Investors' Rights Agreement - Be Inc.
BE INCORPORATED
AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
FEBRUARY 4, 1998
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TABLE OF CONTENTS
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PAGE
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1. GENERAL..................................................................................... 1
1.1 Definitions........................................................................ 1
2. REGISTRATION; RESTRICTIONS ON TRANSFER...................................................... 3
2.1 Restrictions on Transfer........................................................... 3
2.2 Demand Registration................................................................ 4
2.3 Piggyback Registrations............................................................ 5
2.4 Form S-3 Registration.............................................................. 6
2.5 Expenses of Registration........................................................... 7
2.6 Obligations of the Company......................................................... 7
2.7 Termination of Registration Rights................................................. 8
2.8 Delay of Registration.............................................................. 8
2.9 Indemnification.................................................................... 8
2.10 Assignment of Registration Rights.................................................. 11
2.11 Amendment of Registration Rights................................................... 11
2.12 Limitation on Subsequent Registration Rights....................................... 11
2.13 "Market Stand-Off"Agreement........................................................ 11
3. COVENANTS................................................................................... 12
3.1 Basic Financial Information and Reporting.......................................... 12
3.2 Inspection Rights.................................................................. 12
3.3 Confidentiality of Records......................................................... 13
3.4 Reservation of Common Stock........................................................ 13
3.5 Key Man Insurance.................................................................. 13
3.6 Real Property Holding Corporation.................................................. 13
3.7 Covenant to Approve Acquisition by Lead Investor................................... 13
3.8 Termination of Covenants........................................................... 13
4. RIGHTS OF FIRST REFUSAL..................................................................... 14
4.1 Subsequent Offerings............................................................... 14
4.2 Exercise of Rights................................................................. 14
4.3 Issuance of Equity Securities to Other Persons..................................... 14
4.4 Termination of Rights of First Refusal............................................. 15
4.5 Transfer of Rights of First Refusal................................................ 15
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i.
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TABLE OF CONTENTS
(CONTINUED)
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PAGE
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4.6 Excluded Securities............................................................... 15
5. MISCELLANEOUS.............................................................................. 16
5.1 Governing Law..................................................................... 16
5.2 Survival.......................................................................... 16
5.3 Successors and Assigns............................................................ 16
5.4 Separability...................................................................... 16
5.5 Amendment and Waiver.............................................................. 16
5.6 Delays or Omissions............................................................... 16
5.7 Notices........................................................................... 17
5.8 Titles and Subtitles.............................................................. 17
5.9 Counterparts...................................................................... 17
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ii.
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AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the "Agreement") is
entered into as of the 4/th/ day of February, 1998, by and among BE
INCORPORATED, a California corporation (the "Company"), the other parties (the
"Prior Purchasers") to that certain 1996 Investors' Rights Agreement dated April
12, 1996 (the "Prior Agreement") and the purchasers of the Company's Series 2
Preferred Stock ("Series 2 Stock") set forth on Exhibit A of that certain Series
2 Preferred Stock Purchase Agreement of even date herewith (the "Primary
Agreement") and that certain Additional Series 2 Preferred Stock Purchase
Agreement of even date herewith (the "Lead Investor Agreement") (the Primary
Agreement and Lead Investor Agreement together shall be the "Purchase
Agreement"). The purchasers of the Series 2 Stock together with the Prior
Purchasers shall be referred to hereinafter as the "Purchasers" and each
individually as a "Purchaser."
RECITALS
WHEREAS, the Company and the Prior Purchasers are parties to the Prior
Agreement; and
WHEREAS, the Company proposes to sell and issue up to eight million three
hundred eighty-four thousand (8,384,000) shares of its Series 2 Stock pursuant
to the Purchase Agreement; and
WHEREAS, as a condition of entering into the Purchase Agreement, the
additional Purchasers have requested that the Company extend to them
registration rights, information rights and a right of first refusal as set
forth below; and
WHEREAS, the parties intend by this Agreement to supplement and supersede
the Prior Agreement;
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and in the
Purchase Agreement, the parties mutually agree as follows:
1. GENERAL
1.1 DEFINITIONS. As used in this Agreement the following terms shall have
the following respective meanings:
"HOLDER" means any person owning of record Registrable Securities that
have not been sold to the public or any assignee of record of such Registrable
Securities in accordance with Section 2.10 hereof.
