DELTAPOINT, INC.
SERIES A PREFERRED
STOCK PURCHASE AGREEMENT
MAY 6, 1997
TABLE OF CONTENTS
Page
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1. Purchase and Sale of Stock.................................................................................... 1
1.1 Sale and Issuance of Series A Preferred Stock....................................................... 1
1.2 Closing............................................................................................. 1
1.3 Subsequent Sale of Series A Preferred Stock......................................................... 1
2. Representations and Warranties of the Company................................................................. 1
2.1 Organization, Good Standing and Qualification....................................................... 1
2.2 Capitalization and Voting Rights.................................................................... 1
2.3 Subsidiaries........................................................................................ 2
2.4 Authorization....................................................................................... 2
2.5 Valid issuance of Preferred and Common Stock........................................................ 3
2.6 Governmental Consents............................................................................... 3
2.7 Offering............................................................................................ 3
2.8 No Senior Debt...................................................................................... 3
2.9 Registration Statement.............................................................................. 3
3. Representations and Warranties of the Investors............................................................... 3
3.1 Authorization....................................................................................... 3
3.2 Purchase Entirely for Own Account................................................................... 3
3.3 Disclosure of Information........................................................................... 4
3.4 Investment Experience............................................................................... 4
3.5 Accredited Investor................................................................................. 4
3.6 Restricted Securities............................................................................... 4
3.7 Further Limitations on Disposition.................................................................. 4
3.8 Legends............................................................................................. 4
3.9 Further Representations by Foreign Investors........................................................ 4
3.10 Registration Statement.............................................................................. 4
4. California Commissioner of Corporations....................................................................... 5
4.1 Corporate Securities Law............................................................................ 5
5. Conditions of Investor's Obligations at Closing............................................................... 5
5.1 Representations and Warranties....................................................................... 5
5.2 Performance.......................................................................................... 5
5.3 Compliance Certificate............................................................................... 5
5.4 Qualifications....................................................................................... 5
5.5 Opinion of Counsel................................................................................... 5
5.6 Effectiveness of Registration Statement.............................................................. 5
6. Conditions of the Company's Obligations at Closing............................................................. 5
6.1 Representations and Warranties....................................................................... 5
6.2 Payment of Purchase Price............................................................................ 5
6.3 Qualifications....................................................................................... 5
6.4 Effectiveness of Registration Statement.............................................................. 6
7. Registration Rights............................................................................................ 6
7.1 Registration......................................................................................... 6
7.2 Indemnification and Contribution..................................................................... 7
8. Miscellaneous.................................................................................................. 9
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8.1 Survival of Warranties............................................................................... 9
8.2 Covenant Not to Convert Series A Preferred Stock..................................................... 9
8.3 Private Placement.................................................................................... 9
8.4 Successors and Assigns............................................................................... 9
8.5 Governing Law........................................................................................ 9
8.6 Counterparts......................................................................................... 9
8.7 Titles and Subtitles................................................................................. 9
8.8 Notices.............................................................................................. 9
8.9 Finder's Fee......................................................................................... 9
8.10 Attorney's Fees...................................................................................... 9
8.11 Amendments and Waivers............................................................................... 10
8.12 Severability......................................................................................... 10
8.13 Aggregation of Stock................................................................................. 10
8.14 Entire Agreement..................................................................................... 10
EXHIBIT A Amended and Restated Certificate of Determination of Series A
Preferred Stock
EXHIBIT B Opinion of Counsel for the Company
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is made as of the 6th day of May,
1997, by and among DeltaPoint, Inc., a California corporation (the
"Company"), and High Risk Opportunities Hub Fund, Ltd. (the "Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1 SALE AND ISSUANCE OF SERIES A PREFERRED STOCK.
(a) The Company shall adopt and file with the
Secretary of State of California on or before the Closing (as defined below)
the Amended and Restated Certificate of Determination of Series A Preferred
Stock in substantially the form attached hereto as EXHIBIT A (the
"Certificate of Determination").
