Common Stock then held by them,
adjusted for any combinations, consolidations, subdivisions, or stock dividends
with respect to such shares and, in addition, an amount equal to all declared
but unpaid dividends on the Common Stock. If the assets and funds thus
distributed among the holders
-2-
<PAGE>
of the Common Stock shall be insufficient to permit the payment to such holders
of the full aforesaid amount, then the entire assets and funds of the
Corporation legally available for distribution, after payment has been made to
the holders of the Preferred Stock of the full amount to which they shall be
entitled as set forth in paragraph 2(a) above, shall be distributed among the
holders of the Common Stock in proportion to the full amount each such holder is
otherwise entitled to receive.
1. After payment has been made to the holders of the Preferred Stock
and the Common Stock of the full amount to which they shall be entitled as set
forth in paragraphs 2(a) and 2(b) above, the holders of the Preferred Stock and
Common Stock shall be entitled to receive ratably on a per-share basis all the
remaining assets based upon the number of shares of Common Stock into which each
share of Preferred is then convertible; provided, however, that the holders of
Preferred Stock shall not be entitled to receive pursuant to this paragraph (c)
(including amounts received pursuant to paragraph (a) above) more than a total
of $1.00 per share of Series A Preferred and $2.50 per share of Series B
Preferred then held by them, adjusted for any combinations, consolidations, or
stock splits with respect to such shares. If the assets and funds thus
distributed among the holders of each series of Preferred and Common Stock shall
be insufficient to permit the payment of the full aforesaid preferential amounts
as provided in this paragraph (c), the remaining funds and assets of the
Corporation available for distribution shall be distributed among the holders of
each series of Preferred and Common Stock in proportion to the amount each such
holder is otherwise entitled to receive pursuant to this paragraph (c).
1. After payment has been made to the holders of the Preferred Stock
and the Common Stock of the full amounts to which they shall be entitled as set
forth in paragraphs 2(a), 2(b) and 2(c) above, the holders of the Common Stock
shall be entitled to receive ratably on a per-share basis all the remaining
assets.
1. Mergers. For purposes of this Section 2, a merger or
consolidation of the Corporation with or into any other corporation or
corporations, the merger of any other corporation or corporations into the
Corporation, in which the shareholders of the Corporation receive distributions
in cash or securities of another corporation or corporations as a result of such
consolidation or merger, a reorganization where the shareholders of the
Corporation immediately prior to the transaction possess less than 50% of the
voting power of the surviving entity (or its parent) immediately after the
transaction, or a sale of all or substantially all of the assets of the
Corporation, shall be treated as a liquidation, dissolution or winding up of the
Corporation; provided that the holders of the Preferred Stock and the Common
Stock shall each be paid in cash or in the securities received or in a
combination thereof (which combination shall be in the same proportions as the
consideration received in the transaction). Any securities to be delivered to
the holders of the Preferred Stock and Common Stock upon merger, reorganization
or sale of substantially all the assets of the Corporation shall be valued as
follows:
a) if traded on a securities exchange, the value shall be
deemed to be the average of the closing prices of the securities on such
exchange over the 30-day period ending three (3) business days prior to the
closing;
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<PAGE>
a) if actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid prices over the 30-day period ending
three (3) business days prior to the closing; and
a) if there is no active public market, the value shall be the
fair market value thereof as mutually determined by the Corporation and the
holders of not less than a majority of the outstanding shares of the Preferred
Stock, provided that if the Corporation and the holders of a majority of the
outstanding shares of the Preferred Stock are unable to reach agreement, then by
independent appraisal by an investment banker hired and paid by the Corporation,
but acceptable to the holders of a majority of the outstanding shares of
Preferred Stock.
1. As authorized by Section 402.5(c) of the California Corporations
Code, the provisions of Sections 502 and 503 of the California Corporations Code
shall not apply with respect to repurchase by the Corporation of shares of
Common Stock issued to or held by employees or consultants of the Corporation or
its subsidiaries upon termination of their employment or services pursuant to
agreement providing for the right of said repurchase.
A. Conversion. The holders of the Series A Preferred and Series B
Preferred shall have conversion rights as follows (the "Conversion Rights"):
1. Right to Convert. Each share of Series A Preferred and Series B
Preferred shall be convertible into share(s) of Common Stock without the payment
of any additional consideration by the holder thereof and, at the option of the
holder thereof, at any time after the date of issuance of such share, at the
office of the Corporation or any transfer agent for the Series A Preferred and
Series B Preferred. Each share of Series A Preferred and Series B Preferred
shall be convertible into the number of fully paid and nonassessable shares of
Common Stock which results from dividing the Conversion Price (as hereinafter
defined) per share in effect for the Series A Preferred and Series B Preferred
at the time of conversion into the per share Conversion Value (as hereinafter
defined) of such series. The initial Conversion Price per share of Series A
Preferred shall be $.50, and the Conversion Value per share of the Series A
Preferred shall be $.50. The initial Conversion Price per share of the Series B
Preferred shall be $1.25, and the Conversion Value per share of the Series B
Preferred shall be $1.25. The initial Conversion Price of Series A Preferred and
Series B Preferred shall be subject to adjustment from time to time as provided
below. The number of shares of Common Stock into which a share of Series A
Preferred and Series B Preferred is convertible is hereinafter referred to as
the "Conversion Rate" of such series.
1. Automatic Conversion. Each share of Series A Preferred and Series
B Preferred shall automatically be converted into shares of Common Stock at the
applicable effective Conversion Rate immediately upon the closing of a firm
commitment underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer and
sale of Common Stock in which (a) the public offering price equals or exceeds
$1.75 per share (adjusted to reflect subsequent stock dividends, stock splits or
recapitalization) for the Series A Preferred and $4.00 per share (adjusted to
reflect subsequent stock dividends, stock splits or recapitalization) for the
Series B Preferred and (b) the aggregate proceeds raised equals or exceeds
$5,000,000 for the Series A Preferred and $10,000,000 for the Series B
Preferred.
-4-
<PAGE>
1. Mechanics of Conversion. Before any holder of the 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 the Corporation or of any transfer agent for the Preferred Stock and shall
give written notice to the Corporation at such office that he elects to convert
the same (except that no such written notice of election to convert shall be
necessary in the event of an automatic conversion pursuant to Section 3(b)
hereof). The Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Series A Preferred or Series B
Preferred 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 or Series B Preferred to
be converted (except that in the case of an automatic conversion pursuant to
Section 3(b) hereof such conversion shall be deemed to have been made
immediately prior to the closing of the offering referred to in Section 3(b))
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 on such date.
1. Fractional Shares. In lieu of any fractional shares to which the
holder of Series A Preferred or Series B Preferred would otherwise be entitled,
the Corporation shall pay cash equal to such fraction multiplied by the fair
market value of one share of each such series of Preferred Stock as determined
by the Board of Directors of the Corporation. 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 or Series B Preferred of each holder to
be converted at such time into Common Stock and the number of shares of Common
Stock issuable upon such aggregate conversion.
1. Adjustment of Conversion Price. The applicable Conversion Price
of the Series A Preferred and the Series B Preferred shall be subject to
adjustment from time to time as follows:
a) If the Corporation shall issue any Common Stock other than
"Excluded Stock", as defined below, for a consideration per share less than the
applicable Conversion Price for such series in effect immediately prior to the
issuance of such Common Stock (excluding stock dividends, subdivisions,
split-ups, combinations, dividends or recapitalizations which are covered by
Section 3(e)(iii), (iv), (v) and (vi)), the Conversion Price in effect for each
such series immediately after each such issuance shall forthwith (except as
provided in this Section 3(e)) be adjusted to a price equal to the quotient
obtained by dividing:
(1) an amount equal to the sum of
(x) the total number of shares of Common Stock
outstanding (including any shares of Common Stock issuable upon conversion of
the Series A Preferred and Series B Preferred, or deemed to have been issued
pursuant to subdivision (3) of this clause (i) and to clause (ii) below)
immediately prior to such issuance multiplied by the Conversion Price in effect
for each such series immediately prior to such issuance, plus
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<PAGE>
(y) the consideration received by the Corporation
upon such issuance, by
(1) the total number of shares of Common Stock
outstanding (including any shares of Common Stock issuable upon conversion of
the Series A Preferred and Series B Preferred or deemed to have been issued
pursuant to subdivision (3) of this clause (i) and to clause (ii) below)
immediately prior to such issuance plus the additional shares of Common Stock
issued in such issuance (but not including any additional shares of Common Stock
deemed to be issued as a result of any adjustment in the Conversion Price
resulting from such issuance).
For purposes of any adjustment of the Conversion Price
pursuant to this clause (i), the following provisions shall be applicable:
(1) In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
after deducting any discounts or commissions paid or incurred by the Corporation
in connection with the issuance and sale thereof.
(2) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair market value thereof as determined by the
board of directors of the Corporation, in accordance with generally accepted
accounting treatment; provided, however, that if, at the time of such
determination, the Corporation's Common Stock is traded in the over-the-counter
market or on a national or regional securities exchange, such fair market value
as determined by the board of directors of the Corporation shall not exceed the
aggregate "Current Market Price" (as defined below) of the shares of Common
Stock being issued.
(3) In the case of the issuance of (i) options to
purchase or rights to subscribe for Common Stock (other than Excluded Stock),
(ii) securities by their terms convertible into or exchangeable for Common Stock
(other than Excluded Stock), or (iii) options to purchase or rights to subscribe
for such convertible or exchangeable securities:
(A) 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 subdivisions (1) and (2) above), if any,
received by the Corporation upon the issuance of such options or rights plus the
minimum purchase price provided in such options or rights for the Common Stock
covered thereby;
(B) 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 received by the
Corporation for any such securities and
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<PAGE>
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 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 subdivisions (1) and (2)
above);
(C) on any change in the number of shares of
Common Stock deliverable upon exercise of any such options or rights or
conversion of or exchange for such convertible or exchangeable securities, or on
any change in the minimum purchase price of such options, rights or securities,
other than a change resulting from the antidilution provisions of such options,
rights or securities, the Conversion Price shall forthwith be readjusted to such
Conversion Price as would have been obtained had the adjustment made upon (x)
the issuance of such options, rights or securities not exercised, converted or
exchanged prior to such change, as the case may be, been made upon the basis of
such change or (y) the options or rights related to such securities not
converted or exchanged prior to such change, as the case may be, been made upon
the basis of such change; and
(D) on 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 shall forthwith be readjusted to such
Conversion Price as would have been obtained had the adjustment made upon the
issuance of such options, rights, convertible or exchangeable securities or
options or rights related to such convertible or exchangeable securities, as the
case may be, been made upon the basis of the issuance of only the number of
shares of Common Stock actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such convertible or exchangeable
securities or upon the exercise of the options or rights related to such
convertible or exchangeable securities, as the case may be.
a) "Excluded Stock" shall mean:
(1) all shares of Common Stock issued and outstanding on
the date this document is filed with the California Secretary of State and all
shares issuable upon exercise of options or warrants outstanding on the date
this document is filed with the California Secretary of State;
(1) all shares of Series A Preferred and Series B
Preferred and the Common Stock into which the shares of Series A Preferred and
Series B Preferred are convertible; and
(1) all shares of Common Stock, warrants or options to
purchase Common Stock or other securities issued to officers, directors,
consultants or employees of the Corporation pursuant to any plan or arrangement
approved by the board of directors of the Corporation.
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<PAGE>
All outstanding shares of Excluded Stock (including any
shares issuable upon conversion of the Preferred Stock) shall be deemed to be
outstanding for all purposes of the computations of Section 3(e)(i) above.
a) If the number of shares of Common Stock outstanding at any
time after the date hereof is increased by a stock dividend payable in shares of
Common Stock or by a subdivision or split-up of shares of Common Stock, then, on
the date such payment is made or such change is effective, the respective
Conversion Prices of Series A Preferred and Series B Preferred shall be
appropriately decreased so that the number of shares of Common Stock issuable on
conversion of any shares of such series of Series A Preferred and Series B
Preferred shall be increased in proportion to such increase of outstanding
shares of Common Stock.
a) If the number of shares of Common Stock outstanding at any
time after the date hereof is decreased by a combination of the outstanding
shares of Common Stock, then, on the effective date of such combination, the
respective Conversion Prices of Series A Preferred and Series B Preferred shall
be appropriately increased so that the number of shares of Common Stock issuable
on conversion of any shares of a series of Series A Preferred and Series B
Preferred shall be decreased in proportion to such decrease in outstanding
shares of Common Stock.
a) In case the Corporation shall declare a cash dividend upon
its Common Stock payable otherwise than out of retained earnings or shall
distribute to holders of its Common Stock shares of this capital stock (other
than Common Stock), stock or other securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or options or rights (excluding options to purchase and rights to
subscribe for Common Stock or other securities of the Corporation convertible
into or exchangeable for Common Stock), then, in each such case, the holders of
shares of Series A Preferred and Series B Preferred shall, concurrent with the
distribution to holders of Common Stock, receive a like distribution based upon
the number of shares of Common Stock into which Series A Preferred or Series B
Preferred is convertible.
a) In case, at any time after the date hereof, of any capital
reorganization, or any reclassification of the stock of the Corporation (other
than as a result of a stock dividend or subdivision, split-up or combination of
shares), or the consolidation or merger of the Corporation with or into another
person (other than a consolidation or merger in which the Corporation is the
continuing entity and which does not result in any change in the Common Stock),
or of the sale or other disposition of all or substantially all the properties
and assets of the Corporation, the shares of Series A Preferred and Series B
Preferred shall, after such reorganization, reclassification, consolidation,
merger, sale or other disposition, be convertible into the kind and number of
shares of stock or other securities or property of the Corporation or otherwise
to which such holder would have been entitled if immediately prior to such
reorganization, reclassification, consolidation, merger, sale or other
disposition he had converted his shares of Series A Preferred or Series B
Preferred into Common Stock. The provisions of this clause (vi) shall similarly
apply to successive reorganizations, reclassifications, consolidations, mergers,
sales or other dispositions.
-8-
<PAGE>
a) All calculations under this Section 3 shall be made to the
nearest cent or to the nearest one hundredth (1/100) of a share, as the case may
be.
a) For the purpose of any computation pursuant to this Section
3(e), the "Current Market Price" at any date of one share of Common Stock, shall
be deemed to be the average of the highest reported bid and the lowest reported
offer prices on the preceding business day as furnished by the National
Quotation Bureau, Incorporated (or equivalent recognized source of quotations);
provided, however, that if the Common Stock is not traded in such manner that
the quotations referred to in this clause (viii) are available for the period
required hereunder, Current Market Price shall be determined in good faith by
the Board of Directors of the Corporation, but if challenged by the holders of
more than 50% of the outstanding Series A Preferred and Series B Preferred,
voting as separate classes, then as determined by an independent appraiser
selected by the Board of Directors of the Corporation, the cost of such
appraisal to be borne by the challenging parties.
1. Minimal Adjustments. No adjustment in the Conversion Price need
be made if such adjustment would result in a change in the Conversion Price of
less than $0.01. Any adjustment of less than $0.01 which is not made shall be
carried forward and shall be made at the time of and together with any
subsequent adjustment which, on a cumulative basis, amounts to an adjustment of
$0.01 or more in the Conversion Price.
1. No Impairment. Without the consent of the majority of the
outstanding shares of Preferred Stock, the Corporation will not 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 the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 3 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 Series A Preferred and Series B
Preferred against impairment.
1. Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Conversion Rate pursuant to this Section 3,
the 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 Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon written request at any time
of any holder of Series A Preferred or Series B Preferred, furnish or cause to
be furnished to such holder a like certificate setting forth (i) such
adjustments and readjustments, (ii) the Conversion Rate of such series at the
time in effect, and (iii) the number of shares of Common Stock and the amount,
if any, of other property which at the time would be received upon the
conversions of such holder's shares of Series A Preferred or Series B Preferred.
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<PAGE>
1. Notices of Record Date. In the event of any taking by the
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, the Corporation
shall mail to each holder of Series A Preferred and Series B Preferred at least
ten (10) days prior to such record date, a notice specifying the date on which
any such record is to be taken for the purpose of such dividend or distribution
or right, and the amount and character of such dividend, distribution or right.
1. Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of Series A Preferred and Series B Preferred 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 Series A Preferred and Series B Preferred; 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
Series A Preferred and Series B Preferred, the 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 purpose.
1. Notices. Any notice required by the provisions of this Section 3
to be given to the holder of shares of Series A Preferred and Series B Preferred
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
the Corporation.
1. Reissuance of Converted Shares. No shares of Series A Preferred
and Series B Preferred which have been converted into Common Stock after the
original issuance thereof shall ever again be reissued and all such shares so
converted shall upon such conversion cease to be a part of the authorized shares
of the Corporation.
A. Voting Rights. The holder of each share of Series A Preferred and
Series B Preferred shall be entitled to the number of votes equal to the number
of shares of Common Stock into which each share of Series A Preferred and Series
B Preferred could be converted on the record date for the vote or consent of
shareholders written consent and, except as otherwise required by law or
provided for herein, shall have voting rights and powers equal to the voting
rights and powers of the Common Stock. The holder of each share of Series A
Preferred and Series B Preferred shall be entitled to notice of any
shareholders' meeting in accordance with the bylaws of the Corporation and shall
vote with holders of the Common Stock upon the election of directors, except as
provided in Section 5 herein, and upon any other matter submitted to a vote of
shareholders, except those matters required by law to be submitted to a class
vote. Fractional votes shall not, however, be permitted and any fractional
voting rights resulting from the above formula (after aggregating all shares of
Common Stock into which shares of Series A Preferred and Series B Preferred held
by each holder could be converted) shall be rounded to the nearest whole number
(with one-half rounded upward to one).
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<PAGE>
5. Election of Directors. At each election of the Corporation's directors,
(i) the holders of the Corporation's Series A Preferred shall have the right,
voting as a separate class (with cumulative voting rights as among themselves in
accordance with Section 708 of the California Corporations Code) to elect one
(1) member of the Board of Directors, (ii) the holders of the Corporation's
Series B Preferred shall have the right, voting as a separate class (with
cumulative voting rights as among themselves in accordance with Section 708 of
the California Corporations Code) to elect two (2) members of the Board of
Directors, and (iii) the holders of the Corporation's Common Stock shall have
the right, voting as a separate class (with cumulative voting rights as among
themselves in accordance with Section 708 of the California Corporations Code)
to elect one (1) member of the Board of Directors. Any additional directors
shall be elected by all of the holders of Common Stock and Preferred Stock,
voting as a single class.
6. Protective Provisions. In addition to any other class vote that may be
required by law, so long as any shares of 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 at least a majority of the then
outstanding shares of Preferred Stock:
1. sell, convey or otherwise dispose of all or substantially all of
its property or business, or merge into or effect a reorganization with any
other corporation (other than a wholly owned subsidiary corporation) in which
the shareholders of this Corporation immediately prior to the transaction
possess less than 50% of the voting power of the surviving entity (or its
parent) immediately after the transaction;
1. change the rights, preferences, privileges or restrictions of the
Preferred Stock;
1. increase or decrease the aggregate number of authorized shares of
Preferred Stock, other than as provided in either subdivision (b) of Section 405
or subdivision (c) of Section 902 of the California Corporations Code;
1. create a new class or series of shares having rights, preferences
or privileges or increase the number of authorized shares of any class or shares
having rights, preferences or privileges equal to or prior to any outstanding
class or series;
1. pay any dividend on or purchase, redeem or otherwise acquire any
security junior to the Preferred Stock other than repurchases at cost from
employees, consultants, lessors or suppliers upon termination of employment,
consulting, lessor-lessee, or supplier-purchaser relationship, respectively;
1. increase the authorized number of directors of the Corporation
above seven (7); or
1. voluntarily dissolve or liquidate the Corporation.
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<PAGE>
7. Repurchase of Shares. In connection with repurchases by this
Corporation of its Common Stock, pursuant to its agreements with certain of the
holders thereof, Sections 502 and 503 of the California General Corporation Law
shall not apply in whole or in part with respect to such repurchases.
8. Series B Preferred - Right of Redemption.
(a) The Corporation shall be obligated to redeem the Series B
Preferred as follows:
a) The holders of at least a majority of the then outstanding
shares of Series B Preferred may require the Corporation to the extent it may
lawfully do so, to redeem, the Series B Preferred in three (3) annual
installments beginning on the seventh anniversary of the first issuance of the
Series B Preferred, and ending on two (2) years from such first redemption date
(each a "Redemption Date"). The Corporation shall effect such redemptions on the
applicable Redemption Date by paying in cash in exchange for the shares of
Series B Preferred to be redeemed a sum equal to the fair market value per share
of Series B Preferred plus declared and unpaid dividends with respect to such
shares. The fair market value per share of Series B Preferred for the purposes
of this Section 8, shall be determined by the Board of Directors of the
Corporation. If such determination is unacceptable to the holders of a majority
of the Series B Preferred, then the fair market value per share of Series B
Preferred shall be determined by an investment banking firm mutually acceptable
to the Corporation and the holders of a majority of the Series B Preferred. The
total amount to be paid for the Series B Preferred is hereinafter referred to as
the "Redemption Price." The number of shares of Series B Preferred that the
Corporation shall be required to redeem on any one Redemption Date shall be
equal to the amount determined by dividing (i) the aggregate number of shares of
Series B Preferred outstanding immediately prior to the Redemption Date by (ii)
the number of remaining Redemption Dates (including the Redemption Date to which
such calculation applies). Shares subject to redemption pursuant to this Section
8(a) shall be redeemed from each holder of Series B Preferred on a pro rata
basis.
a) At least thirty (30) days but no more than sixty (60) days
prior to the first Redemption Date, the Corporation shall send a notice (a
"Redemption Notice") to all holders of Series B Preferred to be redeemed setting
forth (a) the Redemption Price for the shares to be redeemed, and (b) the place
at which such holders may obtain payment of the Redemption Price upon surrender
of their share certificates. If the Corporation does not have sufficient funds
legally available to redeem all shares to be redeemed at the Redemption Date
(including, if applicable, those to be redeemed at the option of the
Corporation), then it shall redeem such shares pro rata (based on the portion of
the aggregate Redemption Price payable to them) to the extent possible and shall
redeem the remaining shares to be redeemed as soon as sufficient funds are
legally available.
(b) On or prior to the Redemption Date, the Corporation shall
deposit the Redemption Price of all shares to be redeemed with a bank or trust
corporation having aggregate capital and surplus in excess of $100,000,000, as a
trust fund, with irrevocable instructions and authority to the bank or trust
corporation to pay, on and after such Redemption Date, the
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<PAGE>
Redemption Price of the shares to their respective holders upon the surrender of
their share certificates. Any moneys deposited by the Corporation pursuant to
this paragraph 8(b) for the redemption of shares thereafter converted into
shares of Common Stock pursuant to Section 3 hereof no later than the fifth
(5th) day preceding the Redemption Date shall be returned to the Corporation
forthwith upon such conversion. The balance of any funds deposited by the
Corporation pursuant to this Section 8(b) remaining unclaimed at the expiration
of one (1) year following such Redemption Date shall be returned to the
Corporation promptly upon its written request.
(c) On or after such Redemption Date, each holder of shares of
Series B Preferred to be redeemed shall surrender such holder's certificates
representing such shares to the Corporation 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 canceled. In the event less than all the shares represented
by such certificates are redeemed, a new certificate shall be issued
representing the unredeemed shares. From and after such Redemption Date, unless
there shall have been a default in payment of the Redemption Price or the
Corporation is unable to pay the Redemption Price due to not having sufficient
legally available funds, all rights of the holders of such shares as holders of
Series B Preferred (except the right to receive the Redemption Price without
interest upon surrender of their certificates), shall cease and terminate with
respect to such shares, provided that in the event that shares of Series B
Preferred are not redeemed due to a default in payment by the Corporation or
because the Corporation does not have sufficient legally available funds, such
shares of Series B Preferred shall remain outstanding and shall be entitled to
all of the rights and preferences provided herein.
(d) In the event of a call for redemption of any shares of Series B
Preferred, the Conversion Rights (as defined in Section 3) for such Series B
Preferred shall terminate as to the shares designated for redemption at the
close of business on the fifth (5th) day preceding the Redemption Date, unless
default is made in payment of the Redemption Price.
V.
I. Limitation of Directors' Liability. The liability of the directors of
this Corporation for monetary damages shall be eliminated to the fullest extent
permissible under California law.
I. Indemnification of Corporate Agents. This Corporation is authorized to
indemnify its agents to the fullest extent permissible under California law. For
purposes of this provision the term "agent" has the meaning set forth in Section
317 of the California Corporations Code.
I. Repeal or Modification. Any repeal or modification of the foregoing
provisions of this Article V shall not adversely affect any right of
indemnification or limitation of liability of an agent of this Corporation
relating to acts or omissions occurring prior to such repeal or modification.
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<PAGE>
EXHIBIT C
SCHEDULE OF EXCEPTIONS
This Schedule of Exceptions, dated as of the Closing Date, is made and
given pursuant to Section 3 of the Inventa Corporation Series B Convertible
Preferred Stock Purchase Agreement dated February 14, 1997 (the "Agreement").
The section numbers in this Schedule of Exceptions correspond to the
section numbers in the Agreement; however, any information disclosed herein
under any section number shall be deemed to be disclosed and incorporated into
any other section number under the Agreement where such disclosure would be
appropriate. Unless the context otherwise requires, all capitalized terms shall
have the same meanings assigned to them in the Agreement.
2.1 Organization and Standing; Certificate and Bylaws.
The Company is not qualified to do business in any state other than
California, its jurisdiction of incorporation.
2.2 Capitalization.
On October 22, 1991, the Company granted a warrant to purchase 7,502
shares of common stock of the Company (after taking into account the Company's
October 22, 1993 4.5-for-1 stock split) (15,004 shares after taking into account
the Company's January 29, 1997 2-for-1 stock split). The warrant, with a
post-split exercise price of $1.33 per share, is subject to antidilution
adjustment. On July 8, 1994, the Company granted warrants to purchase 100,000
shares of Series A Preferred Stock of the Company (200,000 shares after taking
into account the Company's January 29, 1997 2-for-1 stock split). The Series A
Preferred Stock warrants are exercisable at $1.00 per share. The Company has
reserved a total of 1,350,000 shares of common stock under the Company's 1993
Stock Option Plan (the "Plan"). As of February 1, 1997, options for 439,302
shares were outstanding under the Plan and 868,002 shares remained available for
future issuance under the Plan.
2.3 Subsidiaries.
The Company has a wholly-owned subsidiary in Singapore called ICG Systems
(Far East) Pte. Ltd. The Company has two wholly-owned subsidiaries in Malaysia
called ICG Systems Sdn. Bhd and Baktimaka Sdn. Bhd.
2.7 Litigation.
The Internal Revenue Service ("IRS") has made assessments on the Company's
former Indian subsidiary called Inventa Software India Pvt. Ltd. (now called
Ventura Data Systems Pvt. Ltd. since the Company's divestiture of its ownership)
with respect to federal tax returns filed by the Company for tax years 1990 and
1991 which included payments of certain expenses (the "Disputed Payments") for
work done for the Company in the United States by employees of the Company's
former
<PAGE>
subsidiary. The Company has appealed the assessments. No determination has yet
been made by the IRS. Should the IRS determine that the Company has a tax
liability with respect to the Disputed Payments, the Company expects that such
tax liability, including penalties will not exceed $150,000.
The Company has entered into a settlement agreement (the "Settlement
Agreement") with Resource Support Associates. The Settlement Agreement prohibits
the Company, until July 31, 1997, from engaging in supplemental staffing
services and installation and configuration services related to Peoplesoft
software (except for services involving the extension of Peoplesoft programs to
the Internet) in the following states: Colorado; Idaho; Montana; New Mexico;
Utah and Wyoming. The Settlement Agreement further prohibits the Company from
hiring any employee or consultant of Resource Support Associates until July 31,
1997.
The Company has taken legal action against Greenstar Technology Group to
recover $123,418.54 in accounts receivables. Of this amount, the Company has
already recovered $50,000 and is pursuing collection of the remainder of the
balance outstanding.
The Company has filed a legal petition for the liquidation of the
Malaysian company Inventa Software (M) SDN.BHD.
2.17 Employee Plans.
The Company has adopted a 401(k) savings plan (the "401(k) Plan").
Participants in the 401(k) Plan may defer compensation in an amount not in
excess of the annual statutory limit. The Company makes matching contributions
in an amount equal to twenty five percent (25%) of the first four percent (4%)
of an individual employee's salary contributed to the 401(k) Plan.
On January 15, 1996, the Company adopted a performance incentive bonus
plan for key management employees (the "KMIP") which provides for bonus payments
to participants of the KMIP upon the attainment of specific performance
criteria.
2.18 Employees.
Subsequent to July 8, 1994, every United States employee and consultant
with access to confidential or proprietary information of the Company has
executed a Proprietary Information Agreement, substantially in the form attached
to the Agreement as Exhibit D. Prior to July 8, 1994, the Company did not
require its employees or consultants to sign a Proprietary Information
Agreement.
2.19 Tax Returns and Payments.
See Section 2.7 above regarding the examination of the Company by the
Internal Revenue Service.
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<PAGE>
2.20 Agreements; Action.
On May 30, 1995, the Company entered into an agreement for a $200,000
revolving credit facility with Silicon Valley Bank. On July 29, 1996, the
parties signed a loan modification agreement increasing the revolving credit
facility to $500,000. This credit facility expires on July 28, 1997 and as of
February 10, 1997, $485,000 was outstanding on the credit facility. The credit
facility bears interest at the bank's prime rate plus 2 percent (2%).
The Company leases office space at 2620 Augustine Dr., Santa Clara under
two lease agreements expiring, respectively, in October 1999 and February 2000.
The monthly lease payments under such agreements are, respectively,
approximately $3,000 and $6,400. The Company also lease office space at 2030
Main St., Irvine under a lease agreement expiring in September 1998. The monthly
lease payment under such agreement is approximately $2,300.
The Company leases various equipment under operating lease arrangements.
At December 31, 1996, the minimum aggregate payments under operating equipment
leases for the 1997 and 1998 fiscal years are $61,620.72
The Company leases various equipment under capital lease arrangements. At
December 31, 1996, the minimum aggregate payments under operating equipment
leases for the 1997 and 1998 fiscal years are, respectively, $46,169.19 and
$36,082.17.
In November, 1996, the Company entered into a thirty six (36) month
automobile lease agreement for the benefit of Ashok Santhanam, the Company's
President. The lease agreement is personally guaranteed by Ashok Santhanam.
On February 11, 1997, at 6:00 p.m., the Company received a written
cancellation notice from a customer of the Company called Alltel Healthcare
Systems ("Alltel"). The Company was informed by Alltel that the cancellation of
its contract with the Company was due to an acquisition of Alltel by another
entity. The cancellation of the Alltel contract will reduce the Company's
revenue by $150,000 and $250,000 in the first quarter of 1997 and the fiscal
year 1997, respectively. The Company estimates that its cash flow will be
adversely impacted by approximately $60,000 in the first quarter of 1997 and by
$100,000 for the fiscal year 1997.
2.21 Obligations to Related Parties.
In September 1996, the Company's President, Ashok Santhanam, acquired a
majority interest in Apson Software International Inc., a California corporation
("Apson"). Apson provided services to the Company for $331,000 for the fiscal
year ended December 31, 1996.
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<PAGE>
EXHIBIT D
INSTRUMENT OF ACCESSION
The undersigned hereby acknowledges receipt and review of the Shareholders
Agreement dated February 14, 1997 (the "Agreement"). By signing below, the
undersigned agrees to be bound by the terms of the Agreement as if the
undersigned was an original party thereto. The undersigned further agrees that
for purposes of the Agreement, the undersigned shall be deemed to be a Founder
as defined in the Agreement.
______________________________________
(Print name)
______________________________________
(Signature)
<PAGE>
EXHIBIT E
INVENTA CORPORATION
----------------------
SHAREHOLDERS AGREEMENT
----------------------
February 14, 1997
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I - Right of First Refusal on Founder Transfer ..................... 1
1.1 Company Right .................................................... 1
1.2 Purchasers' Right ................................................ 2
1.3 Aggregation ...................................................... 2
1.4 Failure to Exercise Rights ....................................... 2
1.5 Price ............................................................ 2
1.6 Transfer of Rights ............................................... 3
1.7 Prohibited Transfers ............................................. 3
1.8 Definition of "Shares" ........................................... 3
1.9 Permitted Transfers .............................................. 3
ARTICLE II - Right of Co-Sale on Founder Transfer .......................... 3
2.1 Right of Co-Sale ................................................. 3
2.2 Prohibited Transfers ............................................. 4
2.3 Definition of Shares ............................................. 4
2.4 Permitted Transfers .............................................. 4
2.5 Prohibited Transfers ............................................. 4
ARTICLE III - Tag Along Right ............................................. 5
ARTICLE IV - Right of First Refusal on Company Issuances .................. 6
4.1 Grant of Right ................................................... 6
4.2 New Securities ................................................... 6
4.3 Notice ........................................................... 7
4.4 Sale after Notice ................................................ 7
4.5 Assignment ....................................................... 7
ARTICLE V - Termination of Rights .......................................... 7
ARTICLE VI - Board of Directors ............................................ 8
ARTICLE VII - Specific Performance ......................................... 8
ARTICLE VIII - Legends ..................................................... 8
ARTICLE IX - General Provisions ............................................ 9
9.1 Governing Law .................................................... 9
9.2 Entire Agreement ................................................. 9
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<PAGE>
TABLE OF CONTENTS
(continued)
Page
----
9.3 Amendment ....................................................... 9
9.4 Successors ...................................................... 9
9.5 Invalidity of Provisions ........................................ 9
9.6 Notice .......................................................... 9
9.7 No Waiver ....................................................... 9
9.8 Cooperation ..................................................... 9
9.9 Addition of Parties ............................................. 10
9.10 Counterparts ................................................... 10
EXHIBIT A - Schedule of Purchasers
EXHIBIT B - Schedule of Holders of Series A Preferred Stock
EXHIBIT C - Schedule of Certain Common Stock Holders
EXHIBIT D - Form of Instrument of Accession
ii
<PAGE>
INVENTA CORPORATION
SHAREHOLDERS AGREEMENT
THIS SHAREHOLDERS AGREEMENT is made this 14th day of February, 1997,
between Inventa Corporation, a California corporation (the "Company"), the
purchasers of the Company's Series B Preferred Stock (the "Purchasers") as
listed on Exhibit A attached hereto, Ashok K. Santhanam ("Founder"), the holders
of the Company's Series A Preferred Stock (the "Series A Holders") listed on
Exhibit B attached hereto, and certain holders of the Company's Common Stock
(the "Common Holders") as listed on Exhibit C attached hereto. The Series A
Holders and the Common Holders shall collectively be referred to as the
"Shareholders".
WHEREAS, Founder is the owner of 4,500,000 shares of the Common Stock of
the Company.
WHEREAS, the Series A Holders and the Company are parties to the Series A
Preferred Stock Purchase Agreement dated July 8, 1994 (the "Series A
Agreement").
WHEREAS, the Series A Holders desire to amend and restate, in its
entirety, Section 8 of the Series A Agreement in accordance with the terms of
the Agreement herein.
WHEREAS, the Common Holders are the owners of 42,696 shares of the Common
Stock of the Company.
WHEREAS, the Purchasers have requested, as a condition to entering into
the Series B Convertible Preferred Stock Purchase Agreement of even date
herewith (the "Series B Agreement") that the Founder and the Shareholders enter
into this Agreement, and the Founder and the Shareholders, as an inducement to
the Purchasers to enter into the Series B Agreement of even date herewith, are
willing to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises, mutual covenants and
terms hereof, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
I. ARTICLE
Right of First Refusal on Founder Transfer
A. Company RightCompany RightCompany Right. If at any time Founder desires
(or is required) to sell or transfer in any manner any Shares (as hereinafter
defined) pursuant to the terms of a bona fide offer received from a third party
(a "Buyer"), the Founder shall submit a written offer to sell such Shares (the
"Offered Shares") to the Company on terms and conditions, including price, not
less favorable to the Company than those on which the Founder proposes to sell
such Offered Shares to such third party (the "Offer"). The Offer shall disclose
the identity of the proposed purchaser or transferee, the number of Offered
Shares, the terms of the proposed sale or transfer and any other material facts
relating to the sale or transfer. Within fifteen
<PAGE>
(15) days after receipt of the Offer, the Company shall give notice to the
Founder of its intent to purchase all or some of the Offered Shares from the
Founder on the terms and conditions set forth in the Offer.
A. Purchasers' Right. If, for any reason whatsoever, the Company shall not
exercise its right to purchase all of the Offered Shares as provided herein, the
Company shall promptly provide to the Purchasers, written notice (the "Notice")
of same (which shall include a copy of the written offer provided to the Company
pursuant to Section 1.1 hereof), and then the Purchasers shall have the right,
on a pro rata basis, to purchase, on the same terms and conditions set forth in
the Offer, that portion of the Offered Shares which the Company shall not have
agreed to purchase from the Founder (all such remaining Shares being referred to
as the "Remaining Offered Shares"). For purposes of this Section 1.2,
Purchaser's pro rata right shall be calculated by dividing the number of shares
of Series B Preferred Stock held by such Purchaser by the total number of shares
of Series B Preferred Stock held by all Purchasers.
A. Aggregation. For the purposes of this Article I, the number of shares
of Preferred and/or Common Stock issued upon conversion of Preferred shall
include the holdings of subsidiaries or parents or shareholders of the
Purchasers (or any entities which have the same parent corporation as the
Purchasers) and such holdings shall be aggregated together and with the
Purchasers.
A. Failure to Exercise Rights. In the event that the Company and the
Purchasers, taken together, do not purchase all of the Offered Shares pursuant
to and within the time periods set forth above, any remaining Offered Shares may
be sold or transferred by the Founder at any time within 90 days thereafter,
subject to compliance with Section 2. Any such sale or transfer shall be at not
less than the price nor upon other terms and conditions, if any, not more
favorable to the purchaser or transferee than those specified in the Offer. Any
Offered Shares not sold within such 90-day period shall thereafter again be
subject to the requirements of this Article I. In the event that Shares are sold
or transferred to the Purchasers pursuant to this subsection, said Offered
Shares shall no longer be subject to this Agreement.
A. Price. With respect to any stock to be transferred pursuant to Section
1.1 hereof and as to which a price has not been set by the Founder under Section
1.1 hereof, the price per Share shall be a price set by the Board of Directors
of the Company which will reflect the current value of the Shares in terms of
present earnings and future prospects of the Company. The Company shall notify
the Founder or the Founder's transferee of the price so determined within
fifteen (15) days after receipt by it of written notice of the transfer or
proposed transfer of the Offered Shares. If the Founder or the Founder's
transferee disputes the price as set by the Board of Directors by giving notice
to the Company within ten (10) days after being informed of the price, the price
of the Shares shall be determined by an independent financial analyst selected
by the Board of Directors of the Company, with the cost of such determination to
be divided equally between the Company and the Founder. The Board of Directors
shall select such analyst within fifteen (15) days after receipt of notice that
the Founder is disputing the price set by the Board of Directors. If the Board
is not notified of any such dispute within such ten (10) day period, the
decision of the Board of Directors as to the purchase price shall be final. Any
time required to determine a purchase price or to resolve a dispute shall be
added to the fifteen (15) day period in which the Company may exercise its right
to purchase.
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<PAGE>
A. Transfer of Rights. The right of the Purchasers to purchase Offered
Shares hereunder may not be assigned except to a transferee or assignee who
qualifies as a subsidiary of one of the Purchasers, or a parent of one of the
Purchasers, or any entity which has the same parent corporation as one of the
Purchasers.
A. Prohibited Transfers. The Founder shall not sell, assign, transfer,
pledge, hypothecate, mortgage or dispose of, by gift or otherwise, or in any way
encumber, all or any part of the Shares owned by him during the term of this
Agreement other than in compliance with the terms of this Article I.
A. Definition of "Shares". For purposes of this Article I, the term
"Shares" shall mean and include all shares of capital stock of the Company owned
by the Founder, whether presently held or hereafter acquired.
A. Permitted Transfers. The right of first refusal contained in this
Article I shall not apply to: (a) any transfer of Shares by the Founder by gift
or bequest or through inheritance to, or for the benefit of, any family member;
(b) any transfer of Shares by the Founder to a trust for the benefit of any
family member; (c) any sale or transfer of Shares to the Company (or any
assignee of the Company) pursuant to the terms of a stock restriction or stock
repurchase agreement (which provides for such sale upon the Founder's
termination of employment); (d) any sale of Common Stock in a public offering
pursuant to a registration statement filed by the Company with the Securities
and Exchange Commission; (e) any pledge made pursuant to a bona fide loan
transaction that creates a mere security interest; or (f) any bona fide gift. In
the event of any transfer pursuant to (a) or (b), the transferee of the Shares
shall hold the Shares so acquired with all the rights conferred by, and subject
to all the restrictions imposed by, this Agreement.
I. ARTICLE
Right of Co-Sale on Founder Transfer
A. Right of Co-SaleRight of Co-SaleRight of CoSale. In the event that the
Founder desires (or is required) to sell or transfer in any manner any Shares
(as hereinafter defined) pursuant to the terms of a bona fide offer received
from a Buyer, and the Company and the Purchasers do not exercise their right of
first refusal as to all of the Offered Shares as set forth in Article I hereof,
each Purchaser shall have the right (the "Right of Co-Sale") to require, as a
condition to such sale or transfer, that the Buyer purchase from each Purchaser
at the same price per share and on the same terms and conditions as involved in
such sale or disposition by the Founder that percentage of the Offered Shares
not purchased by the Company or the Purchasers pursuant to Article I above,
expressed by a fraction, the numerator of which is the number of shares of
Preferred (on an as-converted into Common Stock basis) and Common Stock held by
such Purchaser and the denominator of which is the aggregate number of shares of
Preferred (on an as-converted into Common Stock basis) and Common Stock held by
all Purchasers and the number of Shares held by the Founder. The Purchasers
shall act upon the Buyer's offer to buy as soon as practicable after receipt
from the Company of the Notice and in all events within fifteen (15) days after
receipt of the Notice. In the
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event that the Purchasers shall elect to exercise their Right of Co-Sale, the
Purchasers shall communicate in writing such election to the Founder.
A. Agreement not to Transfer. The Founder shall not sell, assign,
transfer, pledge, hypothecate, mortgage or dispose of, by gift or otherwise, or
in any way encumber, all or any part of the Shares (as hereinafter defined)
owned by him during the term of this Agreement other than in compliance with the
terms of this Article II.
A. Definition of Shares. For purposes of this Article II, the term "
Shares" shall mean and include all shares of capital stock of the Company owned
by the Founder, whether presently held or hereafter acquired.
A. Permitted Transfers. The Right of Co-Sale contained in this Article II
shall not apply to: (a) any transfer of Shares by the Founder by gift or bequest
or through inheritance to, or for the benefit of, any family member; (b) any
transfer of Shares by the Founder to a trust for the benefit of any family
member; (c) any sale or transfer of Shares to the Company pursuant to the terms
of a stock restriction or stock repurchase agreement (which provides for such
sale upon the Founder's termination of employment); (d) the Company or the
Purchasers pursuant to the provisions of Article I hereof; (e) any sale of
Common Stock in a public offering pursuant to a registration statement filed by
the Company with the Securities and Exchange Commission; (f) any pledge made
pursuant to a bona fide loan transaction that creates a mere securities
interest; or (g) any bona fide gift. In the event of any transfer pursuant to
(a) or (b) the transferee of the Shares shall hold the Shares so acquired with
all the rights conferred by, and subject to all the restrictions imposed by,
this Agreement.
A. Prohibited Transfers.
1. In the event that a Founder should sell any Shares in
contravention of the co-sale rights of each Purchaser under this Agreement (a
"Prohibited Transfer"), each Purchaser, in addition to such other remedies as
may be available at law, in equity or hereunder, shall have the put option
provided below, and such Founder shall be bound by the applicable provisions of
such option.
1. In the event of a Prohibited Transfer, each Purchaser shall have
the right to sell to such Founder the type and number of shares of Common Stock
equal to the number of shares each Purchaser would have been entitled to
transfer to the purchaser under Section 2(c) hereof had the Prohibited Transfer
been effected pursuant to and in compliance with the terms hereof. Such sale
shall be made on the following terms and conditions:
(a) The price per share at which the shares are to be sold to
the Founder shall be equal to the price per share paid by the purchaser to such
Founder in such Prohibited Transfer. The Founder shall also reimburse each
Purchaser for any and all fees and expenses, including legal fees and expenses,
incurred pursuant to the exercise or the attempted exercise of the Purchaser's
rights under this Article II.
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<PAGE>
(a) Within ninety (90) days after the date on which a
Purchaser received notice of the Prohibited Transfer or otherwise became aware
of the Prohibited Transfer, such Purchaser shall, if exercising the option
created hereby, deliver to the Founder the certificate or certificates
representing the shares to be sold, each certificate to be properly endorsed for
transfer.
(a) Such Founder shall, upon receipt of the certificate or
certificates for the shares to be sold by a Purchaser, pursuant to this Section
2.5(b), pay the aggregate purchase price therefor and the amount of reimbursable
fees and expenses, as specified in Section 2.5(b)(i), in cash or by other means
acceptable to the Purchaser.
(a) Notwithstanding the foregoing, any attempt by a Founder to
transfer Co-Sale Stock in violation of Article II hereof shall be voidable at
the option of a majority in interest of the Purchasers if the Purchasers do not
elect to exercise the put option set forth in this Section 2.5, and the Company
agrees it will not effect such a transfer nor will it treat any alleged
transferee as the holder of such shares without the written consent of a
majority in interest of the Purchasers.
I. ARTICLE
Tag Along Right
A. In the event that shareholders owning at least fifty percent (50%) of
the total number of shares of capital stock of the Company held by all
shareholders (on a fully diluted basis) (the "Proposing Shareholders") shall
have approved in writing a transaction or series of related transactions with
any person or entity regarding a sale of shares held by such Proposing
Shareholders such that any one outside shareholder shall gain a majority of the
outstanding shares of the Company after the closing of such transaction, the
remaining shareholders of the Company ("Remaining Shareholders") shall be
entitled, at their option, to include, at most, the same percentage of their
respective shares in such transfer as the percentage of the respective shares
proposed to be sold by the Proposing Shareholders. The Proposing Shareholders
shall provide to each Remaining Shareholder a notice (the "Tag Along Notice"),
at least thirty (30) days prior to the consummation of the proposed transaction,
setting forth in reasonable detail the material terms and conditions of the
proposed transaction and the price per share at which the Remaining Shareholders
may sell their shares (which price shall be equal to the price at which such
Proposing Shareholders have agreed to sell their shares) (such entitlement shall
be referred to herein as the "Tag Along Rights"). Upon receipt of the Tag Along
Notice, each of the Remaining Shareholders who elects to participate in the
proposed transaction shall provide to the Proposing Shareholders a notice, at
least fifteen (15) days prior to the consummation of the proposed transaction,
of his or her intention to exercise the Tag Along Rights. If no such notice is
given to the Proposing Shareholders, the Tag Along Rights for the particular
Remaining Shareholder shall expire.
1. At the closing of the proposed transaction (which date, place and time
shall be designated by the Proposing Shareholders and provided to each other
Remaining Shareholder in writing at least five (5) business days prior thereto),
each such other Remaining Shareholder shall deliver certificates evidencing all
its shares, duly endorsed, or accompanied by written instruments of transfer
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<PAGE>
in form satisfactory to the proposed purchaser, duly executed, by such Remaining
Shareholder, free and clear of any liens, against delivery of the purchase price
therefor.
1. The Tag Along Rights shall not apply to a disposition by any
shareholder to (a) any other shareholder of the Company or (b) an affiliate of
the disposing shareholder (including any family member of a shareholder or trust
for the benefit of a shareholder or family members), provided the transferee
agrees in writing to be subject to the terms and conditions of this Agreement as
if it were an original party thereto.
I. ARTICLE
Right of First Refusal on Company Issuances
A. Grant of Right. Except as set forth in Article V, the Company hereby
grants to each Series A Holder and each Purchaser (for purposes of this Article
IV, the Series A Holders and the Purchasers shall collectively be referred to as
the "Preferred Holders") who continues to hold, respectively, shares of Series A
Preferred Stock purchased pursuant to the Series A Agreement and Series B
Preferred Stock purchased pursuant to the Series B Agreement (the "Preferred
Shares"), the right of first refusal to purchase all or any part of such
Preferred Holder's Pro Rata Share (as hereinafter defined) of the New Securities
(as defined in Section 4.2) which the Company may, from time to time, propose to
sell and issue. The Preferred Holders may purchase said New Securities on the
same terms and at the same price at which the Company proposes to sell the New
Securities. The "Pro Rata Share" of each Preferred Holder, for purposes of this
right of first refusal, is the ratio of the total number of shares of Common
Stock held by such Preferred Holder, including (i) any shares of Common Stock
into which shares of Preferred Stock held by such Preferred Holder are
convertible, and (ii) any shares deliverable upon the exercise of options of
other rights to purchase Common Stock held by such Preferred Holder, to the
total number of shares of Common Stock outstanding immediately prior to the
issuance of the New Securities (including (i) any shares of Common Stock into
which outstanding shares of Preferred Stock are convertible and (ii) any shares
deliverable upon the exercise of options or other rights to purchase Common
Stock).
A. New Securities. "New Securities" shall mean any capital stock of the
Company, whether now authorized or not, and any rights, options or warrants to
purchase said capital stock, and securities of any type whatsoever that are, or
may become, convertible into said capital stock; provided, however, that "New
Securities" does not include (i) the Preferred Shares purchased pursuant to the
Series B Agreement or other securities issued or issuable upon conversion of the
Preferred Shares ("Conversion Shares"), (ii) securities offered pursuant to a
registration statement filed under the Securities Act of 1933, as amended (the
"Act"), (iii) securities issued pursuant to the acquisition of another
corporation by the Company by merger, purchase of substantially all of the
assets or other reorganization, (iv) shares offered pursuant to lease financing
transactions or bank or lending institution financing transactions that are
approved by the Board of Directors, (v) securities issued in connection with any
stock split, stock dividend or recapitalization of the Company, (vi) all
securities hereafter issued or issuable to officers, directors, employees or
consultants of the Company (for the primary purpose of soliciting or retaining
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<PAGE>
their employment or services) pursuant to any employee or consultant stock
offering, plan or arrangement approved by the Board of Directors, (vii) Series A
Preferred Stock issued upon conversion of the Series A Preferred warrant, and
(viii) Common Stock issued upon conversion of the Preferred Shares.
A. Notice. In the event the Company proposes to undertake an issuance of
New Securities, it shall give to the Preferred Holders written notice (the
"Notice") of its intention, describing the type of New Securities, number of
shares, the price, the terms upon which the Company proposes to issue the same,
and notice to the effect that each Preferred Holder must respond to such Notice
within thirty (30) days after the date thereof. The Preferred Holders shall have
thirty (30) days from the date of such Notice to purchase any or all of the New
Securities for the price and upon the terms specified in the Notice by giving
written notice to the Company and stating therein the quantity of New Securities
to be purchased and forwarding payment for such New Securities to the Company if
immediate payment is required by such terms, or in any event no later than
forty-five (45) days after the date of the Notice.
A. Sale after Notice. In the event any Preferred Holder fails to exercise
in full the right of first refusal within said thirty (30) day period, the
Company shall have ninety (90) days thereafter to sell or enter into an
agreement (pursuant to which the sale of New Securities covered thereby shall be
closed, if at all, within thirty (30) days from the date of said agreement) to
sell the New Securities respecting which such Preferred Holder's rights were not
exercised, at a price and upon general terms no more favorable to the Preferred
Holders thereof than specified in the Notice. In the event the Company has not
sold the New Securities within said ninety (90) day period (or sold and issued
New Securities in accordance with the foregoing within thirty (30) days from the
date of said agreement), the Company shall not thereafter issue or sell any New
Securities without first offering such securities to the Preferred Holders in
the manner provided above.
A. Assignment. The right of first refusal granted under this Article IV is
assignable by the Preferred Holders to any transferee of a minimum of fifty
thousand (50,000) shares of Series A Preferred Stock (as adjusted for any stock
split, stock dividends, combinations, recapitalizations and the like with
respect to such shares) or fifty thousand (50,000) shares of Series B Preferred
Stock (as adjusted for any stock split, stock dividends, combinations,
recapitalizations and the like with respect to the shares), as applicable, or
the Common Stock into which they has been converted.
I. ARTICLE
Termination of Rights
The Right of First Refusal on Founder Transfer, Co-Sale Right, Tag Along
Right, and Right of First Refusal on Company Issuances created under Articles I,
II, III and IV of this Agreement, respectively, shall expire upon (i) the
closing of the first public offering of the Common Stock of the Company to the
general public which is effected pursuant to a registration statement filed
with, and declared effective by, the Securities and Exchange Commission under
the Securities Act of 1933, as amended; (ii) upon the closing of a transaction
or series of related transactions (including, without limitation, any
reorganization, merger or consolidation) which results in (a) the holders of the
outstanding voting equity
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<PAGE>
securities of the Company immediately prior to such transaction or series of
related transactions holding securities representing less than 50% of the voting
power of the surviving entity immediately following such transaction or series
of related transactions or (b) the sale or disposition by the Company of all or
substantially all the Company's assets; or (iii) with respect to the Right of
First Refusal on Founder Transfer, the date on which less than 50% of the Series
B Preferred Stock of the Company initially issued remains outstanding (as
adjusted for any stock split, stock dividends, combinations, recapitalizations
and the like with respect to the shares).
ARTICLE VI
Board of Directors
The Purchasers, the Founder and the Shareholders each agree to hold all
shares of voting capital stock of the Company now owned or hereinafter acquired
by them (including but not limited to all shares of Common Stock issued upon
conversion of the Company's Series A and B Preferred Stock) registered in their
respective names or beneficially owned by them as of the date hereof (and any
and all other securities of the Company legally or beneficially acquired by each
of the Purchasers, the Founder and the Shareholders after the date hereof)
subject to, and to vote their shares of the Company's voting securities in
accordance with, the provisions of this Agreement.
At each election of directors in which the holders of Common Stock and
holders of Preferred Stock, voting together as a single class, are entitled to
elect directors of the Company, the Purchasers, the Founder and the Shareholders
shall consult each other and shall vote their respective shares of the Company's
voting stock so that such directors will be nominees that are mutually
acceptable to a majority in interest of the holders of Common Stock and
Preferred Stock and reasonably acceptable to the holders of Series B Preferred
Stock.
I. ARTICLE I
Specific Performance
The rights of the parties under this Agreement are unique and,
accordingly, the parties shall, in addition to such other remedies as may be
available to any of them at law or in equity, have the right to enforce their
rights hereunder by actions for specific performance to the extent permitted by
law.
I. ARTICLE I
Legends
The certificates representing the Shares shall bear a legend indicating
the existence of the restrictions imposed by Article I, II and III of this
Agreement. Nothing in this Agreement should be
-8-
<PAGE>
construed as a modification or amendment of any restrictions on transfer under
applicable federal or state securities laws.
ARTICLE IX
General Provisions
9.1 Governing Law. This Agreement shall be governed by the laws of the
State of California without regard to choice of law provisions.
9.2 Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes all
prior oral or written agreements and understandings between them or any of them
as to such subject matter.
9.3 Amendment. Except as otherwise expressly provided herein, this
Agreement may be amended only upon the written consent of the Founder, the
majority-in-interest of the Purchasers, the majority-in-interest of the
Shareholders (with the holders of Common Stock and Series A Preferred Stock
voting as a single class) and the Company.
9.4 Successors. This Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective heirs, executors, legal
representatives, successors, and permitted transferees, except as may be
expressly provided otherwise herein.
9.5 Invalidity of Provisions. In the case any one or more of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement and such
invalid, illegal and unenforceable provision shall be reformed and construed so
that it will be valid, legal, and enforceable to the maximum extent permitted by
law.
9.6 Notice. Any notice, demand or request required or permitted to be
given by either the Company or the Founder or the Purchasers or the Shareholders
pursuant to the terms of this Agreement shall be in writing and shall be deemed
given when delivered personally or deposited in the U.S. mail, First Class with
postage prepaid, and addressed to the parties at the addresses of the parties
set forth at the end of this Agreement or such other address as a party may
request by notifying the other in writing.
9.7 No Waiver. Any party's failure to enforce any provision or provisions
of this Agreement shall not in any way be construed as a waiver of any such
provision or provisions, nor prevent that party thereafter from enforcing each
and every other provision of this Agreement. The rights granted to the parties
herein are cumulative and shall not constitute a waiver of any party's right to
assert all other legal remedies available to it under the circumstances.
9.8 Cooperation. The parties agree upon request to execute any further
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
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<PAGE>
9.9 Addition of Parties. The Company agrees that until the termination of
this Agreement, it will cause each of the key employees of the Company who holds
100,000 shares of the capital stock of the Company (on an as-converted basis and
as adjusted for any stock split, stock dividends, combinations,
recapitalizations and the like with respect to such shares), to enter into this
Agreement and thereby to be bound by the terms hereof, all by execution of an
Instrument of Accession in the form attached as Exhibit D hereto. Any such
person so entering into this Agreement shall be deemed to be a Founder for
purposes of this Agreement.
9.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
[This space intentionally left blank]
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<PAGE>
The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY" INVENTA CORPORATION
a California corporation
By:_________________________________________
Ashok K. Santhanam, President
"FOUNDER"
____________________________________________
Ashok K. Santhanam
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<PAGE>
"PURCHASERS"
BATTERY VENTURES PALMER G. AND CHARLES E. DUCOMMUN
CHARITABLE ANNUITY TRUST, u/d/t
By: By:
------------------------------ ------------------------------------
Title: Title: Trustee
--------------------------- ---------------------------------
- --------------------------------- ---------------------------------------
ROBERT DUCOMMUN RAMESH VASUDEVAN
- --------------------------------- ---------------------------------------
ANDREW POTTER HARRY A. CAUNTER
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<PAGE>
"SHAREHOLDERS"
- --------------------------------- ---------------------------------------
B. Nagaraja Kini Muralidharan Manickam
- --------------------------------- ---------------------------------------
Srikantan Moorthy Siby Nidhiry
- --------------------------------- ---------------------------------------
Janice Porter Ramesh Sivakaminathan
- --------------------------------- ---------------------------------------
Balaji Varadarajan Gerald Williams
- --------------------------------- ---------------------------------------
Ebenezer James Ashwin Kedia
- --------------------------------- ---------------------------------------
Andrew Potter Robert Ducommun
- --------------------------------- ---------------------------------------
Ramesh Vasudevan Harry A. Caunter
- --------------------------------- ---------------------------------------
Palmer G. and Charles E. Ducommun Maya Hattangady
Charitable Annuity Trust, u/d/t
Robert Ducommun, Trustee
- --------------------------------- ---------------------------------------
Electra D. DePeyster Santhanam C. Shekar
- --------------------------------- ---------------------------------------
Gomati Venkateswaran Usha Vijayarajan
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<PAGE>
EXHIBIT A
SCHEDULE OF PURCHASERS
Name and Address
- --------------------------------------------------------------------------------
Battery Ventures
20 William Street
Wellesley, MA 01282
Robert Ducommun
1155 Park Ave.
Apt. 1 SW
New York, N.Y. 10128
Palmer G. and Charles E. Ducommun
Charitable Annuity Trust, u/d/t
Robert Ducommun, trustee
1155 Park Ave.
Apt. 1 SW
New York, N.Y. 10128
Andrew Potter
923 Cowper
Palo Alto, CA 94301
Ramesh Vasudevan
5615 Sumac Place
North Vancouver, BC, V7R4T6
Canada
Harry A. Caunter
675 North Court
Suites 225 & 230
Palatine, IL 60067
<PAGE>
EXHIBIT B
SCHEDULE OF HOLDERS
OF SERIES A PREFERRED STOCK
Name and Address
- --------------------------------------------------------------------------------
Harry A. Caunter Ramesh Vasudevan
675 North Court 5615 Sumac Place
Suites 225 & 230 North Vancouver, BC, V7R4T6
Palatine, IL 60067 CANADA
Electra D. De Peyster Gomati Venkateswaran
2000 Redwood Hill Court 26 South Baog Road
Santa Rosa, CA 95404 A2 Anand Bhavan
Madras, 600017
Robert Ducommun INDIA
1155 Park Ave.
Apt. 1 SW Usha Vijayarajan
New York, NY 10128 2/7 12th Cross
Rajmahal Extension
Maya S. Hattangady Bangalore, 560080
414 E. Lansing Way INDIA
Fresno, CA 93704
Palmer G. and Charles E. Ducommun
Charitable Annuity Trust, u/d/t
Attn: Robert Ducommun
1155 Park Ave.
Apt. 1 SW
New York, N.Y. 10128
Andrew Potter
923 Cowper
Palo Alto, CA 94301
Santhanam C. Shekar
349 G Street
San Rafael, CA 94901
<PAGE>
EXHIBIT C
SCHEDULE OF CERTAIN COMMON STOCK HOLDERS
Name and Address
- --------------------------------------------------------------------------------
B. Nagaraja Kini Ramesh Sivakaminathan
450 N. Mathilda Avenue, #A-2111 5-7-7 Block 5, Meadow Park II
Sunnyvale, CA 94086 Jalan 1/130,
Off Jalan Klang Lama
Muralidharan Manickam 58200, Kuala Lumpur
21230 Homestead Road #19 MALAYSIA
Cupertino, CA 95014
Balaji Varadarajan
Srikantan Moorthy 1750 Halford Avenue #216
3440 Warburton Avenue #10 Santa Clara, CA 95051
Santa Clara, CA 95051
Gerald Williams
Siby Nidhiry 1925 Bellomy Street #8
450 N. Mathilda Avenue #C305 Santa Clara, CA 94059
Sunnyvale, CA 94086
Ebenezer James
Janice Porter 45259 S. Grimmer Blvd.
2834 Wentworth Road Fremont, CA 94539
Cameron Park, CA 95682
Ashwin Kedia
450 N. Mathilda Ave.
Apt. K206
Sunnyvale, CA 94086
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EXHIBIT D
INSTRUMENT OF ACCESSION
The undersigned hereby acknowledges receipt and review of the Shareholders
Agreement dated February 14, 1997 (the "Agreement"). By signing below, the
undersigned agrees to be bound by the terms of the Agreement as if the
undersigned was an original party thereto. The undersigned further agrees that
for purposes of the Agreement, the undersigned shall be deemed to be a Founder
as defined in the Agreement.
_________________________________
(Print name)
_________________________________
(Signature)
<PAGE>
EXHIBIT F
February 12, 1997
To: Each Investor listed on
the Schedule of Investors
to the Inventa Corporation
Series B Convertible Preferred
Stock Purchase Agreement
Ladies and Gentlemen:
Reference is made to the Series B Convertible Preferred Stock Purchase
Agreement dated as of February 14, 1997 (the "Agreement"), complete with all
listed exhibits thereto, by and among Inventa Corporation, Inc., a California
corporation, (the "Company") and each of you, providing for the issuance by the
Company to the Investors of shares of Series B Preferred Stock of the Company
(the "Shares"). This opinion is rendered to you in compliance with Section 5.6
of the Agreement, and all terms used herein have the meanings defined for them
in the Agreement unless otherwise defined herein.
We have acted as counsel for the Company in connection with the
negotiation of the Agreement and the issuance of the Shares. As such counsel, we
have made such legal and factual examinations and inquiries as we have deemed
advisable or necessary for the purpose of rendering this opinion. In addition,
we have examined originals or copies of such corporate records of the Company,
certificates of public officials and such other documents which we consider
necessary or advisable for the purpose of rendering this opinion. In such
examination we have assumed the genuineness of all signatures on original
documents, the authenticity and completeness of all documents submitted to us as
originals, the conformity to original documents of all copies submitted to us
and the due execution and delivery of all documents (except as to due execution
and delivery by the Company) where due execution and delivery are a prerequisite
to the effectiveness thereof.
As used in this opinion, the expression "to our knowledge," "known to us"
or similar language with reference to matters of fact means that, after an
examination of documents made available to us by the Company, and after
inquiries of officers of the Company, but without any further independent
factual investigation, we find no reason to believe that the opinions expressed
herein are factually incorrect. Further, the expression "to our knowledge,"
"known to us" or similar language with reference to matters of fact refers to
the current actual knowledge of the attorneys of this firm who have worked on
matters for the Company. Except to the extent expressly set forth herein or as
we otherwise believe to be necessary to our opinion, we have not undertaken any
independent investigation to determine the existence or absence of
<PAGE>
any fact, and no inference as to our knowledge of the existence or absence of
any fact should be drawn from our representation of the Company or the rendering
of the opinion set forth below.
For purposes of this opinion, we are assuming that you have all requisite
power and authority, and have taken any and all necessary corporate or
partnership action, to execute and deliver the Agreement, and we are assuming
that the representations and warranties made by the Investors in the Agreement
and pursuant thereto are true and correct. We are also assuming that each
Investor has purchased the Shares for value, in good faith and without notice of
any adverse claims within the meaning of the California Uniform Commercial Code.
The opinions hereinafter expressed are subject to the following
qualifications:
(a) We express no opinion as to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium or other similar federal or state laws
affecting the rights of creditors;
(b) We express no opinion as to the effect of rules of law governing
specific performance, injunctive relief or other equitable remedies (regardless
of whether any such remedy is considered in a proceeding at law or in equity);
(c) We express no opinion as to compliance with the anti-fraud
provisions of applicable securities laws;
(d) We express no opinion as to the enforceability of the
indemnification provisions of the Registration Rights Agreement, to the extent
the provisions thereof may be subject to limitations of public policy and the
effect of applicable statutes and judicial decisions; and
(e) We are members of the Bar of the State of California and, except
as set forth in paragraph 5 below with respect to the securities laws of other
states, we express no opinion as to any matter relating to the laws of any
jurisdiction other than the federal laws of the United States of America and the
laws of the State of California. To the extent this opinion addresses applicable
securities laws of states other than the State of California, we have not
retained nor relied on the opinion of counsel admitted to the bar of such
states, but rather have relied on compilations of the securities laws of such
states contained in reporting services presently available to us.
Based upon and subject to the foregoing, and except as set forth in the
Schedule of Exceptions to the Agreement, we are of the opinion that:
1. The Company is a corporation duly organized and validly existing under,
and by virtue of, the laws of the State of California and is in good standing
under such laws. The Company has requisite corporate power to own and operate
its properties and assets, and to carry on its business as presently conducted.
The Company is duly qualified to do business, and in good standing in all
foreign jurisdictions where its ownership or leasing of properties or the
conduct of its business requires such qualification, except where the failure to
be so qualified would not have a material adverse effect on the Company's
business as now conducted.
2
<PAGE>
2. The Company has all requisite legal and corporate power to execute and
deliver the Agreement, the Shareholder Agreement and the Registration Rights
Agreement, to sell and issue the Shares under the Agreement, to issue the Common
Stock issuable upon conversion of the Shares and to carry out and perform its
obligations under the terms of the Agreement, the Shareholder, and the
Registration Rights Agreement.
3. The authorized capital of the Company consists of (i) 3,560,000 shares
of Preferred Stock, 1,000,000 shares of which are designated Series A Preferred
Stock and of which 800,000 are issued and outstanding, and 2,560,000 shares of
which are designated Series B Preferred and of which none are issued and
outstanding, and (ii) 20,000,000 shares of Common Stock, of which 4,542,396
shares are issued and outstanding. All issued and outstanding shares of the
Company's capital stock have been duly authorized and validly issued and are
fully paid and nonassessable. The Shares, when issued pursuant to the terms of
the Agreement (including Common Stock issued upon conversion of the Shares),
will be duly authorized, validly issued, fully paid and nonassessable. Except as
set forth in the Agreement, the Shareholders Agreement, and the Registration
Rights Agreement and all the exhibits thereto, there are no options, warrants or
other rights (including conversion or preemptive rights) or agreements
outstanding to purchase any of the Company's authorized and unissued capital
stock.