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"REGISTER," "REGISTERED," and "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"REGISTRABLE SECURITIES" means (i) Common Stock of the Company issued
or issuable upon conversion of the Shares; and (ii) any Common Stock of the
Company issued as (or issuable upon the conversion or exercise of any warrant,
right or other security which is issued as) a dividend or other distribution
with respect to, or in exchange for or in replacement of, such above-described
securities. Notwithstanding the foregoing, Registrable Securities shall not
include any securities sold by a person to the public either pursuant to a
registration statement or Rule 144 or sold in a private transaction in which the
transferor's rights under Section 2 of this Agreement are not assigned.
"REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (1) are then issued and
outstanding or (2) are issuable pursuant to then exercisable or convertible
securities.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Sections 2.2, 2.3 and 2.4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements of a
single special counsel for 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).
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"SHARES" shall mean the Company's (i) Series 1 Preferred Stock, (ii)
the Series 2 Stock and (iii) the shares of Common Stock, if any, issued upon the
exercise of the warrant to acquire up to 1,538,462 shares dated the date hereof.
"FORM S-3" means such form under the Securities Act as 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.
"SEC" or "COMMISSION" means the Securities and Exchange Commission.
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2. REGISTRATION; RESTRICTIONS ON TRANSFER
2.1 RESTRICTIONS ON TRANSFER.
2.1.1 Each Holder agrees not to make any disposition of all or any
portion of the Registrable Securities (or the Common Stock issuable upon the
conversion thereof) unless and until the transferee has agreed in writing for
the benefit of the Company to be bound by this Section 2.1, provided and to the
extent such Section is then applicable and:
(A) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(B) (A) Such Holder shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (B) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(C) Notwithstanding the provisions of paragraphs (i) and (ii)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by a Holder which is (A) a partnership to its partners in
accordance with partnership interests, (B) to the Holder's family member or
trust for the benefit of an individual Holder or (C) in connection with any
exempted transfer pursuant to Section 8.6(3) of the Series 1 Convertible
Preferred Stock Purchase Agreement dated April 12, 1996 or Section 8.6(3) of the
Primary Agreement; provided the transferee will be subject to the terms of this
Section 2.1 to the same extent as if he were an original Holder hereunder.
2.1.2 Each certificate representing the Shares or Registrable
Securities shall (unless otherwise permitted by the provisions of the Agreement)
be stamped or otherwise imprinted with a legend substantially similar to the
following (in addition to any legend required under applicable state securities
laws or as provided elsewhere in the Agreement or the Purchase Agreement):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR,
IN THE OPINION OF COUNSEL OR BASED ON OTHER WRITTEN EVIDENCE
IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE
SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR
HYPOTHECATION IS IN COMPLIANCE THEREWITH.
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2.1.3 The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
2.1.4 Any legend endorsed on an instrument pursuant to applicable
state securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 DEMAND REGISTRATION.
2.2.1 Subject to the conditions of this Section 2.2, if the Company
shall receive at any time after the third anniversary of the date first above
written, a written request from the Holders of more than fifty percent (50%) of
the Registrable Securities then outstanding (the "Initiating Holders") that the
Company file a registration statement under the Securities Act covering the
registration of at least twenty percent (20%) of the Registrable Securities then
outstanding and having an aggregate offering price to the public in excess of
$5,000,000, then the Company shall, within thirty (30) days of the receipt
thereof, give written notice of such request to all Holders, and subject to the
limitations of Section 2.2.2, effect, as soon as practicable, the registration
under the Securities Act of all Registrable Securities that the Holders request
to be registered.