(b) Subject to the terms and conditions of this
Agreement, the Investor agrees to purchase at the Closing and the Company
agrees to sell and issue to the Investor at the Closing 1,746 shares of the
Company's Series A Preferred Stock for the purchase price of $1,000 per share.
1.2 CLOSING. The purchase and sale of the Series A
Preferred Stock shall take place at the offices of Gunderson Dettmer Stough
Villeneuve Franklin & Hachigian, LLP, 155 Constitution Drive, Menlo Park,
California, at 10:00 A.M., on May 12, 1997, or at such other time and place
as the Company and Investor mutually agree upon orally or in writing (which
time and place are designated as the "Closing"). At the Closing the Company
shall deliver to Investor a certificate representing the Series A Preferred
Stock that such Investor is purchasing, and Investor shall deliver to the
Company for cancellation the 6% Convertible Subordinated Debenture originally
dated December 31, 1996 issued by the Company to Investor (the "Note") (with
the principal amount reduced to reflect partial conversions thereof into the
Company's Common Stock). In the event that payment by an Investor is made,
in whole or in part, by cancellation of indebtedness, then such Investor
shall surrender to the Company for cancellation at the Closing any evidence
of such indebtedness or shall execute an instrument of cancellation in form
and substance acceptable to the Company. In addition, at the Closing the
Company shall deliver to Investor, cash in full payment of accrued interest
on the Note through the date of Closing.
1.3 SUBSEQUENT SALE OF SERIES A PREFERRED STOCK. The
Company may sell on or before June 30, 1997, up to the balance of the
authorized number of shares of Series A Preferred Stock not sold at the
Closing to such purchasers as it shall select, at a price not less than
$1,000 per share.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Investor that, as of the date hereof and the
date of Closing:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The
Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of California and has all requisite
corporate power and authority to carry on its business as now conducted and
as proposed to be conducted. The Company is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure to
so qualify would have a material adverse effect on its business or properties.
2.2 CAPITALIZATION AND VOTING RIGHTS. The authorized
capital of the Company consists, or will consist immediately prior to the
Closing, of:
(a) PREFERRED STOCK. 4,000,000 shares of Preferred
Stock (the "Preferred Stock"), of which 2,500 shares have been designated
Series A Preferred Stock (the "Series A Preferred Stock") and up to all of
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which will be sold pursuant to this Agreement or agreements containing
substantially similar terms. The rights, privileges and preferences of the
Series A Preferred Stock will be as stated in the Certificate of
Determination.
(b) COMMON STOCK. 25,000,000 shares of common stock
("Common Stock"), of which 2,567,873 shares were issued and outstanding as of
April 29, 1997.
(c) The outstanding shares of Common Stock are all
duly and validly authorized and issued, fully paid and nonassessable, and
were issued in accordance with the registration or qualification provisions
of the Securities Act of 1933, as amended (the "Act") and any relevant state
securities laws or pursuant to valid exemptions therefrom.
(d) Except for (A) the conversion privileges of the
Series A Preferred Stock to be issued under this Agreement and of $2,150,000
of original principal amount of the Company's 6% Convertible Subordinated
Debentures issued by the Company in December, 1996, including the Note, (the
"Debentures"), (B) the registration rights of the Series A Preferred Stock to
be issued under this Agreement and of any Debentures that remain outstanding
after the Closing, (C) options outstanding on December 31, 1996 to purchase
740,508 shares of Common Stock granted to employees, and options granted to
employees thereafter in the ordinary course of business, including options to
purchase 225,000 options granted to the Company's Chief Executive Officer,
Jeffrey F. Ait, (D) currently outstanding warrants to purchase 198,413 shares
of Common Stock, (E) warrants to purchase up to 29,615 shares of Common Stock
that may be issued to H.J. Meyers and Co., Inc. ("Meyers") pursuant to the
Engagement Agreement between the Company and Meyers dated as of October 15,
1996, (F) registration rights related to the warrants described in clauses
(D) and (E) above, (G) 260,000 shares of Common Stock that may be issuable to
InLet, Inc.("InLet") pursuant to a transaction contemplated in a Letter of
Intent (the "InLet Letter of Intent") among the Company, Inlet and InLet
Divestiture Corp. dated April 16, 1997, and shares of Common Stock that may
be issuable by the Company to InLet for royalties and other payments that may
be payable by the Company pursuant to such transaction and (H) registration
rights related to the Common Stock being registered pursuant to (1)
Post-Effective Amendment No. 2 to the Company's Registration Statement on
Form SB-2 (Reg. No. 333-17733), (2) Post-Effective Amendment No. 4 to the
Company's Registration Statement on Form SB-2 (Reg. No. 333-3784), (3)
Amendment No. 1 to the Company's Registration Statement on Form SB-2 (Reg.