4. All corporate action on the part of the Company, its directors and
shareholders necessary for the authorization, execution, delivery and
performance of the Agreement, the Shareholders Agreement and the Registration
Rights Agreement, the authorization, sale, issuance and delivery of the Shares
and the performance of the Company's obligations under the Agreement, the
Shareholders Agreement, and the Registration Rights Agreement has been taken.
The Agreement, the Shareholders Agreement, and the Registration Rights Agreement
have been duly and validly executed and delivered by the Company and constitute
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms. The Shares will have the rights, preferences and
privileges described in the Restated Articles. To our knowledge, the Shares and
the Common Stock issuable on conversion of the Shares will be free of any liens,
encumbrances or preemptive rights contained in the Company's Restated Articles
or Bylaws.
5. The execution, delivery and performance of and compliance with the
terms of the Agreement, and the issuance of the Shares do not violate any
provision of the Restated Articles or Bylaws, or, to our knowledge, any
provisions of any applicable federal or state law, rule or regulation. To our
knowledge, the execution, delivery and performance of and compliance with the
Agreement, the Shareholders Agreement, and the Registration Rights Agreement and
the issuance of the Shares do not violate or constitute a default under, any
material contract, agreement, instrument, judgment or decree binding upon the
Company.
6. To our knowledge, there are no actions, suits, proceedings or
investigations pending against the Company or its properties before any court or
governmental agency (nor, to our knowledge, has the Company received any written
threat thereof), which, either in any case or in the aggregate, are likely to
result in any material adverse change in the business or financial condition of
the Company or any of its properties, or in any material impairment of the right
or ability of the Company to carry on its business as now conducted, or which
questions the validity of the Agreement, the Shareholders
3
<PAGE>
Agreement or the Registration Rights Agreement or any action taken or to be
taken by the Company in connection therewith.
7. No consent, approval or authorization of or designation, declaration or
filing with any governmental authority on the part of the Company is required in
connection with the valid execution and delivery of the Agreement, the
Shareholders Agreement, and the Registration Rights Agreement or other offer,
sale or issuance of the Shares or the consummation of any other transaction
contemplated thereby, except (a) filing of the Restated Articles in the Office
of the Secretary of State of the State of California, and (b) qualification (or
taking such action as may be necessary to secure an exemption from
qualification, if available) under the California Corporate Securities Law and
other applicable blue sky laws (but excluding jurisdictions outside of the
United States) of the offer and sale of the Shares (and the Common Stock
issuable upon conversion thereof) and the modification of rights of shareholders
contemplated by the Agreement. The filing referred to in clause (a) above has
been accomplished and is effective, and to our knowledge there are no
proceedings or written threat thereof which question the validity of such
filing. Our opinion herein is otherwise subject to the timely and proper
completion of all filings and other actions contemplated by clause (b) above
where such filings and actions are to be undertaken on or after the date hereof.
8. Subject to the accuracy of each Investor's representations in Section 3
of the Agreement we are of the opinion that the offer, sale and issuance of the
Shares in conformity with the terms of the Agreement constitute transactions
exempt from the registration requirements of Section 5 of the Securities Act of
1933, as amended.
This opinion is furnished to the Investors solely for their benefit in
connection with the purchase of the Shares, and may not be relied upon by any
other person or for any other purpose without our prior written consent.
Very truly yours,
WILSON, SONSINI, GOODRICH & ROSATI
A Professional Corporation
4
<PAGE>
EXHIBIT 10.3
INVENTA CORPORATION
______________________________
SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
______________________________
May 11, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Purchase and Sale of Series C Preferred Stock.......................... 1
1.1 Sale and Issuance of Series C Preferred Stock..................... 1
1.2 Closing Date; Delivery............................................ 1
2. Representations and Warranties of the Company.......................... 1
2.1 Organization, Good Standing and Qualification.................... 1
2.2 Capitalization................................................... 2
2.3 Subsidiaries..................................................... 2
2.4 Authorization.................................................... 2
2.5 Valid Issuance of Securities..................................... 2
2.6 Governmental Consents............................................ 3
2.7 Litigation....................................................... 3
2.8 Patent and Trademarks............................................ 3
2.9 Compliance with Other Instruments................................ 4
2.10 Disclosure....................................................... 4
2.11 Registration Rights.............................................. 4
2.12 Title to Property and Assets..................................... 4
2.13 Financial Statements............................................. 5
2.14 Changes.......................................................... 5
2.15 Minute Books..................................................... 6
2.16 Labor Agreements and Actions..................................... 6
2.17 Employee Plans................................................... 7
2.18 Employees........................................................ 7
2.19 Tax Returns and Payments......................................... 7
2.20 Agreements; Action............................................... 7
2.21 Obligations to Related Parties................................... 9
2.22 Real Property Holding Corporation................................ 9
2.23 Insurance........................................................ 9
2.24 Investment Company Act........................................... 9
2.25 Qualified Small Business......................................... 9
3. Representations and Warranties of the Investors........................ 9
3.1 Authorization.................................................... 9
3.2 Purchase Entirely for Own Account................................ 9
3.3 Disclosure of Information........................................ 10
3.4 Economic Risk.................................................... 10
3.5 Restricted Securities............................................ 10
3.6 Further Limitations on Disposition............................... 10
3.7 Legends.......................................................... 11
4. California Commissioner of Corporations................................ 11
4.1 Corporate Securities Law......................................... 11
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
5. Conditions of Investor's Obligations at Closing........................ 12
5.1 Representations and Warranties................................... 12
5.2 Performance...................................................... 12
5.3 Articles of Incorporation........................................ 12
5.4 Compliance Certificate........................................... 12
5.5 Restated Shareholders Agreement.................................. 12
5.6 Restated Registration Rights Agreement........................... 12
5.7 Employment Agreement............................................. 12
5.8 Opinion of Company's Counsel..................................... 12
5.9 Legal Expenses................................................... 12
5.10 Management Rights Agreement...................................... 13
6. Conditions of the Company's Obligations at Closing..................... 13
6.1 Representations and Warranties................................... 13
6.2 Payment of Purchase Price........................................ 13
6.3 Legal Matters.................................................... 13
7. Covenants of the Company............................................... 13
7.1 Delivery of Financial Statements................................. 13
7.2 Inspection Rights................................................ 14
7.3 Reservation of Common Stock...................................... 14
7.4 Proprietary Information Agreement................................ 14
7.5 Termination of Information Covenant.............................. 14
7.6 Key Man Life Insurance........................................... 14
7.7 Chief Executive Officer Recruitment.............................. 14
8. Miscellaneous.......................................................... 14
8.1 Transfer; Successors and Assigns.................................. 14
8.2 Governing Law..................................................... 14
8.3 Counterparts...................................................... 15
8.4 Titles and Subtitles.............................................. 15
8.5 Notices........................................................... 15
8.6 Finder's Fee...................................................... 15
8.7 Expenses.......................................................... 15
8.8 Amendments and Waivers............................................ 15
8.9 Severability...................................................... 15
8.10 Entire Agreement................................................. 15
8.11 Exculpation Among Investors...................................... 16
</TABLE>
-ii-
<PAGE>
EXHIBITS
--------
EXHIBIT A Schedule of Investors
EXHIBIT B Amended and Restated Articles of Incorporation
EXHIBIT C Schedule of Exceptions to Representations and Warranties
EXHIBIT D Form of Proprietary Information Agreement
EXHIBIT E Restated Shareholders Agreement
EXHIBIT F Restated Registration Rights Agreement
EXHIBIT G Opinion of Wilson Sonsini Goodrich & Rosati
EXHIBIT H Management Rights Agreement
-iii-
<PAGE>
SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
-------------------------------------------------------
THIS SERIES C CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT ("Agreement")
is made as of the 11th day of May 1998 by and between Inventa Corporation, a
California corporation (the "Company"), and the persons and entities listed on
the Schedule of Investors attached hereto as Exhibit A (the "Investors").
---------
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Series C Preferred Stock
---------------------------------------------
1.1 Sale and Issuance of Series C Preferred Stock
---------------------------------------------
(a) The Company shall adopt and file with the Secretary of State
of California on or before the Closing (as defined below) the Amended and
Restated Articles of Incorporation in the form attached hereto as Exhibit B.
---------
(b) Subject to the terms and conditions of this Agreement, the
Investors agree to purchase at the Closing and the Company agrees to sell and
issue to the Investors at the Closing that number of shares of the Company's
Series C Preferred Stock (the "Shares") for the aggregate purchase price set
forth opposite each Investor's name on Exhibit A attached hereto, at a purchase
---------
price equal to $1.25 per share of Series C Preferred Stock.
1.2 Closing Date; Delivery. The purchase and sale of the Shares shall
----------------------
take place at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill
Road, Palo Alto, California, at 9:00 a.m., on May 11, 1998, or at such other
time and place as the Company and the Investors 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 Shares which such Investor is purchasing against delivery to the Company by
such Investor of a check made payable to the Company or wire transfer of the
aggregate purchase price therefor.
2. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to the Investors that, except as set forth on a Schedule
of Exceptions attached hereto as Exhibit C, 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
---------------------------------------------
corporation duly organized, validly existing and in good standing under the
laws of the State of California and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
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.
<PAGE>
2.2 Capitalization. The authorized capital of the Company will
--------------
consist, immediately prior to the Closing, of (i) 8,119,511 shares of Preferred
Stock, 1,000,000 shares of which are designated Series A Preferred Stock and of
which 800,000 are issued and outstanding, 2,560,000 shares of which are
designated Series B Preferred Stock and of which 2,560,000 are issued and
outstanding, and 4,059,511 shares of which are designated Series C Preferred
Stock of which none are issued and outstanding, and (ii) 25,000,000 shares of
Common Stock, of which 4,642,344 shares are issued and outstanding. The Company
has reserved 1,350,000 shares of its Common Stock for issuance pursuant to its
1993 Stock Option Plan. Except as set forth in the Schedule of Exceptions
attached as Exhibit C hereto, there are no outstanding options, warrants, rights
(including conversion or preemptive rights) or agreements, orally or in writing,
for the purchase or acquisition from the Company of any shares of its capital
stock.
2.3 Subsidiaries. Except as set forth in the Schedule of Exceptions,
------------
the Company does not presently own or control, directly or indirectly, any
interest in any other corporation, association, or other business entity.
2.4 Authorization. All corporate action on the part of the Company,
-------------
its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement, the performance of all obligations of
the Company hereunder and the authorization, issuance and delivery of the Shares
has been taken or will be taken prior to the Closing, and this Agreement
constitutes a valid and legally binding obligation of the Company, enforceable
in accordance with its terms. The Agreement, the Restated Shareholders Agreement
attached hereto as Exhibit E (the "Restated Shareholders Agreement") and the
---------
Restated Registration Rights Agreement attached hereto as Exhibit F (the
---------
"Restated Registration Rights Agreement"), when executed and delivered, will be
valid and binding obligations of the Company enforceable in accordance with
their terms, except (i) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights; (ii) general principles of equity that
restrict the availability of equitable remedies; and (iii) to the extent that
the enforceability of the indemnification provisions in Section 10 of the
Restated Registration Rights Agreement may be limited by applicable laws. The
sale of the Shares and the subsequent conversion of the Shares into Common Stock
are not and will not be subject to any preemptive rights or rights of first
refusal that have not been properly waived or complied with.
2.5 Valid Issuance of Securities.
----------------------------
(a) The Shares that are being issued to 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. The shares of Common Stock issuable upon conversion of the Shares
have been duly and validly reserved for issuance.
(b) The shares of Common Stock and Preferred Stock outstanding
prior to the Closing are all duly and validly authorized and issued, fully paid
and nonassessable and were issued in compliance with all applicable state and
federal laws concerning the issuance of securities.
-2-
<PAGE>
2.6 Governmental Consents. No consent, approval, order or
---------------------
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for (a) 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 in accordance with such section,
and (b) compliance with the Blue Sky Laws of the various states in which the
Investors may reside, which compliance will be effected in accordance with such
laws. The Company currently holds all licenses, permits, franchises,
registrations and qualifications which may be required to conduct its business,
and all such licenses, permits, franchises, registrations and qualifications are
valid and in full force and effect.
2.7 Litigation. Except as set forth in the Schedule of Exceptions,
----------
there is no action, suit, proceeding or investigation pending or currently
threatened against the Company that questions the validity of this Agreement or
the right of the Company to enter into it, or to consummate the transactions
contemplated hereby, or that might result, either individually or in the
aggregate, in any material adverse changes in the assets, condition, affairs or
prospects of the Company, financially or otherwise, or any change in the current
equity ownership of the Company, nor is the Company aware that there is any
basis for the foregoing. The foregoing includes, without limitation, actions
pending or threatened (or any basis therefor known to the Company) involving the
prior employment of any of the Company's employees, their use in connection with
the Company's business of any information or techniques allegedly proprietary to
any of their former employers, or their obligations under any agreements with
prior employers. The Company is not a party or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
2.8 Patent and Trademarks. To its knowledge, the Company owns or
---------------------
possesses sufficient legal rights to all patents, trademarks, service marks,
trade names, copyrights, trade secrets, information and other proprietary rights
and processes necessary for its business as now conducted and as proposed to be
conducted, without any known infringement of the rights of others. There are no
outstanding options, licenses or agreements of any kind relating to the
foregoing, nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information and other
proprietary rights and processes of any other person or entity other than such
licenses or agreements arising from the purchase or sale of "off the shelf" or
standard products. The Company has not received any communications alleging that
the Company has violated or, by conducting its business as proposed, would
violate any of the patents, trademarks, service marks, trade names, copyrights
or trade secrets or other proprietary rights of any other person or entity. The
Company is not aware that any of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere with their duties to the Company or that would
conflict with the Company's business as proposed to be conducted. Neither the
execution nor
-3-
<PAGE>
delivery of this Agreement, nor the carrying on of the Company's business by the
employees of the Company, nor the conduct of the Company's business as proposed,
will, to the Company's knowledge, conflict with or result in a breach of the
terms, conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any employee is now obligated. The Company
does not believe it is or will be necessary to utilize any inventions, trade
secrets or proprietary information of any of its employees made prior to their
employment by the Company, except for inventions, trade secrets or proprietary
information that have been assigned to the Company.
2.9 Compliance with Other Instruments.
---------------------------------
(a) The Company is not in violation or default of any provisions
of its Amended and Restated Articles 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 and the consummation of the transactions
contemplated hereby 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,
contract, rule, or statute, or of the Company's Restated Articles of
Incorporation or Bylaws, or an event which results in the creation of any lien,
charge or encumbrance upon any assets of the Company.
(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.
2.10 Disclosure. The Company has fully provided the Investors with
----------
all the information which the Investors have requested for deciding whether to
acquire the Shares and all information which the Company believes is reasonably
necessary to enable the Investors to make such decision. There is no information
known to the Company which materially adversely affects the business or
operations of the Company which has not been disclosed to the Investors. Neither
this Agreement nor any other statements or certificates made or delivered in
connection herewith 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, except that, with respect to financial projections, the Company
represents only that such projections were prepared in good faith and that the
Company believes there is a reasonable basis for such projections.
2.11 Registration Rights. Except as set forth in the Restated
-------------------
Registration Rights Agreement, the Company has not granted or agreed to grant
any registration rights, including piggyback rights, to any person or entity.
2.12 Title to Property and Assets. The Company owns its property and
----------------------------
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens
-4-
<PAGE>
which arise in the ordinary course of business and do not materially impair the
Company's ownership or use of such property or assets. With respect to the
property and assets it leases, the Company is in compliance with such leases
and, to the best of its knowledge, holds a valid leasehold interest free of any
liens, claims or encumbrances. All facilities, machinery, equipment, fixtures,
vehicles and other properties owned, leased or used by the Company are in good
operating condition and repair (normal wear and tear accepted) and are
reasonably fit and usable for the purposes for which they are being used.
2.13 Financial Statements. The Company has delivered to the Investors
--------------------
its unaudited financial statements (balance sheet and profit and loss statement
and statement of shareholders equity) at December 31, 1997 and for the fiscal
year then ended and a balance sheet and statement of operations at March 31,
1998 (collectively, the "Financial Statements"). The Financial Statements are
complete and correct in all material respects and have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated and with each other. The Financial
Statements accurately set out and describe the financial condition and operating
results of the Company as of the dates, and for the periods, indicated therein.
Except as set forth in the Financial Statements, the Company has no liabilities,
contingent or otherwise, of a nature required by generally accepted accounting
principles to be reflected in a balance sheet or disclosed in the notes thereto,
other than liabilities incurred in the ordinary course of business subsequent to
March 31, 1998
2.14 Changes. Since March 31, 1998, there has not been:
-------
(a) any change in the assets, liabilities, financial condition
or operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business which have not
been, in the aggregate, materially adverse.
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results, prospects or business of the Company (as such
business is presently conducted and as it is proposed to be conducted);
(c) any waiver by the Company of a valuable right or of a
material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and which is not material to 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);
(e) any change or amendment to a material contract or
arrangement by which the Company or any of its assets or properties is bound or
to which the Company or any of such assets or properties is subject;
-5-
<PAGE>
(f) any resignation or termination of any key officers of the
Company; and the Company, to its knowledge, does not know of the impending
resignation or termination of employment of any such officer;
(g) to the knowledge of the Company any material change, except
in the ordinary course of business, in the contingent obligations of the Company
by way of guaranty, endorsement, indemnity, warranty or otherwise;
(h) any direct or indirect loans made by the Company to any
shareholder, employee, officer or director of the Company, other than advances
made in the ordinary course of business or loans to purchase Common Stock;
(i) any material change in any compensation arrangement or
agreement with any employee, officer, director or shareholder other than in the
ordinary course of business;
(j) any declaration or payment of any dividend or other
distribution of the assets of the Company;
(k) any labor organization activity;
(l) any debt, obligation or liability incurred, assumed or
guaranteed by the Company, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;
(m) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets; or
(n) to the Company's knowledge, any other event or condition of
any character which might materially and adversely affect 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).
2.15 Minute Books. The Company has offered to provide to the
------------
Investors the minute books of the Company, which contain a complete summary of
all meetings of directors and shareholders since the time of incorporation and
reflect all transactions referred to in such minutes accurately in all material
respects.
2.16 Labor Agreements and Actions . The Company is not bound by or
----------------------------
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
-6-
<PAGE>
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.
2.17 Employee Plans. The Company has no "employee welfare benefit
--------------
plans" as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974 ("ERISA"). The Company (i) has not been required to contribute to, (ii)
has not terminated or withdrawn from, and (iii) is not aware of any withdrawal
liability assessed against the Company with respect to any defined benefit plan
as defined in Section 3(35) of ERISA or multiemployer plan as defined in Section
4001 of ERISA in which employees or former employees of the Company have
participated.
2.18 Employees. The Company has not knowingly violated any
---------
employment-related laws, including, without limitation, laws relating to equal
employment opportunity, overtime pay and collective bargaining. 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.
Except as set forth in the Schedule of Exceptions, the employment of each
officer and employee of the Company is terminable at the will of the Company.
Each former and current United States employee and consultant of the Company
with access to confidential or proprietary information has executed a
Proprietary Information Agreement, the form of which is attached hereto as
Exhibit D. To the Company's knowledge, no employee of the Company, nor any
- - ---------
consultant with whom the Company has contracted, is in violation of any term of
any employment contract, proprietary information agreement or any other
agreement relating to the right of any such individual to be employed by, or to
contract with, the Company because of the nature of the business to be conducted
by the Company; and to the Company's knowledge the continued employment by the
Company of its present employees, and the performance of the Company's contracts
with its independent contractors, will not result in any such violation. The
Company has not received any notice alleging that any such violation has
occurred. The Company's relations with its employees is good.
2.19 Tax Returns and Payments. The Company has timely filed all tax
------------------------
returns (federal, state and local) required to be filed by it. All taxes shown
to be due and payable on such returns, any assessments imposed, and to the
Company's knowledge all other taxes due and payable by the Company on or before
the Closing have been paid or will be paid prior to the time they become
delinquent. The Company has not been advised except as set forth in the Schedule
of Exceptions (i) that any of its returns, federal, state or other, have been or
are being audited as of the date hereof, or (ii) of any deficiency in assessment
or proposed judgment to its federal, state or other taxes. The Company has no
knowledge of any liability of any tax to be imposed upon its properties or
assets as of the date of this Agreement that is not adequately provided for.
2.20 Agreements; Action.
------------------
(a) Except for agreements explicitly contemplated hereby
including proprietary agreements and agreements between the Company and its
employees with respect to the
-7-
<PAGE>
sale of the Company's Common Stock, and agreements between the Company and the
Investors with respect to their investment, 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 to its knowledge by which it is bound which may
involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $25,000 (other than obligations of, or payments to, the
Company arising from purchase or sale agreements entered into in the ordinary
course of business), or (ii) the license of any patent, copyright, trade secret
or other proprietary right to or from the Company (other than licenses arising
from the purchase or sale of "off the shelf" or other standard products), 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 (other than
indemnification obligations arising from purchase or sale agreements entered
into in the ordinary course of business).
(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 except as set forth in the Schedule of Exceptions (other than
with respect to dividend obligations, distributions, indebtedness and other
obligations incurred in the ordinary course of business or as disclosed in the
Financial Statements) individually in excess of $25,000 or, in the case of
indebtedness and/or liabilities individually less than $25,000, in excess of
$50,000 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 material amount 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) Except as set forth in the Schedule of Exceptions, the
Company has not engaged in the past three (3) months in any material 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, or 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.
-8-
<PAGE>
2.21 Obligations to Related Parties. There are no obligations of the
------------------------------
Company to officers, directors, shareholders or employees of the Company other
than (a) for payment of salary for services rendered, (b) reimbursement for
reasonable expenses incurred on behalf of the Company and (c) for other standard
employee benefits made generally available to all employees (including stock
option agreements outstanding under any stock option plan approved by the Board
of Directors of the Company). Except as set forth in the Schedule of Exceptions
none of the officers, directors or shareholders of the Company, or any members
of their immediate families, are indebted to the Company or have 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 which competes with the Company, except that officers, directors
and/or shareholders of the Company may own stock in publicly traded companies
which may compete with the Company. No officer, director or shareholder, or any
member of their immediate families, is, directly or indirectly, interested in
any material contract with the Company (other than such contracts as relate to
any such person's ownership of capital stock or other securities of the
Company). Except as may be disclosed in the Financial Statements, the Company
is not a guarantor or indemnitor of any indebtedness of any other person, firm
or corporation.
2.22 Real Property Holding Corporation. The Company is not a real
---------------------------------
property holding corporation within the meaning of Internal Revenue Code Section
897(c)(2) and any regulations promulgated thereunder.
2.23 Insurance. The Company has or will obtain promptly following
---------
Closing fire and casualty insurance policies with coverage customary for
companies similarly situated to the Company.
2.24 Investment Company Act. The Company is not an "investment
----------------------
company," or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
2.25 Qualified Small Business. The Company represents and warrants to
------------------------
the Investors that, to its knowledge, the Shares should qualify as "Qualified
Small Business Stock" as defined in Section 1202(c) of the Internal Revenue Code
of 1986, as amended (the "Code") as of the date hereof.
3. Representations and Warranties of the Investors. Each Investor for
-----------------------------------------------
itself hereby represents and warrants to the Company 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
---------------------------------
the Investor in reliance upon the Investor's representation to the Company,
which by the Investor's execution of this Agreement the Investor hereby
confirms, that the Shares will be acquired for
-9-
<PAGE>
investment for the 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 the
Investor has no present intention of selling, granting any participation in, or
otherwise distributing the same. By executing this Agreement, the Investor
further represents that the Investor does not presently 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
Shares. The Investor represents that it has full power and authority to enter
into this Agreement.
3.3 Disclosure of Information. The Investor believes it has
-------------------------
received information that it considers necessary or appropriate for deciding
whether to acquire the Shares. The 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 Shares. 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 Investor to rely thereon.
3.4 Economic Risk. The Investor has the capacity to protect his own
-------------
interests in connection with the purchase of the Shares, is capable of
evaluating the merits and risks of investment in the Company, can make an
informed investment decision by reason of (i) his preexisting personal or
business relationship with the Company or any of its officers, directors, or
control persons, or (ii) his business and financial knowledge and experience or
the business and financial knowledge and experience of my professional advisers,
if any, and is able to bear the substantial economic risks of an investment in
the Shares for an indefinite period of time.
3.5 Restricted Securities. It understands that the shares of Common
---------------------
Stock sold hereunder 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 shares may be resold without registration under the
Securities Act of 1933, as amended (the "Act"), only in certain limited
circumstances. In this connection, the Investor represents that he is familiar
with SEC Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Act.
3.6 Further Limitations on Disposition. Without in any way
----------------------------------
limiting the representations set forth above, the Investor further agrees not to
make any disposition of all or any portion of the Shares unless and until:
(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) The 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, the Investor
-10-
<PAGE>
shall have furnished the Company with an opinion of counsel, reasonably
satisfactory to the Company, that such disposition will not require registration
under the Act.
(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 the Investor to a shareholder, partner or other affiliate of
the Investor, if the transferee or transferees agree in writing to be subject to
the terms hereof to the same extent as if they were the Investor hereunder.
3.7 Legends. It is understood that the Shares, and the shares of
-------
Common Stock issuable upon conversion thereof and any securities issued in
respect thereof or exchanged therefor may bear one or all of the following
legends:
(a) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT. COPIES OF THE
AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER
MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE
OFFICES OF THE CORPORATION.
(b) Any legend required by the laws of the State of
California, including any legend required by the California Department of
Corporations.
(c) Any legend required by the Blue Sky laws of any other state
to the extent such laws are applicable to the shares represented by the
certificate so legended:
4. California Commissioner of Corporations.
---------------------------------------
4.1 Corporate Securities Law. THE SALE OF THE SECURITIES THAT IS THE
-------------------------
SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA, 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 THE
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.
-11-
<PAGE>
5. Conditions of Investor's Obligations at Closing. The obligations of
-----------------------------------------------
the Investors under Section 1.1 of this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions:
5.1 Representations and Warranties. The representations and
------------------------------
warranties of the Company contained in Section 2 shall be true and correct in
all material respects as of the 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 Articles of Incorporation. The Company shall have filed with,
-------------------------
and have had accepted for filing by, the California Secretary of State the
Amended and Restated Articles of Incorporation of the Company attached as
Exhibit B hereto.
- - ---------
5.4 Compliance Certificate. The President of the Company shall
----------------------
deliver to the Investors at the Closing a certificate certifying that the
conditions specified in Sections 5.1 and 5.2 have been fulfilled.
5.5 Restated Shareholders Agreement. Each key employee of the
-------------------------------
Company who holds at least 100,000 shares of the capital stock of the Company
(on an as-converted basis and as adjusted for any stock split, stock dividends,
combinations, recapitalization and the like with respect to such shares) shall
have entered into a Restated Shareholders Agreement with the Company, in
substantially the form attached hereto as Exhibit E.
---------
5.6 Restated Registration Rights Agreement. The Company shall
--------------------------------------
deliver to the Investors at the Closing copies of the Restated Registration
Rights Agreement executed by the necessary majority of the signatories thereto.
5.7 Employment Agreement. The Company shall at or prior to the
--------------------
Closing enter into an employment agreement with Ashok Santhanam mutually
acceptable to the Company, Mr. Santhanam and the Investors.
5.8 Opinion of Company's Counsel. The Purchasers shall have received
----------------------------
from Wilson Sonsini Goodrich & Rosati, counsel to the Company, an opinion
addressed to them, dated the Closing Date, in substantially the form of Exhibit
-------
G.
- - -
5.9 Legal Expenses. The Company shall pay the legal expenses of the
--------------
Investors in connection with the Series C Preferred Stock financing in an
aggregate amount not to exceed $15,000.
-12-
<PAGE>
5.10 Management Rights Agreement. The Company shall deliver to the
---------------------------
Technology Crossover Ventures entities executed copies of the Management Rights
Agreement attached hereto as Exhibit H.
---------
6. Conditions of the Company's Obligations at Closing. The obligations
--------------------------------------------------
of the Company to the Investors under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions by
the Investors:
6.1 Representations and Warranties. The representations and
------------------------------
warranties of the Investors contained in Section 3 shall be true and correct in
all material respects as of the Closing.
6.2 Payment of Purchase Price. The Investors shall have delivered
-------------------------
to the Company the purchase price specified in Section 1.1 hereof.
6.3 Legal Matters. All material matters of a legal nature which
-------------
pertain to this Agreement, and the transactions contemplated hereby, shall have
been reasonably approved by counsel to the Company.
7. Covenants of the Company.
------------------------
7.1 Delivery of Financial Statements. The Company shall deliver the
--------------------------------
following financial information to each Investor who continues to hold at least
50,000 Shares (or the Common Stock into which the Shares have been converted)
(as adjusted for any stock split, stock dividends, combinations,
recapitalizations and the like with respect to such Shares)(for purposes of
satisfying the 50,000 share threshold herein, shares owned by partners,
subsidiaries, parents, shareholders or affiliates will be aggregated; provided,
however, that the Company shall only be required to deliver financial
information to one representative of each group of affiliated persons or
entities), and as long as such Investor or a principal, partner or manager of
such Investor, is not employed by or associated with a competitor of the
Company:
(a) as soon as practicable after the end of each fiscal year of
the Company an income statement for such fiscal year, a balance sheet of the
Company as of the end of such year and in any event within 120 days thereafter,
and a schedule as to the sources and applications of funds for such year, such
year-end financial reports to be audited by a "Big Six" accounting firm and in
reasonable detail, prepared in accordance with generally accepted accounting
principles ("GAAP");
(b) prior to the commencement of each fiscal year of the
Company, an operating budget and updated three year strategic plan; and
(c) within thirty (30) days of the end of each month, an
unaudited balance sheet and statement of operations as of the end of such month.
-13-
<PAGE>
7.2 Inspection Rights. Each Investor shall have the right to visit
-----------------
and inspect any of the properties of the Company or any of its subsidiaries, and
to discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested all at such reasonable times and as often as may be reasonably
requested; provided, however, that the Company shall not be obligated under this
Section 7.2 with respect to a competitor of the Company or with respect to
information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed.
7.3 Reservation of Common Stock. The Company will at all times
---------------------------
reserve and keep available, solely for issuance and delivery upon the conversion
of the Preferred Stock, all Common Stock issuable from time to time upon such
conversion (the "Conversion Stock").
7.4 Proprietary Information Agreement. The Company shall require
---------------------------------
all employees and consultants to execute and deliver a Proprietary Information
Agreement in the form attached hereto as Exhibit D.
---------
7.5 Termination of Information Covenant. The covenant set forth in
-----------------------------------
Section 7.1 shall terminate as to the Investors and be of no further force or
effect at such time as the initial sale of securities pursuant to a registration
statement filed by the Company under the Securities Act in connection with the
firm commitment underwritten offering of its securities to the general public is
consummated.
7.6 Key Man Life Insurance. The Company shall obtain and maintain a
----------------------
key man life insurance policy for $1,000,000 with respect to the Chief Executive
Officer of the Company with proceeds payable to the Company.
7.7 Chief Executive Officer Recruitment. The Company shall, within
-----------------------------------
six months from the date of Closing, engage an executive recruitment firm which
shall conduct a search for a Chief Executive Officer acceptable to the Board of
Directors of the Company.
8. Miscellaneous.
-------------
8.1 Transfer; Successors and Assigns. 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. 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.
8.2 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.
-14-
<PAGE>
8.3 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.
8.4 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.
8.5 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 or
addresses indicated for such party on Exhibit A hereto, or at such other address
---------
or addresses as such party may designate by ten (10) days' advance written
notice to the other parties.
8.6 Finder's Fee. Except as elsewhere disclosed in this Agreement,
------------
or in Exhibit C hereto, each party represents that it neither is nor will be
---------
obligated for any finder's fee or commission in connection with this
transaction. The Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, employees, or
representatives are responsible.
The Company agrees to indemnify and hold harmless the Investor from
any liability for any commission or compensation in the nature of a finder's 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.
8.7 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 attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
8.8 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 a majority-in-
interest of the Investors.
8.9 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.
8.10 Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the parties hereto pertaining to the subject matter hereof,
and any and all other written or oral agreements existing between the parties
hereto are expressly canceled.
-15-
<PAGE>
8.11 Exculpation Among Investors. Each Investor acknowledges that it
---------------------------
is not relying upon any person, firm or corporation, other than the Company and
its officers and directors, in making its investment or decision to invest in
the Company. Each investor agrees that no Investor nor the respective
controlling persons, officers, directors, partners, agents or employees of any
Investor shall be liable for any action heretofore or hereafter taken or omitted
to be taken by any of them in connection with the Shares.
(Remainder of page left intentionally blank)
-16-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
INVENTA CORPORATION
By: /s/ Ashok K. Santhanam
------------------------------
Ashok K. Santhanam, President
Address:
2620 Augustine Drive, Suite 225
Santa Clara, CA 95054
INVESTORS:
Battery Ventures L.P.
By: /s/ Todd A. Dagres
------------------------------
Name: Todd A. Dagres
Title: General Partner
BOSTON MILLENNIA PARTNERS
LIMITED PARTNERSHIP
By: Glen Partners Limited Partnership,
its General Partner
By: /s/ Martin J. Hernon
------------------------------
General Partner
/s/ Stephen T. Barry
- - -----------------------------------
Stephen T. Barry
/s/ A. Dana Callow, Jr.
- - -----------------------------------
A. Dana Callow, Jr.
/s/ Christian Dubiel
- - -----------------------------------
Christian Dubiel
<PAGE>
/s/ Martin J. Hernon
- - ----------------------------------
Martin J. Hernon
/s/ Robert W. Jevon
- - ----------------------------------
Robert W. Jevon
/s/ Frank P. Pinto
- - ----------------------------------
Frank P. Pinto
/s/ Suresh Shanmugham
- - ----------------------------------
Suresh Shanmugham
/s/ Bruce R. Tiedemann
- - ----------------------------------
Bruce R. Tiedemann
/s/ Harry A. Caunter
- - ----------------------------------
Harry A. Caunter
/s/ Maya S. Hattangady
- - ----------------------------------
Maya S. Caunter
/s/ Santhanam C. Shekar
- - ----------------------------------
Santhanam C. Shekar
TCV II (Q), L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By:_______________________________
Name: Robert C. Bensky
Title: Chief Financial Officer
-18
<PAGE>
TCV II Strategic Partners, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By:/s/ Robert C. Bensky
- - ----------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
TCV II, V.O.F.
a Netherlands Antilles General Partnership
By: Technology Crossover Management II, L.L.C.,
Its: Investment General Partner
By:/s/ Robert C. Bensky
- - ----------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
Technology Crossover Ventures II, C.V.
a Netherlands Antilles Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: Investment General Partner
By:/s/ Robert C. Bensky
- - ----------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
Technology Crossover Ventures II, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By:/s/ Robert C. Bensky
- - ----------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
<PAGE>
RESTATED ARTICLES OF INCORPORATION
OF
INVENTA CORPORATION
Ashok K. Santhanam and Michael J. O'Donnell certify that:
1. They are the duly elected and acting President and Assistant
Secretary, respectively, of Inventa Corporation, a California corporation (the
"Corporation").
2. The Articles of Incorporation of this Corporation are hereby amended
and restated in full to read as set forth in Exhibit A attached hereto.
3. The attached amendment and restatement of the Articles of
Incorporation of this Corporation has been duly approved by the Board of
Directors of this Corporation.
4. The attached amendment and restatement of the Articles of
Incorporation of this Corporation has been approved by the holders of the
requisite number of shares of this Corporation in accordance with Sections 902
and 903 of the California Corporations Code. The total number of outstanding
shares of each class entitled to vote with respect to the attached amendment and
restatement was 800,000 shares of Series A Preferred Stock, 2,560,000 shares of
Series B Preferred and 4,642,344 shares of Common Stock. The number of shares
voting in favor of the attached amendment and restatement equaled or exceeded
the vote required, such required vote being a majority of the outstanding shares
of the Series A Preferred Stock, Series B Preferred Stock and Common Stock,
voting as separate classes.
<PAGE>
The undersigned further declare under penalty of perjury that the matters
set forth in this Certificate are true and correct of their own knowledge.
Executed at Santa Clara, California on April 8, 1998.
/s/ Ashok K. Santhanam
--------------------------------
Ashok K. Santhanam,
President
/s/ Michael J. O'Donnell
--------------------------------
Michael J. O'Donnell,
Assistant Secretary
-2-
<PAGE>
EXHIBIT A
---------
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
INVENTA CORPORATION
I.
The name of this corporation is Inventa Corporation (the "Corporation").
II.
The purpose of this Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the Corporation is authorized to issue is 33,119,511
shares, of which 25,000,000 shares shall be Common Stock with a par value of
$0.001 per share and of which 8,119,511 shares shall be Preferred Stock,
1,000,000 of which are designated Series A Preferred Stock with a par value of
$0.001 per share, 2,560,000 of which are designated Series B Preferred Stock
with a par value of $0.001 per share and 4,059,511 of which are designated
Series C Preferred Stock with a par value of $0.001 per share. The Board of
Directors is authorized to fix the number of shares of any series of Preferred
Stock and to determine or alter the rights, preferences, privileges, and
restrictions granted to or imposed upon any wholly unissued series of Preferred
Stock and, within the limits and restrictions stated in any resolution or
resolutions of the Board of Directors originally fixing the number of shares
constituting any series of Preferred Stock, to increase or decrease (but not
below the number of shares of any such series then outstanding) the number of
shares of any such series subsequent to the issue of shares of that series.
<PAGE>
IV.
The rights, preferences, privileges and restrictions granted to or imposed
upon the Common Stock and Preferred Stock are as follows:
1. Dividend Provisions. The holders of shares of Series A Preferred
-------------------
Stock ("Series A Preferred"), Series B Preferred Stock ("Series B Preferred")
and Series C Preferred Stock ("Series C Preferred") 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 $0.03
per annum per share of Series A Preferred (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares), $0.075 per annum per share of Series B Preferred (as adjusted for any
stock dividends, combinations, splits, recapitalizations and the like with
respect to such shares) and $0.10 per annum per share of Series C Preferred (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares) or, if greater (as determined on a per
annum basis and on an as converted basis for the Series A Preferred, Series B
Preferred and Series C Preferred), an amount equal to that paid on the Common
Stock. Such dividends shall be payable when, as, and if declared by the Board of
Directors, and shall not be cumulative, and no right shall accrue to holders of
Common Stock or Preferred Stock by reason of the fact that dividends on said
shares are not declared in any prior period. After payment has been made to the
holders of Preferred Stock of the full amounts to which they shall be entitled
as set forth in this Section 1, the holders of Preferred Stock and Common Stock
shall be entitled to receive ratably on a per-share basis any remaining funds
declared as dividends.
2. Liquidation Preference.
----------------------
(a) Preferred Preference. In the event of any liquidation,
--------------------
dissolution, or winding up of the Corporation, either voluntary or involuntary,
the holders of the Series C Preferred shall be entitled to receive on a pro rata
basis, prior and in preference to any distribution of any of the assets or
surplus funds of the Corporation to the holders of the Series A Preferred,
Series B Preferred and Common Stock, by reason of their ownership of such stock,
an amount per share equal to the sum of $1.25 per share of Series C Preferred
(as adjusted for any stock dividends, combinations, splits, recapitalizations
and the like with respect to such shares) plus declared and unpaid dividends,
for each share of Series C Preferred then held by them. If upon the occurrence
of such event, the assets and funds thus distributed among the holders of the
Series C Preferred 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 among
the holders of the Series C Preferred in proportion to the number of shares of
Series C Preferred held by each such holder.
(b) After payment has been made to the holders of the Series C
Preferred of the full amount to which they shall be entitled as set forth in
paragraph 2(a) above, the holders of
-2-
<PAGE>
Series A Preferred and Series B Preferred 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 $0.50 for each outstanding share of Series A Preferred (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares), and $1.25 for each outstanding share of
Series B Preferred (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares), plus an amount
equal to any declared but unpaid dividends for each share of Series A Preferred
and Series B Preferred then held by them. If upon the occurrence of such event,
the assets and funds thus distributed among the holders of Series A Preferred
and Series B Preferred shall be insufficient to permit the payment to such
holders of the full aforesaid preferential amounts, then the entire assets and
funds of this Corporation legally available for distribution shall be
distributed ratably among the holders of the Series A Preferred and Series B
Preferred in proportion to the aggregate Series A Preferred liquidation
preference and the Series B Preferred liquidation preference.
(c) After payment has been made to the holders of the Preferred
Stock of the full amounts to which they shall be entitled to as set forth in
paragraphs 2(a) and 2(b) above, the holders of the Common Stock shall then be
entitled to receive the amount of $0.40 per share for each share of Common Stock
then held by them (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares), plus an amount
equal to all declared but unpaid dividends for each share of Common Stock then
held by them. If the assets and funds thus distributed among the holders of the
Common Stock shall be insufficient to permit the payment to such holders of the
full aforesaid amount, then the entire assets and funds of the Corporation
legally available for distribution, shall be distributed among the holders of
the Common Stock ratably on a per-share basis.
(d) After payment has been made to the holders of the Preferred
Stock and the Common Stock of the full amount to which they shall be entitled as
set forth in paragraphs 2(a), 2(b) and 2(c) above, the holders of the Preferred
Stock and Common Stock shall be entitled to receive ratably on a per-share basis
all the remaining assets based upon the number of shares of Common Stock into
which each share of Preferred Stock is then convertible; provided, however, that
the holders of Preferred Stock shall not be entitled to receive pursuant to this
paragraph (d) (including amounts received pursuant to paragraphs 2 (a) and 2(b)
above) more than a total of $1.00 per share of Series A Preferred, $2.50 per
share of Series B Preferred and $2.50 per share of Series C Preferred then held
by them (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares) plus declared and
unpaid dividends.
(e) After payment has been made to the holders of the Preferred
Stock and the Common Stock of the full amounts to which they shall be entitled
as set forth in paragraphs 2(a), 2(b), 2(c) and 2(d) above, the holders of the
Common Stock shall be entitled to receive ratably on a per-share basis all the
remaining assets.
-3-
<PAGE>
(f) Mergers. Unless waived by the approval (by vote or written
-------
consent, as provided by law) of the holders of 66 2/3% of the then outstanding
Series C Preferred, for purposes of this Section 2, a merger or consolidation of
the Corporation with or into any other corporation or corporations, the merger
of any other corporation or corporations into the Corporation, in which the
shareholders of the Corporation receive distributions in cash or securities of
another corporation or corporations as a result of such consolidation or merger,
a reorganization, including a sale of the capital stock of the Corporation,
where the shareholders of the Corporation immediately prior to the transaction
possess less than 50% of the voting power of the surviving entity (or its
parent) immediately after the transaction, or a sale of all or substantially all
of the assets of the Corporation, shall be treated as a liquidation, dissolution
or winding up of the Corporation; provided that the holders of the Preferred
Stock and the Common Stock shall each be paid in cash or in the securities
received or in a combination thereof (which combination shall be in the same
proportions as the consideration received in the transaction). Any securities to
be delivered to the holders of the Preferred Stock and Common Stock upon merger,
reorganization or sale of substantially all the assets of the Corporation shall
be valued as follows:
(i) if traded on a securities exchange, the value shall be
deemed to be the average of the closing prices of the securities on such
exchange over the 30-day period ending three (3) business days prior to the
closing;
(ii) if actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid prices over the 30-day period ending
three (3) business days prior to the closing; and
(iii) if there is no active public market, the value shall be
the fair market value thereof as mutually determined by the Corporation and the
holders of not less than a majority of the outstanding shares of the Preferred
Stock, provided that if the Corporation and the holders of a majority of the
outstanding shares of the Preferred Stock are unable to reach agreement, then by
independent appraisal by an investment banker hired and paid by the Corporation,
but acceptable to the holders of a majority of the outstanding shares of
Preferred Stock.
(g) As authorized by Section 402.5(c) of the California Corporations
Code, the provisions of Sections 502 and 503 of the California Corporations Code
shall not apply with respect to repurchase by the Corporation of shares of
Common Stock issued to or held by employees or consultants of the Corporation or
its subsidiaries upon termination of their employment or services pursuant to
agreement providing for the right of said repurchase.
3. Conversion. The holders of the Series A Preferred, Series B
----------
Preferred and Series C Preferred shall have conversion rights as follows (the
"Conversion Rights"):
(a) Right to Convert. Each share of Series A Preferred, Series B
----------------
Preferred and Series C Preferred shall be convertible into share(s) of Common
Stock without the payment of any additional consideration by the holder thereof
and, at the option of the holder thereof, at any time after the date of issuance
of such share, at the office of the Corporation or any transfer agent for the
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<PAGE>
Series A Preferred, Series B Preferred and Series C Preferred. Each share of
Series A Preferred, Series B Preferred and Series C Preferred shall be
convertible into the number of fully paid and nonassessable shares of Common
Stock which results from dividing the Conversion Price (as hereinafter defined)
per share in effect for the Series A Preferred, Series B Preferred and Series C
Preferred at the time of conversion into the per share Conversion Value (as
hereinafter defined) of such series. The initial Conversion Price per share of
Series A Preferred shall be $.50, and the Conversion Value per share of the
Series A Preferred shall be $.50. The initial Conversion Price per share of the
Series B Preferred shall be $1.25, and the Conversion Value per share of the
Series B Preferred shall be $1.25. The initial Conversion Price per share of
the Series C Preferred shall be $1.25, and the Conversion Value per share of the
Series C Preferred shall be $1.25. The initial Conversion Price of Series A
Preferred, Series B Preferred and Series C Preferred shall be subject to
adjustment from time to time as provided below. The number of shares of Common
Stock into which a share of Series A Preferred, Series B Preferred and Series C
Preferred is convertible is hereinafter referred to as the "Conversion Rate" of
such series.
(b) Automatic Conversion. Each share of Series A Preferred shall
--------------------
automatically be converted into shares of Common Stock at the applicable
effective Conversion Rate immediately upon the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock in which (a) the public offering price equals or exceeds $1.75 per
share (adjusted to reflect subsequent stock dividends, stock splits or
recapitalization) and (b) the aggregate proceeds raised equals or exceeds
$5,000,000.
Each share of Series B Preferred and Series C Preferred shall
automatically be converted into shares of Common Stock at the applicable
effective Conversion Rate immediately upon the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock in which (a) the public offering price equals or exceeds $4.00 per
share (adjusted to reflect subsequent stock dividends, stock splits or
recapitalization) and (b) the aggregate proceeds raised equals or exceeds
$10,000,000.
Notwithstanding the foregoing, each share of Series A Preferred,
Series B Preferred and Series C Preferred shall automatically be converted into
shares of Common Stock at the applicable effective Conversion Rate upon the
approval (by vote or written consent, as provided by law) of the holders of at
least 2/3 of the then outstanding shares of Preferred Stock including the
holders of at least 2/3 of the then outstanding shares of Series C Preferred.
(c) Mechanics of Conversion. Before any holder of the 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 the Corporation or of any transfer agent for the Preferred Stock and
shall give written notice to the Corporation at such office that he elects to
convert the same (except that no such written notice of election to convert
shall be necessary in the event of an automatic conversion pursuant to Section
3(b) hereof). The Corporation shall, as soon as practicable thereafter, issue
and deliver at such office to such holder of Series A Preferred, Series B
Preferred or Series C Preferred a certificate or certificates for the number of
shares of Common
-5-
<PAGE>
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, Series B Preferred
or Series C Preferred to be converted (except that in the case of an automatic
conversion pursuant to Section 3(b) hereof such conversion shall be deemed to
have been made immediately prior to the closing of the offering referred to in
Section 3(b)) 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 on such date.
(d) Fractional Shares. In lieu of any fractional shares to which the
-----------------
holder of Series A Preferred, Series B Preferred or Series C Preferred would
otherwise be entitled, the Corporation shall pay cash equal to such fraction
multiplied by the fair market value of one share of each such series of
Preferred Stock as determined by the Board of Directors of the Corporation.
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,
Series B Preferred or Series C Preferred of each holder to be converted at such
time into Common Stock and the number of shares of Common Stock issuable upon
such aggregate conversion.
(e) Adjustment of Conversion Price. The applicable Conversion Price
------------------------------
of the Series A Preferred, Series B Preferred and Series C Preferred shall be
subject to adjustment from time to time as follows:
(i) If the Corporation shall issue any Common Stock other than
"Excluded Stock", as defined below, for a consideration per share less than the
applicable Conversion Price for such series in effect immediately prior to the
issuance of such Common Stock (excluding stock dividends, subdivisions, split-
ups, combinations, dividends or recapitalizations which are covered by Section
3(e)(iii), (iv), (v) and (vi)), the Conversion Price in effect for each such
series immediately after each such issuance shall forthwith (except as provided
in this Section 3(e)) be adjusted to a price equal to the quotient obtained by
dividing:
(1) an amount equal to the sum of
(x) the total number of shares of Common Stock
outstanding (including any shares of Common Stock issuable upon conversion of
the Series A Preferred, Series B Preferred and Series C Preferred, or deemed to
have been issued pursuant to subdivision (3) of this clause (i) and to clause
(ii) below) immediately prior to such issuance multiplied by the Conversion
Price in effect for each such series immediately prior to such issuance, plus
(y) the consideration received by the Corporation
upon such issuance, by
(2) the total number of shares of Common Stock
outstanding (including any shares of Common Stock issuable upon conversion of
the Series A Preferred, Series B
-6-
<PAGE>
Preferred and Series C Preferred or deemed to have been issued pursuant to
subdivision (3) of this clause (i) and to clause (ii) below) immediately prior
to such issuance plus the additional shares of Common Stock issued in such
issuance (but not including any additional shares of Common Stock deemed to be
issued as a result of any adjustment in the Conversion Price resulting from such
issuance).
For purposes of any adjustment of the Conversion Price pursuant
to this clause (i), the following provisions shall be applicable:
(1) In the case of the issuance of Common Stock for cash,
the consideration shall be deemed to be the amount of cash paid therefor after
deducting any discounts or commissions paid or incurred by the Corporation in
connection with the issuance and sale thereof.
(2) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair market value thereof as determined by the
Board of Directors of the Corporation, in accordance with generally accepted
accounting treatment; provided, however, that if, at the time of such
-------- -------
determination, the Corporation's Common Stock is traded in the over-the-counter
market or on a national or regional securities exchange, such fair market value
as determined by the board of directors of the Corporation shall not exceed the
aggregate "Current Market Price" (as defined below) of the shares of Common
Stock being issued.
(3) In the case of the issuance of (i) options to
purchase or rights to subscribe for Common Stock (other than Excluded Stock),
(ii) securities by their terms convertible into or exchangeable for Common Stock
(other than Excluded Stock), or (iii) options to purchase or rights to subscribe
for such convertible or exchangeable securities:
(A) 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 subdivisions (1) and (2) above), if any,
received by the Corporation upon the issuance of such options or rights plus the
minimum purchase price provided in such options or rights for the Common Stock
covered thereby;
(B) 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 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
-7-
<PAGE>
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 subdivisions (1) and (2) above);
(C) on any change in the number of shares of Common
Stock deliverable upon exercise of any such options or rights or conversion of
or exchange for such convertible or exchangeable securities, or on any change in
the minimum purchase price of such options, rights or securities, other than a
change resulting from the antidilution provisions of such options, rights or
securities, the Conversion Price shall forthwith be readjusted to such
Conversion Price as would have been obtained had the adjustment made upon (x)
the issuance of such options, rights or securities not exercised, converted or
exchanged prior to such change, as the case may be, been made upon the basis of
such change or (y) the options or rights related to such securities not
converted or exchanged prior to such change, as the case may be, been made upon
the basis of such change; and
(D) on 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 shall forthwith be readjusted to such Conversion Price as
would have been obtained had the adjustment made upon the issuance of such
options, rights, convertible or exchangeable securities or options or rights
related to such convertible or exchangeable securities, as the case may be, been
made upon the basis of the issuance of only the number of shares of Common Stock
actually issued upon the exercise of such options or rights, upon the conversion
or exchange of such convertible or exchangeable securities or upon the exercise
of the options or rights related to such convertible or exchangeable securities,
as the case may be.
(iii) "Excluded Stock" shall mean:
(1) all shares of Common Stock issued and outstanding on
the date this document is filed with the California Secretary of State and all
shares issuable upon exercise of options or warrants outstanding on the date
this document is filed with the California Secretary of State;
(2) all shares of Series A Preferred, Series B Preferred
and Series C Preferred and the Common Stock into which the shares of Series A
Preferred, Series B Preferred and Series C Preferred are convertible; and
(3) up to 1,461,429 shares of Common Stock, warrants or
options to purchase Common Stock or other securities issued to officers,
directors, consultants or employees of the Corporation pursuant to any plan or
arrangement approved by the Board of Directors of the Corporation.
-8-
<PAGE>
(4) shares of Common Stock, warrants or options to
purchase Common Stock or other securities issued to officers, directors,
consultants or employees of the Corporation pursuant to any plan or arrangement
approved by a 2/3 vote of the Board of Directors of the Corporation.
All outstanding shares of Excluded Stock (including any
shares issuable upon conversion of the Preferred Stock) shall be deemed to be
outstanding for all purposes of the computations of Section 3(e)(i) above.
(iii) If the number of shares of Common Stock outstanding at
any time after the date hereof is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, on the date such payment is made or such change is effective, the
respective Conversion Prices of Series A Preferred, Series B Preferred and
Series C Preferred shall be appropriately decreased so that the number of shares
of Common Stock issuable on conversion of any shares of such series of Series A
Preferred, Series B Preferred and Series C Preferred shall be increased in
proportion to such increase of outstanding shares of Common Stock.
(iv) If the number of shares of Common Stock outstanding at
any time after the date hereof is decreased by a combination of the outstanding
shares of Common Stock, then, on the effective date of such combination, the
respective Conversion Prices of Series A Preferred, Series B Preferred and
Series C Preferred shall be appropriately increased so that the number of shares
of Common Stock issuable on conversion of any shares of a series of Series A
Preferred, Series B Preferred and Series C Preferred shall be decreased in
proportion to such decrease in outstanding shares of Common Stock.
(v) In case the Corporation shall declare a cash dividend
upon its Common Stock payable otherwise than out of retained earnings or shall
distribute to holders of its Common Stock shares of its capital stock (other
than Common Stock), stock or other securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or options or rights (excluding options to purchase and rights to
subscribe for Common Stock or other securities of the Corporation convertible
into or exchangeable for Common Stock), then, in each such case, the holders of
shares of Series A Preferred, Series B Preferred and Series C Preferred shall,
concurrent with the distribution to holders of Common Stock, receive a like
distribution based upon the number of shares of Common Stock into which Series A
Preferred, Series B Preferred or Series C Preferred is convertible.
(vi) In case, at any time after the date hereof, of any
capital reorganization, or any reclassification of the stock of the Corporation
(other than as a result of a stock dividend or subdivision, split-up or
combination of shares), or the consolidation or merger of the Corporation with
or into another person (other than a consolidation or merger in which the
Corporation is the continuing entity and which does not result in any change in
the Common Stock), or of the sale or other disposition of all or substantially
all the properties and assets of the Corporation, the shares of
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<PAGE>
Series A Preferred, Series B Preferred and Series C Preferred shall, after such
reorganization, reclassification, consolidation, merger, sale or other
disposition, be convertible into the kind and number of shares of stock or other
securities or property of the Corporation or otherwise to which such holder
would have been entitled if immediately prior to such reorganization,
reclassification, consolidation, merger, sale or other disposition he had
converted his shares of Series A Preferred, Series B Preferred or Series C
Preferred into Common Stock. The provisions of this clause (vi) shall similarly
apply to successive reorganizations, reclassifications, consolidations, mergers,
sales or other dispositions.
(vii) All calculations under this Section 3 shall be made to
the nearest cent or to the nearest one hundredth (1/100) of a share, as the case
may be.
(viii) For the purpose of any computation pursuant to this
Section 3(e), the "Current Market Price" at any date of one share of Common
Stock, shall be deemed to be the average of the highest reported bid and the
lowest reported offer prices on the preceding business day as furnished by the
National Quotation Bureau, Incorporated (or equivalent recognized source of
quotations); provided, however, that if the Common Stock is not traded in such
-------- -------
manner that the quotations referred to in this clause (viii) are available for
the period required hereunder, Current Market Price shall be determined in good
faith by the Board of Directors of the Corporation, but if challenged by the
holders of more than 50% of the outstanding Series A Preferred, Series B
Preferred and Series C Preferred, voting as separate classes, then as determined
by an independent appraiser selected by the Board of Directors of the
Corporation, the cost of such appraisal to be borne equally by the Corporation
and the challenging parties.
(f) Minimal Adjustments. No adjustment in the Conversion Price need
-------------------
be made if such adjustment would result in a change in the Conversion Price of
less than $0.01. Any adjustment of less than $0.01 which is not made shall be
carried forward and shall be made at the time of and together with any
subsequent adjustment which, on a cumulative basis, amounts to an adjustment of
$0.01 or more in the Conversion Price.
(g) No Impairment. Without the consent of the majority of the
-------------
outstanding shares of Preferred Stock, the Corporation will not 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 the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 3 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 Series A Preferred, Series B Preferred
and Series C Preferred against impairment.
(h) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of the Conversion Rate pursuant to this Section 3,
the 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 Preferred Stock a certificate setting forth such adjustment or
-10-
<PAGE>
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon written request at any time
of any holder of Series A Preferred, Series B Preferred or Series C Preferred,
furnish or cause to be furnished to such holder a like certificate setting forth
(i) such adjustments and readjustments, (ii) the Conversion Rate of such series
at the time in effect, and (iii) the number of shares of Common Stock and the
amount, if any, of other property which at the time would be received upon the
conversions of such holder's shares of Series A Preferred, Series B Preferred or
Series C Preferred.
(i) Notices of Record Date. In the event of any taking by the
----------------------
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, the Corporation
shall mail to each holder of Series A Preferred, Series B Preferred and Series C
Preferred at least ten (10) days prior to such record date, a notice specifying
the date on which any such record is to be taken for the purpose of such
dividend or distribution or right, and the amount and character of such
dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. The Corporation
---------------------------------------------
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of Series A Preferred, Series B Preferred and Series C Preferred 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 Series A Preferred, Series B
Preferred and Series C Preferred; 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 Series A Preferred, Series B
Preferred and Series C Preferred, the 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 purpose.
(k) Notices. Any notice required by the provisions of this Section
-------
3 to be given to the holder of shares of Series A Preferred, Series B Preferred
and Series C Preferred 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 the Corporation.
(l) Reissuance of Converted Shares. No shares of Series A Preferred,
------------------------------
Series B Preferred and Series C Preferred which have been converted into Common
Stock after the original issuance thereof shall ever again be reissued and all
such shares so converted shall upon such conversion cease to be a part of the
authorized shares of the Corporation.
4. Voting Rights. The holder of each share of Series A Preferred, Series
-------------
B Preferred and Series C Preferred shall be entitled to the number of votes
equal to the number of shares of Common Stock into which each share of Series A
Preferred, Series B Preferred and Series C Preferred could be converted on the
record date for the vote or consent of shareholders written
-11-
<PAGE>
consent and, except as otherwise required by law or provided for herein, shall
have voting rights and powers equal to the voting rights and powers of the
Common Stock. The holder of each share of Series A Preferred, Series B Preferred
and Series C Preferred shall be entitled to notice of any shareholders' meeting
in accordance with the bylaws of the Corporation and shall vote with holders of
the Common Stock upon the election of directors, except as provided in Section 5
herein, and upon any other matter submitted to a vote of shareholders, except
those matters required by law to be submitted to a class vote. Fractional votes
shall not, however, be permitted and any fractional voting rights resulting from
the above formula (after aggregating all shares of Common Stock into which
shares of Series A Preferred, Series B Preferred and Series C Preferred held by
each holder could be converted) shall be rounded to the nearest whole number
(with one-half rounded upward to one).
5. Election of Directors. At each election of the Corporation's
---------------------
directors, (i) the holders of the Corporation's Series A Preferred shall have
the right, voting as a separate class (with cumulative voting rights as among
themselves in accordance with Section 708 of the California Corporations Code)
to elect one (1) member of the Board of Directors, (ii) the holders of the
Corporation's Series B Preferred shall have the right, voting as a separate
class (with cumulative voting rights as among themselves in accordance with
Section 708 of the California Corporations Code) to elect one (1) member of the
Board of Directors, (iii) the holders of the Corporation's Series C Preferred
shall have the right, voting as a separate class (with cumulative voting rights
as among themselves in accordance with Section 708 of the California
Corporations Code) to elect two (2) members of the Board of Directors, and (iv)
the holders of the Corporation's Common Stock shall have the right, voting as a
separate class (with cumulative voting rights as among themselves in accordance
with Section 708 of the California Corporations Code) to elect two (2) members
of the Board of Directors. Any additional directors shall be elected by all of
the holders of Common Stock and Preferred Stock, voting as a single class.
6. Protective Provisions.
---------------------
(a) In addition to any other class vote that may be required by law,
this Corporation shall not without first obtaining the approval (by vote or
written consent, as provided by law) of the holders of at least a majority of
the then outstanding shares of Preferred Stock:
(i) sell, convey or otherwise dispose of all or substantially
all of its property or business, or merge into or effect a reorganization with
any other corporation (other than a wholly owned subsidiary corporation) in
which the shareholders of this Corporation immediately prior to the transaction
possess less than 50% of the voting power of the surviving entity (or its
parent) immediately after the transaction, or sell the capital stock of the
Corporation where the shareholders of this Corporation immediately prior to the
transaction possess less than 50% of the voting power of the Corporation
immediately after the transaction;
(ii) change the rights, preferences, privileges or restrictions
of the Preferred Stock;
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<PAGE>
(iii) increase or decrease the aggregate number of authorized
shares of Preferred Stock, other than as provided in either subdivision (b) of
Section 405 or subdivision (c) of Section 902 of the California Corporations
Code;
(iv) create a new class or series of shares having rights,
preferences or privileges or increase the number of authorized shares of any
class or shares having rights, preferences or privileges equal to or senior to
any outstanding class or series;
(v) pay any dividend on or purchase, redeem or otherwise
acquire any security junior to the Preferred Stock other than repurchases at
cost from employees, consultants, lessors or suppliers upon termination of
employment, consulting, lessor-lessee, or supplier-purchaser relationship,
respectively; or
(vi) voluntarily dissolve or liquidate the Corporation.
(b) Notwithstanding the foregoing Section 6(a), in addition to
any other series vote that may be required by law, so long as 40% of the
originally issued Series C Preferred are outstanding, this Corporation shall not
without first obtaining the approval (by vote or written consent, as provided by
law) of the holders of at least a majority of the then outstanding shares of
Series C Preferred:
(i) materially adversely change the rights, preferences,
privileges or restrictions of the Series C Preferred;
(ii) increase or decrease the aggregate number of authorized
shares of Series C Preferred, other than as provided in either subdivision (b)
of Section 405 or subdivision (c) of Section 902 of the California Corporations
Code; and
(iii) create a new class or series of shares having rights,
preferences or privileges senior to the Series C Preferred.
(c) Notwithstanding the foregoing Sections 6(a) and 6(b), in
addition to any other series vote that may be required by law, so long as 40% of
the originally issued Series C Preferred are outstanding, this Corporation shall
not without first obtaining the approval (by vote or written consent, as
provided by law) of the holders of 66 2/3% of the then outstanding shares of
Series C Preferred, voluntarily dissolve or liquidate, sell, convey or otherwise
dispose of all or substantially all of its property or business, or merge into
or effect a reorganization with any other corporation (other than a wholly owned
subsidiary corporation) in which the shareholders of this Corporation
immediately prior to the transaction possess less than 50% of the voting power
of the surviving entity (or its parent) immediately after the transaction if the
consideration received by the holders of the Series C Preferred as a result of
any such liquidation, dissolution, merger or sale of all or substantially all of
the assets of the Corporation is less than $2.50 per share (as adjusted for any
stock dividends, combinations, splits, recapitalizations and the like with
respect to such shares)
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<PAGE>
(d) Unless otherwise required by California law or except as provided
herein, the holders of Common Stock will not have the right to vote as a
separate class on any matter.
7. Repurchase of Shares. In connection with repurchases by this
--------------------
Corporation of its Common Stock, pursuant to its agreements with certain of the
holders thereof, Sections 502 and 503 of the California General Corporation Law
shall not apply in whole or in part with respect to such repurchases.
8. Series B Preferred - Right of Redemption.
----------------------------------------
(a) Subject to Section 8(e) herein, the Corporation shall be
obligated to redeem the Series B Preferred as follows:
(i) At any time after March 31, 2004, the holders of a
majority of the then outstanding shares of Series B Preferred (the "Series B
Initiating Holders") may require the Corporation to the extent it may lawfully
do so, to redeem all of the outstanding Series B Preferred in three (3) equal
annual installments with the first installment date being the date forty-five
(45) days after receipt by the Corporation of the Series B Exercise Notice (as
defined below), the second installment being the date one (1) year from the
first installment date and the last installment date being a date two (2) years
from such first installment date (each a "Series B Redemption Date"). The
Corporation shall effect such redemptions on the applicable Series B Redemption
Date by paying in cash in exchange for each share of Series B Preferred to be
redeemed on each applicable Series B Redemption Date a sum equal to the fair
market value per share of Series B Preferred as of the date of receipt by the
Corporation of the Series B Exercise Notice plus all accrued and unpaid
dividends thereon. The fair market value per share of Series B Preferred for
the purposes of this Section 8, shall be determined by the Board of Directors of
the Corporation. If such determination is unacceptable to the holders of a
majority of the Series B Preferred, then the fair market value per share of
Series B Preferred shall be determined by an investment banking firm mutually
acceptable to the Corporation and the holders of a majority of the Series B
Preferred. The Series B Initiating Holders shall have the right to revoke a
Series B Exercise Notice by giving written notice to the Corporation within
fifteen (15) days after their receipt of the Series B Redemption Notice (as
defined below). The total amount to be paid for the Series B Preferred is
hereinafter referred to as the "Series B Redemption Price." The number of shares
of Series B Preferred that the Corporation shall be required to redeem on any
one Series B Redemption Date shall be equal to the amount determined by dividing
(i) the aggregate number of shares of Series B Preferred outstanding immediately
prior to the Series B Redemption Date by (ii) the number of remaining Series B
Redemption Dates (including the Series B Redemption Date to which such
calculation applies). Shares subject to redemption pursuant to this Section
8(a) shall be redeemed from each holder of Series B Preferred on a pro rata
basis.
(ii) At any time after March 31, 2004, the Series B Initiating
Holders can elect to exercise the right of first redemption pursuant to this
Section 8(a) by providing written notice (the "Series B Exercise Notice") to the
Corporation. Within fifteen (15) days after the receipt
-14-
<PAGE>
of the Series B Exercise Notice, the Corporation shall (i) send a notice (a
"Series B Redemption Notice") to each holder of record of the Series B Preferred
to be redeemed at the address of such holder appearing on the books of the
Corporation setting forth (a) the Series B Redemption Price for the shares to be
redeemed and (b) the place at which such holders may obtain payment of the
Series B Redemption Price upon surrender of their share certificates, and (ii)
send a notice to each holder of record of the Series C Preferred at the address
of such holder appearing on the books of the Corporation notifying such holders
of the election of the holders of the Series B Preferred to exercise the right
of redemption of the Series B Preferred. If the Corporation does not have
sufficient funds legally available to redeem all shares to be redeemed at any
Series B Redemption Date (including, if applicable, those to be redeemed at the
option of the Corporation), then it shall redeem such shares pro rata (based on
the portion of the aggregate Series B Redemption Price payable to them) to the
extent possible and shall redeem the remaining shares to be redeemed as soon as
sufficient funds are legally available.
