Exhibit 10.35
BLUESTONE SOFTWARE, INC.
SECOND RESTATED INVESTORS' RIGHTS AGREEMENT
MAY 25, 1999
TABLE OF CONTENTS
1. Registration Rights................................................... 1
1.1 Definitions.............................................. 1
1.2 Request for Registration................................. 2
1.3 Company Registration..................................... 4
1.4 Obligations of the Company............................... 5
1.5 Furnish Information...................................... 6
1.6 Expenses of Demand Registration.......................... 7
1.7 Expenses of Company Registration......................... 7
1.8 Underwriting Requirements................................ 7
1.9 Indemnification.......................................... 8
1.10 Reports Under Securities Exchange Act of 1934............ 10
1.11 Form S-3 Registration.................................... 11
1.12 Assignment of Registration Rights........................ 12
1.13 Limitations on Subsequent Registration Rights............ 12
1.14 "Market Stand-Off" Agreement............................. 13
1.15 Termination of Registration Rights....................... 13
1.16 Delay of Registration.................................... 14
2. Covenants of the Company.............................................. 14
2.1 Delivery of Financial Statements......................... 14
2.2 Inspection............................................... 15
2.3 Board of Directors....................................... 15
2.4 Tax Matters.............................................. 16
2.5 Maintenance of Properties and Leases..................... 16
2.6 Insurance................................................ 16
2.7 Key Person Life Insurance................................ 17
2.8 Accounts and Records..................................... 17
2.9 Independent Accountants.................................. 17
2.10 Compliance with Requirements of Government Authorities... 17
2.11 Maintenance of Corporate Existence....................... 17
2.12 Employee Agreements...................................... 17
2.13 Notice of Breach......................................... 18
2.14 Transactions with Affiliates............................. 18
2.15 Maintenance of a Standard System of Accounting........... 18
2.16 Payment of Indebtedness.................................. 18
2.17 Unix GUI Business........................................ 18
2.18 Termination of Covenants................................. 18
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3. Miscellaneous......................................................... 18
3.1 Successors and Assigns................................... 19
3.2 Governing Law............................................ 19
3.3 Counterparts............................................. 19
3.4 Titles and Subtitles..................................... 19
3.5 Notices.................................................. 19
3.6 Expenses................................................. 19
3.7 Amendments and Waivers................................... 19
3.8 Severability............................................. 20
3.9 Aggregation of Stock..................................... 20
3.10 Confidential Information................................. 20
3.11 Entire Agreement......................................... 20
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SECOND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS SECOND RESTATED INVESTORS' RIGHTS AGREEMENT is made as of the 25th
day of May, 1999 by and among Bluestone Software, Inc., a Delaware corporation
(the "COMPANY"), the investors listed on SCHEDULE A hereto, each of which is
herein referred to as an "INVESTOR," and the individual listed on SCHEDULE B
hereto, who is herein referred to as the "COMMON STOCKHOLDER."
The Company and each of the Investors are parties to one or more of the
Series A Preferred Stock Purchase Agreement dated as of April 18, 1997 (the
"SERIES A AGREEMENT"), pursuant to which the Company sold and certain of the
Investors purchased shares of Series A Convertible Preferred Stock, par value
$.001 per share, of the Company (the "SERIES A PREFERRED STOCK"), the Series B
Convertible Preferred Stock Purchase Agreement dated as of April 23, 1998 (the
"SERIES B AGREEMENT"), pursuant to which the Company sold and certain of the
Investors purchased shares of Series B Preferred Stock, par value $.001 per
share, of the Company (the "SERIES B PREFERRED STOCK"), or the Preferred Stock
Purchase Agreement dated as of May 25, 1999 (the "SERIES C AGREEMENT" and
together with the Series A Agreement and the Series B Agreement, the "PURCHASE
AGREEMENTS"), pursuant to which the Company sold and certain of the Investors
purchased shares of Series C Convertible Preferred Stock, par value $.001 per
share, of the Company (the "SERIES C PREFERRED STOCK," and together with the
Series A Preferred Stock and the Series B Preferred Stock, the "PREFERRED
STOCK"). In consideration for the purchase by the Investors in the Preferred
Stock under the Purchase Agreements, the Company desires to grant the Investors
the registration rights, right of first offer and other rights set forth herein.
This Second Restated Investors' Rights amends and restates in its entirety the
Restated Investors' Rights Agreement dated as of April 23, 1998 between the
Company and the parties signatory thereto as amended by the First Amendment
dated as of January 21, 1999 (the "PRIOR AGREEMENT").
INTENDING TO BE LEGALLY BOUND, and in consideration of the mutual
agreements stated below and in the Purchase Agreements, the parties hereby agree
as follows:
1. REGISTRATION RIGHTS. The Company covenants and agrees as follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The term "ACT" means the Securities Act of 1933, as
amended.
(b) The term "FORM S-3" means such form under the Act as
in effect on the date hereof or any registration form under the 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.
(c) The term "HOLDER" means any person owning or having
the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.12 hereof
(d) The term "INITIATING HOLDERS" means the holders of a
majority of the outstanding shares on an as-converted basis of the Series A
Preferred Stock, the Series B Preferred Stock and the Series C Preferred Stock.
(e) The term "1934 ACT" shall mean the Securities
Exchange Act of 1934, as amended.
(f) The term "REGISTER," "REGISTERED," and
"REGISTRATION" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration statement or
document.