2.2.2 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 this Section 2.2
and the Company shall include such information in the written notice referred to
in Section 2.2.1. In such event, the right of any Holder to include his
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall 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 (which underwriter or
underwriters shall be reasonably acceptable to the Company). Notwithstanding
any other provision of this Section 2.2, if the underwriter advises the Company
in writing that marketing factors require a limitation of the number of
securities to be underwritten (including Registrable Securities) then the
Company shall so advise all Holders of Registrable Securities which would
otherwise be underwritten pursuant hereto, and the number of shares that may be
included in the underwriting shall be allocated to the Holders of such
Registrable Securities on a pro rata basis based on the number of Registrable
Securities held by all such Holders (including the Initiating Holders). Any
Registrable Securities excluded or withdrawn from such underwriting shall be
withdrawn from the registration.
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2.2.3 The Company shall not be obligated to effect more than three
(3) registrations pursuant to this Section 2.2.
2.2.4 The Company shall not be required to effect a registration
pursuant to this Section 2.2 during the period starting with the date of filing
of, and ending on the date ninety (90) days following the effective date of the
registration statement pertaining to the initial public offering of the
Company's common stock (the "Initial Offering"), provided that the Company is
making reasonable and good faith efforts to cause such registration statement to
become effective. In addition, the Company shall not be required to effect a
registration pursuant to this Section 2.2 if within thirty (30) days of receipt
of a written request from Initiating Holders pursuant to Section 2.2.1, the
Company gives notice to the Holders of the Company's intention to make its
Initial Offering within ninety (90) days.
2.2.5 Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 2.2, a
certificate signed by the Chairman of the Board stating that in the good faith
judgment of the Board of Directors of the Company, it would be seriously
detrimental to the Company and its shareholders for such registration statement
to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer such filing
for a period of not more than ninety (90) days after receipt of the request of
the Initiating Holders; provided that such right to delay a request shall be
exercised by the Company no more than once in any one-year period.
2.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least thirty (30) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans and corporate reorganizations) and will afford each such Holder an
opportunity to include in such registration statement all or part of such
Registrable Securities held by such Holder. Each Holder desiring to include in
any such registration statement all or any part of the Registrable Securities
held by it shall, within twenty (20) days after receipt of the above-described
notice from the Company, so notify the Company in writing. Such notice shall
state the intended method of disposition of the Registrable Securities by such
Holder. If a Holder decides not to include all of its Registrable Securities in
any registration statement thereafter filed by the Company, such Holder shall
nevertheless continue to have the right to include any Registrable Securities in
any subsequent registration statement or registration statements as may be filed
by the Company with respect to offerings of its securities, all upon the terms
and conditions set forth herein.
2.3.1 Underwriting. If the registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 2.3 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
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Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting. Notwithstanding any other provision of the
Agreement, if the underwriter determines in good faith that marketing factors
require a limitation of the number of shares to be underwritten, the number of
shares that may be included in the underwriting shall be allocated, first, to
the Company; second, to the Holders on a pro rata basis based on the total
number of Registrable Securities held by the Holders; and third, to any
shareholder of the Company (other than a Holder) on a pro rata basis. No such
reduction shall reduce the securities being offered by the Company for its own
account to be included in the registration and underwriting, except that in no
event shall the amount of securities of the selling Holders included in the
registration be reduced below thirty percent (30%) of the total amount of
securities included in such registration, unless such offering is the Initial
Offering, in which event any or all of the Registrable Securities of the Holders
may be excluded in accordance with the immediately preceding sentence. In no
event will shares of any other selling shareholder be included in such
registration which would reduce the number of shares which may be included by
Holders without the written consent of Holders of at least fifty percent (50%)
of the Registrable Securities proposed to be sold in the offering.