No. 333-22565) and (4) registration rights of InLet pursuant to the
transaction contemplated in the InLet Letter of Intent, there are not
outstanding any options, warrants, rights (including conversion or preemptive
rights) or agreements for the purchase or acquisition from the Company of any
shares of its capital stock. In addition to the aforementioned options, as
of December 31, 1996, the Company had reserved an additional 63,213 shares of
its Common Stock for purchase upon exercise of options to be granted in the
future under the Company's 1990 Stock Option Plan, 1992 Stock Option Plan and
1995 Stock Option Plan (the "Option Plans"). In addition to the
aforementioned options, the Board of Directors of the Company has authorized,
and the Company has solicited shareholder approval of, options to purchase an
additional 400,000 shares of Common Stock pursuant to the 1995 Stock Option
Plan The Company is not a party or subject to any agreement or
understanding, and, to the best of the Company's knowledge, there is no
agreement or understanding between any persons and/or entities, which affects
or relates to the voting or giving of written consents with respect to any
security of the Company or by a director of the Company.
2.3 SUBSIDIARIES. The Company does not presently own or
control, directly or indirectly, any interest in any other corporation,
association, or other business entity. The Company is not a participant in
any joint venture, partnership, or similar arrangement.
2.4 AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement, the performance of
all obligations of the Company hereunder, and the authorization, issuance (or
reservation for issuance), sale and delivery of the Series A Preferred Stock
being sold hereunder and the Common Stock issuable upon conversion of the
Series A Preferred Stock has been taken or will be taken prior to the
Closing, and this Agreement constitutes a valid and legally binding
obligation of the Company, enforceable in accordance with its terms, except
(i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws of general application affecting enforcement of
creditors' rights generally, (ii) as limited by laws relating to the
availability of specific performance,
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injunctive relief, or other equitable remedies, and (iii) to the extent the
indemnification provisions contained herein may be limited by applicable
federal or state securities laws.
2.5 VALID ISSUANCE OF PREFERRED AND COMMON STOCK.
The Series A Preferred Stock that is being purchased by the
Investor hereunder, when issued, sold and delivered in accordance with the
terms of this Agreement for the consideration expressed herein, will be duly
and validly issued, fully paid, and nonassessable, and will be free of
restrictions on transfer other than restrictions on transfer under this
Agreement and under applicable state and federal securities laws. The Common
Stock issuable upon conversion of the Series A Preferred Stock purchased
under this Agreement has been duly and validly reserved for issuance and,
upon issuance in accordance with the terms of the Certificate of
Determination, will be duly and validly issued, fully paid, and nonassessable
and will be free of restrictions on transfer other than restrictions on
transfer under this Agreement and under applicable state and federal
securities laws.
2.6 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part
of the Company is required in connection with the consummation of the
transactions contemplated by this Agreement, except for the filing pursuant
to Section 25102(f) of the California Corporate Securities Law of 1968, as
amended, and the rules thereunder, which filing will be effected within
fifteen (15) days of the sale of the Series A Preferred Stock hereunder.
2.7 OFFERING. Subject in part to the truth and accuracy of
Investor's representations set forth in Section 3 of this Agreement, the
offer, sale and issuance of the Series A Preferred Stock as contemplated by
this Agreement are exempt from the registration requirements of the Act, and
neither the Company nor any authorized agent acting on its behalf will take
any action hereafter that would cause the loss of such exemption.
