EXHIBIT 2
STOCKHOLDER RIGHTS AGREEMENT
This Stockholder Rights Agreement (this "AGREEMENT"), dated as of
June 30, 2000 (the "EFFECTIVE DATE"), is between Novadigm, Inc., a Delaware
corporation (the "COMPANY"), and Hewlett-Packard Company, a Delaware
corporation (the "STOCKHOLDER"). Unless otherwise provided herein, all
capitalized terms shall have the meanings set forth in that certain
Alliance Agreement, dated as of even date herewith, by and between the
Company and the Stockholder (the "ALLIANCE AGREEMENT").
RECITALS
A. In connection with the Alliance Agreement, the Company has
agreed to issue to the Stockholder 940,000 shares (the "CONSIDERATION
SHARES") of the Common Stock, par value $0.001 per share, of the Company
("COMMON STOCK") and a Warrant (the "WARRANT") to purchase 250,000 shares
(the "WARRANT SHARES") of Common Stock, on the terms and conditions set
forth in the Alliance Agreement.
B. The Stockholder desires to enter into the Alliance Agreement
and receive the Consideration Shares and the Warrant on the terms and
conditions set forth in the Alliance Agreement, provided it receives the
registration and other rights set forth in this Agreement.
C. The Company is willing to provide such rights requested by the
Stockholder, subject to the limitations set forth in this Agreement.
AGREEMENT
In consideration of the foregoing recitals, the mutual promises
hereinafter set forth, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties
hereto agree as follows:
1. DEFINITIONS.
1.1 Definitions. For purposes of this Agreement:
(a) "CHANGE IN CONTROL" means (i) a transaction or series
of related transactions which results in (A) the Company's stockholders
immediately prior to such transaction or series of related transactions not
holding Voting Stock representing at least sixty percent (60%) of the
voting power of the surviving or continuing entity or (B) a sale,
conveyance or disposition of all or substantially all of the assets of the
Company, unless the Company's stockholders immediately prior to such
transaction or series of related transactions will hold Voting Stock
representing at least sixty percent (60%) of the voting power of the
purchasing entity, or (ii) the approval by the stockholders of the Company
of a complete liquidation or dissolution of the Company.
(b) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.
(c) "FORM S-3" means such form under the Securities Act
as is in effect on the date hereof or any successor registration form under
the Securities Act subsequently adopted by the SEC that permits inclusion
or incorporation of substantial information by reference to other documents
filed by the Company with the SEC.
(d) "HOLDER" means the Stockholder, for so long as it
owns any Registrable Securities, and each of its successors and permitted
assigns and transferees who become registered owners of Registrable
Securities in accordance with the terms of this Agreement.
(e) "PERSON" means a corporation, an association, a
partnership, an organization, a business, an individual, a governmental or
political subdivision thereof or a governmental agency.
(f) "QUALIFIED PURCHASER" means a Person that (i)
represents that it is acquiring any securities of the Company in the
ordinary course of business and not with the purpose nor with the effect of
changing or influencing the control of the Company, nor in connection with
or as a participant in any transaction having such purpose or effect, and
(ii) is (A) a broker or dealer registered under Section 15 of the Exchange
Act; (B) a bank as defined in Section 3(a)(6) of the Exchange Act; (C) an
insurance company as defined in Section 3(a)(19) of the Exchange Act; (D)
an investment company registered under Section 8 of the Investment Company
Act of 1940, as amended; (E) registered as an investment advisor under
Section 203 of the Investment Advisers Act of 1940, as amended, or under
the laws of any state; (F) an employee benefit plan as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), that is subject to the provisions of ERISA, or any such plan
that is not subject to ERISA that is maintained primarily for the benefit
of the employees of a state or local government or instrumentality, or an
endowment fund; or (G) a savings association as defied in Section 3(b) of
the Federal Deposit Insurance Act.
(g) "REGISTRABLE SECURITIES" means (i) the Consideration
Shares; (ii) the Warrant Shares; and (iii) any shares of Common Stock or
other securities of the Company issued as (or issuable upon the conversion
or exercise of any warrant, right or other security that is issued as) a
dividend or other distribution with respect to, or in exchange for, or in
replacement of, the Consideration Shares or Warrant Shares; provided,
however, that such securities shall cease to be Registrable Securities when
such securities (A) are sold, transferred or assigned in violation of this
Agreement or (B) have been sold in a public offering, whether pursuant to
Rule 144 promulgated under the Securities Act ("RULE 144") in a registered
offering or otherwise.
(h) "REGISTRATION STATEMENT" means a Demand Registration
Statement (as defined herein) or Piggyback Registration Statement (as
defined herein), as the case may be.
(i) "SECURITIES ACT" means the Securities Act of 1933, as
amended.
(j) "SEC" means the Securities and Exchange Commission or
any other Federal agency at the time administering the Securities Act.
