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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
ONEWORLD SYSTEMS, INC.
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(Name of Issuer)
SERIES A CONVERTIBLE PREFERRED STOCK, $0.001 PAR VALUE PER SHARE
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(Title of Class of Securities)
682917 10 9
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(CUSIP Number)
MARC LINDEN, c/o ONEWORLD SYSTEMS, INC.
1144 E. ARQUES AVENUE, SUNNYVALE, CA 94086, (408) 523-1100
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(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
MARCH 3, 1999
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [ ].
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SCHEDULE 13D
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CUSIP NO. 682917 10 9 PAGE 2 OF 6 PAGES
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Compton Family Trust, UA dated April 19, 1996, Kevin Compton Trustee
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (A)[ ]
(B)[X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES
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7 SOLE VOTING POWER
310,000
NUMBER OF
SHARES ------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY -0-
EACH
REPORTING ------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH 310,000
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10 SHARED DISPOSITIVE POWER
-0-
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
310,000
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10%
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14 TYPE OF REPORTING PERSON
OO
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SCHEDULE 13D
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CUSIP NO. 682917 10 9 PAGE 3 OF 6 PAGES
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Kevin Compton
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)[ ]
(b)[X]
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3 SEC USE ONLY
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4 SOURCE OF FUNDS
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e) [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
UNITED STATES
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7 SOLE VOTING POWER
310,000
NUMBER OF
SHARES ------------------------------------------------------------
BENEFICIALLY 8 SHARED VOTING POWER
OWNED BY -0-
EACH
REPORTING ------------------------------------------------------------
PERSON 9 SOLE DISPOSITIVE POWER
WITH 310,000
------------------------------------------------------------
10 SHARED DISPOSITIVE POWER
-0-
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11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
310,000(A)
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
10%
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14 TYPE OF REPORTING PERSON
OO
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(A) All 310,000 shares are beneficially owned by the other reporting person
indicated in this Schedule 13D, as to which shares this reporting person
disclaims beneficial ownership.
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SCHEDULE 13D
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CUSIP NO. 682917 10 9 PAGE 4 OF 6 PAGES
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Neither the filing of this Schedule 13D nor any of its contents shall be
deemed to constitute an admission by the Compton Family Trust, UA dated April
19, 1996, Kevin Compton Trustee, and Kevin Compton that it or he are the
beneficial owners of any of the Preferred Series A Shares referred to herein
other than shares of OneWorld Systems Inc. Convertible Preferred Series A Shares
issued and outstanding and owned of record by the aforementioned persons as of
the date hereof, for purposes of Section 13(d) of the Securities and Exchange
Act of 1934, as amended (the "Act"), or for any other purpose, and such
beneficial ownership is hereby expressly disclaimed.
ITEM 1. SECURITY AND ISSUER.
This statement on Schedule 13D relates to the Series A Convertible
Preferred Stock, $0.001 par value, of OneWorld Systems, Inc., a Delaware Company
("Issuer"). The principal executive offices of Issuer are located at 1144 E.
Arques Avenue, Sunnyvale, CA 94086.
ITEM 2. IDENTITY AND BACKGROUND.
The name of the people filing this statement (the "Filing Persons") are
(1) the Compton Family Trust, UA dated April 19, 1996, Kevin Compton Trustee,
and (2) Kevin Compton. The address of the principal office of Kevin Compton is
c/o KPCB, 2730 Sand Hill Road, Suite 250, Menlo Park, CA 94025. Mr. Compton is a
member of the Board of Directors of the Issuer and a General Partner at Kleiner,
Perkins, Caufield & Byers, L.L.P. Mr. Compton is a United States citizen.
During the past five years, the Filing Persons have not been convicted
in a criminal proceeding (excluding traffic violations or similar misdemeanors)
nor, was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction as a result of which either such person was or is subject
to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activity subject to, federal or state securities laws
or a finding of any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Source of funds: Kevin Compton personal checking account
Total Paid: $1,010,429.50
ITEM 4. PURPOSE OF TRANSACTION.
This statement relates to the OneWorld Systems, Inc. Unit Purchase
Agreement dated as of March 3, 1999 (the "Agreement") whereby the Issuer created
a new class of Preferred Stock by filing a Certificate of Designation,
Preferences and Rights of Series A Convertible Preferred Stock with the State of
Delaware, and sold an aggregate of 620,000 Units, each Unit being comprised of
13 shares of Issuer Common Stock and 5 shares of Issuer Series A Convertible
Preferred Stock.
In connection with the Agreement, each of the Investors listed on
Schedule 1.2 to the Agreement (the "Investors") have each entered into an
Investor Rights Agreement with Issuer pursuant to which each Investor has been
granted certain registration rights and other rights.
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SCHEDULE 13D
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CUSIP NO. 682917 10 9 PAGE 5 OF 6 PAGES
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Additionally, Access Technology Partners, L.P., ("Access") has entered
into a Letter Agreement with the Issuer whereby Access received certain
management rights with respect to the Issuer, including the right to nominate
one person to stand for election to the Issuer's Board of Directors, which
election shall be subject to the normal shareholder voting requirements with
respect to such elections.
ITEM 5. INTEREST IN SECURITIES OF ISSUER.
Compton Family Trust, UA dated April 19, 1996, Kevin Compton Trustee is
the beneficial owner of 310,000 shares of Convertible Series A Preferred Stock,
$0.001 par value, of the Issuer. Kevin Compton as trustee has sole power to vote
or direct the vote and sole power to dispose or to direct the disposition of
such shares. The beneficiaries of the Compton Family Trust, UA dated April 19,
1996, Kevin Compton Trustee have the right to receive or direct proceeds from
any sale of such securities held by such trust.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF ISSUER.
Kevin Compton is a Director of the Issuer.
Other than as described herein, to the knowledge of the filing persons,
there are no contracts, arrangements, understandings or relationships (legal or
otherwise) among the person named in Item 2 and between such person and any
person with respect to any securities of Issuer, including but not limited to
transfer or voting of any of the securities, finder's fees, joint ventures, loan
or option arrangements, puts or calls, guarantees or profits, division of
profits or loss, or the giving or withholding of proxies.
ITEM 7. MATERIALS TO BE FILED AS EXHIBITS.
The following documents are filed as exhibits:
1. OneWorld Systems, Inc. Unit Purchase Agreement dated March 3,
1999.
2. Investors Rights Agreement dated as of March 3, 1999.
3. Letter Agreement dated as of March 3, 1999.
4. Agreement to File Jointly and Statement Appointing Designated
Filer and Authorized Signatory.
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SCHEDULE 13D
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CUSIP NO. 682917 10 9 PAGE 6 OF 6 PAGES
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: March 10, 1999
COMPTON FAMILY TRUST, UA DATED APRIL 19, 1996
KEVIN COMPTON, TRUSTEE
By: /s/ KEVIN COMPTON
----------------------------
Kevin Compton, Trustee
KEVIN COMPTON
By: /s/ KEVIN COMPTON
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ONEWORLD SYSTEMS, INC.
UNIT PURCHASE AGREEMENT
This Unit Purchase Agreement (this "AGREEMENT") is made as of March 3,
1999 by and between OneWorld Systems, Inc., a Delaware corporation (the
"COMPANY"), and the investors listed on Schedule 1.2 attached hereto (the
"INVESTORS").
SECTION 1.
AUTHORIZATION AND SALE OF COMMON STOCK AND SERIES A PREFERRED STOCK
1.1 AUTHORIZATION OF SERIES A PREFERRED AND COMMON STOCK. The Company
has authorized the sale and issuance of up to 3,100,000 shares of its Series A
Preferred Stock (the "SERIES A PREFERRED") and up to 8,060,000 shares of its
Common Stock (the "Common Stock"). The Series A Preferred has the rights,
preferences and privileges provided for in the Certificate of Designation, in
the form attached hereto as Exhibit A (the "CERTIFICATE").
1.2 SALE OF THE COMMON STOCK AND SERIES A PREFERRED. Subject to the
terms and conditions set forth herein, the Company will issue and sell to the
Investors, and each of the Investors will purchase from the Company the shares
(the "SHARES") of Common Stock and Series A Preferred set forth opposite their
respective names on Schedule 1.2. Payment for such shares shall be delivered to
the Company at the Closing (as defined below) by certified check or wire
transfer in the amount set forth beside each Investor's name on Schedule 1.2
hereto.
SECTION 2.
CLOSING DATES; DELIVERY
2.1 CLOSING DATES. The closing of the purchase and sale of the Shares
hereunder (the "CLOSING") shall be held at the offices of Wilson Sonsini
Goodrich & Rosati, counsel to the Company, at 9:00 a.m. on March 3, 1999 or at
such other time and location selected by the parties hereto (such date shall
hereinafter be referred to as the "CLOSING DATE").
2.2 DELIVERY. At the Closing, the Company will deliver to each Investor
certificates, registered in such Investor's name (or the name of its nominee),
representing the Shares to be purchased by such Investor in accordance with the
terms hereof.
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SECTION 3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth in the Schedule of Exceptions to the Company's
representations and warranties attached hereto as Schedule 3, the Company
represents and warrants to the Investors as follows:
3.1 ORGANIZATION. Each of the Company and its subsidiaries (as defined
in Rule 405 under the Securities Act of 1933, as amended (the "Securities Act"),
the "Subsidiaries"), is a corporation duly organized and validly existing in
good standing under the laws of the jurisdiction of its organization. Each of
the Company and its Subsidiaries has full power and authority to own, operate
and occupy its properties and to conduct its business as presently conducted and
is registered or qualified to do business and in good standing in each
jurisdiction in which it owns or leases property or transacts business and where
the failure to be so qualified would have a material adverse effect upon the
business, financial condition, prospects, properties or operations of the
Company and its Subsidiaries, considered as one enterprise (a "Material Adverse
Effect"), and no proceeding has been instituted in any such jurisdiction,
revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such
power and authority or qualification. The Company does not have any Subsidiaries
nor does it control, directly or indirectly, or own, directly or indirectly, any
shares of stock or any other equity interest of any corporation, partnership or
limited liability company, other than as disclosed in the Company's Annual
Report on Form 10-K ("Annual Report") or the Company's Quarterly Reports on Form
10-Q ("Quarterly Reports," and together with the Annual Report, the "Exchange
Act Reports") filed from time to time with the Securities and Exchange
Commission (the "SEC") pursuant to the Securities and Exchange Act of 1934, as
amended (the "Exchange Act") or identified on Schedule 3.1.