2.8 NO SENIOR DEBT. Except for the Debentures and for
obligations with respect to equipment leases or other equipment financings
incurred in the ordinary course of business, the Company is not currently
indebted to any banks, commercial finance lenders, leasing or equipment
financing institutions (including the vendor financing such equipment) or
other lending institutions regularly engaged in the business of lending money
(including venture capital, investment banking or similar institutions which
sometimes engage in lending activities but which are primarily engaged in
investments in equity securities), for money borrowed or for the purchase or
leasing of equipment in the case of lease or other equipment financing,
whether or not secured.
2.9 REGISTRATION STATEMENT. The Company has filed Amendment
No. 1 to Registration Statement on Form SB-2 (Reg. No. 333-22565) ("Amendment
No. 1") with the Securities and Exchange Commission (the "SEC"). Amendment
No. 1 covers the issuance of the shares of Common Stock issuable upon
conversion of the Note. Amendment No. 1 has been declared effective by the
SEC. Such effectiveness will expire on May 14, 1997.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. Investor hereby
represents and warrants that:
3.1 AUTHORIZATION. Investor has full power and authority to
enter into this Agreement, and such Agreement constitutes its valid and
legally binding obligation, enforceable in accordance with its terms.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is
made with Investor in reliance upon Investor's representation to the Company,
which by Investor's execution of this Agreement Investor hereby confirms,
that the Series A Preferred Stock to be received by Investor will be acquired
for investment for Investor's own account, not as a nominee or agent, and not
with a view to the resale or distribution of any part thereof, and that
Investor has no present intention of selling, granting any participation in,
or otherwise distributing the same. By executing this Agreement, Investor
further represents that Investor does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of
the Series A Preferred Stock.
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3.3 DISCLOSURE OF INFORMATION. Investor believes it has
received all the information it considers necessary or appropriate for
deciding whether to purchase the Series A Preferred Stock. Such Investor
further represents that it has had an opportunity to ask questions and
receive answers from the Company regarding the terms and conditions of the
offering of the Series A Preferred Stock and the business, properties,
prospects and financial condition of the Company. The foregoing, however,
does not limit or modify the representations and warranties of the Company in
Section 2 of this Agreement or the right of the Investor to rely thereon.
3.4 INVESTMENT EXPERIENCE. Investor is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment, and
has such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Series A
Preferred Stock. If other than an individual, Investor also represents it
has not been organized for the purpose of acquiring the Series A Preferred
Stock.
3.5 ACCREDITED INVESTOR. Investor is an "accredited
investor" within the meaning of Securities and Exchange Commission ("SEC")
Rule 501 of Regulation D, as presently in effect.
3.6 RESTRICTED SECURITIES. Investor understands that the
Series A Preferred Stock and the Common Stock issuable upon conversion
thereof (collectively, the "Securities") it is purchasing are characterized
as "restricted securities" under the federal securities laws inasmuch as they
are being acquired from the Company in a transaction not involving a public
offering and that under such laws and applicable regulations such securities
may be resold without registration under the Act, only in certain limited
circumstances. In this connection, Investor represents that it is familiar
with SEC Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Act.
3.7 FURTHER LIMITATIONS ON DISPOSITION. Without in any way
limiting the representations set forth above, Investor further agrees not to
make any disposition of all or any portion of the Series A Preferred Stock
unless and until the transferee has agreed in writing for the benefit of the
Company to be bound by this Section 3 and such transfer is in compliance with
applicable securities laws.
3.8 LEGENDS. It is understood that the certificates
evidencing the Securities may bear one or all of the following legends:
(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 a registration statement in
effect with respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required or unless
sold pursuant to Rule 144 of such Act."
(b) Any legend required by the laws of the State of
California, including any legend required by the California Department of
Corporations and Sections 417 and 418 of the California Corporations Code.
3.9 FURTHER REPRESENTATIONS BY FOREIGN INVESTORS. If an
Investor is not a United States person, Investor hereby represents that he
has satisfied himself as to the full observance of the laws of his
jurisdiction in connection with any invitation to subscribe for the
Securities or any use of this Agreement, including (i) the legal requirements
within his jurisdiction for the purchase of the Securities, (ii) any foreign
exchange restrictions applicable to such purchase, (iii) any governmental or
other consents that may need to be obtained, and (iv) the income tax and
other tax consequences, if any, that may be relevant to the purchase,
holding, redemption, sale, or transfer of the Securities. Such Investor's
subscription and payment for, and his continued beneficial ownership of the
Securities, will not violate any applicable securities or other laws of his
jurisdiction.