(b) On each Series B Redemption Date, the Corporation shall deposit
the portion of the Series B Redemption Price sufficient to redeem the shares to
be redeemed upon such Series B Redemption Date with a bank or trust corporation
having aggregate capital and surplus in excess of $100,000,000, as a trust fund,
with irrevocable instructions and authority to the bank or trust corporation to
pay, on and after such Series B Redemption Date, the applicable portion of the
Series B Redemption Price to their respective holders upon the surrender of
their share certificates. Any monies deposited by the Corporation pursuant to
this Section 8(b) for the redemption of shares thereafter converted into shares
of Common Stock pursuant to Section 3 hereof no later than the fifth (5th) day
preceding the applicable Series B Redemption Date shall be returned to the
Corporation forthwith upon such conversion. The balance of any funds deposited
by the Corporation pursuant to this Section 8(b) remaining unclaimed at the
expiration of one (1) year following such Series B Redemption Date shall be
returned to the Corporation.
(c) On or after such Series B Redemption Date, each holder of shares
of Series B Preferred to be redeemed shall surrender such holder's certificates
representing such shares to the Corporation in the manner and at the place
designated in the Redemption Notice, and thereupon the applicable portion of the
Series B 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 canceled. In the event less
than all the shares represented by such certificates are redeemed, a new
certificate shall be issued representing the unredeemed shares. From and after
the date the Corporation deposits funds pursuant to Section 8(b) hereof with
respect to shares to be redeemed on such Series B Redemption Date, unless there
shall have been a default in payment of the applicable portion of the Series B
Redemption Price or the Corporation is unable to pay the applicable portion of
the Series B Redemption Price due to not having sufficient legally available
funds, all rights of the holders of such shares as holders of Series B Preferred
(except the right to receive the Series B Redemption Price without interest upon
surrender of their certificates), shall cease and terminate with respect to such
shares, provided that in the event that shares of Series B Preferred are not
redeemed due to a default in payment by the Corporation or because the
-15-
<PAGE>
Corporation does not have sufficient legally available funds, such shares of
Series B Preferred shall remain outstanding and shall be entitled to all of the
rights and preferences provided herein.
(d) In the event of a call for redemption of any shares of Series B
Preferred, the Conversion Rights (as defined in Section 3) for the shares of
Series B Preferred to be redeemed on a particular Series B Redemption Date shall
terminate at the close of business on the fifth (5th) day preceding such Series
B Redemption Date, unless default is made in payment of the Series B Redemption
Price.
(e) In the event that the Series B Initiating Holders have elected to
exercise their right of redemption pursuant to this Section 8 and to the extent
that the Company receives the Series C Exercise Notice (as defined below) from
the Series C Initiating Holders (as defined below) prior to the deposit by the
Company of funds pursuant to Section 8(b) hereof with respect to any applicable
Series B Redemption Date, the right of redemption of the Series C Preferred
shall be superior and in preference to the right of redemption of the Series B
Preferred and the holders of the Series C Preferred shall be entitled to receive
the full amount of the Series C Redemption Price out of legally available funds
of the Corporation prior to the payment of any portion of the Series B
Redemption Price not previously deposited by the Company pursuant to Section
8(b) or required to be paid to the holders of the Series B Preferred pursuant to
the last sentence of Section 8(a)(ii) hereof. In such event, after the full
amount of the Series C Redemption Price has been deposited pursuant to Section
9(b) below, the holders of the Series B Preferred shall be entitled to receive
the full amount of the Series B Redemption Price of the Series B Preferred. If
the funds of the Corporation legally available for redemption of shares of the
Series C Preferred or Series B Preferred are insufficient to redeem the total
number of shares of Series C Preferred or Series B Preferred to be redeemed on a
Series B Redemption Date or Series C Redemption Date those funds which are
legally available will be used to redeem the maximum possible number of such
shares from first the holders of the Series C Preferred to the extent of the
full amount of the Series C Redemption Price and next to the holders of the
Series B Preferred to the extent of the full amount of the Series B Redemption
Price. The shares of Series C Preferred or Series B Preferred not redeemed, as
the case may be, shall remain outstanding and entitled to all the rights and
preferences provided herein, including the rights of conversion set forth in
Section 3. At any time thereafter when additional funds of the Corporation are
legally available for the redemption of shares of Series C Preferred or Series B
Preferred, as the case may be, such funds will immediately be used to redeem the
balance of the shares which the Corporation has become obliged to redeem on any
Redemption Date but which it has not redeemed.
9. Series C Preferred - Right of Redemption.
----------------------------------------
(a) Subject to Section 8(e) above, the Corporation shall be obligated
to redeem the Series C Preferred as follows:
(i) Beginning on or after March 31, 2004, the holders of 66 2/3%
of the then outstanding shares of Series C Preferred (the "Series C Initiating
Holders") may require the
-16-
<PAGE>
Corporation to the extent it may lawfully do so, to redeem all of the
outstanding Series C Preferred. Such redemption shall occur on the 45th day
following the Corporation's receipt of the Series C Exercise Notice (as defined
below) (such date being herein referred to as the "Initial Series C Redemption
Date"), provided that the Series C Initiating Holders shall have the right to
--------
revoke a Series C Exercise Notice by giving written notice to the Corporation
within fifteen (15) days after their receipt of the Series C Redemption Notice,
and provided further that in lieu of redeeming all of the Series C Preferred on
-------- -------
the Initial Series C Redemption Date the Corporation shall have the right to
redeem the Series C Preferred in three (3) equal installments, with the first
installment date being the Initial Series C Redemption Date, the second
installment being the first anniversary of the Initial Series C Redemption Date
and the last installment being the second anniversary of the Initial Series C
Redemption Date (the Initial Series C Redemption Date and each of such other
redemption dates being herein referred to as a "Series C Redemption Date"). The
Corporation shall effect such redemptions on the applicable Series C Redemption
Date by paying in cash in exchange for each share of Series C Preferred to be
redeemed on each applicable Series C Redemption Date, a sum equal to the fair
market value per share of Series C Preferred as of the date of receipt by the
Corporation of the Series C Exercise Notice plus all accrued and unpaid
dividends with respect to such shares thereon plus interest at the rate of 10%
per annum payable on the amount of the unpaid Series C Redemption Price (as
hereinafter defined) accruing from the Initial Series C Redemption Date until
paid. The fair market value per share of Series C Preferred for the purposes of
this Section 9, shall be determined by the Board of Directors of the
Corporation. If such determination is unacceptable to the holders of a majority
of the Series C Preferred, then the fair market value per share of Series C
Preferred shall be determined by an investment banking firm mutually acceptable
to the Corporation and the holders of a majority of the Series C Preferred. The
total amount to be paid for the Series C Preferred is hereinafter referred to as
the "Series C Redemption Price." The number of shares of Series C Preferred that
the Corporation shall be required to redeem on any one Series C Redemption Date
shall be equal to the amount determined by dividing (i) the aggregate number of
shares of Series C Preferred outstanding immediately prior to the Series C
Redemption Date by (ii) the number of remaining Series C Redemption Dates
(including the Series C Redemption Date to which such calculation applies).
Shares subject to redemption pursuant to this Section 9(a) shall be redeemed
from each holder of Series C Preferred on a pro rata basis.
(ii) At any time after March 31, 2004, the Series C Initiating Holders
can elect to exercise the right of first redemption pursuant to this Section
9(a) by providing written notice (the "Series C Exercise Notice") to the
Corporation. Within fifteen (15) days after the receipt of the Series C Exercise
Notice, the Corporation shall (i) send a notice (a Series C "Redemption Notice")
to each holder of record of the Series C Preferred to be redeemed at the address
of such holder appearing on the books of the Corporation setting forth (a) the
Series C Redemption Price for the shares to be redeemed and (b) the place at
which such holders may obtain payment of the Series C Redemption Price upon
surrender of their share certificates. If the Corporation does not have
sufficient funds legally available to redeem all shares to be redeemed at the
Series C Redemption Date (including, if applicable, those to be redeemed at the
option of the Corporation), then it shall redeem such shares pro rata (based on
the portion of the aggregate
-17-
<PAGE>
Series C Redemption Price payable to them) to the extent possible and shall
redeem the remaining shares to be redeemed as soon as sufficient funds are
legally available.
(b) On or prior to the Series C Redemption Date, the Corporation shall
deposit the applicable portion of the Series C Redemption Price of the shares to
be redeemed on such Series C Redemption Date with a bank or trust corporation
having aggregate capital and surplus in excess of $100,000,000, as a trust fund,
with irrevocable instructions and authority to the bank or trust corporation to
pay, on and after such Series C Redemption Date, the applicable portion of the
Series C Redemption Price of the shares to their respective holders upon the
surrender of their share certificates. Any monies deposited by the Corporation
pursuant to this Section 9(b) for the redemption of shares thereafter converted
into shares of Common Stock pursuant to Section 3 hereof no later than the fifth
(5th) day preceding the Series C Redemption Date shall be returned to the
Corporation forthwith upon such conversion. The balance of any funds deposited
by the Corporation pursuant to this Section 9(b) remaining unclaimed at the
expiration of one (1) year following such Series C Redemption Date shall be
returned to the Corporation.
(c) On or after such Series C Redemption Date, each holder of shares
of Series C Preferred to be redeemed shall surrender such holder's certificates
representing such shares to the Corporation in the manner and at the place
designated in the Series C Redemption Notice, and thereupon the applicable
portion of the Series C 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 canceled. In the
event less than all the shares represented by such certificates are redeemed, a
new certificate shall be issued representing the unredeemed shares. From and
after the date the Corporation deposits funds pursuant to Section 9(b) hereof
with respect to shares to be redeemed on such Series C Redemption Date, unless
there shall have been a default in payment of the applicable portion of the
Series C Redemption Price or the Corporation is unable to pay the applicable
portion of the Series C Redemption Price due to not having sufficient legally
available funds, all rights of the holders of such shares as holders of Series C
Preferred (except the right to receive the Series C Redemption Price without
interest upon surrender of their certificates), shall cease and terminate with
respect to such shares, provided that in the event that shares of Series C
Preferred are not redeemed due to a default in payment by the Corporation or
because the Corporation does not have sufficient legally available funds, such
shares of Series C Preferred shall remain outstanding and shall be entitled to
all of the rights and preferences provided herein.
(d) In the event of a call for redemption of any shares of Series C
Preferred, the Conversion Rights (as defined in Section 3) for the shares of
Series C Preferred to be redeemed on a particular Series C Redemption Date shall
terminate at the close of business on the fifth (5th) day preceding such Series
C Redemption Date, unless default is made in payment of the Series C Redemption
Price.
-18-
<PAGE>
V.
1. Limitation of Directors' Liability. The liability of the directors of
----------------------------------
this Corporation for monetary damages shall be eliminated to the fullest extent
permissible under California law.
2. Indemnification of Corporate Agents. This Corporation is authorized to
-----------------------------------
indemnify its agents to the fullest extent permissible under California law. For
purposes of this provision the term "agent" has the meaning set forth in Section
317 of the California Corporations Code.
3. Repeal or Modification. Any repeal or modification of the foregoing
----------------------
provisions of this Article V shall not adversely affect any right of
indemnification or limitation of liability of an agent of this Corporation
relating to acts or omissions occurring prior to such repeal or modification.
-19-
<PAGE>
================================================================================
[LOGO]
SECRETARY OF STATE
I, BILL JONES, Secretary of State of the State of California, hereby
certify:
That the attached transcript has been compared with the record on file in
this office, of which it purports to be a copy, and that it is full, true and
correct.
IN WITNESS WHEREOF, I execute this
certificate and affix the Great
Seal of the State of California this
[ILLEGIBLE]
-----------------------------------
[SEAL]
/s/ Bill Jones
Secretary of State
================================================================================
<PAGE>
EXHIBIT C
---------
SCHEDULE OF EXCEPTIONS
This Schedule of Exceptions, dated as of the Closing Date, is made and
given pursuant to Section 2 of the Inventa Corporation Series C Convertible
Preferred Stock Purchase Agreement dated May 11, 1998 (the "Agreement").
The section numbers in this Schedule of Exceptions correspond to the
section numbers in the Agreement; however, any information disclosed herein
under any section number shall be deemed to be disclosed and incorporated into
any other section number under the Agreement where such disclosure would be
appropriate. Unless the context otherwise requires, all capitalized terms shall
have the same meanings assigned to them in the Agreement.
2.1 Organization and Standing; Certificate and Bylaws.
-------------------------------------------------
The Company is not qualified to do business in any state other than
California, its jurisdiction of incorporation. The Company is currently in the
process of qualifying to do business in New Jersey.
2.2 Capitalization.
--------------
On October 22, 1991, the Company granted a warrant to purchase 7,502
shares of common stock of the Company (after taking into account the Company's
October 22, 1993 4.5-for-1 stock split) (15,004 shares after taking into account
the Company's January 29, 1997 2-for-1 stock split). The warrant, with a post-
split exercise price of $1.33 per share, is subject to antidilution adjustment.
On July 8, 1994, the Company granted warrants to purchase 100,000 shares of
Series A Preferred Stock of the Company (200,000 shares after taking into
account the Company's January 29, 1997 2-for-1 stock split). The Series A
Preferred Stock warrants are exercisable at $0.50 per share. The Company has
reserved a total of 1,350,000 shares of common stock under the Company's 1993
Stock Option Plan (the "Plan"). As of the Closing, options for 395,658 shares
were outstanding under the Plan and 811,998 shares remained available for future
issuance under the Plan.
2.3 Subsidiaries.
------------
The Company has a wholly-owned subsidiary in Singapore called ICG
Systems (Far East) Pte. Ltd. The Company has two wholly-owned subsidiaries in
Malaysia called ICG Systems Sdn. Bhd and Baktimaka Sdn. Bhd.
2.7 Litigation.
----------
The Internal Revenue Service ("IRS") has made assessments on the
Company's former Indian subsidiary called Inventa Software India Pvt. Ltd. (now
called Ventura Data Systems Pvt. Ltd. since the Company's divestiture of its
ownership) with respect to federal tax returns filed by
<PAGE>
the Company for tax years 1990 and 1991 which included payments of certain
expenses (the "Disputed Payments") for work done for the Company in the United
States by employees of the Company's former subsidiary. The Company has appealed
the assessments. No determination has yet been made by the IRS. Should the IRS
determine that the Company has a tax liability with respect to the Disputed
Payments, the Company expects that such tax liability, including penalties will
not exceed $150,000.
The Company has filed a legal petition for the liquidation of the
Malaysian company Inventa Software (M) SDN.BHD which petition has been approved.
2.8 Patents.
-------
The Company does not currently have the legal right to the name
"Inventa" in Singapore. Further, the Company does not currently have the legal
right to the name "Inventa" in Malaysia subject to liquidation of the Malaysian
company Inventa Software (M) SDN.BHD (see Section 2.7). A Company trademark
status report is attached hereto as Exhibit A.
2.9 Compliance with Other Instruments.
---------------------------------
(a) On February 9, 1998, Silicon Valley Bank notified the Company that
it is in violation of certain financial covenants and ratios under the Company's
revolving credit facility with Silicon Valley Bank. In that same letter, Silicon
Valley Bank's waived such defaults as of December 31, 1997. The Company is
currently in default of certain financial covenants and ratios under the credit
facility.
2.14 Changes.
-------
(a) Based upon its own internal audit, the Company believes that audit
adjustments of approximately $100,000 in bad debt and other expenses may be
required for fiscal year 1997.
(f) Steve Magidson, the Company's Director of Operations, recently
notified the Company of his intent to resign from the Company in order to pursue
other opportunities. The parties expect that Mr. Magidson's resignation will be
effective within the next two months.
(i) As a condition to the closing of the Company's Series C Preferred
Stock Financing, the Company will enter into an employment agreement for a term
of three years with Ashok Santhanam. The employment agreement will contain,
among other terms, severance arrangements for certain terminations and upon a
"change of control" of the Company
-2-
<PAGE>
2.17 Employee Plans.
--------------
The Company has adopted a 401(k) savings plan (the "401(k) Plan").
Participants in the 401(k) Plan may defer compensation in an amount not in
excess of the annual statutory limit. The Company makes matching contributions
in an amount equal to twenty five percent (25%) of the first four percent (4%)
of an individual employee's salary contributed to the 401(k) Plan.
On January 15, 1996, the Company adopted a performance incentive bonus
plan for key management employees (the "KMIP") which provides for bonus payments
to participants of the KMIP upon the attainment of specific performance
criteria.
2.18 Employees.
---------
Subsequent to July 8, 1994, every United States employee and
consultant with access to confidential or proprietary information of the Company
has executed a Proprietary Information Agreement ("Proprietary Information
Agreement"), substantially in the form attached to the Agreement as Exhibit D.
Prior to July 8, 1994, the Company did not require its employees or consultants
to sign a Proprietary Information Agreement. Certain employees and consultants
of the Company's foreign subsidiaries have not signed a Proprietary Information
Agreement.
Steve Magidson, the Company's Director of Operations, recently
notified the Company of his intent to resign from the Company in order to pursue
other opportunities. The parties expect that Mr. Magidson's resignation will be
effective within the next two months.
The Company currently has severance agreements with Ashok Santhanam,
Ed Leppert, Karen Wood, Michael Makishima, Srikantan Moorthy, Steven Magidson,
Sanjoy Bose, Massimo Chiocca and Carl Zegalia which provide for severance
payments upon a "change of control" of the Company (as such term is defined in
such agreement).
2.19 Tax Returns and Payments.
------------------------
See Section 2.7 above regarding the examination of the Company by the
Internal Revenue Service.
2.20 Agreements; Action.
------------------
(a) The Company currently has severance agreements with Ashok
Santhanam, Ed Leppert, Karen Wood, Michael Makishima, Srikantan Moorthy, Steven
Magidson, Sanjoy Bose, Massimo Chiocca and Carl Zegalia which provide for
severance payments upon a "change of control" of the Company (as such term is
defined in such agreement).
-3-
<PAGE>
As a condition to the closing of the Company's Series C Preferred
Stock Financing, the Company will enter into an employment agreement for a term
of three years with Ashok Santhanam. The employment agreement will contain,
among other terms, severance arrangements for certain terminations and upon
changes of control of the Company.
In November, 1996, the Company entered into a thirty six (36)
month automobile lease agreement for the benefit of Ashok Santhanam, the
Company's President. The lease agreement is personally guaranteed by Ashok
Santhanam.
(b) Pursuant to a Development Agreement with ADP, Inc. dated February
19, 1998, the Company has agreed that for a period of twenty-four (24) months
following the termination of such agreement, the Company will not (i) provide
any Deliverable (as defined in the agreement) to any provider of payroll
software, payroll or payroll related services or (ii) develop a self-service
application which contains similar functionality to the EasyPay self-service
application developed pursuant to the agreement.
The Company leases office space at 2620 Augustine Dr., Santa
Clara under three lease agreements expiring, respectively, in October 1999,
February 2000 and June 2000. The monthly lease payments under such agreements
are, respectively, approximately $3,076, $6,524 and $3,777. The Company also
lease office space at 2030 Main St., Irvine under a lease agreement expiring in
September 1998 which space the Company is currently subleasing to a third party.
The monthly lease payment under the master lease agreement is approximately
$2,300.
The Company leases various equipment under operating lease
arrangements. At December 31, 1997, the minimum aggregate payments under
operating equipment leases for the 1998 and 1999 fiscal years are, respectively,
$180,909 and $136,882.
The Company leases various equipment under capital lease
arrangements. At December 31, 1997, the minimum aggregate payments under
operating equipment leases for the 1998 and 1999 fiscal years are, respectively,
$145,163 and $119,857.
(c) On May 30, 1995, the Company entered into an agreement for a
$200,000 revolving credit facility with Silicon Valley Bank. On July 29, 1996,
the parties signed a loan modification agreement increasing the revolving credit
facility to $500,000. In July 1997, the agreement was modified to increase the
revolving credit facility to $1.2 million. This credit facility expires on July
28, 1997 and as of March 31, 1998, $300,000 was outstanding on the credit
facility. The credit facility bears interest at the bank's prime rate plus 2
percent (2%).
(e) During the last three months from the date hereof, the Company
has engaged in either merger or sale discussions with C-Bridge Internet
Solutions, Inc., Renaissance Worldwide, Lucent Technologies and Internet
Business Advantages.
-4-
<PAGE>
2.21 Obligations to Related Parties.
------------------------------
In September 1996, the Company's President, Ashok Santhanam, acquired
a majority interest in Apson Software International Inc., a California
corporation (now known as "Challenger Systems"). Challenger Systems provided
services to the Company of approximately $598,849 for the fiscal year ended
December 31, 1997.
-5-
<PAGE>
EXHIBIT A
Inventa Corporation Global Trademark Status Report
09-Apr-98
<TABLE>
<CAPTION>
Country Name Trademark Classes Filing Date Application # Registration Date Registration #
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Malaysia INVENTA 42
Malaysia INVENTA 16 08-Mar-94 94-01756
Malaysia INVENTA 9 08-Mar-94 94-01755
Malaysia INVENTA (STYLIZED) 16 08-Mar-94 94-01757
Malaysia INVENTA (STYLIZED) 9 08-Mar-94 94-01754
Malaysia LIGHTSPEED 35
Malaysia LIGHTSPEED 9 27-Oct-97 97-15528
Malaysia LIGHTSPEED 42
Malaysia RAPIDWEB 9 27-Oct-97 97-15527
Malaysia RAPIDWEB 42
Singapore LIGHTSPEED 42 15-Apr-97 4435/97
Singapore RAPIDWEB 42 25-Apr-97 4845/97
Singapore RAPIDWEB 9 25-Apr-97 4844/97
United States of America INVENTA 42 10-Oct-96 75/179,420 18-Nov-97 2,113,928
United States of America LIGHTSPEED 35,42 15-Oct-96 75/818,303
United States of America RAPIDWEB 9,42 10-Oct-96 75/179,617
<CAPTION>
Country Name Status CaseNumber
- -----------------------------------------------------------
<S> <C> <C>
Malaysia Mailed 09231-TM2011
Malaysia Filed 09231-TM2009
Malaysia Filed 09231-TM2008
Malaysia Filed 09231-TM2010
Malaysia Filed 09231-TM2007
Malaysia Mailed 09231-TM2012
Malaysia Filed 09231-TM2003
Malaysia Mailed 09231-TM2013
Malaysia Filed 09231-TM2004
Malaysia Mailed 09231-TM2005
Singapore Filed 09231-TM2001
Singapore Filed 09231-TM2006
Singapore Filed 09231-TM2002
United States of America Registered 09231-TM1001
United States of America Published* 09231-TM1004
United States of America Allowed 09231-TM1002
</TABLE>
* Request for Extension of Time to Oppose filed against application
<PAGE>
STATUS CODE KEY FOR GLOBAL TRADEMARK STATUS REPORT
Definition of Status Codes
S-Inactive The company has considered adoption or registration of the
mark/mark has been searched, but has not filed an
application.
Mailed The application has been authorized/sent to the trademark
office for filing, but we have not yet received the filing
details.
Filed The application has been filed and is in the initial
examination period.
Published The mark has been published for opposition by third parties.
Allowed The application for the mark was filed as an intent to use
application and the company is now required to submit proof
of use. (This status generally applies to U.S. applications
- may have different meaning for a foreign application)
Registered A certificate of registration has been issued (some cases
published) by the respective country.
<PAGE>
EXHIBIT D
---------
INVENTA CORPORATION
EMPLOYMENT, CONFIDENTIAL INFORMATION AND
INVENTION ASSIGNMENT AGREEMENT
As a condition of my employment with Inventa Corporation, its subsidiaries,
affiliates, successors or assigns (the "Company"), and in consideration of my
employment with the Company and my receipt of the compensation now and hereafter
paid to me by the Company, I agree to the following:
1. At-Will Employment. I understand and acknowledge that my employment
------------------
with the Company is for an unspecified duration and constitutes "at-will"
employment. I acknowledge that this employment relationship may be terminated at
any time, with or without good cause or for any or no cause, at the option
either of the Company or myself, with or without notice.
2. Confidential Information.
------------------------
(a) Company Information. I agree at all times during the term of my
-------------------
employment and thereafter, to hold in strictest confidence, and not to use,
except for the benefit of the Company, or to disclose to any person, firm or
corporation without written authorization of the Board of Directors of the
Company, any Confidential Information of the Company. I understand that
"Confidential Information" means any of the Company's proprietary information,
technical data, trade secrets or know-how, including, but not limited to,
research, product plans, products, services, customer lists and customers
(including, but not limited to, customers of the Company on whom I called or
with whom I became acquainted during the term of my employment), markets,
software, developments, inventions, processes, formulas, technology, designs,
drawings, engineering, hardware configuration information, marketing, finances
or other business information disclosed to me by the Company either directly or
indirectly in writing, orally or by drawings or observation of parts or
equipment. I further understand that Confidential Information does not include
any of the foregoing items which has become publicly known and made generally
available through no wrongful act of mine or of others who were under
confidentiality obligations as to the item or items involved.
(b) Former Employer Information. I agree that I will not, during my
---------------------------
employment with the Company, improperly use or disclose any proprietary
information or trade secrets of any former or concurrent employer or other
person or entity and that I will not bring onto the premises of the Company any
unpublished document or proprietary information belonging to any such employer,
person or entity unless consented to in writing by such employer, person or
entity.
(c) Third Party Information. I recognize that the Company has
-----------------------
received and in the future will receive from third parties their confidential or
proprietary information subject to a duty on the Company's part to maintain the
confidentiality of such information and to use it only for
<PAGE>
certain limited purposes. I agree to hold all such confidential or proprietary
information in the strictest confidence and not to disclose it to any person,
firm or corporation or to use it except as necessary in carrying out my work for
the Company consistent with the Company's agreement with such third party.
3. Inventions.
----------
(a) Inventions Retained and Licensed. I have attached hereto, as
--------------------------------
Exhibit A, a list describing all inventions, original works of authorship,
developments, improvements, and trade secrets which were made by me prior to my
employment with the Company (collectively referred to as "Prior Inventions"),
which belong to me, which relate to the Company's proposed business, products or
research and development, and which are not assigned to the Company hereunder;
or, if no such list is attached, I represent that there are no such Prior
Inventions. If in the course of my employment with the Company, I incorporate
into a the Company product, process or machine a Prior Invention owned by me or
in which I have an interest, the Company is hereby granted and shall have a
nonexclusive, royalty-free, irrevocable, perpetual, worldwide license to make,
have made, modify, use and sell such Prior Invention as part of or in connection
with such product, process or machine.
(b) Assignment of Inventions. I agree that I will promptly make
------------------------
full written disclosure to the Company, will hold in trust for the sole right
and benefit of the Company, and hereby assign to the Company, or its designee,
all my right, title, and interest in and to any and all inventions, original
works of authorship, developments, concepts, improvements or trade secrets,
whether or not patentable or registrable under copyright or similar laws, which
I may solely or jointly conceive or develop or reduce to practice, or cause to
be conceived or developed or reduced to practice, during the period of time I am
in the employ of the Company (collectively referred to as "Inventions"), except
as provided in Section 3(f) below. I further acknowledge that all original works
of authorship which are made by me (solely or jointly with others) within the
scope of and during the period of my employment with the Company and which are
protectible by copyright are "works made for hire," as that term is defined in
the United States Copyright Act.
(c) Inventions Assigned to the United States. I agree to assign to the
----------------------------------------
United States government all my right, title, and interest in and to any and all
Inventions whenever such full title is required to be in the United States by a
contract between the Company and the United States or any of its agencies.
(d) Maintenance of Records. I agree to keep and maintain adequate and
----------------------
current written records of all Inventions made by me (solely or jointly with
others) during the term of my employment with the Company. The records will be
in the form of notes, sketches, drawings, and any other format that may be
specified by the Company. The records will be available to and remain the sole
property of the Company at all times.
-2-
<PAGE>
(e) Patent and Copyright Registrations. I agree to assist the Company,
----------------------------------
or its designee, at the Company's expense, in every proper way to secure the
Company's rights in the Inventions and any copyrights, patents, mask work rights
or other intellectual property rights relating thereto in any and all countries,
including the disclosure to the Company of all pertinent information and data
with respect thereto, the execution of all applications, specifications, oaths,
assignments and all other instruments which the Company shall deem necessary in
order to apply for and obtain such rights and in order to assign and convey to
the Company, its successors, assigns, and nominees the sole and exclusive
rights, title and interest in and to such Inventions, and any copyrights,
patents, mask work rights or other intellectual property rights relating
thereto. I further agree that my obligation to execute or cause to be executed,
when it is in my power to do so, any such instrument or papers shall continue
after the termination of this Agreement. If the Company is unable because of my
mental or physical incapacity or for any other reason to secure my signature to
apply for or to pursue any application for any United States or foreign patents
or copyright registrations covering Inventions or original works of authorship
assigned to the Company as above, then I hereby irrevocably designate and
appoint the Company and its duly authorized officers and agents as my agent and
attorney in fact, to act for and in my behalf and stead to execute and file any
such applications and to do all other lawfully permitted acts to further the
prosecution and issuance of letters patent or copyright registrations thereon
with the same legal force and effect as if executed by me.
(f) Exception to Assignments. I understand that the provisions of this
------------------------
Agreement requiring assignment of Inventions to the Company do not apply to any
invention which qualifies fully under the provisions of California Labor Code
Section 2870 (attached hereto as Exhibit B). I will advise the Company promptly
---------
in writing of any inventions that I believe meet the criteria in California
Labor Code Section 2870 and not otherwise disclosed on Exhibit A.
---------
(4) Conflicting Employment. I agree that, during the term of my employment
----------------------
with the Company, I will not engage in any other employment, occupation,
consulting or other business activity directly related to the business in which
the Company is now involved or becomes involved during the term of my
employment, nor will I engage in any other activities that conflict with my
obligations to the Company.
(5) Returning the Company Documents. I agree that, at the time of leaving
-------------------------------
the employ of the Company, I will deliver to the Company (and will not keep in
my possession, recreate or deliver to anyone else) any and all devices, records,
data, notes, reports, proposals, lists, correspondence, specifications, drawings
blueprints, sketches, materials, equipment, other documents or property, or
reproductions of any aforementioned items developed by me pursuant to my
employment with the Company or otherwise belonging to the Company, its
successors or assigns. In the event of the termination of my employment, I agree
to sign and deliver the "Termination Certification" attached hereto as Exhibit
-------
C.
- -
-3-
<PAGE>
(6) Notification of New Employer. In the event that I leave the employ of
----------------------------
the Company, I hereby grant consent to notification by the Company to my new
employer about my rights and obligations under this Agreement.
(7) Solicitation of Employees. I agree that for a period of twelve (12)
-------------------------
months immediately following the termination of my relationship with the Company
for any reason, whether with or without cause, I shall not either directly or
indirectly solicit, induce, recruit or encourage any of the Company's employees
to leave their employment, or take away such employees, or attempt to solicit,
induce, recruit, encourage or take away employees of the Company, either for
myself or for any other person or entity.
(8) Conflict of Interest Guidelines. I agree to diligently adhere to the
-------------------------------
Conflict of Interest Guidelines attached as Exhibit D hereto.
---------
(9) Representations. I agree to execute any proper oath or verify any
---------------
proper document required to carry out the terms of this Agreement. I represent
that my performance of all the terms of this Agreement will not breach any
agreement to keep in confidence proprietary information acquired by me in
confidence or in trust prior to my employment by the Company. I have not entered
into, and I agree I will not enter into, any oral or written agreement in
conflict herewith.
(10) Arbitration and Equitable Relief.
--------------------------------
(a) Arbitration. Except as provided in Section 10(b) below, I agree
-----------
that any dispute or controversy arising out of or relating to any
interpretation, construction, performance or breach of this Agreement, shall be
settled by arbitration to be held in San Francisco County, California, in
accordance with the rules then in effect of the American Arbitration
Association. The arbitrator may grant injunctions or other relief in such
dispute or controversy. The decision of the arbitrator shall be final,
conclusive and binding on the parties to the arbitration. Judgment may be
entered on the arbitrator's decision in any court having jurisdiction. The
Company and I shall each pay one-half of the costs and expenses of such
arbitration, and each of us shall separately pay our counsel fees and expenses.
(b) Equitable Remedies. I agree that it would be impossible or
------------------
inadequate to measure and calculate the Company's damages from any breach of the
covenants set forth in Sections 2, 3, and 5 herein. Accordingly, I agree that if
I breach any of such Sections, the Company will have available, in addition to
any other right or remedy available, the right to obtain an injunction from a
court of competent jurisdiction restraining such breach or threatened breach and
to specific performance of any such provision of this Agreement. I further agree
that no bond or other security shall be required in obtaining such equitable
relief and I hereby consent to the issuance of such injunction and to the
ordering of specific performance.
11. General Provisions.
------------------
-4-
<PAGE>
(a) Governing Law; Consent to Personal Jurisdiction. This Agreement
-----------------------------------------------
will be governed by the laws of the State of California. I hereby expressly
consent to the personal jurisdiction of the state and federal courts located in
California for any lawsuit filed there against me by the Company arising from or
relating to this Agreement.
(b) Entire Agreement. This Agreement sets forth the entire agreement
----------------
and understanding between the Company and me relating to the subject matter
herein and merges all prior discussions between us. No modification of or
amendment to this Agreement, nor any waiver of any rights under this agreement,
will be effective unless in writing signed by the party to be charged. Any
subsequent change or changes in my duties, salary or compensation will not
affect the validity or scope of this Agreement.
(c) Severability. If one or more of the provisions in this Agreement
------------
are deemed void by law, then the remaining provisions will continue in full
force and effect.
(d) Successors and Assigns. This Agreement will be binding upon my
----------------------
heirs, executors, administrators and other legal representatives and will be for
the benefit of the Company, its successors, and its assigns.
Date: _________________
___________________________________
Signature
___________________________________
Name of Employee (typed or printed)
________________________
Witness
-5-
<PAGE>
EXHIBIT A
---------
LIST OF PRIOR INVENTIONS
AND ORIGINAL WORKS OF AUTHORSHIP
Identifying Number
Title Date or Brief Description
- --------- --------- ----------------------
____ No inventions or improvements
____ Additional Sheets Attached
Signature of Employee: __________________________
Print Name of Employee: _________________________
Date: _________________
<PAGE>
EXHIBIT B
---------
CALIFORNIA LABOR CODE SECTION 2870
EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RIGHTS
"(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer.
(2) Result from any work performed by the employee for the employer.
(b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable."
<PAGE>
EXHIBIT C
---------
INVENTA CORPORATION
TERMINATION CERTIFICATION
This is to certify that I do not have in my possession, nor have I failed
to return, any devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches, materials,
equipment, other documents or property, or reproductions of any aforementioned
items belonging to the Company, its subsidiaries, affiliates, successors or
assigns (the "Company").
I further certify that I have complied with all the terms of the Company's
Employment Confidential Information and Invention Assignment Agreement signed by
me, including the reporting of any inventions and original works of authorship
(as defined therein), conceived or made by me (solely or jointly with others)
covered by that agreement.
I further agree that, in compliance with the Employment, Confidential
Information and Invention Assignment Agreement, I will preserve as confidential
all trade secrets, confidential knowledge, data or other proprietary information
relating to products, processes, know-how, designs, formulas, developmental or
experimental work, computer programs, data bases, other original works of
authorship, customer lists, business plans, financial information or other
subject matter pertaining to any business of the Company or any of its
employees, clients, consultants or licensees.
I further agree that for twelve (12) months from this date, I will not hire
any employees of the Company and I will not solicit, induce, recruit or
encourage any of the Company's employees to leave their employment.
Date:________________
____________________
(Employee's Signature)
__________________________
(Type/Print Employee's Name)
<PAGE>
EXHIBIT D
---------
INVENTA CORPORATION
CONFLICT OF INTEREST GUIDELINES
It is the policy of the Company to conduct its affairs in strict compliance
with the letter and spirit of the law and to adhere to the highest principles of
business ethics. Accordingly, all officers, employees and independent
contractors must avoid activities which are in conflict, or give the appearance
of being in conflict, with these principles and with the interests of the
Company. The following are potentially compromising situations which must be
avoided. Any exceptions must be reported to the President and written approval
for continuation must be obtained.
1. Revealing confidential information to outsiders or misusing
confidential information. Unauthorized divulging of information is a violation
of this policy whether or not for personal gain and whether or not harm to the
Company is intended. (The Employment, Confidential Information and Invention
Assignment Agreement elaborates on this principle and is a binding agreement.)
2. Accepting or offering substantial gifts, excessive entertainment,
favors or payments which may be deemed to constitute undue influence or
otherwise be improper or embarrassing to the Company.
3. Participating in civic or professional organizations that might
involve divulging confidential information of the Company.
4. Initiating or approving personnel actions affecting reward or
punishment of employees or applicants where there is a family relationship or is
or appears to be a personal or social involvement.
5. Initiating or approving any form of personal or social harassment of
employees.
6. Investing or holding outside directorship in suppliers, customers, or
competing companies, including financial speculations, where such investment or
directorship might influence in any manner a decision or course of action of the
Company.
7. Borrowing from or lending to employees, customers or suppliers.
8. Acquiring real estate of interest to the Company.
9. Improperly using or disclosing to the Company any proprietary
information or trade secrets of any former or concurrent employer or other
person or entity with whom obligations of confidentiality exist.
<PAGE>
10. Unlawfully discussing prices, costs, customers, sales or markets with
competing companies or their employees.
11. Making any unlawful agreement with distributors with respect to
prices.
12. Improperly using or authorizing the use of any inventions which are
the subject of patent claims of any other person or entity.
13. Engaging in any conduct which is not in the best interest of the
Company.
Each officer, employee and independent contractor must take every necessary
action to ensure compliance with these guidelines and to bring problem areas to
the attention of higher management for review. Violations of this conflict of
interest policy may result in discharge without warning.
<PAGE>
INVENTA CORPORATION
_____________________________
RESTATED SHAREHOLDERS AGREEMENT
_____________________________
May 11, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I - Right of First Refusal on Shareholder Transfer.................................................... 2
1.1 Company Right............................................................................... 2
1.2 Preferred Holders' Right.................................................................... 2
1.3 Failure to Exercise Rights.................................................................. 2
1.4 Price....................................................................................... 2
1.5 Transfer of Rights.......................................................................... 3
1.6 Prohibited Transfers........................................................................ 3
1.7 Definition of "Shares"...................................................................... 3
1.8 Permitted Transfers......................................................................... 3
ARTICLE II - Right of Co-Sale on Shareholder Transfer......................................................... 3
2.1 Right of Co-Sale............................................................................ 3
2.2 Agreement not to Transfer................................................................... 4
2.3 Definition of Shares........................................................................ 4
2.4 Permitted Transfers......................................................................... 4
2.5 Prohibited Transfers........................................................................ 4
ARTICLE III - Right of First Refusal on Company Issuances..................................................... 5
3.1 Grant of Right to Purchasers................................................................ 5
3.2 Grant of Right ............................................................................. 5
3.3 New Securities.............................................................................. 6
3.4 Notice...................................................................................... 6
3.5 Sale after Company Notice................................................................... 7
3.6 Assignment.................................................................................. 7
ARTICLE IV - Termination of Rights............................................................................ 8
ARTICLE V - Specific Performance.............................................................................. 8
ARTICLE VI - Legends.......................................................................................... 8
ARTICLE VII - Board of Directors.............................................................................. 8
7.1 Board of Directors.......................................................................... 8
7.2 Compensation Committee...................................................................... 9
7.3 Audit Committee............................................................................. 9
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VIII - Reorganizations................................................................................ 9
ARTICLE IX - General Provisions............................................................................... 10
9.1 Governing Law............................................................................... 10
9.2 Entire Agreement............................................................................ 10
9.3 Amendment................................................................................... 10
9.4 Successors.................................................................................. 10
9.5 Invalidity of Provisions.................................................................... 10
9.6 Notice...................................................................................... 10
9.7 No Waiver................................................................................... 11
9.8 Cooperation................................................................................. 11
9.9 Addition of Parties......................................................................... 11
9.10 Counterparts................................................................................ 11
</TABLE>
EXHIBIT A - Schedule of Purchasers
EXHIBIT B - Schedule of Holders of Series A Preferred Stock
EXHIBIT C - Schedule of Holders of Series B Preferred Stock
EXHIBIT D - Schedule of Certain Common Stock Holders
EXHIBIT E - Form of Instrument of Accession
-ii-
<PAGE>
INVENTA CORPORATION
RESTATED SHAREHOLDERS AGREEMENT
THIS RESTATED SHAREHOLDERS AGREEMENT is made this 11th day of May, 1998,
between Inventa Corporation, a California corporation (the "Company"), the
purchasers of the Company's Series C Preferred Stock (the "Purchasers") as
listed on Exhibit A attached hereto, Ashok K. Santhanam ("Founder"), the holders
---------
of the Company's Series A Preferred Stock (the "Series A Holders") listed on
Exhibit B attached hereto, the holders of the Company's Series B Preferred Stock
- ---------
(the "Series B Holders") listed on Exhibit C attached hereto, and certain
---------
holders of the Company's Common Stock (the "Common Holders") as listed on
Exhibit D attached hereto. The Purchasers, Series A Holders and the Series B
- ---------
Holders shall collectively be referred to as the "Preferred Holders". The
Purchasers, the Founder, the Preferred Holders and the Common Holders shall
collectively be referred to as the "Shareholders".
WHEREAS, Founder is the beneficial owner or may be deemed to be the
beneficial owner of 4,500,000 shares of the Common Stock of the Company.
WHEREAS, the Series A Holders and the Company are parties to the Series A
Preferred Stock Purchase Agreement dated July 8, 1994 (the "Series A
Agreement").
WHEREAS, the Series B Holders and the Company are parties to the Series B
Preferred Stock Purchase Agreement dated February 14, 1997 (the "Series B
Agreement").
WHEREAS, the Common Holders are the owners of 42,696 shares of the Common
Stock of the Company.
WHEREAS, the parties desire that this Agreement supersede the Shareholders
Rights Agreement dated February 14, 1997 in its entirety.
WHEREAS, the Purchasers have requested, as a condition to entering into the
Series C Convertible Preferred Stock Purchase Agreement of even date herewith
(the "Series C Agreement") that the Founder and the Shareholders enter into this
Agreement, and the Founder and the Shareholders, as an inducement to the
Purchasers to enter into the Series C Agreement of even date herewith, are
willing to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises, mutual covenants and
terms hereof, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
<PAGE>
ARTICLE I
Right of First Refusal on Shareholder Transfer
----------------------------------------------
1.1 Company Right. If at any time a Shareholder desires (or is required)
-------------
to sell or transfer in any manner any Shares (as hereinafter defined) pursuant
to the terms of a bona fide offer received from a third party (a "Buyer"), the
Shareholder shall submit a written offer to sell such Shares (the "Offered
Shares") to the Company on terms and conditions, including price, not less
favorable to the Company than those on which the Shareholder proposes to sell
such Offered Shares to Buyer (the "Offer"). The Offer shall disclose the
identity of the Buyer, the number of Offered Shares, the terms of the proposed
sale or transfer and any other material facts relating to the sale or transfer.
Within fifteen (15) days after receipt of the Offer, the Company shall give
notice to the Shareholder of its intent to purchase all or some of the Offered
Shares from the Shareholder on the terms and conditions set forth in the Offer.
1.2 Preferred Holders' Right. If, for any reason whatsoever, the Company
------------------------
shall not exercise its right to purchase all of the Offered Shares as provided
herein, the Company shall promptly provide to the Preferred Holders, written
notice (the "Notice") of same (which shall include a copy of the Offer provided
to the Company pursuant to Section 1.1 hereof), and then the Preferred Holders
shall have the right, for a period of fifteen (15) days from the date of the
Notice to purchase, on a pro rata basis, on the same terms and conditions as are
set forth in the Offer, that portion of the Offered Shares which the Company
shall not have agreed to purchase from the Shareholder (all such remaining
Shares being referred to as the "Remaining Offered Shares"). For purposes of
this Section 1.2, Preferred Holder's pro rata right shall be calculated by
dividing the number of shares of Common Stock issuable upon conversion of
Preferred Stock held by such Preferred Holder by the total number of shares of
Common Stock issuable upon conversion of Preferred Stock held by all Preferred
Holders.
1.3 Failure to Exercise Rights. In the event that the Company and the
--------------------------
Preferred Holders, taken together, do not purchase all of the Offered Shares
pursuant to and within the time periods set forth above, any remaining Offered
Shares may be sold or transferred by the Shareholder at any time within 90 days
thereafter, subject to compliance with Article II. Any such sale or transfer
shall be at not less than the price nor upon other terms and conditions, if any,
not more favorable to the Buyer than those specified in the Offer. Any Offered
Shares not sold within such 90-day period shall thereafter again be subject to
the requirements of this Article I. In the event that Shares are sold or
transferred to the Preferred Holders pursuant to this subsection, said Offered
Shares shall no longer be subject to this Agreement.
1.4 Price. With respect to any Shares to be transferred pursuant to
-----
Section 1.1 hereof and as to which a price has not been set by the Shareholder
under Section 1.1 hereof, the price per Share shall be a price set by the Board
of Directors of the Company which will reflect the current value of the Shares
in terms of present earnings and future prospects of the Company. The Company
shall notify the Shareholder of the price so determined within fifteen (15) days
after receipt by it of the Offer. If the Shareholder disputes the price as set
by the Board of Directors by giving notice to the Company within ten (10) days
after being informed of the price, the price of the Shares shall be determined
by an
-2-
<PAGE>
independent financial analyst selected by the Board of Directors of the Company,
with the cost of such determination to be divided equally between the Company
and the Shareholder. The Board of Directors shall select such analyst within
fifteen (15) days after receipt of notice that the Shareholder is disputing the
price set by the Board of Directors. If the Board is not notified of any such
dispute within such ten (10) day period, the decision of the Board of Directors
as to the purchase price shall be final. Any time required to determine a
purchase price or to resolve a dispute shall be added to the fifteen (15) day
period in which the Company may exercise its right to purchase the Offered
Shares.
1.5 Transfer of Rights. The right of the Preferred Holders to purchase
------------------
Offered Shares hereunder may not be assigned except to a transferee or assignee
who qualifies as a partner, subsidiary or affiliate of one of the Preferred
Holders, or a parent of one of the Preferred Holders, or any entity which has
the same parent corporation as one of the Preferred Holders.
1.6 Prohibited Transfers. The Shareholder shall not sell, assign,
--------------------
transfer, pledge, hypothecate, mortgage or dispose of, by gift or otherwise, or
in any way encumber, all or any part of the Shares owned by him during the term
of this Agreement other than in compliance with the terms of this Article I.
1.7 Definition of "Shares". For purposes of this Article I, the term
----------------------
"Shares" shall mean and include all shares of capital stock of the Company owned
by the Shareholder, whether presently held or hereafter acquired.
1.8 Permitted Transfers. The right of first refusal contained in this
-------------------
Article I shall not apply to: (a) any transfer of Shares by the Shareholder by
gift or bequest or through inheritance to, or for the benefit of, any family
member; (b) any transfer of Shares by the Shareholder to a trust for the benefit
of any family member; (c) any sale or transfer of Shares to the Company (or any
assignee of the Company) pursuant to the terms of a stock restriction or stock
repurchase agreement (which provides for such sale upon the Shareholder's
termination of employment); (d) any sale of Common Stock in a public offering
pursuant to a registration statement filed by the Company with the Securities
and Exchange Commission; (e) any pledge made pursuant to a bona fide loan
transaction that creates a mere security interest; or (f) any transfer of Shares
by the Shareholder that is a partnership to its partners. In the event of any
transfer pursuant to (a), (b) or (f), the transferee of the Shares shall hold
the Shares so acquired with all the rights conferred by, and subject to all the
restrictions imposed by, this Agreement.
ARTICLE II
Right of Co-Sale on Shareholder Transfer
----------------------------------------
2.1 Right of Co-Sale. In the event that the Shareholder desires (or is
----------------
required) to sell or transfer in any manner any Shares (as hereinafter defined)
pursuant to the terms of a bona fide offer received from a Buyer, and the
Company and the Preferred Holders do not exercise their right of first refusal
as to all of the Offered Shares as set forth in Article I hereof, each Preferred
Holder shall have the right (the "Right of Co-Sale") to require, as a condition
to such sale or transfer, that the Buyer purchase from each Preferred Holder at
the same price per share and on the same terms and conditions as involved in
such sale or disposition by the Shareholder that percentage of the Offered
Shares not
-3-
<PAGE>
purchased by the Company or the Preferred Holders pursuant to Article I above,
expressed by a fraction, the numerator of which is the number of shares of
Preferred Stock (on an as-converted into Common Stock basis) and Common Stock
held by such Preferred Holder and the denominator of which is the aggregate
number of shares of Preferred Stock (on an as-converted into Common Stock basis)
and Common Stock held by all Preferred Holders and the number of Shares held by
the Shareholder. The Preferred Holders shall act upon the Buyer's offer to buy
as soon as practicable after receipt from the Company of the Notice and in all
events within fifteen (15) days after receipt of the Notice. In the event that
the Preferred Holders shall elect to exercise their Right of Co-Sale, the
Preferred Holders shall communicate in writing such election to the Shareholder.
2.2 Agreement not to Transfer. The Shareholder shall not sell, assign,
-------------------------
transfer, pledge, hypothecate, mortgage or dispose of, by gift or otherwise, or
in any way encumber, all or any part of the Shares (as hereinafter defined)
owned by him during the term of this Agreement other than in compliance with the
terms of this Article II.
2.3 Definition of Shares. For purposes of this Article II, the term
--------------------
"Shares" shall mean and include all shares of capital stock of the Company owned
by the Shareholder, whether presently held or hereafter acquired.
2.4 Permitted Transfers. The Right of Co-Sale contained in this Article
-------------------
II shall not apply to: (a) any transfer of Shares by the Shareholder by gift or
bequest or through inheritance to, or for the benefit of, any family member; (b)
any transfer of Shares by the Shareholder to a trust for the benefit of any
family member; (c) any sale or transfer of Shares to the Company pursuant to the
terms of a stock restriction or stock repurchase agreement (which provides for
such sale upon the Shareholder's termination of employment with the Company, if
applicable); (d) any sale or transfer of Shares to the Company or the Preferred
Holders pursuant to the provisions of Article I hereof; (e) any sale of Common
Stock in a public offering pursuant to a registration statement filed by the
Company with the Securities and Exchange Commission; (f) any pledge made
pursuant to a bona fide loan transaction that creates a mere securities
interest; or (g) any transfer of Shares by the Shareholder that is a partnership
to its partners. In the event of any transfer pursuant to (a), (b) or (f) the
transferee of the Shares shall hold the Shares so acquired with all the rights
conferred by, and subject to all the restrictions imposed by, this Agreement.
2.5 Prohibited Transfers.
--------------------
(a) In the event that the Shareholder should sell any Shares in
contravention of the co-sale rights of each Preferred Holder under this
Agreement (a "Prohibited Transfer"), each Preferred Holder, in addition to such
other remedies as may be available at law, in equity or hereunder, shall have
the put option provided below, and such Shareholder shall be bound by the
applicable provisions of such option.
(b) In the event of a Prohibited Transfer, each Preferred Holder
shall have the right to sell to such Shareholder the type and number of shares
of Common Stock equal to the number of shares each Preferred Holder would have
been entitled to transfer to the Buyer under Section 2.1 hereof
-4-
<PAGE>
had the Prohibited Transfer been effected pursuant to and in compliance with the
terms hereof. Such sale shall be made on the following terms and conditions:
(i) The price per share at which the shares are to be sold to
the Shareholder shall be equal to the price per share paid by the Buyer to such
Shareholder in such Prohibited Transfer. The Shareholder shall also reimburse
each Preferred Holder for any and all fees and expenses, including legal fees
and expenses, incurred pursuant to the exercise or the attempted exercise of the
Preferred Holder's rights under this Article II.
(ii) Within ninety (90) days after the date on which a
Preferred Holder received notice of the Prohibited Transfer or otherwise became
aware of the Prohibited Transfer, such Preferred Holder shall, if exercising the
option created hereby, deliver to the Shareholder the certificate or
certificates representing the shares to be sold, each certificate to be properly
endorsed for transfer.
(iii) Such Shareholder shall, upon receipt of the certificate or
certificates for the shares to be sold by a Preferred Holder, pursuant to this
Section 2.5(b), pay the aggregate purchase price therefor and the amount of
reimbursable fees and expenses, as specified in Section 2.5(b)(i), in cash or by
other means acceptable to the Preferred Holder.
(iv) Notwithstanding the foregoing, any attempt by the
Shareholder to transfer Shares in violation of Article II hereof shall be
voidable at the option of a majority in interest of the Preferred Holders if the
Preferred Holders do not elect to exercise the put option set forth in this
Section 2.5, and the Company agrees it will not effect such a transfer nor will
it treat any alleged transferee as the holder of such shares without the written
consent of a majority in interest of the Preferred Holders.
ARTICLE III
Right of First Refusal on Company Issuances
-------------------------------------------
3.1 Grant of Right to Purchasers. Except as set forth in Article IV, the
----------------------------
Company hereby grants to each of the Purchasers who continue to hold shares of
Series C Preferred Stock purchased pursuant to the Series C Agreement, the right
of first refusal to purchase, on a pro rata basis based on the number of shares
of Common Stock issuable upon conversion of shares of Series C Preferred Stock
then held by them, in the aggregate, fifty (50) percent of the New Securities
(as defined in Section 3.3) which the Company may, from time to time propose to
sell and issue. The Purchasers may purchase said New Securities on the same
terms and at the same price at which the Company proposes to sell the New
Securities. The right of first refusal granted pursuant to this Section 3.1
shall terminate upon the closing of the first sale of the next series or several
series of Preferred Stock of the Company authorized by the shareholders of the
Company subsequent to the date hereof with aggregate proceeds to the Company
from the sale of the next series or several series of Preferred Stock of at
least $5,000,000.
3.2 Grant of Right. Except as set forth in Article IV, the Company hereby
--------------
grants to each Preferred Holder who continues to hold, respectively, shares of
Series A Preferred Stock purchased
-5-
<PAGE>
pursuant to the Series A Agreement, Series B Preferred Stock purchased pursuant
to the Series B Agreement and Series C Preferred Stock purchased pursuant to the
Series C Agreement (the "Preferred Shares"), the right of first refusal to
purchase all or any part of such Preferred Holder's Pro Rata Share (as
hereinafter defined) of the New Securities (as defined in Section 3.3) which the
Company may, from time to time, propose to sell and issue, with a right of over-
subscription (as provided in Section 3.4 below); provided, however, that with
respect to the Purchasers, the right of first refusal pursuant to this Section
3.2 shall only commence after the termination of the Purchasers' right of first
refusal pursuant to Section 3.1 above. The Preferred Holders may purchase said
New Securities on the same terms and at the same price at which the Company
proposes to sell the New Securities. The "Pro Rata Share" of each Preferred
Holder, for purposes of this right of first refusal, is the ratio of the total
number of shares of Common Stock held by such Preferred Holder, including (i)
any shares of Common Stock into which shares of Preferred Stock held by such
Preferred Holder are convertible, and (ii) any shares deliverable upon the
exercise of options of other rights to purchase Common Stock held by such
Preferred Holder, to the total number of shares of Common Stock outstanding
immediately prior to the issuance of the New Securities (including (i) any
shares of Common Stock into which outstanding shares of Preferred Stock are
convertible and (ii) any shares deliverable upon the exercise of options or
other rights to purchase Common Stock).
3.3 New Securities. "New Securities" shall mean any capital stock of the
--------------
Company, whether now authorized or not, and any rights, options or warrants to
purchase said capital stock, and securities of any type whatsoever that are, or
may become, convertible into said capital stock; provided, however, that "New
-------- -------
Securities" does not include (i) the Preferred Shares or other securities issued
or issuable upon conversion of the Preferred Shares ("Conversion Shares"), (ii)
securities offered pursuant to a registration statement filed under the
Securities Act of 1933, as amended (the "Act"), (iii) securities issued
pursuant to the acquisition of another corporation by the Company by merger,
purchase of substantially all of the assets or other reorganization, (iv) shares
offered pursuant to lease financing transactions or bank or lending institution
financing transactions that are approved by the Board of Directors, (v)
securities issued in connection with any stock split, stock dividend or
recapitalization of the Company, (vi) all securities hereafter issued or
issuable to officers, directors, employees or consultants of the Company (for
the primary purpose of soliciting or retaining their employment or services)
pursuant to any employee or consultant stock offering, plan or arrangement
approved by the Board of Directors, and (vii) securities issuable pursuant to
warrants outstanding as of May 11, 1998 (the "Warrant Shares") or securities
issued upon conversion of the Warrant Shares.
3.3 Notice. In the event the Company proposes to undertake an issuance
------
of New Securities, it shall give to the Preferred Holders written notice (the
"Company Notice") of its intention, describing the type of New Securities,
number of shares, the price, the terms upon which the Company proposes to issue
the same, and notice to the effect that each Preferred Holder must respond to
such Company Notice within twenty (20) days after the date thereof. The
Preferred Holders shall have twenty (20) days from the date of such Company
Notice to purchase any or all of the New Securities for the price and upon the
terms specified in the Company Notice by giving written notice to the Company
and stating therein the quantity of New Securities to be purchased and
forwarding payment for such New Securities to the Company if immediate payment
is required by such terms, or in any event no later than forty-five (45) days
after the date of the Company Notice. The Company shall promptly, in writing,
inform each
-6-
<PAGE>
Preferred Holder which elects to purchase its Pro Rata Share of the New
Securities of any other Preferred Holder's failure to do so (the "Over-
subscription Notice"), in which case the Preferred Holders electing to purchase
their Pro Rata Share of the New Securities shall have the right to purchase
their Pro Rata Share of such shares (the "Over-subscription Right") and any
portion of the remainder of such shares which other Preferred Holders have
elected not to purchase pursuant to the exercise of their Over-subscription
Right, for the price and upon the terms specified in the Company Notice for a
period of thirty (30) days after the date of the Over-subscription Notice. If a
Preferred Holder elects not to exercise such right, then that portion of the
shares which is not purchased may be offered to third parties on terms no less
favorable to the Company for a period of one hundred twenty (120) days.
3.5 Sale after Company Notice. In the event any Preferred Holder fails to
-------------------------
exercise in full the right of first refusal within said twenty (20) day period,
the Company shall have ninety (90) days thereafter to sell or enter into an
agreement (pursuant to which the sale of New Securities covered thereby shall be
closed, if at all, within thirty (30) days from the date of said agreement) to
sell the New Securities respecting which such Preferred Holder's rights were not
exercised, at a price and upon general terms no more favorable to the Preferred
Holders thereof than specified in the Company Notice. In the event the Company
has not sold the New Securities within said ninety (90) day period (or sold and
issued New Securities in accordance with the foregoing within thirty (30) days
from the date of said agreement), the Company shall not thereafter issue or sell
any New Securities without first offering such securities to the Preferred
Holders in the manner provided above.
3.6 Assignment. The right of first refusal granted under this Article III
----------
is assignable by the Preferred Holders to any transferee of a minimum of fifty
thousand (50,000) shares of Series A Preferred Stock (as adjusted for any stock
split, stock dividends, combinations, recapitalizations and the like with
respect to such shares) or fifty thousand (50,000) shares of Series B Preferred
Stock (as adjusted for any stock split, stock dividends, combinations,
recapitalizations and the like with respect to such shares), or fifty thousand
(50,000) shares of Series C Preferred Stock (as adjusted for any stock split,
stock dividends, combinations, recapitalizations and the like with respect to
such shares), as applicable, or the Common Stock into which each such series of
Preferred Stock has been converted. For the purposes of satisfying the 50,000
share threshold herein, the number of shares of the Common Stock issuable upon
conversion of applicable series of Preferred Stock owned by the Preferred
Holders shall include the holdings of partners, subsidiaries, parents,
shareholders or affiliates of the Preferred Holders (or any entities which have
the same parent corporation as the Preferred Holders) and such holdings shall be
aggregated together and with the holdings of the Preferred Holders with respect
to the applicable series of Preferred Stock.
-7-
<PAGE>
ARTICLE IV
Termination of Rights
---------------------
The Right of First Refusal on Shareholder Transfer, Co-Sale Right, Right of
First Refusal on Company Issuances, the right to designate members of the Board
of Directors, Compensation Committee and Audit Committee and the right to direct
the voting of the shares beneficially owned by the Founder created under
Articles I, II, III, VII and VIII of this Agreement, respectively, shall expire
upon (i) the closing of the first public offering of the Common Stock of the
Company to the general public which is effected pursuant to a registration
statement filed with, and declared effective by, the Securities and Exchange
Commission under the Securities Act of 1933, as amended; (ii) upon the closing
of a transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation) which results in (a)
the holders of the outstanding voting equity securities of the Company
immediately prior to such transaction or series of related transactions holding
securities representing less than 50% of the voting power of the surviving
entity immediately following such transaction or series of related transactions
or (b) the sale or disposition by the Company of all or substantially all the
Company's assets; or (iii) with respect to the Right of First Refusal on
Shareholder Transfer, the date on which less than 50% of the Preferred Stock of
the Company initially issued remains outstanding (as adjusted for any stock
split, stock dividends, combinations, recapitalizations and the like with
respect to the shares).
ARTICLE V
Specific Performance
--------------------
The rights of the parties under this Agreement are unique and, accordingly,
the parties shall, in addition to such other remedies as may be available to any
of them at law or in equity, have the right to enforce their rights hereunder by
actions for specific performance to the extent permitted by law.
ARTICLE VI
Legends
-------
The certificates representing the Shares shall bear a legend indicating the
existence of the restrictions imposed by Article I, II, III, VII and VIII of
this Agreement. Nothing in this Agreement should be construed as a modification
or amendment of any restrictions on transfer under applicable federal or state
securities laws.
ARTICLE VII
Board of Directors
------------------
7.1 Board of Directors. As soon as practicable after the Closing, the
------------------
Board of Directors of the Company shall be comprised of seven members. The
Purchasers and the Shareholders agree to cause
-8-
<PAGE>
to be elected to the Company's Board of Directors (i) one representative elected
by the holders of Series A Preferred Stock, (ii) one representative elected by
the holders of Series B Preferred Stock (who shall be a representative of
Battery Ventures L.P.), (iii) two representatives elected by the holders of the
Series C Preferred Stock (one of whom shall be a representative of the
Technology Crossover Ventures entities, and one of whom shall be a
representative of Boston Millennia Partners Limited Partnership), (iv) two
representatives elected by the holders of Common Stock of the Company (one of
whom shall be Ashok Santhanam and the other shall be reasonably approved by the
holders of the Series C Preferred Stock), and (v) the Chief Executive Officer of
the Company. In addition, the Board of Directors of the Company shall elect
Ashok Santhanam as Chairman of the Board to serve in that capacity as long as he
is a director of the Company. If any Purchaser elects not to designate a
representative to the Board, it shall have the right to appoint an observer who
shall be entitled to attend all meetings of the Board and to consult with
management. The Company shall pay the reasonable out-of-pocket expenses of non-
employee members of the Company's Board of Directors in connection with
attending Board of Directors meetings and will pay the reasonable out-of-pocket
expenses of Board observers in connection with attending Board of Directors
meetings, in accordance with the Company's standard travel policy.
7.2 Compensation Committee. The Company shall use its best efforts and
----------------------
the Purchasers and Shareholders agree to cause the Board of Directors of the
Company to appoint and maintain a Compensation Committee, which shall contain
no more than three persons, one of whom shall be a representative of Boston
Millennia Partners Limited Partnership, one of whom shall be a representative of
Battery Ventures, and one of whom shall be Ashok Santhanam. The Compensation
Committee shall administer the Company's stock option plans and make
recommendations to the Board of Directors with respect to management
compensation and terms of employment. The Board of Directors of the Company
shall have the power to accept or reject any recommendation of the Compensation
Committee, but shall not approve an employee's compensation in amounts which
differ from the amounts recommended by the Compensation Committee.
7.3 Audit Committee. The Company shall use its best efforts and the
---------------
Purchasers and Shareholders agree to cause the Board of Directors to appoint and
maintain an Audit Committee, which shall include at least one representative of
the Purchasers.
ARTICLE VIII
Reorganizations
---------------
The Shareholders hereby agree that at any meeting of the shareholders
of the Company, however called, and in any written action by consent of
shareholders of the Company, the Shareholders shall vote all shares of stock of
the Company entitled to vote held by the Shareholder as directed by the holders
of a majority of the outstanding shares of Common Stock and Common Stock
issuable upon conversion of Preferred Stock then held by the Shareholders in
connection with any reorganization of the Company pursuant to Section 1200 et.
seq. of the California Corporations Code; provided, however, that this Article
VIII shall not affect any rights granted to the Preferred Holders or the
Purchasers pursuant to Sections 6(a) and 6(c) of the Company's Amended and
Restated Articles of Incorporation. The Shareholders shall not enter into any
agreement or understanding with any person or entity to vote
-9-
<PAGE>
or give instructions in any manner inconsistent with the preceding sentence. In
the event any Shareholder fails to vote in accordance herewith, such
Shareholders shall be deemed to have irrevocably appointed such person or
persons as may be designated by the Board of Directors of the Company as proxy
to vote such Shareholder's stock in accordance herewith.
ARTICLE IX
General Provisions
------------------
9.1 Governing Law. This Agreement shall be governed by the laws of the
-------------
State of California without regard to choice of law provisions.
9.2 Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties with respect to the subject matter hereof and supersedes all
prior oral or written agreements and understandings between them or any of them
as to such subject matter.
9.3 Amendment. Except as otherwise expressly provided herein, this
---------
Agreement, other than Article VII herein, may be amended only upon the written
consent of the majority of the shares beneficially owned or deemed to be
beneficially owned by the Founder, the majority-in-interest of the Purchasers,
the majority-in-interest of the Common Holders, the Series A Holders, and the
Series B Holders (with the Common Holders, the Series A Holders and the Series B
Holders voting as a single class) and the Company; provided, however, that
Article VII herein may be amended only upon the written consent of 2/3 of (i)
the shares then beneficially owned or deemed to be beneficially owned by the
Founder and the shares then owned by the Common Holders, (ii) the shares then
owned by the Series A Holders (iii) the shares then owned by the Series B
Holders, and (iv) the shares then owned by the Purchasers, with each voting as a
separate class.
9.4 Successors. This Agreement shall be binding upon and shall inure to
----------
the benefit of the parties hereto and their respective heirs, executors, legal
representatives, successors, and permitted transferees, except as may be
expressly provided otherwise herein.
9.5 Invalidity of Provisions. In the case any one or more of the
------------------------
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement and such
invalid, illegal and unenforceable provision shall be reformed and construed so
that it will be valid, legal, and enforceable to the maximum extent permitted by
law.
9.6 Notice. Any notice, demand or request required or permitted to be
------
given by either the Company or the Shareholders pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage prepaid, and
addressed to the parties at the addresses of the parties set forth on the
Exhibits to this Agreement or such other address as a party may request by
notifying the other in writing.
-10-
<PAGE>
9.7 No Waiver. Any party's failure to enforce any provision or provisions
---------
of this Agreement shall not in any way be construed as a waiver of any such
provision or provisions, nor prevent that party thereafter from enforcing each
and every other provision of this Agreement. The rights granted to the parties
herein are cumulative and shall not constitute a waiver of any party's right to
assert all other legal remedies available to it under the circumstances.