3.2 DUE AUTHORIZATION. The Company has all requisite power and authority
to execute, deliver and perform its obligations under this Agreement and the
Investor Rights Agreement and such agreements have been duly authorized and
validly executed and delivered by the Company and constitute legal, valid and
binding agreements of the Company enforceable against the Company in accordance
with their terms, except as rights to indemnity and contribution may be limited
by state or federal securities laws or the public policy underlying such laws,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
3.3 NON-CONTRAVENTION. Except as set forth on Schedule 3.3, the
execution and delivery of the Agreement and the Investor Rights Agreement, the
issuance and sale of the Shares to be sold by the Company under the Agreement,
the fulfillment of the terms of the Agreement and the Investor Rights Agreement
and the consummation of the transactions contemplated hereby and thereby will
not (A) conflict with or constitute a violation of, or default (with the passage
of time or otherwise)
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under, or give to others any rights of termination, amendment, acceleration or
cancellation of, (i) any material bond, debenture, note or other evidence of
indebtedness, or under any material lease, contract, indenture, mortgage, deed
of trust, loan agreement, joint venture or other agreement or instrument to
which the Company or any Subsidiary is a party or by which it or any of its
Subsidiaries or their respective properties are bound, (ii) the charter, by-laws
or other organizational documents of the Company or any Subsidiary, or (iii) any
law, administrative regulation, ordinance, judgement, injunction, or order of
any court or governmental agency, arbitration panel or authority applicable to
the Company or any Subsidiary or their respective properties, or (B) result in
the creation or imposition of any lien, encumbrance, claim, security interest or
restriction whatsoever upon any of the material properties or assets of the
Company or any Subsidiary or an acceleration of indebtedness pursuant to any
obligation, agreement or condition contained in any material bond, debenture,
note or any other evidence of indebtedness or any material indenture, mortgage,
deed of trust or any other agreement or instrument to which the Company or any
Subsidiary is a party or by which any of them is bound or to which any of the
property or assets of the Company or any Subsidiary is subject. No consent,
waiver, approval, authorization or other order of, or registration,
qualification or filing with, any regulatory body, administrative agency, or
other governmental body in the United States is required for the execution and
delivery of the Agreements and the valid issuance and sale of the Shares to be
sold pursuant to the Agreements, other than such as have been made or obtained,
and except for any securities filings required to be made under federal or state
securities laws.
3.4 CAPITALIZATION. The capitalization of the Company as of December 31,
1998 is as set forth in Schedule 3.4. The Company has not issued any capital
stock since that date other than pursuant to the Company's employee benefit
plans. The Shares to be sold pursuant to this Agreement have been duly
authorized, and when issued and paid for in accordance with the terms of the
Agreement will be duly and validly issued, fully paid and nonassessable. The
outstanding shares of capital stock of the Company have been duly and validly
issued and are fully paid and nonassessable, have been issued in compliance with
all federal and state securities laws, and were not issued in violation of any
preemptive rights or similar rights to subscribe for or purchase securities.
Except as set forth in Schedule 3.4, there are no outstanding rights (including,
without limitation, preemptive rights), warrants or options to acquire, or
instruments convertible into or exchangeable for, any unissued shares of capital
stock or other equity interest in the Company or any Subsidiary, or any
contract, commitment, agreement, understanding or arrangement of any kind to
which the Company is a party or of which the Company has knowledge and relating
to the issuance or sale of any capital stock of the Company or any Subsidiary,
any such convertible or exchangeable securities or any such rights, warrants or
options. Without limiting the foregoing, no preemptive right, co-sale right,
registration right, right of first refusal or other similar right exists with
respect to the Shares or the issuance and sale thereof. No further approval or
authorization of any stockholder, the Board of Directors of the Company or
others is required for the issuance and sale of the Shares. Except as set forth
on Schedule 3.1, the Company owns the entire equity interest in each of its
Subsidiaries, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest, other than as described in the Company
audited financial statements contained in the Company's Annual Report. Except as
contemplated hereby, there are no stockholders agreements,
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voting agreements or other similar agreements with respect to the Common Stock
to which the Company is a party or, to the knowledge of the Company, between or
among any of the Company's stockholders.
3.5 LEGAL PROCEEDINGS. There is no action, suit, notice of violation,
proceeding or investigation pending or, to the best actual knowledge of the
Company, threatened against or affecting the Company or any of its Subsidiaries
or any of their respective properties before or by any court, governmental or
administrative agency or regulatory authority (Federal, state, county, local or
foreign) which (i) relates to or challenges the legality, validity or
enforceability of the Agreement or the Investor Rights Agreement or the Shares,
(ii) could, individually or in the aggregate, have a Material Adverse Effect or
(iii) could, individually or in the aggregate, adversely impair the ability of
the Company to perform fully on a timely basis its obligations under the
Agreement or the Investor Rights Agreement.
3.6 NO VIOLATIONS. Neither the Company nor any Subsidiary, except as
listed on Schedule 3.6, is in violation of its charter, bylaws, or other
organizational document, or in violation of any law, administrative regulation,
ordinance or order of any court or governmental agency, arbitration panel or
authority applicable to the Company or any Subsidiary, which violation,
individually or in the aggregate, would be reasonably likely to have a Material
Adverse Effect, or is in default in any material respect in the performance of
any obligation, agreement or condition contained in any bond, debenture, note or
any other evidence of indebtedness in any indenture, mortgage, deed of trust or
any other agreement or instrument to which the Company or any Subsidiary is a
party or by which the Company or any Subsidiary is bound or by which the
properties of the Company or any Subsidiary are bound or affected, and there
exists no condition which, with the passage of time or otherwise, would
constitute a material default under any such document or instrument or result in
the imposition of any material penalty or the acceleration of any material
indebtedness.
3.7 GOVERNMENTAL PERMITS, ETC. Each of the Company and its Subsidiaries
has all necessary franchises, licenses, certificates and other authorizations
from any foreign, federal, state or local government or governmental agency,
department, or body that are currently necessary for the operation of the
business of the Company and its Subsidiaries as currently conducted, except
where the failure to currently possess could not reasonably be expected to have
a Material Adverse Effect on the Company.
3.8 INTELLECTUAL PROPERTY. Subject to the matters discussed under "Risk
Factors" in the Company's Exchange Act Reports, (i) each of the Company and its
Subsidiaries owns or possesses sufficient rights to use all material patents,
patent rights, trademarks, copyrights, licenses, inventions, trade secrets,
trade names and know-how (collectively, "Intellectual Property") that are
necessary for the conduct of its business as now conducted, except where the
failure to currently own or possess would not have a Material Adverse Effect on
the Company, (ii) neither the Company nor any of its Subsidiaries has received
any notice of, or has any knowledge of, any infringement of or conflict with
asserted rights of the Company or any of its Subsidiaries by others with respect
to any
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Intellectual Property, except as would not have a Material Adverse Effect on the
Company, (iii) neither the Company nor any of its Subsidiaries has received any
notice of, or has any knowledge of, any infringement of or conflict with
asserted rights of a third party with respect to any Intellectual Property that,
individually or in the aggregate, would have a Material Adverse Effect on the
Company. None of the Company's trademarks, trade names, service marks, service
mark registrations, service names, patents, patent rights, copyrights,
inventions, licenses, approvals, government authorizations, trade secrets or
other intellectual property rights have expired or terminated, or are expected
to expire or terminate within two years from the date of this Agreement.
3.9 FINANCIAL STATEMENTS. The financial statements of the Company and
the related notes contained in the Company's Exchange Act Reports comply as to
form in all material respects with all applicable accounting requirements and
the published rules and regulations of the Commission with respect thereto, and
present fairly, in accordance with generally accepted accounting principles, the
financial position of the Company and its Subsidiaries as of the dates
indicated, and the results of its operations and cash flows for the periods
therein specified. Such financial statements (including the related notes) have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods therein specified, except
that the unaudited financial statements contained in the Company's Quarterly
Reports do not contain all of the notes required pursuant to generally accepted
accounting principals.
3.10 NO MATERIAL ADVERSE EFFECT. Except as disclosed in Schedule 3.10 or
otherwise disclosed, since December 31, 1998, there has not been any event or
occurrence which has caused or resulted in a Material Adverse Effect, including,
without limitation, (i) the incurrence of any obligation, direct or contingent,
that is material to the Company and its Subsidiaries considered as one
enterprise, except obligations incurred in the ordinary course of business, (ii)
any dividend or distribution of any kind declared, paid or made on the capital
stock of the Company or any of its Subsidiaries, (iii) any loss or damage
(whether or not insured) to the physical property of the Company or any of its
Subsidiaries, (iv) any amendment to the Company's charter or by-laws, (v) any
sale of a material asset of the Company or any of its Subsidiaries, (vi) any
capital expenditure of the Company or any of its Subsidiaries in excess of
$50,000, or (vii) any agreement, approval, commitment or authorization to do any
of the foregoing, except as contemplated herein.
3.11 DISCLOSURE. The Company has fully provided each Investor with all
information requested by such Investor in deciding whether to purchase the
Shares. Such information provided, as of the date of such information and on the
date hereof, did not and does not contain an untrue statement of a material
fact, or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that the Company makes
no representation or warranty with respect to any forward-looking statements
made within such information provided.
3.12 FOREIGN CORRUPT PRACTICES. Neither the Company nor any of its
Subsidiaries, nor, to the knowledge of the Company or any Subsidiary, any agent
or other person acting on behalf of the Company or any of its Subsidiaries, have
(i) directly or indirectly, used any corporate funds for
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unlawful contributions, gifts, entertainment or other unlawful expenses related
to foreign or domestic political activity; (ii) made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns from corporate funds; (iii) failed to disclose
fully any contribution made by the Company or made by any person acting on its
behalf and of which the Company is aware in violation of law; (iv) violated in
any material respect any provision of the Foreign Corrupt Practices Act of 1977,
as amended; or (v) made any unlawful bribe, rebate, payoff, influence, kick-back
or other unlawful payment.
3.13 NO MANIPULATION OF STOCK. The Company has not taken and will not
take, any action designed to or that might reasonably be expected to cause or
result in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares.
3.14 ACCOUNTING CONTROLS. The Company and each of its Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurances that (i) transactions are executed in accordance with
management's general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain accountability for
assets, (iii) access to assets is permitted only in accordance with management's
general or specific authorization, and (iv) the recorded accountability for
assets is compared with existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.
3.15 COMPLIANCE WITH FLORIDA STATUTES. The Company has complied with all
provisions of Florida Statutes Section 517.075, and the regulations thereunder,
relating to doing business with the Government of Cuba or with any person or
affiliate located in Cuba.
3.16 REPORTING STATUS. The Company has filed in a timely manner all
documents that the Company was required to file under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), including documents filed pursuant
to Section 13(a) or 15(d) thereof, during the 12 months preceding the date of
this Agreement (the foregoing materials being collectively referred to herein as
the "SEC Documents"). The SEC Documents complied in all material respects with
the SEC's requirements as of their respective filing dates, and the information
contained therein as of the date thereof did not contain an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein in light of the circumstances under
where they were made not misleading:
3.17 LISTING. The Company shall comply with all requirements of the
National Association of Securities Dealers, Inc. with respect to the issuance of
the Shares and the listing thereof.
3.18 YEAR 2000 COMPLIANCE. The information set forth in the Company's
Exchange Act Reports with respect to the Company's efforts regarding Year 2000
matters (i) conforms in all material respects to the guidelines set forth in SEC
Release No. 33-7558 and (ii) accurately describes the status of the Company's
efforts regarding Year 2000 matters. To the Company's knowledge, the
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costs associated with ensuring that the Company is Year 2000 compliant will not
have a Material Adverse Effect on the Company.
3.19 CERTAIN FEES. No fees or commissions will be payable by the Company
to any broker, finder, investment banker or bank with respect to the
consummation of the transactions contemplated hereby. The Company has taken no
action that would require any Investor to pay any such fee or commission.
3.20 PRIVATE OFFERING. Neither the Company nor any person acting on its
behalf has taken or will take any action (including, without limitation, any
offering of any securities of the Company under circumstances which would
require the integration of such offering with the offering of the Shares or the
shares of Common Stock issuable upon conversion of the Series A Preferred (the
"Underlying Shares") under the Securities Act) which might subject the offering,
issuance or sale of the Shares or the Underlying Shares to the registration
requirements of Section 5 of the Securities Act.
3.21 SENIORITY. No class of equity securities of the Company is senior
to the Series A Preferred in right of payment, whether upon liquidation,
dissolution or otherwise.
3.22 REAL PROPERTY HOLDING COMPANY. The Company is not a real property
holding company within the meaning of Section 897 of the Internal Revenue code
of 1986, as amended.