(g) The term "REGISTRABLE SECURITIES" means the Common
Stock issuable or issued (i) upon conversion of the Series A Preferred Stock,
the Series B Preferred Stock or the Series C Preferred Stock issued or issuable
by the Company or (ii) upon exercise of the warrants to purchase shares of the
Company's Common Stock issued pursuant to the Convertible Subordinated Secured
Note and Warrant Purchase Agreement, dated as of January 21, 1999, by and
between the Company and the investors signatory thereto or (iii) as a result of
a dividend or distribution or stock split or reclassification of the Series A
Preferred Stock, the Series B Preferred Stock or the Series C Preferred Stock or
the Common Stock issued or issuable upon conversion thereof.
(h) The number of shares of "REGISTRABLE SECURITIES THEN
OUTSTANDING" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities.
(i) The term "SEC" shall mean the Securities and
Exchange Commission.
(j) With respect only to Sections 1.3, 1.4, 1.5, 1.7,
1.8, 1.10, 1.11 (other than with respect to the right to request that the
Company effect such registration), 1.12, 1.14, 1.15 and 2.3 (except for
Subsection 2.3(e)) hereof, the term "Holder" shall also include the Common
Stockholder and the term "Registrable Securities" shall also include any Common
Stock held by the Common Stockholder (whether issued upon conversion of the
Preferred Stock or otherwise, other than shares of Common Stock issued after the
date hereof for incentive purposes).
1.2 REQUEST FOR REGISTRATION
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(a) If the Company shall receive, at any time after the earlier
of (i) two (2) years after the date hereof, or (ii) one (1) year after the
effective date of the first registration statement for a public offering (the
"Initial Public Offering") of securities of the Company (other than a
registration statement relating either to the sale of securities to employees of
the Company pursuant to a stock option, stock purchase or similar plan or a SEC
Rule 145 transaction), a written request from the Initiating Holders, that the
Company file a registration statement under the Act covering an offering of
securities of the Company at a gross offering price of at least $20,000,000 in
the aggregate, then the Company shall:
(i) within ten (10) days of the receipt thereof, give
written notice of such request to all Holders;
(ii) file with the SEC as soon as practicable, but in
any event within sixty (60) days of the receipt of such request, a
registration statement covering the registration under the Act of all
Registrable Securities which the Holders request to be registered, subject to
the limitations of subsection 1.2(b), within twenty (20) days of the mailing
of such notice by the Company in accordance with Section 3.5; and
(iii) use its best efforts to cause such registration
statement to become effective as soon as practicable, but in any event within
sixty (60) days after the filing thereof.
(b) 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 its request made pursuant to
subsection 1.2(a), and the Company shall include such information in the written
notice referred to in subsection 1.2(a). The underwriter will be selected by the
Company and shall be reasonably acceptable to the Initiating Holders. In such
event, the right of any Holder to include its 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 upon by the Initiating Holders
and such Holder) to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Company as provided in subsection 1.4(e)) enter into an underwriting agreement
in customary form with the underwriter or underwriters selected for such
underwriting. Notwithstanding any other provision of this Section 1.2, if the
underwriter advises the Initiating Holders in writing that marketing factors
require a limitation of the number of shares to be underwritten, then the
Initiating Holders shall so advise all Holders of Registrable Securities which
would otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities of
the Company owned by each Holder; provided, however, that the number of shares
of Registrable Securities to be included in such underwriting shall not be
reduced unless all other securities are first entirely excluded from the
underwriting.
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(c) Notwithstanding the foregoing, if the Company shall furnish
to Holders requesting a registration statement pursuant to this Section 1.2 a
certificate signed by the Chief Executive Officer 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 stockholders 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 taking action
with respect to such filing for a period of not more than ninety (90) days after
receipt of the request of the Initiating Holders; provided, however, that the
Company may not utilize this right more than once in any twelve-month period.
(d) In addition, the Company shall not be obligated to effect,
or to take any action to effect, any registration pursuant to this Section 1.2:
(i) After the Company has effected two (2) registrations
at the request of Initiating Holders pursuant to this Section 1.2 and such
registrations have been declared or ordered effective;
(ii) During the period starting with the date sixty (60)
days prior to the Company's good faith estimate of the date of filing of, and
ending on a date one hundred eighty (180) days after the effective date of, a
registration subject to Section 1.3 hereof, provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(iii) If the Initiating Holders propose to dispose of
shares of Registrable Securities that may be immediately registered on Form
S-3 pursuant to a request made pursuant to Section 1.11 below.
1.3 COMPANY REGISTRATION. If at any time after the Initial
Public Offering, (but without any obligation to do so) the Company proposes to
register any of its stock or other securities under the Act in connection with
the public offering in excess of $1,000,000 of such securities solely for cash
in excess of $1,000,000 (other than a registration initiated by a Holder on Form
S-3, a registration relating solely to the sale of securities to participants in
a Company stock option, stock purchase or similar plan or a SEC Rule 145
transaction, a registration on any form which does not include substantially the
same information as would be required to be included in a registration statement
covering the sale of the Registrable Securities or a registration in which the
only Common Stock being registered is Common Stock issuable upon conversion of
debt securities that are also being registered), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within twenty (20) days after mailing of
such notice by the Company in accordance with Section 3.5, the Company shall,
subject to the provisions of Section 1.8, include in such registration all of
the Registrable Securities that each such Holder has requested to be registered,
and shall use its best efforts to cause such registration statement to become
effective.