3.10 REGISTRATION STATEMENT. Investor acknowledges that it
has reviewed the Company's Amendment No. 1 to Registration Statement on Form
SB-2 (Reg. No. 333-22565).
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4. CALIFORNIA COMMISSIONER OF CORPORATIONS.
4.1 CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES
THAT ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
FOR SUCH SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105
OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS
AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED,
UNLESS THE SALE IS SO EXEMPT.
5. CONDITIONS OF INVESTOR'S OBLIGATIONS AT CLOSING. The obligations of
Investor under subsection 1.1(b) of this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions,
the waiver of which shall not be effective against any Investor who does
not consent thereto:
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true on and as of
the Closing with the same effect as though such representations and
warranties had been made on and as of the date of such Closing.
5.2 PERFORMANCE. The Company shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or
before the Closing.
5.3 COMPLIANCE CERTIFICATE. The President of the Company
shall deliver to each Investor at the Closing a certificate stating that the
conditions specified in Sections 5.1 and 5.2 have been fulfilled.
5.4 QUALIFICATIONS. All authorizations, approvals, or
permits, if any, of any governmental authority or regulatory body of the
United States or of any state that are required in connection with the lawful
issuance and sale of the Securities pursuant to this Agreement shall be duly
obtained and effective as of the Closing.
5.5 OPINION OF COUNSEL. The Investor shall have received an
opinion of the Company's counsel in substantially the form attached hereto as
Exhibit A.
5.6 EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement (as defined below) shall have been declared effective by the SEC and
no stop order shall have been issued by the SEC with respect to the securities
of the Company.
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations of the
Company to each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions by
that Investor:
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Investor contained in Section 3 shall be true on and as of
the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.
6.2 PAYMENT OF PURCHASE PRICE. The Investor shall have
delivered the purchase price specified in Section 1.2.
6.3 QUALIFICATIONS. All authorizations, approvals, or
permits, if any, of any governmental authority or regulatory body of the
United States or of any state that are required in connection with the lawful
issuance and sale of the Securities pursuant to this Agreement shall be duly
obtained and effective as of the Closing.
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6.4 EFFECTIVENESS OF REGISTRATION STATEMENT. The
Registration Statement shall have been declared effective by the SEC and no
stop order shall have been issued by the SEC with respect to the securities
of the Company.
7. REGISTRATION RIGHTS
7.1 REGISTRATION.
(a) Company shall prepare and file a new registration
statement or an amendment to Amendment No. 1 ( such registration statement
or amendment, the "Registration Statement") with the SEC under the Act to
register the issuance and/or resale of the Common Stock issuable upon
conversion of the Series A Preferred Stock (the "Registrable Securities") and
shall use its best efforts to secure the effectiveness of such Registration
Statement on or before the Closing. The number of Registrable Securities to
be registered shall be based on the applicable conversion price at the time
the Registration Statement is filed. The Company shall further amend the
Registration Statement to include additional Registrable Securities, if any,
at such time as the holders of a majority of the Registrable Securities shall
direct; provided, however, that the Company shall not be obligated to effect
more than one such amendment.
(b) Company shall pay all Registration Expenses (as
defined below) in connection with any registration, qualification or
compliance hereunder, and Investor shall pay all Selling Expenses (as defined
below) and other expenses that are not Registration Expenses relating to the
Registrable Securities resold by such Investor. "Registration Expenses"
shall mean all expenses, except for Selling Expenses, incurred by Company in
complying with the registration provisions herein described, including,
without limitation, all registration, qualification and filing fees, printing
expenses, escrow fees, fees and disbursements of counsel for Company, blue
sky fees and expenses and the expense of any special audits incident to or
required by any such registration. "Selling Expenses" shall mean all selling
commissions, underwriting fees and stock transfer taxes applicable to the
Registrable Securities and all fees and disbursements of counsel for
Investor.