2.4 FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders of Registrable Securities a written request or requests that
the Company effect a registration on Form S-3 and any related qualification or
compliance with respect to all or a part of the Registrable Securities owned by
such Holder or Holders, the Company will:
2.4.1 promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders of Registrable
Securities; and
2.4.2 as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4: (i) if
Form S-3 is not available for such offering by the Holders, (ii) if the Holders,
together with the holders of any other securities of the Company entitled to
inclusion in such registration, propose to sell Registrable Securities and such
other securities (if any) at an aggregate price to the public of less than
$500,000, (iii) if the Company shall furnish to the Holders a certificate signed
by the Chairman of the Board of Directors of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such Form S-3
Registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 registration statement for a
period of not more than ninety (90) days after receipt of the request of the
Holder or Holders under this Section 2.4, provided that such right to delay a
request shall be exercised by the Company no more than once in any one year
period, (iv) if the Company has, within the twelve (12) month period preceding
the date of such request, already
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effected two (2) registrations on Form S-3 for the Holders pursuant to this
Section 2.4, or (v) in any particular jurisdiction in which the Company would be
required to qualify to do business or to execute a general consent to service of
process in effecting such registration, qualification or compliance.
2.4.3 Subject to the foregoing, the Company shall file a Form S-3
registration statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders.
2.5 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 2.2 or any registration under Section 2.3 or Section 2.4 herein shall be
borne by the Company. All Selling Expenses incurred in connection with any
registrations hereunder, shall be borne by the holders of the securities so
registered pro rata on the basis of the number of shares so registered. The
Company shall not, however, be required to pay for expenses of any registration
proceeding begun pursuant to Section 2.2 or 2.4, the request of which has been
subsequently withdrawn by the Initiating Holders unless (a) the withdrawal is
based upon material adverse information concerning the Company of which the
Initiating Holders were not aware at the time of such request or (b) the Holders
of a majority of Registrable Securities agree to forfeit their right to one
requested registration pursuant to Section 2.2 or Section 2.4 in which event
such right shall be forfeited by all Holders). If the Holders are required to
pay the Registration Expenses, such expenses shall be borne by the holders of
securities (including Registrable Securities) requesting such registration in
proportion to the number of shares for which registration was requested. If the
Company is required to pay the Registration Expenses of a withdrawn offering
pursuant to Section 2.5(a), then the Holders shall not forfeit their rights
pursuant to Section 2.2 or Section 2.4 to a demand registration.
2.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
2.6.1 Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to ninety (90) days.
2.6.2 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.
2.6.3 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 such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
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2.6.4 Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
2.6.5 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.
2.6.6 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.
2.6.7 Furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable Securities
are delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated 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 and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities and (ii) a 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, if any, and to the Holders
requesting registration of Registrable Securities.
2.7 TERMINATION OF REGISTRATION RIGHTS. All registration rights granted
under this Section 2 shall terminate and be of no further force and effect seven
(7) years after the date following the Company's Initial Offering.
2.8 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.
2.9 INDEMNIFICATION. In the event any Registrable Securities are included
in a registration statement under Sections 2.2, 2.3 or 2.4:
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2.9.1 To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers and directors of each Holder,
any underwriter (as defined in the Securities Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Securities Act or the Securities Exchange Act of 1934, as amended, (the
"1934 Act"), against any losses, claims, damages, or liabilities (joint or
several) to which they may become subject under the Securities Act, the 1934 Act
or other federal or state law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a
"Violation") by the Company: (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the 1934 Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the 1934 Act or any state securities law in connection with the offering covered
by such registration statement; and the Company will reimburse each such Holder,
partner, officer or director, underwriter or controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided however,
that the indemnity agreement contained in this Section 2.9.1 shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action
if such settlement is effected without the consent of the Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it
arises out of or is based upon a Violation which occurs in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by such Holder, partner, officer, director, underwriter
or controlling person of such Holder.