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1.4 OBLIGATIONS OF THE COMPANY. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities and use its best
efforts to cause such registration statement to become effective, and, upon
the request of the Holders of at least a majority of the Registrable
Securities registered thereunder, keep such registration statement effective
for a period of up to one hundred twenty (120) days or until the distribution
contemplated in the Registration Statement has been completed, whichever
occurs first; provided, however, that (i) such 120-day period shall be
extended for a period of time equal to the period the Holder refrains from
selling any securities included in such registration at the request of an
underwriter of Common Stock (or other securities) of the Company; and (ii) in
the case of any registration of Registrable Securities on Form S-3 that are
intended to be offered on a continuous or delayed basis, such 120-day period
shall be extended, if necessary, to keep the registration statement effective
until all such Registrable Securities are sold, provided that Rule 415, or
any successor rule under the Act, permits an offering on a continuous or
delayed basis, and provided further that applicable rules under the Act
governing the obligation to file a post-effective amendment permit, in lieu
of filing a post-effective amendment that (A) includes any prospectus
required by Section 10(a)(3) of the Act or (B) reflects facts or events
representing a material or fundamental change in the information set forth in
the registration statement, the incorporation by reference of information
required to be included in (A) and (B) above to be contained in periodic
reports filed pursuant to Section 13 or 15(d) of the 1934 Act in the
registration statement.
(b) Prepare and file with the SEC such amendment 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 Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of
a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities
owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities
or Blue Sky laws of such jurisdictions as shall be reasonably requested by
the Holders; provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions,
unless the Company is already subject to service in such jurisdiction and
except as may be required by the Act.
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(e) In the event of any underwritten public offering,
enter into and perform its obligations under an underwriting agreement, in
usual and customary form, with the managing underwriter of such offering.
Each Holder participating in such underwriting shall also enter into and
perform its obligations under such an agreement.
(f) Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the 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.
(g) File all applications, documents and other
information necessary to list the Registrable Securities being registered
hereunder on each securities exchange on which similar securities issued by
the Company are then listed, and otherwise use its best efforts to cause such
listing to be effected.
(h) Provide a transfer agent and registrar for all
Registrable Securities registered pursuant hereto and a CUSIP number for all
such Registrable Securities, in each case not later than the effective date
of such registration.
(i) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 1, on the
date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Section 1, 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, an opinion,
dated such date, of the counsel representing the Company for the purposes of
such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders requesting registration of
Registrable Securities.
1.5 FURNISH INFORMATION.
(a) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to this Section 1 with respect to the
Registrable Securities of any selling Holder that such Holder shall furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.11 if, due to the
operation of subsection 1.5(a), the anticipated aggregate offering price of the
Registrable Securities to be included in the registration does not equal or
exceed the anticipated aggregate offering price
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required to originally trigger the Company's obligation to initiate such
registration as specified in subsection 1.2(a) or subsection 1.11(b)(2),
whichever is applicable.
1.6 EXPENSES OF DEMAND REGISTRATION. All expenses other than
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company
(including fees and disbursements of counsel for the Company in its capacity as
counsel to the selling Holders hereunder and if Company counsel does not make
itself available for this purpose, then the Company will pay the reasonable fees
and disbursements of one (1) counsel for the selling Holders) shall be borne by
the Company; provided, however, that the Company shall not be required to pay
for any expenses of any registration proceeding begun pursuant to Section 1.2 if
the registration request is subsequently withdrawn at the request of the Holders
of at least a majority of the Registrable Securities to be registered (in which
case all participating Holders shall bear such expenses ratably based on the
ratio that the amounts of Registrable Securities each participating Holder
included in such withdrawn registration statement bears to the total amount of
Registrable Securities included in such registration statement by all
participating Holders), unless the Initiating Holders agree to forfeit its right
to one demand registration pursuant to Section 1.2; provided further, however,
that if at the time of such withdrawal the Holders have learned of a material
adverse change in the condition or prospects of the Company from that known to
the Holders at the time of their request and have withdrawn the request with
reasonable promptness following disclosure by the Company of such material
adverse change, then the Holders shall not be required to pay any of such
expenses and shall retain their fights pursuant to Section 1.2.
1.7 EXPENSES OF COMPANY REGISTRATION. The Company shall bear and pay
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.12), including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto and the fees and disbursements of counsel for the Company in its
capacity as counsel to the selling Holders hereunder and if Company counsel does
not make itself available for this purpose, then the Company will pay the
reasonable fees and disbursements of one counsel for the selling Holders
selected by them, but excluding underwriting discounts and commissions relating
to Registrable Securities.
1.8 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's capital stock, the Company
shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by
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stockholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the underwriters determine in their sole
discretion is compatible with the success of the offering, then the Company
shall be required to include in the offering only that number of such
securities, including Registrable Securities, that the underwriters determine in
their sole discretion will not jeopardize the success of the offering (the
securities so included to be determined first by excluding securities requested
to be included that are not Registrable Securities, then by excluding securities
requested to be included that are Registrable Securities held by the Common
Stockholder and then by apportioning pro rata among the selling Holders who are
not the Common Stockholder according to the total amount of Registrable
Securities entitled to be included therein owned by each such selling Holder or
in such other proportions as shall mutually be agreed to by such selling
Holders) but in no event shall any shares being sold by a stockholder exercising
a demand registration right similar to that granted in Section 1.2 be excluded
from such offering. For purposes of the preceding parenthetical concerning
apportionment, for any selling Holder of Registrable Securities that is a
partnership or corporation, the partners, retired partners and stockholders of
such holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling stockholder," and any pro-rata reduction with
respect to such "selling stockholder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "selling stockholder," as defined in this sentence.
Notwithstanding any other provisions of this Section 1.8, if the underwritten
offering is a Company registration pursuant to Section 1.3, then the shares
being sold by the Company shall not be excluded from such offering.