(k) "SIGNIFICANT EVENT" means any of (i) the acquisition
by a Person or "13D Group" (as defined below), other than the Stockholder,
of beneficial ownership of Voting Stock representing twenty percent (20%)
or more of the then-outstanding Voting Stock; (ii) the announcement or
commencement by a Person or 13D Group, other than the Stockholder, of a
tender or exchange offer to acquire Voting Stock which, if successful,
would result in such Person or 13D Group owning, when combined with any
other Voting Stock owned by such Person or 13D Group, twenty percent (20%)
or more of the then-outstanding Voting Stock; or (iii) the entering into by
the Company, or publicly announced determination by the Company to seek to
enter into, any merger, sale or other business combination transaction,
other than a transaction with the Stockholder, pursuant to which (A) the
outstanding shares of Common Stock would be converted into cash or
securities of another Person or 13D Group, other than the Stockholder, (B)
fifty percent (50%) or more of the then-outstanding shares of Common Stock
would be owned by Persons other than the then-current holders of shares of
Common Stock or (C) would result in all or substantially all of the
Company's assets being sold to any Person or 13D Group, other than the
Stockholder (unless the Company's stockholders immediately prior to such
sale of all or substantially all of the Company's assets will hold Voting
Stock representing at least fifty percent (50%) of the voting power of the
Person or 13D Group purchasing such assets).
(l) "13D GROUP" means any group of Persons formed for the
purposes of acquiring, holding, voting or disposing of Voting Stock which
would be required under Section 13(d) of the Exchange Act and the rules and
regulations thereunder to file a statement on Schedule 13D with the SEC as
a "person" within the meaning of Section 13(d)(3) of the Exchange Act if
such group beneficially owned voting securities representing more than five
percent (5% ) of the Total Voting Power.
(m) "TOTAL VOTING POWER" means the total number of votes
which may be cast in the election of directors of the Company at any
meeting of the stockholders of the Company, if all Voting Stock was
represented and voted to the fullest extent possible at such meeting, other
than the votes that may be cast only upon the happening of a contingency
that has not occurred as of the relevant time;
(n) "VOTING POWER" of any Voting Stock means the number
of votes such Voting Stock is entitled to cast for directors of the Company
at any meeting of the stockholders of the Company.
(o) "VOTING STOCK" means the Common Stock or other
securities issued by the Company ordinarily entitled to vote in the
election of the board of directors of the Company (other than securities
having such power only upon the happening of a contingency that has not
occurred as of the relevant time).
2. REGISTRATION.
2.1 Demand Registration.
(a) Request by Holders. Upon the written request from
Holders of at least fifty percent (50%) of the Registrable Securities then
outstanding (the "INITIATING HOLDERS") requesting that the Company effect a
registration of all or part of such Initiating Holders' Registrable
Securities and specifying the intended method or methods of disposition
thereof (which may include block trades) (the "REGISTRATION REQUEST"), then
the Company shall, within fifteen (15) days of the receipt of such
Registration Request, give written notice of such request ("REQUEST
NOTICE") to all Holders (other than Initiating Holders) and, thereafter,
shall prepare and, as soon as reasonably practicable, file with the SEC a
registration statement on Form S-3 (a "DEMAND REGISTRATION STATEMENT")
registering the disposition in a non-underwritten offering pursuant to Rule
415 promulgated under the Securities Act ("RULE 415"), in accordance with
the reasonably intended method or methods of disposition specified in the
Registration Request of all Registrable Securities that Holders request to
be registered and included in such Demand Registration Statement in
accordance with this Section 2.1(a) (a "DEMAND REGISTRATION").
Notwithstanding the foregoing, in no event may Initiating Holders deliver a
request that the Company effect a Demand Registration pursuant to this
Section 2.1(a) earlier than ninety (90) days prior to the first anniversary
of the Effective Date. In the event Form S-3 is unavailable for such a
registration, the Company shall use such other form as is available, in the
Company's reasonable judgment, to register the public resale of the
Registrable Securities in a non-underwritten offering pursuant to Rule 415.
To be included in the Demand Registration Statement, any Holder (other than
Initiating Holders) must provide, within twenty (20) days after receipt of
the Request Notice, written notice to the Company of the number of shares
of Registrable Securities such Holder has elected to include in the Demand
Registration Statement (which notice shall specify the intended method or
methods of disposition of such Registrable Securities, which may include
block trades). The Company shall use its commercially reasonable efforts to
have the Demand Registration Statement declared effective by the SEC as
soon as reasonably practicable after it files the Demand Registration
Statement with the SEC; provided, however, that the Company shall have no
obligation under this Section 2.1(a) to seek to have the Demand
Registration Statement declared effective by the SEC prior to the first
anniversary of the Effective Date. The Stockholder's rights under Section
2.1 are subject to the provisions of Section 3.
(b) Number of Demand Registrations. The Company shall not
be required to effect a Demand Registration after the Company has effected
three (3) Demand Registrations or when all the Registrable Securities are
saleable without registration pursuant to Rule 144(k) promulgated under the
Securities Act ("RULE 144(K)").