9.8 Cooperation. The parties agree upon request to execute any further
-----------
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
9.9 Addition of Parties. The Company agrees that until the termination of
-------------------
this Agreement, it will cause each of the key employees of the Company who holds
at least 100,000 shares of the capital stock of the Company (on an as-converted
basis and as adjusted for any stock split, stock dividends, combinations,
recapitalizations and the like with respect to such shares), to enter into this
Agreement and thereby to be bound by the terms hereof, all by execution of an
Instrument of Accession in the form attached as Exhibit E hereto. Any such
---------
person so entering into this Agreement shall be deemed to be a Shareholder for
purposes of this Agreement.
9.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
(This space intentionally left blank)
-11-
<PAGE>
The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY" INVENTA CORPORATION
a California corporation
By:_________________________________
Ashok K. Santhanam, President
"FOUNDER" Ashok K. Santhanam and Revathi Santhanam,
Trustees of the Santhanam Family Trust U/D/T
dated May 23, 1997
By:_________________________________
Ashok K. Santhanam, Trustee
____________________________________
Revathi Santhanam
Sujatha Ramkumar, Trustee of the Amarnath
Santhanam 1997 Trust UTA dated May 23, 1997
By:_________________________________
Sujatha Ramkumar, Trustee
Sujatha Ramkumar, Trustee of the Rishikesh
Santhanam 1997 Trust UTA dated May 23, 1997
By:_________________________________
Sujatha Ramkumar, Trustee
-12-
<PAGE>
"PURCHASERS"
Battery Ventures L.P.
By:_________________________________
Name:
Title:
BOSTON MILLENNIA PARTNERS
LIMITED PARTNERSHIP
By: Glen Partners Limited Partnership,
its General Partner
By:_________________________________
General Partner
____________________________________
Stephen T. Barry
____________________________________
A. Dana Callow, Jr.
____________________________________
Christian Dubiel
____________________________________
Martin J. Hernon
____________________________________
Robert W. Jevon
____________________________________
Frank P. Pinto
-13-
<PAGE>
____________________________________
Suresh Shanmugham
____________________________________
Bruce R. Tiedemann
____________________________________
Harry A. Caunter
____________________________________
Maya S. Hattangady
____________________________________
Santhanam C. Shekar
TCV II (Q), L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By:_________________________________
Name: Robert C. Bensky
Title: Chief Financial Officer
TCV II Strategic Partners, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By:_________________________________
Name: Robert C. Bensky
Title: Chief Financial Officer
-14-
<PAGE>
TCV II, V.O.F.
a Netherlands Antilles General Partnership
By: Technology Crossover Management II, L.L.C.,
Its: Investment General Partner
By:____________________________________
Name: Robert C. Bensky
Title: Chief Financial Officer
Technology Crossover Ventures II, C.V.
a Netherlands Antilles Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: Investment General Partner
By:____________________________________
Name: Robert C. Bensky
Title: Chief Financial Officer
Technology Crossover Ventures II, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By:____________________________________
Name: Robert C. Bensky
Title: Chief Financial Officer
"OTHER SHAREHOLDERS"
Battery Ventures L.P.
By:____________________________________
Name:
Title:
____________________________________
Harry A. Caunter
____________________________________
Electra D. DePeyster
-15-
<PAGE>
____________________________________
Robert Ducommun
____________________________________
Maya S. Hattangady
Palmer G. and Charles E. Ducommun
Charitable Annuity Trust, u/d/t
By:_________________________________
Robert Ducommun, Trustee
____________________________________
Andrew Potter
____________________________________
Santhanam C. Shekar
____________________________________
Ramesh Vasudevan
____________________________________
Gomati Venkateswaran
____________________________________
Usha Vijayarajan
-16-
<PAGE>
EXHIBIT A
---------
SCHEDULE OF PURCHASERS
Name and Address
- --------------------------------------------------------------------------------
Battery Ventures L.P. Suresh Shanmugham
20 William Street c/o Boston Millennia Partners
Wellesley, MA 01282 30 Rose Wharf, Ste. 330
Boston, MA 02110
Boston Millennia Partners
30 Rose Wharf, Ste. 330 Bruce R. Tiedemann
Boston, MA 02110 c/o Boston Millennia Partners
30 Rose Wharf, Ste. 330
Stephen T. Barry Boston, MA 02110
c/o Boston Millennia Partners
30 Rose Wharf, Ste. 330 Harry A. Caunter
Boston, MA 02110 675 North Court
Suites 225 & 230
A. Dana Callow, Jr. Palatine, IL 60067
c/o Boston Millennia Partners
30 Rose Wharf, Ste. 330 Maya S. Hattangady
Boston, MA 02110 414 E. Lansing Way
Fresno, CA 93704
Christian Dubiel
c/o Boston Millennia Partners Santhanam C. Shekar
30 Rose Wharf, Ste. 330 349 G Street
Boston, MA 02110 San Rafael, CA 94901
Martin J. Hernon Frank P. Pinto
c/o Boston Millennia Partners c/o Boston Millennia Partners
30 Rose Wharf, Ste. 330 30 Rose Wharf, Ste. 330
Boston, MA 02110 Boston, MA 02110
Robert W. Jevon
c/o Boston Millennia Partners
30 Rose Wharf, Ste. 330
Boston, MA 02110
<PAGE>
TCV II (Q), L.P. TCV II Strategic Partners, L.P.
c/o Technology Crossover Ventures c/o Technology Crossover Ventures
56 Main Street, Suite 210 56 Main Street, Suite 210
Millburn, NJ 07041 Millburn, NJ 07041
Attention: Robert C. Bensky Attention: Robert C. Bensky
with a copy to: with a copy to:
c/o Technology Crossover Ventures c/o Technology Crossover Ventures
575 High Street, Suite 400 575 High Street, Suite 400
Palo Alto, CA 94301 Palo Alto, CA 94301
Attention: Jay C. Hoag Attention: Jay C. Hoag
TCV II, V.O.F. Technology Crossover Ventures II, C.V.
c/o Technology Crossover Ventures c/o Technology Crossover Ventures
56 Main Street, Suite 210 56 Main Street, Suite 210
Millburn, NJ 07041 Millburn, NJ 07041
Attention: Robert C. Bensky Attention: Robert C. Bensky
with a copy to: with a copy to:
c/o Technology Crossover Ventures c/o Technology Crossover Ventures
575 High Street, Suite 400 575 High Street, Suite 400
Palo Alto, CA 94301 Palo Alto, CA 94301
Attention: Jay C. Hoag Attention: Jay C. Hoag
Technology Crossover Ventures II, L.P.
c/o Technology Crossover Ventures
56 Main Street, Suite 210
Millburn, NJ 07041
Attention: Robert C. Bensky
with a copy to:
c/o Technology Crossover Ventures
575 High Street, Suite 400
Palo Alto, CA 94301
Attention: Jay C. Hoag
<PAGE>
EXHIBIT B
---------
SCHEDULE OF HOLDERS
OF SERIES A PREFERRED STOCK
Name and Address
- --------------------------------------------------------------------------------
Harry A. Caunter Ramesh Vasudevan
675 North Court 1369 Camwell Drive
Suites 225 & 230 West Vancouver, BC, V7S2M6
Palatine, IL 60067 Canada
Electra D. De Peyster Gomati Venkateswaran
2000 Redwood Hill Court 26 South Baog Road
Santa Rosa, CA 95404 A2 Anand Bhavan
Madras, 600017
Robert Ducommun INDIA
1155 Park Ave.
Apt. 1 SW Usha Vijayarajan
New York, NY 10128 2/7 12th Cross
Rajmahal Extension
Maya S. Hattangady Bangalore, 560080
414 E. Lansing Way INDIA
Fresno, CA 93704
Palmer G. and Charles E. Ducommun
Charitable Annuity Trust, u/d/t
Attn: Robert Ducommun
1155 Park Ave.
Apt. 1 SW
New York, N.Y. 10128
Andrew Potter
401 Vine Street
Menlo Park, CA 94025
Santhanam C. Shekar
349 G Street
San Rafael, CA 94901
<PAGE>
EXHIBIT C
---------
SCHEDULE OF HOLDERS
OF SERIES B PREFERRED STOCK
Name and Address
- --------------------------------------------------------------------------------
Battery Ventures L.P.
20 William Street
Wellesley, MA 01282
Harry A. Caunter
675 North Court
Suites 225 & 230
Palatine, IL 60067
Robert Ducommun
1155 Park Ave.
Apt. 1 SW
New York, N.Y. 10128
Palmer G. and Charles E. Ducommun
Charitable Annuity Trust, u/d/t
Robert Ducommun, trustee
1155 Park Ave.
Apt. 1 SW
New York, N.Y. 10128
Andrew Potter
401 Vine Street
Menlo Park, CA 94025
Ramesh Vasudevan
1369 Camwell Drive
West Vancouver, BC, V7S2M6
Canada
<PAGE>
EXHIBIT D
---------
SCHEDULE OF CERTAIN COMMON STOCK HOLDERS
Name and Address
- --------------------------------------------------------------------------------
B. Nagaraja Kini Ramesh Sivakaminathan
450 N. Mathilda Avenue, #A-2111 4349 Calypso Terrace
Sunnyvale, CA 94086 Fremont, CA 94555
Muralidharan Manickam Balaji Varadarajan
20800 Homestead Road #37C 35600 Purcell Place
Cupertino, CA 95014 Fremont, CA 94536
Srikantan Moorthy Gerald Williams
1951 Nobili Avenue 3743 Payne Avenue
Santa Clara, CA 95051 San Jose, CA 95117
Siby Nidhiry Ebenezer James
450 N. Mathilda Avenue #C305 45259 S. Grimmer Blvd.
Sunnyvale, CA 94086 Fremont, CA 94539
Janice Porter
2834 Wentworth Road
Cameron Park, CA 95682
Ashwin Kedia
450 N. Mathilda Ave.
Apt. K206
Sunnyvale, CA 94086
<PAGE>
EXHIBIT E
---------
INSTRUMENT OF ACCESSION
-----------------------
The undersigned hereby acknowledges receipt and review of the Restated
Shareholders Agreement dated April ___, 1998 (the "Agreement"). By signing
below, the undersigned agrees to be bound by the terms of the Agreement as if
the undersigned was an original party thereto. The undersigned further agrees
that for purposes of the Agreement, the undersigned shall be deemed to be a
Shareholder as defined in the Agreement.
_______________________
(Print name)
_______________________
(Signature)
<PAGE>
INVENTA CORPORATION
-----------------------------
RESTATED SHAREHOLDERS RIGHTS
AGREEMENT
-----------------------------
May 11, 1998
<PAGE>
RESTATED REGISTRATION RIGHTS AGREEMENT
This Restated Registration Rights Agreement (the "Agreement"), dated as of
May 11, 1998 is entered into by and among Inventa Corporation, a California
corporation (the "Company") and the holders of the Company's Series A Preferred
Stock listed on Exhibit A attached hereto (collectively, the "Series A
---------
Holders"), the holders of the Company's Series B Preferred Stock listed on
Exhibit B attached hereto (collectively, the "Series B Holders") and the holders
- ---------
of the Company's Series C Preferred Stock listed on Exhibit C attached hereto
---------
(collectively, the "Series C Holders")(the Series A Holders, the Series B
Holders and the Series C Holders shall collectively be referred to as
"Shareholders").
R E C I T A L S
---------------
A. The Series A Holders, the Series B Holders and the Company are parties
to the Registration Rights Agreement dated February 14, 1997.
B. The Series C Holders and the Company are parties to the Series C
Convertible Preferred Stock Purchase Agreement as of the date hereof (the
"Series C Purchase Agreement").
C. The execution of this Agreement is a condition to the closing of the
transactions contemplated by the Series C Purchase Agreement.
D. The Shareholders and the Company desire that the transactions
contemplated by the Series C Purchase Agreement be consummated.
E. The Series A Holders, the Series B Holders and the Company desire that
this Agreement supersede the Registration Rights Agreement dated February 14,
1997 in its entirety.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
-------------------
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the common stock of the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Holder" shall mean any holder, or an assignee under Section 15
hereof, of outstanding Registrable Securities.
<PAGE>
"Initiating Holders" shall mean any Holders who in the aggregate are
Holders of more than fifty percent (50%) of the outstanding Registrable
Securities.
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering of the
effectiveness of such registration statement.
"Registrable Securities", subject to Sections 5(b) and 6(b) hereof,
shall mean shares of Common Stock (i) issued or issuable pursuant to the
conversion of the Shares, and (ii) issued in respect of securities issued
pursuant to the conversion of the Shares upon any stock split, stock dividend,
recapitalization, substitution, or similar event; provided, however, that
Registrable Securities shall not include any (a) shares of Common Stock which
have previously been registered, (b) shares of Common Stock which have
previously been sold to the public, or (c) securities which would otherwise be
Registrable Securities held by a Holder who is then permitted to sell all of
such securities within any three (3) month period following the Company's
initial public offering pursuant to Rule 144 if such securities then held by
such Holder constitute less than one percent of the Company's outstanding equity
securities.
"Registration Expenses" shall mean all expenses (excluding
underwriting discounts and selling commissions) incurred in connection with a
registration under Sections 5, 6 and 8 hereof, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration, and the
reasonable fees and expenses of one counsel for the selling Shareholders (but
excluding the compensation of regular employees of the Company, which shall be
paid in any event by the Company).
"Restricted Securities" shall mean the securities of the Company
required to bear or bearing the legend set forth in Section 3 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities.
"Shares" shall mean shares of the Company's Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock.
2. Restrictions on Transferability. The Restricted Securities held by
-------------------------------
the Shareholders shall not be transferred except upon the conditions specified
in this Agreement, which conditions are intended to insure compliance with the
provisions of the Securities Act or, in the case of Section 16 hereof, to assist
in an orderly distribution. Each Shareholder will cause any proposed transferee
of
2
<PAGE>
Restricted Securities held by that Shareholder to agree to take and hold those
securities subject to the provisions and upon the conditions specified in this
Agreement.
3. Restrictive Legend. Each certificate representing (i) the Shares,
------------------
and (ii) shares of the Company's Common Stock issued upon conversion of the
Shares, and (iii) any other securities issued in respect of the Shares, or the
Common Stock issued upon conversion of the Shares, upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event, shall
(unless otherwise permitted or unless the securities evidenced by such
certificate shall have been registered under the Securities Act) be stamped or
otherwise imprinted with a legend substantially in the following form (in
addition to any legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, (THE "ACT") OR ANY STATE SECURITIES LAWS. SUCH
SHARES MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF SUCH
REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND
ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT.
COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND
RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICE OF THE
CORPORATION.
Upon request of a holder of such a certificate, the Company shall
remove the foregoing legend from the certificate or issue to such holder a new
certificate therefor free of any transfer legend, if, with such request, the
Company shall have received either the opinion referred to in Section 4(i) or
the "no-action" letter referred to in Section 4(ii) to the effect that any
transfer by such holder of the securities evidenced by such certificate will not
violate the Securities Act and applicable state securities laws, unless any such
transfer legend may be removed pursuant to Rule 144(k), in which case no such
opinion or "no-action" letter shall be required, and provided that the Company
shall not be obligated to remove any such legends prior to the date of the
initial public offering of the Company's Common Stock under the Securities Act.
4. Notice of Proposed Transfers. The holder of each certificate
----------------------------
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 4. Prior to any proposed transfer
of any Restricted Securities (other than under circumstances described in
Sections 5, 6 and 8 hereof), the holder thereof shall give written notice to the
Company of such holder's intention to effect such transfer. Each such notice
shall describe the manner and circumstances of the proposed transfer in
sufficient detail, and shall be accompanied (except in transactions in
compliance with Rule 144 promulgated under the Securities Act or for a transfer
to a holder's spouse, ancestors, descendants or a trust for any of their
benefit, or in transactions involving the distribution without consideration of
Restricted Securities by a holder to any of its partners or
3
<PAGE>
retired partners or to the estate of any of its partners or retired partners) by
either (i) a written opinion of legal counsel to the holder who shall be
reasonably satisfactory to the Company, addressed to the Company and reasonably
satisfactory in form and substance to the Company's counsel, to the effect that
the proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act or (ii) a "no-action" letter from the
Commission to the effect that the distribution of such securities without
registration will not result in a recommendation by the staff of the Commission
that action be taken with respect thereto, whereupon the holder of such
Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by such holder to the
Company. Each certificate evidencing the Restricted Securities transferred as
above provided shall bear the restrictive legend set forth in Section 3 above,
except that such certificate shall not bear such restrictive legend after the
date of the Company's initial public offering under the Securities Act if the
opinion of counsel or "no-action" letter referred to above expressly indicates
that such legend is not required in order to establish compliance with the
Securities Act or if such legend is no longer required pursuant to Rule 144(k).
5. Demand Registration.
-------------------
(a) Request for Registration. If the Company shall receive from
------------------------
Initiating Holders a written request that the Company effect any registration
with respect to the Registrable Securities, the Company will:
(i) promptly given written notice of the proposed registration
to all other Holders; and
(ii) as soon as practicable, use its diligent best efforts to
effect such registration after January 1, 2000 (including, without
limitation, the execution of an undertaking to file post effective
amendments, appropriate qualification under applicable blue sky or
other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act) as may be so requested
and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such
request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are
specified in a written request delivered to the Company within fifteen
(15) days after receipt of such written notice from the Company;
provided that the Company shall not be obligated to effect, or to take
any action to effect, any such registration pursuant to this Section
5:
(A) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process
in effecting such registration, qualification or compliance, unless
the Company is already subject to service in such jurisdiction and
except as may be required by the Securities Act;
(B) After the Company has effected two (2) such
registrations pursuant to this Section 5(a) and such registrations
have been declared or ordered effective, or
4
<PAGE>
withdrawn at the request of the majority of the Initiating Holders,
and the sales of such Registrable Securities have closed; or
(C) Within one hundred eighty (180) days of the effective
date of any other registration statement on Form S-1.
Subject to the foregoing clauses (A), (B) and (C), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable, after receipt of the request or
requests of the Initiating Holders; provided, however, that if the Company shall
furnish to such Holders a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors of the
Company, it would be seriously detrimental to the Company and its shareholders
for such registration statement to be filed on or before the time filing would
be required and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
(but not more than once during any twelve month period) for a period of not more
than ninety (90) days after receipt of the request of the Initiating Holders.
The registration statement filed pursuant to the request of the
Initiating Holders, may, subject to the provisions of Section 5(b) below,
include other securities of the Company which are held by officers or directors
of the Company or which are held by persons who, by virtue of agreements with
the Company, are entitled to include their securities in any such registration,
but the Company shall have no right to include any of its securities in any such
registration except as provided in Section 5(b) below.
(b) Underwriting. If the 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
Section 5, and the Company shall include such information in the written notice
referred to in Section 5(a)(i) above. The right of any Holder to registration
pursuant to Section 5 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 with respect to such participation and
inclusion) to the extent provided herein. A Holder may elect to include in such
underwriting all or a part of the Registrable Securities he holds.
If officers or directors of the Company shall request inclusion of
securities of the Company other than Registrable Securities in any registration
pursuant to Section 5, or if holders of securities of the Company who are
entitled by contract with the Company to have securities included in such a
registration (such officers, directors, and other shareholders being
collectively referred to as the "Other Shareholders") request such inclusion,
the Initiating Holders shall, on behalf of all Holders, offer to include the
securities of such Other Shareholders in the underwriting and may condition such
offer on their acceptance of the further applicable provisions of this
Agreement. The Company shall (together with all Holders and Other Shareholders
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form with
5
<PAGE>
the representative of the underwriter or underwriters (the "Underwriter")
selected for such underwriting by more than fifty percent (50%) of the
Initiating Holders and reasonably acceptable to the Company. Notwithstanding any
other provision of this Section 5, if the Underwriter determines that marketing
factors require a limitation on the number of shares to be underwritten, the
Underwriter may (subject to the allocation priority set forth below) limit the
number of Registrable Securities to be included in the registration and
underwriting to not less than fifty percent (50%) of the securities which
Holders have requested be included therein. The Company shall so advise all
holders of securities requesting registration, and the number of shares of
securities that are entitled to be included in the registration and underwriting
shall be allocated in the following priority: first, among all Holders of
Registrable Securities requesting inclusion (and pro rata among such holders on
the basis of all Registrable Securities then held by such holders); and second,
among all Other Shareholders in proportion, as nearly as practicable, to the
respective amounts of securities which they had requested to be included in such
registration at the time of filing the registration statement. If any Holder or
Other Shareholder disapproves of the terms of any such underwriting, such holder
may elect to withdraw therefrom by written notice to the Company and the
Underwriter. Any Registrable Securities excluded or withdrawn from such
underwriting shall be withdrawn from such registration. If the Underwriter has
not limited the number of Registrable Securities or other securities to be
underwritten, the Company may include its securities for its own account in such
registration if the underwriter so agrees and if the number of Registrable
Securities and other securities which would otherwise have been included in such
registration and underwriting will not thereby be limited.
6. Company Registration.
--------------------
(a) If the Company shall determine to register any of its securities
either for its own account or for the account of a security holder or holders
exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans or a registration
relating solely to a Commission Rule 145 transaction or a registration on any
registration form which does not permit secondary sales or does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of Registrable Securities, the Company
will:
(i) promptly give to each Holder written notice thereof (which,
to the extent then known, shall include a list of the jurisdictions in
which the Company intends to attempt to qualify such securities under
the applicable blue sky or other state securities laws); and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting
involved therein, all of the Registrable Securities specified in a
written request or requests made by any Holder within fifteen (15)
days after receipt of the written notice from the Company described in
clause (i) above, except as set forth in Section 6(b) below. Such
written request may specify all or a part of a Holder's Registrable
Securities.
6
<PAGE>
(b) Underwriting. If the registration of which the Company gives
------------
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 6(a)(i). In such event the right of any Holder to
registration pursuant to Section 6 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the Other Shareholders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the Underwriter selected for underwriting by the Company.
Notwithstanding any other provision of this Section 6, if the Underwriter
determines that marketing factors require a limitation on the number of shares
to be underwritten, and (a) if such registration is the first registered
offering of the Company's securities to the public, the Underwriter may (subject
to the allocation priority set forth below) exclude from such registration and
underwriting some or all of the Registrable Securities which would otherwise be
underwritten pursuant hereto, and (b) if such registration is other than the
first registered offering of the sale of the Company's securities to the public,
the Underwriter may (subject to the allocation priority set forth below) limit
the number of Registrable Securities to be included in the secondary portion of
the registration and underwriting to not less than fifty percent (50%) of the
securities which Holders have requested be included therein. The Company shall
so advise all holders of securities requesting registration, and the number of
shares of securities that are entitled to be included in the registration and
underwriting by persons other than the Company shall be allocated in the
following priority: first, to Holders of Registrable Securities (and pro rata
among such holders on the basis of all Registrable Securities then held by such
holders); and second, among all Other Shareholders in proportion, as nearly as
practicable, to the respective amounts of securities which they had requested to
be included in such registration at the time of filing the registration
statement. If any Holder or Other Shareholder disapproves of the terms of any
such underwriting, he may elect to withdraw therefrom by written notice to the
Company and the Underwriter. Any Registrable Securities or other securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration.
7. Expenses of Registration. All Registration Expenses incurred in
------------------------
connection with any registration, qualification or compliance pursuant to this
Agreement shall be borne by the Company, and all Selling Expenses shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of their shares so registered; provided, however, that the Company shall
not be required to pay any Registration Expenses if, as a result of the
withdrawal of a request for registration by Initiating Holders, the registration
statement does not become effective, unless such withdrawal is caused by a
material adverse change in the business or operations of the Company after such
request for registration, or unless the Initiating Holders agree to have such
registration considered a registration pursuant to Section 5(a)(ii)(B). If the
Company is not required to pay any Registration Expenses, then the Holders and
Other Shareholders requesting registration shall bear such Registration Expenses
pro rata on the basis of the number of their shares so included in the
registration request, and such registration shall not be considered a
registration for purposes of Section 5(a)(ii)(B).
7
<PAGE>
8. Registration on Form S-3. The Company shall use its best efforts to
------------------------
qualify for registration on Form S-3, and to that end, the Company shall comply
with the reporting requirements of the Exchange Act following the effective date
of the first registration of any securities of the Company for a registered
public offering. After the Company has qualified for the use of Form S-3,
Initiating Holders shall have the right to request four (4) registrations on
Form S-3 (such requests shall be in writing and shall state the number of shares
of Registrable Securities to be disposed of and the intended method of
disposition of such shares by each such holder), subject only to the following
limitations:
(a) The Company shall not be obligated to cause a registration on
Form S-3 to become effective prior to one hundred eighty (180) days following
the effective date of a Company-initiated registration (other than a
registration effected solely to qualify an employee benefit plan or to effect a
business combination pursuant to Rule 145), provided that notice of such
Company-initiated registration is given to Holders prior to receipt of a request
from a holder of Registrable Securities for registration on Form S-3, and
provided that the Company shall use its best efforts to achieve such
effectiveness promptly following such one hundred eighty (180) day period;
(b) The Company shall not be obligated to cause a registration on
Form S-3 to become effective prior to expiration of one hundred eighty (180)
days following the effective date of the most recent registration pursuant to a
request by a holder of Registrable Securities under this Agreement or pursuant
to a request by a holder of registration rights under any other agreement of the
Company granting Form S-3 demand registration rights; provided, however, that
the Company shall use its best efforts to achieve such effectiveness promptly
following such one hundred eighty (180) day period;
(c) The Company shall not be required to effect a registration
pursuant to this Section 8 more than once in any twelve (12) month period;
(d) The Company shall not be required to maintain and keep any such
registration on Form S-3 effective for a period exceeding one hundred eighty
(180) days from the effective date thereof. The Company shall give notice to
all Holders and all holders of registration rights under any other agreement of
the Company granting Form S-3 or similar demand registration rights of the
receipt of a request for registration pursuant to this Section 8 and shall
provide a reasonable opportunity for all such other holders to participate in
the registration. Subject to the foregoing, the Company will use its best
efforts to effect promptly the registration of all shares of Registrable
Securities on Form S-3 to the extent requested by the Holder or Holders thereof
for purposes of disposition. In the event the Underwriter, in the case of an
underwritten offering, determines that market factors require a limitation on
the number of shares to be underwritten, then shares shall be excluded from such
registration and underwriting pursuant to the method described in Section 6(b);
and
(e) The value of the aggregate shares of Registrable Securities to be
registered on Form S-3 for each such right of registration shall be at least
$500,000.
8
<PAGE>
9. Registration Procedures. In the case of each registration effected by
-----------------------
the Company pursuant to this Agreement, the Company will keep each Holder
advised in writing as to the initiation of such registration and as to the
completion thereof. At its expense, the Company will:
(a) Keep such registration effective for a period of ninety (90) days
or until the Holder or Holders have completed the distribution described in the
registration statement relating thereto, whichever first occurs; and
(b) Furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request; and
(c) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 5 or 8 hereof, the Company will
enter into any underwriting agreement reasonably necessary to effect the offer
and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions, and provided further that if the underwriter
so requests the underwriting agreement will contain customary indemnification
and contribution provisions, and provided further that the Underwriter is
reasonably acceptable to the Company.
10. Indemnification.
---------------
(a) The Company will indemnify each Holder, each of its officers,
directors and partners, and each person controlling such Holder, if Registrable
Securities held by such Holder are included in the securities with respect to
which registration, qualification or compliance has been effected pursuant to
this Agreement, and each underwriter, if any, and each person who controls any
underwriter, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
or any violation by the Company of the Securities Act including any rule or
regulation thereunder applicable to the Company relating to action or inaction
required of the Company in connection with any such registration, qualification
or compliance, and will reimburse each such Holder, each of its officers,
directors and partners, and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter, for any legal and
any other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement (or alleged untrue statement) or omission (or alleged omission) based
upon written information furnished to the Company by such Holder or underwriter
and stated to be specifically for use therein.
9
<PAGE>
(b) Each Holder will, if Registrable Securities or other securities
held by such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify the
Company, each of its directors, officers and agents and each underwriter, if
any, of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of the
Securities Act and the rules and regulations thereunder, each other such Holder
and each of their officers, directors and partners, and each person controlling
such Holder, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, and will reimburse the Company and such
Holders, directors, officers, agents, partners, persons, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating of defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by such Holder and stated to be specifically for use therein;
provided, however, that the obligations of such Holders hereunder shall be
limited to an amount equal to the net proceeds to each such Holder of securities
sold as contemplated herein.
(c) Each party entitled to indemnification under this Section 10 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement. An indemnified
party shall have the right to retain its own 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. No
Indemnifying Party in the defense of any such claim or litigation shall, except
with the consent of each Indemnified Party, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with defense of such claim and
litigation resulting therefrom.
10
<PAGE>
(d) If the indemnification provided for in this Section 10 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any losses, claims, damages or liabilities referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability 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 any untrue or alleged untrue statement of a material fact or
the omission to state a material fact that resulted in such loss, claim, damage
or liability, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by a court of law 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;
provided, that in no event shall any contribution by a Holder thereunder exceed
the proceeds from the offering received by such Holder.
(e) The obligations of the Company and Holders under this Section 10
shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this agreement.
11. Information by Holder. Each Holder holding securities included in any
---------------------
registration shall furnish to the Company such information regarding such Holder
as the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Agreement.
12. Limitations on Registration of Issues of Securities. From and after
---------------------------------------------------
the date of this Agreement, the Company shall not enter into any agreement with
any holder or prospective holder of any securities of the Company giving such
holder or prospective holder the right to require the Company to initiate any
registration of any securities of the Company, provided that this Section 12
shall not limit the right of the Company to enter any agreements with any holder
or prospective holder of any securities of the Company giving such holder or
prospective holder the right to require the Company, upon any registration of
any of its securities, to include, among the securities which the Company is
then registering, securities owned by such holder. Any right given by the
Company to any holder or prospective holder of the Company's securities in
connection with the registration of securities shall be conditioned such that it
shall be consistent with the provisions of this Agreement and with the rights of
the Holders provided in this Agreement.
13. Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission which may permit the sale of the
Restricted Securities to the public without registration, the Company agrees to:
(a) Make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act, at all times from
and after ninety (90) days following
11
<PAGE>
the effective date of the first registration under the Securities Act filed by
the Company for an offering of its securities to the general public;
(b) Use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act at any time after it has become subject to
such reporting requirements;
(c) So long as a Shareholder owns any Restricted Securities, furnish
to the Shareholder forthwith upon request a written statement by the Company as
to its compliance with the reporting requirements of Rule 144 (at any time from
and after ninety (90) days following the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents so filed as a Shareholder may reasonably request in availing itself of
any rule or regulation of the Commission allowing a Shareholder to sell any such
securities without registration.
14. No-Action Letter or Opinion of Counsel in Lieu of Registration.
--------------------------------------------------------------
Notwithstanding anything in this Agreement to the contrary, if at any time after
the date of the Company's initial public offering of its securities under the
Securities Act the Company shall have obtained from the Commission a "no-action"
letter in which the Commission has indicated that it will take no action if,
without registration under the Securities Act, any Holder disposes of
Registrable Securities covered by any request for registration made under this
Agreement in the manner in which such Holder proposes to dispose of the
Registrable Securities included in such request, or if in the opinion of counsel
for the Company concurred in by counsel for such Holder no registration under
the Securities Act is required in connection with such disposition, the
Registrable Securities included in such request shall not be eligible for
registration under this Agreement; provided, however, with respect to any Holder
who may deemed to be an "affiliate," as that term is defined under Rule 144, if,
notwithstanding the opinion of such counsel, the Holder is unable to dispose of
all of the Registrable Securities included in his request in the manner in which
such Holder so proposes without registration, the Registrable Securities
included in such request shall be eligible for registration under this
Agreement.
15. Transfer or Assignment of Registration Rights. The rights to cause
---------------------------------------------
the Company to register Shareholder's securities granted to Shareholder by the
Company under Sections 5, 6 and 8 hereof may be transferred or assigned by
Shareholder to a transferee or assignee of at least 100,000 shares of the
Restricted Securities; provided, however, that a Shareholder may transfer or
assign such rights to a partner or shareholder of Shareholder without
restriction as to minimum shareholding. The Company shall be given written
notice by Shareholder at the time of said transfer or assignment, stating the
name and address of said transferee or assignee and identifying the securities
with respect to which such registration rights are being transferred or
assigned, and provided further that the transferee or assignee of such rights is
not deemed by the Board of Directors of the Company, in its
12
<PAGE>
reasonable judgment, to be a competitor of the Company; and provided further
that the transferee or assignee of such rights assumes the obligations of a
Shareholder under this Agreement.
16. "Market Stand-off" Agreement. Each Shareholder agrees, if requested
----------------------------
by the Company and an underwriter of Common Stock (or other securities) of the
Company, not to sell or otherwise transfer or dispose of any Common Stock (or
other securities) of the Company held by Shareholder during a period of time
determined by the Company and its underwriters (not to exceed 180 days)
following the effective date of the Company's initial public offering of its
capital stock, provided that all officers, directors and employees of the
Company holding stock or stock options of at least one (1%) percent of the
Company's outstanding stock prior to the initial public offering of the Company
enter into similar agreements; provided, further, that with respect to the
Series C Holders, the prohibition against the sale, transfer or other
dispostions of any Common Stock (or other securities) of the Company held by
them pursuant to this Section 16 shall not prohibit (i) the sale of any shares
of Common Stock purchased by such Series C Holder pursuant to a directed share
program or otherwise in the Company's initial public offering, or (ii) the sale,
in the open market, of any shares of Common Stock by such Series C Holder
provided that such shares are purchased in the open market after the completion
of the Company's initial public offering.
Such agreement shall be in writing in a form satisfactory to the
Company and such underwriter. The Company may impose stop-transfer instructions
with respect to the Shares (or securities) subject to the foregoing restriction
until the end of said period.
17. Governing Law. This Agreement and the legal relations between the
-------------
parties arising hereunder shall be governed by and interpreted in accordance
with the laws of the State of California. The parties hereto agree to submit to
the jurisdiction of the federal and state courts of the State of California with
respect to the breach or interpretation of this Agreement or the enforcement of
any and all rights, duties, liabilities, obligations, powers, and other
relations between the parties arising under this Agreement.
18. Entire Agreement. This Agreement constitutes the full and entire
----------------
understanding and agreement between the parties regarding rights to
registration. Except as otherwise expressly provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon, the successors,
assigns, heirs, executors and administrators of the parties hereto.
19. Notices, Etc. All notices and other communications required or
-------------
permitted hereunder shall be in writing and shall be mailed by first-class mail,
postage prepaid, or otherwise delivered by hand or by messenger, addressed (a)
if to a Shareholder, at the address or addresses set forth on Exhibit A,
---------
Exhibit B or Exhibit C attached hereto, or at such other address or addresses as
- --------- ---------
the Shareholder shall have furnished to the other parties hereto in writing, or
(b) if to any other holder of any securities, at such address as such holder
shall have furnished the other parties hereto in writing, or, until any such
holder so furnishes an address to the Company, then to and at the address of the
last holder of such Shares who has so furnished an address to the Company, or
(c) if to the Company,
13
<PAGE>
at the address of its principal offices set forth on the signature page of this
Agreement, or at such other address as the Company shall have furnished to the
other parties hereto in writing.
20. Other Registration Rights. This Agreement supersedes any previous
-------------------------
agreement between the Company and any party with respect to the grant by the
Company of registration rights, including but not limited to Registration Rights
Agreement dated February 14, 1997.
21. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
22. Amendments. Any provision of this Agreement may be amended, waived or
----------
modified upon the written consent of the Company, and the Shareholders (or their
assignees to whom Shareholders have expressly assigned their rights in
compliance with Section 15 hereof) who then hold more than fifty percent (50%)
of the Registrable Securities then held by persons entitled to registration
rights hereunder, provided further, any such amendment, waiver or modification
applies by its terms to each applicable Shareholder and each such assignee and,
provided further, that a Shareholder or such assignee hereunder may waive any of
such Holder's rights or the Company's obligations hereunder without obtaining
the consent of any other Shareholder or assignee.
(Remainder of this page left intentionally blank)
14
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Restated Registration
Rights Agreement as of the date first above written.
"INVENTA CORPORATION"
By:______________________________
Ashok Santhanam, President
"SHAREHOLDERS"
Battery Ventures L.P.
By:______________________________
Name:
Title:
BOSTON MILLENNIA PARTNERS
LIMITED PARTNERSHIP
By: Glen Partners Limited Partnership,
its General Partner
By:______________________________
General Partner
_________________________________
Stephen T. Barry
_________________________________
A. Dana Callow, Jr.
_________________________________
Christian Dubiel
15
<PAGE>
_________________________________
Martin J. Hernon
_________________________________
Robert W. Jevon
_________________________________
Frank P. Pinto
_________________________________
Suresh Shanmugham
_________________________________
Bruce R. Tiedemann
_________________________________
Harry A. Caunter
_________________________________
Electra D. DePeyster
_________________________________
Robert Ducommun
_________________________________
Maya S. Hattangady
Palmer G. and Charles E. Ducommun
Charitable Annuity Trust, u/d/t
_________________________________
Robert Ducommun, Trustee
16
<PAGE>
_________________________________
Andrew Potter
_________________________________
Santhanam C. Shekar
TCV II (Q), L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By:______________________________
Name: Robert C. Bensky
Title: Chief Financial Officer
TCV II Strategic Partners, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By:______________________________
Name: Robert C. Bensky
Title: Chief Financial Officer
TCV II, V.O.F.
a Netherlands Antilles General Partnership
By: Technology Crossover Management II, L.L.C.,
Its: Investment General Partner
By:______________________________
Name: Robert C. Bensky
Title: Chief Financial Officer
Technology Crossover Ventures II, C.V.
a Netherlands Antilles Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: Investment General Partner
By:_________________________________
Name: Robert C. Bensky
Title: Chief Financial Officer
17
<PAGE>
Technology Crossover Ventures II, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By:_________________________________
Name: Robert C. Bensky
Title: Chief Financial Officer
_________________________________
Ramesh Vasudevan
_________________________________
Gomati Venkateswaran
_________________________________
Usha Vijayarajan
18
<PAGE>
EXHIBIT A
---------
SCHEDULE OF HOLDERS
OF SERIES A PREFERRED STOCK
Name and Address
- --------------------------------------------------------------------------------
Harry A. Caunter Ramesh Vasudevan
675 North Court 1369 Camwell Drive
Suites 225 & 230 West Vancouver, BC, V7S2M6
Palatine, IL 60067 Canada
Electra D. De Peyster Gomati Venkateswaran
2000 Redwood Hill Court 26 South Baog Road
Santa Rosa, CA 95404 A2 Anand Bhavan
Madras, 600017
Robert Ducommun INDIA
1155 Park Ave.
Apt. 1 SW Usha Vijayarajan
New York, NY 10128 2/7 12th Cross
Rajmahal Extension
Maya S. Hattangady Bangalore, 560080
414 E. Lansing Way INDIA
Fresno, CA 93704
Palmer G. and Charles E. Ducommun
Charitable Annuity Trust, u/d/t
Robert Ducommun, trustee
1155 Park Ave.
Apt. 1 SW
New York, N.Y. 10128
Andrew Potter
401 Vine Street
Menlo Park, CA 94025
Santhanam C. Shekar
349 G Street
San Rafael, CA 94901
<PAGE>
EXHIBIT B
---------
SCHEDULE OF HOLDERS
OF SERIES B PREFERRED STOCK
Name and Address
- --------------------------------------------------------------------------------
Battery Ventures L.P.
20 William Street
Wellesley, MA 01282
Harry A. Caunter
675 North Court
Suites 225 & 230
Palatine, IL 60067
Robert Ducommun
1155 Park Ave.
Apt. 1 SW
New York, N.Y. 10128
Palmer G. and Charles E. Ducommun
Charitable Annuity Trust, u/d/t
Robert Ducommun, trustee
1155 Park Ave.
Apt. 1 SW
New York, N.Y. 10128
Andrew Potter
401 Vine Street
Menlo Park, CA 94025
Ramesh Vasudevan
1369 Camwell Drive
West Vancouver, BC, V7S2M6
Canada
<PAGE>
EXHIBIT C
---------
SCHEDULE OF HOLDERS
OF SERIES C PREFERRED STOCK
Name and Address
- --------------------------------------------------------------------------------
Battery Ventures L.P. Suresh Shanmugham
20 William Street c/o Boston Millennia Partners
Wellesley, MA 01282 30 Rose Wharf, Ste. 330
Boston, MA 02110
Boston Millennia Partners
30 Rose Wharf, Ste. 330 Bruce R. Tiedemann
Boston, MA 02110 c/o Boston Millennia Partners
30 Rose Wharf, Ste. 330
Stephen T. Barry Boston, MA 02110
c/o Boston Millennia Partners
30 Rose Wharf, Ste. 330 Harry A. Caunter
Boston, MA 02110 675 North Court
Suites 225 & 230
A. Dana Callow, Jr. Palatine, IL 60067
c/o Boston Millennia Partners
30 Rose Wharf, Ste. 330 Maya S. Hattangady
Boston, MA 02110 414 E. Lansing Way
Fresno, CA 93704
Christian Dubiel
c/o Boston Millennia Partners Santhanam C. Shekar
30 Rose Wharf, Ste. 330 349 G Street
Boston, MA 02110 San Rafael, CA 94901
Martin J. Hernon TCV II (Q), L.P.
c/o Boston Millennia Partners c/o Technology Crossover Ventures
30 Rose Wharf, Ste. 330 56 Main Street, Suite 210
Boston, MA 02110 Millburn, NJ 07041
Attention: Robert C. Bensky
Robert W. Jevon
c/o Boston Millennia Partners with a copy to:
30 Rose Wharf, Ste. 330 c/o Technology Crossover Ventures
Boston, MA 02110 575 High Street, Suite 400
Palo Alto, CA 94301
Frank P. Pinto Attention: Jay C. Hoag
c/o Boston Millennia Partners
30 Rose Wharf, Ste. 330
Boston, MA 02110
<PAGE>
TCV II Strategic Partners, L.P. TCV II, V.O.F.
c/o Technology Crossover Ventures c/o Technology Crossover Ventures
56 Main Street, Suite 210 56 Main Street, Suite 210
Millburn, NJ 07041 Millburn, NJ 07041
Attention: Robert C. Bensky Attention: Robert C. Bensky
with a copy to: with a copy to:
c/o Technology Crossover Ventures c/o Technology Crossover Ventures
575 High Street, Suite 400 575 High Street, Suite 400
Palo Alto, CA 94301 Palo Alto, CA 94301
Attention: Jay C. Hoag Attention: Jay C. Hoag
Technology Crossover Ventures II, C.V. Technology Crossover Ventures II, L.P.
c/o Technology Crossover Ventures c/o Technology Crossover Ventures
56 Main Street, Suite 210 56 Main Street, Suite 210
Millburn, NJ 07041 Millburn, NJ 07041
Attention: Robert C. Bensky Attention: Robert C. Bensky
with a copy to: with a copy to:
c/o Technology Crossover Ventures c/o Technology Crossover Ventures
575 High Street, Suite 400 575 High Street, Suite 400
Palo Alto, CA 94301 Palo Alto, CA 94301
Attention: Jay C. Hoag Attention: Jay C. Hoag
<PAGE>
[LETTERHEAD OF WILSON SONSINI GOODRICH & ROSATI]
May 11, 1998
To: Each Investor listed on
the Schedule of Investors
to the Inventa Corporation
Series C Convertible Preferred
Stock Purchase Agreement
Ladies and Gentlemen:
Reference is made to the Series C Convertible Preferred Stock Purchase
Agreement dated as of May 11, 1998 (the "Agreement"), complete with all listed
exhibits thereto, by and among Inventa Corporation, a California corporation,
(the "Company") and each of you, providing for the issuance by the Company to
the Investors of shares of Series C Preferred Stock of the Company (the
"Shares"). This opinion is rendered to you in compliance with Section 5.8 of the
Agreement, and all terms used herein have the meanings defined for them in the
Agreement unless otherwise defined herein.
We have acted as counsel for the Company in connection with the negotiation
of the Agreement and the issuance of the Shares. As such counsel, we have made
such legal and factual examinations and inquiries as we have deemed advisable or
necessary for the purpose of rendering this opinion. In addition, we have
examined originals or copies of such corporate records of the Company,
certificates of public officials and such other documents which we consider
necessary or advisable for the purpose of rendering this opinion. In such
examination we have assumed the genuineness of all signatures on original
documents, the authenticity and completeness of all documents submitted to us as
originals, the conformity to original documents of all copies submitted to us
and the due execution and delivery of all documents (except as to due execution
and delivery by the Company) where due execution and delivery are a prerequisite
to the effectiveness thereof.
As used in this opinion, the expression "to our knowledge," "known to us"
or similar language with reference to matters of fact means that, after an
examination of documents made available to us by the Company, and after
inquiries of officers of the Company, but without any further independent
factual investigation, we find no reason to believe that the opinions expressed
herein are factually incorrect. Further, the expression "to our knowledge,"
"known to us" or similar language with reference to matters of fact refers to
the current actual knowledge of the attorneys of this firm who have worked on
matters for the Company. Except to the extent expressly set forth herein or as
we otherwise believe to be necessary to our opinion, we have not undertaken any
independent investigation to determine the existence or absence of any fact, and
no inference as to our knowledge
<PAGE>
of the existence or absence of any fact should be drawn from our representation
of the Company or the rendering of the opinion set forth below.
For purposes of this opinion, we are assuming that you have all requisite
power and authority, and have taken any and all necessary corporate or
partnership action, to execute and deliver the Agreement, and we are assuming
that the representations and warranties made by the Investors in the Agreement
and pursuant thereto are true and correct. We are also assuming that each
Investor has purchased the Shares for value, in good faith and without notice of
any adverse claims within the meaning of the California Uniform Commercial Code.
The opinions hereinafter expressed are subject to the following
qualifications:
(a) We express no opinion as to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium or other similar federal or state laws
affecting the rights of creditors;
(b) We express no opinion as to the effect of rules of law governing
specific performance, injunctive relief or other equitable remedies (regardless
of whether any such remedy is considered in a proceeding at law or in equity);
(c) We express no opinion as to compliance with the anti-fraud
provisions of applicable securities laws;
(d) We express no opinion as to the enforceability of the
indemnification provisions of the Registration Rights Agreement, to the extent
the provisions thereof may be subject to limitations of public policy and the
effect of applicable statutes and judicial decisions; and
(e) We are members of the Bar of the State of California and we
express no opinion as to any matter relating to the laws of any jurisdiction
other than the federal laws of the United States of America and the laws of the
State of California. To the extent this opinion addresses applicable securities
laws of states other than the State of California, we have not retained nor
relied on the opinion of counsel admitted to the bar of such states, but rather
have relied on compilations of the securities laws of such states contained in
reporting services presently available to us.
Based upon and subject to the foregoing, and except as set forth in the
Schedule of Exceptions to the Agreement, we are of the opinion that:
1. The Company is a corporation duly organized and validly existing
under, and by virtue of, the laws of the State of California and is in good
standing under such laws. The Company has requisite corporate power to own and
operate its properties and assets, and to carry on its business as presently
conducted. The Company is duly qualified to do business, and in good standing
in all foreign jurisdictions where its ownership or leasing of properties or the
conduct of its business requires such qualification, except where the failure to
be so qualified would not have a material adverse effect on the Company's
business as now conducted.
2
<PAGE>
2. The Company has all requisite legal and corporate power to execute and
deliver the Agreement, the Shareholder Agreement and the Registration Rights
Agreement, to sell and issue the Shares under the Agreement, to issue the Common
Stock issuable upon conversion of the Shares and to carry out and perform its
obligations under the terms of the Agreement, the Shareholders Agreement, and
the Registration Rights Agreement.
3. The authorized capital of the Company consists of (i) 8,119,511 shares
of Preferred Stock, 1,000,000 shares of which are designated Series A Preferred
Stock and of which 800,000 are issued and outstanding, and 2,560,000 shares of
which are designated Series B Preferred and of which 2,560,000 are issued and
outstanding, and 4,059,511 shares of which are designated Series C Preferred
Stock and of which none are issued and outstanding, and (ii) 25,000,000 shares
of Common Stock, of which 4,642,344 shares are issued and outstanding. All
issued and outstanding shares of the Company's capital stock have been duly
authorized and validly issued and are fully paid and nonassessable. The Shares,
when issued pursuant to the terms of the Agreement (including Common Stock
issued upon conversion of the Shares), will be duly authorized, validly issued,
fully paid and nonassessable. Except as set forth in the Agreement, the
Shareholders Agreement, and the Registration Rights Agreement and all the
exhibits thereto, to out knowledge, there are no options, warrants or other
rights (including conversion or preemptive rights) or agreements outstanding to
purchase any of the Company's authorized and unissued capital stock.
4. All corporate action on the part of the Company, its directors and
shareholders necessary for the authorization, execution, delivery and
performance of the Agreement, the Shareholders Agreement and the Registration
Rights Agreement, the authorization, sale, issuance and delivery of the Shares
and the performance of the Company's obligations under the Agreement, the
Shareholders Agreement, and the Registration Rights Agreement has been taken.
The Agreement, the Shareholders Agreement, and the Registration Rights Agreement
have been duly and validly executed and delivered by the Company and constitute
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms. The Shares will have the rights, preferences and
privileges described in the Restated Articles. To our knowledge, the Shares and
the Common Stock issuable on conversion of the Shares will be free of any liens,
encumbrances or preemptive rights contained in the Company's Restated Articles
or Bylaws.
5. The execution, delivery and performance of and compliance with the
terms of the Agreement, and the issuance of the Shares do not violate any
provision of the Restated Articles or Bylaws, or, to our knowledge, any
provisions of any applicable federal or state law, rule or regulation. To our
knowledge, the execution, delivery and performance of and compliance with the
Agreement, the Shareholders Agreement, and the Registration Rights Agreement and
the issuance of the Shares do not violate or constitute a default under, any
material contract, agreement, instrument, judgment or decree binding upon the
Company.
6. To our knowledge, there are no actions, suits, proceedings or
investigations pending against the Company or its properties before any court or
governmental agency (nor, to our knowledge, has the Company received any written
threat thereof), which, either in any case or in the
3
<PAGE>
aggregate, are likely to result in any material adverse change in the business
or financial condition of the Company, or in any material impairment of the
right or ability of the Company to carry on its business as now conducted, or
which questions the validity of the Agreement, the Shareholders Agreement or the
Registration Rights Agreement or any action taken or to be taken by the Company
in connection therewith.
7. No consent, approval or authorization of or designation, declaration
or filing with any governmental authority on the part of the Company is required
in connection with the valid execution and delivery of the Agreement, the
Shareholders Agreement, and the Registration Rights Agreement or other offer,
sale or issuance of the Shares or the consummation of any other transaction
contemplated thereby, except (a) filing of the Restated Articles in the Office
of the Secretary of State of the State of California, and (b) qualification (or
taking such action as may be necessary to secure an exemption from
qualification, if available) under the California Corporate Securities Law and
other applicable blue sky laws (but excluding jurisdictions outside of the
United States) of the offer and sale of the Shares (and the Common Stock
issuable upon conversion thereof) and the modification of rights of shareholders
contemplated by the Agreement. The filing referred to in clause (a) above has
been accomplished and is effective, and to our knowledge there are no
proceedings or written threat thereof which question the validity of such
filing. Our opinion herein is otherwise subject to the timely and proper
completion of all filings and other actions contemplated by clause (b) above
where such filings and actions are to be undertaken on or after the date hereof.
8. Subject to the accuracy of each Investor's representations in Section
3 of the Agreement we are of the opinion that the offer, sale and issuance of
the Shares in conformity with the terms of the Agreement constitute transactions
exempt from the registration requirements of Section 5 of the Securities Act of
1933, as amended.
This opinion is furnished to the Investors solely for their benefit in
connection with the purchase of the Shares, and may not be relied upon by any
other person or for any other purpose without our prior written consent.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
A Professional Corporation
4
<PAGE>
MANAGEMENT RIGHTS AGREEMENT
This MANAGEMENT RIGHTS AGREEMENT ("Agreement") is entered into as of May
11, 1998 by and between Inventa Corporation, a California corporation (the
"Company") and TCV II (Q), L.P., a Delaware limited partnership ("Fund").
RECITALS
A. Fund's organizational documents require that Fund have and maintain
the status of a "venture capital operating company" as defined in the Department
of Labor Regulations, Section 25101.3-101(d) (the "Regulations").
B. The Regulations require that a venture capital operating company
must have direct contractual rights to participate substantially in or
substantially influence the conduct of the management of its portfolio
companies.
C. In order to induce Fund to invest in the Company, the Company has
agreed to provide such rights to Fund.
NOW THEREFORE, the parties hereto agree that upon Fund's purchase of shares
of Series C Preferred Stock of the Company, Fund will be entitled to the
following contractual management rights, in addition to rights to non-public
financial information, inspection rights, and other rights specifically provided
to all investors in connection with the current financing:
(1) Fund shall be entitled to consult with and advise management of the
Company on significant business issues, including management's proposed annual
and quarterly operating plans, and management will meet with Fund within thirty
days after the end of each fiscal quarter at the Company's facilities at
mutually agreeable times for such consultation and advice and to review progress
in achieving said plans;
(2) Fund may examine the books and records of the Company and inspect
its facilities and may request information at reasonable times and intervals
concerning the general status of the Company's financial condition and
operations, provided that access to highly confidential proprietary information
and facilities need not be provided except to the extent provided to all of the
Company's investors under the terms of the current financing;
(3) If Fund is not represented on the Company's Board of Directors by
an affiliate of the Fund, the Company shall invite a representative of Fund to
attend all meetings of its Board of Directors in a nonvoting observer capacity
(provided that such representative may be excluded from such portion of the
meetings of the Board of Directors as (i) is an executive session of the Board
of Directors limited solely to Board members, (ii) necessary to protect the
attorney-client privilege or (iii) would result in a conflict of interest with
Fund) and, in this respect, shall give such representative timely copies of all
notices, minutes, consents, and other material that it provides to its
directors. Such representative may participate in discussions of matters brought
to the Board.
Fund agrees, and will cause any representative of Fund to agree, to hold in
confidence and trust and not use or disclose any confidential information
provided to or learned by it in connection with its rights under this Agreement.
<PAGE>
The rights described herein shall terminate and be of no further force or
effect upon the consummation of the sale of the Company's securities pursuant to
a registration statement filed by the Company under the Securities Act of 1933,
as amended, in connection with the firm commitment underwritten offering of its
securities to the public. The confidentiality provisions hereof will survive any
such termination.
IN WITNESS WHEREOF the parties hereto have hereby executed this Agreement
as of the date first above written.
Inventa Corporation
a California Corporation
By: ________________________________
Ashok K. Santhanam, President
TCV II (Q), L.P.
a Delaware Limited Partnership
By: Technology Crossover Management
Its: General Partner
By: ________________________________
Name : Robert C. Bensky
Title: Chief Financial Officer
<PAGE>
MANAGEMENT RIGHTS AGREEMENT
This MANAGEMENT RIGHTS AGREEMENT ("Agreement") is entered into as of
May 11, 1998 by and between Inventa Corporation, a California corporation (the
"Company") and TCV II (Q), L.P., a Delaware limited partnership ("Fund").
RECITALS
A. Fund's organizational documents require that Fund have and maintain
the status of a "venture capital operating company" as defined in the Department
of Labor Regulations, Section 25101.3-101(d) (the "Regulations").
B. The Regulations require that a venture capital operating company
must have direct contractual rights to participate substantially in or
substantially influence the conduct of the management of its portfolio
companies.
C. In order to induce Fund to invest in the Company, the Company has
agreed to provide such rights to Fund.
NOW THEREFORE, the parties hereto agree that upon Fund's purchase of
shares of Series C Preferred Stock of the Company, Fund will be entitled to the
following contractual management rights, in addition to rights to non-public
financial information, inspection rights, and other rights specifically provided
to all investors in connection with the current financing:
(1) Fund shall be entitled to consult with and advise management of
the Company on significant business issues, including management's proposed
annual and quarterly operating plans, and management will meet with Fund within
thirty days after the end of each fiscal quarter at the Company's facilities at
mutually agreeable times for such consultation and advice and to review progress
in achieving said plans;
(2) Fund may examine the books and records of the Company and inspect
its facilities and may request information at reasonable times and intervals
concerning the general status of the Company's financial condition and
operations, provided that access to highly confidential proprietary information
and facilities need not be provided except to the extent provided to all of the
Company's investors under the terms of the current financing;
(3) If Fund is not represented on the Company's Board of Directors by
an affiliate of the Fund, the Company shall invite a representative of Fund to
attend all meetings of its Board of Directors in a nonvoting observer capacity
(provided that such representative may be excluded from such portion of the
meetings of the Board of Directors as (i) is an executive session of the Board
of Directors limited solely to Board members, (ii) necessary to protect the
attorney-client privilege or (iii) would result in a conflict of interest with
Fund) and, in this respect, shall give such representative timely copies of all
notices, minutes, consents, and other material that it provides to its
directors. Such representative may participate in discussions of matters brought
to the Board.
Fund agrees, and will cause any representative of Fund to agree, to
hold in confidence and trust and not use or disclose any confidential
information provided to or learned by it in connection with its rights under
this Agreement.
<PAGE>
The rights described herein shall terminate and be of no further force
or effect upon the consummation of the sale of the Company's securities pursuant
to a registration statement filed by the Company under the Securities Act of
1933, as amended, in connection with the firm commitment underwritten offering
of its securities to the public. The confidentiality provisions hereof will
survive any such termination.
IN WITNESS WHEREOF the parties hereto have hereby executed this
Agreement as of the date first above written.
Inventa Corporation
a California Corporation
By: ________________________________
Ashok K. Santhanam, President
TCV II Strategic Partners, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management
II, L.L.C.,
Its: General Partner
By: ________________________________
Name : Robert C. Bensky
Title: Chief Financial Officer
<PAGE>
MANAGEMENT RIGHTS AGREEMENT
This MANAGEMENT RIGHTS AGREEMENT ("Agreement") is entered into as of
May 11, 1998 by and between Inventa Corporation, a California corporation (the
"Company") and Technology Crossover Ventures II, L.P., a Delaware limited
partnership ("Fund").
RECITALS
A. Fund's organizational documents require that Fund have and maintain
the status of a "venture capital operating company" as defined in the Department
of Labor Regulations, Section 25101.3-101(d) (the "Regulations").
B. The Regulations require that a venture capital operating company
must have direct contractual rights to participate substantially in or
substantially influence the conduct of the management of its portfolio
companies.
C. In order to induce Fund to invest in the Company, the Company has
agreed to provide such rights to Fund.
NOW THEREFORE, the parties hereto agree that upon Fund's purchase of
shares of Series C Preferred Stock of the Company, Fund will be entitled to the
following contractual management rights, in addition to rights to non-public
financial information, inspection rights, and other rights specifically provided
to all investors in connection with the current financing:
(1) Fund shall be entitled to consult with and advise management of the
Company on significant business issues, including management's proposed annual
and quarterly operating plans, and management will meet with Fund within thirty
days after the end of each fiscal quarter at the Company's facilities at
mutually agreeable times for such consultation and advice and to review progress
in achieving said plans;
(2) Fund may examine the books and records of the Company and inspect
its facilities and may request information at reasonable times and intervals
concerning the general status of the Company's financial condition and
operations, provided that access to highly confidential proprietary information
and facilities need not be provided except to the extent provided to all of the
Company's investors under the terms of the current financing;
(3) If Fund is not represented on the Company's Board of Directors by
an affiliate of the Fund, the Company shall invite a representative of Fund to
attend all meetings of its Board of Directors in a nonvoting observer capacity
(provided that such representative may be excluded from such portion of the
meetings of the Board of Directors as (i) is an executive session of the Board
of Directors limited solely to Board members, (ii) necessary to protect the
attorney-client privilege or (iii) would result in a conflict of interest with
Fund) and, in this respect, shall give such representative timely copies of all
notices, minutes, consents, and other material that it provides to its
directors. Such representative may participate in discussions of matters brought
to the Board.
Fund agrees, and will cause any representative of Fund to agree, to
hold in confidence and trust and not use or disclose any confidential
information provided to or learned by it in connection with its rights under
this Agreement.
<PAGE>
The rights described herein shall terminate and be of no further force
or effect upon the consummation of the sale of the Company's securities pursuant
to a registration statement filed by the Company under the Securities Act of
1933, as amended, in connection with the firm commitment underwritten offering
of its securities to the public. The confidentiality provisions hereof will
survive any such termination.
IN WITNESS WHEREOF the parties hereto have hereby executed this
Agreement as of the date first above written.
Inventa Corporation
a California Corporation
By:_________________________________
Ashok K. Santhanam, President
Technology Crossover Ventures II, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II,
L.L.C.,
Its: General Partner
By: __________________________________
Name : Robert C. Bensky
Title: Chief Financial Officer
<PAGE>
EXHIBIT 10.4
INVENTA CORPORATION
______________________________
SERIES D CONVERTIBLE PREFERRED
STOCK PURCHASE AGREEMENT
______________________________
January 19, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Purchase and Sale of Series D Preferred Stock........................... 1
1.1 Sale and Issuance of Series D Preferred Stock...................... 1
1.2 Closing Date; Delivery............................................. 1
2. Representations and Warranties of the Company........................... 1
2.1 Organization, Good Standing and Qualification..................... 1
2.2 Capitalization.................................................... 2
2.3 Subsidiaries...................................................... 2
2.4 Authorization..................................................... 2
2.5 Valid Issuance of Securities...................................... 2
2.6 Governmental Consents............................................. 3
2.7 Litigation........................................................ 3
2.8 Patent and Trademarks............................................. 3
2.9 Compliance with Other Instruments................................. 4
2.10 Disclosure........................................................ 4
2.11 Registration Rights............................................... 4
2.12 Title to Property and Assets...................................... 4
2.13 Financial Statements.............................................. 5
2.14 Changes........................................................... 5
2.15 Minute Books...................................................... 6
2.16 Labor Agreements and Actions...................................... 6
2.17 Employee Plans.................................................... 6
2.18 Employees......................................................... 7
2.19 Tax Returns and Payments.......................................... 7
2.20 Agreements; Action................................................ 7
2.21 Obligations to Related Parties.................................... 8
2.22 Real Property Holding Corporation................................. 9
2.23 Insurance......................................................... 9
2.24 Investment Company Act............................................ 9
2.25 Qualified Small Business.......................................... 9
2.26 Offering of Shares................................................ 9
3. Representations and Warranties of the Investors......................... 9
3.1 Authorization...................................................... 9
3.2 Purchase Entirely for Own Account.................................. 9
3.3 Disclosure of Information.......................................... 10
3.4 Economic Risk...................................................... 10
3.5 Restricted Securities.............................................. 10
3.6 Further Limitations on Disposition................................. 10
</TABLE>
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<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
3.7 Legends............................................................ 11
4. California Commissioner of Corporations................................. 11
4.1 Corporate Securities Law........................................... 11
5. Conditions of Investor's Obligations at Closing......................... 11
5.1 Representations and Warranties..................................... 12
5.2 Performance........................................................ 12
5.3 Articles of Incorporation.......................................... 12
5.4 Compliance Certificate............................................. 12
5.5 Shareholders Agreement............................................. 12
5.6 Registration Rights Agreement...................................... 12
5.7 Opinion of Company's Counsel....................................... 12
6. Conditions of the Company's Obligations at Closing...................... 12
6.1 Representations and Warranties..................................... 12
6.2 Payment of Purchase Price.......................................... 12
6.3 Legal Matters...................................................... 12
7. Covenants of the Company................................................ 12
7.1 Delivery of Financial Statements................................... 12
7.2 Inspection Rights.................................................. 13
7.3 Reservation of Common Stock........................................ 13
7.4 Proprietary Information Agreement.................................. 13
7.5 Termination of Information Covenant................................ 13
7.6 Key Man Life Insurance............................................. 14
7.7 Qualified Small Business Stock..................................... 14
7.8 Legal Expenses..................................................... 14
8. Miscellaneous........................................................... 14
8.1 Transfer; Successors and Assigns.................................. 14
8.2 Governing Law..................................................... 14
8.3 Counterparts...................................................... 14
8.4 Titles and Subtitles.............................................. 14
8.5 Notices........................................................... 14
8.6 Finder's Fee...................................................... 15
8.7 Expenses.......................................................... 15
8.8 Amendments and Waivers............................................ 15
8.9 Severability...................................................... 15
8.10 Entire Agreement.................................................. 15
8.11 Exculpation Among Investors....................................... 15
</TABLE>
-ii-
<PAGE>
EXHIBITS
--------
EXHIBIT A Schedule of Investors
EXHIBIT B Amended and Restated Articles of Incorporation
EXHIBIT C Schedule of Exceptions to Representations and Warranties
EXHIBIT D Form of Proprietary Information Agreement
EXHIBIT E Amended and Restated Shareholders Agreement
EXHIBIT F Amended and Restated Registration Rights Agreement
EXHIBIT G Opinion of Wilson Sonsini Goodrich & Rosati
-iii-
<PAGE>
SERIES D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES D CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT ("Agreement")
is made as of the 19th day of January, 2000 by and between Inventa Corporation,
a California corporation (the "Company"), and the persons and entities listed on
the Schedule of Investors attached hereto as Exhibit A (the "Investors").
---------
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Purchase and Sale of Series D Preferred Stock.
---------------------------------------------
1.1 Sale and Issuance of Series D Preferred Stock.
---------------------------------------------
(a) The Company shall adopt and file with the Secretary of State
of California on or before the Closing (as defined below) the Amended and
Restated Articles of Incorporation in the form attached hereto as Exhibit B.
---------
(b) Subject to the terms and conditions of this Agreement, the
Investors agree to purchase at the Closing and the Company agrees to sell and
issue to the Investors at the Closing that number of shares of the Company's
Series D Preferred Stock (the "Shares") for the aggregate purchase price set
forth opposite each Investor's name on Exhibit A attached hereto, at a purchase
---------
price equal to $7.41 per share of Series D Preferred Stock.
1.2 Closing Date; Delivery. The purchase and sale of the Shares shall
----------------------
take place at the offices of Wilson Sonsini Goodrich & Rosati, 650 Page Mill
Road, Palo Alto, California, at 9:00 a.m., on January ___, 2000, or at such
other time and place as the Company and the Investors 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 Shares which such Investor is purchasing against delivery to
the Company by such Investor of a check made payable to the Company or wire
transfer of the aggregate purchase price therefor.
2. Representations and Warranties of the Company. The Company hereby
---------------------------------------------
represents and warrants to the Investors that, except as set forth on a Schedule
of Exceptions attached hereto as Exhibit C, 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
---------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of California and has all requisite corporate power and authority
to carry on its business as now conducted and as proposed to be 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.
<PAGE>
2.2 Capitalization. The authorized capital of the Company will
--------------
consist, immediately prior to the Closing, of (i) 14,479,511 shares of Preferred
Stock, 1,000,000 shares of which are designated Series A Preferred Stock and of
which 800,000 are issued and outstanding, 2,560,000 shares of which are
designated Series B Preferred Stock and of which 2,560,000 are issued and
outstanding, 8,219,511 shares of which are designated Series C Preferred Stock
of which 8,055,511 are issued and outstanding, and 3,000,000 shares of which are
designated Series D Preferred Stock, none of which are issued and outstanding,
and (ii) 25,000,000 shares of Common Stock, of which 4,713,055 shares are issued
and outstanding. The Company has reserved 5,355,000 shares of its Common Stock
for issuance pursuant to its 1993 Stock Option Plan. Except as set forth in the
Schedule of Exceptions attached as Exhibit C hereto, there are no outstanding
---------
options, warrants, rights (including conversion or preemptive rights) or
agreements, orally or in writing, for the purchase or acquisition from the
Company of any shares of its capital stock.