1.9 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the 1934 Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the Act,
or 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"): (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 Act, the 1934 Act, any state securities law or
any rule or regulation promulgated under the Act, or the 1934 Act or any state
securities law; and the Company will pay to each such Holder, underwriter or
controlling person, as incurred, 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 subsection 1.9(a) shall not
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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 any such Holder, underwriter or
controlling person.
(b) To the extent permitted by law, each selling Holder will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, any other
Holder selling securities in such registration statement and any controlling
person of any such underwriter or other Holder, against any losses, claims,
damages or liabilities (joint or several) to which any of the foregoing persons
may become subject, under the Act, or 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 expressly
for use in connection with such registration; and each such Holder will pay, as
incurred, any legal or other expenses reasonably incurred by any person intended
to be indemnified pursuant to this subsection 1.9(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection
1.9(b) 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,
that, in no event shall any indemnity under this subsection 1.9(b) exceed the
gross proceeds from the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this
Section 1.9 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 1.9, 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
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate 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 1.9, 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
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under this Section 1.9. Each indemnified party shall furnish such information
regarding itself or the claim in question as an indemnifying party may
reasonably request in writing and as shall be reasonably required in connection
with the defense of such claim.
(d) If the indemnification provided for in this Section 1.9 is
held by a court of competent jurisdiction to be unavailable to an indemnified
party with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
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 statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined 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.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 1.9 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.10 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration of
its Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
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(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144 (at
any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any
time after it has become subject to such reporting requirements), or that it
qualifies as a registrant whose securities may be resold pursuant to Form S-3
(at any time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents filed by
the Company with the SEC, and (iii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the SEC which
permits the selling of any such securities without registration or pursuant to
such form.
1.11 FORM S-3 REGISTRATION. In case the Company shall receive from any
Holder or Holders 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:
(a) promptly give written notice of the proposed registration,
and any related qualification or compliance, to all other Holders;
(b) file with the Commission as soon as practicable, but in any
event within 30 days after the receipt of such request, a registration statement
on Form S-3 covering such Registrable Securities, and use its best efforts to
cause such registration statement to become effective as soon as practicable,
but in any event within 60 days thereafter, and use its best efforts to effect
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 15 days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect more than
one registration pursuant to this Section 1.11 in any twelve-month period, and
further provided that the Company shall not be obligated to effect any such
registration, qualification or compliance, pursuant to this section 1.11: (1) if
Form S-3 is not available for such offering by the Holders, (2) 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 (net of any
underwriters' discounts or commission) of less than $1,000,000; (3) if the
Company shall furnish to the Holders a certificate signed by the President 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
stockholders 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 sixty (60)
-11-
days after receipt of the request of the Holder or Holders under this Section
1.11; provided, however, that the Company shall not utilize this right more than
once in any twelve month period; or (4) 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; and
(c) All expenses incurred in connection with a registration
requested pursuant to Section 1.11, including (without limitation) all
registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of counsel for the selling Holder or Holders
and counsel for the Company, but excluding any underwriters' discounts or
commissions associated with Registrable Securities, shall be borne by the
Company. Registrations effected pursuant to this Section 1.11 shall not be
counted as demands for registrations or registrations effected pursuant to
Sections 1.2 or 1.3, respectively.
1.12 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Securities pursuant to this Section 1 may be assigned
(but only with all related obligations and provided that the rights of the
Initiating Holders to request registration pursuant to Section 1.2 shall not be
assignable) by a Holder to a transferee or assignee of such securities who
acquires at least two percent (2%) of the Registrable Securities (as adjusted
for stock splits, combinations and the like), provided: (a) the Company is,
within a reasonable time after such transfer, 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; (b) such
transferee or assignee agrees in writing to be bound by and subject to the terms
and conditions of this Agreement, including without limitation the provisions of
Section 1.14 below; and (c) such assignment shall be effective only if such
transfer is exempt from registration under the Act. For the purposes of
determining the number of shares of Registrable Securities held by a transferee
or assignee, the holdings of transferees and assignees of a partnership who are
partners or retired partners of such partnership (including spouses and
ancestors, lineal descendants and siblings of such partners or spouses who
acquire Registrable Securities by gift, will or intestate succession) shall be
aggregated together with the partnership; provided that all assignees and
transferees who would not qualify individually for assignment of registration
rights shall have a single attorney-in-fact for the purpose of exercising any
rights, receiving notices or taking any action under this Section 1.
1.13 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and after the
date of this Agreement, the Company shall not, without the prior written consent
of the Holders of at least a majority of the outstanding Registrable Securities,
enter into any agreement with any holder or prospective holder of any securities
of the Company that would allow such holder or prospective holder (a) to include
such securities in any registration filed under Section 1.2 hereof, unless under
the terms of such agreement, such holder or prospective holder may include such
securities in any such registration only to the extent that the inclusion of his
securities will not reduce the amount of the Registrable Securities of the
Holders that is included or (b) to make a demand registration that could result
in such registration statement being declared effective prior
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to the earlier of either of the dates set forth in subsection 1.2(a) or within
one hundred eighty (180) days of the effective date of any registration effected
pursuant to Section 1.2.