(c) Deferral. The Company shall be entitled to postpone
the filing of any Demand Registration Statement otherwise required to be
prepared and filed by the Company pursuant to this Section 2.1, delay a
request for effectiveness of any such Demand Registration Statement, or
suspend the use of any effective Demand Registration Statement under this
Section 2.1, for a reasonable period of time, but not in excess of
forty-five (45) days (a "DELAY PERIOD"), if the board of directors of the
Company determines that, in its good faith judgment, the registration and
distribution of the Registrable Securities covered or to be covered by such
Demand Registration Statement would be materially detrimental to the
Company or would require the disclosure of material, non-public information
by the Company in the Demand Registration Statement with respect to which
the board of directors of the Company believes that the Company has a bona
fide business purpose for preserving confidentiality, and the Company
promptly gives the Initiating Holders a written certificate signed by an
executive officer of the Company notifying such Holders of such
determination and an approximation of the period of the anticipated delay;
provided, however, that (i) the aggregate number of days included in all
Delay Periods during any consecutive twelve (12) months shall not exceed
the aggregate of ninety (90) days and (ii) a period of at least ninety (90)
days shall elapse between the termination of any Delay Period and the
commencement of the immediately succeeding Delay Period. If the Company
shall so postpone the filing of a Demand Registration Statement, the
Initiating Holders shall have the right to withdraw the Request Notice by
giving written notice within forty-five (45) days after receipt of the
notice of postponement or, if earlier, the termination of such Delay Period
(and, in the event of such withdrawal, such request shall not be counted
for purposes of determining the number of Demand Registrations which the
Company is obligated to effect pursuant to Section 2.1(b)). The time period
for which the Company is required to maintain the effectiveness of any
Demand Registration Statement shall be extended by the aggregate number of
days of all Delay Periods during such registration. The Company shall not
be entitled to initiate a Delay Period unless it shall (A) to the extent
permitted by agreements with other security holders of the Company,
concurrently prohibit sales by such other security holders under
registration statements covering securities held by such other security
holders and (B) in the case of a delay arising as a result of the potential
for premature disclosure of material information, in accordance with the
Company's policies from time to time in effect, forbid purchases and sales
in the open market by directors and executive officers of the Company
during such Delay Period. Upon receipt of a written notice from the Company
of a Delay Period, the Holders shall forthwith discontinue disposition of
all Registrable Securities pursuant to the Demand Registration Statement
and suspend use of any prospectus forming a part thereof until the Company
notifies the Holders that the Delay Period is no longer in effect, and, if
so directed by the Company, deliver to the Company all copies in their
possession of any such prospectus.
(d) Effective Registration Statement. The Company shall
use its commercially reasonable efforts to maintain the effectiveness of a
Demand Registration Statement until the earlier of (i) one hundred twenty
(120) days after the effective date thereof or (ii) when all Registrable
Securities covered by such Demand Registration Statement have been disposed
of pursuant to the Demand Registration Statement or otherwise cease to be
Registrable Securities (a "REGISTRATION PERIOD"). A Demand Registration
shall not be deemed to have been effected (A) unless a Demand Registration
Statement with respect thereto has become effective, provided, however,
that a Demand Registration which does not become effective after the
Company has filed a Demand Registration Statement with respect thereto
solely by reason of the refusal to proceed of the Initiating Holders (other
than a refusal to proceed based upon the written advice of counsel relating
to a legal matter with respect to the Company) shall be deemed to have been
effected by the Company at the request of the Initiating Holders unless the
Initiating Holders shall have elected to pay all expenses in connection
with such Demand Registration or (B) if, after it has become effective,
such Demand Registration becomes subject to any stop order or injunction or
similar order or requirement of the SEC or other governmental agency or
court for any reason.
2.2 Piggyback Registrations.
(a) Notification and Rights. The Company shall provide
written notification to all Holders in writing at least thirty (30) days
prior to filing any registration statement under the Securities Act for
purposes of effecting an underwritten public offering of Common Stock for
the Company's account or the account of others (excluding any registration
statement that registers Common Stock in an underwritten public offering
for issuance solely upon conversion, exercise or exchange of other
securities of the Company) (a "PIGGYBACK REGISTRATION STATEMENT") and will
afford each Holder an opportunity to include in such Piggyback Registration
Statement all or any part of the Registrable Securities then held by such
Holder (a "PIGGYBACK REGISTRATION"); provided, however, the Company shall
have no obligation under this Section 2.2(a) to include Registrable
Securities in a Piggyback Registration Statement declared effective by the
SEC prior to the first anniversary of the Effective Date. Each Holder
desiring to include in a Piggyback Registration Statement all or any part
of the Registrable Securities then held by such Holder shall, within thirty
(30) days after receipt of the above-described notice from the Company, so
notify the Company in writing, and in such notice shall inform the Company
of the number of Registrable Securities such Holder wishes to include in
such Piggyback Registration Statement. The Stockholder's rights under
Section 2.2 are subject to the provisions of Section 3. No Piggyback
Registration effected under this Section 2.2 shall relieve the Company of
its obligation to effect any Demand Registration under Section 2.1, nor
shall any Piggyback Registration be deemed to have been effected pursuant
to Section 2.1.
(b) Number of Piggyback Registrations. There shall be no
limit on the number of times the Holders may request registration of
Registrable Securities on a Piggyback Registration Statement under Section
2.2(a).
(c) Underwriting. If Holders elect to participate in an
underwritten public offering pursuant to Section 2.2(a), all Holders
proposing to distribute their Registrable Securities through the applicable
Piggyback Registration Statement shall enter into, and perform such
obligations set forth in, an underwriting agreement in customary form,
including, without limitation, indemnification and contribution
obligations, with the managing underwriter(s) selected by the Company for
such underwritten public offering. No Holder may participate in an
underwritten public offering pursuant to Section 2.2(a) unless such Holder
(i) agrees to sell such Holder's Registrable Securities on the basis
provided in such underwriting agreement, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, custody agreements and
other documents required under the terms of such underwriting agreement and
(iii) agrees to pay its pro rata share of all underwriting discounts and
commissions. Notwithstanding any other provision of this Agreement, if the
managing underwriter(s) determine(s) in good faith that inclusion of all or
any of the Registrable Securities in the Piggyback Registration Statement
would materially adversely affect the proposed underwritten public
offering, then the managing underwriter(s) may exclude such shares of
Registrable Securities from the Piggyback Registration Statement and the
underwritten public offering; provided, however, that the number of
Registrable Securities, if any, which are permitted by the managing
underwriter(s) to be included in the Piggyback Registration Statement shall
be allocated among Holders requesting inclusion of their Registrable
Securities in such Piggyback Registration Statement pursuant to Section
2.2(a), based on the number of Registrable Securities that such Holders
request to so include.