2.9.2 To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers, each person, if any, who controls the Company within the meaning of
the Securities Act, any underwriter and any other Holder selling securities
under such registration statement or any of such other Holder's partners,
directors or officers or any person who controls such Holder, against any
losses, claims, damages or liabilities (joint or several) to which the Company
or any such director, officer, controlling person, underwriter or other such
Holder, or partner, director, officer or controlling person of such other Holder
may become subject under the Securities Act, the 1934 Act or other federal or
state law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will reimburse any legal
or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, underwriter or other Holder, or partner, officer,
director or controlling person of such other Holder in connection with
investigating or defending any such loss, claim, damage, liability or action if
it is judicially determined that there was such a Violation; provided, however,
that the
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indemnity agreement contained in this Section 2.9.2 shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided further, that in no event shall any
indemnity under this Section 2.9.2 exceed the net proceeds from the offering
received by such Holder.
2.9.3 Promptly after receipt by an indemnified party under this
Section 2.9 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.9, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 2.9.
2.9.4 If the indemnification provided for in this Section 2.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any losses, claims, damages or liabilities referred to
herein, the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
2.9.5 The foregoing indemnity agreements of the Company and Holders
are subject to the condition that, insofar as they relate to any Violation made
in a preliminary prospectus but eliminated or remedied in the amended prospectus
on file with the SEC at the time the registration statement in question becomes
effective or the amended prospectus filed with the SEC pursuant to SEC Rule
424(b) (the "Final Prospectus"), such indemnity agreement shall not inure to the
benefit of any person if a copy of the Final Prospectus was furnished to the
<PAGE>
indemnified party and was not furnished to the person asserting the loss,
liability, claim or damage at or prior to the time such action is required by
the Securities Act.
2.9.6 The obligations of the Company and Holders under this Section
2.9 shall survive the completion of any offering of Registrable Securities in a
registration statement, and otherwise.
2.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to
register Registrable Securities pursuant to this Section 2 may be assigned by a
Holder to a transferee or assignee of Registrable Securities; provided, however,
that no such transferee or assignee shall be entitled to registration rights
under Sections 2.2, 2.3 or 2.4 hereof unless it acquires at least fifty thousand
(50,000) shares of Registrable Securities (as adjusted for stock splits and
combinations) and the Company shall, within twenty (20) days after such
transfer, be furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned. Notwithstanding the foregoing, rights
to cause the Company to register securities may be assigned to any subsidiary,
parent, general partner, limited partner, retired partner, family member or
trust for the benefit of a Holder.
2.11 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2 may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of more than fifty percent (50%)
of the Registrable Securities. Any amendment or waiver effected in accordance
with this Section 2.11 shall be binding upon each Holder and the Company. By
acceptance of any benefits under this Section 2, Holders of Registrable
Securities hereby agree to be bound by the provisions hereunder.
2.12 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date of this
Agreement, the Company shall not, without the prior written consent of the
Holders of a majority of the Registrable Securities, enter into any agreement
with any holder or prospective holder of any securities of the Company that
would permit such holder to require that the Company register any securities
held by such holder.
2.13 "MARKET STAND-OFF" AGREEMENT. If requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, no Purchaser
shall sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by such Purchaser (other than those included in
the registration) for a period specified by the underwriters not to exceed one
hundred eighty (180) days following the effective date of a registration
statement of the Company filed under the Securities Act, provided that:
2.13.1 such agreement shall apply only to the Company's Initial
Offering; and
2.13.2 all officers and directors of the Company and holders of at
least one percent (1%) of the Company's voting securities enter into similar
agreements.
The obligations described in this Section 2.13 shall not apply to a
registration relating solely to employee benefit plans on Form S-8 or similar
form that may be promulgated in the
<PAGE>
future, or a registration relating solely to a Commission Rule 145 transaction
on Form S-4 or similar forms that may be promulgated in the future. The Company
may impose stop-transfer instructions with respect to the shares (or securities)
subject to the foregoing restriction until the end of said one hundred eighty
(180) day period.