1.14 "MARKET STAND-OFF" AGREEMENT. Each Investor hereby agrees that,
during the period of duration specified by the Company and an underwriter of
Common Stock or other securities of the Company, following the effective date of
a registration statement of the Company filed under the Act, it shall not, to
the extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to donees who agree to be similarly bound) any securities of the Company
held by it at any time during such period except Common Stock included in such
registration; provided, however, that:
(a) such agreement shall be applicable only to the first such
registration statement of the Company that covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and
(b) all officers and directors of the Company and all other
persons with registration rights (whether or not pursuant to this Agreement)
enter into similar agreements; and
(c) such market stand-off time period shall not exceed 180
days.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
Notwithstanding the foregoing, the obligations described in this
Section 1.14 shall not apply to a registration relating solely to employee
benefit plans on Form S-1 or Form S-8 or similar forms that may be promulgated
in the future, or a registration relating solely to a Commission Rule 145
transaction on Form S-4 or a similar form that may be promulgated in the future.
1.15 TERMINATION OF REGISTRATION RIGHTS.
(a) No Holder shall be entitled to exercise any right provided
for in this Section 1 after five (5) years following the consummation of the
sale of securities pursuant to a registration statement filed by the Company
under the Act in connection with the initial firm commitment underwritten
offering of its securities to the general public.
(b) In addition, the right of any Holder to request
registration or inclusion in any registration pursuant to Sections 1.2, 1.3 and
1.11 shall terminate on the closing of the first Company-initiated registered
public offering of Common Stock of the Company if all shares of Registrable
Securities held or entitled to be held upon conversion by such Holder may
-13-
immediately be sold under Rule 144 during any 90-day period, or on such date
after the closing of the first Company-initiated registered public offering of
Common Stock of the Company as all shares of Registrable Securities held or
entitled to be held upon conversion by such Holder may immediately be sold under
Rule 144 during any 90-day period; provided, however, that the provisions of
this Section 1.15(b) shall not apply to any Holder who owns more than two
percent (2%) of the Company's outstanding Common Stock.
1.16 DELAY OF REGISTRATION. No Holder shall have any right to take
action to restrain, enjoin or otherwise delay any registration as result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 1, provided, however, that this Section 1.16
shall not affect any right or remedy that the Holder may otherwise have.
2. COVENANTS OF THE COMPANY.
2.1 DELIVERY OF FINANCIAL STATEMENTS. The Company shall deliver to
each Investor:
(a) as soon as practicable, but in any event within ninety (90)
days after the end of each fiscal year of the Company, an income statement for
such fiscal year, a balance sheet of the Company and statement of stockholders'
equity as of the end of such year, and a statement of cash flows for such year,
such year-end financial reports to be in reasonable detail, prepared in
accordance with generally accepted accounting principals ("GAAP"), and audited
and certified by independent public accountants of nationally recognized
standing selected by the Company;
(b) so long as an Investor holds at least five percent (5.0%)
of the then outstanding Common Stock of the Company (on a fully as-converted
basis, as if all shares of Preferred Stock and all convertible securities had
been fully converted into shares of Common Stock): within thirty (30) days of
the end of each month, an unaudited income statement and statement of cash flows
and balance sheet for and as of the end of such month, in reasonable detail
comparing actual performance to budget;
(c) so long as an Investor holds at least five percent (5.0%)
of the then outstanding Common Stock of the Company (on a fully as-converted
basis, as if all shares of Preferred Stock and all convertible securities had
been fully converted into shares of Common Stock): as soon as practicable, but
in any event thirty (30) days prior to the end of each fiscal year, a budget and
business plan for the next fiscal year, prepared on a monthly basis, including
balance sheets and statements of cash flows for such months and, as soon as
prepared, statements of operating goals for each of the Company's functional
units and any other budgets or revised budgets prepared by the Company;
(d) with respect to the financial statements called for in
subsections (b) and (c) of this Section 2.1, an instrument executed by the Chief
Financial Officer or President of
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the Company and certifying that such financials were prepared in accordance with
GAAP consistently applied with prior practice for earlier periods (with the
exception of footnotes that may be required by GAAP) and fairly present the
financial condition of the Company and its results of operation for the period
specified, subject to year-end audit adjustment; and
(e) so long as an Investor holds at least five percent (5.0%)
of the then outstanding Common Stock of the Company (on a fully as-converted
basis, as if all shares of Preferred Stock and all convertible securities had
been fully converted into shares of Common Stock): such other information
relating to the financial condition, business, prospects or corporate affairs
(including press releases and the like) of the Company as the Investor or any
assignee of any Investor may from time to time reasonably request, provided,
however, that the Company shall not be obligated under this subsection (e) or
any other subsection of Section 2.1 to provide information which the Company's
Board deems in good faith to be a trade secret or similar confidential
information.
2.2 INSPECTION. The Company shall permit each Investor that holds at
least five percent (5.0%) of the then outstanding Common Stock of the Company
(on a fully as-converted basis, as if all shares of Preferred Stock and all
convertible securities had been fully converted into shares of Common Stock), at
such Investor's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers, all at such reasonable times as may be
requested by the Investor; provided, however, that the Company shall not be
obligated pursuant to this Section 2.2 to provide access to any information
which it reasonably considers to be a trade secret or similar confidential
information.