2.3 Related Obligations of the Company. The Company shall have the
following obligations:
(a) Company's Expenses. All expenses incurred in
connection with any registration of Registrable Securities pursuant to this
Agreement, including all SEC and "blue sky" registration, filing and
qualification fees, printer's and accounting fees, and fees and
disbursements of counsel for the Company, but excluding fees and
disbursements of counsel for the Holders, any discounts, commissions or
other amounts payable to underwriters or brokers and any transfer taxes
relating to Registrable Securities sold by the Holders, shall be borne by
the Company. Each Holder whose Registrable Securities are registered
pursuant to this Agreement shall bear all discounts, commissions or other
amounts payable to underwriters or brokers and transfer taxes in connection
with the offering or sale of such Registrable Securities by such Holder.
Notwithstanding the foregoing, the Company shall not be required to pay for
any expense of any registration proceedings begun pursuant to Section
2.1(a) if the registration request is subsequently withdrawn at the request
of Initiating Holders who hold a majority of the Registrable Securities to
be included in the Demand Registration Statement, unless such Initiating
Holders elect to consider such withdrawn registration request an effected
Demand Registration for purposes of Section 2.1(b).
(b) Amendments and Supplements. The Company shall
promptly prepare and file with the SEC such amendments (including
post-effective amendments) and supplements to the applicable Registration
Statement and the prospectus forming a part of such Registration Statement
(the "PROSPECTUS"), as may be necessary to keep such Registration Statement
effective and the Prospectus available for use by the applicable Holders
(i) at all times during the Registration Period, with respect to the Demand
Registration Statement, or (ii) until such time as the Registrable
Securities included in a Piggyback Registration Statement shall have been
disposed of in accordance with the intended methods of disposition set
forth therein.
(c) Prospectuses. The Company shall furnish to the
Holders whose Registrable Securities are included in a Registration
Statement such number of copies of (i) the Prospectus included in such
Registration Statement, including all amendments or supplements thereto, as
such Holders may reasonably request and (ii) such other documents as such
Holders may reasonably request in order to facilitate the disposition of
such Registrable Securities.
(d) Blue Sky. The Company shall, to the extent
applicable, if at all, use its commercially reasonable efforts to register
and qualify the Registrable Securities covered by a Registration Statement
under such state securities or "blue sky" laws of such states as shall be
reasonably requested by the Holders whose Registrable Securities are
included in such Registration Statement and take any other action which may
be reasonably necessary or advisable to enable such Holders to consummate
the disposition of the Registrable Securities in any states; provided that
the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business, file a general consent to service of
process or subject itself to taxation in any such states in which the
Company is not otherwise required to qualify, provide such consent to
service or pay taxes in order to carry on its business.
(e) Notification. The Company shall promptly notify each
Holder whose Registrable Securities are included in a Registration
Statement, at any time when a Prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event as a
result of which the Prospectus included in such Registration Statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing. Upon receipt of any such notice, such Holders will suspend
their use of such Prospectus until the Company has amended or supplemented
such Prospectus or filed documents that are incorporated by reference into
such Prospectus to correct such misstatements or omission. Subject to
Section 2.1(c), upon the occurrence of an event contemplated by this
Section 2.3(e), the Company shall use its commercially reasonable efforts
to prepare and file with the SEC a supplement or post-effective amendment
to the applicable Registration Statement or Prospectus or file any other
document so that the Prospectus will not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(f) Review. The Company shall, a reasonable time prior to
the filing of a Registration Statement, any related Prospectus, any
amendment to such Registration Statement or any amendment or supplement to
a related Prospectus, provide copies of such document to the Holders
requesting that their Registrable Securities be included in such
Registration Statement, and shall not at any time file any amendments to
such Registration Statement, any related Prospectus or any amendment or
supplement to such Registration Statement or a related Prospectus, of which
such Holders shall not have previously been advised and furnished a copy or
to which such Holders shall reasonably object within five (5) days of
receipt thereof.
(g) Other Notifications. The Company shall promptly
notify the Holders:
(i) when a Registration Statement, the
Prospectus or any prospectus supplement related thereto or
post-effective amendment to such Registration Statement has been
filed, and, with respect to such Registration Statement or any
post-effective amendment thereto, when the same has become
effective;
(ii) of any request by the SEC for amendments
or supplements to a Registration Statement or a Prospectus
related thereto or for additional information;
(iii) of the issuance by the SEC of any stop
order suspending the effectiveness of a Registration Statement or
the initiation of any proceedings by any Person for such purpose;
and
(iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification
of any Registrable Securities for sale under the securities or
"blue sky" laws of any jurisdiction or the initiation of any
proceedings for such purpose.
(h) Stop Orders. The Company shall make every reasonable
effort to obtain the withdrawal of any order suspending to the
effectiveness of a Registration Statement at the earliest possible moment.