3.23 TITLE. The Company and its Subsidiaries have good and marketable
title in fee simple to all real property owned by them and good and marketable
title to all personal property owned by them which is material to the business
of the Company and its Subsidiaries, in each case free and clear of all liens,
encumbrances and defects except such as do not materially affect the value of
such property and do not interfere with the use made and proposed to be made of
such property by the Company or any of its Subsidiaries. Any real property and
facilities held under lease by the Company or any of its Subsidiaries are held
by them under valid, subsisting and enforceable leases with such exceptions as
are not material and do not interfere with the use made and proposed to be made
of such property and buildings by the Company and its Subsidiaries.
SECTION 4.
REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
Each Investor hereby severally represents and warrants to the Company
with respect to the purchase of the Shares as follows:
4.1 EXPERIENCE. It has substantial experience in evaluating and
investing in private placement transactions of securities in companies similar
to the Company so that it is capable of evaluating the merits and risks of its
investment in the Company and has the capacity to protect its own interests.
Investor is an "accredited investor" as defined in Regulation 501(a) of
Regulation D promulgated under the Securities Act of 1933, as amended (the
"Securities Act").
-7-
<PAGE> 14
4.2 INVESTMENT. It is acquiring the Shares for investment for its own
account, not as a nominee or agent, and not with the view to, or for resale in
connection with, any distribution thereof. It understands that the Shares have
not been, and will not be when issued, registered under the Securities Act by
reason of a specific exemption from the registration provisions of the
Securities Act, the availability of which depends upon, among other things, the
bona fide nature of the investment intent and the accuracy of the
representations as expressed herein.
4.3 RULE 144. It acknowledges that the Shares must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption
from such registration is available. It is aware of the provisions of Rule 144
promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, which may include, among other things, the existence of a public
market for the shares, the availability of certain current public information
about the Company, the resale occurring not less than one year after a party has
purchased and paid for the security to be sold, the sale being effected through
a "broker's transaction" or in transactions directly with a "market maker" and
the number of shares being sold during any three-month period not exceeding
specified limitations.
4.4 NO PUBLIC MARKET. It understands that no public market now exists
for the Shares, and that a market may never exist for the Shares.
4.5 ACCESS TO DATA. Its officers and agents, to the extent that they
desired, have had an opportunity to discuss the Company's management, business
plan and financial condition with the Company's management. It understands that
a purchase of the Shares involves a high degree of risk, and there can be no
assurance the Company's business objectives will be obtained.
4.6 AUTHORIZATION. This Agreement and the Investors' Rights Agreement,
when executed and delivered by the Investors, will constitute a valid and
legally binding obligation of each such Investor, enforceable in accordance with
its terms, except as rights to indemnity and contribution may be limited by
state or federal securities laws or the public policy underlying such laws,
except as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law).
4.7 AUTHORITY. It has all requisite legal power and authority to enter
into this Agreement and the Investors' Rights Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Investors' Rights Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary action on the part of it. The execution and delivery of this Agreement
and the Investors Rights Agreement do not, and the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default (with or without notice or lapse of time, or both),
under any provision of the organization documents of such Investor.
-8-
<PAGE> 15
4.8 NO CONFLICTS. The execution, delivery and performance of this
Agreement by such Investor will not breach, cause a default under or otherwise
conflict with or give rise to any acceleration or termination of the charter
documents of such Investor or any material contract or agreement to which such
Investor is a party.
4.9 BROKER'S AND FINDERS' FEES. It has not incurred, and will not incur,
directly or indirectly, any liability for brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated hereby.
4.10 NOT ACTING IN CONCERT. Notwithstanding the fact that immediately
after the Closing, the Investors will hold an aggregate of 64% of the voting
power of the Company on a fully-diluted basis, and the fact that certain of the
Investors are affiliated entities as indicated by the three numbered groupings
of Investors contained in Schedule 1.2 hereto, such Investor is not acting in
concert with any other Investor, or group of Investors, whether affiliated or
otherwise, for the purpose of gaining control over the direction of the Company.
SECTION 5.
CONDITIONS TO CLOSING OF THE INVESTORS
The Investors' obligations to purchase the Shares at the Closing are, at
the option of the Investors, subject to the fulfillment of the following
conditions:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Company in Section 3 hereof shall be true and correct in
all material respects as of the Closing Date and the Company shall have
performed all obligations and conditions required to be performed or observed by
it on or prior to the Closing Date and all documents incident thereto shall be
satisfactory in form and content to the Investors and special counsel to the
Investors.
5.2 OFFICER'S CERTIFICATE. The Company shall have delivered to each
Investor a certificate or certificates, executed by an authorized officer of the
Company, dated the Closing Date, certifying to the fulfillment of the conditions
specified in Section 5.1.
5.3 INVESTOR RIGHTS AGREEMENT. The Company and the Investors shall have
executed and delivered the Investor Rights Agreement substantially in the form
attached hereto as Exhibit B.
5.4 FEES AND EXPENSES. The Company shall pay the fees and expenses of
one counsel to Investors reasonably incurred; provided, however, that under no
circumstances shall such amount exceed $10,000 in the aggregate.
5.5 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all documents
and instruments incident to such transactions shall have been reasonably
approved by special counsel to the Investors, and the
-9-
<PAGE> 16
Investors and its special counsel shall have received all such counterpart
originals or certified or other copies of such documents as they may reasonably
request.
5.6 COMPLIANCE WITH LAWS. The offer and purchase and sale of Shares to
the Investors hereunder shall be legally permitted by all laws and regulations
to which the Company or the Investors are subject.
5.7 LEGAL OPINION. Each Investor shall have received from Wilson Sonsini
Goodrich & Rosati, P.C., counsel to the Company, an opinion, dated as of the
Closing, in the form attached hereto as Exhibit A.
SECTION 6.
CONDITIONS TO CLOSING OF COMPANY
The Company's obligation to sell and issue the Shares at the Closing
Date is, at the option of the Company, subject to the fulfillment as of the
Closing Date of the following conditions:
6.1 REPRESENTATIONS AND COVENANTS. The representations made by the
Investors in Section 4 hereof shall be true and correct when made, and shall be
true and correct on the Closing Date and the Investors shall have performed all
obligations and conditions required to be performed or observed by it on or
prior to the Closing Date and all documents incident thereto shall be
satisfactory in form and content to the Company.
SECTION 7.
COVENANTS
7. REGISTRATION OF THE SHARES; COMPLIANCE WITH THE SECURITIES ACT; SHAREHOLDER
APPROVAL; LISTING.
7.1 REGISTRATION PROCEDURES AND EXPENSES. The Company shall:
(a) subject to receipt of necessary information from the
Investors, prepare and file with the SEC, within sixty (60) days after the
Closing Date, a registration statement (the "Registration Statement") to enable
the resale of the Common Stock purchased hereby by the Investors from time to
time through the automated quotation system of the Nasdaq National Market or
NASD Over the Counter (OTC) Bulletin Board system as applicable, or in
privately-negotiated transactions;
(b) use its reasonable efforts, subject to receipt of
necessary information from the Investors, to cause the Registration Statement to
become effective within 90 days after the Registration Statement is filed by the
Company;
-10-
<PAGE> 17
(c) in each case upon providing written notice thereof to
each Investor at least five (5) days prior thereto, prepare and file with the
SEC such amendments and supplements to the Registration Statement and the
prospectus used in connection therewith (the "Prospectus") as may be necessary
to keep the Registration Statement current and effective for a period not
exceeding, with respect to each Investor's Shares purchased hereunder, the
earlier of (i) the date on which the Investor may sell all Shares then held by
the Investor in accordance with the provisions of Rule 144 of the Securities Act
during any three (3)-month period, or (ii) such time as all Shares purchased by
such Investor in this offering have been sold;
(d) furnish to the Investor with respect to the Shares
registered under the Registration Statement such number of copies of the
Registration Statement, Prospectuses and Preliminary Prospectuses in conformity
with the requirements of the Securities Act and such other documents as the
Investor may reasonably request, in order to facilitate the public sale or other
disposition of all or any of the Shares by the Investor; provided, however, that
the obligation of the Company to deliver copies of Prospectuses or Preliminary
Prospectuses to the Investor shall be subject to the receipt by the Company of
reasonable assurances from the Investor that the Investor will comply with the
applicable provisions of the Securities Act and of such other securities or blue
sky laws as may be applicable in connection with any use of such Prospectuses or
Preliminary Prospectuses;
(e) file documents required of the Company for normal blue
sky clearance in states specified in writing by the Investor, provided, however,
that the Company shall not be required to qualify to do business or consent to
service of process in any jurisdiction in which it is not now so qualified or
has not so consented;
(f) bear all expenses in connection with the procedures in
paragraph (a) through (e) of this Section 7.1 and the registration of the Shares
pursuant to the Registration Statement; and
(g) advise the Investors, promptly after it shall receive
notice or obtain knowledge of the issuance of any stop order by the SEC delaying
or suspending the effectiveness of the Registration Statement or of the
initiation or threat of any proceeding for that purpose; and it will promptly
use its reasonable efforts to prevent the issuance of any stop order or to
obtain its withdrawal at the earliest possible moment if such stop order should
be issued.
7.2 TRANSFER OF SHARES AFTER REGISTRATION; SUSPENSION.
(a) The Investor agrees that it will not effect any
disposition of the Shares or its right to purchase the Shares that would
constitute a sale within the meaning of the Securities Act except as
contemplated in the Registration Statement referred to in Section 7.1 and as
described below, and that it will promptly notify the Company of any changes in
the information set forth in the Registration Statement regarding the Investor
or its plan of distribution.
-11-
<PAGE> 18
(b) If any Investor (or any permitted transferee) shall
propose to sell any Shares pursuant to the Registration Statement, it shall
notify Company of its intent to do so at least three (3) full business days
prior to such sale. Such notice shall be deemed to constitute a representation
that any information previously supplied by such Investor or transferee is
accurate as of the date of such notice. At any time within such three (3)
business-day period, the Company may refuse to permit the Investor or transferee
to resell any Shares pursuant to the Registration Statement; provided, however,
that the Company in each case shall use its best reasonable efforts to respond
as rapidly as possible; and provided, however, that in order to exercise this
right, the Company must deliver a certificate in writing to the requesting party
to the effect that a delay in such sale is necessary because a sale pursuant to
such Registration Statement in its then-current form would not be, in the
reasonable judgment of the Company, in the best interests of the Company and its
stockholders. In no event shall such delay exceed thirty (30) calendar days with
respect to any single exercise of the Company's rights hereunder, and provided
further, however, that in no event shall the Company be permitted to exercise
this right more than three times or for more than an aggregate of sixty (60)
calendar days in any single calendar year. In addition, the Company agrees to
use its reasonable best efforts to resolve whatever condition or conditions have
occasioned any such delay on its part, and will promptly end such delay upon
resolution of such condition or conditions.
(c) Provided that a suspension is not then in effect the
Investor may sell Shares under the Registration Statement, provided that it
arranges for delivery of a current Prospectus to the transferee of such Shares.
Upon receipt of a request therefor, the Company has agreed to provide an
adequate number of current Prospectuses to the Investor and to supply copies to
any other parties requiring such Prospectuses.