3. COVENANTS.
3.1 BASIC FINANCIAL INFORMATION AND REPORTING.
3.1.1 The Company will maintain true books and records of account
in which full and correct entries will be made of all its business transactions
pursuant to a system of accounting established and administered in accordance
with generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and reserves as shall be required
under generally accepted accounting principles consistently applied.
3.1.2 As soon as practicable after the end of each fiscal year of
the Company, and in any event within 135 days thereafter, the Company will
furnish each Purchaser an audited consolidated balance sheet of the Company, as
at the end of such fiscal year, and an audited consolidated statement of income
and an audited consolidated statement of cash flows of the Company, for such
year, all prepared in accordance with generally accepted accounting principles
and setting forth in each case in comparative form the figures for the previous
fiscal year, all in reasonable detail. Such financial statements shall be
accompanied by a report and opinion thereon by independent public accountants of
national standing selected by the Company's Board of Directors.
3.1.3 The Company will furnish each Purchaser, as soon as
practicable after the end of the first, second and third quarterly accounting
periods in each fiscal year of the Company, and in any event within forty-five
(45) days thereafter, a consolidated balance sheet of the Company as of the end
of each such quarterly period, and a consolidated statement of income and a
consolidated statement of cash flows of the Company for such period and for the
current fiscal year to date.
3.1.4 So long as a Purchaser (with its affiliates) shall own not
less than nine hundred thousand (900,000) shares of Registrable Securities (a
"Major Purchaser"), the Company will furnish each such Major Purchaser (i) at
least thirty (30) days prior to the beginning of each fiscal year an annual
budget and operating plans for such fiscal year; and (ii) within thirty (30)
days after the end of each month, an unaudited balance sheet and statements of
income and cash flows.
3.2 INSPECTION RIGHTS. Each Major Purchaser shall have the right to
visit and inspect any of the properties of the Company or any of its
subsidiaries, and to discuss the affairs, finances and accounts of the Company
or any of its subsidiaries with its officers, all at such reasonable times and
as often as may be reasonably requested; provided, however, that the Company
shall not be obligated under this Section 3.2 with respect to a competitor of
the
<PAGE>
Company or with respect to information which the Board of Directors determines
in good faith is confidential and should not, therefore, be disclosed.
3.3 CONFIDENTIALITY OF RECORDS. Each Purchaser agrees to use, and to use
its best efforts to insure that its authorized representatives use, the same
degree of care as such Purchaser uses to protect its own confidential
information to keep confidential any information furnished to it which the
Company identifies as being confidential or proprietary (so long as such
information is not in the public domain), except that such Purchaser may
disclose such proprietary or confidential information to any partner, subsidiary
or parent of such Purchaser for the purpose of evaluating its investment in the
Company as long as such partner, subsidiary or parent is advised of the
confidentiality provisions of this Section 3.3.
3.4 RESERVATION OF COMMON STOCK. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the conversion of the
Preferred Stock, all Common Stock issuable from time to time upon such
conversion.
3.5 KEY MAN INSURANCE. The Company will use its best efforts to obtain
and maintain in full force and effect term life insurance in the amount of five
million ($5,000,000) dollars on the life of Jean-Louis Gassee, naming the
Company as beneficiary.
3.6 REAL PROPERTY HOLDING CORPORATION. The Company covenants that it will
operate in a manner such that it will not become a "United States real property
holding corporation" as that term is defined in Section 897(c)(2) of the
Internal Revenue Code of 1986, as amended, and the regulations thereunder
("FIRPTA"). The Company agrees to make determinations as to its status as a
USRPHC, and will file statements concerning those determinations with the
Internal Revenue Service, in the manner and at the times required under Reg.