2.3 Subsidiaries. Except as set forth in the Schedule of Exceptions,
------------
the Company does not presently own or control, directly or indirectly, any
interest in any other corporation, association, or other business entity.
2.4 Authorization. All corporate action on the part of the Company,
-------------
its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement, the performance of all obligations of
the Company hereunder and the authorization, issuance and delivery of the Shares
has been taken or will be taken prior to the Closing, and this Agreement
constitutes a valid and legally binding obligation of the Company, enforceable
in accordance with its terms. The Agreement, the Amended and Restated
Shareholders Agreement attached hereto as Exhibit E (the "Shareholders
---------
Agreement") and the Amended and Restated Registration Rights Agreement attached
hereto as Exhibit F (the "Registration Rights Agreement"), when executed and
---------
delivered, will be valid and binding obligations of the Company enforceable in
accordance with their terms, except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights; (ii) general principles of equity
that restrict the availability of equitable remedies; and (iii) to the extent
that the enforceability of the indemnification provisions in Section 10 of the
Registration Rights Agreement may be limited by applicable laws. The sale of the
Shares and the subsequent conversion of the Shares into Common Stock are not and
will not be subject to any preemptive rights or rights of first refusal that
have not been properly waived or complied with.
2.5 Valid Issuance of Securities.
----------------------------
(a) The Shares that are being issued to 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. The shares of Common Stock issuable upon conversion of the Shares
have been duly and validly reserved for issuance.
(b) The shares of Common Stock and Preferred Stock outstanding
prior to the Closing are all duly and validly authorized and issued, fully paid
and nonassessable and were issued in compliance with all applicable state and
federal laws concerning the issuance of securities.
-2-
<PAGE>
2.6 Governmental Consents. No consent, approval, order or
---------------------
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
the Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for (a) 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 in accordance with such section,
and (b) compliance with the Blue Sky Laws of the various states in which the
Investors may reside, which compliance will be effected in accordance with such
laws. The Company currently holds all licenses, permits, franchises,
registrations and qualifications which may be required to conduct its business,
and all such licenses, permits, franchises, registrations and qualifications are
valid and in full force and effect.
2.7 Litigation. Except as set forth in the Schedule of Exceptions,
----------
there is no action, suit, proceeding or investigation pending or currently
threatened against the Company that questions the validity of this Agreement or
the right of the Company to enter into it, or to consummate the transactions
contemplated hereby, or that might result, either individually or in the
aggregate, in any material adverse changes in the assets, condition, affairs or
prospects of the Company, financially or otherwise, or any change in the current
equity ownership of the Company, nor is the Company aware that there is any
basis for the foregoing. The foregoing includes, without limitation, actions
pending or threatened (or any basis therefor known to the Company) involving the
prior employment of any of the Company's employees, their use in connection with
the Company's business of any information or techniques allegedly proprietary to
any of their former employers, or their obligations under any agreements with
prior employers. The Company is not a party or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or which the Company intends to initiate.
2.8 Patent and Trademarks. To its knowledge, the Company owns or
---------------------
possesses sufficient legal rights to all patents, trademarks, service marks,
trade names, copyrights, trade secrets, information and other proprietary rights
and processes necessary for its business as now conducted and as proposed to be
conducted, without any known infringement of the rights of others. There are no
outstanding options, licenses or agreements of any kind relating to the
foregoing, nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information and other
proprietary rights and processes of any other person or entity other than such
licenses or agreements arising from the purchase or sale of "off the shelf" or
standard products. The Company has not received any communications alleging that
the Company has violated or, by conducting its business as proposed, would
violate any of the patents, trademarks, service marks, trade names, copyrights
or trade secrets or other proprietary rights of any other person or entity. The
Company is not aware that any of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere with their duties to the Company or that would
conflict with the Company's business as proposed to be conducted. Neither the
execution nor delivery of this Agreement, nor the carrying on of the Company's
business by the employees of the
-3-
<PAGE>
Company, nor the conduct of the Company's business as proposed, will, to the
Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any employee is now obligated. The Company
does not believe it is or will be necessary to utilize any inventions, trade
secrets or proprietary information of any of its employees made prior to their
employment by the Company, except for inventions, trade secrets or proprietary
information that have been assigned to the Company.
2.9 Compliance with Other Instruments.
---------------------------------
(a) The Company is not in violation or default of any provisions
of its Restated Articles 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 and the consummation of the transactions
contemplated hereby 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,
contract, rule, or statute, or of the Company's Restated Articles of
Incorporation or Bylaws, or an event which results in the creation of any lien,
charge or encumbrance upon any assets of the Company.
(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.
2.10 Disclosure. The Company has fully provided the Investors with all
----------
the information which the Investors have requested for deciding whether to
acquire the Shares and all information which the Company believes is reasonably
necessary to enable the Investors to make such decision. There is no information
known to the Company which materially adversely affects the business or
operations of the Company which has not been disclosed to the Investors. Neither
this Agreement nor any other statements or certificates made or delivered in
connection herewith 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, except that, with respect to financial projections, the Company
represents only that such projections were prepared in good faith and that the
Company believes there is a reasonable basis for such projections.
2.11 Registration Rights. Except as set forth in the Registration
-------------------
Rights Agreement, the Company has not granted or agreed to grant any
registration rights, including piggyback rights, to any person or entity.
2.12 Title to Property and Assets. The Company owns its property and
----------------------------
assets free and clear of all mortgages, liens, loans and encumbrances, except
such encumbrances and liens which arise in the ordinary course of business and
do not materially impair the Company's ownership or use of such property or
assets. With respect to the property and assets it leases, the Company is in
compliance with such leases and, to the best of its knowledge, holds a valid
leasehold
-4-
<PAGE>
interest free of any liens, claims or encumbrances. All facilities, machinery,
equipment, fixtures, vehicles and other properties owned, leased or used by the
Company are in good operating condition and repair (normal wear and tear
accepted) and are reasonably fit and usable for the purposes for which they are
being used.
2.13 Financial Statements. The Company has delivered to the Investors
--------------------
its unaudited financial statements (balance sheet and profit and loss statement
and statement of shareholders equity) at December 31, 1998 and for the fiscal
year then ended and a balance sheet and statement of operations at September 30,
1999 (collectively, the "Financial Statements"). The Financial Statements are
complete and correct in all material respects and have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods indicated and with each other. The Financial
Statements accurately set out and describe the financial condition and operating
results of the Company as of the dates, and for the periods, indicated therein.
Except as set forth in the Financial Statements, the Company has no liabilities,
contingent or otherwise, of a nature required by generally accepted accounting
principles to be reflected in a balance sheet or disclosed in the notes thereto,
other than liabilities incurred in the ordinary course of business subsequent to
September 30, 1999.
2.14 Changes. Since September 30, 1999, there has not been:
-------
(a) any change in the assets, liabilities, financial condition
or operating results of the Company from that reflected in the Financial
Statements, except changes in the ordinary course of business which have not
been, in the aggregate, materially adverse.
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties, financial
condition, operating results, prospects or business of the Company (as such
business is presently conducted and as it is proposed to be conducted);
(c) any waiver by the Company of a valuable right or of a
material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company, except in the ordinary
course of business and which is not material to 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);
(e) any change or amendment to a material contract or
arrangement by which the Company or any of its assets or properties is bound or
to which the Company or any of such assets or properties is subject;
(f) any resignation or termination of any key officers of the
Company; and the Company, to its knowledge, does not know of the impending
resignation or termination of employment of any such officer;
-5-
<PAGE>
(g) to the knowledge of the Company any material change, except
in the ordinary course of business, in the contingent obligations of the Company
by way of guaranty, endorsement, indemnity, warranty or otherwise;
(h) any direct or indirect loans made by the Company to any
shareholder, employee, officer or director of the Company, other than advances
made in the ordinary course of business or loans to purchase Common Stock;
(i) any material change in any compensation arrangement or
agreement with any employee, officer, director or shareholder other than in the
ordinary course of business;
(j) any declaration or payment of any dividend or other
distribution of the assets of the Company;
(k) any labor organization activity;
(l) any debt, obligation or liability incurred, assumed or
guaranteed by the Company, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;
(m) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets; or
(n) to the Company's knowledge, any other event or condition of
any character which might materially and adversely affect 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).
2.15 Minute Books. The Company has offered to provide to the Investors
------------
the minute books of the Company, which contain a complete summary of all
meetings of directors and shareholders since the time of incorporation and
reflect all transactions referred to in such minutes accurately in all material
respects.
2.16 Labor Agreements and Actions. The Company is not bound by or
----------------------------
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.
2.17 Employee Plans. The Company has no "employee welfare benefit
--------------
plans" as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974 ("ERISA"). The
-6-
<PAGE>
Company (i) has not been required to contribute to, (ii) has not terminated or
withdrawn from, and (iii) is not aware of any withdrawal liability assessed
against the Company with respect to any defined benefit plan as defined in
Section 3(35) of ERISA or multi employer plan as defined in Section 4001 of
ERISA in which employees or former employees of the Company have participated.
2.18 Employees. The Company has not knowingly violated any employment-
---------
related laws, including, without limitation, laws relating to equal employment
opportunity, overtime pay and collective bargaining. 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. Except as set
forth in the Schedule of Exceptions, the employment of each officer and employee
of the Company is terminable at the will of the Company. Each former and current
United States employee and consultant of the Company with access to confidential
or proprietary information has executed a Proprietary Information Agreement, the
form of which is attached hereto as Exhibit D. To the Company's knowledge, no
---------
employee of the Company, nor any consultant with whom the Company has
contracted, is in violation of any term of any employment contract, proprietary
information agreement or any other agreement relating to the right of any such
individual to be employed by, or to contract with, the Company because of the
nature of the business to be conducted by the Company; and to the Company's
knowledge the continued employment by the Company of its present employees, and
the performance of the Company's contracts with its independent contractors,
will not result in any such violation. The Company has not received any notice
alleging that any such violation has occurred. The Company's relations with its
employees is good.
2.19 Tax Returns and Payments. The Company has timely filed all tax
------------------------
returns (federal, state and local) required to be filed by it. All taxes shown
to be due and payable on such returns, any assessments imposed, and to the
Company's knowledge all other taxes due and payable by the Company on or before
the Closing have been paid or will be paid prior to the time they become
delinquent. The Company has not been advised except as set forth in the Schedule
of Exceptions (i) that any of its returns, federal, state or other, have been or
are being audited as of the date hereof, or (ii) of any deficiency in assessment
or proposed judgment to its federal, state or other taxes. The Company has no
knowledge of any liability of any tax to be imposed upon its properties or
assets as of the date of this Agreement that is not adequately provided for.
2.20 Agreements; Action.
------------------
(a) Except for agreements explicitly contemplated hereby
including proprietary agreements and agreements between the Company and its
employees with respect to the sale of the Company's Common Stock, and agreements
between the Company and the Investors with respect to their investment, 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 to its knowledge by which it is bound which may
involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $25,000 (other than obligations of, or payments to, the
-7-
<PAGE>
Company arising from purchase or sale agreements entered into in the ordinary
course of business), or (ii) the license of any patent, copyright, trade secret
or other proprietary right to or from the Company (other than licenses arising
from the purchase or sale of "off the shelf" or other standard products), 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 (other than
indemnification obligations arising from purchase or sale agreements entered
into in the ordinary course of business).
(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 except as set forth in the Schedule of Exceptions (other than
with respect to dividend obligations, distributions, indebtedness and other
obligations incurred in the ordinary course of business or as disclosed in the
Financial Statements) individually in excess of $25,000 or, in the case of
indebtedness and/or liabilities individually less than $25,000, in excess of
$50,000 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 material amount 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) Except as set forth in the Schedule of Exceptions, the
Company has not engaged in the past three (3) months in any material 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, or 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.
2.21 Obligations to Related Parties. There are no obligations of the
------------------------------
Company to officers, directors, shareholders or employees of the Company other
than (a) for payment of salary for services rendered, (b) reimbursement for
reasonable expenses incurred on behalf of the Company and (c) for other standard
employee benefits made generally available to all employees (including stock
option agreements outstanding under any stock option plan approved by the Board
of Directors of the Company). Except as set forth in the Schedule of Exceptions
none of the officers, directors or shareholders of the Company, or any members
of their immediate families, are indebted to the Company or have 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 which competes with the Company, except that officers, directors
and/or shareholders of
-8-
<PAGE>
the Company may own stock in publicly traded companies which may compete with
the Company. No officer, director or shareholder, or any member of their
immediate families, is, directly or indirectly, interested in any material
contract with the Company (other than such contracts as relate to any such
person's ownership of capital stock or other securities of the Company). Except
as may be disclosed in the Financial Statements, the Company is not a guarantor
or indemnitor of any indebtedness of any other person, firm or corporation.
2.22 Real Property Holding Corporation. The Company is not a real
---------------------------------
property holding corporation within the meaning of Internal Revenue Code Section
897(c)(2) and any regulations promulgated thereunder.
2.23 Insurance. The Company has or will obtain promptly following
---------
Closing fire and casualty insurance policies with coverage customary for
companies similarly situated to the Company.
2.24 Investment Company Act. The Company is not an "investment
----------------------
company," or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
2.25 Qualified Small Business. The Company represents and warrants to
------------------------
the Investors that, to its knowledge, the Shares should qualify as "Qualified
Small Business Stock" as defined in Section 1202(c) of the Internal Revenue Code
of 1986, as amended (the "Code") as of the date hereof.
2.26 Offering of Shares. Neither the Company nor any person authorized
------------------
or employed by the Company as agent, broker, dealer or otherwise in connection
with the offering or sale of the Shares or any security of the Company similar
to the Shares has offered the Shares or any such similar security for sale to,
or solicited any offer to buy the Shares or any such similar security from, or
otherwise approached or negotiated with respect thereto with, any person or
persons, and neither the Company nor any person acting on its behalf has taken
or will take any other action (including, without limitation, any offer,
issuance or sale of any security of the Company under circumstances which might
require the integration of such security with the Shares under the Securities
Act of 1933, as amended (the "Act") or the rules and regulations of the
Commission thereunder), in either case so as to subject the offering, issuance
or sale of the Shares to the registration provisions of the Act.
3. Representations and Warranties of the Investors. Each Investor for
-----------------------------------------------
itself hereby represents and warrants to the Company 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
---------------------------------
the Investor in reliance upon the Investor's representation to the Company,
which by the Investor's execution of this Agreement the Investor hereby
confirms, that the Shares will be acquired for
-9-
<PAGE>
investment for the 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 the
Investor has no present intention of selling, granting any participation in, or
otherwise distributing the same. By executing this Agreement, the Investor
further represents that the Investor does not presently 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
Shares. The Investor represents that it has full power and authority to enter
into this Agreement.
3.3 Disclosure of Information. The Investor believes it has received
-------------------------
information that it considers necessary or appropriate for deciding whether to
acquire the Shares. The 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 Shares. 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 Investor to rely thereon.
3.4 Economic Risk. The Investor has the capacity to protect his own
-------------
interests in connection with the purchase of the Shares, is capable of
evaluating the merits and risks of investment in the Company, can make an
informed investment decision by reason of (i) his preexisting personal or
business relationship with the Company or any of its officers, directors, or
control persons, or (ii) his business and financial knowledge and experience or
the business and financial knowledge and experience of my professional advisers,
if any, and is able to bear the substantial economic risks of an investment in
the Shares for an indefinite period of time.
3.5 Restricted Securities. It understands that the shares of Common
---------------------
Stock sold hereunder 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 shares may be resold without registration under the
Act, only in certain limited circumstances. In this connection, the Investor
represents that he is familiar with SEC Rule 144, as presently in effect, and
understands the resale limitations imposed thereby and by the Act.
3.6 Further Limitations on Disposition. Without in any way limiting
----------------------------------
the representations set forth above, the Investor further agrees not to make any
disposition of all or any portion of the Shares unless and until:
(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) The 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, the Investor shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration under the Act.
-10-
<PAGE>
(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 the Investor to a shareholder, partner or other affiliate of
the Investor, if the transferee or transferees agree in writing to be subject to
the terms hereof to the same extent as if they were the Investor hereunder.
3.7 Legends. It is understood that the Shares, and the shares of
-------
Common Stock issuable upon conversion thereof and any securities issued in
respect thereof or exchanged therefor may bear one or all of the following
legends:
(a) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE
REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT. COPIES OF THE
AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER
MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF
THIS CERTIFICATE TO THE SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE
OFFICES OF THE CORPORATION.
(b) Any legend required by the laws of the State of California,
including any legend required by the California Department of Corporations.
(c) Any legend required by the Blue Sky laws of any other state
to the extent such laws are applicable to the shares represented by the
certificate so legended.
4. California Commissioner of Corporations.
---------------------------------------
4.1 Corporate Securities Law. THE SALE OF THE SECURITIES THAT IS THE
------------------------
SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER OF
CORPORATIONS OF THE STATE OF CALIFORNIA, 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 THE
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 the
-----------------------------------------------
Investors under Section 1.1 of this Agreement are subject to the fulfillment, on
or before the Closing, of each of the following conditions:
-11-
<PAGE>
5.1 Representations and Warranties. The representations and warranties
------------------------------
of the Company contained in Section 2 shall be true and correct in all material
respects as of the 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 Articles of Incorporation. The Company shall have filed with, and
-------------------------
have had accepted for filing by, the California Secretary of State the Amended
and Restated Articles of Incorporation of the Company attached as Exhibit B
---------
hereto.
5.4 Compliance Certificate. The President of the Company shall deliver
----------------------
to the Investors at the Closing a certificate certifying that the conditions
specified in Sections 5.1 and 5.2 have been fulfilled.
5.5 Shareholders Agreement. The Company shall deliver to the Investors
----------------------
at the Closing copies of the Shareholders Agreement executed by the necessary
majority of the signatories thereto.
5.6 Registration Rights Agreement. The Company shall deliver to the
-----------------------------
Investors at the Closing copies of the Registration Rights Agreement executed by
the necessary majority of the signatories thereto.
5.7 Opinion of Company's Counsel. The Purchasers shall have received
----------------------------
from Wilson Sonsini Goodrich & Rosati, counsel to the Company, an opinion
addressed to them, dated the Closing Date, in substantially the form of Exhibit
-------
G.
- - -
6. Conditions of the Company's Obligations at Closing. The obligations of
--------------------------------------------------
the Company to the Investors under this Agreement are subject to the
fulfillment, on or before the Closing, of each of the following conditions by
the Investors:
6.1 Representations and Warranties. The representations and
------------------------------
warranties of the Investors contained in Section 3 shall be true and correct in
all material respects as of the Closing.
6.2 Payment of Purchase Price. The Investors shall have delivered to
-------------------------
the Company the purchase price specified in Section 1.1 hereof.
6.3 Legal Matters. All material matters of a legal nature which
-------------
pertain to this Agreement, and the transactions contemplated hereby, shall have
been reasonably approved by counsel to the Company.
7. Covenants of the Company.
------------------------
7.1 Delivery of Financial Statements. The Company shall deliver the
--------------------------------
following financial information to each Investor who continues to hold at least
50,000 Shares (or the Common
-12-
<PAGE>
Stock into which the Shares have been converted) (as adjusted for any stock
split, stock dividends, combinations, recapitalizations and the like with
respect to such Shares)(for purposes of satisfying the 50,000 share threshold
herein, shares owned by partners, subsidiaries, parents, shareholders or
affiliates will be aggregated; provided, however, that the Company shall only be
required to deliver financial information to one representative of each group of
affiliated persons or entities), and as long as such Investor or a principal,
partner or manager of such Investor, is not employed by or associated with a
competitor of the Company:
(a) as soon as practicable after the end of each fiscal
year of the Company an income statement for such fiscal year, a balance sheet of
the Company as of the end of such year and in any event within 120 days
thereafter, and a schedule as to the sources and applications of funds for such
year, such year-end financial reports to be audited by a "Big Five" accounting
firm and in reasonable detail, prepared in accordance with generally accepted
accounting principles ("GAAP");
(b) prior to the commencement of each fiscal year of the
Company, an operating (c) within thirty (30) days of the end of each month, an
unaudited balance sheet and statement of operations as of the end of such month.
7.2 Inspection Rights. Each Investor shall have the right to
-----------------
visit and inspect any of the properties of the Company or any of its
subsidiaries, and to discuss the affairs, finances and accounts of the Company
or any of its subsidiaries with its officers, and to review such information as
is reasonably requested all at such reasonable times and as often as may be
reasonably requested; provided, however, that the Company shall not be obligated
under this Section 7.2 with respect to a competitor of the Company or with
respect to information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed.
7.3 Reservation of Common Stock. The Company will at all times
---------------------------
reserve and keep available, solely for issuance and delivery upon the conversion
of the Preferred Stock, all Common Stock issuable from time to time upon such
conversion (the "Conversion Stock").
7.4 Proprietary Information Agreement. The Company shall
---------------------------------
require all employees and consultants to execute and deliver a Proprietary
Information Agreement in the form attached hereto as Exhibit D.
---------
7.5 Termination of Information Covenant. The covenant set forth
-----------------------------------
in Section 7.1 shall terminate as to the Investors and be of no further force or
effect at such time as the initial sale of securities pursuant to a registration
statement filed by the Company under the Securities Act in connection with the
firm commitment underwritten offering of its securities to the general public is
consummated.
-13-
<PAGE>
7.6 Key Man Life Insurance. The Company shall obtain and
----------------------
maintain a key man life insurance policy for $1,000,000 with respect to the
Chief Executive Officer of the Company with proceeds payable to the Company.
7.7 Qualified Small Business Stock. The Company shall submit to
------------------------------
the Investors and to the Internal Revenue Service any reports that may be
required to be submitted to such persons under Section 1202(d)(1)(C) of the
Internal Revenue Code of 1986, as amended (the "Code") and any related Treasury
Regulations. In addition, within fifteen (15) business days after any Investor
has delivered to the Company a written request for information regarding such
Investor's stock in reasonable contemplation of the Investor's sale, exchange or
other disposition of its stock, the Company shall provide the Investor with such
information as the Investor may reasonably request in order for the Investor to
determine whether the stock held by such Investor constitutes "qualified small
business stock" as defined in Section 1202(c) of the Code. The Company's
obligation to furnish such information pursuant to this Section 7.7 shall
continue notwithstanding the fact that a class of the Company's stock may be
traded on an established securities market.
7.8 Legal Expenses. The Company shall pay the legal expenses of
--------------
the Investors in connection with the Series D Preferred Stock financing in an
aggregate amount not to exceed $25,000.
8. Miscellaneous.
-------------
8.1 Transfer; Successors and Assigns. 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. 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.
8.2 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.
8.3 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.
8.4 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.
8.5 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 or
addresses
-14-
<PAGE>
indicated for such party on Exhibit A hereto, or at such other address or
---------
addresses as such party may designate by ten (10) days' advance written notice
to the other parties.
8.6 Finder's Fee. Except as elsewhere disclosed in this Agreement,
------------
or in Exhibit C hereto, each party represents that it neither is nor will be
---------
obligated for any finder's fee or commission in connection with this
transaction. The Investor agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its officers, employees, or
representatives are responsible.
The Company agrees to indemnify and hold harmless the Investor from any
liability for any commission or compensation in the nature of a finder's 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.
8.7 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 attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
8.8 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-in-interest of the Shares.
8.9 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.
8.10 Entire Agreement. This Agreement constitutes the entire
----------------
agreement between the parties hereto pertaining to the subject matter hereof,
and any and all other written or oral agreements existing between the parties
hereto are expressly canceled.
8.11 Exculpation Among Investors. Each Investor acknowledges that it
---------------------------
is not relying upon any person, firm or corporation, other than the Company and
its officers and directors, in making its investment or decision to invest in
the Company. Each investor agrees that no Investor nor the respective
controlling persons, officers, directors, partners, agents or employees of any
Investor shall be liable for any action heretofore or hereafter taken or omitted
to be taken by any of them in connection with the Shares.
-15-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
INVENTA CORPORATION
By: /s/ David A. Lavanty
-------------------------------
David A. Lavanty, President
Address:
255 Shoreline Drive, 2nd Floor
Redwood Shores, CA 94065
<PAGE>
INVESTORS:
BANCBOSTON VENTURES INC.
By: /s/ Mara D. Heymann
-----------------------------
Name: Mara D. Heymann
Title: Director
PRIVATE EQUITY PORTFOLIO FUND II, LLC
BY BANKBOSTON NA, ITS MANAGER,
By: /s/ Glen Holland
-----------------------------
Name: Glen Holland
Title: Director
-2-
<PAGE>
BATTERY VENTURES III, L.P.
By: Battery Partners III, L.P.
By: /s/ Todd Dagres
-------------------------
Todd Dagres
Title: General Partner
----------------------
-3-
<PAGE>
BOSTON MILLENNIA PARTNERS LIMITED PARTNERSHIP
By: Glen Partners Limited Partnership
Its General Partner
By: /s/ [ILLEGIBLE]
----------------------------
General Partner
BOSTON MILLENNIA ASSOCIATES I, PARTNERSHIP
By: /s/ [ILLEGIBLE]
----------------------------
General Partner
-4-
<PAGE>
/s/ Robert Ducommun
- -----------------------------------------
Robert Ducommun
PALMER G. AND CHARLES E. DUCOMMUN
CHARITABLE ANNUITY TRUST U/D/T
By: /s/ Robert Ducommun
-----------------------------------------
Robert Ducommun, Trustee
-5-
<PAGE>
ESSEX PRIVATE PLACEMENT FUND II, LIMITED PARTNERSHIP
By: Essex Investment Mgt. Company LLC
Its General Partner
By: /s/ [ILLEGIBLE]
-------------------------------------
Its: Principal
-------------------------------------
-6-
<PAGE>
THE CHASE MANHATTAN BANK, AS TRUSTEE
FOR FIRST PLAZA GROUP TRUST
By: /s/ John F. Weeda
---------------------------
John F. Weeda
Title: Vice President
------------------------
The Chase Manhattan Bank Has executed this Document/Agreement
solely to its capacity as Directed Trustee of the First Plaza Group Trust
upon the direction of General Motors Investment Management
Corporation.
-7-
<PAGE>
TECHNOLOGY CROSSOVER VENTURES II, C.V.
a Netherlands Antilles Limited Partnership
By: Technology Crossover Management II, L.L.C.
Its: Investment General Partner
By: /s/ RBJ
---------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
TCV II, V.O.F.
a Netherlands Antilles General Partnership
By: Technology Crossover Management II, L.L.C.
Its: Investment General Partner
By: /s/ RBJ
---------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
TCV II(Q), L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.
Its: General Partner
By: /s/ RBJ
---------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
TECHNOLOGY CROSSOVER VENTURES II, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.
Its: General Partner
By: /s/ RBJ
---------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
TCV II STRATEGIC PARTNERS, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.
Its: General Partner
By: /s/ RBJ
---------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
-8-
<PAGE>
EXHIBIT A
---------
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
Name and Address Shares Amount
- - ----------------------------------------------- --------------------- ---------------------
<S> <C> <C>
BancBoston Ventures Inc. 944,670 $ 7,000,004.70
435 Tasso Street, Suite 250
Palo Alto, CA 94301
Attention: Maia Heymann
Private Equity Portfolio II, LLC 134,952 $ 999,994.32
c/o BancBoston Capital
175 Federal Street, 10/th/ Floor
Boston, MA 02110
Attention: Glen Holland
Battery Ventures III, L.P. 62,672 $ 464,399.52
20 William Street
Wellesley, MA 01282
Attention: Rick Frisbie
Boston Millennia Associates I, Limited 8,203 $ 60,784.23
Partnership
30 Rowes Wharf
Boston, MA 02110
Attention: Martin J. Hernon
Boston Millennia Partners Limited Partnership 417,168 $ 3,091,214.88
30 Rowes Wharf
Boston, MA 02110
Attention: Martin J. Hernon
Robert Ducommun 13,500 $ 100,035.00
1155 Park Avenue, Apt. 1 SW
New York, NY 10128
Palmer G. and Charles E. Ducommun 6,700 $ 49,647.00
Charitable Annuity Trust, u/d/t
1155 Park Avenue, Apt. 1 SW
New York, NY 10128
Attention: Robert Ducommun
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Essex Private Placement Fund II, 269,906 $ 2,000,003.46
Limited Partnership
c/o Essex Investment Mgt. Company
125 High Street
Boston, MA 02110
Attention: Susan Stickells
The Chase Manhattan Bank,
as Trustee for First Plaza Group Trust
Global Investor Services 716,858 $ 5,311,917.78
4 Chase Metro Tech Center, 18/th/ Floor
Brooklyn, NY 11245
Attention: John F. Weeda
Technology Crossover Ventures II, L.P. 203,486 $ 1,507,831.26
c/o Technology Crossover Ventures
56 Main Street, Suite 210
Millburn, NJ 07041
Attention: Robert C. Bensky
TCV II (Q), L.P. 156,443 $ 1,159,242.63
c/o Technology Crossover Ventures
56 Main Street, Suite 210
Millburn, NJ 07041
Attention: Robert C. Bensky
Technology Crossover Ventures II, C.V 31,068 $ 230,213.88
c/o Technology Crossover Ventures
56 Main Street, Suite 210
Millburn, NJ 07041
Attention: Robert C. Bensky
TCV II Strategic Partners, L.P 27,764 $ 205,731.24
c/o Technology Crossover Ventures
56 Main Street, Suite 210
Millburn, NJ 07041
Attention: Robert C. Bensky
</TABLE>
-2-
<PAGE>
<TABLE>
<S> <C> <C>
TCV II, V.O.F 6,610 $ 48,980.10
c/o Technology Crossover Ventures
56 Main Street, Suite 210
Millburn, NJ 07041
Attention: Robert C. Bensky
TOTAL 3,000,000 $22,230,000.00
</TABLE>
-3-
<PAGE>
EXHIBIT B
---------
AMENDED AND RESTATED ARTICLES OF INCORPORATION
<PAGE>
EXHIBIT C
---------
SCHEDULE OF EXCEPTIONS
<PAGE>
EXHIBIT B
---------
AMENDED AND RESTATED ARTICLES OF INCORPORATION
<PAGE>
[LOGO]
SECRETARY OF STATE [SEAL]
I, BILL JONES, Secretary of State of the State of California, hereby
certify:
That the attached transcript of 22 page(s) has been compared with the
record on file in this office, of which it purports to be a copy, and that it is
full, true and correct.
[SEAL] IN WITNESS WHEREOF, I execute this
certificate and affix the Great
Seal of the State of California
this day of
JAN 8 2000
-----------------------------------
/s/ Bill Jones
Secretary of State
<PAGE>
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
INVENTA CORPORATION
David A. Lavanty and Michael J. O'Donnell certify that:
1. They are the duly elected and acting President and Assistant
Secretary, respectively, of Inventa Corporation, a California
corporation (the "Corporation").
2. The Articles of Incorporation of this Corporation are hereby amended
and restated in full to read as set forth in Exhibit A attached
---------
hereto.
3. The attached amendment and restatement of the Articles of
Incorporation of this Corporation has been duly approved by the Board
of Directors of this Corporation.
4. The attached amendment and restatement of the Articles of
Incorporation of this Corporation has been approved by the holders of
the requisite number of shares of this Corporation in accordance with
Sections 902 and 903 of the California Corporations Code. The total
number of outstanding shares of each class entitled to vote with
respect to the attached amendment and restatement was 800,000 shares
of Series A Preferred Stock, 2,560,000 shares of Series B Preferred
Stock, 8,055,511 shares of Series C Preferred Stock and 4,755,194
shares of Common Stock. The number of shares voting in favor of the
attached amendment and restatement equaled or exceeded the vote
required, such required vote being a majority of the outstanding
shares of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Common Stock, voting as separate classes.
<PAGE>
The undersigned further declare under penalty of perjury that the
matters set forth in this Certificate are true and correct of their own
knowledge.
Executed at Redwood Shores, California on December ___, 1999.
/s/ David A. Lavanty,
--------------------------------
David A. Lavanty,
President
/s/ Michael J. O'Donnell,
--------------------------------
Michael J. O'Donnell,
Assistant Secretary
-2-
<PAGE>
EXHIBIT A
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AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
INVENTA CORPORATION
I.
The name of this corporation is Inventa Corporation (the "Corporation").
II.
The purpose of this Corporation is to engage in any lawful act or activity
for which a corporation may be organized under the General Corporation Law of
California other than the banking business, the trust company business or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the Corporation is authorized to issue is 39,779,511 shares, of
which 25,000,000 shares shall be Common Stock with a par value of $0.001 per
share and of which 14,779,511 shares shall be Preferred Stock, 1,000,000 of
which are designated Series A Preferred Stock with a par value of $0.001 per
share, 2,560,000 of which are designated Series B Preferred Stock with a par
value of $0.001 per share, 8,219,511 of which are designated Series C Preferred
Stock with a par value of $0.001 per share and 3,000,000 of which are designated
Series D Preferred Stock with a par value of $0.001 per share. The Board of
Directors is authorized to fix the number of shares of any series of Preferred
Stock and to determine or alter the rights, preferences, privileges, and
restrictions granted to or imposed upon any wholly unissued series of Preferred
Stock and, within the limits and restrictions stated in any resolution or
resolutions of the Board of Directors originally fixing the number of shares
constituting any series of Preferred Stock, to increase or decrease (but not
below the number of shares of any such series then outstanding) the number of
shares of any such series subsequent to the issue of shares of that series.
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IV.
The rights, preferences, privileges and restrictions granted to or imposed
upon the Common Stock and Preferred Stock are as follows:
1. Dividend Provisions. The holders of shares of Series A Preferred
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Stock ("Series A Preferred"), Series B Preferred Stock ("Series B Preferred"),
Series C Preferred Stock ("Series C Preferred") and Series D Preferred Stock
("Series D Preferred") 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 $0.03 per annum per share of
Series A Preferred (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares), $0.075 per annum
per share of Series B Preferred (as adjusted for any stock dividends,
combinations, splits, recapitalizations and the like with respect to such
shares), $0.10 per annum per share of Series C Preferred (as adjusted for any
stock dividends, combinations, splits, recapitalizations and the like with
respect to such shares) and $0.59 per annum per share of Series D Preferred (as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares) or, if greater (as determined on a per
annum basis and on an as converted basis for the Preferred Stock), an amount
equal to that paid on the Common Stock. Such dividends shall be payable when,
as, and if declared by the Board of Directors, and shall not be cumulative, and
no right shall accrue to holders of Common Stock or Preferred Stock by reason of
the fact that dividends on said shares are not declared in any prior period.
After payment has been made to the holders of Preferred Stock of the full
amounts to which they shall be entitled as set forth in this Section 1, the
holders of Preferred Stock and Common Stock shall be entitled to receive ratably
on an as-converted basis any remaining funds declared as dividends.
2. Liquidation Preference.
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(a) Preferred Preference. In the event of any liquidation,
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dissolution, or winding up of the Corporation, either voluntary or involuntary,
the holders of the Series C Preferred and Series D Preferred shall be entitled
to receive on a pro rata basis, prior and in preference to any distribution of
any of the assets or surplus funds of the Corporation to the holders of the
Series A Preferred, Series B Preferred and Common Stock, by reason of their
ownership of such stock, an amount per share equal to the sum of $1.25 per share
of Series C Preferred and $7.41 per share of Series D Preferred (in each case as
adjusted for any stock dividends, combinations, splits, recapitalizations and
the like with respect to such shares) plus declared and unpaid dividends, for
each share of Series C Preferred or Series D Preferred then held by them. If
upon the occurrence of such event, the assets and funds thus distributed among
the holders of the Series C Preferred and Series D Preferred 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 among the holders of the
Series C Preferred and Series D Preferred in proportion to the aggregate
liquidation preference of the shares held by each such holder.
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(b) After payment has been made to the holders of the Series C
Preferred and Series D Preferred of the full amounts to which they shall be
entitled as set forth in paragraph 2(a) above, the holders of Series A Preferred
and Series B Preferred 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
$0.50 for each outstanding share of Series A Preferred (as adjusted for any
stock dividends, combinations, splits, recapitalizations and the like with
respect to such shares), and $1.25 for each outstanding share of Series B
Preferred (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares), plus an amount
equal to any declared but unpaid dividends for each share of Series A Preferred
and Series B Preferred then held by them. If upon the occurrence of such event,
the assets and funds thus distributed among the holders of Series A Preferred
and Series B Preferred shall be insufficient to permit the payment to such
holders of the full aforesaid preferential amounts, then the entire assets and
funds of this Corporation legally available for distribution shall be
distributed ratably among the holders of the Series A Preferred and Series B
Preferred in proportion to the aggregate Series A Preferred liquidation
preference and the Series B Preferred liquidation preference.
(c) After payment has been made to the holders of the Preferred Stock
of the full amounts to which they shall be entitled to as set forth in
paragraphs 2(a) and 2(b) above, the holders of the Common Stock shall then be
entitled to receive the amount of $0.40 per share for each share of Common Stock
then held by them (as adjusted for any stock dividends, combinations, splits,
recapitalizations and the like with respect to such shares), plus an amount
equal to all declared but unpaid dividends for each share of Common Stock then
held by them. If the assets and funds thus distributed among the holders of the
Common Stock shall be insufficient to permit the payment to such holders of the
full aforesaid amount, then the entire assets and funds of the Corporation
legally available for distribution, shall be distributed among the holders of
the Common Stock ratably on a per-share basis.
(d) After payment has been made to the holders of the Preferred Stock
and the Common Stock of the full amount to which they shall be entitled as set
forth in paragraphs 2(a), 2(b) and 2(c) above, the holders of the Preferred
Stock and Common Stock shall be entitled to receive ratably on a per-share basis
all the remaining assets based upon the number of shares of Common Stock into
which each share of Preferred Stock is then convertible; provided, however, that
the holders of Preferred Stock shall not be entitled to receive pursuant to this
paragraph (d) (including amounts received pursuant to paragraphs 2 (a) and 2(b)
above) more than a total of $1.00 per share of Series A Preferred, $2.50 per
share of Series B Preferred, $2.50 per share of Series C Preferred and $14.82
per share of Series D Preferred then held by them (as adjusted for any stock
dividends, combinations, splits, recapitalizations and the like with respect to
such shares) plus declared and unpaid dividends.
(e) After payment has been made to the holders of the Preferred Stock
and the Common Stock of the full amounts to which they shall be entitled as set
forth in paragraphs 2(a), 2(b), 2(c) and 2(d) above, the holders of the Common
Stock shall be entitled to receive ratably on a per-share basis all the
remaining assets.
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(f) Mergers. Unless waived by the approval (by vote or written
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consent, as provided by law) of the holders of 66 2/3% of the then outstanding
Series C Preferred and holders of 66 2/3% of the then outstanding Series D
Preferred, for purposes of this Section 2, a merger or consolidation of the
Corporation with or into any other corporation or corporations, or the merger of
any other corporation or corporations into the Corporation, in which the
shareholders of the Corporation receive distributions in cash or securities of
another corporation or corporations as a result of such consolidation or merger,
a reorganization, including a sale of the capital stock of the Corporation,
where the shareholders of the Corporation immediately prior to the transaction
possess less than 50% of the voting power of the surviving entity (or its
parent) immediately after the transaction, or a sale of all or substantially all
of the assets of the Corporation, shall be treated as a liquidation, dissolution
or winding up of the Corporation; provided that the holders of the Preferred
Stock and the Common Stock shall each be paid the liquidation preference in cash
or in the securities received or in a combination thereof (which combination
shall be in the same proportions as the consideration received in the
transaction). Any securities to be delivered to the holders of the Preferred
Stock and Common Stock upon merger, reorganization or sale of substantially all
the assets of the Corporation shall be valued as follows:
(i) if traded on a securities exchange, the value shall be
deemed to be the average of the closing prices of the securities on such
exchange over the 30-day period ending three (3) business days prior to the
closing;
(ii) if actively traded over-the-counter, the value shall be
deemed to be the average of the closing bid prices over the 30-day period ending
three (3) business days prior to the closing; and
(iii) if there is no active public market, the value shall be the
fair market value thereof as mutually determined by the Corporation and the
holders of not less than a majority of the outstanding shares of the Preferred
Stock, provided that if the Corporation and the holders of a majority of the
outstanding shares of the Preferred Stock are unable to reach agreement, then by
independent appraisal by an investment banker hired and paid by the Corporation,
but acceptable to the holders of a majority of the outstanding shares of
Preferred Stock.
(g) As authorized by Section 402.5(c) of the California Corporations
Code, the provisions of Sections 502 and 503 of the California Corporations Code
shall not apply with respect to repurchase by the Corporation of shares of
Common Stock issued to or held by employees or consultants of the Corporation or
its subsidiaries upon termination of their employment or services pursuant to
agreement providing for the right of said repurchase.
3. Conversion. The holders of Preferred Stock shall have conversion
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rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Preferred Stock shall be
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convertible into share(s) of Common Stock without the payment of any additional
consideration by the holder thereof and, at the option of the holder thereof, at
any time after the date of issuance of such share, at the office of the
Corporation or any transfer agent for the Preferred Stock. Each share of
Preferred Stock
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shall be convertible into such number of fully paid and nonassessable shares of
Common Stock as is determined by dividing the applicable Original Issue Price of
such share of Preferred Stock by the Conversion Price (the "Conversion Price")
at the time in effect for a share of such series of Preferred Stock. The
Original Issue Price per share of Series A Preferred is $0.50, and the
Conversion Price per share of Series A Preferred initially shall be $0.50. The
Original Issue Price per share of Series B Preferred is $1.25, and the
Conversion Price per share of Series B Preferred initially shall be $1.25. The
Original Issue Price per share of Series C Preferred is $1.25, and the
Conversion Price per share of Series C Preferred initially shall be $1.25. The
Original Issue Price per share of Series D Preferred is $7.41, and the
Conversion Price per share of Series D Preferred initially shall be $7.41. The
Conversion Price of each series of Preferred Stock shall be subject to
adjustment from time to time as provided below. The number of shares of Common
Stock into which a share of Preferred Stock is convertible is hereinafter
referred to as the "Conversion Rate" of such series.
(b) Automatic Conversion. Each share of Preferred Stock shall
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automatically be converted into shares of Common Stock at the then effective
Conversion Rate immediately upon the closing of a firm commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale of Common Stock
in which the aggregate proceeds raised equals or exceeds $20,000,000 (a
"Qualified Public Offering").
Notwithstanding the foregoing, each share of Series A Preferred,
Series B Preferred and Series C Preferred shall automatically be converted into
shares of Common Stock at the applicable effective Conversion Rate upon the
approval (by vote or written consent, as provided by law) of (i) the holders of
at least 2/3 of the then outstanding shares of Series A Preferred, Series B
Preferred and Series C Preferred (voting together as a separate class) and (ii)
the holders of at least 2/3 of the then outstanding shares of Series C
Preferred.
Notwithstanding the foregoing, each share of Series D Preferred
shall automatically be converted into shares of Common Stock at the applicable
effective Conversion Rate upon the approval (by vote or written consent, as
provided by law) of the holders of at least 2/3 of the then outstanding shares
of Series D Preferred.
(c) Mechanics of Conversion. Before any holder of the Preferred Stock
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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 the Corporation or of any transfer agent for the Preferred Stock and shall
give written notice to the Corporation at such office that he elects to convert
the same (except that no such written notice of election to convert shall be
necessary in the event of an automatic conversion pursuant to Section 3(b)
hereof). The Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Preferred Stock a certificate or
certificates for the number of shares of Common Stock to which such holder shall
be entitled. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the shares of
Preferred Stock to be converted (except that in the case of an automatic
conversion pursuant to Section 3(b) hereof such conversion shall be deemed to
have been made immediately prior to the closing of the offering referred to in
Section 3(b)) and the person
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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 on such date.
(d) Fractional Shares. In lieu of any fractional shares to which the
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holder of Preferred Stock would otherwise be entitled, the Corporation shall pay
cash equal to such fraction multiplied by the fair market value of one share of
each such series of Preferred Stock as determined by the Board of Directors of
the Corporation. Whether or not fractional shares are issuable upon such
conversion shall be determined on the basis of the total number of shares of
Preferred Stock of each holder to be converted at such time into Common Stock
and the number of shares of Common Stock issuable upon such aggregate
conversion.
(e) Adjustment of Conversion Price. The Conversion Price of each
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series of Preferred Stock shall be subject to adjustment from time to time as
follows:
(i) If the Corporation shall issue any Common Stock other than
"Excluded Stock", as defined below, without consideration or for consideration
per share less than the applicable Conversion Price for such series in effect on
the date of and immediately prior to such issuance, then and in such event, the
Conversion Price in effect for such series shall be reduced, concurrently with
such issuance, to a price determined by multiplying such Conversion Price by a
fraction, the numerator of which shall be the total number of shares of Common
Stock outstanding (including any shares of Common Stock issuable upon conversion
of the Preferred Stock, or deemed to have been issued pursuant to subdivision
(3) of this clause (i) and to clause (ii) below) immediately prior to such
issuance plus the number of shares of Common Stock which the aggregate
consideration received by the Corporation for the total number of shares of
Common Stock so issued would purchase at such Conversion Price; and the
denominator of which shall be the total number of shares of Common Stock
outstanding (including any shares of Common Stock issuable upon conversion of
the Preferred Stock or deemed to have been issued pursuant to subdivision (3) of
this clause (i) and to clause (ii) below) immediately prior to such issuance
plus the additional shares of Common Stock issued in such issuance (but not
including any additional shares of Common Stock deemed to be issued as a result
of any adjustment in the Conversion Price resulting from such issuance).
For purposes of any adjustment of the Conversion Price pursuant to
this clause (i), the following provisions shall be applicable:
(1) In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
after deducting any discounts or commissions paid or incurred by the Corporation
in connection with the issuance and sale thereof.
(2) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be deemed to be the fair market value thereof as determined by the
Board of Directors of the Corporation, in accordance with generally accepted
accounting treatment; provided, however, that if, at the time
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of such determination, the Corporation's Common Stock is traded in the over-the-
counter market or on a national or regional securities exchange, such fair
market value as determined by the board of directors of the Corporation shall
not exceed the aggregate "Current Market Price" (as defined below) of the shares
of Common Stock being issued.
(3) In the case of the issuance of (i) options to
purchase or rights to subscribe for Common Stock (other than Excluded Stock),
(ii) securities by their terms convertible into or exchangeable for Common Stock
(other than Excluded Stock), or (iii) options to purchase or rights to subscribe
for such convertible or exchangeable securities:
(A) 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 subdivisions (1) and (2) above), if any,
received by the Corporation upon the issuance of such options or rights plus the
minimum purchase price provided in such options or rights for the Common Stock
covered thereby;
(B) 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 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 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
subdivisions (1) and (2) above);
(C) on any change in the number of shares of Common
Stock deliverable upon exercise of any such options or rights or conversion of
or exchange for such convertible or exchangeable securities, or on any change in
the minimum purchase price of such options, rights or securities, other than a
change resulting from the antidilution provisions of such options, rights or
securities, the Conversion Price shall forthwith be readjusted to such
Conversion Price as would have been obtained had the adjustment made upon (x)
the issuance of such options, rights or securities not exercised, converted or
exchanged prior to such change, as the case may be, been made upon the basis of
such change or (y) the options or rights related to such securities not
converted or exchanged prior to such change, as the case may be, been made upon
the basis of such change; and
(D) on 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 shall forthwith be readjusted to such Conversion Price as
would have been obtained had the adjustment made upon the
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issuance of such options, rights, convertible or exchangeable securities or
options or rights related to such convertible or exchangeable securities, as the
case may be, been made upon the basis of the issuance of only the number of
shares of Common Stock actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such convertible or exchangeable
securities or upon the exercise of the options or rights related to such
convertible or exchangeable securities, as the case may be.
(ii) "Excluded Stock" shall mean:
(1) all shares of Common Stock issued and outstanding on
the date this document is filed with the California Secretary of State and all
shares issuable upon exercise of options or warrants outstanding on the date
this document is filed with the California Secretary of State;
(2) all shares of Series A Preferred, Series B Preferred,
Series C Preferred and Series D Preferred and the Common Stock into which such
shares are convertible;
(3) up to 1,562,808 shares of Common Stock, warrants or
options to purchase Common Stock or other securities issued to officers,
directors, consultants or employees of the Corporation pursuant to any plan or
arrangement approved by the Board of Directors of the Corporation; and
(4) shares of Common Stock, warrants or options to purchase
Common Stock or other securities issued to officers, directors, consultants or
employees of the Corporation pursuant to any plan or arrangement approved by a
2/3 vote of the Board of Directors of the Corporation.
All outstanding shares of Excluded Stock (including any
shares issuable upon conversion of the Preferred Stock) shall be deemed to be
outstanding for all purposes of the computations of Section 3(e)(i) above.
(iii) If the number of shares of Common Stock outstanding at any
time after the date hereof is increased by a stock dividend payable in shares of
Common Stock or by a subdivision or split-up of shares of Common Stock, then, on
the date such payment is made or such change is effective, the respective
Conversion Prices of Series A Preferred, Series B Preferred, Series C Preferred
and Series D Preferred shall be appropriately decreased so that the number of
shares of Common Stock issuable on conversion of any shares of such series of
Preferred Stock shall be increased in proportion to such increase of outstanding
shares of Common Stock.
(iv) If the number of shares of Common Stock outstanding at any
time after the date hereof is decreased by a combination of the outstanding
shares of Common Stock, then, on the effective date of such combination, the
respective Conversion Prices of Series A Preferred, Series B Preferred, Series C
Preferred and Series D Preferred shall be appropriately increased so that the
number of shares of Common Stock issuable on conversion of any shares of a
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series of Preferred Stock shall be decreased in proportion to such decrease in
outstanding shares of Common Stock.
(v) In case the Corporation shall declare a cash dividend upon
its Common Stock payable otherwise than out of retained earnings or shall
distribute to holders of its Common Stock shares of its capital stock (other
than Common Stock), stock or other securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or options or rights (excluding options to purchase and rights to
subscribe for Common Stock or other securities of the Corporation convertible
into or exchangeable for Common Stock), then, in each such case, the holders of
shares of Preferred Stock shall, concurrent with the distribution to holders of
Common Stock, receive a like distribution based upon the number of shares of
Common Stock into which such shares of Preferred Stock are convertible.
(vi) In case, at any time after the date hereof, of any capital
reorganization, or any reclassification of the stock of the Corporation (other
than as a result of a stock dividend or subdivision, split-up or combination of
shares), or the consolidation or merger of the Corporation with or into another
person (other than a consolidation or merger in which the Corporation is the
continuing entity and which does not result in any change in the Common Stock),
or of the sale or other disposition of all or substantially all the properties
and assets of the Corporation, the shares of Preferred Stock shall, after such
reorganization, reclassification, consolidation, merger, sale or other
disposition, be convertible into the kind and number of shares of stock or other
securities or property of the Corporation or otherwise to which such holder
would have been entitled if immediately prior to such reorganization,
reclassification, consolidation, merger, sale or other disposition he had
converted his shares of Preferred Stock into Common Stock. The provisions of
this clause (vi) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, sales or other dispositions.
(vii) All calculations under this Section 3 shall be made to the
nearest cent or to the nearest one hundredth (1/100) of a share, as the case may
be.
(viii) For the purpose of any computation pursuant to this
Section 3(e), the "Current Market Price" at any date of one share of Common
Stock, shall be deemed to be the average of the highest reported bid and the
lowest reported offer prices on the preceding business day as furnished by the
National Quotation Bureau, Incorporated (or equivalent recognized source of
quotations); provided, however, that if the Common Stock is not traded in such
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manner that the quotations referred to in this clause (viii) are available for
the period required hereunder, Current Market Price shall be determined in good
faith by the Board of Directors of the Corporation, but if challenged by the
holders of more than 50% of the outstanding Series A Preferred, Series B
Preferred, Series C Preferred and Series D Preferred, voting as separate
classes, then as determined by an independent appraiser selected by the Board of
Directors of the Corporation, the cost of such appraisal to be borne equally by
the Corporation and the challenging parties.
(f) Minimal Adjustments. No adjustment in the Conversion Price need
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be made if such adjustment would result in a change in the Conversion Price of
less than $0.01. Any
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adjustment of less than $0.01 which is not made shall be carried forward and
shall be made at the time of and together with any subsequent adjustment which,
on a cumulative basis, amounts to an adjustment of $0.01 or more in the
Conversion Price.
(g) No Impairment. Without the consent of the majority of the
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outstanding shares of Preferred Stock, the Corporation will not 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 the Corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 3 and in the
taking of all such action as may be necessary or appropriate in order to protect
the Conversion Rights of the holders of Preferred Stock against impairment.
(h) Certificate as to Adjustments. Upon the occurrence of each
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adjustment or readjustment of the Conversion Rate pursuant to this Section 3,
the 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 Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon written request at any time
of any holder of Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (i) such adjustments and readjustments,
(ii) the Conversion Rate of such series at the time in effect, and (iii) the
number of shares of Common Stock and the amount, if any, of other property which
at the time would be received upon the conversions of such holder's shares of
Preferred Stock.
(i) Notices of Record Date. In the event of any taking by the
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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, the Corporation
shall mail to each holder of Preferred Stock at least ten (10) days prior to
such record date, a notice specifying the date on which any such record is to be
taken for the purpose of such dividend or distribution or right, and the amount
and character of such dividend, distribution or right.
(j) Reservation of Stock Issuable Upon Conversion. The Corporation
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shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of Preferred Stock such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of Preferred Stock; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of all then outstanding shares of Preferred Stock, the 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 purpose.
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(k) Notices. Any notice required by the provisions of this Section 3
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to be given to the holder of shares of Preferred Stock shall be deemed given if
deposited in the United States mail, postage prepaid, and addressed to each
holder of record at his address appearing on the books of the Corporation.
(l) Reissuance of Converted Shares. No shares of Preferred Stock
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which have been converted into Common Stock after the original issuance thereof
shall ever again be reissued and all such shares so converted shall upon such
conversion cease to be a part of the authorized shares of the Corporation.
(m) Special Adjustment of Conversion Price for Qualified Public
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Offering. Notwithstanding Section 3(a) above, in the event the Series D
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Preferred is automatically converted into Common Stock by reason of a Qualified
Public Offering as set forth in Section 3(b) hereof, and the initial public
offering price per share (the "IPO Price") is less than 125% of the Original
Issue Price of the Series D Preferred (adjusted for stock splits and the like),
then the Conversion Price per share of Series D Preferred shall be reduced to a
number equal to the quotient of (i) the Conversion Price of the Series D
Preferred in effect immediately prior to such offering divided by (ii) a
fraction, the numerator of which is the Original Issue Price of the Series D
Preferred multiplied by 1.25 and the denominator of which is the IPO Price.
4. Voting Rights. The holder of each share of Preferred Stock shall be
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entitled to the number of votes equal to the number of shares of Common Stock
into which each share of Preferred Stock could be converted on the record date
for the vote or consent of shareholders written consent and, except as otherwise
required by law or provided for herein, shall have voting rights and powers
equal to the voting rights and powers of the Common Stock. The holder of each
share of Preferred Stock shall be entitled to notice of any shareholders'
meeting in accordance with the bylaws of the Corporation and shall vote with
holders of the Common Stock upon the election of directors, except as provided
in Section 5 herein, and upon any other matter submitted to a vote of
shareholders, except those matters required by law to be submitted to a class
vote. Fractional votes shall not, however, be permitted and any fractional
voting rights resulting from the above formula (after aggregating all shares of
Common Stock into which shares of Preferred Stock held by each holder could be
converted) shall be rounded to the nearest whole number (with one-half rounded
upward to one).
5. Election of Directors. At each election of the Corporation's
---------------------
directors, (i) the holders of the Corporation's Series A Preferred shall have
the right, voting as a separate class (with cumulative voting rights as among
themselves in accordance with Section 708 of the California Corporations Code)
to elect one (1) member of the Board of Directors, (ii) the holders of the
Corporation's Series B Preferred shall have the right, voting as a separate
class (with cumulative voting rights as among themselves in accordance with
Section 708 of the California Corporations Code) to elect one (1) member of the
Board of Directors, (iii) the holders of the Corporation's Series C Preferred
shall have the right, voting as a separate class (with cumulative voting rights
as among themselves in accordance with Section 708 of the California
Corporations Code) to elect two (2) members of the Board of Directors, and (iv)
the holders of the Corporation's Common Stock
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<PAGE>
shall have the right, voting as a separate class (with cumulative voting rights
as among themselves in accordance with Section 708 of the California
Corporations Code) to elect two (2) members of the Board of Directors. Any
additional directors shall be elected by all of the holders of Common Stock and
Preferred Stock, voting as a single class.
6. Protective Provisions.
---------------------
(a) In addition to any other class vote that may be required by law,
this Corporation shall not without first obtaining the approval (by vote or
written consent, as provided by law) of the holders of at least a majority of
the then outstanding shares of Preferred Stock:
(i) sell, convey or otherwise dispose of all or substantially
all of its property or business, or merge into or effect a reorganization with
any other corporation (other than a wholly owned subsidiary corporation) in
which the shareholders of this Corporation immediately prior to the transaction
possess less than 50% of the voting power of the surviving entity (or its
parent) immediately after the transaction, or sell the capital stock of the
Corporation where the shareholders of this Corporation immediately prior to the
transaction possess less than 50% of the voting power of the Corporation
immediately after the transaction;
(ii) change the rights, preferences, privileges or restrictions
of the Preferred Stock;
(iii) increase or decrease the aggregate number of authorized
shares of Preferred Stock, other than as provided in either subdivision (b) of
Section 405 or subdivision (c) of Section 902 of the California Corporations
Code;
(iv) create a new class or series of shares having rights,
preferences or privileges or increase the number of authorized shares of any
class or shares having rights, preferences or privileges equal to or senior to
any outstanding class or series;
(v) pay any dividend on or purchase, redeem or otherwise
acquire any security junior to the Preferred Stock other than repurchases at
cost from employees, consultants, lessors or suppliers upon termination of
employment, consulting, lessor-lessee, or supplier-purchaser relationship,
respectively; or
(vi) voluntarily dissolve or liquidate the Corporation.
(b) Notwithstanding the foregoing Section 6(a), in addition to any
other series vote that may be required by law, so long as 40% of the originally
issued shares of Series C Preferred are outstanding, this Corporation shall not
without first obtaining the approval (by vote or written consent, as provided by
law) of the holders of at least a majority of the then outstanding shares of
Series C Preferred:
(i) materially adversely change the rights, preferences,
privileges or restrictions of the Series C Preferred;
-12-
<PAGE>
(ii) increase or decrease the aggregate number of authorized
shares of Series C Preferred, other than as provided in either subdivision (b)
of Section 405 or subdivision (c) of Section 902 of the California Corporations
Code; or
(iii) create a new class or series of shares having rights,
preferences or privileges senior to the Series C Preferred.
(c) Notwithstanding the foregoing Sections 6(a) and 6(b), in addition
to any other series vote that may be required by law, so long as 40% of the
originally issued shares of Series C Preferred are outstanding, this Corporation
shall not without first obtaining the approval (by vote or written consent, as
provided by law) of the holders of 66 2/3% of the then outstanding shares of
Series C Preferred, voluntarily dissolve or liquidate, sell, convey or otherwise
dispose of all or substantially all of its property or business, or merge into
or effect a reorganization with any other corporation (other than a wholly owned
subsidiary corporation) in which the shareholders of this Corporation
immediately prior to the transaction possess less than 50% of the voting power
of the surviving entity (or its parent) immediately after the transaction if the
consideration received by the holders of the Series C Preferred as a result of
any such liquidation, dissolution, merger or sale of all or substantially all of
the assets of the Corporation is less than $2.50 per share (as adjusted for any
stock dividends, combinations, splits, recapitalizations and the like with
respect to such shares).
(d) Notwithstanding the foregoing Section 6(a), in addition to any
other series vote that may be required by law, so long as 40% of the originally
issued shares of Series D Preferred are outstanding, this Corporation shall not
without first obtaining the approval (by vote or written consent, as provided by
law) of the holders of 66 2/3% of the then outstanding shares of Series D
Preferred, materially adversely change the rights, preferences, privileges or
restrictions of the Series D Preferred.
(e) Unless otherwise required by California law or except as provided
herein, the holders of Common Stock will not have the right to vote as a
separate class on any matter.
7. Repurchase of Shares. In connection with repurchases by this
--------------------
Corporation of its Common Stock, pursuant to its agreements with certain of the
holders thereof, Sections 502 and 503 of the California General Corporation Law
shall not apply in whole or in part with respect to such repurchases.
8. Series B Preferred - Right of Redemption.
----------------------------------------
(a) Subject to Section 8(e) herein, the Corporation shall be
obligated to redeem the Series B Preferred as follows:
(i) At any time after March 31, 2004, the holders of a majority
of the then outstanding shares of Series B Preferred (the "Series B Initiating
Holders") may require the Corporation to the extent it may lawfully do so, to
redeem all of the outstanding Series B Preferred in three (3) equal annual
installments with the first installment date being the date forty-five (45) days
after receipt by the Corporation of the Series B Exercise Notice (as defined
below), the second
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<PAGE>
installment being the date one (1) year from the first installment date and the
last installment date being a date two (2) years from such first installment
date (each a "Series B Redemption Date"). The Corporation shall effect such
redemptions on the applicable Series B Redemption Date by paying in cash in
exchange for each share of Series B Preferred to be redeemed on each applicable
Series B Redemption Date a sum equal to the fair market value per share of
Series B Preferred as of the date of receipt by the Corporation of the Series B
Exercise Notice plus all accrued and unpaid dividends thereon. The fair market
value per share of Series B Preferred for the purposes of this Section 8, shall
be determined by the Board of Directors of the Corporation. If such
determination is unacceptable to the holders of a majority of the Series B
Preferred, then the fair market value per share of Series B Preferred shall be
determined by an investment banking firm mutually acceptable to the Corporation
and the holders of a majority of the Series B Preferred. The Series B Initiating
Holders shall have the right to revoke a Series B Exercise Notice by giving
written notice to the Corporation within fifteen (15) days after their receipt
of the Series B Redemption Notice (as defined below). The total amount to be
paid for the Series B Preferred is hereinafter referred to as the "Series B
Redemption Price." The number of shares of Series B Preferred that the
Corporation shall be required to redeem on any one Series B Redemption Date
shall be equal to the amount determined by dividing (i) the aggregate number of
shares of Series B Preferred outstanding immediately prior to the Series B
Redemption Date by (ii) the number of remaining Series B Redemption Dates
(including the Series B Redemption Date to which such calculation applies).
Shares subject to redemption pursuant to this Section 8(a) shall be redeemed
from each holder of Series B Preferred on a pro rata basis.
(ii) At any time after March 31, 2004, the Series B Initiating
Holders can elect to exercise the right of first redemption pursuant to this
Section 8(a) by providing written notice (the "Series B Exercise Notice") to the
Corporation. Within fifteen (15) days after the receipt of the Series B
Exercise Notice, the Corporation shall (i) send a notice (a "Series B Redemption
Notice") to each holder of record of the Series B Preferred to be redeemed at
the address of such holder appearing on the books of the Corporation setting
forth (a) the Series B Redemption Price for the shares to be redeemed and (b)
the place at which such holders may obtain payment of the Series B Redemption
Price upon surrender of their share certificates, and (ii) send a notice to each
holder of record of the Series C Preferred at the address of such holder
appearing on the books of the Corporation notifying such holders of the election
of the holders of the Series B Preferred to exercise the right of redemption of
the Series B Preferred. If the Corporation does not have sufficient funds
legally available to redeem all shares to be redeemed at any Series B Redemption
Date (including, if applicable, those to be redeemed at the option of the
Corporation), then it shall redeem such shares pro rata (based on the portion of
the aggregate Series B Redemption Price payable to them) to the extent possible
and shall redeem the remaining shares to be redeemed as soon as sufficient funds
are legally available.
(b) On each Series B Redemption Date, the Corporation shall deposit
the portion of the Series B Redemption Price sufficient to redeem the shares to
be redeemed upon such Series B Redemption Date with a bank or trust corporation
having aggregate capital and surplus in excess of $100,000,000, as a trust fund,
with irrevocable instructions and authority to the bank or trust corporation to
pay, on and after such Series B Redemption Date, the applicable portion of the
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<PAGE>
Series B Redemption Price to their respective holders upon the surrender of
their share certificates. Any monies deposited by the Corporation pursuant to
this Section 8(b) for the redemption of shares thereafter converted into shares
of Common Stock pursuant to Section 3 hereof no later than the fifth (5th) day
preceding the applicable Series B Redemption Date shall be returned to the
Corporation forthwith upon such conversion. The balance of any funds deposited
by the Corporation pursuant to this Section 8(b) remaining unclaimed at the
expiration of one (1) year following such Series B Redemption Date shall be
returned to the Corporation.
(c) On or after such Series B Redemption Date, each holder of shares
of Series B Preferred to be redeemed shall surrender such holder's certificates
representing such shares to the Corporation in the manner and at the place
designated in the Redemption Notice, and thereupon the applicable portion of the
Series B 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 canceled. In the event less
than all the shares represented by such certificates are redeemed, a new
certificate shall be issued representing the unredeemed shares. From and after
the date the Corporation deposits funds pursuant to Section 8(b) hereof with
respect to shares to be redeemed on such Series B Redemption Date, unless there
shall have been a default in payment of the applicable portion of the Series B
Redemption Price or the Corporation is unable to pay the applicable portion of
the Series B Redemption Price due to not having sufficient legally available
funds, all rights of the holders of such shares as holders of Series B Preferred
(except the right to receive the Series B Redemption Price without interest upon
surrender of their certificates), shall cease and terminate with respect to such
shares, provided that in the event that shares of Series B Preferred are not
redeemed due to a default in payment by the Corporation or because the
Corporation does not have sufficient legally available funds, such shares of
Series B Preferred shall remain outstanding and shall be entitled to all of the
rights and preferences provided herein.
(d) In the event of a call for redemption of any shares of Series B
Preferred, the Conversion Rights (as defined in Section 3) for the shares of
Series B Preferred to be redeemed on a particular Series B Redemption Date shall
terminate at the close of business on the fifth (5th) day preceding such Series
B Redemption Date, unless default is made in payment of the Series B Redemption
Price.
(e) In the event that the Series B Initiating Holders have elected to
exercise their right of redemption pursuant to this Section 8 and to the extent
that the Company receives the Series C Exercise Notice (as defined below) from
the Series C Initiating Holders (as defined below) or the Series D Exercise
Notice (as defined below) from the Series D Initiating Holders (as defined
below) prior to the deposit by the Company of funds pursuant to Section 8(b)
hereof with respect to any applicable Series B Redemption Date, the right of
redemption of the Series C Preferred and the Series D Preferred shall be
superior and in preference to the right of redemption of the Series B Preferred
and the holders of the Series C Preferred and Series D Preferred shall be
entitled to receive the full amount of the Series C Redemption Price and the
Series D Redemption Price out of legally available funds of the Corporation
prior to the payment of any portion of the Series B Redemption Price not
previously deposited by the Company pursuant to Section 8(b) or required to be
paid to the holders of the Series B Preferred pursuant to the last sentence of
Section 8(a)(ii) hereof. In such
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<PAGE>
event, after the full amount of the Series C Redemption Price and the Series D
Redemption Price has been deposited pursuant to Sections 9(b) and 10(b) below,
the holders of the Series B Preferred shall be entitled to receive the full
amount of the Series B Redemption Price of the Series B Preferred. If the funds
of the Corporation legally available for redemption of shares of the Series B
Preferred, Series C Preferred or Series D Preferred are insufficient to redeem
the total number of shares of Series B Preferred, Series C Preferred or Series D
Preferred to be redeemed on a Series B Redemption Date, Series C Redemption Date
or Series D Redemption Date, those funds which are legally available will be
used to redeem the maximum possible number of such shares from first the holders
of the Series C Preferred and Series D Preferred to the extent of the full
amount of the Series C Redemption Price and Series D Redemption Price pro rata
based on the relative redemption price of such series and next to the holders of
the Series B Preferred to the extent of the full amount of the Series B
Redemption Price. The shares of Series B Preferred, Series C Preferred or Series
D Preferred not redeemed, as the case may be, shall remain outstanding and
entitled to all the rights and preferences provided herein, including the rights
of conversion set forth in Section 3. At any time thereafter when additional
funds of the Corporation are legally available for the redemption of shares of
Series B Preferred, Series C Preferred or Series D Preferred, as the case may
be, such funds will immediately be used to redeem the balance of the shares
which the Corporation has become obliged to redeem on any Redemption Date but
which it has not redeemed.