7.3 INDEMNIFICATION. For the purpose of this Section 7.3:
(i) the term "Selling Stockholder" shall include the
Investor and any affiliate of such Investor;
(ii) the term "Registration Statement" shall include
any final Prospectus, exhibit, supplement or amendment included in or relating
to the Registration Statement (or any of the securities offered thereunder)
referred to in Section 7.1; and
(iii) the term "untrue statement" shall include any
untrue statement or alleged untrue statement, or any omission or alleged
omission to state in the Registration Statement a material fact required to be
stated therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(a) The Company agrees to indemnify and hold harmless each
Selling Stockholder from and against any losses, claims, damages or liabilities
to which such Selling Stockholder may become subject (under the Securities Act
or otherwise) insofar as such losses, claims, damages or liabilities (or actions
or proceedings in respect thereof) arise out of, or are based upon (i) any
untrue statement or alleged untrue statement of a material fact contained in the
Registration Statement, or (ii) any omission or alleged omission to state
therein a material fact
-12-
<PAGE> 19
required to be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the company of the
Securities Act, the Exchange Act, any state securities laws or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any state
securities laws, (iv) any failure by the Company to fulfill any undertaking
included in the Registration Statement, and the Company will reimburse such
Selling Stockholder for any reasonable legal or other expenses reasonably
incurred in connection with investigating, defending or preparing to defend any
such action, proceeding or claim, provided, however, that the Company shall not
be liable in any such case to the extent that such loss, claim, damage or
liability arises out of, or is based upon, an untrue statement made in such
Registration Statement in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Selling Stockholder
specifically for use in preparation of the Registration Statement or the failure
of such Selling Stockholder to comply with its covenants and agreements
contained in 7.2 hereof respecting sale of the Shares or any statement or
omission in any Prospectus that is corrected in any subsequent Prospectus that
was delivered to the Investor prior to the pertinent sale or sales by the
Investor.
(b) The Investor agrees to indemnify and hold harmless the
Company (and each person, if any, who controls the Company within the meaning of
Section 15 of the Securities Act, each officer of the Company who signs the
Registration Statement and each director of the Company) from and against any
losses, claims, damages or liabilities, joint or several, to which the Company
(or any such officer, director or controlling person) may become subject (under
the Securities Act or otherwise), insofar as such losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) arise out of, or are
based upon, (i) any failure to comply with the covenants and agreements
contained in Section 7.2 hereof respecting sale of the Shares, or (ii) any
untrue statement of a material fact contained in the Registration Statement if
such untrue statement was made in reliance upon and in conformity with written
information furnished by or on behalf of the Investor specifically for use in
preparation of the Registration Statement, and the Investor will reimburse the
Company (or such officer, director or controlling person), as the case may be,
for any legal or other expenses reasonably incurred in investigating, defending
or preparing to defend any such action, proceeding or claim; provided that in no
event shall any indemnity under this Subsection 7.3(b) exceed the net proceeds
from the offering received by the Selling Stockholder.
(c) Promptly after receipt by any indemnified person of a
notice of a claim or the beginning of any action in respect of which indemnity
is to be sought against an indemnifying person pursuant to this Section 7.3,
such indemnified person shall notify the indemnifying person in writing of such
claim or of the commencement of such action, but the omission to so notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party under this Section 7.3 (except to the extent that such
omission materially and adversely affects the indemnifying party's ability to
defend such action) or from any liability otherwise than under this Section 7.3.
Subject to the provisions hereinafter stated, in case any such action shall be
brought against an indemnified person, the indemnifying person shall be entitled
to participate therein, and, to the extent that it shall elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid notice
from such indemnified party, shall be entitled to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified person. After notice
from the
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<PAGE> 20
indemnifying person to such indemnified person of its election to assume the
defense thereof, such indemnifying person shall not be liable to such
indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof, provided, however,
that if there exists or shall exist a conflict of interest that would make it
inappropriate, in the opinion of counsel to the indemnified person, for the same
counsel to represent both the indemnified person and such indemnifying person or
any affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided,
however, that unless another such specific conflict of interest between
indemnified parties requires otherwise, no indemnifying person shall be
responsible for the fees and expenses of more than one separate counsel
(together with appropriate local counsel) for all indemnified parties. In no
event shall any indemnifying person be liable in respect of any amounts paid in
settlement of any action unless the indemnifying person shall have approved the
terms of such settlement; provided that such consent shall not be unreasonably
withheld. No indemnifying person shall, without the prior written consent of the
indemnified person, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified person is or could have been a
party and indemnification could have been sought hereunder by such indemnified
person, unless such settlement includes an unconditional release of such
indemnified person from all liability on claims that are the subject matter of
such proceeding.
(d) If the indemnification provided for in this Section
7.3 is unavailable to or insufficient to hold harmless an indemnified party
under subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Company on the one hand and the Investors
on the other in connection with the statements or omissions or other matters
which resulted in such losses, claims, damages or liabilities (or actions in
respect thereof), as well as any other relevant equitable considerations. The
relative fault shall be determined by reference to, among other things, in the
case of an untrue statement, whether the untrue statement relates to information
supplied by the Company on the one hand or an Investor on the other and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement. The Company and the Investors agree
that it would not be just and equitable if contribution pursuant to this
subsection (d) were determined by pro rata allocation (even if the Investors
were treated as one entity for such purpose) or by any other method of
allocation which does not take into account the equitable considerations
referred to above in this subsection (d). The amount paid or payable by an
indemnified party as a result of the losses, claims, damages or liabilities (or
actions in respect thereof) referred to above in this subsection (d) shall be
deemed to include any legal or other expenses reasonably incurred by such
indemnified party in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this subsection (d), no Investor
shall be required to contribute any amount in excess of the amount by which the
net amount received by the Investor from the sale of the Shares to which such
loss relates exceeds the amount of any damages which such Investor has otherwise
been required to pay by reason of such untrue statement. No person guilty of
fraudulent misrepresentation (within the
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<PAGE> 21
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 Investors' obligations in this subsection to contribute
are several in proportion to their sales of Shares to which such loss relates
and not joint.
(e) The parties to this Agreement hereby acknowledge that
they are sophisticated business persons who were represented by counsel during
the negotiations regarding the provisions hereof including, without limitation,
the provisions of this Section 7.3, and are fully informed regarding said
provisions. They further acknowledge that the provisions of this Section 7.3
fairly allocate the risks in light of the ability of the parties to investigate
the Company and its business in order to assure that adequate disclosure is made
in the Registration Statement as required by the Securities Act and the Exchange
Act. The parties are advised that federal or state public policy as interpreted
by the courts in certain jurisdictions may be contrary to certain of the
provisions of this Section 7.3, and the parties hereto hereby expressly waive
and relinquish any right or ability to assert such public policy as a defense to
a claim under this Section 7.3 and further agree not to attempt to assert any
such defense.
7.4 TERMINATION OF CONDITIONS AND OBLIGATIONS. The conditions precedent
imposed by this Section 7 upon the transferability of the Shares shall cease and
terminate as to any particular number of the Shares when such Shares shall have
been effectively registered under the Securities Act and sold or otherwise
disposed of in accordance with the intended method of disposition set forth in
the Registration Statement covering such Shares or at such time as an opinion of
counsel satisfactory to the Company shall have been rendered to the effect that
such conditions are not necessary in order to comply with the Securities Act.
7.5 SHAREHOLDER APPROVAl. The Company shall use its reasonable best
efforts to seek shareholder approval for an increase in the authorized number of
shares of Common Stock or a reverse stock split, and to reserve sufficient
shares of Common Stock, to enable the Company to perform it conversion
obligations with respect to the Shares. Upon such action, the Company shall use
its reasonable best efforts to ensure that the Underlying Shares when issued in
accordance with the Certificate of Incorporation shall be duly authorized,
validly issued, fully paid and nonassessable and free and clear of all liens.
7.6 LISTING. Promptly following the Closing, the Company shall use its
best reasonable efforts to cause all of the outstanding shares of the Common
Stock of the Company and the Underlying Shares to be approved for listing in the
Nasdaq National Market or SmallCap Market, as the case may be, and shall provide
to the Investors evidence of such listing when approved and shall use its best
reasonable efforts to maintain the listing of its Common Stock on such exchange.
-15-
<PAGE> 22
SECTION 8.
MISCELLANEOUS
8.1 FURTHER ASSURANCES. The parties hereto shall take all such actions,
and shall execute and deliver all such documents and instruments, as may be
reasonably requested by the other to carry out the purposes and intent of the
provisions of this Agreement.
8.2 GOVERNING LAW. Except as set forth below, this Agreement shall be
governed by and construed in accordance with the laws of the State of
California.
8.3 ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement shall be settled by binding arbitration to be held in San Jose,
California. Such arbitration shall be in accordance with the rules of the
American Arbitration Association, and judgment upon the award may be entered in
any court of competent jurisdiction. The prevailing party or parties in such
arbitration and any ensuing legal action shall be reimbursed by the party or
parties who do not prevail for their reasonable attorneys', accountants' and
experts' fees and the costs of such actions.
8.4 AMENDMENT. Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated other than by a written instrument
signed by each of the parties hereto.
8.5 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be effective upon receipt and
my be delivered in person, by telecopy, express delivery service or U.S. mail,
in which event it may be mailed by first-class, registered or certified mail,
postage prepaid, addressed to:
if to the Company to:
OneWorld Systems, Inc.
1144 E. Arques Avenue
Sunnyvale, California 94086
Attn: Neil Selvin
Fax: (408)523-2019
with a copy to:
Alan K. Austin
Wilson Sonsini Goodrich & Rosati,
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
Fax: (650) 493-6811
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<PAGE> 23
if to the Investors:
to the address listed on Schedule 8.5 attached hereto
with a copy to:
Patrick Pohlen
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, California 94306-2155
Fax: (650) 857-0663
8.6 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to either party upon any breach or default of such
other party under this Agreement, shall impair any such right, power or remedy
of such party nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of either party or any waiver on the part of either party of any
provisions or conditions of this Agreement, must be in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement, or by law or otherwise afforded to either
party, shall be cumulative and not alternative.
8.7 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue full force and effect
without said provision.
8.8 TITLES AND SUBTITLES. The titles of the paragraphs and subparagraphs
of this Agreement are used for convenience only and are not considered in
construing or interpreting this Agreement.
8.9 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
8.10 COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be enforceable against the party actually
executing such counterpart, and all of which together shall constitute one
instrument.
8.11 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.
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<PAGE> 24
8.12 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.
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<PAGE> 25
The foregoing Unit Stock Purchase Agreement is hereby executed as of the
date set forth above.
ONEWORLD SYSTEMS, INC.
By:
--------------------------------
Title:
--------------------------------
INVESTORS:
ACCESS TECHNOLOGY PARTNERS
BROKERS FUND, L.P.
By: H&Q VENTURE MANAGEMENT, L.L.C.
Its: General Partner
By:
--------------------------------
Its:
--------------------------------
ACCESS TECHNOLOGY PARTNERS, L.P.
By: ACCESS TECHNOLOGY MANAGEMENT, L.L.C.
Its: General Partner
By: H&Q VENTURE MANAGEMENT, L.L.C.
Its: Managing Member
By:
--------------------------------
Its:
--------------------------------
[SIGNATURE PAGE TO THE UNIT PURCHASE AGREEMENT]
<PAGE> 26
HAMBRECHT & QUIST CALIFORNIA
By:
-------------------------------------
Its:
-------------------------------------
HAMBRECHT & QUIST EMPLOYEE VENTURE FUND, L.P. II
By: H&Q VENTURE MANAGEMENT, L.L.C
Its: General Partner
By:
--------------------------------------
Its:
--------------------------------------
DANIEL H. CASE III
By:
-------------------------------------
DELAWARE CHARTER GUARANTEE & TRUST
COMPANY, CUSTODIAN FOR DANIEL H. CASE
By:
-------------------------------------
Name:
-------------------------------------
STEPHEN M. CASE
By:
-------------------------------------
[SIGNATURE PAGE TO THE UNIT PURCHASE AGREEMENT]
<PAGE> 27
DAVID GOLDEN
By:
-------------------------------------
MARK ZANOLI
By:
-------------------------------------
[SIGNATURE PAGE TO THE UNIT PURCHASE AGREEMENT]
<PAGE> 28
INTEGRAL CAPITAL PARTNERS IV, L.P.