(S)1.897-2(h), or any supplementary or successor provision thereto. Within 30
days of a request from an Purchaser or any of its partners, the Company will
inform the requesting party, in the manner set forth in Reg. (S)1.897-
2(h)(1)(iv) or any supplementary or successor provision thereto, whether that
party's interest in the Company constitutes a United States real property
interest (within the meaning of Internal Revenue Code Section 897(c)(1) and the
regulations thereunder) and whether the Company has provided to the Internal
Revenue Service all required notices as to its USRPHC status.
3.7 COVENANT TO APPROVE ACQUISITION BY LEAD INVESTOR. Each Purchaser
hereby irrevocably agrees that in the event that the matter of the sale of
assets of the Company as contemplated by, and subject to Lead Investor's
satisfaction of all conditions set forth in, Section 9.3 of the Lead Investor
Agreement as currently in effect, is submitted to a vote of the shareholders,
such Purchaser shall vote its shares in favor of the sale of assets as set forth
in such Section 9.3, provided that no amendment to such Section 9.3 shall be
binding on the Purchaser unless approved in writing by a majority in interest of
the Purchasers.
3.8 TERMINATION OF COVENANTS. All covenants of the Company contained in
Section 3 of this Agreement shall expire and terminate as to each Purchaser
after the time of
<PAGE>
effectiveness of the Company's first firm commitment underwritten public
offering registered under the Securities Act.
4. RIGHTS OF FIRST REFUSAL.
4.1 SUBSEQUENT OFFERINGS. Each Major Purchaser shall have a right of
first refusal to purchase its pro rata share of all Equity Securities, as
defined below, that the Company may, from time to time, propose to sell and
issue after the date of this Agreement, other than the Equity Securities
excluded by Section 4.6 hereof. Each Major Purchaser's pro rata share is equal
to the ratio of the number of shares of the Company's Common Stock (including
all shares of Common Stock issued or issuable upon conversion of the Preferred
Stock and other convertible securities and the exercise of all outstanding
options and warrants) of which such Major Purchaser is deemed to be a holder
immediately prior to the issuance of such Equity Securities to the total number
of shares of the Company's outstanding Common Stock (including all shares of
Common Stock issued or issuable upon conversion of the Preferred Stock and other
convertible securities and the exercise of all outstanding options and
warrants). The term "Equity Securities" shall mean (i) any stock or similar
security of the Company, (ii) any security convertible, with or without
consideration, into any stock or similar security (including any option to
purchase such a convertible security), (iii) any security carrying any warrant
or right to subscribe to or purchase any stock or similar security or (iv) any
such warrant or right.
4.2 EXERCISE OF RIGHTS. If the Company proposes to issue any Equity
Securities, it shall give each Major Purchaser written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. Each Major Purchaser shall have
fifteen (15) days from the giving of such notice to agree to purchase its pro
rata share of the Equity Securities for the price and upon the terms and
conditions specified in the notice by giving written notice to the Company and
stating therein the quantity of Equity Securities to be purchased.
Notwithstanding the foregoing, the Company shall not be required to offer or
sell such Equity Securities to any Major Purchaser who would cause the Company
to be in violation of applicable federal securities laws by virtue of such offer
or sale.
4.3 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If not all of the
Major Purchasers elect to purchase their pro rata share of the Equity
Securities, then the Company shall promptly notify in writing the Major
Purchasers who do so elect and shall offer such Major Purchasers the right to
acquire such unsubscribed shares ("Subscription Notice"). Each of such Major
Purchasers shall have five (5) days after receipt of the Subscription Notice to
notify the Company of its election to purchase all or a portion thereof of the
unsubscribed shares. If the Major Purchasers fail to exercise in full the
rights of first refusal, the Company shall have ninety (90) days thereafter to
sell the Equity Securities in respect of which the Major Purchasers' rights were
not exercised, at a price and upon terms and conditions no more favorable to the
purchasers thereof than specified in the Company's notice to the Major
Purchasers pursuant to Section 4.2 hereof. If the Company has not sold such
Equity Securities within such ninety (90) days, the Company shall not thereafter
issue or sell any Equity Securities, without first offering such securities to
the Major Purchasers in the manner provided above.