9. Series C Preferred - Right of Redemption.
----------------------------------------
(a) Subject to Section 8(e) above, the Corporation shall be obligated
to redeem the Series C Preferred as follows:
(i) Beginning on or after March 31, 2004, the holders of 66
2/3% of the then outstanding shares of Series C Preferred (the "Series C
Initiating Holders") may require the Corporation to the extent it may lawfully
do so, to redeem all of the outstanding Series C Preferred. Such redemption
shall occur on the 45th day following the Corporation's receipt of the Series C
Exercise Notice (as defined below) (such date being herein referred to as the
"Initial Series C Redemption Date"), provided that the Series C Initiating
--------
Holders shall have the right to revoke a Series C Exercise Notice by giving
written notice to the Corporation within fifteen (15) days after their receipt
of the Series C Redemption Notice, and provided further that in lieu of
-------- -------
redeeming all of the Series C Preferred on the Initial Series C Redemption Date
the Corporation shall have the right to redeem the Series C Preferred in three
(3) equal installments, with the first installment date being the Initial Series
C Redemption Date, the second installment being the first anniversary of the
Initial Series C Redemption Date and the last installment being the second
anniversary of the Initial Series C Redemption Date (the Initial Series C
Redemption Date and each of such other redemption dates being herein referred to
as a "Series C Redemption Date"). The Corporation shall effect such redemptions
on the applicable Series C Redemption Date by paying in cash in exchange for
each share of Series C Preferred to be redeemed on each applicable Series C
Redemption Date, a sum equal to the fair market value per share of Series C
Preferred as of the date of receipt by the Corporation of the Series C Exercise
Notice plus all accrued and unpaid dividends with respect to such shares thereon
plus interest at the rate of 10% per annum payable on the amount of the unpaid
Series C Redemption Price (as hereinafter defined) accruing from the Initial
Series C Redemption
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<PAGE>
Date until paid. The fair market value per share of Series C Preferred for the
purposes of this Section 9, shall be determined by the Board of Directors of the
Corporation. If such determination is unacceptable to the holders of a majority
of the Series C Preferred, then the fair market value per share of Series C
Preferred shall be determined by an investment banking firm mutually acceptable
to the Corporation and the holders of a majority of the Series C Preferred. The
total amount to be paid for the Series C Preferred is hereinafter referred to as
the "Series C Redemption Price." The number of shares of Series C Preferred that
the Corporation shall be required to redeem on any one Series C Redemption Date
shall be equal to the amount determined by dividing (i) the aggregate number of
shares of Series C Preferred outstanding immediately prior to the Series C
Redemption Date by (ii) the number of remaining Series C Redemption Dates
(including the Series C Redemption Date to which such calculation applies).
Shares subject to redemption pursuant to this Section 9(a) shall be redeemed
from each holder of Series C Preferred on a pro rata basis.
(ii) At any time after March 31, 2004, the Series C Initiating
Holders can elect to exercise the right of first redemption pursuant to this
Section 9(a) by providing written notice (the "Series C Exercise Notice") to the
Corporation. Within fifteen (15) days after the receipt of the Series C Exercise
Notice, the Corporation shall (i) send a notice (a Series C "Redemption Notice")
to each holder of record of the Series C Preferred to be redeemed at the address
of such holder appearing on the books of the Corporation setting forth (a) the
Series C Redemption Price for the shares to be redeemed and (b) the place at
which such holders may obtain payment of the Series C Redemption Price upon
surrender of their share certificates. If the Corporation does not have
sufficient funds legally available to redeem all shares to be redeemed at the
Series C Redemption Date (including, if applicable, those to be redeemed at the
option of the Corporation), then it shall redeem such shares pro rata (based on
the portion of the aggregate Series C Redemption Price payable to them) to the
extent possible and shall redeem the remaining shares to be redeemed as soon as
sufficient funds are legally available.
(b) On or prior to the Series C Redemption Date, the Corporation
shall deposit the applicable portion of the Series C Redemption Price of the
shares to be redeemed on such Series C Redemption Date with a bank or trust
corporation having aggregate capital and surplus in excess of $100,000,000, as a
trust fund, with irrevocable instructions and authority to the bank or trust
corporation to pay, on and after such Series C Redemption Date, the applicable
portion of the Series C Redemption Price of the shares to their respective
holders upon the surrender of their share certificates. Any monies deposited by
the Corporation pursuant to this Section 9(b) for the redemption of shares
thereafter converted into shares of Common Stock pursuant to Section 3 hereof no
later than the fifth (5th) day preceding the Series C Redemption Date shall be
returned to the Corporation forthwith upon such conversion. The balance of any
funds deposited by the Corporation pursuant to this Section 9(b) remaining
unclaimed at the expiration of one (1) year following such Series C Redemption
Date shall be returned to the Corporation.
(c) On or after such Series C Redemption Date, each holder of shares
of Series C Preferred to be redeemed shall surrender such holder's certificates
representing such shares to the Corporation in the manner and at the place
designated in the Series C Redemption Notice, and thereupon the applicable
portion of the Series C Redemption Price of such shares shall be payable to
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<PAGE>
the order of the person whose name appears on such certificate or certificates
as the owner thereof and each surrendered certificate shall be canceled. In the
event less than all the shares represented by such certificates are redeemed, a
new certificate shall be issued representing the unredeemed shares. From and
after the date the Corporation deposits funds pursuant to Section 9(b) hereof
with respect to shares to be redeemed on such Series C Redemption Date, unless
there shall have been a default in payment of the applicable portion of the
Series C Redemption Price or the Corporation is unable to pay the applicable
portion of the Series C Redemption Price due to not having sufficient legally
available funds, all rights of the holders of such shares as holders of Series C
Preferred (except the right to receive the Series C Redemption Price without
interest upon surrender of their certificates), shall cease and terminate with
respect to such shares, provided that in the event that shares of Series C
Preferred are not redeemed due to a default in payment by the Corporation or
because the Corporation does not have sufficient legally available funds, such
shares of Series C Preferred shall remain outstanding and shall be entitled to
all of the rights and preferences provided herein.
(d) In the event of a call for redemption of any shares of Series C
Preferred, the Conversion Rights (as defined in Section 3) for the shares of
Series C Preferred to be redeemed on a particular Series C Redemption Date shall
terminate at the close of business on the fifth (5th) day preceding such Series
C Redemption Date, unless default is made in payment of the Series C Redemption
Price.
10. Series D Preferred - Right of Redemption.
----------------------------------------
(a) Subject to Section 8(e) above, the Corporation shall be obligated
to redeem the Series D Preferred as follows:
(i) Beginning on or after March 31, 2004, the holders of 66
2/3% of the then outstanding shares of Series D Preferred (the "Series D
Initiating Holders") may require the Corporation to the extent it may lawfully
do so, to redeem all of the outstanding Series D Preferred. Such redemption
shall occur on the 45th day following the Corporation's receipt of the Series D
Exercise Notice (as defined below) (such date being herein referred to as the
"Initial Series D Redemption Date"), provided that the Series D Initiating
--------
Holders shall have the right to revoke a Series D Exercise Notice by giving
written notice to the Corporation within fifteen (15) days after their receipt
of the Series D Redemption Notice, and provided further that in lieu of
-------- -------
redeeming all of the Series D Preferred on the Initial Series D Redemption Date
the Corporation shall have the right to redeem the Series D Preferred in three
(3) equal installments, with the first installment date being the Initial Series
D Redemption Date, the second installment being the first anniversary of the
Initial Series D Redemption Date and the last installment being the second
anniversary of the Initial Series D Redemption Date (the Initial Series D
Redemption Date and each of such other redemption dates being herein referred to
as a "Series D Redemption Date"). The Corporation shall effect such redemptions
on the applicable Series D Redemption Date by paying in cash in exchange for
each share of Series D Preferred to be redeemed on each applicable Series D
Redemption Date, a sum equal to the fair market value per share of Series D
Preferred as of the date of receipt by the Corporation of the Series D Exercise
Notice plus all accrued and unpaid dividends with respect to such shares thereon
plus interest at the rate of 10% per annum payable on the amount of the unpaid
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<PAGE>
Series D Redemption Price (as hereinafter defined) accruing from the Initial
Series D Redemption Date until paid. The fair market value per share of Series D
Preferred for the purposes of this Section 10, shall be determined by the Board
of Directors of the Corporation. If such determination is unacceptable to the
holders of a majority of the Series D Preferred, then the fair market value per
share of Series D Preferred shall be determined by an investment banking firm
mutually acceptable to the Corporation and the holders of a majority of the
Series D Preferred. The total amount to be paid for the Series D Preferred is
hereinafter referred to as the "Series D Redemption Price." The number of shares
of Series D Preferred that the Corporation shall be required to redeem on any
one Series D Redemption Date shall be equal to the amount determined by dividing
(i) the aggregate number of shares of Series D Preferred outstanding immediately
prior to the Series D Redemption Date by (ii) the number of remaining Series D
Redemption Dates (including the Series D Redemption Date to which such
calculation applies). Shares subject to redemption pursuant to this Section
10(a) shall be redeemed from each holder of Series D Preferred on a pro rata
basis.
(ii) At any time after March 31, 2004, the Series D Initiating
Holders can elect to exercise the right of first redemption pursuant to this
Section 10(a) by providing written notice (the "Series D Exercise Notice") to
the Corporation. Within fifteen (15) days after the receipt of the Series D
Exercise Notice, the Corporation shall (i) send a notice (a Series D "Redemption
Notice") to each holder of record of the Series D Preferred to be redeemed at
the address of such holder appearing on the books of the Corporation setting
forth (a) the Series D Redemption Price for the shares to be redeemed and (b)
the place at which such holders may obtain payment of the Series D Redemption
Price upon surrender of their share certificates. If the Corporation does not
have sufficient funds legally available to redeem all shares to be redeemed at
the Series D Redemption Date (including, if applicable, those to be redeemed at
the option of the Corporation), then it shall redeem such shares pro rata (based
on the portion of the aggregate Series D Redemption Price payable to them) to
the extent possible and shall redeem the remaining shares to be redeemed as soon
as sufficient funds are legally available.
(b) On or prior to the Series D Redemption Date, the Corporation
shall deposit the applicable portion of the Series D Redemption Price of the
shares to be redeemed on such Series D Redemption Date with a bank or trust
corporation having aggregate capital and surplus in excess of $100,000,000, as a
trust fund, with irrevocable instructions and authority to the bank or trust
corporation to pay, on and after such Series D Redemption Date, the applicable
portion of the Series D Redemption Price of the shares to their respective
holders upon the surrender of their share certificates. Any monies deposited by
the Corporation pursuant to this Section 10(b) for the redemption of shares
thereafter converted into shares of Common Stock pursuant to Section 3 hereof no
later than the fifth (5th) day preceding the Series D Redemption Date shall be
returned to the Corporation forthwith upon such conversion. The balance of any
funds deposited by the Corporation pursuant to this Section 10(b) remaining
unclaimed at the expiration of one (1) year following such Series D Redemption
Date shall be returned to the Corporation.
(c) On or after such Series D Redemption Date, each holder of shares
of Series D Preferred to be redeemed shall surrender such holder's certificates
representing such shares to the Corporation in the manner and at the place
designated in the Series D Redemption Notice, and
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<PAGE>
thereupon the applicable portion of the Series D 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 canceled. In the event less than all the shares represented
by such certificates are redeemed, a new certificate shall be issued
representing the unredeemed shares. From and after the date the Corporation
deposits funds pursuant to Section 10(b) hereof with respect to shares to be
redeemed on such Series D Redemption Date, unless there shall have been a
default in payment of the applicable portion of the Series D Redemption Price or
the Corporation is unable to pay the applicable portion of the Series D
Redemption Price due to not having sufficient legally available funds, all
rights of the holders of such shares as holders of Series D Preferred (except
the right to receive the Series D Redemption Price without interest upon
surrender of their certificates), shall cease and terminate with respect to such
shares, provided that in the event that shares of Series D Preferred are not
redeemed due to a default in payment by the Corporation or because the
Corporation does not have sufficient legally available funds, such shares of
Series D Preferred shall remain outstanding and shall be entitled to all of the
rights and preferences provided herein.
(d) In the event of a call for redemption of any shares of Series D
Preferred, the Conversion Rights (as defined in Section 3) for the shares of
Series D Preferred to be redeemed on a particular Series D Redemption Date shall
terminate at the close of business on the fifth (5th) day preceding such Series
D Redemption Date, unless default is made in payment of the Series D Redemption
Price.
V.
1. Limitation of Directors' Liability. The liability of the directors of
----------------------------------
this Corporation for monetary damages shall be eliminated to the fullest extent
permissible under California law.
2. Indemnification of Corporate Agents. This Corporation is authorized
-----------------------------------
to indemnify its agents to the fullest extent permissible under California law.
For purposes of this provision the term "agent" has the meaning set forth in
Section 317 of the California Corporations Code.
3. Repeal or Modification. Any repeal or modification of the foregoing
----------------------
provisions of this Article V shall not adversely affect any right of
indemnification or limitation of liability of an agent of this Corporation
relating to acts or omissions occurring prior to such repeal or modification.
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<PAGE>
EXHIBIT C
---------
SCHEDULE OF EXCEPTIONS
<PAGE>
EXHIBIT C
---------
SCHEDULE OF EXCEPTIONS
This Schedule of Exceptions, dated as of the Closing Date, is made and
given pursuant to Section 2 of the Inventa Corporation Series D Preferred Stock
Purchase Agreement dated January 19, 2000 (the "Agreement").
The section numbers in this Schedule of Exceptions correspond to the
section numbers in the Agreement; however, any information disclosed herein
under any section number shall be deemed to be disclosed and incorporated into
any other section number under the Agreement where such disclosure would be
appropriate. Unless the context otherwise requires, all capitalized terms shall
have the same meanings assigned to them in the Agreement.
2.1 Organization, Good Standing and Qualification
---------------------------------------------
The Company has facilities located in Illinois and Virginia and is
currently in the process of qualifying to do business in such states as a
foreign corporation.
2.2 Capitalization.
--------------
On July 8, 1994, the Company granted warrants to purchase 100,000 shares of
Series A Preferred Stock of the Company (200,000 shares after taking into
account the Company's 2-for-1 stock split effective as of January 29, 1997).
The Series A Preferred Stock warrants are exercisable at $0.50 per share. The
Company has reserved a total of 5,355,000 shares of common stock under the
Company's 1993 Stock Option Plan (the "Plan"). As of the Closing, options for
3,620,998 shares were outstanding under the Plan and 1,478,808 shares remained
available for future issuance under the Plan.
In connection with the Loan and Security Agreement with Greyrock Capital
dated November 17, 1999, the Company issued a warrant to Greyrock to purchase up
to 160,000 shares of Series C Preferred Stock at an exercise price of $2.50 per
share. The warrant expires on November 30, 2004.
2.3 Subsidiaries.
------------
The Company has a wholly-owned subsidiary in Singapore called ICG Systems
(Far East) Pte. Ltd. and two wholly-owned subsidiaries in Malaysia called ICG
Systems Sdn. Bhd and Baktimaka Sdn. Bhd. The Company is currently in the process
of liquidating all three subsidiaries.
2.7 Litigation.
----------
The Internal Revenue Service ("IRS") has made assessments on the Company's
former Indian subsidiary called Inventa Software India Pvt. Ltd. (now called
Ventura Data Systems Pvt. Ltd. since the Company's divestiture of its ownership)
with respect to federal tax returns filed by the Company for tax years 1990 and
1991 which included payments of certain expenses (the "Disputed Payments") for
work done for the Company in the United States by employees of the Company's
<PAGE>
former subsidiary. The Company has appealed the assessments. No final
determination has yet been made by the IRS. Should the IRS determine that the
Company has a tax liability with respect to the Disputed Payments, the Company
expects that such tax liability, including penalties will not exceed $76,000.
The Company has filed a legal petition for the liquidation of the Malaysian
company Inventa Software (M) SDN. BHD which petition has been approved.
2.8 Patents.
-------
The Company does not currently have the legal right to the name "Inventa"
in Singapore. Further, the Company does not currently have the legal right to
the name "Inventa" in Malaysia subject to liquidation of the Malaysian company
Inventa Software (M) SDN. BHD (see Section 2.7). A Company trademark status
report is attached hereto as Exhibit A.
2.12 Title to Property and Assets.
----------------------------
In connection with the Loan and Security Agreement with Greyrock Capital
dated November 17, 1999, the Company has granted Greyrock a security interest in
all receivables, inventory, equipment, investment property and general
intangibles (as defined in the agreement).
2.13 Financial Statements.
--------------------
The Company's auditors have conducted audit procedures regarding the
Company's financial statements for the fiscal year ended December 31, 1998. The
Company and its auditors are currently engaged in discussions related to expense
recognition associated with the issuance of options under the Company's 1993
Stock Option Plan.
2.14 Changes.
-------
The Company entered into the Loan and Security Agreement with Greyrock
Capital dated November 17, 1999, as described in Section 2.20(c) below.
Concurrently with the closing of the Greyrock agreement, the Company paid off
its line of credit with Silicon Valley Bank.
2.17 Employee Plans.
--------------
The Company has adopted a 401(k) savings plan (the "401(k) Plan").
Participants in the 401(k) Plan may defer compensation in an amount not in
excess of the annual statutory limit. The Company makes matching contributions
in an amount equal to twenty five percent (25%) of the first four percent (4%)
of an individual employee's salary contributed to the 401(k) Plan.
The Company maintains performance incentive bonus plans which provide for
bonus payments to employees upon the attainment of specific performance
criteria.
-2-
<PAGE>
2.18 Employees.
---------
Subsequent to July 8, 1994, every United States employee and consultant
with access to confidential or proprietary information of the Company has
executed a Proprietary Information Agreement ("Proprietary Information
Agreement"), substantially in the form attached to the Agreement as Exhibit D.
Prior to July 8, 1994, the Company did not require its employees or consultants
to sign a Proprietary Information Agreement. Certain employees and consultants
of the Company's foreign subsidiaries have not signed a Proprietary Information
Agreement.
In January 1999, the Company entered into an Employment and Noncompetition
Agreement with David Lavanty for a term of three years. The agreement provides
for severance payments and accelerated vesting of stock options in the event of
termination under certain circumstances and upon a change of control of the
Company.
The Company currently has severance agreements with Ashok Santhanam, David
Lavanty, Ed Leppert, Robert Kudis, Tony Moretto, Michael Makishima, Srikantan
Moorthy, Massimo Chiocca and Elizabeth Campbell which provide for severance
payments upon a "change of control" of the Company (as such term is defined in
such agreement).
2.19 Tax Returns and Payments.
------------------------
See Section 2.7 above regarding the examination of the Company by the
Internal Revenue Service.
2.20 Agreements; Action.
------------------
(a) The Company currently has severance agreements with Ashok
Santhanam, David Lavanty, Ed Leppert, Robert Kudis, Tony Moretto, Michael
Makishima, Srikantan Moorthy, Massimo Chiocca and Elizabeth Campbell which
provide for severance payments upon a "change of control" of the Company (as
such term is defined in such agreement).
The Company entered into an Employment and Noncompetition Agreement with
David Lavanty as described in Section 2.18 above.
In December 1999, the Company entered into a thirty six (36) month
automobile lease agreement for the benefit of Ashok Santhanam, the Company's
President. The lease agreement is personally guaranteed by Ashok Santhanam.
(b) The Company entered into a Master Services Agreement with ADP,
Inc. in December 1998, pursuant to which the Company has agreed that (i) for a
period of twenty-four (24) months following the termination of such agreement,
the Company will not provide any Deliverable (as defined in the agreement) to
any provider of payroll software, payroll or payroll related services, and (ii)
for a period of twelve (12) months following the termination of such agreement,
the Company will not build or develop an Internet-enabling application/program
which contains similar functionality to the applications/programs developed
pursuant to the agreement.
The Company entered into a Software Development Agreement with Cal-Surance
Associates, Inc. in February 1999, pursuant to which the Company has agreed that
for a period of twenty-four (24)
-3-
<PAGE>
months following completion of the Engagement (as defined in the agreement), the
Company will not undertake an engagement for any brokerage firms that sell
professional liability insurance, insurance companies that sell professional
liability insurance, or other insurance companies selling, marketing or
intending to sell or market professional liability insurance, where the
deliverables of such engagement are substantially similar in the purpose to or
substantially competitive with those provided under the Engagement. This
agreement was subsequently assigned by Cal-Surance to ePolicy.com, Inc. as of
September 16, 1999.
As of July 30, 1999, the Company entered into an Engagement Addendum
subject to a Master Software Development Agreement with ePolicy.com, Inc.
pursuant to which the Company has agreed that for a period of twenty-four (24)
months following completion of any RADD Engagement, the Company will not
undertake an engagement for (i) brokerage firms that sell professional liability
insurance, and/or business owners insurance, workmen's compensation insurance,
commercial automobile insurance and/or comparison shopping as it relates to such
insurance; (ii) insurance companies that sell professional liability insurance,
and/or business owners insurance, workmen's compensation insurance, commercial
automobile insurance and/or comparison shopping as it relates to such insurance;
or (iii) other insurance companies selling, marketing or intending to sell or
market professional liability insurance, and/or business owners insurance,
workmen's compensation insurance, commercial automobile insurance and/or
comparison shopping as it relates to such insurance, where the deliverables of
such engagement are substantially similar in the purpose to or substantially
competitive with those provided under the Engagement.
As of September 20, 1999, the Company entered into an Engagement Addendum
subject to a Master Services Agreement with Pure Markets Corporation
("PMC")("Blacksmith") dated as of August 16,1999, pursuant to which the Company
has agreed that (i) for a period of twelve (12) months after the delivery of the
final Deliverable in accordance with this Engagement Addendum or any additional
Engagement Addendum into which the parties may enter, Inventa agrees that
neither Inventa nor any of its employees (acting within the scope of their
employment) will, without PMC's prior written consent, perform any work or
services for any PMC Competitors, their parents, subsidiaries or affiliates, nor
will Inventa itself become a PMC Competitor. "PMC Competitor" means any person
or entity that engages in, or has taken specific actions to engage in, the
business of providing, either via the Internet or any other electronic means, a
marketplace or exchange whereby multiple lessors and multiple lessees can
interact and conduct lease and related financial transactions in direct
competition with PMC.
The Company leases office space for its headquarters at 255 Shoreline
Drive, Redwood Shores, California under a lease agreement expiring in March
2001, with monthly lease payments of approximately $56,778. In addition, the
Company leases office space in New Brunswick, New Jersey; Oakbrook Terrace,
Illinois; Plymouth Meeting, Pennsylvania; and New York, New York under three
lease agreements expiring, respectively, in October 2003, April 2002, December
1999 and September 1999. The monthly lease payments under such agreements are
approximately $11,266, $9,852, $6,500 and $2,200, respectively. The Company also
leases office space in Reston, Virginia on a month-to-month basis with a monthly
lease payment of approximately $5,120.
-4-
<PAGE>
The Company leases various equipment under operating lease arrangements.
At December 31, 1998, the minimum aggregate payments under operating equipment
leases for the 1999 and 2000 fiscal years were, respectively, $20,742 and
$11,974.
The Company leases various equipment under capital lease arrangements. At
December 31, 1998, the minimum aggregate payments under capital equipment leases
for the 1999 and 2000 fiscal years were, respectively, $131,496 and $60,308.
(c) On November 17, 1999, the Company entered into a Loan and
Security Agreement with Greyrock Capital that provides for a term loan in the
amount of $4,000,000, for an initial term of one year and a revolving line of
credit up to $2,000,000 based upon accounts receivable balances. The loan bears
interest at the prime rate plus two percent (2%) per annum. In connection with
this agreement, the Company granted warrants to Greyrock to purchase shares of
Series C Preferred Stock as described in Section 2.2 above.
(d) The Company is currently negotiating to acquire all of the
outstanding stock of Xtend-Tech, Inc. in exchange for 1,350,000 shares of the
Company's Common Stock.
-5-
<PAGE>
EXHIBIT D
---------
FORM OF PROPRIETARY INFORMATION AGREEMENT
<PAGE>
EXHIBIT D
---------
INVENTA CORPORATION
EMPLOYMENT, CONFIDENTIAL INFORMATION AND
INVENTION ASSIGNMENT AGREEMENT
As a condition of my employment with Inventa Corporation, its subsidiaries,
affiliates, successors or assigns (the "Company"), and in consideration of my
employment with the Company and my receipt of the compensation now and hereafter
paid to me by the Company, I agree to the following:
(a) At-Will Employment. I understand and acknowledge that my
------------------
employment with the Company is for an unspecified duration and constitutes "at-
will" employment. I acknowledge that this employment relationship may be
terminated at any time, with or without good cause or for any or no cause, at
the option either of the Company or myself, with or without notice.
(b) Confidential Information.
------------------------
(i) Company Information. I agree at all times during the term
-------------------
of my employment and thereafter, to hold in strictest confidence, and not to
use, except for the benefit of the Company, or to disclose to any person, firm
or corporation without written authorization of the Board of Directors of the
Company, any Confidential Information of the Company. I understand that
"Confidential Information" means any of the Company's proprietary information,
technical data, trade secrets or know-how, including, but not limited to,
research, product plans, products, services, customer lists and customers
(including, but not limited to, customers of the Company on whom I called or
with whom I became acquainted during the term of my employment), markets,
software, developments, inventions, processes, formulas, technology, designs,
drawings, engineering, hardware configuration information, marketing, finances
or other business information disclosed to me by the Company either directly or
indirectly in writing, orally or by drawings or observation of parts or
equipment. I further understand that Confidential Information does not include
any of the foregoing items which has become publicly known and made generally
available through no wrongful act of mine or of others who were under
confidentiality obligations as to the item or items involved.
(ii) Former Employer Information. I agree that I will not,
---------------------------
during my employment with the Company, improperly use or disclose any
proprietary information or trade secrets of any former or concurrent employer or
other person or entity and that I will not bring onto the premises of the
Company any unpublished document or proprietary information belonging to any
such employer, person or entity unless consented to in writing by such employer,
person or entity.
<PAGE>
(iii) Third Party Information. I recognize that the Company has
-----------------------
received and in the future will receive from third parties their confidential or
proprietary information subject to a duty on the Company's part to maintain the
confidentiality of such information and to use it only for certain limited
purposes. I agree to hold all such confidential or proprietary information in
the strictest confidence and not to disclose it to any person, firm or
corporation or to use it except as necessary in carrying out my work for the
Company consistent with the Company's agreement with such third party.
(c) Inventions.
----------
(i) Inventions Retained and Licensed. I have attached hereto,
--------------------------------
as Exhibit A, a list describing all inventions, original works of authorship,
developments, improvements, and trade secrets which were made by me prior to my
employment with the Company (collectively referred to as "Prior Inventions"),
which belong to me, which relate to the Company's proposed business, products or
research and development, and which are not assigned to the Company hereunder;
or, if no such list is attached, I represent that there are no such Prior
Inventions. If in the course of my employment with the Company, I incorporate
into a the Company product, process or machine a Prior Invention owned by me or
in which I have an interest, the Company is hereby granted and shall have a
nonexclusive, royalty-free, irrevocable, perpetual, worldwide license to make,
have made, modify, use and sell such Prior Invention as part of or in connection
with such product, process or machine.
(ii) Assignment of Inventions. I agree that I will promptly
------------------------
make full written disclosure to the Company, will hold in trust for the sole
right and benefit of the Company, and hereby assign to the Company, or its
designee, all my right, title, and interest in and to any and all inventions,
original works of authorship, developments, concepts, improvements or trade
secrets, whether or not patentable or registrable under copyright or similar
laws, which I may solely or jointly conceive or develop or reduce to practice,
or cause to be conceived or developed or reduced to practice, during the period
of time I am in the employ of the Company (collectively referred to as
"Inventions"), except as provided in Section 3(f) below. I further acknowledge
that all original works of authorship which are made by me (solely or jointly
with others) within the scope of and during the period of my employment with the
Company and which are protectible by copyright are "works made for hire," as
that term is defined in the United States Copyright Act.
(iii) Inventions Assigned to the United States. I agree to
----------------------------------------
assign to the United States government all my right, title, and interest in and
to any and all Inventions whenever such full title is required to be in the
United States by a contract between the Company and the United States or any of
its agencies.
(iv) Maintenance of Records. I agree to keep and maintain
----------------------
adequate and current written records of all Inventions made by me (solely or
jointly with others) during the term of my employment with the Company. The
records will be in the form of notes, sketches, drawings, and any other format
that may be specified by the Company. The records will be available to and
remain the sole property of the Company at all times.
-2-
<PAGE>
(v) Patent and Copyright Registrations. I agree to assist the
----------------------------------
Company, or its designee, at the Company's expense, in every proper way to
secure the Company's rights in the Inventions and any copyrights, patents, mask
work rights or other intellectual property rights relating thereto in any and
all countries, including the disclosure to the Company of all pertinent
information and data with respect thereto, the execution of all applications,
specifications, oaths, assignments and all other instruments which the Company
shall deem necessary in order to apply for and obtain such rights and in order
to assign and convey to the Company, its successors, assigns, and nominees the
sole and exclusive rights, title and interest in and to such Inventions, and any
copyrights, patents, mask work rights or other intellectual property rights
relating thereto. I further agree that my obligation to execute or cause to be
executed, when it is in my power to do so, any such instrument or papers shall
continue after the termination of this Agreement. If the Company is unable
because of my mental or physical incapacity or for any other reason to secure my
signature to apply for or to pursue any application for any United States or
foreign patents or copyright registrations covering Inventions or original works
of authorship assigned to the Company as above, then I hereby irrevocably
designate and appoint the Company and its duly authorized officers and agents as
my agent and attorney in fact, to act for and in my behalf and stead to execute
and file any such applications and to do all other lawfully permitted acts to
further the prosecution and issuance of letters patent or copyright
registrations thereon with the same legal force and effect as if executed by me.
(vi) Exception to Assignments. I understand that the provisions
------------------------
of this Agreement requiring assignment of Inventions to the Company do not apply
to any invention which qualifies fully under the provisions of California Labor
Code Section 2870 (attached hereto as Exhibit B). I will advise the Company
---------
promptly in writing of any inventions that I believe meet the criteria in
California Labor Code Section 2870 and not otherwise disclosed on Exhibit A.
---------
(d) Conflicting Employment. I agree that, during the term of my
----------------------
employment with the Company, I will not engage in any other employment,
occupation, consulting or other business activity directly related to the
business in which the Company is now involved or becomes involved during the
term of my employment, nor will I engage in any other activities that conflict
with my obligations to the Company.
(e) Returning the Company Documents. I agree that, at the time of
-------------------------------
leaving the employ of the Company, I will deliver to the Company (and will not
keep in my possession, recreate or deliver to anyone else) any and all devices,
records, data, notes, reports, proposals, lists, correspondence, specifications,
drawings blueprints, sketches, materials, equipment, other documents or
property, or reproductions of any aforementioned items developed by me pursuant
to my employment with the Company or otherwise belonging to the Company, its
successors or assigns. In the event of the termination of my employment, I agree
to sign and deliver the "Termination Certification" attached hereto as Exhibit
-------
C.
- -
(f) Notification of New Employer. In the event that I leave the
----------------------------
employ of the Company, I hereby grant consent to notification by the Company to
my new employer about my rights and obligations under this Agreement.
-3-
<PAGE>
(g) Solicitation of Employees. I agree that for a period of twelve
-------------------------
(12) months immediately following the termination of my relationship with the
Company for any reason, whether with or without cause, I shall not either
directly or indirectly solicit, induce, recruit or encourage any of the
Company's employees to leave their employment, or take away such employees, or
attempt to solicit, induce, recruit, encourage or take away employees of the
Company, either for myself or for any other person or entity.
(h) Conflict of Interest Guidelines. I agree to diligently adhere to
-------------------------------
the Conflict of Interest Guidelines attached as Exhibit D hereto.
---------
(i) Representations. I agree to execute any proper oath or verify
---------------
any proper document required to carry out the terms of this Agreement. I
represent that my performance of all the terms of this Agreement will not breach
any agreement to keep in confidence proprietary information acquired by me in
confidence or in trust prior to my employment by the Company. I have not entered
into, and I agree I will not enter into, any oral or written agreement in
conflict herewith.
(j) Arbitration and Equitable Relief.
--------------------------------
(i) Arbitration. Except as provided in Section 10(b) below, I
-----------
agree that any dispute or controversy arising out of or relating to any
interpretation, construction, performance or breach of this Agreement, shall be
settled by arbitration to be held in San Francisco County, California, in
accordance with the rules then in effect of the American Arbitration
Association. The arbitrator may grant injunctions or other relief in such
dispute or controversy. The decision of the arbitrator shall be final,
conclusive and binding on the parties to the arbitration. Judgment may be
entered on the arbitrator's decision in any court having jurisdiction. The
Company and I shall each pay one-half of the costs and expenses of such
arbitration, and each of us shall separately pay our counsel fees and expenses.
(ii) Equitable Remedies. I agree that it would be impossible or
------------------
inadequate to measure and calculate the Company's damages from any breach of the
covenants set forth in Sections 2, 3, and 5 herein. Accordingly, I agree that if
I breach any of such Sections, the Company will have available, in addition to
any other right or remedy available, the right to obtain an injunction from a
court of competent jurisdiction restraining such breach or threatened breach and
to specific performance of any such provision of this Agreement. I further agree
that no bond or other security shall be required in obtaining such equitable
relief and I hereby consent to the issuance of such injunction and to the
ordering of specific performance.
(k) General Provisions.
------------------
(i) Governing Law; Consent to Personal Jurisdiction. This
-----------------------------------------------
Agreement will be governed by the laws of the State of California. I hereby
expressly consent to the personal jurisdiction of the state and federal courts
located in California for any lawsuit filed there against me by the Company
arising from or relating to this Agreement.
-4-
<PAGE>
(ii) Entire Agreement. This Agreement sets forth the entire
----------------
agreement and understanding between the Company and me relating to the subject
matter herein and merges all prior discussions between us. No modification of or
amendment to this Agreement, nor any waiver of any rights under this agreement,
will be effective unless in writing signed by the party to be charged. Any
subsequent change or changes in my duties, salary or compensation will not
affect the validity or scope of this Agreement.
(iii) Severability. If one or more of the provisions in this
------------
Agreement are deemed void by law, then the remaining provisions will continue in
full force and effect.
(iv) Successors and Assigns. This Agreement will be binding upon
----------------------
my heirs, executors, administrators and other legal representatives and will be
for the benefit of the Company, its successors, and its assigns.
Date: _________________
___________________________________
Signature
___________________________________
Name of Employee (typed or printed)
________________________
Witness
-5-
<PAGE>
EXHIBIT A
---------
LIST OF PRIOR INVENTIONS
AND ORIGINAL WORKS OF AUTHORSHIP
Identifying Number
Title Date or Brief Description
------------------------------------------------------------------
____ No inventions or improvements
____ Additional Sheets Attached
Signature of Employee: __________________________
Print Name of Employee: _________________________
Date: _________________
-6-
<PAGE>
EXHIBIT B
---------
CALIFORNIA LABOR CODE SECTION 2870
EMPLOYMENT AGREEMENTS; ASSIGNMENT OF RIGHTS
(l) "Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(i) Relate at the time of conception or reduction to practice of
the invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer.
(ii) Result from any work performed by the employee for the
employer.
(m) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable."
-7-
<PAGE>
EXHIBIT C
---------
INVENTA CORPORATION
TERMINATION CERTIFICATION
This is to certify that I do not have in my possession, nor have I failed
to return, any devices, records, data, notes, reports, proposals, lists,
correspondence, specifications, drawings, blueprints, sketches, materials,
equipment, other documents or property, or reproductions of any aforementioned
items belonging to the Company, its subsidiaries, affiliates, successors or
assigns (the "Company").
I further certify that I have complied with all the terms of the Company's
Employment Confidential Information and Invention Assignment Agreement signed by
me, including the reporting of any inventions and original works of authorship
(as defined therein), conceived or made by me (solely or jointly with others)
covered by that agreement.
I further agree that, in compliance with the Employment, Confidential
Information and Invention Assignment Agreement, I will preserve as confidential
all trade secrets, confidential knowledge, data or other proprietary information
relating to products, processes, know-how, designs, formulas, developmental or
experimental work, computer programs, data bases, other original works of
authorship, customer lists, business plans, financial information or other
subject matter pertaining to any business of the Company or any of its
employees, clients, consultants or licensees.
I further agree that for twelve (12) months from this date, I will not hire
any employees of the Company and I will not solicit, induce, recruit or
encourage any of the Company's employees to leave their employment.
Date:_____________________ ___________________________________
(Employee's Signature)
___________________________________
(Type/Print Employee's Name)
-8-
<PAGE>
EXHIBIT D
---------
INVENTA CORPORATION
CONFLICT OF INTEREST GUIDELINES
It is the policy of the Company to conduct its affairs in strict compliance
with the letter and spirit of the law and to adhere to the highest principles of
business ethics. Accordingly, all officers, employees and independent
contractors must avoid activities which are in conflict, or give the appearance
of being in conflict, with these principles and with the interests of the
Company. The following are potentially compromising situations which must be
avoided. Any exceptions must be reported to the President and written approval
for continuation must be obtained.
(n) Revealing confidential information to outsiders or misusing
confidential information. Unauthorized divulging of information is a violation
of this policy whether or not for personal gain and whether or not harm to the
Company is intended. (The Employment, Confidential Information and Invention
Assignment Agreement elaborates on this principle and is a binding agreement.)
(o) Accepting or offering substantial gifts, excessive entertainment,
favors or payments which may be deemed to constitute undue influence or
otherwise be improper or embarrassing to the Company.
(p) Participating in civic or professional organizations that might
involve divulging confidential information of the Company.
(q) Initiating or approving personnel actions affecting reward or
punishment of employees or applicants where there is a family relationship or is
or appears to be a personal or social involvement.
(r) Initiating or approving any form of personal or social harassment
of employees.
(s) Investing or holding outside directorship in suppliers,
customers, or competing companies, including financial speculations, where such
investment or directorship might influence in any manner a decision or course of
action of the Company.
(t) Borrowing from or lending to employees, customers or suppliers.
(u) Acquiring real estate of interest to the Company.
(v) Improperly using or disclosing to the Company any proprietary
information or trade secrets of any former or concurrent employer or other
person or entity with whom obligations of confidentiality exist.
-9-
<PAGE>
(w) Unlawfully discussing prices, costs, customers, sales or markets
with competing companies or their employees.
(x) Making any unlawful agreement with distributors with respect to
prices.
(y) Improperly using or authorizing the use of any inventions which
are the subject of patent claims of any other person or entity.
(z) Engaging in any conduct which is not in the best interest of the
Company.
Each officer, employee and independent contractor must take every necessary
action to ensure compliance with these guidelines and to bring problem areas to
the attention of higher management for review. Violations of this conflict of
interest policy may result in discharge without warning.
-10-
<PAGE>
EXHIBIT E
---------
AMENDED AND RESTATED SHAREHOLDERS AGREEMENT
<PAGE>
INVENTA CORPORATION
_____________________
AMENDED AND RESTATED SHAREHOLDERS AGREEMENT
_____________________
January 19, 2000
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
ARTICLE I Right of First Refusal on Shareholder Transfer............... 2
1.1 Company Right........................................ 2
1.2 Preferred Holders' Right............................. 2
1.3 Failure to Exercise Rights........................... 2
1.4 Price................................................ 2
1.5 Transfer of Rights................................... 3
1.6 Prohibited Transfers................................. 3
1.7 Definition of "Shares"............................... 3
1.8 Permitted Transfers.................................. 3
ARTICLE II Right of Co-Sale on Shareholder Transfer.................... 3
2.1 Right of Co-Sale..................................... 3
2.2 Agreement not to Transfer............................ 4
2.3 Definition of Shares................................. 4
2.4 Permitted Transfers.................................. 4
2.5 Prohibited Transfers................................. 4
ARTICLE III Right of First Refusal on Company Issuances................ 5
3.1 Grant of Right....................................... 5
3.2 New Securities....................................... 6
3.3 Notice............................................... 6
3.4 Sale after Company Notice............................ 7
3.5 Assignment........................................... 7
ARTICLE IV Termination of Rights....................................... 7
ARTICLE V Specific Performance......................................... 8
ARTICLE VI Legends..................................................... 8
ARTICLE VII Board of Directors......................................... 8
7.1 Board of Directors................................... 8
7.2 Compensation Committee............................... 9
7.3 Audit Committee...................................... 9
ARTICLE VIII Reorganizations........................................... 9
ARTICLE IX General Provisions.......................................... 10
9.1 Governing Law........................................ 10
9.2 Entire Agreement..................................... 10
</TABLE>
-i-
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
(continued)
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9.3 Amendment............................................. 10
9.4 Successors............................................ 10
9.5 Invalidity of Provisions.............................. 10
9.6 Notice................................................ 10
9.7 No Waiver............................................. 10
9.8 Cooperation........................................... 11
9.9 Addition of Parties................................... 11
9.10 Counterparts.......................................... 11
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EXHIBIT A - Schedule of Purchasers
EXHIBIT B - Schedule of Holders of Series A Preferred Stock
EXHIBIT C - Schedule of Holders of Series B Preferred Stock
EXHIBIT D - Schedule of Holders of Series C Preferred Stock
EXHIBIT E - Schedule of Certain Common Stock Holders
EXHIBIT F - Form of Instrument of Accession
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INVENTA CORPORATION
AMENDED AND RESTATED SHAREHOLDERS AGREEMENT
THIS AMENDED AND RESTATED SHAREHOLDERS AGREEMENT is made this 19th day of
January, 2000, between Inventa Corporation, a California corporation (the
"Company"), the purchasers of the Company's Series D Preferred Stock (the
"Purchasers") as listed on Exhibit A attached hereto, Ashok K. Santhanam
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("Founder"), the holders of the Company's Series A Preferred Stock (the "Series
A Holders") listed on Exhibit B attached hereto, the holders of the Company's
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Series B Preferred Stock (the "Series B Holders") listed on Exhibit C attached
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hereto, the holders of the Company's Series C Preferred Stock (the "Series C
Holders") listed on Exhibit D attached hereto, and certain holders of the
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Company's Common Stock (the "Common Holders") as listed on Exhibit E attached
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hereto. The Purchasers, Series A Holders, Series B Holders and Series C Holders
shall collectively be referred to as the "Preferred Holders". The Purchasers,
the Founder, the Preferred Holders and the Common Holders shall collectively be
referred to as the "Shareholders".
WHEREAS, Founder is the beneficial owner or may be deemed to be the
beneficial owner of 4,500,000 shares of the Common Stock of the Company.
WHEREAS, the Series A Holders and the Company are parties to the Series A
Preferred Stock Purchase Agreement dated July 8, 1994 (the "Series A
Agreement").
WHEREAS, the Series B Holders and the Company are parties to the Series B
Preferred Stock Purchase Agreement dated February 14, 1997 (the "Series B
Agreement").
WHEREAS, the Series C Holders and the Company are parties to the Series C
Preferred Stock Purchase Agreements dated May 11, 1998 and May 28, 1999 (the
"Series C Agreements").
WHEREAS, the Common Holders are the owners of 42,696 shares of the Common
Stock of the Company.
WHEREAS, the parties desire that this Agreement supersede the Restated
Shareholders Agreement dated May 11, 1998 in its entirety.
WHEREAS, the Purchasers have requested, as a condition to entering into the
Series D Convertible Preferred Stock Purchase Agreement of even date herewith
(the "Series D Agreement") that the Founder and the Shareholders enter into this
Agreement, and the Founder and the Shareholders, as an inducement to the
Purchasers to enter into the Series D Agreement of even date herewith, are
willing to enter into this Agreement.
NOW, THEREFORE, in consideration of the premises, mutual covenants and
terms hereof, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
<PAGE>
ARTICLE I
Right of First Refusal on Shareholder Transfer
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1.1 Company Right. If at any time a Shareholder desires (or is required)
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to sell or transfer in any manner any Shares (as hereinafter defined) pursuant
to the terms of a bona fide offer received from a third party (a "Buyer"), the
Shareholder shall submit a written offer to sell such Shares (the "Offered
Shares") to the Company on terms and conditions, including price, not less
favorable to the Company than those on which the Shareholder proposes to sell
such Offered Shares to Buyer (the "Offer"). The Offer shall disclose the
identity of the Buyer, the number of Offered Shares, the terms of the proposed
sale or transfer and any other material facts relating to the sale or transfer.
Within fifteen (15) days after receipt of the Offer, the Company shall give
notice to the Shareholder of its intent to purchase all or some of the Offered
Shares from the Shareholder on the terms and conditions set forth in the Offer.
1.2 Preferred Holders' Right. If, for any reason whatsoever, the Company
------------------------
shall not exercise its right to purchase all of the Offered Shares as provided
herein, the Company shall promptly provide to the Preferred Holders, written
notice (the "Notice") of same (which shall include a copy of the Offer provided
to the Company pursuant to Section 1.1 hereof), and then the Preferred Holders
shall have the right, for a period of fifteen (15) days from the date of the
Notice to purchase, on a pro rata basis, on the same terms and conditions as are
set forth in the Offer, that portion of the Offered Shares which the Company
shall not have agreed to purchase from the Shareholder (all such remaining
Shares being referred to as the "Remaining Offered Shares"). For purposes of
this Section 1.2, Preferred Holder's pro rata right shall be calculated by
dividing the number of shares of Common Stock issuable upon conversion of
Preferred Stock held by such Preferred Holder by the total number of shares of
Common Stock issuable upon conversion of Preferred Stock held by all Preferred
Holders.
1.3 Failure to Exercise Rights. In the event that the Company and the
--------------------------
Preferred Holders, taken together, do not purchase all of the Offered Shares
pursuant to and within the time periods set forth above, any remaining Offered
Shares may be sold or transferred by the Shareholder at any time within 90 days
thereafter, subject to compliance with Article II. Any such sale or transfer
shall be at not less than the price nor upon other terms and conditions, if any,
not more favorable to the Buyer than those specified in the Offer. Any Offered
Shares not sold within such 90-day period shall thereafter again be subject to
the requirements of this Article I. In the event that Shares are sold or
transferred to the Preferred Holders pursuant to this subsection, said Offered
Shares shall no longer be subject to this Agreement.
1.4 Price. With respect to any Shares to be transferred pursuant to
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Section 1.1 hereof and as to which a price has not been set by the Shareholder
under Section 1.1 hereof, the price per Share shall be a price set by the Board
of Directors of the Company which will reflect the current value of the Shares
in terms of present earnings and future prospects of the Company. The Company
shall notify the Shareholder of the price so determined within fifteen (15) days
after receipt by it of the Offer. If the Shareholder disputes the price as set
by the Board of Directors by giving notice to the
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Company within ten (10) days after being informed of the price, the price of the
Shares shall be determined by an independent financial analyst selected by the
Board of Directors of the Company, with the cost of such determination to be
divided equally between the Company and the Shareholder. The Board of Directors
shall select such analyst within fifteen (15) days after receipt of notice that
the Shareholder is disputing the price set by the Board of Directors. If the
Board is not notified of any such dispute within such ten (10) day period, the
decision of the Board of Directors as to the purchase price shall be final. Any
time required to determine a purchase price or to resolve a dispute shall be
added to the fifteen (15) day period in which the Company may exercise its right
to purchase the Offered Shares.
1.5 Transfer of Rights. The right of the Preferred Holders to purchase
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Offered Shares hereunder may not be assigned except to a transferee or assignee
who qualifies as a partner, subsidiary or affiliate of one of the Preferred
Holders, or a parent of one of the Preferred Holders, or any entity which has
the same parent corporation as one of the Preferred Holders.
1.6 Prohibited Transfers. The Shareholder shall not sell, assign,
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transfer, pledge, hypothecate, mortgage or dispose of, by gift or otherwise, or
in any way encumber, all or any part of the Shares owned by him during the term
of this Agreement other than in compliance with the terms of this Article I.
1.7 Definition of "Shares". For purposes of this Article I, the term
---------------------
"Shares" shall mean and include all shares of capital stock of the Company owned
by the Shareholder, whether presently held or hereafter acquired.
1.8 Permitted Transfers. The right of first refusal contained in this
-------------------
Article I shall not apply to: (a) any transfer of Shares by the Shareholder by
gift or bequest or through inheritance to, or for the benefit of, any family
member; (b) any transfer of Shares by the Shareholder to a trust for the benefit
of any family member; (c) any sale or transfer of Shares to the Company (or any
assignee of the Company) pursuant to the terms of a stock restriction or stock
repurchase agreement (which provides for such sale upon the Shareholder's
termination of employment); (d) any sale of Common Stock in a public offering
pursuant to a registration statement filed by the Company with the Securities
and Exchange Commission; (e) any pledge made pursuant to a bona fide loan
transaction that creates a mere security interest; (f) any transfer of Shares by
a Shareholder that is a partnership to its partners; or (g) any transfer of
Shares by a Shareholder that is a trust to a successor trust or successor
trustee. In the event of any transfer pursuant to (a), (b), (f) or (g), the
transferee of the Shares shall hold the Shares so acquired with all the rights
conferred by, and subject to all the restrictions imposed by, this Agreement.
ARTICLE II
Right of Co-Sale on Shareholder Transfer
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2.1. Right of Co-Sale. In the event that the Shareholder desires (or is
----------------
required) to sell or transfer in any manner any Shares (as hereinafter defined)
pursuant to the terms of a bona fide offer received from a Buyer, and the
Company and the Preferred Holders do not exercise their right of
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<PAGE>
first refusal as to all of the Offered Shares as set forth in Article I hereof,
each Preferred Holder shall have the right (the "Right of Co-Sale") to require,
as a condition to such sale or transfer, that the Buyer purchase from each
Preferred Holder at the same price per share and on the same terms and
conditions as involved in such sale or disposition by the Shareholder that
percentage of the Offered Shares not purchased by the Company or the Preferred
Holders pursuant to Article I above, expressed by a fraction, the numerator of
which is the number of shares of Preferred Stock (on an as-converted into Common
Stock basis) and Common Stock held by such Preferred Holder and the denominator
of which is the aggregate number of shares of Preferred Stock (on an as-
converted into Common Stock basis) and Common Stock held by all Preferred
Holders and the number of Shares held by the Shareholder. The Preferred Holders
shall act upon the Buyer's offer to buy as soon as practicable after receipt
from the Company of the Notice and in all events within fifteen (15) days after
receipt of the Notice. In the event that the Preferred Holders shall elect to
exercise their Right of Co-Sale, the Preferred Holders shall communicate in
writing such election to the Shareholder.
2.2. Agreement not to Transfer. The Shareholder shall not sell, assign,
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transfer, pledge, hypothecate, mortgage or dispose of, by gift or otherwise, or
in any way encumber, all or any part of the Shares (as hereinafter defined)
owned by him during the term of this Agreement other than in compliance with the
terms of this Article II.
2.3. Definition of Shares. For purposes of this Article II, the term "
--------------------
Shares" shall mean and include all shares of capital stock of the Company owned
by the Shareholder, whether presently held or hereafter acquired.
2.4. Permitted Transfers. The Right of Co-Sale contained in this Article II
-------------------
shall not apply to: (a) any transfer of Shares by the Shareholder by gift or
bequest or through inheritance to, or for the benefit of, any family member; (b)
any transfer of Shares by the Shareholder to a trust for the benefit of any
family member; (c) any sale or transfer of Shares to the Company pursuant to the
terms of a stock restriction or stock repurchase agreement (which provides for
such sale upon the Shareholder's termination of employment with the Company, if
applicable); (d) any sale or transfer of Shares to the Company or the Preferred
Holders pursuant to the provisions of Article I hereof; (e) any sale of Common
Stock in a public offering pursuant to a registration statement filed by the
Company with the Securities and Exchange Commission; (f) any pledge made
pursuant to a bona fide loan transaction that creates a mere security interest;
(g) any transfer of Shares by a Shareholder that is a partnership to its
partners; or (h) any transfer of Shares by a Shareholder that is a trust to a
successor trust or successor trustee. In the event of any transfer pursuant to
(a), (b), (g) or (h), the transferee of the Shares shall hold the Shares so
acquired with all the rights conferred by, and subject to all the restrictions
imposed by, this Agreement.
2.5. Prohibited Transfers.
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(a) In the event that the Shareholder should sell any Shares in
contravention of the co-sale rights of each Preferred Holder under this
Agreement (a "Prohibited Transfer"), each Preferred Holder, in addition to such
other remedies as may be available at law, in equity or hereunder, shall have
the put option provided below, and such Shareholder shall be bound by the
applicable provisions of such option.
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(b) In the event of a Prohibited Transfer, each Preferred Holder shall
have the right to sell to such Shareholder the type and number of shares of
Common Stock equal to the number of shares each Preferred Holder would have been
entitled to transfer to the Buyer under Section 2.1 hereof had the Prohibited
Transfer been effected pursuant to and in compliance with the terms hereof. Such
sale shall be made on the following terms and conditions:
(i) The price per share at which the shares are to be sold to the
Shareholder shall be equal to the price per share paid by the Buyer to such
Shareholder in such Prohibited Transfer. The Shareholder shall also reimburse
each Preferred Holder for any and all fees and expenses, including legal fees
and expenses, incurred pursuant to the exercise or the attempted exercise of the
Preferred Holder's rights under this Article II.
(ii) Within ninety (90) days after the date on which a Preferred
Holder received notice of the Prohibited Transfer or otherwise became aware of
the Prohibited Transfer, such Preferred Holder shall, if exercising the option
created hereby, deliver to the Shareholder the certificate or certificates
representing the shares to be sold, each certificate to be properly endorsed for
transfer.
(iii) Such Shareholder shall, upon receipt of the certificate or
certificates for the shares to be sold by a Preferred Holder, pursuant to this
Section 2.5(b), pay the aggregate purchase price therefor and the amount of
reimbursable fees and expenses, as specified in Section 2.5(b)(i), in cash or by
other means acceptable to the Preferred Holder.
(iv) Notwithstanding the foregoing, any attempt by the Shareholder to
transfer Shares in violation of Article II hereof shall be voidable at the
option of a majority in interest of the Preferred Holders if the Preferred
Holders do not elect to exercise the put option set forth in this Section 2.5,
and the Company agrees it will not effect such a transfer nor will it treat any
alleged transferee as the holder of such shares without the written consent of a
majority in interest of the Preferred Holders.
ARTICLE III
Right of First Refusal on Company Issuances
3.1. Grant of Right. Preferred Holder who continues to hold, respectively,
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shares of Series A Preferred Stock purchased pursuant to the Series A Agreement,
Series B Preferred Stock purchased pursuant to the Series B Agreement, Series C
Preferred Stock purchased pursuant to the Series C Agreement and Series D
Preferred Stock purchased pursuant to the Series D Agreement (the "Preferred
Shares"), the right of first refusal to purchase all or any part of such
Preferred Holder's Pro Rata Share (as hereinafter defined) of the New Securities
(as defined in Section 3.2) which the Company may, from time to time, propose to
sell and issue, with a right of over-subscription (as provided in Section 3.3
below). The Preferred Holders may purchase said New Securities on the same terms
and at the same price at which the Company proposes to sell the New Securities.
The "Pro Rata Share" of each Preferred
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<PAGE>
Holder, for purposes of this right of first refusal, is the ratio of the total
number of shares of Common Stock held by such Preferred Holder, including (i)
any shares of Common Stock into which shares of Preferred Stock held by such
Preferred Holder are convertible, and (ii) any shares deliverable upon the
exercise of options of other rights to purchase Common Stock held by such
Preferred Holder, to the total number of shares of Common Stock outstanding
immediately prior to the issuance of the New Securities (including (i) any
shares of Common Stock into which outstanding shares of Preferred Stock are
convertible and (ii) any shares deliverable upon the exercise of options or
other rights to purchase Common Stock).
3.2 New Securities. "New Securities" shall mean any capital stock of the
--------------
Company, whether now authorized or not, and any rights, options or warrants to
purchase said capital stock, and securities of any type whatsoever that are, or
may become, convertible into said capital stock; provided, however, that "New
-------- -------
Securities" does not include (i) the Preferred Shares or other securities issued
or issuable upon conversion of the Preferred Shares ("Conversion Shares"), (ii)
securities offered pursuant to a registration statement filed under the
Securities Act of 1933, as amended (the "Act"), (iii) securities issued pursuant
to the acquisition of another corporation by the Company by merger, purchase of
substantially all of the assets or other reorganization, (iv) shares offered
pursuant to lease financing transactions or bank or lending institution
financing transactions that are approved by the Board of Directors, (v)
securities issued in connection with any stock split, stock dividend or
recapitalization of the Company, (vi) all securities hereafter issued or
issuable to officers, directors, employees or consultants of the Company (for
the primary purpose of soliciting or retaining their employment or services)
pursuant to any employee or consultant stock offering, plan or arrangement
approved by the Board of Directors, (vii) securities issuable pursuant to
warrants outstanding as of January 7, 2000 (the "Warrant Shares") or securities
issued upon conversion of the Warrant Shares, and (viii) warrants for up to
675,000 shares to be issued to First Plaza Group Trust (or any designee thereof)
("First Plaza") upon the achievement of certain sales targets to General Motors
Corporation, or any affiliate thereof, as a result of the introduction by First
Plaza, and the shares issuable upon exercise thereof.
3.3 Notice. In the event the Company proposes to undertake an issuance of
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New Securities, it shall give to the Preferred Holders written notice (the
"Company Notice") of its intention, describing the type of New Securities,
number of shares, the price, the terms upon which the Company proposes to issue
the same, and notice to the effect that each Preferred Holder must respond to
such Company Notice within twenty (20) days after the date thereof. The
Preferred Holders shall have twenty (20) days from the date of such Company
Notice to purchase any or all of the New Securities for the price and upon the
terms specified in the Company Notice by giving written notice to the Company
and stating therein the quantity of New Securities to be purchased and
forwarding payment for such New Securities to the Company if immediate payment
is required by such terms, or in any event no later than forty-five (45) days
after the date of the Company Notice. The Company shall promptly, in writing,
inform each Preferred Holder which elects to purchase its Pro Rata Share of the
New Securities of any other Preferred Holder's failure to do so (the "Over-
subscription Notice"), in which case the Preferred Holders electing to purchase
their Pro Rata Share of the New Securities shall have the right to purchase
their Pro Rata Share of such shares (the "Over-subscription Right") and any
portion of the remainder of such shares which other Preferred Holders
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<PAGE>
have elected not to purchase pursuant to the exercise of their Over-subscription
Right, for the price and upon the terms specified in the Company Notice for a
period of thirty (30) days after the date of the Over-subscription Notice. If a
Preferred Holder elects not to exercise such right, then that portion of the
shares which is not purchased may be offered to third parties on terms no less
favorable to the Company for a period of one hundred twenty (120) days.
3.4 Sale after Company Notice. In the event any Preferred Holder fails to
-------------------------
exercise in full the right of first refusal within said twenty (20) day period,
the Company shall have ninety (90) days thereafter to sell or enter into an
agreement (pursuant to which the sale of New Securities covered thereby shall be
closed, if at all, within thirty (30) days from the date of said agreement) to
sell the New Securities respecting which such Preferred Holder's rights were not
exercised, at a price and upon general terms no more favorable to the Preferred
Holders thereof than specified in the Company Notice. In the event the Company
has not sold the New Securities within said ninety (90) day period (or sold and
issued New Securities in accordance with the foregoing within thirty (30) days
from the date of said agreement), the Company shall not thereafter issue or sell
any New Securities without first offering such securities to the Preferred
Holders in the manner provided above.
3.5 Assignment. The right of first refusal granted under this Article III
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is assignable by the Preferred Holders to any transferee of a minimum of fifty
thousand (50,000) shares of Series A Preferred Stock, fifty thousand (50,000)
shares of Series B Preferred Stock, fifty thousand (50,000) shares of Series C
Preferred Stock, or fifty thousand (50,000) shares of Series D Preferred Stock
(in each case as adjusted for any stock split, stock dividends, combinations,
recapitalizations and the like with respect to such shares), as applicable, or
the Common Stock into which each such series of Preferred Stock has been
converted. For the purposes of satisfying the 50,000 share threshold herein, the
number of shares of the Common Stock issuable upon conversion of applicable
series of Preferred Stock owned by the Preferred Holders shall include the
holdings of partners, subsidiaries, parents, shareholders or affiliates of the
Preferred Holders (or any entities which have the same parent corporation as the
Preferred Holders) and such holdings shall be aggregated together and with the
holdings of the Preferred Holders with respect to the applicable series of
Preferred Stock.
ARTICLE IV
Termination of Rights
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The Right of First Refusal on Shareholder Transfer, Co-Sale Right, Right of
First Refusal on Company Issuances, the right to designate members of the Board
of Directors, Compensation Committee and Audit Committee and the right to direct
the voting of the shares beneficially owned by the Founder created under
Articles I, II, III, VII and VIII of this Agreement, respectively, shall expire
upon (i) the closing of the first public offering of the Common Stock of the
Company to the general public which is effected pursuant to a registration
statement filed with, and declared effective by, the Securities and Exchange
Commission under the Securities Act of 1933, as amended; (ii) upon the closing
of a transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation) which results in (a)
the holders of the
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outstanding voting equity securities of the Company immediately prior to such
transaction or series of related transactions holding securities representing
less than 50% of the voting power of the surviving entity immediately following
such transaction or series of related transactions or (b) the sale or
disposition by the Company of all or substantially all the Company's assets; or
(iii) with respect to the Right of First Refusal on Shareholder Transfer, the
date on which less than 50% of the Preferred Stock of the Company initially
issued remains outstanding (as adjusted for any stock split, stock dividends,
combinations, recapitalizations and the like with respect to the shares).
ARTICLE V
Specific Performance
--------------------
The rights of the parties under this Agreement are unique and, accordingly,
the parties shall, in addition to such other remedies as may be available to any
of them at law or in equity, have the right to enforce their rights hereunder by
actions for specific performance to the extent permitted by law.
ARTICLE VI
Legends
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The certificates representing the Shares shall bear a legend indicating the
existence of the restrictions imposed by Article I, II, III, VII and VIII of
this Agreement. Nothing in this Agreement should be construed as a modification
or amendment of any restrictions on transfer under applicable federal or state
securities laws.
ARTICLE VII
Board of Directors
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7.1 Board of Directors. As soon as practicable after the Closing, the
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Board of Directors of the Company shall be comprised of seven members. The
Purchasers and the Shareholders agree to cause to be elected to the Company's
Board of Directors (i) one representative elected by the holders of Series A
Preferred Stock, (ii) one representative elected by the holders of Series B
Preferred Stock (who shall be a representative of Battery Ventures L.P.), (iii)
two representatives elected by the holders of the Series C Preferred Stock (one
of whom shall be a representative of the Technology Crossover Ventures entities,
and one of whom shall be a representative of Boston Millennia Partners Limited
Partnership), (iv) two representatives elected by the holders of Common Stock of
the Company (one of whom shall be Ashok Santhanam and the other shall be
reasonably approved by the holders of the Series C Preferred Stock), and (v) the
Chief Executive Officer of the Company. In addition, the Board of Directors of
the Company shall elect Ashok Santhanam as Chairman of the Board to serve in
that capacity as long as he is a director of the Company. If any Preferred
Holder named in clause (ii) or (iii) above elects not to designate a
representative to the Board, such Preferred Holder shall have the right to
appoint an observer who shall be entitled to
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attend all meetings of the Board and to consult with management. The Company
shall pay the reasonable out-of-pocket expenses of non-employee members of the
Company's Board of Directors in connection with attending Board of Directors
meetings and will pay the reasonable out-of-pocket expenses of Board observers
in connection with attending Board of Directors meetings, in accordance with the
Company's standard travel policy.
7.2 Compensation Committee. The Company shall use its best efforts and the
----------------------
Purchasers and Shareholders agree to cause the Board of Directors of the Company
to appoint and maintain a Compensation Committee, which shall contain no more
than three persons, one of whom shall be a representative of Boston Millennia
Partners Limited Partnership, one of whom shall be a representative of Battery
Ventures, and one of whom shall be Ashok Santhanam. The Compensation Committee
shall administer the Company's stock option plans and make recommendations to
the Board of Directors with respect to management compensation and terms of
employment. The Board of Directors of the Company shall have the power to accept
or reject any recommendation of the Compensation Committee, but shall not
approve an employee's compensation in amounts which differ from the amounts
recommended by the Compensation Committee.
7.3 Audit Committee. The Company shall use its best efforts and the
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Purchasers and Shareholders agree to cause the Board of Directors to appoint and
maintain an Audit Committee, which shall include at least one representative of
the Purchasers.
ARTICLE VIII
Reorganizations
---------------
The Shareholders hereby agree that at any meeting of the shareholders
of the Company, however called, and in any written action by consent of
shareholders of the Company, the Shareholders shall vote all shares of stock of
the Company entitled to vote held by the Shareholder as directed by the holders
of a majority of the outstanding shares of Common Stock and Common Stock
issuable upon conversion of Preferred Stock then held by the Shareholders in
connection with any reorganization of the Company pursuant to Section 1200 et.
seq. of the California Corporations Code; provided, however, that this Article
VIII shall not affect any rights granted to the Preferred Holders or the
Purchasers pursuant to Sections 6(a) and 6(c) of the Company's Amended and
Restated Articles of Incorporation. The Shareholders shall not enter into any
agreement or understanding with any person or entity to vote or give
instructions in any manner inconsistent with the preceding sentence. In the
event any Shareholder fails to vote in accordance herewith, such Shareholders
shall be deemed to have irrevocably appointed such person or persons as may be
designated by the Board of Directors of the Company as proxy to vote such
Shareholder's stock in accordance herewith.
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ARTICLE IX
General Provisions
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9.1 Governing Law. This Agreement shall be governed by the laws of the
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State of California without regard to choice of law provisions.
9.2 Entire Agreement. This Agreement constitutes the entire agreement
----------------
between the parties with respect to the subject matter hereof and supersedes all
prior oral or written agreements and understandings between them or any of them
as to such subject matter.
9.3 Amendment. Except as otherwise expressly provided herein, this
---------
Agreement, other than Article VII herein, may be amended only upon the written
consent of the majority of the shares beneficially owned or deemed to be
beneficially owned by the Founder, the majority-in-interest of the Preferred
Holders, the majority-in-interest of the Common Holders, and the Company;
provided, however, that Article VII herein may be amended only upon the written
consent of 2/3 of (i) the shares then beneficially owned or deemed to be
beneficially owned by the Founder and the shares then owned by the Common
Holders, (ii) the shares then owned by the Series A Holders (iii) the shares
then owned by the Series B Holders, (iv) the shares then owned by the Series C
Holders and (v) the shares then owned by the Purchasers, with each voting as a
separate class.
9.4 Successors. This Agreement shall be binding upon and shall inure to
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the benefit of the parties hereto and their respective heirs, executors, legal
representatives, successors, and permitted transferees, except as may be
expressly provided otherwise herein.
9.5 Invalidity of Provisions. In the case any one or more of the
------------------------
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement and such
invalid, illegal and unenforceable provision shall be reformed and construed so
that it will be valid, legal, and enforceable to the maximum extent permitted by
law.