2.3 BOARD OF DIRECTORS.
(a) Following the Closing and in accordance with Section D.1 of
the Company's Third Amended and Restated Certificate of Incorporation, the Board
of Directors of the Company shall consist of six (6) members. Subject to Section
D.1 of the Company's Third Amended and Restated Certificate of Incorporation,
the Company shall use its best efforts to cause and maintain the election of the
following persons to the Board of Directors: (i) the Company's Chief Executive
Officer, (ii) one (1) director nominated by the holders of a majority of the
outstanding shares of Common Stock of the Company, (iii) two (2) directors
nominated by the holders of the outstanding shares of Series A Preferred Stock
(each an "INVESTORS' BOARD REPRESENTATIVE"), one of whom shall be selected by
Patricof & Co. Ventures, Inc., or its successors or assigns, and one of whom
shall be selected by Adams Capital Management, Inc., or its successor or
assigns, (iv) one (1) outside director selected by a majority of the outstanding
shares of Common Stock, so long as such person is approved by the holders of at
least seventy-five percent (75%) of the Series A Preferred Stock and Series B
Preferred Stock, then outstanding, voting together on an as-converted basis, and
(v) one (1) director nominated by GE Capital ("GECC BOARD REPRESENTATIVE"). The
Investors' Board Representatives and the GECC
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Board Representative shall have the right, but not the obligation, to be elected
to any and all committees of the Board;
(b) The Company shall hold meetings of its Board of Directors
no less frequently than bimonthly, unless the Board unanimously agrees to hold
such meetings less frequently. The Company shall reimburse the Investors' Board
Representatives' and the GECC Board Representative's reasonable expenses
incurred in attending the meetings of the Company's Board (or any committee
thereof) which are required and/or requested, and any reasonable business
expense incurred by such Representative.
2.4 TAX MATTERS.
(a) The Company will promptly pay and discharge, or cause to be
paid and discharged, when due and payable, all lawful taxes, assessments and
governmental charges or levies imposed upon the income, profits, property or
business of the Company or any subsidiary; provided, however, that any such tax,
assessment, charge or levy need not be paid if the validity thereof shall
currently be contested in good faith by appropriate proceedings and if the
Company shall have set aside on its books adequate reserves with respect
thereto, and provided, further, that the Company will pay all such taxes,
assessments, charges or levies forthwith upon the commencement of proceedings to
foreclose any hen which may have attached as security therefor;
(b) During the entire period the Preferred Stock (and upon
conversion, the Common Stock) is held by an Investor, the Company agrees to meet
the active business requirements set forth in Section 1202(c)(2)(A) and
Section 1202(e) of the Internal Revenue Code of 1986, as amended (the "Code");
and
(c) The Company agrees to submit such reports to the Secretary
of the Treasury as required by Section 1202(d)(1) of the Code.
2.5 MAINTENANCE OF PROPERTIES AND LEASES. The Company will keep its
properties and those of its subsidiaries in good repair, working order and
condition, reasonable wear and tear excepted, and from time to time make all
needful and proper repairs, renewals, replacements, additions and improvements
thereto; and the Company and its subsidiaries will at all times comply with each
material provision of all leases to which any of them is a party or under which
any of them occupies property if the breach of such provision might have a
material and adverse effect on the condition, financial or otherwise, or
operations of the Company.
2.6 INSURANCE. The Company will keep its assets and those of its
subsidiaries which are of an insurable character insured by financially sound
and reputable insurers against loss or damage by fire, explosion and other risks
customarily insured against by companies in the Company's line of business, and
the Company will maintain, with financially sound and
-16-
reputable insurers, insurance against other hazards and risks and liability to
persons and property to the extent and in the manner customary for companies in
similar businesses similarly situated.
2.7 KEY PERSON LIFE INSURANCE. The Company has as of the date hereof
obtained and will cause to be maintained, from financially sound and reputable
insurers, term life insurance on the life of Mel Baiada in the amount of
$2,000,000, on the life of Kevin Kilroy in the amount of $1,000,000, and on each
of the lives of Robert Bickel, Mark Nigro and John Capobianco in the amount of
$500,000. Such policies shall name the Company as loss payee and shall not be
cancellable by the Company without prior approval of the Holders of at least 75%
of the Registrable Securities then outstanding.
2.8 ACCOUNTS AND RECORDS. The Company will keep true records and books
of account in which full, true and correct entries will be made of all dealings
or transactions in relation to its business and affairs in accordance with
generally accepted accounting principles applied on a consistent basis.
2.9 INDEPENDENT ACCOUNTANTS. The Company will retain independent
public accountants of recognized national standing who shall certify the
Company's financial statements at the end of each fiscal year. In the event the
services of the independent public accountants so selected, or any firm of
independent public accountants hereafter employed by the Company, are
terminated, the Company will promptly thereafter notify the Holders and will
request the firm of independent public accountants whose services are terminated
to deliver to the Holders a letter from such firm setting forth the reasons for
the termination of their services. In the event of such termination, the Company
will promptly thereafter engage another firm of independent public accounts of
recognized national standing. In its notice to the Holders the Company shall
state whether the change of accountants was recommended or approved by the Board
of Directors of the Company or any committee thereof.
2.10 COMPLIANCE WITH REQUIREMENTS OF GOVERNMENT AUTHORITIES. The
Company and all its subsidiaries shall duly observe and conform to all valid
requirements of governmental authorities relating to the conduct of their
businesses or to their properties or assets.
2.11 MAINTENANCE OF CORPORATE EXISTENCE. The Company shall maintain in
full force and effect its corporate existence, rights and franchises and all
licenses and other rights in or to use patents, processes, licenses, trademarks,
trade names or copyrights owned or possessed by it or any subsidiary and deemed
by the Company to be necessary to the conduct of their business.
2.12 EMPLOYEE AGREEMENTS. The Company will cause each person employed
by it or any subsidiary to enter into an agreement containing, among other
things, confidentiality, non-competition/non-solicitation and
discovery/inventions provisions in form and content reasonably satisfactory to
the Investors.
-17-
2.13 NOTICE OF BREACH. The Company shall furnish to each of the
Investors within ten (10) days after becoming aware of (i) any material default
or breach of the terms of this Agreement, any Purchase Agreement, the Second
Restated First Refusal and Co-Sale Agreement or the Restated Voting Agreement
(collectively, the "TRANSACTION AGREEMENTS"), or any document or agreement
delivered in connection with the Transaction Agreements, or (ii) any material
adverse event affecting the Company or its business, financial condition,
operations, prospects or affairs, a statement setting forth, in reasonable
detail, such default, breach or event, including the Company's proposed response
thereto.
