Common Stock Agreement - Digital Equipment Corp. and Immersion Corp.
DIGITAL EQUIPMENT CORPORATION
and
IMMERSION CORPORATION
COMMON STOCK AGREEMENT
This Common Stock Agreement, dated June __, 1998, (the "Effective
Date") is entered into by and between Digital Equipment Corporation, a
Massachusetts corporation with principal offices at 111 Powdermill Road,
Maynard, Massachusetts 01754. ("DIGITAL") and Immersion Corporation, a
California corporation with principal offices at 2158 Paragon Drive, San Jose,
California 95131, ("IMMERSION"), and is hereinafter referred to as "this
Agreement".
WHEREAS, DIGITAL has agreed to assign all rights, title and interest to
the U.S. Patent No. 5,185,561, issued on February 9, 1993, (the "Patent") to
IMMERSION under a separate Assignment of Patent Agreement to be executed by
DIGITAL contemporaneously with this Agreement; and
WHEREAS, IMMERSION has agreed to issue Common Stock to DIGITAL as
specified herein as compensation for such assignment of the Patent;
NOW THEREFORE, in consideration of the mutual provisions and covenants
contained herein, DIGITAL and IMMERSION agree as follows:
ARTICLE 1 - COMMON SHARES
In consideration for the assignment of Patent No. 5,185,561 pursuant to
the Assignment of Patent Agreement dated June ___, 1998 and for the provision
of consulting services by DIGITAL pursuant to Article 7 of this Agreement,
IMMERSION agrees to issue to DIGITAL 100,000 shares of IMMERSION's Common Stock
(the "Shares") with a fair market value of $2.95 per share on the Effective Date
of this Agreement. IMMERSION represents that such Shares will be duly and
validly issued, fully paid and non-assessable, and free from all taxes, liens
and charges with respect to the issuance thereof. In addition, IMMERSION agrees
to pay DIGITAL an up-front fee of ten thousand U.S. dollars (US $ 10,000.00) on
the Effective Date of this Agreement.
ARTICLE 2 - REPRESENTATIONS AND WARRANTIES
2.1 This Agreement is made with DIGITAL in reliance upon DIGITAL's
representation to IMMERSION, evidenced by DIGITAL's execution of this
Agreement, that DIGITAL is acquiring the Shares for investment for its own
account, and not with a view to, or for resale in connection with, any
distribution or public offering thereof within the meaning of the Securities Act
of 1933, as amended (the "Securities Act") and the California Corporations Code.
DIGITAL has not been organized for the sole purpose of acquiring the Shares.
DIGITAL has the full right, power and authority to enter into and perform this
Agreement.
2.2 DIGITAL understands and acknowledges that the offering of the Shares
pursuant to this Agreement will not be registered under the Securities Act or
qualified under the California Corporations Code on the grounds that the
offering and sale of securities contemplated by this Agreement are exempt from
registration under the Securities Act and exempt from qualification pursuant to
Section 25102(f) of the California Corporations Code, and that IMMERSION's
reliance upon such exemptions is predicated upon DIGITAL's representations set
forth in this Agreement. DIGITAL acknowledges and understands that the Shares
must be held indefinitely unless the Shares are subsequently registered under
the Securities Act and qualified under the California Corporations Code or an
exemption from such registration and such qualification is available.
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2.3 DIGITAL covenants that in no event will DIGITAL dispose of any of
the Shares (other than in conjunction with an effective registration statement
for the Shares under the Securities Act or in compliance with Rule 144
promulgated under the Securities Act) unless and until (i) DIGITAL has notified
IMMERSION of the proposed disposition and shall have furnished IMMERSION with a
statement of the circumstances surrounding the proposed disposition, and (ii)
if reasonably requested by IMMERSION, DIGITAL shall have furnished IMMERSION
with an opinion of counsel reasonably satisfactory in form and substance to
IMMERSION to the effect that (a) such disposition will not require registration
under the Securities Act and (b) appropriate action necessary for compliance
with the Securities Act, the California Corporations Code and any other
applicable state, local or foreign law has been taken. It is agreed that
IMMERSION will not require a notice setting forth the circumstances surrounding
a proposed disposition or opinions of counsel for transactions made pursuant to
Rule 144.
2.4 Notwithstanding the provisions of Section 2.3 above, but subject to
compliance with the Securities Act, the California Corporations Code and any
other applicable state, local or foreign law, no registration statement or
opinion of counsel shall be necessary for a transfer by DIGITAL if the transfer
is to any person or entity controlling, controlled by or under common control
with DIGITAL, and if the transferee agrees in writing to be bound by the terms
of this Agreement to the same extent as if he were an original DIGITAL
hereunder.
2.5 DIGITAL (i) has such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of such
DIGITAL's prospective investment in the Shares; (ii) has the ability to bear the
economic risks of its prospective investment; (iii) has been furnished with and
has had access to such information as DIGITAL has considered necessary to make a
determination as to the purchase of the Shares together with such additional
information as is necessary to verify the accuracy of the information supplied;
(iv) has had all questions which have been asked by DIGITAL satisfactorily
answered by IMMERSION; and (v) has not been offered the Shares by any form of
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media, or broadcast over television or radio, or
any seminar or meeting whose attendees have been invited by any such media.