(c) In the case of the registration effected by the
Company pursuant to these registration provisions, Company will use its best
efforts to: (i) keep such registration effective until the earlier of (A) the
second anniversary of the Closing, (B) such date as all of the Registrable
Securities have been resold or (C) such time as all of the Registrable
Securities held by Investor can be sold within a given three-month period
without compliance with the registration requirements of the Securities Act
pursuant to Rule 144 promulgated thereunder ("Rule 144"); (ii) prepare and
file with the SEC such amendments and supplements to the Registration
Statement and the prospectus used in connection with the 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 the
Registration Statement; (iii) furnish such number of prospectuses and other
documents incident thereto, including any amendment of or supplement to the
prospectus, as Investor from time to time may reasonably request; (iv) cause
the Registrable Securities to be listed on each securities exchange and
quoted on each quotation service on which similar securities issued by
Company are then listed or quoted; (v) provide a transfer agent and registrar
for all securities registered pursuant to the Registration Statement and a
CUSIP number for all such securities; (vi) otherwise use its best efforts to
comply with all applicable rules and regulations of the SEC; and (vii) file
the documents required of Company and otherwise use its best efforts to
maintain requisite blue sky clearance in (X) all jurisdictions in which
shares of the Series A Preferred Stock were originally sold and (Y) all other
states specified in writing by Investor, provided, however, that, as to
clause (Y), Company shall not be required to qualify to do business or
consent to service of process in any state in which it is not now so
qualified or has not so consented.
(d) Company shall furnish to Investor upon request a
reasonable number of copies of a supplement to or an amendment of the
prospectus used in connection with the Registration Statement as may be
necessary in order to facilitate the public sale or other disposition of all
or any of the Registrable Securities held by the Investor.
(e) With a view to making available to Investor the
benefits of Rule 144 and any other rule or regulation of the SEC that may at
any time permit Investor to sell Registrable Securities to the public
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without registration or pursuant to a registration statement on Form S-3,
Company covenants and agrees to use its best efforts to: (i) make and keep
public information available, as those terms are understood and defined in
Rule 144, until the earlier of (A) the second anniversary of the Closing or
(B) such date as all of the Registrable Securities shall have been resold;
(ii) file with the SEC in a timely manner all reports and other documents
required of Company under the Securities Act and the Securities Exchange Act
of 1934, as amended (the "Exchange Act"); and (iii) furnish to Investor upon
request, as long as the Investor owns any Registrable Securities, (A) a
written statement by Company that it has complied with the reporting
requirements of the Securities Act and the Exchange Act, (B) a copy of the
most recent annual or quarterly report of Company, and (C) such other
information as may be reasonably requested in order to avail Investor of any
rule or regulation of the SEC that permits the selling of any such
Registrable Securities without registration or pursuant to such registration
statement on Form S-3.
(f) If Investor shall propose to sell any Registrable
Securities pursuant to the Registration Statement, it shall notify Company of
its intent to do so by 12:00 noon Pacific time on the second business day
prior to such proposed sale. Such notice shall be deemed to constitute a
representation that any written information previously supplied by Investor
is accurate as of the date of such notice. At any time on or before 5:00
p.m. Pacific time on the business day after the business day on which the
Company receives such notice, Company may refuse to permit the Investor to
resell any Registrable Securities pursuant to the Registration Statement for
an initial period not to exceed thirty (30) days; provided, however, that in
order to exercise this right, Company must deliver a certificate in writing
to the Investor 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 stockholders due to
disclosure obligations of Company. For example, if the Company receives such
notice from Investor on 11:00 a.m. Pacific time on Tuesday, it must deliver
such certificate to Investor on or before 5:00 p.m. Pacific time on Wednesday
in order to exercise the foregoing right to delay the sale. If the Company
exercises such right, it shall use its best efforts to amend the Registration
Statement if necessary and to take all other actions necessary to allow such
sale, and shall notify the Investor promptly after it has determined that
such sale has become permissible. Notwithstanding the foregoing, Company
shall not be entitled to exercise its right to withdraw the registration
statement more than three (3) times in any calendar year or for more than two
consecutive thirty (30) day periods in any calendar year. Investor hereby
covenants and agrees that it will not sell any Registrable Securities
pursuant to the Registration Statement during the periods the Registration
Statement is withdrawn as set forth in this Section 7.1(f).