(i) Basic Financial Information. The Company shall
furnish the following reports to each Holder:
(i) Within ninety (90) days after the end of
each fiscal year of the Company, a consolidated balance sheet of
the Company and its subsidiaries, if any, as at the end of such
fiscal year, and consolidated statements of income and cash flows
of the Company and its subsidiaries, if any, for such year,
prepared in accordance with generally accepted accounting
principles consistently applied (except as may be indicated in the
notes thereto) and setting forth in each case in comparative form
the figures for the previous fiscal year, all in reasonable detail
and certified by independent public accountants selected by the
Company; and
(ii) Within forty-five days after the end of the
first, second, and third quarterly accounting periods in each
fiscal year of the Company, a consolidated balance sheet of the
Company and its subsidiaries, if any, as of the end of each such
quarterly period, and consolidated statements of income and cash
flows of the Company and its subsidiaries, if any, for such period
and for the current fiscal year to date, prepared in accordance
with generally accepted accounting principles consistently applied
(except as may be indicated in the notes thereto) and setting
forth in comparative form the figures for the corresponding
periods of the previous fiscal year, subject to changes resulting
from normal year-end adjustments and excluding footnote disclosure
of the type associated with audited financial statements, all in
reasonable detail and certified by the principal financial or
accounting officer of the Company.
(j) Miscellaneous. The Company shall:
(i) if required by the Stockholder, use
commercially reasonable efforts to make available to its security
holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months, but not more
than eighteen (18) months, beginning with the first day of the
Company's first full calendar quarter after the effective date of
a Registration Statement, which earnings statement shall satisfy
the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder;
(ii) provide and cause to be maintained a
transfer agent and registrar for all Registrable Securities
included in a Registration Statement from and after a date not
later than the effective date of such Registration Statement; and
(iii) use commercially reasonable efforts to
list all Registrable Securities included in a Registration
Statement on any securities exchange on which any of the
securities of the same class as the Registrable Securities are
then listed.
2.4 Furnish Information. It shall be a condition precedent to the
obligation of the Company to include any Registrable Securities of a Holder
in a Registration Statement pursuant to Sections 2.1 and 2.2 that such
Holder shall furnish to the Company such information regarding itself, the
securities of the Company, including such Registrable Securities,
beneficially owned by it, and the intended method of disposition of such
Registrable Securities as shall be reasonably requested by the Company to
effect the registration of such Registrable Securities. Each Holder that
has included Registrable Securities in a Registration Statement shall
thereafter furnish promptly to the Company all information regarding such
Holder and the proposed distribution by such Holder of such Registrable
Securities required to make the information previously furnished to the
Company by such Holder not materially misleading.
2.5 Indemnification. In the event any Registrable Securities
are included in a Registration Statement in accordance with Section 2.1
or 2.2, then:
(a) By the Company. The Company agrees to indemnify and
hold harmless each Holder and each Person, if any, who controls any Holder
within the meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act from and against all losses, claims, damages and
liabilities (including, without limitation, any legal or other expenses
reasonably incurred by such Holder or controlling Person in connection with
defending or investigating any such action or claim) caused by any untrue
statement or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto) pursuant to which such
Holder's Registrable Securities were registered under the Securities Act,
or caused by 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 caused by any untrue statement or alleged untrue
statement of a material fact contained in any related Prospectus (as
amended or supplemented if the Company shall have furnished any amendments
or supplements thereto), or caused by any omission or alleged omission to
state therein a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading,
except insofar as such losses, claims, damages or liabilities were caused
by any such untrue statement or omission or alleged untrue statement or
omission based upon written information related to such Holder furnished to
the Company by, or on behalf of, such Holder specifically for use therein;
provided, however, that the foregoing indemnity with respect to any
Prospectus shall not inure to the benefit of any Holder from whom the
Person asserting any such losses, claims, damages or liabilities acquired
Registrable Securities, or any Person controlling such Holder, if a copy of
the final Prospectus (as then amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) was not sent by, or
delivered on behalf of, such Holder to such Person at or prior to the
written confirmation of the sale of the Registrable Securities to such
Person and the final Prospectus (as so amended or supplemented) would have
cured the defect giving rise to such loss, claim, damage or liability.
(b) By Selling Holders. Each Holder agrees, severally and
not jointly, to indemnify and hold harmless the Company and each of its
directors, each of its officers who sign the applicable Registration
Statement and each Person if any, who controls the Company within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from the Company
to the Holders pursuant to Section 2.5(a), but only with respect to written
information relating to such Holder furnished to the Company by, or on
behalf of, such Holder specifically for use in the applicable Registration
Statement (or any amendment hereto) or any related Prospectus (or any
amendments or supplement thereto). The indemnity on obligations of any
Holder in connection with any Registration Statement under this Section
2.5(b) shall be limited in amount to the total proceeds received by such
Holder from the sale of Registrable Securities pursuant to such
Registration Statement.
(c) Procedures. In case any proceeding (including any
governmental investigation) shall be instituted involving any Person in
respect of which indemnity may be sought pursuant to either Section 2.5(a)
or 2.5(b) above, such Person (the "INDEMNIFIED PARTY") shall promptly
notify the Person against whom such indemnity may be sought (the
"INDEMNIFYING PARTY") in writing and, unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties exists with respect to such proceeding, shall permit
the indemnifying party to assume the defense of such proceeding with
counsel reasonably satisfactory to the indemnified party and the
indemnifying party shall pay the fees and disbursements of such counsel
related to such proceeding. It is understood that if an indemnifying party
does not assume the defense of a proceeding, such indemnifying party shall
not, in connection with such proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate
firm (in addition to any local counsel) for (i) the Company, its directors,
its officers who signed the applicable Registration Statement and each
Person, if any, who controls the Company or (ii) all Holders and all
Persons, if any, who control any Holders, as the case may be, and that all
such fees and expenses shall be reimbursed as they are incurred. In such
case involving Holders and such Persons who control Holders, such firm
shall be designated in writing by the Holders of a majority of the
Registrable Securities involved in such case. The indemnified party shall
cooperate with the indemnifying party and shall furnish the indemnifying
party all information available to the indemnified party which relate to
such action or claim that the indemnifying party may reasonably request.