ARTICLE 3 - LEGENDS
3.1 All certificates representing the Shares purchased under this
Agreement shall, where applicable, have endorsed thereon the following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH
RULE 144 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE
HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY'S STATING THAT
SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.
Any legend required to be placed thereon by the California Commissioner
of Corporations or any other state securities agency.
IMMERSION need not register a transfer of any such Shares and may also
instruct its transfer agent not to register the transfer of any such Shares,
unless the conditions specified in the foregoing legends are satisfied.
3.2 In the event that IMMERSION offers its securities in an initial
public offering, DIGITAL hereby agrees that, upon the request of IMMERSION or
the underwriters managing any underwritten offering of IMMERSION's securities,
not to sell, make any short sale, grant any option for the purchase of, or
otherwise dispose of any securities of IMMERSION held by it at any time (other
than those included in the registration) without the prior written consent of
IMMERSION or such underwriters, as the case may be, for such period of time
(not to exceed one hundred eight (180) days) from the effective date of such
registration as may be requested by the underwriters; provided, that the
officers and directors of IMMERSION and all other holders of more than 5% of
IMMERSION's outstanding voting securities also agree to such restrictions.
3.3 If, during any period that DIGITAL is not eligible to sell Shares
in reliance upon Rule 144, IMMERSION (other than in consequence of or related
to the exercise of demand registration rights by holders of IMMERSION's
securities having demand registration rights) shall determine to register any
of its securities under the Securities Act for its own account (other than a
registration relating to employee stock option or purchase plans, or a
registration on Securities and Exchange Commission ("SEC") Form S-4 relating to
an SEC Rule 145 transaction, or a registration on any form other than SEC Forms
S-1, S-2 or S-3, or their successor forms or any successor to such forms, which
does not include substantially the same information as would be required to be
included in a registration covering the sale of the Shares) IMMERSION will
promptly give to DIGITAL written notice thereof; and include in such
registration statement, and in any underwriting involved therein, all the
Shares specified in a written request, made within thirty (30) days after
receipt of such written notice from IMMERSION, by DIGITAL, except as set forth
in this Section 3.3. If the registration of which IMMERSION gives notice is for
a registered public offering involving an underwriting, IMMERSION shall so
advise DIGITAL as a part of the written notice given pursuant to this Section
3.3. In such event the right of DIGITAL to registration pursuant to this
Section 3.3 shall be conditioned upon DIGITAL's participation in such
underwriting and the inclusion of DIGITAL's Shares in the underwriting to the
extent provided herein. Digital shall (together with IMMERSION and the other
holders distributing their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by IMMERSION. Notwithstanding any other
provision of this Section 3.3, the underwriter may limit the number of Shares
and other securities of IMMERSION held by shareholders (other than DIGITAL)
having contractual rights to registration to be included in the registration
and underwriting, or may exclude Shares and the shares of officers, directors
and advisors ("Additional Shares") entirely from such registration and
underwriting. IMMERSION shall so advise all holders of Shares and Additional
Shares which would otherwise be registered and underwritten pursuant hereto,
and the number of Shares and Additional Shares of such holders that may be
included in the registration and underwriting shall be allocated among holders
requesting registration in proportion, as nearly as practicable, to the
respective amounts of shares held by each of such holders as of the date of the
notice pursuant to this Section 3.3, subject to the provisions of this Section
3.3. If DIGITAL disapproves of the terms of any such underwriting, DIGITAL may
elect to withdraw therefrom by written notice to IMMERSION and the underwriter.
Any Shares excluded or withdrawn from such underwriting shall be withdrawn
from such registration.
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ARTICLE 4 - DILUTION PROTECTION
The number of Shares issued to DIGITAL herein shall be appropriately
adjusted by IMMERSION for any change in the number of shares of IMMERSION Common
Stock by reason of stock dividends, stock splits, stock combinations,
reclassifications, recapitalizations, or similar events prior to the issuance of
the Shares (each a "Recapitalization Event").
ARTICLE 5 - INITIAL PUBLIC OFFERING
If within three (3) years of the Effective Date of this Agreement
IMMERSION has not (i) closed a sale of stock pursuant to a registration
statement under the Securities Act of 1933, as amended, for an underwritten
initial public offering covering IMMERSION's Common Stock (an "IPO"), (ii) been
acquired by a company that is traded on a national stock market exchange other
an acquisition to effect a reincorporation of IMMERSION, or (iii) been acquired
for cash by a company that is not traded on a national stock market exchange
(each a "Liquidity Event"), IMMERSION or its successor or acquiror will pay
DIGITAL Two Hundred Thousand U.S. dollars (US$200,00.00) on May __, 2001, and
DIGITAL shall retain its Shares of IMMERSION or the shares or securities
acquired by DIGITAL in the acquisition of IMMERSION.