By: INTEGRAL CAPITAL MANAGEMENT IV, LLC
Its: General Partner
By:
-------------------------------------
Pamela K. Hagenah
A Manager
INTEGRAL CAPITAL PARTNERS IV MS SIDE FUND, L.P.
By: ICP MS MANAGEMENT, LLC
Its: General Partner
By:
-------------------------------------
Pamela K. Hagenah
A Manager
[SIGNATURE PAGE TO THE UNIT PURCHASE AGREEMENT]
<PAGE> 29
COMPTON FAMILY TRUST, APRIL 19, 1996
By:
---------------------------------------
Its:
---------------------------------------
[SIGNATURE PAGE TO THE UNIT PURCHASE AGREEMENT]
<PAGE> 30
SCHEDULE 1.2
INVESTORS
<TABLE>
<CAPTION>
NO. OF SERIES A NO. OF
PREFERRED COMMON
SHARES SHARES AGGREGATE
PURCHASER PURCHASED PURCHASED PURCHASE PRICE
- --------- --------------- --------- --------------
<S> <C> <C> <C>
1. Hambrecht & Quist Affiliates
Hambrecht & Quist California 136,010 353,626 $ 443,317.79
Hambrecht & Quist Employee Venture Fund, L.P. II 52,315 136,019 $ 170,518.13
Access Technology Partners, L.P. 1,102,050 2,865,330 $3,592,076.87
Access Technology Partners Brokers Fund, L.P. 12,205 31,733 $ 39,781.59
Daniel H. Case III 23,595 61,347 $ 76,906.72
Mark Zanoli 3,550 9,230 $ 11,571.05
David Golden 2,360 6,136 $ 7,692.30
2. Integral Capital Partners Affiliates
Integral Capital Partners IV, L.P. 1,388,275 3,609,515 $4,525,012.95
Integral Capital Partners IV MS Side Fund, L.P. 6,725 17,485 $ 21,919.80
3. Unaffiliated Individuals
Compton Family Trust, April 19, 1996 310,000 806,000 $1,010,429.50
Stephen M. Case 47,185 122,681 $ 153,797.15
Delaware Charter Guarantee & Trust Company,
Custodian for Daniel H. Case IRA Rollover 15,730 40,898 $ 51,271.15
</TABLE>
<PAGE> 31
SCHEDULE 3
SCHEDULES OF EXCEPTIONS TO THE COMPANY'S
REPRESENTATIONS AND WARRANTIES
The disclosures set forth in this disclosure schedule are numbered to
the first or principal section of the OneWorld Systems, Inc. Unit Purchase
Agreement (the "PURCHASE Agreement") to which they apply. While the Company has
attempted to indicate the appropriate sections to which these disclosures apply,
each disclosure made shall qualify each representation and warranty of the
Company set forth in the Purchase Agreement to which such disclosure applies.
<PAGE> 32
SCHEDULE 3.1
ORGANIZATION AND SUBSIDIARIES OF THE COMPANY
AS OF DECEMBER 31, 1998
<TABLE>
<S> <C>
OneWorld Systems, Inc. 17,184,293 share publicly issued and outstanding
FaxWorks Solutions, Inc. 100% Common Stock owned by OneWorld Systems, Inc.
(FKA SofNet, Inc.)
GVIL Holding Corporation 100% (100 shares) Common Stock owned by OneWorld Systems,
Inc. 100% (1,000 shares) Preferred Stock owned by
FaxWorks Solutions, Inc.
Global Village Communication UK, Ltd. 100% Ordinary Shares owned by GVIL Holding Corporation
(FKA KNX, Ltd.)
OneWorld Systems, FSC 100% Common Stock owned by OneWorld Systems, Inc.
Global Village Communication Europe B.V. 100% Common Stock owned by OneWorld Systems, Inc.
Global Village Communication E.U.R.L. 100% Common Stock owned by OneWorld Systems, Inc.
</TABLE>
<PAGE> 33
SCHEDULE 3.3
CONFLICTS OF THE COMPANY
The Company has issued a Common Stock Purchase Warrant (the "Warrant"),
dated as of June 18, 1998, to Boca Research, Inc. ("Boca") in connection with a
sale of the assets of the Company's former modem business to Boca as of the same
date. Copies of the Warrant have been provided to counsel for the Investors. The
Warrant gives Boca the right to purchase an aggregate of 425,000 shares of
Common Stock at the applicable exercise price as stated therein, and provides
for, among other things, demand and piggy-back registration rights to Boca with
respect to the shares underlying the Warrant. These rights potentially conflict
with those granted to the Investors herein and under the Investor Rights
Agreement, most notably in that the Warrant grants Boca priority over all other
holders of the Company's equity securities in cases of an underwriter cutback on
a piggyback registration, and provides demand rights that can not be
piggy-backed on by other holders of the Company's equity securities without the
permission of Boca. The Warrant also requires the Company to provide notice to
Boca 20 days prior to a proposed securities issuance, such as the sale of the
Units pursuant to this Agreement.
The Company has provided Boca with the required notice, and asked for a
written waiver from Boca as to the 20-day requirement. The Company has also
asked Boca to amend the Warrant so as to resolve the conflicts disclosed above
between the terms of the Warrant and the terms of this Agreement and the
Investor Rights Agreement. The Company has not received a formal response to
these requests thus far. The Company agrees to use reasonable efforts to obtain
the written waiver as to the 20-day requirement and to amend the warrant so as
to resolve the conflict in registration rights.
<PAGE> 34
SCHEDULE 3.4
CAPITALIZATION OF THE COMPANY
AS OF DECEMBER 31, 1998
<TABLE>
<S> <C> <C>
1) Common Stock
Authorized 30,000,000 Shares
Issued and Outstanding (17,432,325)
Subject to employee stock options granted (4,069,579)
Subject to nonemployee director stock options (100,000)
granted
Subject to employee stock purchase plan 1999 (30,000)
purchases
Reserved for warrant (425,000)
Held as treasury stock 248,032
-----------
Total stock available for issue 8,191,128 Shares
===========
2) Preferred Stock
Authorized 5,000,000 Shares
Issued and outstanding None
Reserved for option None
-----------
Total stock available for issue 5,000,000 Shares
===========
</TABLE>
The Company has issued a Common Stock Purchase Warrant (the "Warrant"),
dated as of June 18, 1998, to Boca Research, Inc. ("Boca") in connection with a
sale of the assets of the Company's former modem business to Boca as of the same
date. Copies of the Warrant have been provided to counsel for the Investors. The
Warrant gives Boca the right to purchase an aggregate of 425,000 shares of
Common Stock at the applicable exercise price as stated therein, and provides
for, among other things, demand and piggy-back registration rights to Boca with
respect to the shares underlying the Warrant. These rights potentially conflict
with those granted to the Investors herein and under the Investor Rights
Agreement, most notably in that the Warrant grants Boca priority over all other
holders of the Company's equity securities in cases of an underwriter cutback on
a piggyback registration, and provides demand rights that can not be
piggy-backed on by other holders of the Company's equity securities without the
permission of Boca. The Warrant also requires the Company to provide notice to
Boca 20 days prior to a proposed securities issuance, such as the sale of the
Units pursuant to this Agreement.
The Company has provided Boca with the required notice, and asked for a
written waiver from Boca as to the 20-day requirement. The Company has also
asked Boca to amend the Warrant so as to resolve the conflicts disclosed above
between the terms of the Warrant and the terms of this Agreement and the
Investor Rights Agreement. The Company has not received a formal response to
these requests thus far.
<PAGE> 35
SCHEDULE 3.4 (CONT'D.)
The Company has also entered into a Purchase Agreement dated as of
October 3, 1997 by and between the Company and the Trustees of the KNX Pension
Scheme (the "Pension Scheme"), pursuant to which the Company issued 142,392
shares of Common Stock (the "Pension Scheme Shares") to the Pension Scheme in
satisfaction of certain existing indebtedness of the Company. Pursuant to this
agreement, the Company was required to register the Pension Scheme Shares under
the Securities Act on an S-3 Registration Statement, and did so on January 26,
1998. The Company is required by the agreement to keep such registration
statement effective until the earlier of the sale of all Pension Scheme Shares
by the Pension Scheme pursuant to the registration statement or October 3, 1999.
As of March 3, 1999, counsel to the Company received notice from Brown Brothers
Harriman & Co., brokers for the Pension Scheme, that the Pension Scheme intends
to sell all of the Pension Scheme Shares pursuant to the S-3 Registration
Statement referenced above in the near future.
<PAGE> 36
SCHEDULE 3.6
COMPANY VIOLATIONS
The Company has been notified by Nasdaq that it does not meet certain
requirements for continued listing on the Nasdaq National Market(R), and has
been delisted effective at the close of market on February 24, 1999.
The Company has issued a Common Stock Purchase Warrant (the "Warrant"),
dated as of June 18, 1998, to Boca Research, Inc. ("Boca") in connection with a
sale of the assets of the Company's former modem business to Boca as of the same
date. Copies of the Warrant have been provided to counsel for the Investors. The
Warrant gives Boca the right to purchase an aggregate of 425,000 shares of
Common Stock at the applicable exercise price as stated therein, and provides
for, among other things, demand and piggy-back registration rights to Boca with
respect to the shares underlying the Warrant. These rights potentially conflict
with those granted to the Investors herein and under the Investor Rights
Agreement, most notably in that the Warrant grants Boca priority over all other
holders of the Company's equity securities in cases of an underwriter cutback on
a piggyback registration, and provides demand rights that can not be
piggy-backed on by other holders of the Company's equity securities without the
permission of Boca. The Warrant also requires the Company to provide notice to
Boca 20 days prior to a proposed securities issuance, such as the sale of the
Units pursuant to this Agreement.
The Company has provided Boca with the required notice, and asked for a
written waiver from Boca as to the 20-day requirement. The Company has also
asked Boca to amend the Warrant so as to resolve the conflicts disclosed above
between the terms of the Warrant and the terms of this Agreement and the
Investor Rights Agreement. The Company has not received a formal response to
these requests thus far.
<PAGE> 37
SCHEDULE 3.10
MATERIAL ADVERSE CHANGES
As is disclosed more fully on Schedule 3.6 hereto, the Company was
delisted by Nasdaq effective February 24, 1999.
<PAGE> 38
SCHEDULE 8.5
INVESTOR ADDRESSES
Hambrecht & Quist California
One Bush Street
San Francisco, CA 94104
Attn: Jeff Fulcher
Access Technology Partners, L.P.
c/o Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Attn: Carol Wong
Access Technology Partners Brokers Fund, L.P.
c/o Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Attn: Jeff Fulcher
H & Q Employee Venture Fund II
c/o Hambrecht & Quist
One Bush Street
<PAGE> 39
San Francisco, CA 94104
Attn: Jeff Fulcher
Daniel H. Case III
c/o Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Delaware Charter Guarantee & Trust Company
Custodian for Daniel H. Case
IRA Rollover
2030 Ahualani Place
Honolulu, HI 96822
Stephen M. Case
1207 Alps Drive
Mclean, VA 22102
Mark Zanoli
c/o Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
<PAGE> 40
David Golden
c/o Hambrecht & Quist
One Bush Street
San Francisco, CA 94104
Kevin Compton
14950 Gypsy Hill Road
Saratoga, CA 95070
Integral Capital Partners IV, L.P.