2.14 TRANSACTIONS WITH AFFILIATES. The Company shall not, without the
approval of the disinterested members of the Company's Board of Directors,
engage in any loans, leases, contracts or other transactions with any director,
officer or key employee of the Company, or any member of any such person's
immediate family, including the parents, spouse, children and other relatives of
any such person (including the hiring thereof) or any affiliate of any such
person, including without limitation Bluestone Consulting Inc.
2.15 MAINTENANCE OF A STANDARD SYSTEM OF ACCOUNTING. The Company will
maintain a standard system of accounting established and administered in
accordance with generally accepted accounting principles.
2.16 PAYMENT OF INDEBTEDNESS. The Company will promptly pay or cause to
be paid when due, or in conformance with customary trade terms otherwise in
accordance with policies related thereto adopted by the Company's Board of
Directors, all indebtedness incident to operations of the Company.
2.17 UNIX GUI BUSINESS. Except as provided in the letter agreement
dated April 23, 1998, between the Company and Bluestone Consulting, Inc., the
Company has discontinued its Unix GUI business, and will not incur any
additional obligations in respect of, or make any investment or advance to, such
business and the discontinuance and/or disposition of such business has not
resulted in and will not result in any tax or other liabilities to the Company.
2.18 TERMINATION OF COVENANTS. The covenants set forth in this Section
2 shall terminate and be of no further force and effect after the time of
effectiveness of the Company's first firm commitment underwritten public
offering of Common Stock pursuant to a registration statement under the
Securities Act, resulting in aggregate gross proceeds to the Company of at least
$20,000,000 at a gross offering price to the public which is greater than or
equal to 150% of then applicable conversion price of the Series C Preferred
Stock.
3. MISCELLANEOUS.
3.1 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
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successors and assigns of the parties (including transferees of any shares of
Registrable 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.
3.2 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Delaware without giving effect to conflict of law
principles.
3.3 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.
3.4 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.
3.5 NOTICES. Unless otherwise provided, all notices, consents or other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given (i) when delivered
personally, (ii) three business days after being mailed by first class mail,
postage prepaid, or (iii) one business day after being sent by a reputable
overnight delivery service, postage or delivery charges prepaid, to the parties
at their respective addresses stated on the signature page of this Agreement.
Notices may also be given by prepaid telegram or facsimile and shall be
effective on the date transmitted if confirmed within 24 hours thereafter by a
signed original sent in the manner provided in the preceding sentence. Any party
may change its address for notice and the address to which copies must be sent
by giving notice of the new addresses to the other parties in accordance with
this Section 3.5, except that any such change of address notice shall not be
effective unless and until received.
3.6 EXPENSES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
3.7 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 at least 75% of the
Registrable Securities then outstanding (excluding any securities deemed
Registrable Securities pursuant to Section 1.1(i) hereof); provided, however,
that in the event such amendment or waiver adversely affects the rights and/or
obligations of the Common Stockholder under this Agreement in a different manner
than other Holders, such amendment or waiver shall also require the written
consent of a majority of the Common Stockholder. Any amendment or waiver
effected in accordance with this paragraph
-19-
shall be binding upon each Holder of any Registrable Securities then outstanding
or securities exercisable for or convertible into Registrable Securities
(including Holders of any securities deemed Registrable Securities pursuant to
Section 1.1(i) hereof), each future holder of all such Registrable Securities,
and the Company.
3.8 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.
3.9 AGGREGATION OF STOCK. All shares of Registrable Securities 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.
3.10 CONFIDENTIAL INFORMATION. Each Investor acknowledges that the
information received by them pursuant to Sections 2.1 and 2.2 of this Agreement
may be confidential. Each Investor agrees that it will not use such Confidential
Information in violation of the 1934 Act or reproduce, disclose or disseminate
such information to any third person (other than its employees, agents or
attorneys), except in connection with the exercise of any right hereunder. For
purposes of this Section 3.10, Confidential Information shall not include any
information that (i) is or becomes generally available to the public other than
as a result of a disclosure by the Company or any of its directors, officers,
employees or agents, (ii) is or becomes available to the Investors on a
non-confidential basis from a source other than the Company, or (iii) is
independently acquired or developed by the Investors without violating any of
the Investors' obligations under this Agreement.
3.11 ENTIRE AGREEMENT. This Agreement, the Series C Agreement and the
Second Restated First Refusal and Co-Sale Agreement dated as of May 25, 1999
between the Company and the parties signatory thereto constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof.
[SIGNATURE PAGES FOLLOW]
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SIGNATURE PAGES
SECOND RESTATED INVESTORS' RIGHTS AGREEMENT
IN WITNESS WHEREOF, the parties have executed this Second Restated
Investors' Rights Agreement as of the date first above written.
BLUESTONE SOFTWARE, INC.
By: /s/ P. Kevin Kilroy
--------------------------------------
Name: P. Kevin Kilroy
Title: President
Address: 1000 Briggs Road
Mt. Laurel, NJ 08054
Telephone No.: 609-727-4600
Facsimile No.: 609-787-9395
INVESTORS:
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Anton Simunovic
--------------------------------------
Name: Anton Simunovic
Title: Vice President
Address: 260 Long Ridge Road
Stamford, CT 06927
Telephone No.: (203) 961-2887
Facsimile No.: (203) 357-4565
-21-
SIGNATURE PAGES
SECOND RESTATED INVESTORS' RIGHTS AGREEMENT
THE P/A FUND, L.P.