7.2 INDEMNIFICATION AND CONTRIBUTION.
(a) Company agrees to indemnify and hold harmless
Investor from and against any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) to which Investor 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, any untrue statement of a material fact or
omission to state a material fact in the Registration Statement on the
effective date thereof, or arise out of any failure by Company to fulfill any
undertaking included in the Registration Statement, and Company will, as
incurred, reimburse Investor for any legal or other expenses reasonably
incurred in investigating, defending or preparing to defend any such action,
proceeding or claim; provided, however, that 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 (i) an untrue statement or omission in such
Registration Statement in reliance upon and in conformity with written
information furnished to Company by or on behalf of Investor specifically for
use in preparation of the Registration Statement, (ii) the failure of
Investor to comply with the covenants and agreements contained in Section
7.1(f) hereof, or (iii) an untrue statement or omission in any prospectus
that is corrected in any subsequent prospectus, or supplement or amendment
thereto, that was delivered to the Investor prior to the pertinent sale or
sales by Investor.
(b) Investor agrees to indemnify and hold harmless
Company from and against any losses, claims, damages or liabilities (or
actions or proceedings in respect thereof) to which Company 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) an untrue statement of a material fact or
omission to state a material fact in the Registration Statement in reliance
upon and in conformity with written information furnished to Company by or on
behalf of Investor specifically for use in preparation of the Registration
Statement;
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provided, however, that Investor shall not be liable in any such case for any
untrue statement or omission in any prospectus which statement has been
corrected, in writing, by Investor and delivered to Company before the sale
from which such loss occurred, (ii) the failure of Investor to comply with
the covenants and agreements contained in Section 7.1(f) hereof, or (iii) an
untrue statement or omission in any prospectus that is corrected in any
subsequent prospectus, or supplement or amendment thereto, that was delivered
to the Investor prior to the pertinent sale or sales by the Investor, and
Investor will, as incurred, reimburse Company for any legal or other expenses
reasonably incurred in investigating, defending or preparing to defend any
such action, proceeding or claim.
(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 7.2(c) such indemnified person shall notify the indemnifying person
in writing of such claim or of the commencement of such action, and, subject
to the provisions hereinafter stated, in case any such action shall be
brought against an indemnified person and the indemnifying person shall have
been notified thereof, the indemnifying person shall be entitled to
participate therein, and, to the extent that it shall wish, to assume the
defense thereof, with counsel reasonably satisfactory to the indemnified
person. After notice from the indemnifying person to such indemnified person
of the indemnifying person's election to assume the defense thereof, the
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
reasonable judgment of 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.
(d) If the indemnification provided for in this
Section 7.2 is unavailable to or insufficient to hold harmless an indemnified
party under this Section 7.2 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 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 Company on the one hand and
Investor on the other in connection with the statements or omissions 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,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by Company on the one hand or Investor on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission. Company and Investor agree that it
would not be just and equitable if contribution pursuant to this subsection
(iv) were determined by pro rata allocation (even if Investor and all other
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 (iv). 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 (iv)
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 (iv),
Investor shall not be required to contribute any amount in excess of the
amount by which the net amount received by Investor from the sale of the
Registrable Securities to which such loss relates exceeds the amount of any
damages which Investor has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. 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. Investor's
obligations in this subsection (iv) to contribute are several in proportion
to its respective sales of Registrable Securities to which such loss relates
and not joint.
(e) The obligations of Company and Investor under this
Section 7.2 shall be in addition to any liability which Company and Investor
may otherwise have and shall extend, upon the same terms and conditions, to
each person, if any, who controls Company or Investor within the meaning of
the Securities Act and the Exchange Act.
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8. MISCELLANEOUS.