The indemnifying party shall not be liable for any settlement of any
proceeding effected without its written consent but, if settled with such
consent or if there be a final judgment for the plaintiff, the indemnifying
party agrees to indemnify the indemnified party from and against any loss
or liability by reason of such settlement or judgment. No indemnifying
party shall, without the prior written consent of the indemnified party,
effect any settlement of any pending or threatened proceeding in respect of
which such indemnified party is or could have been a party and indemnity
could have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such proceeding.
(d) Contribution. If the indemnification provided for in
Section 2.5(a) or 2.5(b) is unavailable to an indemnified party, then each
indemnifying party under such Section, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages or liabilities in such proportion as is appropriate to reflect the
relative fault of the indemnifying party or parties, on the one hand, and
of the indemnified party or parties, on the other hand, in connection with
the statements or omissions that resulted in such losses, claims, damages
or liabilities, as well as other relevant equitable considerations. The
relative fault of the Company and the Holders shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company or by the
Holders and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The
Holders' respective obligations to contribute pursuant to this Section
2.5(d) are several in proportion to the respective number of Registrable
Securities of each Holder that were registered pursuant to the applicable
Registration Statement.
The Company and each Holder agree that it would not be just or
equitable if contribution pursuant this Section 2.5(d) were determined by
pro rata allocation or by any other method of allocation that does not take
account of the equitable considerations referred to in the foregoing
paragraph. The amount paid or payable by an indemnified party as a result
of the losses, claims, damages and liabilities referred to in the foregoing
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or
claim. No person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution
from any Person who was not guilty of such fraudulent misrepresentation.
The remedies provided for in Section 2.5 are not exclusive and shall not
limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity. Notwithstanding the provisions of
this Section 2.5(d), no Holder shall be required to contribute any amount
in excess of the amount by which the total proceeds received by such Holder
from the sale of Registrable Securities exceeds the amount of any damages
that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission.
3. DISTRIBUTION CONTROL MEASURES.
3.1 Sales Limitations.
(a) Prior to the first anniversary of the Effective Date,
none of the Consideration Shares may be offered for sale, sold, assigned or
transferred to any Person other than an Affiliate of the Stockholder. From,
and including, the first anniversary of the Effective Date, to, but
excluding, the second anniversary of the Effective Date, no more than
470,000 of the Consideration Shares (as adjusted for stock splits, stock
dividends and similar events) in the aggregate, may be offered for sale,
sold, assigned or transferred to any Person other than an Affiliate of the
Stockholder. The transfer restrictions in Section 3.1 shall terminate upon
the consummation of a Change in Control.
(b) The Holders, in the aggregate, may not sell, during
any calendar quarter an amount of Consideration Shares and Warrant Shares,
including any shares of Common Stock or other securities of the Company
issued as (or issuable upon the conversion or exercise of any warrant,
right or other security that is issued as) a dividend or other distribution
with respect to, or in exchange for, or in replacement of, the
Consideration Shares (collectively, the "SECURITIES"), in the aggregate, in
excess of two percent (2%) of the Outstanding Company Common Stock.
However, the aforesaid sales limitation and all other sales limitations set
forth in Section 3.1 shall not apply to a sale of Securities by the Holders
(i) in a transaction in which a majority of the Common Stock held by
stockholders other than the Stockholder or a majority of Common Stock held
by Affiliates of the Company is being sold, (ii) in an underwritten public
offering in accordance with Section 2.2 above, (iii) in a tender offer,
merger, consolidation, reorganization, or other business combination of the
Company or (iv) to an Affiliate of the Stockholder; provided, however, that
in the case of clause (iv) the terms, conditions, and limitations on the
sale of Securities set forth in this Agreement shall continue to apply to
such transferred Securities.
(c) Any sale of Securities by a Holder must be executed
through a stock brokerage firm.
(d) Any sale of Securities by a Holder must be executed
during the regular trading hours of the Nasdaq National Market ("Nasdaq"),
or such other principal exchange or market on which the Common Stock is
trading, and must not be (i) in a transaction which would be reported on
Nasdaq, or such other exchange or market, as the opening transaction for
the applicable day or (ii) executed during the last half hour of such
regular trading hours.
(e) Any sale of Securities by a Holder, other than a
block trade or trades to Qualified Purchasers, must be at a price not lower
than the lowest current independent published bid for a share of Common
Stock, and all Securities sold by the Holders on any one day, other than in
a block trade or trades to Qualified Purchasers, must, in the aggregate, be
less than twenty-five percent (25%) of the trading volume for Common Stock
on that day.