9.6 Notice. Any notice, demand or request required or permitted to be
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given by either the Company or the Shareholders pursuant to the terms of this
Agreement shall be in writing and shall be deemed given when delivered
personally or deposited in the U.S. mail, First Class with postage prepaid, and
addressed to the parties at the addresses of the parties set forth on the
Exhibits to this Agreement or such other address as a party may request by
notifying the other in writing.
9.7 No Waiver. Any party's failure to enforce any provision or provisions
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of this Agreement shall not in any way be construed as a waiver of any such
provision or provisions, nor prevent that party thereafter from enforcing each
and every other provision of this Agreement. The rights granted to the parties
herein are cumulative and shall not constitute a waiver of any party's right to
assert all other legal remedies available to it under the circumstances.
9.8 Cooperation. The parties agree upon request to execute any further
-----------
documents or instruments necessary or desirable to carry out the purposes or
intent of this Agreement.
-10-
<PAGE>
9.9 Addition of Parties. The Company agrees that until the termination of
-------------------
this Agreement, it will cause each of the key employees of the Company who holds
at least 100,000 shares of the capital stock of the Company (on an as-converted
basis and as adjusted for any stock split, stock dividends, combinations,
recapitalizations and the like with respect to such shares), to enter into this
Agreement and thereby to be bound by the terms hereof, all by execution of an
Instrument of Accession in the form attached as Exhibit E hereto. Any such
---------
person so entering into this Agreement shall be deemed to be a Shareholder for
purposes of this Agreement.
9.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one
instrument.
This space intentionally left blank
-11-
<PAGE>
The foregoing agreement is hereby executed as of the date first above
written.
"COMPANY" INVENTA CORPORATION
a California corporation
By: /s/ David A. Lavanty
-----------------------
David A. Lavanty, President
<PAGE>
"PURCHASERS"
BANCBOSTON VENTURES INC.
By: /s/ Maia D. Heymann
----------------------------------
Name: Maia D. Heymann
Title: Director
PRIVATE EQUITY PORTFOLIO FUND II, LLC
BY BANKBOSTON NA, ITS MANAGER
By: /s/ Glen Holland
----------------------------------
Name: Glen Holland
Title: Vice President, Director
BATTERY VENTURES III, L.P.
By: Battery Partners III, L.P.
By: /s/ TODD DAGRES
----------------------------------
Title: TODD DAGRES, GENERAL PARTNER
-------------------------------
BOSTON MILLENNIA PARTNERS LIMITED PARTNERSHIP
By: Glen Partners Limited Partnership
Its General Partner
By: /s/ Martin J. Hernon
----------------------------------
General Partner
/s/ Robert Ducommun
-------------------------------------
Robert Ducommun
BOSTON MILLENNIA ASSOCIATES I
PARTNERSHIP
By: /s/ Martin J. Hernon
----------------------------------
General Partner
-14-
<PAGE>
PALMER G. AND CHARLES E.
DUCOMMUN CHARITABLE ANNUITY
TRUST U/D/T
By: /s/ Robert Ducommun
---------------------------------
Robert Ducommun, Trustee
ESSEX PRIVATE PLACEMENT FUND II,
LIMITED PARTNERSHIP
By: Essex Investment Mgt. Company LLC
Its General Partner
By: /s/ [ILLEGIBLE]
---------------------------------
Title: PRINCIPAL
------------------------------
THE CHASE MANHATTAN BANK, AS
TRUSTEE FOR FIRST PLAZA GROUP
TRUST
By: /s/ John F. Weeda
---------------------------------
JOHN F. WEEDA
Title: VICE PRESIDENT
------------------------------
The Chase Manhattan Bank has executed
this Document/Agreement solely in its
capacity as Directed Trustee of the
First Plaza Group Trust upon the
direction of General Motors Investment
Management Corporation.
TCV II (Q), L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II,
L.L.C.,
Its: General Partner
By: /s/ Robert C. Bensky
---------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
-15-
<PAGE>
TCV II Strategic Partners, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II,
L.L.C.,
Its: General Partner
By: /s/ Robert C. Bensky
----------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
TCV II, V.O.F.
a Netherlands Antilles General Partnership
By: Technology Crossover Management II,
L.L.C.,
Its: Investment General Partner
By: /s/ Robert C. Bensky
---------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
Technology Crossover Ventures II, C.V.
a Netherlands Antilles Limited Partnership
By: Technology Crossover Management II,
L.L.C.,
Its: Investment General Partner
By: /s/ Robert C. Bensky
---------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
Technology Crossover Ventures II, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II,
L.L.C.,
Its: General Partner
By: /s/ Robert C. Bensky
---------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
-16-
<PAGE>
"OTHER SHAREHOLDERS"
BATTERY VENTURES III, L.P.
By: Battery Partners III, L.P.
By: /s/ Todd Dagres
---------------------------------
Name: Todd Dagres
Title: General Partner
BATTERY VENTURES L.P.
By: /s/ Todd Dagres
---------------------------------
Name: Todd Dagres
Title: General Partner
BOSTON MILLENNIA ASSOCIATES I PARTNERSHIP
By: /s/ Martin J. Hernon
---------------------------------
General Partner
BOSTON MILLENNIA PARTNERS
LIMITED PARTNERSHIP
By: Glen Partners Limited Partnership,
its General Partner
By: /s/ Martin J. Hernon
---------------------------------
General Partner
____________________________________
Stephen T. Barry
____________________________________
A. Dana Callow, Jr.
____________________________________
Harry A. Caunter
____________________________________
Electra D. DePeyster
-17-
<PAGE>
____________________________________
Christian Dubiel
/s/ Robert Ducommun
------------------------------------
Robert Ducommun
Palmer G. and Charles E. Ducommun
Charitable Annuity Trust, u/d/t
By: /s/ Robert Ducommun
---------------------------------
Robert Ducommun, Trustee
____________________________________
Maya S. Hattangady
____________________________________
Martin J. Hernon
____________________________________
Ebenezer James
____________________________________
Robert W. Jevon
____________________________________
Ashwin Kedia
____________________________________
B. Nagaraja Kini
____________________________________
Muralidharam Manickam
____________________________________
Srikantan Moorthy
-18-
<PAGE>
__________________________________________
Siby Nidhiry
__________________________________________
Frank P. Pinto
__________________________________________
Janice Porter
__________________________________________
Andrew Potter
__________________________________________
Suresh Shanmugham
__________________________________________
Santhanam C. Shekar
__________________________________________
Ramesh Sivakaminathan
TCV II (Q), L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II,
L.L.C.,
Its: General Partner
By: /s/ Robert C. Bensky
----------------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
-19-
<PAGE>
TCV II Strategic Partners, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II,
L.L.C.,
Its: General Partner
By: /s/ Robert C. Bensky
---------------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
TCV II, V.O.F.
a Netherlands Antilles General Partnership
By: Technology Crossover Management II,
L.L.C.,
Its: Investment General Partner
By: /s/ Robert C. Bensky
----------------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
Technology Crossover Ventures II, C.V.
a Netherlands Antilles Limited Partnership
By: Technology Crossover Management II,
L.L.C.,
Its: Investment General Partner
By: /s/ Robert C. Bensky
----------------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
Technology Crossover Ventures II, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II,
L.L.C.,
Its: General Partner
By: /s/ Robert C. Bensky
----------------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
-20-
<PAGE>
EXHIBIT F
---------
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
<PAGE>
IVENTA CORPORATION
_____________________________
AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT
_____________________________
January 19, 2000
<PAGE>
AMENDED AND RESTATED REGISTRATION RIGHTS AGREEMENT
This Restated Registration Rights Agreement (the "Agreement"), dated as of
January 25, 2000 is entered into by and among Inventa Corporation, a California
corporation (the "Company") and the holders of the Company's Series A Preferred
Stock listed on Exhibit A attached hereto (collectively, the "Series A
---------
Holders"), the holders of the Company's Series B Preferred Stock listed on
Exhibit B attached hereto (collectively, the "Series B Holders"), the holders of
- ---------
the Company's Series C Preferred Stock listed on Exhibit C attached hereto
---------
(collectively, the "Series C Holders") the holders of the Company's Series D
Preferred Stock listed on Exhibit D added hereto (collectively, the "Series D
---------
Holders")and the Xtend-Tech Shareholders (collectively, the "Xtend-Tech
Holders") (the Series A Holders, the Series B Holders, the Series C Holders, the
Series D Holders and the Xtend-Tech Holders shall collectively be referred to as
"Shareholders").
R E C I T A L S
---------------
A. The Series A Holders, the Series B Holders, the Series C Holders and
the Company are parties to the Restated Registration Rights Agreement dated
January 19, 2000.
B. The Xtend-Tech Holders and the Company are parties to the Agreement
and Plan of Reorganization as of the date hereof (the "Reorganization
Agreement").
C. The execution of this Agreement is in connection with the closing of
the transactions contemplated by the Reorganization Agreement.
D. The Shareholders and the Company desire that the transactions
contemplated by the Reorganization Agreement be consummated.
E. The Series A Holders, the Series B Holders, the Series C Holders, the
Series D Holders and the Company desire that this Agreement supersede the
Restated Registration Rights Agreement dated January 19, 2000 in its entirety.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties hereto agree as follows:
1. Certain Definitions. As used in this Agreement, the following terms
-------------------
shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
"Common Stock" shall mean the common stock of the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
<PAGE>
"Holder" shall mean any holder, or an assignee under Section 15
hereof, of outstanding Registrable Securities.
"Initiating Holders" shall mean any Holders who in the aggregate are
Holders of more than fifty percent (50%) of the outstanding Registrable
Securities.
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering of the
effectiveness of such registration statement.
"Registrable Securities", subject to Sections 5(b) and 6(b) hereof,
shall mean shares of Common Stock (i) issued or issuable pursuant to the
conversion of the Shares, and (ii) issued in respect of securities issued
pursuant to the conversion of the Shares upon any stock split, stock dividend,
recapitalization, substitution, or similar event, and (iii) issued in respect to
securities issued to Xtend-Tech Holders pursuant to the stock exchange
transaction consummated in the Reorganization Agreement; provided, however, that
Registrable Securities shall not include any (a) shares of Common Stock which
have previously been registered, (b) shares of Common Stock which have
previously been sold to the public, or (c) securities which would otherwise be
Registrable Securities held by a Holder who is then permitted to sell all of
such securities within any three (3) month period following the Company's
initial public offering pursuant to Rule 144 if such securities then held by
such Holder constitute less than one percent of the Company's outstanding equity
securities.
"Registration Expenses" shall mean all expenses (excluding
underwriting discounts and selling commissions) incurred in connection with a
registration under Sections 5, 6 and 8 hereof, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and the expense of any
special audits incident to or required by any such registration, and the
reasonable fees and expenses of one counsel for the selling Shareholders (but
excluding the compensation of regular employees of the Company, which shall be
paid in any event by the Company).
"Restricted Securities" shall mean the securities of the Company
required to bear or bearing the legend set forth in Section 3 hereof.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities.
"Shares" shall mean shares of the Company's Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock.
2. Restrictions on Transferability. The Restricted Securities held by the
-------------------------------
Shareholders shall not be transferred except upon the conditions specified in
this Agreement, which conditions are intended to insure compliance with the
provisions of the Securities Act or, in the case of Section 16 hereof, to assist
in an orderly distribution. Each Shareholder will cause any proposed transferee
of Restricted Securities held by that Shareholder to agree to take and hold
those securities subject to the provisions and upon the conditions specified in
this Agreement.
<PAGE>
3. Restrictive Legend. Each certificate representing (i) the Shares, and
------------------
(ii) shares of the Company's Common Stock issued upon conversion of the Shares,
and (iii) any other securities issued in respect of the Shares, or the Common
Stock issued upon conversion of the Shares, upon any stock split, stock
dividend, recapitalization, merger, consolidation or similar event, shall
(unless otherwise permitted or unless the securities evidenced by such
certificate shall have been registered under the Securities Act) be stamped or
otherwise imprinted with a legend substantially in the following form (in
addition to any legend required under applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, (THE "ACT") OR ANY STATE SECURITIES LAWS. SUCH
SHARES MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF SUCH
REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND
ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT.
COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND
RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICE OF THE
CORPORATION.
Upon request of a holder of such a certificate, the Company shall
remove the foregoing legend from the certificate or issue to such holder a new
certificate therefor free of any transfer legend, if, with such request, the
Company shall have received either the opinion referred to in Section 4(i) or
the "no-action" letter referred to in Section 4(ii) to the effect that any
transfer by such holder of the securities evidenced by such certificate will not
violate the Securities Act and applicable state securities laws, unless any such
transfer legend may be removed pursuant to Rule 144(k), in which case no such
opinion or "no-action" letter shall be required, and provided that the Company
shall not be obligated to remove any such legends prior to the date of the
initial public offering of the Company's Common Stock under the Securities Act.
4. Notice of Proposed Transfers. The holder of each certificate
----------------------------
representing Restricted Securities by acceptance thereof agrees to comply in all
respects with the provisions of this Section 4. Prior to any proposed transfer
of any Restricted Securities (other than under circumstances described in
Sections 5, 6 and 8 hereof), the holder thereof shall give written notice to the
Company of such holder's intention to effect such transfer. Each such notice
shall describe the manner and circumstances of the proposed transfer in
sufficient detail, and shall be accompanied (except in transactions in
compliance with Rule 144 promulgated under the Securities Act or for a transfer
to a holder's spouse, ancestors, descendants or a trust for any of their
benefit, or in transactions involving the distribution without consideration of
Restricted Securities by a holder that is a partnership to any of its partners
or retired partners or to the estate of any of its partners or retired partners,
or by a holder that is a trust to any successor trust or successor trustee) by
either (i) a written opinion of legal counsel to the holder who shall be
reasonably satisfactory to the Company, addressed to the Company and reasonably
satisfactory in form and substance to the Company's counsel, to the effect that
the proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act or (ii) a "no-action" letter from the
Commission to the effect
<PAGE>
that the distribution of such securities without registration will not result in
a recommendation by the staff of the Commission that action be taken with
respect thereto, whereupon the holder of such Restricted Securities shall be
entitled to transfer such Restricted Securities in accordance with the terms of
the notice delivered by such holder to the Company. Each certificate evidencing
the Restricted Securities transferred as above provided shall bear the
restrictive legend set forth in Section 3 above, except that such certificate
shall not bear such restrictive legend after the date of the Company's initial
public offering under the Securities Act if the opinion of counsel or "no-
action" letter referred to above expressly indicates that such legend is not
required in order to establish compliance with the Securities Act or if such
legend is no longer required pursuant to Rule 144(k).
5. Demand Registration.
-------------------
(a) Request for Registration. If the Company shall receive from
------------------------
Initiating Holders a written request that the Company effect any registration
with respect to the Registrable Securities, the Company will:
(i) promptly given written notice of the proposed registration
to all other Holders; and
(ii) as soon as practicable, use its diligent best efforts to
effect such registration after January 1, 2000 (including, without limitation,
the execution of an undertaking to file post effective amendments, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act) as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified in
a written request delivered to the Company within fifteen (15) days after
receipt of such written notice from the Company; provided that the Company shall
not be obligated to effect, or to take any action to effect, any such
registration pursuant to this Section 5:
(A) In any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(B) After the Company has effected two (2) such
registrations pursuant to this Section 5(a) and such registrations have been
declared or ordered effective, or withdrawn at the request of the majority of
the Initiating Holders, and the sales of such Registrable Securities have
closed; or
(C) Within one hundred eighty (180) days of the effective
date of any other registration statement on Form S-1.
Subject to the foregoing clauses (A), (B) and (C), the Company shall
file a registration statement covering the Registrable Securities so requested
to be registered as soon as practicable, after receipt of the request or
requests of the Initiating Holders; provided, however, that
<PAGE>
if the Company shall furnish to such Holders a certificate signed by the
President of the Company stating that in the good faith judgment of the Board of
Directors of the Company, it would be seriously detrimental to the Company and
its shareholders for such registration statement to be filed on or before the
time filing would be required and it is therefore essential to defer the filing
of such registration statement, the Company shall have the right to defer such
filing (but not more than once during any twelve month period) for a period of
not more than ninety (90) days after receipt of the request of the Initiating
Holders.
The registration statement filed pursuant to the request of the
Initiating Holders, may, subject to the provisions of Section 5(b) below,
include other securities of the Company which are held by officers or directors
of the Company or which are held by persons who, by virtue of agreements with
the Company, are entitled to include their securities in any such registration,
but the Company shall have no right to include any of its securities in any such
registration except as provided in Section 5(b) below.
(b) Underwriting. If the 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
Section 5, and the Company shall include such information in the written notice
referred to in Section 5(a)(i) above. The right of any Holder to registration
pursuant to Section 5 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 with respect to such participation and
inclusion) to the extent provided herein. A Holder may elect to include in such
underwriting all or a part of the Registrable Securities he holds.
If officers or directors of the Company shall request inclusion of
securities of the Company other than Registrable Securities in any registration
pursuant to Section 5, or if holders of securities of the Company who are
entitled by contract with the Company to have securities included in such a
registration (such officers, directors, and other shareholders being
collectively referred to as the "Other Shareholders") request such inclusion,
the Initiating Holders shall, on behalf of all Holders, offer to include the
securities of such Other Shareholders in the underwriting and may condition such
offer on their acceptance of the further applicable provisions of this
Agreement. The Company shall (together with all Holders and Other Shareholders
proposing to distribute their securities through such underwriting) enter into
an underwriting agreement in customary form with the representative of the
underwriter or underwriters (the "Underwriter") selected for such underwriting
by more than fifty percent (50%) of the Initiating Holders and reasonably
acceptable to the Company. Notwithstanding any other provision of this Section
5, if the Underwriter determines that marketing factors require a limitation on
the number of shares to be underwritten, the Underwriter may (subject to the
allocation priority set forth below) limit the number of Registrable Securities
to be included in the registration and underwriting to not less than fifty
percent (50%) of the securities which Holders have requested be included
therein. The Company shall so advise all holders of securities requesting
registration, and the number of shares of securities that are entitled to be
included in the registration and underwriting shall be allocated in the
following priority: first, among all Holders of Registrable Securities
requesting inclusion (and pro rata among such holders on the basis of all
Registrable Securities then held by such holders); and second, among all Other
Shareholders in proportion, as nearly as practicable, to the respective amounts
of securities which
<PAGE>
they had requested to be included in such registration at the time of filing the
registration statement. If any Holder or Other Shareholder disapproves of the
terms of any such underwriting, such holder may elect to withdraw therefrom by
written notice to the Company and the Underwriter. Any Registrable Securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration. If the Underwriter has not limited the number of Registrable
Securities or other securities to be underwritten, the Company may include its
securities for its own account in such registration if the underwriter so agrees
and if the number of Registrable Securities and other securities which would
otherwise have been included in such registration and underwriting will not
thereby be limited.
6. Company Registration.
--------------------
(a) If the Company shall determine to register any of its securities
either for its own account or for the account of a security holder or holders
exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans or a registration
relating solely to a Commission Rule 145 transaction or a registration on any
registration form which does not permit secondary sales or does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of Registrable Securities, the Company
will:
(i) promptly give to each Holder written notice thereof (which,
to the extent then known, shall include a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under the applicable blue
sky or other state securities laws); and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all of the Registrable Securities specified in a written request or
requests made by any Holder within fifteen (15) days after receipt of the
written notice from the Company described in clause (i) above, except as set
forth in Section 6(b) below. Such written request may specify all or a part of a
Holder's Registrable Securities.
(b) Underwriting. If the registration of which the Company gives
------------
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 6(a)(i). In such event the right of any Holder to
registration pursuant to Section 6 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the Other Shareholders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the Underwriter selected for underwriting by the Company.
Notwithstanding any other provision of this Section 6, if the Underwriter
determines that marketing factors require a limitation on the number of shares
to be underwritten, and (a) if such registration is the first registered
offering of the Company's securities to the public, the Underwriter may (subject
to the allocation priority set forth below) exclude from such registration and
underwriting some or all of the Registrable Securities which would otherwise be
underwritten pursuant hereto, and (b) if such registration is other than the
first registered offering of the sale of the Company's securities to the public,
the Underwriter may
<PAGE>
(subject to the allocation priority set forth below) limit the number of
Registrable Securities to be included in the secondary portion of the
registration and underwriting to not less than fifty percent (50%) of the
securities which Holders have requested be included therein. The Company shall
so advise all holders of securities requesting registration, and the number of
shares of securities that are entitled to be included in the registration and
underwriting by persons other than the Company shall be allocated in the
following priority: first, to Holders of Registrable Securities (and pro rata
among such holders on the basis of all Registrable Securities then held by such
holders); and second, among all Other Shareholders in proportion, as nearly as
practicable, to the respective amounts of securities which they had requested to
be included in such registration at the time of filing the registration
statement. If any Holder or Other Shareholder disapproves of the terms of any
such underwriting, he may elect to withdraw therefrom by written notice to the
Company and the Underwriter. Any Registrable Securities or other securities
excluded or withdrawn from such underwriting shall be withdrawn from such
registration.
7. Expenses of Registration. All Registration Expenses incurred in
------------------------
connection with any registration, qualification or compliance pursuant to this
Agreement shall be borne by the Company, and all Selling Expenses shall be borne
by the holders of the securities so registered pro rata on the basis of the
number of their shares so registered; provided, however, that the Company shall
not be required to pay any Registration Expenses if, as a result of the
withdrawal of a request for registration by Initiating Holders, the registration
statement does not become effective, unless such withdrawal is caused by a
material adverse change in the business or operations of the Company after such
request for registration, or unless the Initiating Holders agree to have such
registration considered a registration pursuant to Section 5(a)(ii)(B). If the
Company is not required to pay any Registration Expenses, then the Holders and
Other Shareholders requesting registration shall bear such Registration Expenses
pro rata on the basis of the number of their shares so included in the
registration request, and such registration shall not be considered a
registration for purposes of Section 5(a)(ii)(B).
8. Registration on Form S-3. The Company shall use its best efforts to
------------------------
qualify for registration on Form S-3, and to that end, the Company shall comply
with the reporting requirements of the Exchange Act following the effective date
of the first registration of any securities of the Company for a registered
public offering. After the Company has qualified for the use of Form S-3,
Initiating Holders shall have the right to request four (4) registrations on
Form S-3 (such requests shall be in writing and shall state the number of shares
of Registrable Securities to be disposed of and the intended method of
disposition of such shares by each such holder), subject only to the following
limitations:
(a) The Company shall not be obligated to cause a registration on
Form S-3 to become effective prior to one hundred eighty (180) days following
the effective date of a Company-initiated registration (other than a
registration effected solely to qualify an employee benefit plan or to effect a
business combination pursuant to Rule 145), provided that notice of such
Company-initiated registration is given to Holders prior to receipt of a request
from a holder of Registrable Securities for registration on Form S-3, and
provided that the Company shall use its best efforts to achieve such
effectiveness promptly following such one hundred eighty (180) day period;
<PAGE>
(b) The Company shall not be obligated to cause a registration on
Form S-3 to become effective prior to expiration of one hundred eighty (180)
days following the effective date of the most recent registration pursuant to a
request by a holder of Registrable Securities under this Agreement or pursuant
to a request by a holder of registration rights under any other agreement of the
Company granting Form S-3 demand registration rights; provided, however, that
the Company shall use its best efforts to achieve such effectiveness promptly
following such one hundred eighty (180) day period;
(c) The Company shall not be required to effect a registration
pursuant to this Section 8 more than once in any twelve (12) month period;
(d) The Company shall not be required to maintain and keep any such
registration on Form S-3 effective for a period exceeding one hundred eighty
(180) days from the effective date thereof. The Company shall give notice to all
Holders and all holders of registration rights under any other agreement of the
Company granting Form S-3 or similar demand registration rights of the receipt
of a request for registration pursuant to this Section 8 and shall provide a
reasonable opportunity for all such other holders to participate in the
registration. Subject to the foregoing, the Company will use its best efforts to
effect promptly the registration of all shares of Registrable Securities on Form
S-3 to the extent requested by the Holder or Holders thereof for purposes of
disposition. In the event the Underwriter, in the case of an underwritten
offering, determines that market factors require a limitation on the number of
shares to be underwritten, then shares shall be excluded from such registration
and underwriting pursuant to the method described in Section 6(b); and
(e) The value of the aggregate shares of Registrable Securities to be
registered on Form S-3 for each such right of registration shall be at least
$500,000.
9. Registration Procedures. In the case of each registration effected by
-----------------------
the Company pursuant to this Agreement, the Company will keep each Holder
advised in writing as to the initiation of such registration and as to the
completion thereof. At its expense, the Company will:
(a) Keep such registration effective for a period of ninety (90) days
(except as set forth in Section 8(d)) or until the Holder or Holders have
completed the distribution described in the registration statement relating
thereto, whichever first occurs; and
(b) Furnish such number of prospectuses and other documents incident
thereto as a Holder from time to time may reasonably request; and
(c) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 5 or 8 hereof, the Company will
enter into any underwriting agreement reasonably necessary to effect the offer
and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions, and provided further that if the underwriter
so requests the underwriting agreement will contain customary indemnification
and contribution provisions, and provided further that the Underwriter is
reasonably acceptable to the Company.
<PAGE>
10. Indemnification.
---------------
(a) The Company will indemnify each Holder, each of its officers,
directors and partners, and each person controlling such Holder, if Registrable
Securities held by such Holder are included in the securities with respect to
which registration, qualification or compliance has been effected pursuant to
this Agreement, and each underwriter, if any, and each person who controls any
underwriter, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not misleading,
or any violation by the Company of the Securities Act including any rule or
regulation thereunder applicable to the Company relating to action or inaction
required of the Company in connection with any such registration, qualification
or compliance, and will reimburse each such Holder, each of its officers,
directors and partners, and each person controlling such Holder, each such
underwriter and each person who controls any such underwriter, for any legal and
any other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, provided that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement (or alleged untrue statement) or omission (or alleged omission) based
upon written information furnished to the Company by such Holder or underwriter
and stated to be specifically for use therein.
(b) Each Holder will, if Registrable Securities or other securities
held by such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify the
Company, each of its directors, officers and agents and each underwriter, if
any, of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of the
Securities Act and the rules and regulations thereunder, each other such Holder
and each of their officers, directors and partners, and each person controlling
such Holder, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, and will reimburse the Company and such
Holders, directors, officers, agents, partners, persons, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by such Holder and stated to be specifically for use therein;
provided, however, that the obligations of such Holders hereunder shall be
limited to an amount equal to the net proceeds to each such Holder of securities
sold as contemplated herein.
<PAGE>
(c) Each party entitled to indemnification under this Section 10 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement. An indemnified
party shall have the right to retain its own 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. No
Indemnifying Party in the defense of any such claim or litigation shall, except
with the consent of each Indemnified Party, consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with defense of such claim and
litigation resulting therefrom.
(d) If the indemnification provided for in this Section 10 is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any losses, claims, damages or liabilities referred to herein, the
indemnifying party, in lieu of indemnifying such indemnified party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid or
payable by such indemnified party as a result of such loss, claim, damage or
liability 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 any untrue or alleged untrue statement of a material fact or
the omission to state a material fact that resulted in such loss, claim, damage
or liability, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by a court of law 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;
provided, that in no event shall any contribution by a Holder thereunder exceed
the proceeds from the offering received by such Holder.
(e) The obligations of the Company and Holders under this Section 10
shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this agreement.
11. Information by Holder. Each Holder holding securities included in any
---------------------
registration shall furnish to the Company such information regarding such Holder
as the Company may reasonably request in writing and as shall be reasonably
required in connection with any registration, qualification or compliance
referred to in this Agreement.
<PAGE>
12. Limitations on Registration of Issues of Securities. From and after
---------------------------------------------------
the date of this Agreement, the Company shall not enter into any agreement with
any holder or prospective holder of any securities of the Company giving such
holder or prospective holder the right to require the Company to initiate any
registration of any securities of the Company, provided that this Section 12
shall not limit the right of the Company to enter any agreements with any holder
or prospective holder of any securities of the Company giving such holder or
prospective holder the right to require the Company, upon any registration of
any of its securities, to include, among the securities which the Company is
then registering, securities owned by such holder. Any right given by the
Company to any holder or prospective holder of the Company's securities in
connection with the registration of securities shall be conditioned such that it
shall be consistent with the provisions of this Agreement and with the rights of
the Holders provided in this Agreement.
13. Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission which may permit the sale of the
Restricted Securities to the public without registration, the Company agrees to:
(a) Make and keep public information available as those terms are
understood and defined in Rule 144 under the Securities Act, at all times from
and after ninety (90) days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the general public;
(b) Use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act at any time after it has become subject to
such reporting requirements;
(c) So long as a Shareholder owns any Restricted Securities, furnish
to the Shareholder forthwith upon request a written statement by the Company as
to its compliance with the reporting requirements of Rule 144 (at any time from
and after ninety (90) days following the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the Securities Act and the Exchange Act (at any time
after it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of the Company, and such other reports and
documents so filed as a Shareholder may reasonably request in availing itself of
any rule or regulation of the Commission allowing a Shareholder to sell any such
securities without registration.
14. No-Action Letter or Opinion of Counsel in Lieu of Registration.
--------------------------------------------------------------
Notwithstanding anything in this Agreement to the contrary, if at any time after
the date of the Company's initial public offering of its securities under the
Securities Act the Company shall have obtained from the Commission a "no-action"
letter in which the Commission has indicated that it will take no action if,
without registration under the Securities Act, any Holder disposes of
Registrable Securities covered by any request for registration made under this
Agreement in the manner in which such Holder proposes to dispose of the
Registrable Securities included in such request, or if in the opinion of counsel
for the Company concurred in by counsel for such Holder no registration under
the Securities Act is required in connection with such disposition, the
Registrable Securities included in such request shall not be eligible for
registration under this Agreement; provided, however, with respect to any Holder
who may deemed to be an "affiliate," as that term is defined under Rule 144,
<PAGE>
if, notwithstanding the opinion of such counsel, the Holder is unable to dispose
of all of the Registrable Securities included in his request in the manner in
which such Holder so proposes without registration, the Registrable Securities
included in such request shall be eligible for registration under this
Agreement.
15. Transfer or Assignment of Registration Rights. The rights to cause
---------------------------------------------
the Company to register a Shareholder's securities granted to such Shareholder
by the Company under Sections 5, 6 and 8 hereof may be transferred or assigned
by the Shareholder to a transferee or assignee of at least 100,000 shares of the
Restricted Securities; provided, however, that a Shareholder may transfer or
assign such rights to a partner or shareholder of Shareholder or to a successor
trust or successor trustee without restriction as to minimum shareholding. The
Company shall be given written notice by Shareholder at the time of said
transfer or assignment, stating the name and address of said transferee or
assignee and identifying the securities with respect to which such registration
rights are being transferred or assigned, and provided further that the
transferee or assignee of such rights is not deemed by the Board of Directors of
the Company, in its reasonable judgment, to be a competitor of the Company; and
provided further that the transferee or assignee of such rights assumes the
obligations of a Shareholder under this Agreement.
16. "Market Stand-off" Agreement. Each Shareholder agrees, if requested by
---------------------------
the Company and an underwriter of Common Stock (or other securities) of the
Company, not to sell or otherwise transfer or dispose of any Common Stock (or
other securities) of the Company held by Shareholder during a period of time
determined by the Company and its underwriters (not to exceed 180 days)
following the effective date of the Company's initial public offering of its
capital stock, provided that all officers, directors and employees of the
Company holding stock or stock options of at least one (1%) percent of the
Company's outstanding stock prior to the initial public offering of the Company
enter into similar agreements; provided, further, that with respect to the
Series C Holders and Series D Holders, the prohibition against the sale,
transfer or other dispostions of any Common Stock (or other securities) of the
Company held by them pursuant to this Section 16 shall not prohibit (i) the sale
of any shares of Common Stock purchased by such Series C Holder or Series D
Holder pursuant to a directed share program or otherwise in the Company's
initial public offering, or (ii) the sale, in the open market, of any shares of
Common Stock by such Series C Holder or Series D Holder provided that such
shares are purchased in the open market after the completion of the Company's
initial public offering.
Such agreement shall be in writing in a form satisfactory to the
Company and such underwriter. The Company may impose stop-transfer instructions
with respect to the Shares (or securities) subject to the foregoing restriction
until the end of said period.
17. Governing Law. This Agreement and the legal relations between the
-------------
parties arising hereunder shall be governed by and interpreted in accordance the
laws of the State of California. The parties hereto agree to submit to the
jurisdiction of the federal and state courts of the State of California with
respect to the breach or interpretation of this Agreement or the enforcement of
any and all rights, duties, liabilities, obligations, powers, and other
relations between the parties arising under this Agreement.
<PAGE>
18. Entire Agreement. This Agreement constitutes the full and entire
----------------
understanding and agreement between the parties regarding rights to
registration. Except as otherwise expressly provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon, the successors,
assigns, heirs, executors and administrators of the parties hereto.
19. Notices, Etc. All notices and other communications required or
-------------
permitted hereunder shall be in writing and shall be mailed by first-class mail,
postage prepaid, or otherwise delivered by hand or by messenger, addressed (a)
if to a Shareholder, at the address or addresses set forth on Exhibit A, Exhibit
--------- -------
B, Exhibit C, Exhibit C attached hereto, or at such other address or addresses
- - --------- ---------
as the Shareholder shall have furnished to the other parties hereto in writing,
or (b) if to any other holder of any securities, at such address as such holder
shall have furnished the other parties hereto in writing, or, until any such
holder so furnishes an address to the Company, then to and at the address of the
last holder of such Shares who has so furnished an address to the Company, or
(c) if to the Company, at the address of its principal offices set forth on the
signature page of this Agreement, or at such other address as the Company shall
have furnished to the other parties hereto in writing.
20. Other Registration Rights. This Agreement supersedes any previous
-------------------------
agreement between the Company and any party with respect to the grant by the
Company of registration rights, including but not limited to Registration Rights
Agreement dated February 14, 1997.
21. Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
22. Amendments. Any provision of this Agreement may be amended, waived or
----------
modified upon the written consent of the Company, and the Shareholders (or their
assignees to whom Shareholders have expressly assigned their rights in
compliance with Section 15 hereof) who then hold more than fifty percent (50%)
of the Registrable Securities then held by persons entitled to registration
rights hereunder, provided further, any such amendment, waiver or modification
applies by its terms to each applicable Shareholder and each such assignee and,
provided further, that a Shareholder or such assignee hereunder may waive any of
such Holder's rights or the Company's obligations hereunder without obtaining
the consent of any other Shareholder or assignee.
(Remainder of this page left intentionally blank)
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Restated Registration
Rights Agreement as of the date first above written.
"INVENTA CORPORATION"
By: /s/ David A. Lavanty
---------------------------------
David A. Lavanty, President
-14-
<PAGE>
"SHAREHOLDERS"
____________________________________
Stephen T. Barry
BANCBOSTON VENTURES INC.
By: /s/ Maia D. Heymann
---------------------------------
Name: Maia D. Heymann
Title: Director
BATTERY VENTURES III, L.P.
By: Battery Partners III, L.P.
By: /s/ Todd Dagres
---------------------------------
Name: TODD DAGRES
Title: GENERAL PARTNER
BOSTON MILLENNIA PARTNERS
LIMITED PARTNERSHIP
By: Glen Partners Limited Partnership,
its General Partner
By: /s/ Martin J Hernon
---------------------------------
General Partner
BOSTON MILLENNIA ASSOCIATES & PARTNERSHIP
By: Martin J Hernon, General Partner
---------------------------------
____________________________________
Dana Callow, Jr.
____________________________________
Harry A. Caunter
-15-
<PAGE>
THE CHASE MANHATTAN BANK AS TRUSTEE
FOR FIRST PLAZA GROUP TRUST
By: /s/ John F. Weeda The Chase Manhattan Bank has executed
--------------------------------- this Document/Agreement solely in its
JOHN F. WEEDA capacity as Directed Trustee of the
First Plaza Group Trust upon the
Title: VICE PRESIDENT direction of General Motors Investment
------------------------------ Management Corporation.
____________________________________
Electra D. DePeyster
/s/ Robert Ducommun
- ------------------------------------
Robert Ducommun
Palmer G. and Charles E. Ducommun
Charitable Annuity Trust, u/d/t
/s/ Robert Ducommun
- ------------------------------------
Robert Ducommun, Trustee
____________________________________
Christian Dubiel
ESSEX PRIVATE PLACEMENT FUND II, LIMITED PARTNERSHIP
By: Essex Investment Mgt. Company LLC
Its General Partner
By: /s/ [ILLEGIBLE]
---------------------------------
Its: PRINCIPAL
--------------------------------
____________________________________
Maya S. Hattangady
____________________________________
Martin J. Hernon
-16-
<PAGE>
___________________________________
Robert W. Jevon
___________________________________
Frank P. Pinto
___________________________________
Andrew Potter
PRIVATE EQUITY PORTFOLIO II, LLC
BY BANKBOSTON NA, ITS MANAGER
By: /s/ Glen Holland
--------------------------------
Name: Glen Holland
Title: Vice President
___________________________________
Suresh Shanmugham
___________________________________
Santhanam C. Shekar
___________________________________
Bruce R. Tiedemann
TCV II (Q), L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By: /s/ Robert C. Bensky
--------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
-17-
<PAGE>
TCV II STRATEGIC PARTNERS, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By: /s/ Robert C. Bensky
--------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
TCV II, V.O.F.
a Netherlands Antilles General Partnership
By: Technology Crossover Management II, L.L.C.,
Its: Investment General Partner
By: /s/ Robert C. Bensky
--------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
TECHNOLOGY CROSSOVER VENTURES II, C.V.
a Netherlands Antilles Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: Investment General Partner
By: /s/ Robert C. Bensky
--------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
TECHNOLOGY CROSSOVER VENTURES II, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.
Its: General Partner
By: /s/ Robert C. Bensky
--------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
-18-
<PAGE>
EXHIBIT G
---------
LEGAL OPINION OF WILSON SONSINI GOODRICH & ROSATI
<PAGE>
Wilson Sonsini Goodrich & Rosati
PROFESSIONAL CORPORATION
January 19, 2000
To: Each Investor listed on
the Schedule of Investors
to the Inventa Corporation
Series D Convertible Preferred
Stock Purchase Agreement
[LOGO]
Ladies and Gentlemen:
Reference is made to the Series D Convertible Preferred Stock
PALO ALTO Purchase Agreement dated as of January 19, 2000 (the "Purchase
Agreement"), complete with all listed exhibits thereto, by and among
Inventa Corporation, a California corporation, (the "Company") and
each of you, providing for the issuance by the Company to the
Investors of shares of Series D Preferred Stock of the Company (the
"Shares"). This opinion is rendered to you in compliance with
KIRKLAND Section 5.6 of the Purchase Agreement, and all terms used herein
have the meanings defined for them in the Purchase Agreement unless
otherwise defined herein.
AUSTIN We have acted as counsel for the Company in connection with the
negotiation of the Purchase Agreement and the issuance of the
Shares. As such counsel, we have made such legal and factual
examinations and inquiries as we have deemed advisable or necessary
for the purpose of rendering this opinion. In addition, we have
examined originals or copies of such corporate records of the
Company, certificates of public officials and such other documents
which we consider necessary or advisable for the purpose of
rendering this opinion. In such examination we have assumed the
genuineness of all signatures on original documents, the
authenticity and completeness of all documents submitted to us as
originals, the conformity to original documents of all copies
submitted to us and the due execution and delivery of all documents
(except as to due execution and delivery by the Company) where due
execution and delivery are a prerequisite to the effectiveness
thereof.
As used in this opinion, the expression "to our knowledge,"
"known to us" or similar language with reference to matters of fact
means that, after an examination of documents made available to us
by the Company, and after inquiries of officers of the Company, but
without any further independent factual investigation, we find no
reason to believe that the opinions expressed herein are factually
incorrect. Further, the expression "to our knowledge," "known to us"
or similar language with reference to matters of fact refers to the
current actual knowledge of the attorneys of this firm who have
worked on matters for the Company. Except to the extent expressly
set forth herein or as we otherwise believe to be necessary to our
opinion, we have not undertaken any independent investigation to
determine the existence or absence of any fact, and no
<PAGE>
January 19, 2000
Page 2
inference as to our knowledge of the existence or absence of any
fact should be drawn from our representation of the Company or the
rendering of the opinion set forth below.
For purposes of this opinion, we are assuming that you have all
requisite power and authority, and have taken any and all necessary
corporate or partnership action, to execute and deliver the Purchase
Agreement, and we are assuming that the representations and
warranties made by the Investors in the Purchase Agreement and
pursuant thereto are true and correct. We are also assuming that
each Investor has purchased the Shares for value, in good faith and
without notice of any adverse claims within the meaning of the
California Uniform Commercial Code.
The opinions hereinafter expressed are subject to the following
qualifications:
(a) We express no opinion as to the effect of applicable
bankruptcy, insolvency, reorganization, moratorium or other similar
federal or state laws affecting the rights of creditors;
(b) We express no opinion as to the effect of rules of law
governing specific performance, injunctive relief or other equitable
remedies (regardless of whether any such remedy is considered in a
proceeding at law or in equity);
(c) We express no opinion as to compliance with the anti-
fraud provisions of applicable securities laws;
(d) We express no opinion as to the enforceability of the
indemnification provisions of the Registration Rights Agreement to
the extent the provisions thereof may be subject to limitations of
public policy and the effect of applicable statutes and judicial
decisions; and
(e) We are members of the Bar of the State of California
and we express no opinion as to any matter relating to the laws of
any jurisdiction other than the federal laws of the United States of
America and the laws of the State of California. To the extent this
opinion addresses applicable securities laws of states other than
the State of California, we have not retained nor relied on the
opinion of counsel admitted to the bar of such states, but rather
have relied on compilations of the securities laws of such states
contained in reporting services presently available to us.
Based upon and subject to the foregoing, and except as set
forth in the Schedule of Exceptions to the Purchase Agreement, we
are of the opinion that:
1. The Company is a corporation duly organized and validly
existing under, and by virtue of, the laws of the State of
California and is in good standing under such laws. The Company has
requisite corporate power to own and operate its properties and
assets, and to carry on its business as presently conducted. The
Company is duly qualified to do business, and in good standing in
all foreign jurisdictions where its ownership or leasing of
properties or the conduct of its
<PAGE>
January 19, 2000
Page 3
business requires such qualification, except where the failure to be
so qualified would not have a material adverse effect on the
Company's business as now conducted.
2. The Company has all requisite legal and corporate power to
execute and deliver the Purchase Agreement, the Shareholders
Agreement, the Registration Rights Agreement and the side letter
agreement of even date herewith among the Company and the Investors
listed on Schedule A thereto regarding a proposed private placement
of common stock (collectively, the "Agreements"), to sell and issue
the Shares under the Purchase Agreement, to issue the Common Stock
issuable upon conversion of the Shares and to carry out and perform
its obligations under the terms of the Agreements.
3. The authorized capital of the Company consists of (i)
14,779,511 shares of Preferred Stock, 1,000,000 shares of which are
designated Series A Preferred Stock and of which 800,000 are issued
and outstanding, 2,560,000 shares of which are designated Series B
Preferred Stock and of which 2,560,000 are issued and outstanding,
8,219,511 shares of which are designated Series C Preferred Stock
and of which 8,055,511 are issued and outstanding, and 3,000,000
shares of which are designated Series D Preferred Stock, none of
which are issued and outstanding, and (ii) 25,000,000 shares of
Common Stock, of which 4,713,055 shares are issued and outstanding.
All issued and outstanding shares of the Company's capital stock
have been duly authorized and validly issued and are fully paid and
nonassessable. The Shares, when issued pursuant to the terms of the
Purchase Agreement (including Common Stock issued upon conversion of
the Shares), will be duly authorized, validly issued, fully paid and
nonassessable. Except as set forth in the Agreements and all the
exhibits thereto, to our knowledge, there are no options, warrants
or other rights (including conversion or preemptive rights) or
agreements outstanding to purchase any of the Company's authorized
and unissued capital stock.
4. All corporate action on the part of the Company, its
directors and shareholders necessary for the authorization,
execution, delivery and performance of the Agreements, the
authorization, sale, issuance and delivery of the Shares and the
performance of the Company's obligations under the Agreements has
been taken. The Agreements have been duly and validly executed and
delivered by the Company and constitute valid and binding
obligations of the Company, enforceable against the Company in
accordance with their terms. The Shares will have the rights,
preferences and privileges described in the Restated Articles. To
our knowledge, the Shares and the Common Stock issuable on
conversion of the Shares will be free of any liens, encumbrances or
preemptive rights contained in the Company's Restated Articles or
Bylaws.
5. The execution, delivery and performance of and compliance
with the terms of the Agreements, and the issuance of the Shares do
not violate any provision of the Restated Articles or Bylaws, or, to
our knowledge, any provisions of any applicable federal or state
law, rule or regulation. To our knowledge, the execution, delivery
and performance of and compliance with the Agreements and the
issuance of the Shares do not violate or constitute a default under,
any material contract, agreement, instrument, judgment or decree
binding upon the Company.
<PAGE>
January 19, 2000
Page 4
6. To our knowledge, there are no actions, suits, proceedings
or investigations pending against the Company or its properties
before any court or governmental agency (nor, to our knowledge, has
the Company received any written threat thereof), which, either in
any case or in the aggregate, are likely to result in any material
adverse change in the business or financial condition of the
Company, or in any material impairment of the right or ability of
the Company to carry on its business as now conducted, or which
questions the validity of the Agreements or any action taken or to
be taken by the Company in connection therewith.
7. No consent, approval or authorization of or designation,
declaration or filing with any governmental authority on the part of
the Company is required in connection with the valid execution and
delivery of the Agreements or other offer, sale or issuance of the
Shares or the consummation of any other transaction contemplated
thereby, except (a) filing of the Restated Articles in the Office of
the Secretary of State of the State of California, and (b)
qualification (or taking such action as may be necessary to secure
an exemption from qualification, if available) under the California
Corporate Securities Law and other applicable blue sky laws (but
excluding jurisdictions outside of the United States) of the offer
and sale of the Shares (and the Common Stock issuable upon
conversion thereof) and the modification of rights of shareholders
contemplated by the Purchase Agreement. The filing referred to in
clause (a) above has been accomplished and is effective, and to our
knowledge there are no proceedings or written threat thereof which
question the validity of such filing. Our opinion herein is
otherwise subject to the timely and proper completion of all filings
and other actions contemplated by clause (b) above where such
filings and actions are to be undertaken on or after the date
hereof.
8. Subject to the accuracy of each Investor's representations
in Section 3 of the Purchase Agreement we are of the opinion that
the offer, sale and issuance of the Shares in conformity with the
terms of the Purchase Agreement constitute transactions exempt from
the requirements of Section 5 of the Securities Act of 1933, as
amended.
This opinion is furnished to the Investors solely for their
benefit in connection with the purchase of the Shares, and may not
be relied upon by any other person or for any other purpose without
our prior written consent.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ Wilson Sonsini Goodrich & Rosati
<PAGE>
EXHIBIT 10.9
INVENTA TECHNOLOGIES, INC.
2000 STOCK PLAN
1. Purposes of the Plan. The purposes of this 2000 Stock Plan are:
--------------------
. to attract and retain the best available personnel for positions
of substantial responsibility,
. to provide additional incentive to Employees, Directors and
Consultants, and
. to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees as
shall be administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
---------------
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options are, or will be, granted under
the Plan.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means a committee of Directors appointed by the
---------
Board in accordance with Section 4 of the Plan.
(f) "Common Stock" means the common stock of the Company.
------------
(g) "Company" means Inventa Technologies, Inc., a Delaware
-------
corporation.
(h) "Consultant" means any person, including an advisor, engaged
----------
by the Company or a Parent or Subsidiary to render services to such entity.
(i) "Director" means a member of the Board.
--------
(j) "Disability" means total and permanent disability as defined
----------
in Section 22(e)(3) of the Code.
<PAGE>
(k) "Employee" means any person, including Officers and Directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. A Service
Provider shall not cease to be an Employee in the case of (i) any leave of
absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, then three (3) months following the 91st day of
such leave, any Incentive Stock Option held by the Optionee shall cease to be
treated as an Incentive Stock Option and shall be treated for tax purposes as a
Nonstatutory Stock Option. Neither service as a Director nor payment of a
director's fee by the Company shall be sufficient to constitute "employment" by
the Company.
(l) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(m) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without limitation the
Nasdaq National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market,
its Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock on the last market trading day prior
to the day of determination, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(n) "Incentive Stock Option" means an Option intended to qualify
----------------------
as an incentive stock option within the meaning of Section 422 of the Code and
the regulations promulgated thereunder.
(o) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(p) "Notice of Grant" means a written or electronic notice
---------------
evidencing certain terms and conditions of an individual Option grant. The
Notice of Grant is part of the Option Agreement.
(q) "Officer" means a person who is an officer of the Company
-------
within the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(r) "Option" means a stock option granted pursuant to the Plan.
------
-2-
<PAGE>
(s) "Option Agreement" means an agreement between the Company and
----------------
an Optionee evidencing the terms and conditions of an individual Option grant.
The Option Agreement is subject to the terms and conditions of the Plan.
(t) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(u) "Optionee" means the holder of an outstanding Option granted
--------
under the Plan.
(v) "Parent" means a "parent corporation," whether now or
------
hereafter existing, as defined in Section 424(e) of the Code.
(w) "Plan" means this 2000 Stock Plan.
----
(x) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
----------
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(y) "Section 16(b)" means Section 16(b) of the Exchange Act.
-------------
(z) "Service Provider" means an Employee, Director or Consultant.
----------------
(aa) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 12 of the Plan.
(bb) "Subsidiary" means a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
-------------------------
the Plan, the maximum aggregate number of Shares that may be optioned and sold
under the Plan is 7,000,000 Shares, plus an annual increase to be added on
the first day of the Company's fiscal year beginning in 2001, equal to the
lesser of (i) 1,500,000 shares, (ii) 5% of the outstanding shares on such
date or (iii) a lesser amount determined by the Board. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, the unpurchased Shares which were subject thereto shall
become available for future grant or sale under the Plan (unless the Plan has
terminated); provided, however, that Shares that have actually been issued under
--------
the Plan shall not be returned to the Plan and shall not become available for
future distribution under the Plan, except that if Shares of restricted stock
are repurchased by the Company at their original purchase price, such Shares
shall become available for future grant under the Plan.
4. Administration of the Plan.
--------------------------
(a) Procedure.
---------
(i) Multiple Administrative Bodies. Different
------------------------------
Committees with respect to different groups of Service Providers may administer
the Plan.
-3-
<PAGE>
(ii) Section 162(m). To the extent that the
--------------
Administrator determines it to be desirable to qualify Options granted hereunder
as "performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administrated by a Committee of two or more "outside
directors" within the meaning of Sectiion 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify
----------
transactions hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder shall be structured to satisfy the requirements for exemption under
Rule 16b-3.
(iv) Other Administration. Other than as provided
--------------------
above, the Plan shall be administered by (A) the Board or (B) a Committee, which
committee shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options may
be granted hereunder;
(iii) to determine the number of shares of Common Stock
to be covered by each Option granted hereunder;
(iv) to approve forms of agreement for use under the
Plan;
(v) to determine the terms and conditions, not
inconsistent with the terms of the Plan or any Option granted hereunder. Such
terms and conditions include, but are not limited to, the exercise price, the
time or times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration or waiver of forfeiture restrictions, and
any restriction or limitation regarding any Option or the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;
(vi) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(vii) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations relating to
sub-plans established for the purpose of satisfying applicable foreign laws;
(viii) to modify or amend each Option (subject to Section
14(c) of the Plan), including the discretionary authority to extend the post-
termination exercisability period of Options longer than is otherwise provided
for in the Plan;
(ix) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the Shares to be
issued upon exercise of an Option that number of Shares having a Fair Market
Value equal to the amount required to be withheld. The Fair Market
-4-
<PAGE>
Value of the Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined. All elections by an Optionee
to have Shares withheld for this purpose shall be made in such form and under
such conditions as the Administrator may deem necessary or advisable;
(x) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option previously
granted by the Administrator;
(xi) to make all other determinations deemed necessary
or advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
----------------------------------
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.
5. Eligibility. Nonstatutory Stock Options may be granted to Service
-----------
Providers. Incentive Stock Options may be granted only to Employees.
6. Limitations.
-----------
(a) Each Option shall be designated in the Option Agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option shall confer upon an Optionee
any right with respect to continuing the Optionee's relationship as a Service
Provider with the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such relationship at any
time, with or without cause.
(c) The following limitations shall apply to grants of Options:
(i) No Service Provider shall be granted, in any fiscal
year of the Company, Options to purchase more than [________] Shares.
(ii) In connection with his or her initial service, a
Service Provider may be granted Options to purchase up to an additional
[________] Shares, which shall not count against the limit set forth in
subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 12.
(iv) If an Option is cancelled in the same fiscal year
of the Company in which it was granted (other than in connection with a
transaction described in Section 12), the
-5-
<PAGE>
cancelled Option will be counted against the limits set forth in subsections (i)
and (ii) above. For this purpose, if the exercise price of an Option is reduced,
the transaction will be treated as a cancellation of the Option and the grant of
a new Option
7. Term of Plan. Subject to Section 18 of the Plan, the Plan shall
------------
become effective upon its adoption by the Board. It shall continue in effect for
a term of ten (10) years unless terminated earlier under Section 14 of the Plan.
8. Term of Option. The term of each Option shall be stated in the
--------------
Option Agreement. In the case of an Incentive Stock Option, the term shall be
ten (10) years from the date of grant or such shorter term as may be provided in
the Option Agreement. Moreover, in the case of an Incentive Stock Option granted
to an Optionee who, at the time the Incentive Stock Option is granted, owns
stock representing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
term of the Incentive Stock Option shall be five (5) years from the date of
grant or such shorter term as may be provided in the Option Agreement.
9. Option Exercise Price and Consideration.
---------------------------------------
(a) Exercise Price. The per share exercise price for the Shares to
--------------
be issued pursuant to exercise of an Option shall be determined by the
Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time the
Incentive Stock Option is granted, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee
described in paragraph (A) immediately above, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the
per Share exercise price shall be determined by the Administrator. In the case
of a Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price of less than 100% of the Fair Market
Value per Share on the date of grant pursuant to a merger or other corporate
transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is
---------------------------------
granted the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions that must be satisfied before the
Option may be exercised.
-6-
<PAGE>
(c) Form of Consideration. The Administrator shall determine the
---------------------
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares, provided Shares acquired from the
Company (A) have been owned by the Optionee for more than six (6) months on the
date of surrender, and (B) have a Fair Market Value on the date of surrender
equal to the aggregate exercise price of the Shares as to which said Option
shall be exercised;
(v) consideration received by the Company under a
cashless exercise program implemented by the Company in connection with the
Plan;
(vi) a reduction in the amount of any Company liability
to the Optionee, including any liability attributable to the Optionee's
participation in any Company-sponsored deferred compensation program or
arrangement;
(vii) any combination of the foregoing methods of
payment; or
(viii) such other consideration and method of payment
for the issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement. Unless the Administrator provides otherwise,
vesting of Options granted hereunder shall be tolled during any unpaid leave of
absence. An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives:
(i) written or electronic notice of exercise (in accordance with the Option
Agreement) from the person entitled to exercise the Option, and (ii) full
payment for the Shares with respect to which the Option is exercised. Full
payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan. Shares issued
upon exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly after the
Option is exercised. No adjustment will be made for a
-7-
<PAGE>
dividend or other right for which the record date is prior to the date the
Shares are issued, except as provided in Section 12 of the Plan.
Exercising an Option in any manner shall decrease the number of
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Relationship as a Service Provider. If an
-------------------------------------------------
Optionee ceases to be a Service Provider, other than upon the Optionee's death
or Disability, the Optionee may exercise his or her Option within such period of
time as is specified in the Option Agreement to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement). In the absence of
a specified time in the Option Agreement, the Option shall remain exercisable
for three (3) months following the Optionee's termination. If, on the date of
termination, the Optionee is not vested as to his or her entire Option, the
Shares covered by the unvested portion of the Option shall revert to the Plan.
If, after termination, the Optionee does not exercise his or her Option within
the time specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(c) Disability of Optionee. If an Optionee ceases to be a
----------------------
Service Provider as a result of the Optionee's Disability, the Optionee may
exercise his or her Option within such period of time as is specified in the
Option Agreement to the extent the Option is vested on the date of termination
(but in no event later than the expiration of the term of such Option as set
forth in the Option Agreement). In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months following
the Optionee's termination. If, on the date of termination, the Optionee is not
vested as to his or her entire Option, the Shares covered by the unvested
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified herein,
the Option shall terminate, and the Shares covered by such Option shall revert
to the Plan.
(d) Death of Optionee. If an Optionee dies while a Service
-----------------
Provider, the Option may be exercised within such period of time as is specified
in the Option Agreement (but in no event later than the expiration of the term
of such Option as set forth in the Notice of Grant), by the Optionee's estate or
by a person who acquires the right to exercise the Option by bequest or
inheritance, but only to the extent that the Option is vested on the date of
death. In the absence of a specified time in the Option Agreement, the Option
shall remain exercisable for twelve (12) months following the Optionee's
termination. If, at the time of death, the Optionee is not vested as to his or
her entire Option, the Shares covered by the unvested portion of the Option
shall immediately revert to the Plan. The Option may be exercised by the
executor or administrator of the Optionee's estate or, if none, by the person(s)
entitled to exercise the Option under the Optionee's will or the laws of descent
or distribution. If the Option is not so exercised within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
11. Non-Transferability of Options. Unless determined otherwise by the
------------------------------
Administrator, an Option may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee. If the Administrator makes an Option
transferable,
-8-
<PAGE>
such Option shall contain such additional terms and conditions as
the Administrator deems appropriate.
12. Adjustments Upon Changes in Capitalization, Dissolution, Merger or
------------------------------------------------------------------
Asset Sale.
- ----------
(a) Changes in Capitalization. Subject to any required action by
-------------------------
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, the number of shares that may be added annually to the
shares reserved under the Plan (pursuant to Section 3(a)(i)), as well as the
price per share of Common Stock covered by each such outstanding Option, shall
be proportionately adjusted for any increase or decrease in the number of issued
shares of Common Stock resulting from a stock split, reverse stock split, stock
dividend, combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed to
have been "effected without receipt of consideration." Such adjustment shall be
made by the Board, whose determination in that respect shall be final, binding
and conclusive. Except as expressly provided herein, no issuance by the Company
of shares of stock of any class, or securities convertible into shares of stock
of any class, shall affect, and no adjustment by reason thereof shall be made
with respect to, the number or price of shares of Common Stock subject to an
Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated. To the extent it has not been previously exercised, an
Option will terminate immediately prior to the consummation of such proposed
action.
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option shall be assumed or an equivalent option
or right substituted by the successor corporation or a Parent or Subsidiary of
the successor corporation. In the event that the successor corporation refuses
to assume or substitute for the Option, the Optionee shall fully vest in and
have the right to exercise the Option as to all of the Optioned Stock, including
Shares as to which it would not otherwise be vested or exercisable. If an Option
becomes fully vested and exercisable in lieu of assumption or substitution in
the event of a merger or sale of assets, the Administrator shall notify the
Optionee in writing or electronically that the Option shall be fully vested and
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option shall terminate upon the expiration of such period. For the purposes
of this paragraph, the Option shall be considered assumed if, following the
merger or sale of assets, the option confers the right to purchase or receive,
for each Share of Optioned Stock subject to the Option immediately prior to the
merger or sale of
-9-
<PAGE>
assets, the consideration (whether stock, cash, or other securities or property)
received in the merger or sale of assets by holders of Common Stock for each
Share held on the effective date of the transaction (and if holders were offered
a choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares); provided, however, that if such
consideration received in the merger or sale of assets is not solely common
stock of the successor corporation or its Parent, the Administrator may, with
the consent of the successor corporation, provide for the consideration to be
received upon the exercise of the Option, for each Share of Optioned Stock
subject to the Option, to be solely common stock of the successor corporation or
its Parent equal in fair market value to the per share consideration received by
holders of Common Stock in the merger or sale of assets.
13. Date of Grant. The date of grant of an Option shall be, for all
-------------
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.
14. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
--------------------
approval of any Plan amendment to the extent necessary and desirable to comply
with Applicable Laws.
(c) Effect of Amendment or Termination. No amendment, alteration,
----------------------------------
suspension or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan shall not affect the Administrator's ability to exercise
the powers granted to it hereunder with respect to Options granted under the
Plan prior to the date of such termination.
15. Conditions Upon Issuance of Shares.
----------------------------------
(a) Legal Compliance. Shares shall not be issued pursuant to the
----------------
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) Investment Representations. As a condition to the exercise of
--------------------------
an Option, the Company may require the person exercising such Option to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.
16. Inability to Obtain Authority. The inability of the Company to
-----------------------------
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any
-10-
<PAGE>
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
17. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. Shareholder Approval. The Plan shall be subject to approval by the
--------------------
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Such shareholder approval shall be obtained in the manner and to the
degree required under Applicable Laws.
-11-
<PAGE>
INVENTA TECHNOLOGIES, INC.
2000 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
----------------------------
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number
------------------------------
Date of Grant
------------------------------
Vesting Commencement Date
------------------------------
Exercise Price per Share $
------------------------------
Total Number of Shares Granted
------------------------------
Total Exercise Price $
------------------------------
Type of Option: Incentive Stock Option
----
Nonstatutory Stock Option
----
Term/Expiration Date:
------------------------------
Vesting Schedule:
----------------
Subject to accelerated vesting as set forth below, this Option may be
exercised, in whole or in part, in accordance with the following schedule:
[25% of the Shares subject to the Option shall vest twelve months after the
Vesting Commencement Date, and 1/48 of the Shares subject to the Option shall
vest each month thereafter, subject to the Optionee continuing to be a Service
Provider on such dates].
<PAGE>
Termination Period:
------------------
This Option may be exercised for [three months] after Optionee ceases to be
a Service Provider. Upon the death or Disability of the Optionee, this Option
may be exercised for [twelve months] after Optionee ceases to be a Service
Provider. In no event shall this Option be exercised later than the
Term/Expiration Date as provided above.
II. AGREEMENT
---------
A. Grant of Option.
---------------
The Plan Administrator of the Company hereby grants to the Optionee
named in the Notice of Grant attached as Part I of this Agreement (the
"Optionee") an option (the "Option") to purchase the number of Shares, as set
forth in the Notice of Grant, at the exercise price per share set forth in the
Notice of Grant (the "Exercise Price"), subject to the terms and conditions of
the Plan, which is incorporated herein by reference. Subject to Section 14(c)
of the Plan, in the event of a conflict between the terms and conditions of the
Plan and the terms and conditions of this Option Agreement, the terms and
conditions of the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock Option
("ISO"), this Option is intended to qualify as an Incentive Stock Option under
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option ("NSO").
B. Exercise of Option.
-------------------
(a) Right to Exercise. This Option is exercisable during its term in
-----------------
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an
------------------
exercise notice, in the form attached as Exhibit A (the "Exercise Notice"),
---------
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "Exercised Shares"), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall be completed
by the Optionee and delivered to the Company. The Exercise Notice shall be
accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares. This Option shall be deemed to be exercised upon receipt by the Company
of such fully executed Exercise Notice accompanied by such aggregate Exercise
Price.
No Shares shall be issued pursuant to the exercise of this Option
unless such issuance and exercise complies with Applicable Laws. Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.
-2-
<PAGE>
C. Method of Payment. Payment of the aggregate Exercise Price shall be by
-----------------
any of the following, or a combination thereof, at the election of the Optionee:
1. cash; or
2. check; or
3. consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan; or
4. surrender of other Shares provided Shares acquired from the
Company, (i) have been owned by the Optionee for more than six (6) months on the
date of surrender, and (ii) have a Fair Market Value on the date of surrender
equal to the aggregate Exercise Price of the Exercised Shares.
D. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by the Optionee. The terms
of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
E. Term of Option. This Option may be exercised only within the term set
--------------
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.
F. Tax Obligations.
---------------
1. Withholding Taxes. Optionee agrees to make appropriate arrangements
-----------------
with the Company (or the Parent or Subsidiary employing or retaining Optionee)
for the satisfaction of all Federal, state, local and foreign income and
employment tax withholding requirements applicable to the Option exercise.
Optionee acknowledges and agrees that the Company may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.
2. Notice of Disqualifying Disposition of ISO Shares. If the Option
granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
G. Entire Agreement; Governing Law. The Plan is incorporated herein by
-------------------------------
reference. The Plan and this Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and supersede in their
entirety all prior undertakings and agreements of the Company and Optionee with
respect to the subject matter hereof, and may not be modified adversely to the
Optionee's interest except by means of a writing signed by the Company and
Optionee. This agreement is governed by the internal substantive laws, but not
the choice of law rules, of California.
-3-
<PAGE>
H. NO GUARANTEE OF CONTINUED SERVICE.
---------------------------------
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT
TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE
PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED,
BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE FURTHER
ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED
HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS
OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING
PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S RIGHT
OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP AS A SERVICE
PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the Plan and this Option Agreement. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option Agreement.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Administrator upon any questions relating to the Plan
and Option Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: INVENTA TECHNOLOGIES, INC.
- ------------------------- ----------------------------
Signature By
- ------------------------- ----------------------------
Print Name Title
- -------------------------
Residence Address
- -------------------------
-4-
<PAGE>
CONSENT OF SPOUSE
-----------------
The undersigned spouse of Optionee has read and hereby approves the terms
and conditions of the Plan and this Option Agreement. In consideration of the
Company's granting his or her spouse the right to purchase Shares as set forth
in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's spouse as
attorney-in-fact for the undersigned with respect to any amendment or exercise
of rights under the Plan or this Option Agreement.
----------------------------------
Spouse of Optionee
<PAGE>
EXHIBIT A
---------
INVENTA TECHNOLOGIES, INC.
2000 STOCK PLAN
EXERCISE NOTICE
Inventa Technologies, Inc.
255 Shoreline Drive, Second Floor
Redwood Shores, CA 94065
Attention: [Title]
1. Exercise of Option. Effective as of today, ________________, _____, the
------------------
undersigned ("Purchaser") hereby elects to purchase ______________ shares (the
"Shares") of the Common Stock of Inventa Technologies, Inc. (the "Company")
under and pursuant to the 2000 Stock Plan (the "Plan") and the Stock Option
Agreement dated, _____ (the "Option Agreement"). The purchase price for the
Shares shall be $_____, as required by the Option Agreement.
2. Delivery of Payment. Purchaser herewith delivers to the Company the
-------------------
full purchase price for the Shares.
3. Representations of Purchaser. Purchaser acknowledges that Purchaser has
----------------------------
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
4. Rights as Shareholder. Until the issuance (as evidenced by the
---------------------
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exercise of the Option. The Shares so acquired shall
be issued to the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which the record
date is prior to the date of issuance, except as provided in Section 12 of the
Plan.
5. Tax Consultation. Purchaser understands that Purchaser may suffer
----------------
adverse tax consequences as a result of Purchaser's purchase or disposition of
the Shares. Purchaser represents that Purchaser has consulted with any tax
consultants Purchaser deems advisable in connection with the purchase or
disposition of the Shares and that Purchaser is not relying on the Company for
any tax advice.
<PAGE>
6. Entire Agreement; Governing Law. The Plan and Option Agreement are
-------------------------------
incorporated herein by reference. This Agreement, the Plan and the Option
Agreement constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede in their entirety all prior undertakings and
agreements of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's interest except by
means of a writing signed by the Company and Purchaser. This agreement is
governed by the internal substantive laws, but not the choice of law rules, of
California.