8.1 SURVIVAL OF WARRANTIES. The warranties, representations
and covenants of the Company and Investor contained in or made pursuant to
this Agreement shall survive the execution and delivery of this Agreement and
the Closing and shall in no way be affected by any investigation of the
subject matter thereof made by or on behalf of the Investor or the Company.
8.2 COVENANT NOT TO CONVERT SERIES A PREFERRED STOCK. No
Investor shall, without the prior written consent of the Company, convert any
shares of Series A Preferred whereby, solely by virtue of such conversion,
such Investor will be deemed, pursuant to Rule 13d-3 under the Securities
Exchange Act of 1934, to be the beneficial owner of more than 4.9% of any
class of the Company's then issued and outstanding equity securities which
are registered pursuant to Section 12 of such Exchange Act.
8.3 PRIVATE PLACEMENT. The Company agrees not to consummate
any private placement financing as long as High Risk Opportunities Hub Fund,
Ltd. holds any shares of Series A Preferred. The rights of Investor pursuant
to this Section 8.3 are not assignable to any assignee or transferee of
Series A Preferred.
8.4 SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, the terms and conditions of this Agreement shall inure to the benefit
of and be binding upon the respective successors and assigns of the parties
(including transferees of any Securities). Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the
parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
8.5 GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the State of California as applied to agreements
among California residents entered into and to be performed entirely within
California.
8.6 COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
8.7 TITLES AND SUBTITLES. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
8.8 NOTICES. Unless otherwise provided, any notice required
or permitted under this Agreement shall be given in writing and shall be
deemed effectively given upon personal delivery to the party to be notified
or upon confirmation of receipt of a facsimile transmission, or upon deposit
with the United States Post Office, by registered or certified mail, postage
prepaid and addressed to the party to be notified at the address indicated
for such party on the signature page hereof, or at such other address as such
party may designate by ten (10) days' advance written notice to the other
parties.
8.9 FINDERS' FEE. Each party represents that it neither is
nor will be obligated for any finders' fee or commission in connection with
this transaction. Investor agrees to indemnify and to hold harmless the
Company from any liability for any commission or compensation in the nature
of a finders' fee (and the costs and expenses of defending against such
liability or asserted liability) for which Investor or any of its officers,
partners, employees, or representatives is responsible.
The Company agrees to indemnify and hold harmless Investor
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability
or asserted liability) for which the Company or any of its officers,
employees or representatives is responsible.
8.10 ATTORNEY'S FEES. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement or the
Certificate of Determination, the prevailing party shall be entitled to
reasonable
9
attorney's fees, costs and necessary disbursements in addition to any other
relief to which such party may be entitled.
8.11 AMENDMENTS AND WAIVERS. Any term of this Agreement may
be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders
of a majority of the Common Stock issued or issuable upon conversion of the
Series A Preferred Stock. Any amendment or waiver effected in accordance
with this paragraph shall be binding upon each holder of any securities
purchased under this Agreement at the time outstanding (including securities
into which such securities are convertible), each future holder of all such
securities, and the Company.
8.12 SEVERABILITY. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the Agreement shall
be interpreted as if such provision were so excluded and shall be enforceable
in accordance with its terms.
8.13 AGGREGATION OF STOCK. All shares of Series A Preferred
held or acquired by affiliated entities or persons shall be aggregated
together for the purpose of determining the availability of any rights under
this Agreement.
8.14 ENTIRE AGREEMENT. This Agreement and the documents
referred to herein constitute the entire agreement among the parties and no
party shall be liable or bound to any other party in any manner by any
warranties, representations, or covenants except as specifically set forth
herein or therein.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
DELTAPOINT, INC.
By: /s/ Jeffrey F. Ait
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Jeffrey F. Ait, Chief Executive Officer
Address: 22 Lower Ragsdale Drive
Monterey, CA 93940
HIGH RISK OPPORTUNITIES HUB FUND, LTD.:
By: /s/ Robert H. Fasulo
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Robert H. Fasulo, C.F.O.
III Offshore Advisors
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Address: 250 S. Australian, Suite 600
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West Palm Beach, FL 33401
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