2750 Sand Hill Road
Menlo Park, CA 94025
Attn: Pamela Hagenah
Integral Capital Partners IV MS Side Fund, L.P.
2750 Sand Hill Road
Menlo Park, CA 94025
Attn: Pamela Hagenah
<PAGE> 41
ONEWORLD SYSTEMS, INC.
-----------------
UNIT PURCHASE AGREEMENT
-----------------
March 3, 1999
<PAGE> 42
ONEWORLD SYSTEMS, INC.
INVESTOR RIGHTS AGREEMENT
March 3, 1999
<PAGE> 43
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
1. RIGHTS OF INVESTORS......................................................................1
2. REGISTRATION RIGHTS......................................................................1
2.1 Definitions.......................................................................1
2.2 Requested Registration............................................................3
2.3 Expenses of Registration..........................................................5
2.4 Obligations of the Company........................................................5
2.5 Furnish Information...............................................................7
2.6 Delay of Registration.............................................................7
2.7 Indemnification...................................................................7
2.8 Transfer of Shares After Registration............................................10
2.9 Rule 144 Reporting...............................................................11
2.10 Assignment of Registration Rights................................................11
2.11 Termination of Registration Rights...............................................11
3. LEGENDS.................................................................................12
4. MISCELLANEOUS...........................................................................12
4.1 Successors and Assigns...........................................................12
4.2 Governing Law....................................................................12
4.3 Counterparts.....................................................................12
4.4 Titles and Subtitles.............................................................12
4.5 Stock Splits, etc................................................................12
4.6 Notices..........................................................................12
4.7 Attorneys' Fees..................................................................13
4.8 Amendments and Waivers...........................................................13
4.9 Severability.....................................................................13
4.10 Entire Agreement.................................................................13
4.11 Further Assurances...............................................................13
</TABLE>
Schedule A - Investors
-i-
<PAGE> 44
ONEWORLD SYSTEMS, INC.
INVESTOR RIGHTS AGREEMENT
This Investor Rights Agreement (the "AGREEMENT") is made and entered into
as of March 3, 1999 by and among OneWorld Systems, Inc., a Delaware corporation
(the "COMPANY"), and the persons listed on Schedule A attached hereto (the
"INVESTORS").
RECITALS
WHEREAS, the Company desires for the Investors to purchase shares of the
Company's Common Stock and Series A Preferred Stock pursuant to a Unit Purchase
Agreement of even date herewith (the "PURCHASE AGREEMENT"); and
WHEREAS, as an inducement for the Investors to enter into the Purchase
Agreement, the Company and the Investors desire to enter into this Agreement.
1. RIGHTS OF INVESTORS.
The Company hereby grants to the Investors the registration rights
(collectively the "INVESTOR RIGHTS") contained herein. The Investors accept the
Investor Rights, as applicable, and agree to be bound by the obligations
contained herein.
2. REGISTRATION RIGHTS.
2.1 DEFINITIONS.
(a) Exchange Act. The term "EXCHANGE ACT" means the Securities
Exchange Act of 1934, as amended.
(b) Form S-1. The term "FORM S-1" 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.
(c) Form S-3. The term "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 which permits
inclusion or incorporation of substantial information by reference to other
documents filed by the Company with the SEC.
(d) Holder. For purposes of this Section 2, the term "HOLDER"
means any person owning of record Registrable Securities that have not been sold
to the public or pursuant to Rule 144 promulgated under the Securities Act or
any assignee of record of such Registrable
<PAGE> 45
Securities to whom rights under this Section 2 have been duly assigned in
accordance with this Agreement (including Section 2.10 hereof).
(e) Initiating Holder. The term "INITIATING HOLDER" shall mean
any Holder or Holders who in the aggregate are Holders of not less than a
majority of the then outstanding Registrable Securities which have not been sold
to the public.
(f) Preferred Stock. The term "PREFERRED STOCK" shall mean the
Series A Preferred Stock of the Company.
(g) Registrable Securities. The term "REGISTRABLE SECURITIES"
means: (1) all shares of Series A Preferred Stock and Common Stock issued and
outstanding as of March 12, 2001, (2) all shares of Common Stock issued or
issuable pursuant to the conversion of Series A Preferred Stock, and (3) any
shares of the Common Stock of the Company or other securities issued in
connection with any stock split, stock dividend, recapitalization or similar
event relating to the foregoing; excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which rights under
this Section 2 are not assigned in accordance with this Agreement or any
Registrable Securities sold to the public or sold pursuant to Rule 144
promulgated under the Securities Act.
(h) Registration. The terms "REGISTER," "REGISTERED," and
"REGISTRATION" refer to a registration effected by preparing and filing a
registration statement on Form S-1 or Form S-3 in compliance with the Securities
Act, and the declaration or ordering of effectiveness of such registration
statement.
(i) Registration Expenses. "REGISTRATION EXPENSES" shall mean all
expenses incurred by the Company in complying with Section 2.2 hereof,
including, without limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel and accountants for the Company,
fees and expenses of one counsel for all the Holders, blue sky fees and expenses
and the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the
Company, which shall be paid in any event by the Company).
(j) SEC. The term "SEC" or "COMMISSION" means the U.S. Securities
and Exchange Commission.
(k) Selling Expenses. "SELLING EXPENSES" shall mean all
underwriting discounts and selling commissions applicable to the sale of
Registrable Securities.
-2-
<PAGE> 46
2.2 REQUESTED REGISTRATION.
(a) Request for Registration by Initiating Holders. If the
Company shall receive from Initiating Holders, at any time after the date sixty
(60) calendar days from the date hereof, a written request that the Company
effect any registration with respect to all or a part of that portion of the
Registrable Securities which consists of Common Stock, or alternately, at any
time after the date two (2) calendar years from the date hereof, a written
request that the Company effect any registration with respect to all or part of
that portion of the Registrable Securities which consists of Series A Preferred
Stock and/or Common Stock, the Company will:
(i)promptly give written notice of the proposed
registration, qualification or compliance to all other Holders of Registrable
Securities; and
(ii) as soon as practicable, use its best efforts to effect
such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws and appropriate compliance
with applicable regulations issued under the Securities Act) 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 of the same class as those which are the
subject of the request and are specified in a written request received by the
Company within 15 days after written notice from the Company is given under
Section 2.2(a)(i) above; provided, however, that the Company shall not be
obligated to effect, or take any action to effect, any such registration
pursuant to this Section 2.2(a):
(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 or applicable rules or regulations thereunder; or
(B) With respect to that portion of the Registrable
Securities which consists of shares of Common Stock, after the Company has
effected one such registration of shares of Common Stock pursuant to Section 2.2
and such registration has been declared or ordered effective and the sale of
such Registrable Securities shall have closed; and with respect to that portion
of the Registrable Securities which consists of shares of Series A Preferred
Stock, after the Company has effected one such registration of shares of Series
A Preferred Stock pursuant to Section 2.2 and such registration has been
declared or ordered effective and the sale of such Registrable Securities shall
have closed.
The registration statement filed pursuant to the request of the Initiating
Holders may, subject to the provisions of Section 2.2(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 and
-3-
<PAGE> 47
such other holders shall have no absolute right to include any of its securities
in any such registration.
(b) Underwriting; Request by Initiating Holders. 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 2.2(a) and the Company shall
include such information in the written notice referred to in Section 2.2(a). In
such event, the right of any Holder to include such Holder's Registrable
Securities in such registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the Company as provided in Section
2.4(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a majority in
interest of the Initiating Holders and reasonably acceptable to the Company.
Notwithstanding any other provision of Section 2.2, if the underwriter advises
the Company and the Initiating Holders in writing that marketing factors require
a limitation of the number of shares to be underwritten, then the Company shall
so advise all Holders of Registrable Securities which would otherwise be
underwritten pursuant hereto, and the number of shares of Registrable Securities
that may be included in the underwriting shall be allocated among all Holders
thereof, including the Initiating Holders, in such proportion (as nearly as
practicable) among the Holders pro rata based on the amount of Registrable
Securities owned by each Holder.
(c) Notwithstanding the foregoing, if the Company shall furnish
to the Holders requesting the filing of a registration statement pursuant to
Section 2.2(a), a certificate signed by the President or Chief Executive Officer
of the Company stating that a delay in the filing of the registration statement
is necessary because in the reasonable judgment of the Company, it would not be
in the best interest of the Company and its stockholders for such registration
statement to be filed. In no event shall such delay exceed thirty (30) calendar
days with respect to any single exercise of the Company's rights hereunder, and
provided further, however, that in no event shall Company be permitted to
exercise this right more than three times or for more than an aggregate of sixty
(60) calendar days in any single calendar year. In addition, the Company agrees
to use its reasonable best efforts to resolve whatever condition or conditions
have occasioned any such delay on its part, and will promptly end such delay
upon resolution of such condition or conditions.
(d) Notwithstanding the foregoing, in the event that the Company
shall prepare and file with the SEC a registration statement covering securities
to be distributed on its own behalf (including, but not limited to, registration
statements relating to secondary offerings of securities of the Company, but
excluding any registration statement relating to any employee benefit plan or a
corporate reorganization, a "Company Registration"), and such registration
statement shall become effective, then during the period of effectiveness of
such Company Registration, the Company shall have no obligation to prepare,
file, or keep effective any registration statement with respect to Registrable
Securities of the Holders; however, such obligations of the Company with
-4-
<PAGE> 48
respect to the Holders as are contained elsewhere in this Section 2 shall arise
again immediately upon the end of the effectiveness of any Company Registration,
and if necessary, at such time the Company shall prepare, file and keep
effective a registration statement with respect to any Registrable Securities of
the Holders for which a previously effective registration statement was
preempted by a Company Registration.
(e) In the event that because of a planned Company Registration,
pursuant to Section 2.2(d) the Company will fail to maintain the effectiveness
of an effective registration statement previously filed with the SEC to register
Registrable Securities of the Holders pursuant to a request by the Initiating
Holders under this Section 2.2, the Company shall notify all Holders in writing
at least 30 days prior to such Company Registration, and will afford each such
Holder an opportunity to include in such Company Registration all or any part of
the Registrable Securities then held by such Holder. Each Holder desiring to
include in any such Company Registration all or any part of the Registrable
Securities held by such Holder shall, within 15 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 Company Registration. If a Company
Registration as which the Company gives notice under this Section 2.2(e) is for
an underwritten offering, then the Company shall so advise the Holders. In such
event, the right of any such Holder's Registrable Securities to be included in
the Company Registration 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 Registrable Securities through such underwriting shall enter
into an underwriting agreement in customary form with the managing underwriter
or underwriter(s) selected for such underwriting. Notwithstanding any other
provision of this Agreement, if the managing underwriter(s) determine(s) in good
faith that marketing factors require a limitation of the number of shares to be
underwritten, then the managing underwriter(s) may exclude shares (including
Registrable Securities) from the registration and the underwriting, and the
number of shares that may be included in the registration and the underwriting
shall be allocated, first, to the Company, and second, to each of the Holders of
Registrable Securities requesting inclusion of their Registrable Securities in
such registration statement, to be allocated among all Holders thereof pro rata
based on the amount of Registrable Securities of the Company owned by each
Holder. Any Registrable Securities excluded or withdrawn from such underwriting
shall be excluded and withdrawn from the Company Registration.