<PAGE>
4.4 TERMINATION OF RIGHTS OF FIRST REFUSAL. The rights of first refusal
established by this Section 4 shall terminate upon the closing of an
underwritten public offering of Common Stock of the Company made pursuant to an
effective registration statement under the Securities Act.
4.5 TRANSFER OF RIGHTS OF FIRST REFUSAL. The rights of first refusal of
each Major Purchaser under this Section 4 may be transferred to any constituent
partner or affiliate of such Major Purchaser, to any successor in interest to
all or substantially all the assets of such Major Purchaser, or to a transferee
who acquires at least five hundred thousand (500,000) shares of Registrable
Securities.
4.6 EXCLUDED SECURITIES. The rights of first refusal established by this
Section 4 shall have no application to any of the following Equity Securities:
4.6.1 up to 3,569,000 shares of Common Stock (and/or options,
warrants or other Common Stock purchase rights issued pursuant to such options,
warrants or other rights) issued or to be issued after the date hereof to
employees, officers or directors of, or consultants or advisors to the Company
or any subsidiary, pursuant to stock purchase or stock option plans or other
arrangements that are approved by the Board (including therein options
outstanding on the date hereof) plus any shares reacquired by the Company from
such persons upon termination of such persons' service relationship with the
Company;
4.6.2 stock issued pursuant to any rights or agreements outstanding
as of the date of this Agreement, options and warrants outstanding as of the
date of this Agreement; and stock issued pursuant to any such rights or
agreements granted after the date of this Agreement, provided that the rights of
first refusal established by this Section 4 applied with respect to the initial
sale or grant by the Company of such rights or agreements;
4.6.3 any Equity Securities issued for consideration other than
cash pursuant to a merger, consolidation, acquisition or similar business
combination;
4.6.4 any Equity Securities that are issued by the Company as part
of an underwritten public offering referred to in Section 4.4 hereof;
4.6.5 shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Company;
4.6.6 shares of Common Stock issued upon conversion of the
Preferred Stock; and
4.6.7 any Equity Securities issued pursuant to any equipment
leasing arrangement or bank financing approved by the Company's Board of
Directors.
<PAGE>
5. MISCELLANEOUS.
5.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
5.2 SURVIVAL. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by any Holder and the closing
of the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company pursuant hereto in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
5.3 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 and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities from time to time;
provided, however, that prior to the receipt by the Company of adequate written
notice of the transfer of any Registrable Securities specifying the full name
and address of the transferee, the Company may deem and treat the person listed
as the holder of such shares in its records as the absolute owner and holder of
such shares for all purposes, including the payment of dividends or any
redemption price.
5.4 SEPARABILITY. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
5.5 AMENDMENT AND WAIVER.
5.5.1 By execution of this Agreement, the Company and the Prior
Purchasers holding more than fifty percent (50%) of the Registrable Securities
as defined in the Prior Agreement hereby amend the Prior Agreement in its
entirety and supersede it by this Agreement.
5.5.2 Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of more than fifty percent (50%) of the Registrable Securities.
5.5.3 Except as otherwise expressly provided, the obligations of
the Company and the rights of the Holders under this Agreement may be waived
only with the written consent of the holders of more than fifty percent (50%) of
the Registrable Securities.
5.6 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
<PAGE>
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part 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, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
5.7 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified, (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (iv) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
party to be notified at the address as set forth on the Schedule of Purchasers
as attached to the Primary Agreement or at such other address as such party may
designate by ten (10) days advance written notice to the other parties hereto.
5.8 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
5.9 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date set forth in the first paragraph hereof.
COMPANY:
BE INCORPORATED
By: /s/ Jean-Louis Gassee
------------------------------
Jean-Louis Gassee
Chief Executive Officer
PURCHASER:
By:_______________________________
Name:_____________________________
Title:____________________________
Address:__________________________