ARTICLE 6 - PATENT RESALE
Should IMMERSION assign all right, title and interest in the Patent to a
third party (not pursuant to a Liquidity Event) within twelve (12) months of the
Effective Date of this Agreement, IMMERSION shall pay DIGITAL fifty percent
(50%) of the transfer price (or a dollar amount equal to fifty percent (50%) of
the value received by IMMERSION) but not less than two hundred and fifty
thousand US dollars (US$250,000.00), and DIGITAL shall retain its Shares of
IMMERSION. Should IMMERSION sell the patent to a third party (not pursuant to a
Liquidity Event) after twelve (12) months and within four (4) years of the
Effective Date of this Agreement, it shall pay DIGITAL twenty percent (20%) of
the transfer price (or a dollar amount equal to twenty percent (20%) of the
value received by IMMERSION), but not less than one hundred thousand US dollars
(US$100,000.00), and DIGITAL shall retain its Shares of IMMERSION or the shares
or securities acquired by DIGITAL in the acquisition of IMMERSION.
.
ARTICLE 7 - CONSULTING SERVICES
DIGITAL will provide consulting services related to the maintenance,
prosecution, and enforcement of the Patent. Such consulting services shall last
for a period of three (3) years, and shall not exceed twenty (20) hours of
consulting services in the first year, ten (10) hours in the second year, and
five (5) hours in the third year. In addition, DIGITAL shall provide, upon
request, copies of relevant documentation, for example, any existing design
notebooks, indicating the date of invention of the Patent.
ARTICLE 8 - ASSIGNMENT
Subject to compliance with the Securities Act, the California
Corporations Code and any other applicable state, local or foreign law, this
Agreement is assignable by DIGITAL to any person or entity controlling,
controlled by or under common control with DIGITAL.
ARTICLE 9 - REPORTS
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IMMERSION shall provide DIGITAL with the same general reports that are
provided to all holders of Preferred Stock of IMMERSION.
ARTICLE 10 - TRANSFER TAXES
IMMERSION shall pay the fees required by the United States Patent and
Trademark Office in connection with the assignment of the Patent by DIGITAL to
IMMERSION. DIGITAL shall pay all transfer, documentary, sales, use,
registration and other such taxes and fees incurred in connection with the
transactions described in this Agreement, including but not limited to any
sales tax that may result from the assignment of the Patent by DIGITAL to
IMMERSION in exchange for the consideration described herein. Any other
transfer, documentary, sales, use, registration and other such taxes and fees
incurred in connection with the assignment of the Patent shall be shared
equally by the parties.
ARTICLE 11 - GENERAL
11.1 Nothing in this Agreement shall be construed as making either party
the agent of the other.
11.2 The failure of either party to give notice to the other party of
the breach or non-fulfillment of any term, clause, provision or condition of
this Agreement shall not constitute a waiver thereof, nor shall the waiver of
any breach or non-fulfillment of any term, clause, provision or condition of
this Agreement constitute a waiver of any other breach or non-fulfillment of
that or any other term, clause, provision or condition of this Agreement.
11.3 Any notice under this Agreement shall be in writing and deemed to
have been sufficiently given when, if given to DIGITAL, is addressed to:
Director
Corporate Licensing Office
Digital Equipment Corporation
111 Powdermill Road, MSO2-3/C11
Maynard, MA 01754 USA
And when, if given to IMMERSION, it is addressed to:
President
Immersion Corporation
2158 Paragon Drive
San Jose, CA 95131
and sent by registered or certified mail, return receipt requested,
postage prepaid. The date of execution of the return receipt or five (5)
days after the date of mailing, whichever comes first, shall be deemed
to be the date on which such notice has been given. Each party shall
give prompt written notice to the other party of any change in its
address or corporate name, and after notice of such change has been
given, any notice by the other party to it shall be addressed in
accordance with that change.
11.4 If any provision of this Agreement is held invalid by any law,
rule, order, or by the final determination of any State or Federal court, it
shall not affect any other provisions of this Agreement which can be given
effect without such invalid provision, and to this extent the parties agree that
the provisions of the Agreement are and shall be severable.
11.5 This Agreement is governed by the laws of California.
11.6 This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original for all purposes.
11.7 This Agreement and the Assignment of Patent Agreement set forth the
entire agreement and understanding between the parties as to the subject matter
hereof and merges all prior discussions and agreements between them, and neither
of the parties shall be bound by any conditions, definitions, warranties,
understandings or representations with respect to such subject matter other than
as expressly provided herein. This Agreement may not be modified, amended, or
supplemented except by a document executed by a proper and duly authorized
officer or representative of the party to be bound thereby.
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IN WITNESS WHEREOF, the parties hereto have as of the Effective Date first
written above caused this Common Stock Agreement, to be signed in duplicate by
their duly authorized representatives.
DIGITAL EQUIPMENT CORPORATION IMMERSION CORPORATION
Date Date
/s/ William B. Strecker /s/ Louis B. Rosenberg
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Signed Signed
William B. Strecker Louis B. Rosenberg
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Printed Printed
VP Corp. Strategy and Technology President
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Title Title
6-10-98 6-12-98
-------------------------------- --------------------------------
Date Date
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