2.3 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with one demand registration (pursuant to Section 2.2) 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.
2.4 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities under this Agreement, the Company
shall, as expeditiously as reasonably possible:
-5-
<PAGE> 49
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and keep such registration statement
effective until the distribution is completed, subject to any termination or
suspension of the Holders' registration rights as provided elsewhere herein.
(b) Prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and all amendments and supplements thereto, and such other
documents as they may reasonably request in order to facilitate the disposition
of the Registrable Securities owned by them that are included in such
registration.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions,
unless the Company is already subject to service in such jurisdiction and except
as may be required by the Securities Act or applicable rules or regulations
thereunder.
(e) In the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the 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 and, following such notification, promptly deliver to each Holder
copies of all amendments or supplements referred to in paragraphs (b) and (c) of
this Section 2.4.
(g) Furnish, at the request of any Holder registering Registrable
Securities, on the date that such Registrable Securities are delivered to the
underwriters for sale, if such securities are being sold through underwriters,
(i) an opinion, dated as of such date, of the counsel representing the Company
for the purposes of such registration, in form and substance as is customarily
given to underwriters in an underwritten public offering addressed to the
underwriters, if
-6-
<PAGE> 50
any, and if there are no underwriters, to the Holders requesting registration of
Registrable Securities; provided, however that the requesting Holder and the
Company shall each bear one half of the reasonable fees and expenses of counsel
in generating such opinion, and (ii) a "comfort" letter dated as of such date,
from the independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants to
underwriters in an underwritten public offering and reasonably satisfactory to a
majority in interest of the Holders requesting registration, addressed to the
underwriters; provided, however that the requesting Holder and the Company shall
each bear one half of the reasonable fees and expenses of the Company's
independent certified public accountants in generating such letter.
2.5 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to Sections 2.2 that the
selling Holders shall furnish to the Company such information regarding
themselves, the Registrable Securities held by them, and the intended method of
disposition of such securities as shall be required to timely effect the
registration of Registrable Securities.
2.6 DELAY OF REGISTRATION. No Holder shall have any right to obtain
or seek an injunction restraining or otherwise delaying any such registration as
the result of any controversy that might arise with respect to the
interpretation or implementation of this Section 2.
2.7 INDEMNIFICATION.
(a) For the purpose of this Section 2.7:
(i)the term "registration statement" shall include any final
prospectus, exhibit, supplement or amendment included in or relating to the
registration statement (or any of the securities offered thereunder) referred to
in Section 2.2 and
(ii) the term "untrue statement" shall include any untrue
statement or alleged untrue statement, or any omission or alleged omission to
state in the registration statement a material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(b) The Company agrees to indemnify and hold harmless each Holder
(or any partner, officer or director of such Holder, and any person who controls
such Holder within the meaning of the Securities Act or the Exchange Act) from
and against any losses, claims, damages or liabilities, joint or several, to
which such person may become subject (under the Securities Act or otherwise)
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon (i) any untrue
statement or alleged untrue statement of a material fact, or any omission to
state or alleged omission to state a material fact contained in the registration
statement, (ii) any violation or alleged violation by the Company of the
Securities Act, the Exchange Act, any state securities law or any rule or
regulation promulgated thereunder in connection with the offering covered by the
registration statement, or (iii) any failure by the
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<PAGE> 51
Company to fulfill any undertaking included in the registration statement, and
the Company will reimburse such person for any reasonable legal or other
expenses reasonably incurred in investigating, defending or preparing to defend
any such action, proceeding or claim, or preparing to defend any such action,
proceeding or claim, provided, however, that the Company shall not be liable in
any such case to the extent that such loss, claim, damage or liability arises
out of, or is based upon, an untrue statement or alleged untrue statement, or
any omission to state or alleged omission to state a material fact made in such
registration statement in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Holder specifically
for use in preparation of the registration statement or the failure of such
Holder to comply with its covenants and agreements contained in 2.8 hereof
respecting sale of the Registrable Securities or any statement or omission in
any Prospectus that is corrected in any subsequent Prospectus that was delivered
to the Holder prior to the pertinent sale or sales by the Holder.
(c) Each Holder agrees to indemnify and hold harmless the Company
(and each person, if any, who controls the Company within the meaning of Section
15 of the Securities Act, each officer of the Company who signs the registration
statement and each director of the Company) from and against any losses, claims,
damages or liabilities to which the Company (or any such officer, director or
controlling person) may become subject (under the Securities Act or otherwise),
insofar as such losses, claims, damages or liabilities (or actions or
proceedings in respect thereof) arise out of, or are based upon, (i) any failure
to comply with the covenants and agreements contained in Section 2.8 hereof
respecting sale of the Registrable Securities, or (ii) any untrue statement or
alleged untrue statement of a material fact, or any omission to state or alleged
omission to state a material fact contained in the registration statement if
such untrue statement or alleged untrue statement, or any omission to state or
alleged omission to state a material fact was made in reliance upon and in
conformity with written information furnished by or on behalf of such Holder the
Investor specifically for use in preparation of the registration statement, and
such Holder will reimburse the Company (or such officer, director or controlling
person), as the case may be, for any legal or other expenses reasonably incurred
in connection with investigating, defending or preparing to defend any such
action, proceeding or claim; provided, however, that the indemnity agreement
contained in this Section 2.7(c) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement is
effected without the consent of such Holder, which consent shall not be
unreasonably withheld; provided, further, that in no event shall the liability
of any Holder under this Section 2.7 exceed the proceeds from the offering
actually received by such Holder.
(d) Promptly after receipt by any indemnified person of a notice
of a claim or the beginning of any action in respect of which indemnity is to be
sought against an indemnifying person pursuant to this Section 2.7, such
indemnified person shall notify the indemnifying person in writing of such claim
or of the commencement of such action, but the omission to so notify the
indemnifying party will not relieve it from any liability which it may have to
any indemnified party under this Section 2.7 (except to the extent that such
omission materially and adversely affects the indemnifying party's ability to
defend such action) or from any liability otherwise than under this Section 7.3.
Subject to the provisions hereinafter stated, in case any such action shall be
brought
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against an indemnified person, the indemnifying person shall be entitled to
participate therein, and, to the extent that it shall elect by written notice
delivered to the indemnified party promptly after receiving the aforesaid notice
from such indemnified party, shall be entitled to assume the defense thereof,
with counsel reasonably satisfactory to such indemnified person. After notice
from the indemnifying person to such indemnified person of its election to
assume the defense thereof, such indemnifying person shall not be liable to such
indemnified person for any legal expenses subsequently incurred by such
indemnified person in connection with the defense thereof, provided, however,
that if there exists or shall exist a conflict of interest that would make it
inappropriate, in the opinion of counsel to the indemnified person, for the same
counsel to represent both the indemnified person and such indemnifying person or
any affiliate or associate thereof, the indemnified person shall be entitled to
retain its own counsel at the expense of such indemnifying person; provided,
however, that unless an additional specific conflict of interest between two
indemnified parties otherwise requires, no indemnifying person shall be
responsible for the fees and expenses of more than one separate counsel
(together with appropriate local counsel) for all indemnified parties. In no
event shall any indemnifying person be liable in respect of any amounts paid in
settlement of any action unless the indemnifying person shall have approved the
terms of such settlement; provided that such consent shall not be unreasonably
withheld. No indemnifying person shall, without the prior written consent of the
indemnified person, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified person is or could have been a
party and indemnification could have been sought hereunder by such indemnified
person, unless such settlement includes an unconditional release of such
indemnified person from all liability on claims that are the subject matter of
such proceeding.
(e) If the indemnification provided for in this Section 2.7 is
unavailable to or insufficient to hold harmless an indemnified party under
subsection (a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) referred to therein,
then each indemnifying party shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (or actions in respect thereof) in such proportion as is appropriate
to reflect the relative fault of the Company on the one hand and the Holders on
the other in connection with the statements or omissions or other matters which
resulted in such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The relative
fault shall be determined by reference to, among other things, in the case of an
untrue statement, whether the untrue statement relates to information supplied
by the Company on the one hand or Holder on the other and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such untrue statement. The Company and the Holders agree that it would not be
just and equitable if contribution pursuant to this subsection (d) were
determined by pro rata allocation (even if the Holders were treated as one
entity for such purpose) or by any other method of allocation which does not
take into account the equitable considerations referred to above in this
subsection (d). The amount paid or payable by an indemnified party as a result
of the losses, claims, damages or liabilities (or actions in respect thereof)
referred to above in this subsection (d) shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Holder
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<PAGE> 53
shall be required to contribute any amount in excess of the amount by which the
net amount received by such Holder from the sale of the Registrable Securities
to which such loss relates exceeds the amount of any damages which such Holder
has otherwise been required to pay by reason of such untrue statement. 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 Holders' obligations in
this subsection to contribute are several in proportion to their sales of
Registrable Securities to which such loss relates and not joint.
(f) The parties to this Agreement hereby acknowledge that they
are sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 2.7, and are fully informed regarding said
provisions. They further acknowledge that the provisions of this Section 2.7
fairly allocate the risks in light of the ability of the parties to investigate
the Company and its business in order to assure that adequate disclosure is made
in the registration statement as required by the Securities Act and the Exchange
Act. The parties are advised that federal or state public policy as interpreted
by the courts in certain jurisdictions may be contrary to certain of the
provisions of this Section 2.7, and the parties hereto hereby expressly waive
and relinquish any right or ability to assert such public policy as a defense to
a claim under this Section 2.7 and further agree not to attempt to assert any
such defense.
2.8 TRANSFER OF SHARES AFTER REGISTRATION.
(a) RESTRICTIONS ON TRANSFER. No Holder may make any sale of any
Restricted Shares except either (i) in accordance with the Registration
Statement, in which case Holder must comply with the requirement of delivering a
current prospectus, or (ii) in accordance with Rule 144. Such Restricted Shares
are not transferable on the books of the Company unless the certificate
submitted to the Company's transfer agent evidencing such Shares is accompanied
by a separate certificate executed by an officer of, or other person duly
authorized by, the Holder for purposes of establishing compliance with this
Agreement. Such certificate shall be in such form as shall be supplied by the
Company.
(b) NOTICE OF PROPOSED SALE; RIGHT OF COMPANY TO SUSPEND USE OF
REGISTRATION STATEMENT. If any Holder shall propose to sell any Registrable
Securities pursuant to the Registration Statement, it shall notify Company of
its intent to do so at least three (3) full business days prior to such sale.
Such notice shall be deemed to constitute a representation that any information
previously supplied by such Holder is accurate as of the date of such notice. At
any time within such three (3) business-day period, Company may refuse to permit
the Holder to resell any Registrable Securities pursuant to the Registration
Statement; provided, however, that the Company in each case shall use its best
reasonable efforts to respond as rapidly as possible; and provided, however,
that in order to exercise this right, Company must deliver a certificate in
writing to the Holder to the effect that a delay in such sale is necessary
because a sale pursuant to such Registration Statement in its then-current form
would not be in the best interests of Company and its
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<PAGE> 54
shareholders. In no event shall such delay exceed thirty (30) calendar days with
respect to any single exercise of the Company's rights hereunder, and provided
further, however, that in no event shall Company be permitted to exercise this
right more than three times or for more than an aggregate of sixty (60) calendar
days in any single calendar year. In addition, the Company agrees to use its
reasonable best efforts to resolve whatever condition or conditions have
occasioned any such delay on its part, and will promptly end such delay upon
resolution of such condition or conditions.
2.9 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 Registrable 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:
(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 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; and
(c) So long as a Holder owns any Registrable Securities, to
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of Rule 144 and of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents of the
Company as a Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Holder to sell any such securities
without registration.