3.2 Standstill.
(a) The Stockholder hereby agrees that the Stockholder
and its Affiliates shall neither acquire, nor enter into discussions,
negotiations, arrangements or understandings with any third party to
acquire beneficial ownership (as defined in Rule 13d-3 promulgated under
the Exchange Act) of any Voting Stock (an "VOTING STOCK ACQUISITION"), any
securities convertible into or exchangeable for Voting Stock, or any other
right to acquire Voting Stock (except, in any case, by way of dividends or
other distributions or offerings of Company securities made available to
holders of any class of Voting Stock generally) without the prior written
consent of the Company, if the effect of such Voting Stock Acquisition
would be to increase the Voting Power of all Voting Stock then beneficially
owned by the Stockholder and its Affiliates at the time of such Voting
Stock Acquisition to more than ten percent (10%) of the Total Voting Power
at the time of such Voting Stock Acquisition (the "STANDSTILL PERCENTAGE");
provided, however, that the Stockholder shall not be required to obtain the
prior written consent of the Company to engage in any Voting Stock
Acquisition (i) following the commencement of a Significant Event and (ii)
prior to the completion or termination of such Significant Event.
(b) The Stockholder will not be obligated to dispose of
any Voting Stock to the extent that the aggregate percentage of the Total
Voting Power of the Company represented by Voting Stock beneficially owned
by the Stockholder or which the Stockholder has a right to acquire is
increased beyond the Standstill Percentage (i) as a result of a
recapitalization of the Company or a repurchase or exchange of securities
by the Company or any other action taken by the Company or its Affiliates;
(ii) as a result of any tender offer, merger, consolidation or
reorganization of the Company; (iii) by way of stock dividends or other
distributions or rights or offerings made available to holders of shares of
Voting Stock generally; (iv) with the consent of a majority of the total
members of the Company's board of directors; or (v) as part of a
transaction on behalf of any defined benefit pension plan, profit sharing
Plan, 401(k) savings plan, sheltered employee retirement plan or any other
retirement plan of the Stockholder or its Affiliates (collectively, the
"RETIREMENT PLANS"), where the Company securities in such Retirement Plans
are voted by a trustee, the Stockholder or its majority owned subsidiary
for the benefit of employees or, for those Retirement Plans where
Stockholder or this Affiliate agrees not to vote any Company Voting Stock
that would otherwise cause the Standstill Percentage to be exceeded.
(c) The provisions of this Section 3.2 shall terminate
upon the second anniversary of the Effective Date of this Agreement.
3.3 Right of First Refusal.
(a) If the Stockholder intends to sell Securities with
Voting Power constituting less than five percent (5%) of the Total Voting
Power of the Company to any Person, other than a Qualified Purchaser, that
beneficially owns five percent (5%) or more of the Total Voting Power of
the Company, as indicated on a Schedule 13D or 13G filed with the SEC, in
either case in a transaction other than in (i) an underwritten public
offering in accordance with Section 2.2 above, (ii) a tender offer, merger,
reorganization or consolidation of the Company or (iii) a sale of the
Common Stock in a transaction where a majority of the Common Stock held by
stockholders other than the Holders or a majority of Common Stock held by
Affiliates of the Company is being sold, then the Stockholder shall provide
written notice thereof to the Company (the "STOCKHOLDER NOTICE") providing
the Company with the first right to acquire the Securities the Stockholder
intends to sell free and clear of all liens. The Stockholder Notice shall
specify the number of Securities involved, the name and address of the
proposed purchaser, and the proposed price per share. For a period of ten
(10) business days after delivery of the Stockholder Notice, the Company
shall be entitled to elect to purchase all, but not less than all, of the
Securities described in the Stockholder Notice, at the price per share
described in such Stockholder Notice. The Company may exercise such right
by delivery of a written notice (a "COMPANY PURCHASE ELECTION") to the
Stockholder, irrevocably electing to purchase such Securities that the
Stockholder intends to sell and shall have thirty (30) days to consummate
said purchase from the Stockholder. In the event that the Company has not
delivered a Company Purchase Election prior to the expiration of such ten
(10) day period or has failed to purchase and pay for such Securities
within said thirty (30) day period, the Company's right to purchase such
Securities shall expire, and the Stockholder shall be entitled to sell the
Securities described in the Stockholder Notice for a period of ninety (90)
days following the date of the Stockholder Notice, but only to the proposed
purchaser set forth in the Stockholder Notice and only for a purchase price
of at least ninety-five percent (95%) of the purchase price set forth in
the Stockholder Notice. In the event the Stockholder has not sold such
Securities by the end of such sixty (60) day period, the rights of the
Company set forth above in this Section 3.3 shall apply to any subsequent
sale of the Voting Stock in excess of the threshold amount by the
Stockholder. Notwithstanding the foregoing, the provisions of this Section
shall not apply to any sales or other transfers by the Stockholder to any
of its Affiliates.
(b) The provisions of this Section 3.3 shall terminate
upon the second anniversary of the Effective Date of this Agreement.
3.4 Holdback. Each Holder and the Company agrees that in the event
of an underwritten public offering of Common Stock or securities
convertible into Common Stock, such Holder and the Company shall not, for a
period beginning seven (7) days prior to the date of the final prospectus
used in connection with such offering through ninety (90) days from the
date of such final prospectus (or such longer period as required by the
managing underwriter(s) of such offering, but in no event in excess of one
hundred and eighty (180) days from the date of such prospectus), offer to
sell, sell, transfer, assign or dispose of, directly or indirectly, any
shares of Common Stock, or any securities convertible into or exercisable
for Common Stock, except as part of such underwritten public offering or
with the prior written consent of the managing underwriter(s) of such
offering; provided, however, that the foregoing restrictions shall not
apply to a transfer to any Affiliate of such Person or to any other
transferee in a private transaction not requiring registration under the
Securities Act, or to any bona fide pledge of such Registrable Securities,
provided that such Affiliate or other transferee or pleedgee acknowledges
in writing that it is bound by the provisions of this Section 3.4 and
enters into a lock-up agreement with such managing underwriter(s)
consistent therewith. If requested by the Company, each Holder shall enter
into a lock-up agreement with such managing underwriter(s) evidencing the
provisions of this Section 3.4.