Submitted by: Accepted by:
PURCHASER: INVENTA TECHNOLOGIES, INC.
- --------------------------- -----------------------------
Signature By
- --------------------------- -----------------------------
Print Name Its
Address: Address:
- ------- -------
- --------------------------- Inventa Technologies, Inc.
255 Shoreline Drive,Secound Floor
- --------------------------- Redwood Shores, CA 94065
------------------------------
Date Received
-2-
<PAGE>
EXHIBIT 10.10
INVENTA TECHNOLOGIES, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 2000 Employee Stock Purchase
Plan of Inventa Technologies, Inc..
1. Purpose. The purpose of the Plan is to provide employees of the
-------
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Internal Revenue Code of 1986, as amended. The
provisions of the Plan, accordingly, shall be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
-----------
(a) "Board" shall mean the Board of Directors of the Company or any
-----
committee thereof designated by the Board of Directors of the Company in
accordance with Section 14 of the Plan.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" shall mean the common stock of the Company.
------------
(d) "Company" shall mean Inventa Technologies, Inc. and any Designated
-------
Subsidiary of the Company.
(e) "Compensation" shall mean all base straight time gross earnings
------------
and commissions, but exclusive of payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses and other compensation.
(f) "Designated Subsidiary" shall mean any Subsidiary that has been
---------------------
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(g) "Employee" shall mean any individual who is an Employee of the
--------
Company for tax purposes whose customary employment with the Company is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Company. Where the period of leave exceeds 90 days and
the individual's right to reemployment is not guaranteed either by statute or by
contract, the employment relationship shall be deemed to have terminated on the
91st day of such leave.
(h) "Enrollment Date" shall mean the first Trading Day of each
---------------
Offering Period.
(i) "Exercise Date" shall mean the last Trading Day of each Purchase
-------------
Period.
<PAGE>
(j) "Fair Market Value" shall mean, as of any date, the value of
-----------------
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the date of determination, as reported in
The Wall Street Journal or such other source as the Board deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock prior
to the date of determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Board; or
(iv) For purposes of the Enrollment Date of the first Offering
Period under the Plan, the Fair Market Value shall be the initial price to the
public as set forth in the final prospectus included within the registration
statement in Form S-1 filed with the Securities and Exchange Commission for the
initial public offering of the Company's Common Stock (the "Registration
Statement").
(k) "Offering Periods" shall mean the periods of approximately
----------------
twenty-four (24) months during which an option granted pursuant to the Plan may
be exercised, commencing on the first Trading Day on or after May 1 and November
1 of each year and terminating on the last Trading Day in the periods ending
twenty-four months later; provided, however, that the first Offering Period
under the Plan shall commence with the first Trading Day on or after the date on
which the Securities and Exchange Commission declares the Company's Registration
Statement effective and ending on the last Trading Day on or before April 30,
2002. The duration and timing of Offering Periods may be changed pursuant to
Section 4 of this Plan.
(l) "Plan" shall mean this 2000 Employee Stock Purchase Plan.
----
(m) "Purchase Period" shall mean the approximately six month period
---------------
commencing after one Exercise Date and ending with the next Exercise Date,
except that the first Purchase Period of any Offering Period shall commence on
the Enrollment Date and end with the next Exercise Date.
(n) "Purchase Price" shall mean 85% of the Fair Market Value of a
--------------
share of Common Stock on the Enrollment Date or on the Exercise Date, whichever
is lower; provided however, that the Purchase Price may be adjusted by the Board
pursuant to Section 20.
(o) "Reserves" shall mean the number of shares of Common Stock
--------
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
-2-
<PAGE>
(p) "Subsidiary" shall mean a corporation, domestic or foreign, of
----------
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
(q) "Trading Day" shall mean a day on which national stock exchanges
-----------
and the Nasdaq System are open for trading.
3. Eligibility.
-----------
(a) Any Employee who shall be employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase such stock possessing five percent (5%) or more of the total combined
voting power or value of all classes of the capital stock of the Company or of
any Subsidiary, or (ii) to the extent that his or her rights to purchase stock
under all employee stock purchase plans of the Company and its subsidiaries
accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of
stock (determined at the fair market value of the shares at the time such option
is granted) for each calendar year in which such option is outstanding at any
time.
4. Offering Periods. The Plan shall be implemented by consecutive,
----------------
overlapping Offering Periods with a new Offering Period commencing on the first
Trading Day on or after May 1 and November 1 each year, or on such other date as
the Board shall determine, and continuing thereafter until terminated in
accordance with Section 20 hereof; provided, however, that the first Offering
Period under the Plan shall commence with the first Trading Day on or after the
date on which the Securities and Exchange Commission declares the Company's
Registration Statement effective and ending on the last Trading Day on or before
April 30, 2002. The Board shall have the power to change the duration of
Offering Periods (including the commencement dates thereof) with respect to
future offerings without shareholder approval if such change is announced at
least five (5) days prior to the scheduled beginning of the first Offering
Period to be affected thereafter.
5. Participation.
-------------
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office prior
to the applicable Enrollment Date.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Enrollment Date and shall end on the last payroll in the
Offering Period to which such authorization is applicable, unless sooner
terminated by the participant as provided in Section 10 hereof.
-3-
<PAGE>
6. Payroll Deductions.
------------------
(a) At the time a participant files his or her subscription agreement,
he or she shall elect to have payroll deductions made on each pay day during the
Offering Period in an amount not exceeding fifteen percent (15%) of the
Compensation which he or she receives on each pay day during the Offering
Period.
(b) All payroll deductions made for a participant shall be credited to
his or her account under the Plan and shall be withheld in whole percentages
only. A participant may not make any additional payments into such account.
(c) A participant may discontinue his or her participation in the Plan
as provided in Section 10 hereof, or may increase or decrease the rate of his or
her payroll deductions during the Offering Period by completing or filing with
the Company a new subscription agreement authorizing a change in payroll
deduction rate. The Board may, in its discretion, limit the number of
participation rate changes during any Offering Period. The change in rate shall
be effective with the first full payroll period following five (5) business days
after the Company's receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant's
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a participant's
payroll deductions may be decreased to zero percent (0%) at any time during a
Purchase Period. Payroll deductions shall recommence at the rate provided in
such participant's subscription agreement at the beginning of the first Purchase
Period which is scheduled to end in the following calendar year, unless
terminated by the participant as provided in Section 10 hereof.
(e) At the time the option is exercised, in whole or in part, or at
the time some or all of the Company's Common Stock issued under the Plan is
disposed of, the participant must make adequate provision for the Company's
federal, state, or other tax withholding obligations, if any, which arise upon
the exercise of the option or the disposition of the Common Stock. At any time,
the Company may, but shall not be obligated to, withhold from the participant's
compensation the amount necessary for the Company to meet applicable withholding
obligations, including any withholding required to make available to the Company
any tax deductions or benefits attributable to sale or early disposition of
Common Stock by the Employee.
7. Grant of Option. On the Enrollment Date of each Offering Period, each
---------------
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Purchase Period more than
5,000 shares of the Company's Common Stock (subject to any adjustment
pursuant to Section 19), and provided further that such purchase shall be
subject to the limitations set forth in Sections 3(b) and 12 hereof. The Board
may, for future Offering Periods, increase or decrease, in its absolute
discretion, the maximum number of shares of
-4-
<PAGE>
the Company's Common Stock an Employee may purchase during each Purchase Period
of such Offering Period. Exercise of the option shall occur as provided in
Section 8 hereof, unless the participant has withdrawn pursuant to Section 10
hereof. The option shall expire on the last day of the Offering Period.
8. Exercise of Option.
------------------
(a) Unless a participant withdraws from the Plan as provided in
Section 10 hereof, his or her option for the purchase of shares shall be
exercised automatically on the Exercise Date, and the maximum number of full
shares subject to option shall be purchased for such participant at the
applicable Purchase Price with the accumulated payroll deductions in his or her
account. No fractional shares shall be purchased; any payroll deductions
accumulated in a participant's account which are not sufficient to purchase a
full share shall be retained in the participant's account for the subsequent
Purchase Period or Offering Period, subject to earlier withdrawal by the
participant as provided in Section 10 hereof. Any other monies left over in a
participant's account after the Exercise Date shall be returned to the
participant. During a participant's lifetime, a participant's option to purchase
shares hereunder is exercisable only by him or her.
(b) If the Board determines that, on a given Exercise Date, the number
of shares with respect to which options are to be exercised may exceed (i) the
number of shares of Common Stock that were available for sale under the Plan on
the Enrollment Date of the applicable Offering Period, or (ii) the number of
shares available for sale under the Plan on such Exercise Date, the Board may in
its sole discretion (x) provide that the Company shall make a pro rata
allocation of the shares of Common Stock available for purchase on such
Enrollment Date or Exercise Date, as applicable, in as uniform a manner as shall
be practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Exercise Date, and continue all Offering Periods then in effect, or (y) provide
that the Company shall make a pro rata allocation of the shares available for
purchase on such Enrollment Date or Exercise Date, as applicable, in as uniform
a manner as shall be practicable and as it shall determine in its sole
discretion to be equitable among all participants exercising options to purchase
Common Stock on such Exercise Date, and terminate any or all Offering Periods
then in effect pursuant to Section 20 hereof. The Company may make pro rata
allocation of the shares available on the Enrollment Date of any applicable
Offering Period pursuant to the preceding sentence, notwithstanding any
authorization of additional shares for issuance under the Plan by the Company's
shareholders subsequent to such Enrollment Date.
9. Delivery. As promptly as practicable after each Exercise Date on
--------
which a purchase of shares occurs, the Company shall arrange the delivery to
each participant, as appropriate, of a certificate representing the shares
purchased upon exercise of his or her option.
10. Withdrawal.
----------
(a) A participant may withdraw all but not less than all the payroll
deductions credited to his or her account and not yet used to exercise his or
her option under the Plan at any time by giving written notice to the Company in
the form of Exhibit B to this Plan. All of the participant's payroll deductions
credited to his or her account shall be paid to such participant
-5-
<PAGE>
promptly after receipt of notice of withdrawal and such participant's option for
the Offering Period shall be automatically terminated, and no further payroll
deductions for the purchase of shares shall be made for such Offering Period. If
a participant withdraws from an Offering Period, payroll deductions shall not
resume at the beginning of the succeeding Offering Period unless the participant
delivers to the Company a new subscription agreement.
(b) A participant's withdrawal from an Offering Period shall not have
any effect upon his or her eligibility to participate in any similar plan which
may hereafter be adopted by the Company or in succeeding Offering Periods which
commence after the termination of the Offering Period from which the participant
withdraws.
11. Termination of Employment.
-------------------------
Upon a participant's ceasing to be an Employee, for any reason, he or
she shall be deemed to have elected to withdraw from the Plan and the payroll
deductions credited to such participant's account during the Offering Period but
not yet used to exercise the option shall be returned to such participant or, in
the case of his or her death, to the person or persons entitled thereto under
Section 15 hereof, and such participant's option shall be automatically
terminated. The preceding sentence notwithstanding, a participant who receives
payment in lieu of notice of termination of employment shall be treated as
continuing to be an Employee for the participant's customary number of hours per
week of employment during the period in which the participant is subject to such
payment in lieu of notice.
12. Interest. No interest shall accrue on the payroll deductions of a
--------
participant in the Plan.
13. Stock.
-----
(a) Subject to adjustment upon changes in capitalization of the
Company as provided in Section 19 hereof, the maximum number of shares of the
Company's Common Stock which shall be made available for sale under the Plan
shall be 500,000 shares plus an annual increase to be added on the first day of
the Company's fiscal year beginning in 2001, equal to the lesser of (i) 600,000
shares, (ii) 2% of the outstanding shares on such date or (iii) a lesser amount
determined by the Board.
(b) The participant shall have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan shall be
registered in the name of the participant or in the name of the participant and
his or her spouse.
14. Administration. The Plan shall be administered by the Board or a
--------------
committee of members of the Board appointed by the Board. The Board or its
committee shall have full and exclusive discretionary authority to construe,
interpret and apply the terms of the Plan, to determine eligibility and to
adjudicate all disputed claims filed under the Plan. Every finding, decision and
determination made by the Board or its committee shall, to the full extent
permitted by law, be final and binding upon all parties.
-6-
<PAGE>
15. Designation of Beneficiary.
--------------------------
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to an Exercise Date
on which the option is exercised but prior to delivery to such participant of
such shares and cash. In addition, a participant may file a written designation
of a beneficiary who is to receive any cash from the participant's account under
the Plan in the event of such participant's death prior to exercise of the
option. If a participant is married and the designated beneficiary is not the
spouse, spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its discretion, may deliver such shares and/or
cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
16. Transferability. Neither payroll deductions credited to a
---------------
participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in Section 15 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Offering Period in accordance with Section 10 hereof.
17. Use of Funds. All payroll deductions received or held by the
------------
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
18. Reports. Individual accounts shall be maintained for each
-------
participant in the Plan. Statements of account shall be given to participating
Employees at least annually, which statements shall set forth the amounts of
payroll deductions, the Purchase Price, the number of shares purchased and the
remaining cash balance, if any.
19. Adjustments Upon Changes in Capitalization, Dissolution, Liquidation,
---------------------------------------------------------------------
Merger or Asset Sale.
- --------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the Reserves, the maximum number of shares each
participant may purchase each Purchase Period (pursuant to Section 7), the
number of shares that may be added annually to the shares reserved under the
Plan (pursuant to Section 13(a)(i)), as well as the price per share and the
number of shares of Common Stock covered by each option under the Plan which has
not yet been exercised shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the
-7-
<PAGE>
number of shares of Common Stock effected without receipt of consideration by
the Company; provided, however, that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Offering Period then in progress
shall be shortened by setting a new Exercise Date (the "New Exercise Date"), and
shall terminate immediately prior to the consummation of such proposed
dissolution or liquidation, unless provided otherwise by the Board. The New
Exercise Date shall be before the date of the Company's proposed dissolution or
liquidation. The Board shall notify each participant in writing, at least ten
(10) business days prior to the New Exercise Date, that the Exercise Date for
the participant's option has been changed to the New Exercise Date and that the
participant's option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.
(c) Merger or Asset Sale. In the event of a proposed sale of all or
--------------------
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each outstanding option shall be assumed or an
equivalent option substituted by the successor corporation or a Parent or
Subsidiary of the successor corporation. In the event that the successor
corporation refuses to assume or substitute for the option, any Purchase Periods
then in progress shall be shortened by setting a new Exercise Date (the "New
Exercise Date") and any Offering Periods then in progress shall end on the New
Exercise Date. The New Exercise Date shall be before the date of the Company's
proposed sale or merger. The Board shall notify each participant in writing, at
least ten (10) business days prior to the New Exercise Date, that the Exercise
Date for the participant's option has been changed to the New Exercise Date and
that the participant's option shall be exercised automatically on the New
Exercise Date, unless prior to such date the participant has withdrawn from the
Offering Period as provided in Section 10 hereof.
20. Amendment or Termination.
------------------------
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in Section 19 hereof, no
such termination can affect options previously granted, provided that an
Offering Period may be terminated by the Board of Directors on any Exercise Date
if the Board determines that the termination of the Offering Period or the Plan
is in the best interests of the Company and its shareholders. Except as provided
in Section 19 and this Section 20 hereof, no amendment may make any change in
any option theretofore granted which adversely affects the rights of any
participant. To the extent necessary to comply with Section 423 of the Code (or
any successor rule or provision or any other applicable law, regulation or stock
exchange rule), the Company shall obtain shareholder approval in such a manner
and to such a degree as required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be
-8-
<PAGE>
entitled to change the Offering Periods, limit the frequency and/or number of
changes in the amount withheld during an Offering Period, establish the exchange
ratio applicable to amounts withheld in a currency other than U.S. dollars,
permit payroll withholding in excess of the amount designated by a participant
in order to adjust for delays or mistakes in the Company's processing of
properly completed withholding elections, establish reasonable waiting and
adjustment periods and/or accounting and crediting procedures to ensure that
amounts applied toward the purchase of Common Stock for each participant
properly correspond with amounts withheld from the participant's Compensation,
and establish such other limitations or procedures as the Board (or its
committee) determines in its sole discretion advisable which are consistent with
the Plan.
(c) In the event the Board determines that the ongoing operation of
the Plan may result in unfavorable financial accounting consequences, the Board
may, in its discretion and, to the extent necessary or desirable, modify or
amend the Plan to reduce or eliminate such accounting consequence including, but
not limited to:
(i) altering the Purchase Price for any Offering Period
including an Offering Period underway at the time of the change in Purchase
Price;
(ii) shortening any Offering Period so that Offering Period ends
on a new Exercise Date, including an Offering Period underway at the time of the
Board action; and
(iii) allocating shares.
Such modifications or amendments shall not require stockholder
approval or the consent of any Plan participants.
21. Notices. All notices or other communications by a participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under Section 20 hereof.
-9-
<PAGE>
24. Automatic Transfer to Low Price Offering Period. To the extent
-----------------------------------------------
permitted by any applicable laws, regulations, or stock exchange rules if the
Fair Market Value of the Common Stock on any Exercise Date in an Offering Period
is lower than the Fair Market Value of the Common Stock on the Enrollment Date
of such Offering Period, then all participants in such Offering Period shall be
automatically withdrawn from such Offering Period immediately after the exercise
of their option on such Exercise Date and automatically re-enrolled in the
immediately following Offering Period as of the first day thereof.
-10-
<PAGE>
EXHIBIT A
---------
INVENTA TECHNOLOGIES, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
_____ Original Application Enrollment Date:___________
_____ Change in Payroll Deduction Rate
_____ Change of Beneficiary(ies)
1. ____________________ hereby elects to participate in the Inventa
Technologies, Inc. Employee Stock Purchase Plan (the "Employee Stock
Purchase Plan") and subscribes to purchase shares of the Company's Common
Stock in accordance with this Subscription Agreement and the Employee Stock
Purchase Plan.
2. I hereby authorize payroll deductions from each paycheck in the amount of
____% of my Compensation on each payday (from 0 to _____%) during the
Offering Period in accordance with the Employee Stock Purchase Plan.
(Please note that no fractional percentages are permitted.)
3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock at the applicable Purchase Price
determined in accordance with the Employee Stock Purchase Plan. I
understand that if I do not withdraw from an Offering Period, any
accumulated payroll deductions will be used to automatically exercise my
option.
4. I have received a copy of the complete Employee Stock Purchase Plan. I
understand that my participation in the Employee Stock Purchase Plan is in
all respects subject to the terms of the Plan. I understand that my
ability to exercise the option under this Subscription Agreement is subject
to shareholder approval of the Employee Stock Purchase Plan.
5. Shares purchased for me under the Employee Stock Purchase Plan should be
issued in the name(s) of (Employee or Employee and Spouse only).
6. I understand that if I dispose of any shares received by me pursuant to the
Plan within 2 years after the Enrollment Date (the first day of the
Offering Period during which I purchased such shares) or one year after the
Exercise Date, I will be treated for federal income tax purposes as having
received ordinary income at the time of such disposition in an amount equal
to the excess of the fair market value of the shares at the time such
shares were purchased by me over the price which I paid for the shares. I
-
hereby agree to notify the Company in writing within 30 days after the date
---------------------------------------------------------------------------
of any disposition of my shares and I will make adequate provision for
----------------------------------------------------------------------
Federal, state or other tax withholding obligations, if any, which arise
------------------------------------------------------------------------
upon the
--------
<PAGE>
disposition of the Common Stock. The Company may, but will not be
-------------------------------
obligated to, withhold from my compensation the amount necessary to meet
any applicable withholding obligation including any withholding necessary
to make available to the Company any tax deductions or benefits
attributable to sale or early disposition of Common Stock by me. If I
dispose of such shares at any time after the expiration of the 2-year and
1-year holding periods, I understand that I will be treated for federal
income tax purposes as having received income only at the time of such
disposition, and that such income will be taxed as ordinary income only to
the extent of an amount equal to the lesser of (1) the excess of the fair
market value of the shares at the time of such disposition over the
purchase price which I paid for the shares, or (2) 15% of the fair market
value of the shares on the first day of the Offering Period. The remainder
of the gain, if any, recognized on such disposition will be taxed as
capital gain.
7. I hereby agree to be bound by the terms of the Employee Stock Purchase
Plan. The effectiveness of this Subscription Agreement is dependent upon
my eligibility to participate in the Employee Stock Purchase Plan.
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the
Employee Stock Purchase Plan:
NAME: (Please print)_____________________________________________________
(First) (Middle) (Last)
_________________________ ___________________________________
Relationship
___________________________________
(Address)
-2-
<PAGE>
Employee's Social
Security Number: ____________________________________
Employee's Address: ____________________________________
____________________________________
____________________________________
I UNDERSTAND THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT
SUCCESSIVE OFFERING PERIODS UNLESS TERMINATED BY ME.
<TABLE>
<S> <C>
Dated:_________________________ _____________________________________________________
Signature of Employee
_____________________________________________________
Spouse's Signature (If beneficiary other than spouse)
</TABLE>
-3-
<PAGE>
EXHIBIT B
---------
INVENTA TECHNOLOGIES, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
The undersigned participant in the Offering Period of the Inventa
Technologies, Inc. Employee Stock Purchase Plan which began on ____________,
______ (the "Enrollment Date") hereby notifies the Company that he or she hereby
withdraws from the Offering Period. He or she hereby directs the Company to pay
to the undersigned as promptly as practicable all the payroll deductions
credited to his or her account with respect to such Offering Period. The
undersigned understands and agrees that his or her option for such Offering
Period will be automatically terminated. The undersigned understands further
that no further payroll deductions will be made for the purchase of shares in
the current Offering Period and the undersigned shall be eligible to participate
in succeeding Offering Periods only by delivering to the Company a new
Subscription Agreement.
Name and Address of Participant:
________________________________
________________________________
________________________________
Signature:
________________________________
Date:___________________________
<PAGE>
Exhibit 10.36
Inventa Corporation
2620 Augustine Drive, Suite 225
Santa Clara, California 95954
May 11, 1998
TO THE SERIES C PREFERRED
STOCK INVESTORS
Re: Inventa Corporation / Directed Share Program
Dear Investor:
This letter shall confirm our understanding with respect to the purchase
by the Investors named on Schedule A attached hereto (the "Investors") of shares
of common stock in the event of the initial registered public offering (the
"IPO") by Inventa Corporation (the "Company") of its common stock. In connection
with the IPO, the Company shall use its best efforts to ensure that the managing
underwriters (the "UW") of the IPO establish a directed share program (the
"Program") in connection with the IPO. The number of shares (the "Shares") in
the Program shall consist of the greater of (i) that number of shares determined
by dividing $2,500,000 by the IPO offering price or (ii) 15% of the shares to be
offered in the offering (excluding shares related to the exercise of any UW
over-allotment option); provided, however, that the Shares shall not exceed that
number of shares determined by dividing $4,000,000 by the IPO offering price.
The Investors shall have the option, but not the obligation, to purchase or
direct the purchase of all or any portion of the Shares at the IPO price. The
Investors shall cooperate with the Company and the UW in all respects in order
to enable the Company to comply with its obligations hereunder. Each Investor
shall have the right to purchase, on a pro rata basis based on its ownership of
common stock issuable upon conversion of the Series C Preferred Stock, its share
of the Shares and any portion of the remainder of the Shares which other
Investors have elected not to purchase.
This document may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
By: /s/ Ashok K. Santhanam
------------------------------------
Ashok K. Santhanam
President
Acknowledged and Agreed
Battery Ventures L.P.
By: /s/ Todd A. Dagres
--------------------------
Name: Todd A. Dagres
Title: General Partner
(Signatures continue on next page)
<PAGE>
BOSTON MILLENNIA PARTNERS
LIMITED PARTNERSHIP
By: Glen Partners Limited Partnership,
its General Partner
By: /s/ Martin J. Hernon
------------------------------------
General Partner
- ---------------------------------------
Stephen T. Barry
/s/ A. Dana Callow, Jr.
- ---------------------------------------
A. Dana Callow, Jr.
/s/ Christian Dubiel
- ---------------------------------------
Christian Dubiel
/s/ Martin J. Hernon
- ---------------------------------------
Martin J. Hernon
/s/ Robert W. Jevon
- ---------------------------------------
Robert W. Jevon
/s/ Frank P. Pinto
- ---------------------------------------
Frank P. Pinto
/s/ Suresh Shanmugham
- ---------------------------------------
Suresh Shanmugham
/s/ Bruce R. Tiedemann
- ---------------------------------------
Bruce R. Tiedemann
(Signatures continue on next page)
<PAGE>
TCV II (Q), L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By: /s/ Robert C. Bensky
----------------------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
TCV II Strategic Partners, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By: /s/ Robert C. Bensky
----------------------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
TCV II, V.O.F.
a Netherlands Antilles General Partnership
By: Technology Crossover Management II, L.L.C.,
Its: Investment General Partner
By: /s/ Robert C. Bensky
----------------------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
Technology Crossover Ventures II, C.V.
a Netherlands Antilles Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: Investment General Partner
By: /s/ Robert C. Bensky
----------------------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
Technology Crossover Ventures II, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By: /s/ Robert C. Bensky
----------------------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
<PAGE>
SCHEDULE A
SCHEDULE OF INVESTORS
Name and Address
Battery Ventures L.P.
20 William Street
Wellesley, MA 01282
Boston Millennia Partners Limited Partnership
30 Rowes Wharf
Boston, MA 02110
Attn: Martin J. Hernon
Stephen T. Barry
c/o Boston Millennia Partners
30 Rose Wharf, Ste. 330
Boston, MA 02110
A. Dana Callow, Jr.
c/o Boston Millennia Partners
30 Rose Wharf, Ste. 330
Boston, MA 02110
Christian Dubiel
c/o Boston Millennia Partners
30 Rose Wharf, Ste. 330
Boston, MA 02110
Martin J. Hernon
c/o Boston Millennia Partners
30 Rose Wharf, Ste. 330
Boston, MA 02110
Robert W. Jevon
c/o Boston Millennia Partners
30 Rose Wharf, Ste. 330
Boston, MA 02110
Frank P. Pinto
c/o Boston Millennia Partners
30 Rose Wharf, Ste. 330
Boston, MA 02110
Suresh Shanmugham
c/o Boston Millennia Partners
30 Rose Wharf, Ste. 330
Boston, MA 02110
<PAGE>
Bruce R. Tiedemann
c/o Boston Millennia Partners
30 Rose Wharf, Ste. 330
Boston, MA 02110
TCV II (Q), L.P.
c/o Technology Crossover Ventures
56 Main Street, Suite 210
Millburn, NJ 07041
Attention: Robert C. Bensky
with a copy to:
c/o Technology Crossover Ventures
575 High Street, Suite 400
Palo Alto, CA 94301
Attention: Jay C. Hoag
TCV II Strategic Partners, L.P.
c/o Technology Crossover Ventures
56 Main Street, Suite 210
Millburn, NJ 07041
Attention: Robert C. Bensky
with a copy to:
c/o Technology Crossover Ventures
575 High Street, Suite 400
Palo Alto, CA 94301
Attention: Jay C. Hoag
TCV II, V.O.F.
c/o Technology Crossover Ventures
56 Main Street, Suite 210
Millburn, NJ 07041
Attention: Robert C. Bensky
with a copy to:
c/o Technology Crossover Ventures
575 High Street, Suite 400
Palo Alto, CA 94301
Attention: Jay C. Hoag
Technology Crossover Ventures II, C.V.
c/o Technology Crossover Ventures
56 Main Street, Suite 210
Millburn, NJ 07041
Attention: Robert C. Bensky
<PAGE>
with a copy to:
c/o Technology Crossover Ventures
575 High Street, Suite 400
Palo Alto, CA 94301
Attention: Jay C. Hoag
Technology Crossover Ventures II, L.P.
c/o Technology Crossover Ventures
56 Main Street, Suite 210
Millburn, NJ 07041
Attention: Robert C. Bensky
with a copy to:
c/o Technology Crossover Ventures
575 High Street, Suite 400
Palo Alto, CA 94301
Attention: Jay C. Hoag
<PAGE>
Exhibit 10.37
Inventa Corporation
255 Shoreline Drive, 2nd Floor
Redwood Shores, California 94065
January 14, 2000
TO THE SERIES D PREFERRED
STOCK INSTITUTIONAL INVESTORS
Re: Inventa Corporation / Private Placement
Dear Investor:
This letter shall confirm our understanding with respect to the purchase
by the Investors named on Schedule A attached hereto (the "Investors") of
unregistered shares of common stock of Inventa Corporation (the "Company") in a
private placement (the "Private Placement") that the parties intend to close in
the event of, and immediately prior to or contemporaneously with, the initial
firm commitment underwritten public offering (the "IPO") by the Company of its
common stock.
1. Right to Participate in the Private Placement.
(a) The Company shall use its commercially reasonable efforts to
close the Private Placement immediately before or contemporaneously with the
IPO. The terms of the Private Placement will provide, subject to the provisions
hereof, that the Company will offer each Investor the right to participate in
the Private Placement.
(b) Subject to the terms hereof, the Company agrees to offer to the
Investors pursuant to the Private Placement a number of shares (the "Private
Placement Shares") equal to the greater of (a) the quotient obtained by dividing
$2,500,000 by the price at which shares are sold to the public in the IPO, less
underwriting discount (the "IPO Price") or (b) 15% of the shares to be offered
in the IPO (excluding shares related to the exercise of any Underwriters'
over-allotment option); provided, however, that the number of Private Placement
Shares shall not exceed that number of shares determined by dividing $3,000,000
by the IPO Price. The Investors that purchase shares of common stock in the
Private Placement shall become parties to an Investor Rights Agreement that
provides registration rights for the shares of common stock purchased in the
Private Placement similar to those granted to the Investors in connection with
their purchase of the Company's Series D Preferred Stock.
(c) The Company shall offer to each Investor the right to purchase
its pro rata Share of the Private Placement Shares at the IPO Price. Each
Investor's "pro rata share" shall equal the quotient obtained by dividing (i)
the number of shares of Common Stock issuable or issued upon conversion of
shares of Series D Preferred Stock then held by such Investor, by (ii) the
number of shares of Common Stock issuable or issued upon conversion of shares of
Series D Preferred Stock
<PAGE>
then held by all Investors. All Private Placement Shares as to which Investors
do not indicate an interest in purchasing shall be reallocated on a pro rata
basis among the Investors who indicate an interest in purchasing more than their
pro rata share.
(d) The Private Placement and all offers to be made to the Investors
shall be conducted in compliance with all applicable federal and state
securities laws and regulations, including, without limitation, the Securities
Act of 1933, as amended (the "Securities Act"), and all applicable rules and
regulations promulgated by the National Association of Securities Dealers, Inc.
and other such self-regulating or quasi-public regulatory organizations. The
Investors participating in the Private Placement shall comply with all
reasonable requirements and procedures required by the Company of all Investors
participating in the Private Placement (provided such requirements and
procedures do not materially and adversely affect the participation rights
granted in this Section 1), if any.
2. Alternative Transaction. Notwithstanding the foregoing, in the event
that (a) regulatory authorities continue to object to this arrangement after
full discussion and negotiation with the Company and its legal counsel (with the
participation of one legal counsel representing Investors, if desired by
Investors); (b) regulatory authorities allow the Company to fulfill its
obligations under this arrangement only on the condition that recission rights
or other specific liability will be assumed by the Company or the underwriters
or that special risks related to the Private Placement be included in the
prospectus filed in connection with the IPO; (c) the resolution with regulatory
authorities relating to this arrangement would delay the Company's offering
beyond delays caused by comments from regulatory authorities with respect to
other issues, provided that the Company has used its good faith efforts (with
the participation of one legal counsel representing Investors, if desired by
Investors) to timely resolve any regulatory issues that arise in connection with
this arrangement; or (d) regulatory authorities do not allow the Company to
issue securities of the Company to the holders of the Company's Series C
Preferred Stock (the "Series C Holders") at the time of the IPO, then the
Company and the Investors agree to negotiate in good faith to enter into an
alternative transaction that as closely as practicable approximates the economic
benefit of the Private Placement. Additionally, if the Company and the Series C
Holders agree to reduce the number of shares available to the Series C Holders
at the time of the IPO from the number set forth in that certain Letter
Agreement dated May 11, 1998, the number of shares available in the Private
Placement shall be reduced accordingly, but in no event shall the number of
shares available in the Private Placement be reduced to less than the number
determined by dividing $2,000,000 by the IPO Price, unless required as a result
of any of the reasons set forth in clauses (a) through (d) of this section 2.
<PAGE>
This document may be executed in counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument.
INVENTA CORPORATION
By: /s/ David A. Lavanty
--------------------------------------
David A. Lavanty
President
<PAGE>
Acknowledged and Agreed:
BATTERY VENTURES III, L.P.
By: Battery Partners III, L.P.
By: /s/ Todd Dagres
---------------------------------------
Title: Todd Dagres, General Partner
BANCBOSTON VENTURES INC.
By: /s/ Maia D. Heymann
---------------------------------------
Name: Maia D. Heymann
Title: Director
PRIVATE EQUITY PORTFOLIO FUND II, LLC
By:
---------------------------------------
Name: Glen Holland
Title: Vice President
BOSTON MILLENNIA PARTNERS
LIMITED PARTNERSHIP
By: Glen Partners Limited Partnership,
its General Partner
By: /s/ Martin Hennon
---------------------------------------
General Partner
Boston Millennia Associates I
Partnership
By: /s/ Martin Hennon
---------------------------------------
General Partner
<PAGE>
ESSEX PRIVATE PLACEMENT FUND II,
LIMITED PARTNERSHIP
By: Essex Investment Mgt. Company LLC
Its General Partner
By: /s/ [ILLEGIBLE]
---------------------------------------
Title: Principal
------------------------------------
THE CHASE MANHATTAN BANK AS TRUSTEE
FOR FIRST PLAZA GROUP TRUST
By: /s/ John Weeda
---------------------------------------
Trust: John F. Weeda
------------------------------------
Vice President
TCV II (Q), L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By: /s/ Robert C. Bensky
---------------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
TCV II Strategic Partners, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By: /s/ Robert C. Bensky
---------------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
<PAGE>
TCV II, V.O.F.
a Netherlands Antilles General Partnership
By: Technology Crossover Management II, L.L.C.,
Its: Investment General Partner
By: /s/ Robert C. Bensky
---------------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
Technology Crossover Ventures II, C.V.
a Netherlands Antilles Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: Investment General Partner
By: /s/ Robert C. Bensky
---------------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
Technology Crossover Ventures II, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.,
Its: General Partner
By: /s/ Robert C. Bensky
---------------------------------------
Name: Robert C. Bensky
Title: Chief Financial Officer
<PAGE>
SCHEDULE A
SCHEDULE OF INVESTORS
Name and Address
BancBoston Ventures Inc.
435 Tasso Street, Suite 250
Palo Alto, CA 94301
Attn: Maia Heymann
Private Equity Portfolio II, LLC
175 Federal Street, 10th Floor
Boston, MA 02110
Attn: Glen Holland
Battery Ventures III, L.P.
20 William Street
Wellesley, MA 01282
Boston Millennia Partners Limited Partnership
30 Rowes Wharf
Boston, MA 02110
Attn: Martin J. Hernon
Essex Private Placement Fund II, Limited Partnership
125 High Street
Boston, MA 02110
Attn: Susan Stickells
The Chase Manhattan Bank as Trustee for
First Plaza Group Trust
Global Investor Services
4 Chase Metro Tech Center, 18th Floor
Brooklyn, NY 11245
Attn: John F. Weeda
TCV II (Q), L.P.
c/o Technology Crossover Ventures
56 Main Street, Suite 210
Millburn, NJ 07041
Attention: Jon Q. Reynolds, Jr.
<PAGE>
with a copy to:
c/o Technology Crossover Ventures
575 High Street, Suite 400
Palo Alto, CA 94301
Attention: Jon Q. Reynolds, Jr.
TCV II Strategic Partners, L.P.
c/o Technology Crossover Ventures
56 Main Street, Suite 210
Millburn, NJ 07041
Attention: Robert C. Bensky
with a copy to:
c/o Technology Crossover Ventures
575 High Street, Suite 400
Palo Alto, CA 94301
Attention: Jon Q. Reynolds, Jr.
TCV II, V.O.F.
c/o Technology Crossover Ventures
56 Main Street, Suite 210
Millburn, NJ 07041
Attention: Robert C. Bensky
with a copy to:
c/o Technology Crossover Ventures
575 High Street, Suite 400
Palo Alto, CA 94301
Attention: Jon Q. Reynolds, Jr.
Technology Crossover Ventures II, C.V.
c/o Technology Crossover Ventures
56 Main Street, Suite 210
Millburn, NJ 07041
Attention: Robert C. Bensky
with a copy to:
c/o Technology Crossover Ventures
575 High Street, Suite 400
Palo Alto, CA 94301
Attention: Jon Q. Reynolds, Jr.
<PAGE>
Technology Crossover Ventures II, L.P.
c/o Technology Crossover Ventures
56 Main Street, Suite 210
Millburn, NJ 07041
Attention: Robert C. Bensky
with a copy to:
c/o Technology Crossover Ventures
575 High Street, Suite 400
Palo Alto, CA 94301
Attention: Jon Q. Reynolds, Jr.
<PAGE>
Exhibit 10.38
INVENTA CORPORATION
PRIVATE PLACEMENT AGREEMENT
This Agreement is made as of January 28, 2000, among Inventa Corporation
(the "Company") and the entities listed on Schedule A hereto (individually, a
"Purchaser" and, collectively, the "Purchasers").
Reference is made to the letter agreement (the "Letter Agreement") dated
as of January 14, 2000, among the Company and the Purchasers. Capitalized terms
used herein but not defined herein shall have the meanings given to them in the
Letter Agreement.
1. Sale of Shares. The Company shall issue and sell to each Purchaser
listed on Schedule A, and each Purchaser shall purchase, the number of shares of
the Company's unregistered common stock (the "Shares") having the aggregate
purchase price set forth opposite such Purchaser's name on Schedule A, which
number represents such Purchaser's "pro rata share" of the Private Placement as
defined in the Letter Agreement, or such other number as agreed to by the
Company and the Purchaser. The price per share shall be equal to the price (the
"IPO Price") at which the Company offers its common stock to the public in its
initial firm commitment underwritten public offering (the "IPO"), less the
underwriting discount.
2. Registration Rights. Each Purchaser that has purchased Shares pursuant
to the terms of this Agreement shall become a party to the Investor Rights
Agreement between the Company and the holders of the Company's preferred stock
and shall be a "Holder" thereunder with respect to such Shares, all of which
shall be deemed "Registrable Securities" for all purposes thereunder. All
consents required to be obtained in connection with the granting of these rights
have been or will be obtained by the Company prior to the closing of the IPO.
3. Binding Agreement. This agreement represents a binding commitment by
the Company and the Purchasers. The closing of the sale, and the issuance of the
Shares hereunder, are subject to no conditions other than (a) the closing of the
IPO; (b) each Purchaser's payment for the shares shall occur contemporaneously
with the closing of the IPO; (c) no objection by regulatory authorities to this
Private Placement after full discussion and negotiation with the Company and its
legal counsel (with the participation of one legal counsel representing
Investors, if desired by Investors); (d) that no law, regulation, or regulatory
order requires that recission rights or other specific liability be assumed by
the Company or the underwriters or that special risks related to the Private
Placement be included in the prospectus filed in connection with the IPO; or (e)
that no delay in the IPO process be caused by resolution of matters related to
this Private Placement beyond delays caused by comments from regulatory
authorities with respect to other issues, provided that the Company has used its
good faith efforts (with the participation of one legal counsel representing
Investors, if desired by Investors) to timely resolve any regulatory issues that
arise in connection with this arrangement
<PAGE>
4. Counterparts. This agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the date and year first above
written.
COMPANY:
INVENTA CORPORATION
By:
--------------------------------------
David A. Lavanty
President
PURCHASERS:
BANCBOSTON VENTURES INC.
By:
-------------------------------
Name: Maia D. Heymann
Title: Director
PRIVATE EQUITY PORTFOLIO FUND II, LLC
By:
-------------------------------
Name: Glen Holland
Title: Vice President
BOSTON MILLENNIA PARTNERS
LIMITED PARTNERSHIP
By: Glen Partners Limited Partnership,
its General Partner
By:
-------------------------------
General Partner
<PAGE>
BOSTON MILLENNIA ASSOCIATES I,
LIMITED PARTNERSHIP
By:
-------------------------------
Title:
----------------------------
ESSEX PRIVATE PLACEMENT FUND II,
LIMITED PARTNERSHIP
By: Essex Investment Mgt. Company LLC
Its General Partner
By:
-------------------------------
Title:
----------------------------
<PAGE>
EXHIBIT A
SCHEDULE OF PURCHASERS
Name and Address Amount
- --------------------------------------------------------------------------------
BancBoston Ventures Inc. $1,596,700
435 Tasso Street, Suite 250
Palo Alto, CA 94301
Attention: Maia Heymann
Private Equity Portfolio II, LLC 228,100
c/o BancBoston Capital
175 Federal Street, 10th Floor
Boston, MA 02110
Attention: Glen Holland
Boston Millennia Associates I, Limited 14,400
Partnership
30 Rowes Wharf
Boston, MA 02110
Attention: Martin J. Hernon
Boston Millennia Partners Limited Partnership 704,600
30 Rowes Wharf
Boston, MA 02110
Attention: Martin J. Hernon
Essex Private Placement Fund II, 456,200
Limited Partnership
c/o Essex Investment Mgt. Company
125 High Street
Boston, MA 02110
Attention: Susan Stickells
TOTAL $3,000,000
<PAGE>
EXHIBIT 10.39
INVENTA CORPORATION
STOCK RESTRICTION AGREEMENT
This Stock Restriction Agreement (the "Agreement") is entered into as of
January __, 2000, (the "Effective Date") by and between Inventa Corporation, a
California Corporation (the "Company"), and ________________________ the
"Shareholder" as recipient of shares of Common Stock of the Company (the
"Shares").
WHEREAS, the Company is acquiring all outstanding shares of XTend-Tech,
Inc. ("XTend"), including those shares held by the Shareholder, and
WHEREAS, the Company desires that certain restrictions apply to the Shares,
and the Shareholder is willing to accept restrictions on the Shares according to
the terms and conditions contained herein in consideration of his continued
employment and the Company's acquisition of all the Common Stock of XTend (the
"Acquisition") and the agreement of certain other owners of XTend Common Stock
to place similar restrictions on the Shares held by them, therefore:
In consideration of the mutual covenants and representations herein set
forth, the Company and the Shareholder agree as follows:
1. Definitions.
(a) "Shares" refers to the _______ shares of Common Stock of the
------
Company received by the Shareholder in the Acquisition and all shares
subsequently received in respect thereof as a consequence of stock dividends,
stock splits, reverse stock splits, recapitalizations, mergers, reorganizations
or the like, and all new, substituted or additional securities or other
properties to which Shareholder is or may be entitled by reason of Shareholder's
ownership of the Shares.
(b) "Unvested Shares" shall mean any of the Shares which have not yet
---------------
been released pursuant to Section 2 below from the Company's Repurchase Option
described in Section 3.
(c) "Repurchase Option" shall have the meaning set forth in Section 3.
-----------------
2. Vesting. The Shares shall vest and be released from the Company's
Repurchase Option in accordance with the following provisions:
(a) Thirty-five percent (35%) of the total number of Shares shall vest
and be released immediately upon the closing of the Acquisition;
(b) Sixty-five percent (65%) of the Shares shall be subject to the
Company's Repurchase Option as of January ___, 2000 (the "Release Start Date").
The Shares shall vest and be released from the Company's Repurchase Option as
follows:
<PAGE>
(i) Fifteen percent (15%) of the Shares shall vest and be released
from the Company's Repurchase Option on the first anniversary of the Effective
Date of this Agreement if Shareholder is still employed by the Company on that
date.
(ii) One-forty-eighth (1/48) of the total number of Shares shall vest
and be released from the Repurchase Option beginning on the last day of the
month in which the first anniversary of the Effective Date of this Agreement
occurs, and continuing on the last day of each month thereafter for the next 23
-
months based upon Shareholder's continued employment with Company until all such
Shares are released, after a total elapsed period of three (3) years from the
Effective Date of this Agreement.
3. Repurchase Option; Termination.
------------------------------
(a) Repurchase. Effective as of the date (the "Termination Date") which is
----------
the date of (i) receipt by the President or Controller of the Company of written
notice of Shareholder's voluntary termination of employment, or (ii) the
involuntary termination for cause of the Shareholder's employment with or
service to the Company, the Company or its assignee shall have an irrevocable,
exclusive option (the "Repurchase Option") for a period of fifteen (15) business
days from the Termination Date to repurchase at a price equal to $.01 per share
(the "Purchase Price") up to that number of shares which shall constitute
Unvested Shares as of the Termination Date. For the purposes of this Agreement
"cause" means, and is limited to, the following: the Shareholder's (1) gross
negligence in the performance of his agreed upon duties for the Company; (2)
willful refusal to follow directives of Company senior management after receipt
of written warning with respect thereto, which is not cured within five (5)
business days thereof; (3) commission of a felony; (4) inability to perform his
agreed upon duties for the Company by reason of alcoholism or drug dependency;
and (5) refusal to appear at his regular place of work for the Company. A
resignation by the Shareholder from his employment with or service to the
Company shall be for "Good Reason" if: (a) the regular place of Shareholder's
employment is relocated to a site more than thirty (30) miles from the
Shareholder's established regular site of employment at the time of Closing, or
(b) there is a reduction in the Shareholder's annual compensation from the
Company, unless at least seventy five percent (75%) of all other employees in
the same class are also subject to the same percentage reduction in their annual
compensation from the Company. Nothing in this Section 3(a) shall preclude the
Shareholder's right to claim that his termination was the result of a
constructive termination, and if Shareholder prevails on said constructive
termination claim, the termination shall then be deemed to have been with "Good
Reason".
(b) Termination. Anything to the contrary not withstanding, if the
-----------
Shareholder's employment with or service to the Company shall be terminated (i)
by the Company without cause, or (ii) by the Shareholder for Good Reason, or
(iii) upon the Shareholder's death or permanent disability, then in any such
event, effective as of the date of such event (the "Expiration Date"), the
Repurchase Option with respect to such Unvested Shares shall automatically and
immediately be terminated and released, and such Unvested Shares shall vest in
accordance with Section 2(b)(i) and (ii) but without regard to the continued
employment requirement.
(c) Mechanics of Repurchase. In order to exercise the Repurchase Option,
-----------------------
the Company shall deliver written notice of exercise to Shareholder within the
time period specified in
-2-
<PAGE>
paragraph (a). The Company shall pay to Shareholder within the time period
specified in paragraph (a), the aggregate repurchase price by cash or check.
Upon delivery of such notice, (i) the Company or its assignee shall become the
legal and beneficial owner of the Shares being repurchased and all rights and
interests therein or relating thereto, (ii) the Company shall have the right to
retain and transfer to its own name or the name of its assignee the repurchased
Shares, and (iii) Shareholder shall retain solely the right to receive the
payment for the Shares so repurchased.
4. Restrictions on Transfer. Except for the transfer of Unvested Shares to
------------------------
the Company or its assignee as contemplated by this Agreement, no Unvested
Shares or any beneficial interest therein shall be transferred, encumbered or
otherwise disposed of in any way until the release of such Shares from the
Repurchase Option in accordance with the provisions of this Agreement.
5. Legends. The share certificate evidencing the Shares shall be endorsed
-------
with the following restrictive legends (in addition to any legend required under
applicable state securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION
THEREOF, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH
SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT
SAYING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
THE SHARES REPRESENTED HEREBY ARE SUBJECT TO CERTAIN RESTRICTIONS UPON
TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT BETWEEN THE
COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS AVAILABLE UPON THE REQUEST OF
THE REGISTERED HOLDER HEREOF TO THE SECRETARY OF THE COMPANY.
6. Adjustments for Stock Splits, etc. All references to the number of
---------------------------------
Shares and the purchase price of the Shares in this Agreement shall be
appropriately adjusted to reflect any stock dividend, stock split,
recapitalization, merger, reorganization or other change in the Shares which may
be made by the Company after the date of this Agreement.
7. Escrow. As security for the faithful performance of this Agreement,
------
Shareholder agrees, immediately, to deliver such certificate(s), together with
two stock powers in the form attached hereto as Exhibit B, executed by
Shareholder (with the date and number of Shares left blank), to the Secretary of
the Company ("Escrow Agent"). Escrow Agent shall hold such Shares pursuant to
an escrow agreement in the form attached hereto as Exhibit A, by which Escrow
Agent shall be authorized to take all such actions and to effectuate all such
transfers and/or releases of such
-3-
<PAGE>
Shares as are in accordance with the terms of this Agreement. The Shares shall
be released from escrow upon termination of the Repurchase Option provided for
in Section 3.
8. Market Stand-Off Agreement. Shareholder and each transferee of the
--------------------------
Shares issued hereunder agrees by acceptance hereof or thereof not to sell, make
a short sale of, loan, grant any options for the purchase of, or otherwise
dispose of any shares of Common Stock of the Company held by Shareholder without
the prior written consent of the Company or the underwriters managing any
underwritten public offering of the Company's securities, for such period from
the effective date of the offering as the managing underwriters shall request
(but not to exceed one hundred eighty (180) days), and further agrees to execute
any agreement reflecting the above provision as may be requested by the
underwriters at the time of any such public offering.
9. General Provisions.
------------------
(a) This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of California as they apply to contracts
entered into and wholly to be performed within such state.
(b) This Agreement, including its Exhibits, represents the entire
agreement between the parties with respect to the subject matter hereof.
(c) Any notice, demand or request required or permitted to be given by
either the Company or Shareholder pursuant to the terms of this Agreement shall
be in writing and shall be deemed given when delivered, if delivered personally;
three business days after the business day of deposit in the U.S. mail, by
registered or certified mail with postage prepaid; one business day after the
business day of facsimile transmission, if a confirmation copy is sent by first
class mail with postage prepaid; or, one business day after the business day of
deposit with Federal Express or similar overnight carrier, freight prepaid; in
any such case addressed to any party at such party's address as set forth at the
end of this Agreement or such other address as the party may designate by
notifying the other in writing.
(d) The rights and benefits of the Company under this Agreement shall be
transferable to any one or more persons or entities, and all covenants and
agreements hereunder shall inure to the benefit of, and be enforceable by the
Company's successors and assigns. The rights and obligations of Shareholder
under this Agreement may only be assigned with the prior written consent of the
Company.
(e) Either party's failure to enforce any provision or provisions of this
Agreement shall not in any way be construed as a waiver of any such provision or
provisions, nor prevent that party from thereafter enforcing each and every
other provision of this Agreement. The rights granted both parties herein are
cumulative and shall not constitute a waiver of either party's right to assert
all other legal remedies available to it under the circumstances.
(f) Shareholder agrees upon request to execute any further documents or
instruments necessary or desirable to carry out the purposes or intent of this
Agreement.
-4-
<PAGE>
10. Attorneys Fees.
--------------
If any litigation or any other proceeding is commenced in connection with or
related to this Agreement, the losing party shall pay the expenses, including
but not limited to, the reasonable attorneys' fees and expenses, and costs,
including costs of attorney travel of the prevailing party. The court shall be
entitled to prorate said fees and expenses between the parties in the event that
a suit or proceeding is successful only in part.
-5-
<PAGE>
By Shareholder's signature below, Shareholder represents that Shareholder
hereby accepts this Agreement subject to all of the terms and provisions
thereof. Shareholder has reviewed this Agreement in its entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Agreement
and fully understands all provisions of this Agreement.
"THE COMPANY"
INVENTA CORPORATION Address
----------------------------
By:_____________________________
Title:__________________________ Address
----------------------------
"SHAREHOLDER"
________________________
Signature Page to Inventa Corporation Stock Restriction Agreement
6
<PAGE>
EXHIBIT A
JOINT ESCROW INSTRUCTIONS
January __, 2000
Secretary
Inventa Corporation
255 Shoreline Drive, Suite 200
Redwood Shores, CA 94065
Dear Sir:
As Escrow Agent for both Inventa Corporation, a California corporation (the
"Company"), and the undersigned holder of stock of the Company ("Shareholder"),
you are hereby authorized and directed to hold the documents delivered to you
pursuant to the terms of that certain Stock Restriction Agreement ("Agreement")
between the Company and the undersigned, to which a copy of these Joint Escrow
Instructions is attached as Exhibit A, in accordance with the following
---------
instructions:
1. In the event the Company and/or any assignee of the Company (referred
to collectively for convenience herein as the "Company") exercises the
Repurchase Option set forth in the Agreement, the Company shall give to
Shareholder and you a written notice specifying the number of shares of stock to
be purchased, the purchase price, and the time for a closing hereunder at the
principal office of the Company. Shareholder and the Company hereby irrevocably
authorize and direct you to close the transaction contemplated by such notice in
accordance with the terms of the notice, unless you receive objection from such
Shareholder within ten days of such notice, in which event you shall hold the
Shares subject to the notice, and all dividends related thereto, until the
dispute with respect to such Shares is resolved by the parties, or by
arbitration or a court of competent jurisdiction. Until resolved neither the
Company nor the Shareholder shall have the right to vote such Shares.
2. At the closing, you are directed (a) to date the stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver the same, together with the certificate
evidencing the shares of stock to be transferred, to the Company or its
assignee, in accordance with the Agreement, against the simultaneous delivery to
you of the purchase price (by check) for the number of shares of stock being
purchased pursuant to the exercise of the Repurchase Option.
3. Shareholder irrevocably authorizes the Company to deposit with you any
certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to the shares as defined in the Agreement.
Shareholder does hereby irrevocably constitute and appoint you as his attorney-
in-fact and agent for the term of this escrow to execute with respect to such
securities all documents necessary or appropriate to make such securities
negotiable and to complete any
1
<PAGE>
transaction herein contemplated. Subject to the provisions of this paragraph 3,
Shareholder shall exercise all rights and privileges of a stockholder of the
Company while the stock is held by you.
4. Upon written request of Shareholder, but no more than once each year,
unless the Repurchase Option has been exercised, you will deliver to Shareholder
a certificate or certificates representing so many shares of stock as have been
released from the Unvested Shares subject to the Repurchase Option in accordance
with the terms thereof. Fifteen days (15) after the Expiration Date, you will
deliver to Purchaser a certificate or certificates representing the aggregate
number of Shares not purchased by the Company or its assignees pursuant to
exercise of the Repurchase Option.
5. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
6. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties.
You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Shareholder while acting in
good faith, and any act done or omitted by you pursuant to the advice of your
own attorneys shall be conclusive evidence of such good faith.
7. You are hereby expressly authorized to comply with and obey orders,
judgments or decrees of any duly approved arbitrator or court of competent
jurisdiction. In case you obey or comply with any such order, judgment or
decree, you shall not be liable to any of the parties hereto or to any other
person, firm or corporation by reason of such compliance, notwithstanding any
such order, judgment or decree being subsequently reversed, modified, annulled,
set aside, vacated or found to have been entered without jurisdiction.
8. You shall not be liable in any respect on account of the identity,
authorities or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
9. You shall not be liable for the outlawing of any rights under any
applicable statute of limitations with respect to these Joint Escrow
Instructions or any documents deposited with you.
10. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
11. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be an officer of the Company or if you shall resign by written
notice to each party. In the event of any such termination, the Company and the
Shareholder shall appoint a successor Escrow Agent satisfactory to both of them.
-2-
<PAGE>
12. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
13. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, by written objection or other written notice of any party
hereto, or otherwise, you are authorized and directed to retain in your
possession without liability to anyone all or any part of said securities until
such disputes shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a duly appointed
arbitrator or court of competent jurisdiction after the time for appeal has
expired and no appeal has been perfected, but you shall be under no duty
whatsoever to institute or defend any such proceedings.
14. Any and all disputes or controversies arising from or respecting this
agreement shall be decided by binding arbitration under the rules of the
American Arbitration Association. The arbitrator shall consist of one arbitrator
mutually agreed upon by both parties. Arbitration shall take place in San Mateo
County, California or any other location mutually agreeable to the parties. At
the request of either party, arbitration proceedings will be conducted in the
utmost secrecy. The arbitrator shall be able to decree any and all relief of an
equitable nature and to award damages, with or without an accounting and costs.
The decree of judgment of an award rendered by the arbitrator may be entered in
any court of competent jurisdiction.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given when delivered, if given by personal
delivery: three (3) business days after the business day of deposit in the
United States Post Office, by registered or certified mail with postage and fees
prepaid; one (1) business day after the business day of facsimile transmission,
if a confirmation copy is sent via first class mail, postage prepaid; or one (1)
business day after the business day of deposit with Federal Express or similar
overnight carrier, freight prepaid; in any such case addressed to each of the
other parties thereunto entitled at the addresses indicated in the Company's
records, or at such other addresses as a party may designate by ten days'
advance written notice to each of the other parties hereto.
16. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
-3-
<PAGE>
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns.
Very truly yours,
COMPANY:
INVENTA CORPORATION
a California corporation
By:___________________________________
Title:________________________________
SHAREHOLDER:
______________________________________
ESCROW AGENT:
___________________
Secretary
4
Signature Page to Escrow Agreement
<PAGE>
EXHIBIT B
---------
STOCK POWER AND ASSIGNMENT
--------------------------
SEPARATE FROM CERTIFICATE
-------------------------
FOR VALUE RECEIVED and pursuant to that certain Stock Restriction Agreement
dated as of January __, 2000 the undersigned hereby sells, assigns and transfers
unto _____________________ ______________________________, __________shares of
the Common Stock of Inventa Corporation, a California Corporation (the
"Company"), standing in the undersigned's name on the books of the Company
represented by Certificate No. _____ delivered herewith, and does hereby
irrevocably constitute the Secretary of the Company as attorney-in-fact, with
full power of substitution, to transfer said stock on the books of the Company.
Dated: ________________, ______
________________________________
(Signature)
________________________________
(Please Print Name)
This Stock Power may only be utilized for the repurchase of Unvested Shares
by the Company to the extent provided and otherwise in accordance with the
provisions of the Stock Restriction Agreement dated as of January __, 2000 by
and between the signatory hereto and the Company.
<PAGE>
EXHIBIT 10.40
NONCOMPETITION AGREEMENT
------------------------
This NONCOMPETITION AGREEMENT (the "Agreement"), dated the [_____] day of
[____________, 2000] (the "Effective Date") is made by and between Inventa
Corporation, a California corporation ("Inventa"), XTend-Tech, Inc., a Delaware
Corporation ("XTend") and ____________ (the "Employee").
BACKGROUND
----------
This Agreement is entered into in connection with and is a condition to the
Agreement dated as of January __, 2000 (the "Agreement") between Inventa
Corporation and XTend, pursuant to which Inventa has acquired all outstanding
shares of XTend including all shares held by Employee on the date hereof ("the
Acquisition").
Employee is a stockholder and key employee of XTend and has been actively
involved in the development and/or marketing of XTend's products. Inventa
intends to continue the business of XTend after the Effective Date and integrate
such business into its ongoing business. To preserve and protect the assets of
XTend, including XTend's goodwill, customers and trade secrets of which Employee
has, and will, in his role as an employee of XTend or Inventa, have knowledge,
and to preserve and protect XTend's and Inventa's goodwill and business
interests going forward, and in consideration for Inventa's undertaking the
Acquisition, Employee has agreed to enter into this Agreement.
Employee and Inventa believe the limitations as to time, geographical area
and scope of activity contained in this Agreement are reasonably necessary to,
and no greater than that required to, protect the goodwill and business
interests purchased by Inventa.
1. Noncompete. During the Restricted Period, Employee shall not either
----------
for himself or on behalf of any other person, partnership, firm, association or
corporation in any territory in which Inventa is actively engaged in business
(a) undertake any business which is in competition with any business of XTend or
Inventa as operated by Inventa as of the date of termination, (b) act as an
employee, agent, advisor or consultant of any then existing competitor of XTend
or Inventa with respect to any business which had been operated by XTend
immediately prior to the date of termination, (c) accept employment or perform
services for any of Inventa's competitors with respect to any business operated
by XTend immediately prior to the date of termination, (d) take any action to or
do anything reasonably intended to divert business from Inventa or influence or
attempt to influence any existing customers of Inventa to cease doing business
with Inventa or to alter its then existing business relationship with Inventa,
in each case with respect to any business operated by XTend immediately prior to
the date of termination, (e) hire, or solicit for purposes of hiring any
employees of XTend or Inventa, or (f) take any action or do anything reasonably
intended to influence any existing suppliers of Inventa to cease doing business
with Inventa or to alter its then existing business relationship with Inventa,
in each case with respect to any business operated by XTend immediately prior to
the date of termination. As used herein, "Restricted Period" means (i) two (2)
years following the termination by the Company of Employee's employment or
service
<PAGE>
with Inventa for cause, (ii) one (1) year following the termination of
Employee's employment or service with Inventa by Inventa without cause, or by
Employee for "good reason", or (iii) the period ending two (2) years from the
date Employee voluntarily terminates his employment or service with Inventa
without good reason, whichever of (i) through (iii) is applicable.
2. Geographic Area. The geographical areas in which the restrictions
---------------
provided for in this Agreement apply include all cities, counties and states of
the United States, and all other countries, in which XTend or Inventa or any of
its subsidiaries has engaged in licensing or sales or otherwise conducted
business or selling or licensing efforts at any time during the two years prior
to the Effective Date or during the term of this Agreement. The agreement not to
compete in each such geographic subdivision is a separate and severable
agreement from all such other agreements. Employee acknowledges that the scope
and period of restrictions and the geographical area to which the restrictions
imposed in this Section applies are fair and reasonable and are reasonably
required for the protection of Inventa and that this Agreement accurately
describes the business to which the restrictions are intended to apply.
3. Severability. The parties intend that the covenants contained in this
------------
Agreement shall be construed as a series of separate covenants, one for each
county of each state of the United States of America, and each nation. Except
for geographic coverage, each such separate covenant shall be deemed identical
in terms of the covenants contained in this Agreement. If, in any judicial
proceeding, a court shall refuse to enforce any of the separate covenants (or
any part thereof) deemed included in this Agreement, then such unenforceable
covenant (or such part) shall be deemed eliminated from this Agreement for the
purpose of those proceedings to the extent necessary to permit the remaining
separate covenants (or portions thereof) to be enforced. In the event that the
provisions of this Agreement should ever be deemed to exceed the time or
geographic limitations, or the scope of these covenants, as permitted by
applicable law, then such provisions shall be reformed to the maximum time or
geographic limitations, as the case may be, permitted by applicable laws.
4. Injunctions. Employee acknowledges that any breach of the covenants of
-----------
this Agreement may result in immediate and irreparable injury to Inventa and,
accordingly, consents to the application of such injunctive relief and such
other equitable remedies for the benefit of Inventa as a court of competent
jurisdiction may deem appropriate in the event such a breach occurs or is
threatened. The foregoing remedies will be in addition to all other legal
remedies to which Inventa may be entitled hereunder, including, without
limitation, monetary damages.
5. Miscellaneous.
-------------
(a) Notices. Any and all notices permitted or required to be given
under this Agreement must be in writing. Notices will be deemed given (i) when
personally received or when sent by facsimile transmission (to the receiving
party's facsimile number), (ii) on the first business day after having been sent
by commercial overnight courier with written verification of receipt, or (iii)
on the third business day after having been sent by registered or certified mail
from a location on the United States mainland, return receipt requested, postage
prepaid, whichever occurs first, at the address set forth below or at any new
address, notice of which will have been given in accordance with this Section:
-2-
<PAGE>
If to Inventa: Inventa Corp.
255 Shoreline Drive
Redwood Shores, CA 94065
Attn: Chief Executive Officer
With a simultaneous copy to: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, CA 94304-1050
Attn: Michael J. O'Donnell, Esq.
If to Employee, at Employee's address in the personnel records of Inventa.
With a simultaneous copy to: Sills Cummis Radin Tischman Epstein
& Gross, P.A.
One Riverfront Plaza
Newark, NJ 07012-5400
Attn: Victor H. Boyajian, Esq.
(b) Amendments. This Agreement contains the entire agreement and
----------
supersedes and replaces all prior agreements between Inventa and Employee or
XTend and Employee concerning the subject matter hereof. This Agreement may not
be changed or modified in whole or in part except by a writing signed by the
party against whom enforcement of the change or modification is sought.
(c) Successors and Assigns. This Agreement will not be assignable by
----------------------
Employee the rights and obligations of Inventa and XTend under this Agreement
may be assigned to a corporation which becomes the successor to such party as
the result of a merger or other corporate reorganization and which continues the
business of Inventa or to any other subsidiary of Inventa.
(d) Governing Law. This Agreement will be governed by and interpreted
-------------
according to the substantive laws of the State of New Jersey without regard to
such state's conflicts law, with exclusive jurisdiction in New Jersey, venue in
Essex County (State Court) or Newark (Federal Court).
(e) No Waiver. The failure of either party to insist on strict
---------
compliance with any of the terms of this Agreement in any instance or instances
will not be deemed to be a waiver of any term of this Agreement or of that
party's right to require strict compliance with the terms of this Agreement in
any other instance.
(f) Attorneys Fees. If any litigation or any other proceeding is
--------------
commenced in connection with or related to this Agreement, the losing party
shall pay the expenses, including but not limited to, the reasonable attorneys'
fees and expenses, and costs, including costs of attorney travel of the
prevailing party. The court shall be entitled to prorate said fees and expenses
between the parties in the event that a suit or proceeding is successful only in
part.
-3-
<PAGE>
(g) Submission to Jurisdiction. Each of the Parties submits to the
--------------------------
jurisdiction of any state or federal court sitting in Essex County, New Jersey,
in any action or proceeding arising out of or relating to this Agreement and
agrees that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each Party also agrees not to bring any action or
proceeding arising out of or relating to this Agreement in any other court. Each
of the Parties waives any defense of inconvenient forum to the maintenance of
any action or proceeding so brought and waives any bond, surety, or other
security that might be required of any other Party with respect thereto. Each
Party agrees that a final judgment in any action or proceeding so brought shall
be conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or at equity.
(h) Counterparts. This Agreement may be executed in counterparts,
------------
which when taken together will constitute one instrument. Any copy of this
Agreement with the original signatures of all parties appended will constitute
an original.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
INVENTA CORPORATION EMPLOYEE
By:____________________________ _________________________________
(Signature)
Title:_________________________ _________________________________
(Print Name)
4
Signature Page to Non-Competition Agreement
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Amendment No. 3 to Registration
Statement (No. 333-95813) on Form S-1 of our reports dated February 11, 2000
relating to the consolidated financial statements and financial statement
schedules for Inventa Technologies, Inc., and February 11, 2000 relating to the
financial statements of XTEND-Tech, Inc. which appear in such Registration
Statement. We also consent to the reference to us under the heading "Experts"
in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
San Jose, California
March 24, 2000
<PAGE>
Exhibit 24.2
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints David A. Lavanty and Ashok Santhanam, and
each of them acting individually, as his true and lawful attorneys-in-fact and
agents, each with full power of substitution, for him in any and all capacities,
to sign any and all amendments to this Registration Statement (including
post-effective amendments or any abbreviated registration statement and any
amendments thereto filed pursuant to Rule 462(b) increasing the number of
securities for which registration is sought), and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, with full power of each to act alone, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully for all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or his or their substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration Statement
has been signed by the following persons in the capacities and on the dates
indicated:
Signature Title Date
--------- ----- ----
/s/ Michael Shahbazian Sevnior Vice President and Chief
- ----------------------- Financial Officer February 16, 2000
Michael Shahbazian (Principal Financial Officer)