2.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights of a Holder under
this Section 2 may be assigned by any Holder in connection with any transfer or
assignment by a Holder of Registrable Securities provided that: (i) such
transfer may otherwise be effected in accordance with applicable securities
laws, (ii) such transfer is effected in compliance with the restrictions on
transfer contained in the Agreement and in any other agreement between the
Company and the Holder, (iii) such assignee or transferee either holds
subsequent to such transfer not less than one hundred thousand (100,000) shares
of Registrable Securities (treating the outstanding Series A Preferred Stock on
an as-converted basis) or is a subsidiary, wholly-owned entity, successor
entity, parent, member or stockholder of a Holder, and (iv) such other party
agrees in writing with the Company to be bound by all of the provisions of this
Section 2.
2.11 TERMINATION OF REGISTRATION RIGHTS. The registration rights
granted pursuant to Section 2 will terminate as to any Holder upon the earlier
to occur of (a) such time as a Holder can sell all of its remaining Registrable
Securities under Rule 144 of the Securities Act
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<PAGE> 55
during any three (3)-month period, or (b) such time as all Registrable
Securities purchased by such Holder pursuant to the Purchase Agreement have been
sold.
3. LEGENDS.
Each Investor understands that the share certificates evidencing any
Registrable Securities shall be endorsed with the following legends (in addition
to any legends required under applicable state securities laws):
(a) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED."
(b) Any legend required to be place thereon by any other
applicable state securities laws.
4. MISCELLANEOUS.
4.1 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and permitted transferees and
permitted assigns of the parties.
4.2 GOVERNING LAW. This Agreement shall be governed in all respects
by the laws of the State of California as applied to contracts made and to be
performed entirely within that state between residents of that state.
4.3 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one instrument.
4.4 TITLES AND SUBTITLES. The titles of the paragraphs and
subparagraphs of this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.
4.5 STOCK SPLITS, ETC. All share numbers used in this Agreement are
subject to adjustment in the case of any stock split, reverse stock split,
combination or similar events.
4.6 NOTICES. Any notice required or permitted to be given to a party
pursuant to the provisions of this Agreement will be in writing and will be
effective and or (i) the date of delivery by facsimile, or (ii) the business day
after deposit with a nationally-recognized courier or overnight service,
including Express Mail, for United States deliveries or (iii) five (5) business
days
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<PAGE> 56
after deposit in the United States mail by registered or certified mail for
United States deliveries. All notices not delivered personally or by facsimile
will be sent with postage and other charges prepaid and properly addressed to
the party to be notified at the address set forth below such party's signature
on this Agreement or at such other address as such party may designate by ten
(10) days advance written notice to the other parties hereto. All notices for
delivery outside the United States will be sent by facsimile, or by nationally
recognized courier or overnight service. Any notice given hereunder to more than
one person will be deemed to have been given, for purposes of counting time
periods hereunder, on the date given to the last party required to be given such
notice. Notices to the Company will be marked to the attention of the Chief
Financial Officer.
4.7 ATTORNEYS' FEES. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
4.8 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 party against whom enforcement of such amendment
or waiver is sought; provided, however that with respect to any Investor, the
consent of the holders of more than 50% of the Registrable Securities shall be
sufficient to bind any and all Investors; and provided, further, that where the
amendment or waiver affects a right or creates an obligation that is specific to
a party named herein (whether an individual, trust, partnership or corporation),
the amendment or waiver of such right or creation of such obligation shall
require the consent of such party.
4.9 SEVERABILITY. If any provision of this Agreement is held to be
unenforceable under applicable law, then such provision shall be excluded from
this Agreement and the balance of the Agreement shall be interpreted as if such
provision was so excluded and shall be enforceable in accordance with its terms.
4.10 ENTIRE AGREEMENT. This Agreement, together with all Exhibits
hereto, constitute the full and entire understanding and agreement between the
parties with respect to the subject matter hereof and supersedes all prior
negotiations, correspondence, agreements, understandings, duties or obligations
among the parties with respect to the subject matter hereof.
4.11 FURTHER ASSURANCES. From and after the date of this Agreement,
upon the request of a party, the other parties shall execute and deliver such
instruments, documents or other writings as may be reasonably necessary or
desirable to confirm and carry out and to effectuate fully the intent and
purposes of this Agreement.
[Remainder of Page Intentionally Left Blank]
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<PAGE> 57
IN WITNESS WHEREOF, the parties hereto have executed this Investor Rights
Agreement as of the date first above written.
ONEWORLD SYSTEMS, INC.
By:_________________________________
Title:______________________________
INVESTORS:
ACCESS TECHNOLOGY PARTNERS
BROKERS FUND, L.P.
By: H&Q VENTURE MANAGEMENT, L.L.C.
Its: General Partner
By:________________________________________
Its:_______________________________________
ACCESS TECHNOLOGY PARTNERS, L.P.
By: ACCESS TECHNOLOGY MANAGEMENT, L.L.C.
Its: General Partner
By: H&Q VENTURE MANAGEMENT, L.L.C.
Its: Managing Member
By:________________________________________
Its:_______________________________________
[SIGNATURE PAGE TO THE INVESTOR RIGHTS AGREEMENT]
<PAGE> 58
HAMBRECHT & QUIST CALIFORNIA
By:________________________________________
Its:_______________________________________
HAMBRECHT & QUIST EMPLOYEE VENTURE FUND, L.P. II
By: H&Q VENTURE MANAGEMENT, L.L.C
Its: General Partner
By:________________________________________
Its:_______________________________________
DANIEL H. CASE III
By:________________________________________
DELAWARE CHARTER GUARANTEE & TRUST
COMPANY, CUSTODIAN FOR DANIEL H. CASE
By:________________________________________
Its:_______________________________________
STEPHEN M. CASE
By:________________________________________
[SIGNATURE PAGE TO THE INVESTOR RIGHTS AGREEMENT]
<PAGE> 59
DAVID GOLDEN
By:________________________________________
MARK ZANOLI
By:________________________________________
[SIGNATURE PAGE TO THE INVESTOR RIGHTS AGREEMENT]
<PAGE> 60
INTEGRAL CAPITAL PARTNERS IV, L.P.
By: INTEGRAL CAPITAL MANAGEMENT IV, LLC
Its: General Partner
By:_______________________________
Pamela K. Hagenah
A Manager
INTEGRAL CAPITAL PARTNERS IV MS SIDE FUND, L.P.
By: ICP MS MANAGEMENT, LLC
Its: General Partner
By:_______________________________
Pamela K. Hagenah
A Manager
[SIGNATURE PAGE TO THE INVESTOR RIGHTS AGREEMENT]
<PAGE> 61
COMPTON FAMILY TRUST, APRIL 19, 1996
By: ________________________________________
Its: _______________________________________
[SIGNATURE PAGE TO THE INVESTOR RIGHTS AGREEMENT]
<PAGE> 62
SCHEDULE A
INVESTORS
Hambrecht & Quist California
Hambrecht & Quist Employee Venture Fund, L.P. II
Access Technology Partners, L.P.
Access Technology Partners Brokers Fund, L.P.
Daniel H. Case III
Delaware Charter Guarantee & Trust Company, Custodian for
Daniel H. Case IRA Rollover
Stephen M. Case
Mark Zanoli
David Golden
Integral Capital Partners IV, L.P.
Integral Capital Partners IV MS Side Fund, L.P.
Compton Family Trust, April 19, 1996
<PAGE> 63
OneWorld Systems, Inc.
1144 East Arques Avenue
Sunnyvale, California 94086
March 3, 1999
Access Technology Partners, L.P.
c/o Hambrecht & Quist LLC
One Bush Street
San Francisco, CA 94104
Attn: Mr. Charles Walker
RE: MANAGEMENT RIGHTS
Dear Mr Walker:
This letter will confirm our agreement that pursuant to the purchase by
Access Technology Partners, L.P. ("Investor") of an aggregate of 13,885,830
shares of Common Stock or Common Stock issuable upon conversion of shares of
Series A Preferred Stock (the "Shares") of OneWorld Systems, Inc. (the
"Company"), the Investor shall have the right to nominate one (1) person to
stand for election to the Company's Board of Directors, whose election shall be
subject to the normal shareholder voting requirements with respect to such
elections. In the event that the Investor elects not to nominate one such member
of the Company's Board of Directors, or in the event that such nominee is not
elected to the Board of Directors, the Investor will be entitled to the
following contractual management rights, in addition to rights to certain
non-public financial information, inspection rights, and other rights
specifically provided to all investors in the current financing:
(1) Investor shall be entitled to consult with and advise management of
the Company on significant business issues, including management's
proposed annual operating plans, and management will meet with
Investor regularly during each year at the Company's facilities at
mutually agreeable times for such consultation and advice and to
review progress in achieving said plans;
(2) Investor 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;
(3) The Company shall invite a representative of Investor to attend all
meetings of its Board of Directors in a nonvoting observer capacity,
and, in this respect, shall give such representative copies of all
notices, minutes, consents, and other material that it provides to
its directors; provided, however, that the
<PAGE> 64
Access Technology Partners, L.P.
March 3, 1999
Page 2
Company reserves the right to exclude such representative from
access to any material or meeting or portion thereof if the Company
believes, upon advice of counsel, that such exclusion is reasonably
necessary to preserve the attorney-client privilege, to protect
highly confidential proprietary information or for other similar
reasons. Such representative may participate in discussions of
matters brought to the Board.
The rights described herein shall terminate and be of no further force or
effect at such time as the Shares held by Investor shall represent less than 5%
of the Company's voting power, on a fully diluted basis. The confidentiality
provisions hereof will survive any such termination.
Very truly yours,
ONEWORLD SYSTEMS, INC.
By:
-------------------------------------
Title:
-------------------------------------
Agreed and accepted this 3rd day of March, 1999.
ACCESS TECHNOLOGY PARTNERS, L.P.
By: ACCESS TECHNOLOGY MANAGEMENT, L.L.C.
Its: General Partner
By: H&Q VENTURE MANAGEMENT, L.L.C.
Its: Managing Member
By:
-----------------------------------
Its:
-----------------------------------
<PAGE> 65
SCHEDULE 13D
EXHIBIT 4
AGREEMENT TO FILE JOINTLY AND STATEMENT
APPOINTING DESIGNATED FILER AND AUTHORIZED SIGNATORY
Each of the undersigned entity (the "Reporting Person") hereby
designates Kevin Compton, or such other person or entity as is designated in
writing by Kevin Compton (any such person or entity is referred to as the
"Designated Filer") as the beneficial owner to make a joint filing on Schedule
13D (the "Report") pursuant to Section 13(d) of the Securities Exchange Act of
1934 (the "Exchange Act") with respect to the securities of OneWorld Systems,
Inc. beneficially owned by the Reporting Person.
Each Reporting Person hereby further authorizes and designates Kevin
Compton (the "Authorized Signatory") to execute and file on behalf of such
Reporting Person the Report.
Each Reporting Person acknowledges that the Designated Filer and the
Authorized Signatory are not assuming any of the Reporting Person's
responsibilities to comply with Section 13(d) of the Exchange Act.
IN WITNESS WHEREOF, the parties have caused this Agreement to File
Jointly and Statement Appointing Designated Filer and Authorized Signatory to be
duly executed on March 10, 1999.
COMPTON FAMILY TRUST, UA DATED APRIL 19, 1996
KEVIN COMPTON, TRUSTEE
By: /s/ KEVIN COMPTON
----------------------------
Kevin Compton, Trustee