3.5 Legend. Any certificates representing Securities issued to a
Holder shall contain a legend to the effect that such Securities are
subject to the transfer restrictions contained in this Agreement until such
time as such restrictions terminate with respect to such Securities.
4. SECURITIES ACT AND EXCHANGE ACT REPORTS.
4.1 The Company agrees to:
(a) Use commercially reasonable efforts to file with the
SEC in a timely manner all reports and other documents required of the
Company under the Securities Act and the Exchange Act so long as the
Company remains subject to such requirements.
(b) Make and keep public information available, as those
terms are understood and defined in Rule 144 under the Securities Act.
(c) So long as any Holder owns any Registrable
Securities, furnish to such Holder upon written request (a) a written
statement by the Company as to its compliance with the reporting
requirements of Rule 144, the Securities Act and the Exchange Act, and (b)
such other reports and documents so filed with the SEC as such Holder may
reasonably request in availing itself of any rule or regulation of the SEC
allowing such Holder to sell any such securities without registration. Upon
the request of any Holder, the Company shall take such action as is
necessary to allow transfer of Registrable Securities in accordance with
the provisions of Rule 144(k), including, without limitation, if necessary,
the issuance of new certificates for such Registrable Securities bearing a
legend restricting further transfer.
5. MISCELLANEOUS.
5.1 Successors and Assigns. The terms and conditions of this
Agreement will inure to the benefit of, and be binding upon, the respective
successors and permitted assigns of the parties; provided that nothing
herein shall be deemed to permit any assignment, transfer or other
disposition of Securities in violation of the terms of this Agreement or
the Securities. If any permitted transferee of any Holder shall acquire
Securities, in any manner, whether by operation of law or otherwise, such
Securities shall be held subject to all of the terms of this Agreement,
and, by taking and holding such Securities, such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement and such Person shall be entitled to
receive the benefits hereof.
5.2 Governing Law. This Agreement will be governed by and
construed under the internal laws of the State of Delaware, without
reference to principles of conflict of laws.
5.3 Counterparts. This Agreement may be executed in two
counterparts, each of which will be deemed an original, but all of which
together will constitute the same instrument.
5.4 Headings. The headings and captions used in this Agreement are
used for convenience of reference only and are not to be considered in
construing or interpreting this Agreement.
5.5 Notices. Any notices required, permitted or desired to be
given hereunder shall be delivered personally, via facsimile with a written
notice to be delivered pursuant to this Section 5.5, sent by overnight
courier or mailed, registered or certified mail, return-receipt requested,
to the following addresses, and shall be deemed to have been received on
the day of personal delivery, upon receipt of confirmation if by facsimile,
one business day after deposit with a nationally recognized overnight
courier or five (5) business days after deposit in the mail:
If to the Company, to:
Novadigm, Inc.
One International Blvd.
Suite 200
Mahwah, New Jersey 07495
Attention: Albion J. Fitzgerald
Attention: Robert B. Anderson
Facsimile: (201) 512-1001
with a copy to:
Katten Muchin Zavis
525 West Monroe
Suite 1600
Chicago, Illinois 60661
Attention: Mark D. Wood, Esq.
Facsimile: (312) 902-1061
If to the Stockholder, to:
Hewlett-Packard Company
3000 Hanover Street, MS 20 BQ
Palo Alto, California 94304
Attention: Charles N. Charnas, Esq.
Facsimile: (650) 857-4837
with copies to:
Hewlett-Packard Company
3000 Hanover Street, MS 20 BT
Palo Alto, California 94304
Attention: C.D. Portfolio
Facsimile: (650) 852-8442
Skadden, Arps, Slate, Meagher & Flom LLP
525 University Avenue
Suite 220
Palo Alto, California 94301
Attention: Kenton J. King, Esq.
Facsimile: (650) 470-4570
or at such other address or facsimile number as any party, including a
Holder other than the Stockholder, may specify in a written notice given to
the other party hereto.
5.6 Severability. If any provision of this Agreement is held to be
unenforceable under applicable law, such provision will be excluded from
this Agreement and the balance of the Agreement will be interpreted as if
such provision was so excluded and will be enforceable in accordance with
its terms.
5.7 Entire Agreement. This Agreement and the Alliance Agreement
and the Warrant, together with all schedules and exhibits hereto and
thereto, all other documents expressly referred to herein and therein and
all documents delivered contemporaneously herewith or therewith, constitute
the final agreement of the parties concerning the matters referred to in
those agreements and supersede all prior agreements and understandings,
including the Confidential Disclosure Agreement effective December 22, 1999
between Novadigm and HP.
5.8 Amendment. Any provision of this Agreement may be amended and
the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and the Holders of a majority of the Registrable
Securities then outstanding. Any amendment or waiver effected in accordance
with this Section shall be binding upon each Holder and the Company.