By: FOSTIN CAPITAL PARTNERS II, L.P.
its General Partner
By: /s/ William C. Hulley
--------------------------------------
Name: William C. Hulley
Title: General Partner
Address: 518 Broad Street
Sewickley, PA 15143
Telephone No.: 412-749-9454
Facsimile No.: 412-749-9459
PATRICOF PRIVATE INVESTMENT CLUB, L.P.
By: APA EXCELSIOR IV PARTNERS, L.P.,
its General Partner
By: PATRICOF & CO. MANAGERS, INC.,
its General Partner
By: /s/ Gregory M. Case
--------------------------------------
Name: Gregory M. Case
Title: Vice President
Address: 455 South Gulph Road
Suite 410
King of Prussia, PA 19406
Telephone No.: 610-265-0286
Facsimile No.: 610-265-4959
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SIGNATURE PAGES
SECOND RESTATED INVESTORS' RIGHTS AGREEMENT
APA EXCELSIOR IV, L.P.
By: APA EXCELSIOR IV PARTNERS, L.P.,
its General Partner
By: PATRICOF & CO. MANAGERS, INC.,
its General Partner
By: /s/ Gregory M. Case
--------------------------------------
Name: Gregory M. Case
Title: Vice President
Address: 455 South Gulph Road
Suite 410
King of Prussia, PA 19406
Telephone No.: 610-265-0286
Facsimile No.: 610-265-4959
COUTTS & CO. (CAYMAN) LTD., CUST. FOR
APA EXCELSIOR IV/OFFSHORE, L.P.
By: PATRICOF & CO. VENTURES, INC.,
its Investment Advisor
By: /s/ Gregory M. Case
--------------------------------------
Name: Gregory M. Case
Title: Managing Director
Address: 455 South Gulph Road
Suite 410
King of Prussia, PA 19406
Telephone No.: 610-265-0286
Facsimile No.: 610-265-4959
-23-
SIGNATURE PAGES
SECOND RESTATED INVESTORS' RIGHTS AGREEMENT
/s/ Mel Baiada
-----------------------------------
MEL BAIADA
Address: 100 Briggs Road
Mt. Laurel, NJ 08054
Telephone No.: 609-727-4600
Facsimile No.: 609-787-9395
/s/ Eugene Levy
-----------------------------------
EUGENE LEVY
Address: 90 Riverside Drive
Apt. 5E
New York, NY 10024
Telephone No.: 212-753-6300
Facsimile No.: 212-319-6155
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FIRST AMENDMENT TO THE
SECOND RESTATED INVESTORS' RIGHTS AGREEMENT
THIS AGREEMENT is made as of June 16, 1999, by and among
Bluestone Software, Inc., a Delaware corporation (the "Company"), and the
parties listed on the signature pages hereto (the "Investors").
BACKGROUND
The Company and the Investors are parties to that certain Second
Restated Investor's Rights Agreement dated as of May 25, 1999 (the "Investors'
Rights Agreement"). The Company and the Investors desire to amend the Investors'
Rights Agreement as provided herein.
INTENDING TO BE LEGALLY BOUND, the parties hereto agree as follows:
1. Section 2.3(a) of the Investors' Rights Agreement shall be
amended and restated in its entirety to read as follows:
(a) In accordance with Section E.1 of the Company's Third
Amended and Restated Certificate of Incorporation, as
amended by the Certificate of Amendment date June __,
1999 (the "Certificate of Incorporation"), the Board
of Directors of the Company shall consist of seven
(7) members. Subject to Section E.1 of the Company's
Certificate of Incorporation, the Company shall use
its best efforts to cause and maintain the election
of the following persons to the Board of Directors:
(i) the Company's Chief Executive Officer, (ii) one
(1) director nominated by the holders of a majority
of the outstanding shares of Common Stock of the
Company, (iii) two (2) directors nominated by the
holders of the outstanding shares of the Series A
Preferred Stock (each an "INVESTORS' BOARD
REPRESENTATIVE"), one of whom shall be selected by
Patricof & Co. Ventures, Inc., or its successors and
assigns, (iv) two (2) outside directors selected by a
majority of the outstanding shares of Common tock, so
long as such persons are approved by the holders of
at least seventy-five percent (75%) of the Series A
Preferred Stock and Series B Preferred Stock, then
outstanding, voting together on an as-converted
basis, and (v) one (1) director nominated by GE
Capital ("GECC BOARD REPRESENTATIVE"). The Investors'
Board Representatives and the GECC Board
Representative shall have the right, but no the
obligation, to be elected to any and all committees
of the Board.
2. The Investors' Rights Agreement is amended in accordance with
Section 3.7 therein.
3. Except as specifically amended herein, the Investors' Rights
Agreement shall
remain in full force and effect in accordance with its terms.
4. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original and all of which
shall constitute on agreement, and the signatures of any party
to any counterpart shall be deemed to be a signature to, and
may be appended to, any other counterpart.
[SIGNATURE PAGES FOLLOW]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
THE COMPANY:
BLUESTONE SOFTWARE, INC.
By: /s/ P. Kevin Kilroy
----------------------------
Name: P. Kevin Kilroy
Title: President
THE INVESTORS:
GENERAL ELECTRIC CAPITAL CORPORATION
By: /s/ Anton Simunovic
----------------------------
Name: Anton Simunovic
Title: Vice President
THE P/A FUND, L.P.
By: FOSTIN CAPITAL PARTNERS II,
L.P., its General Partner
By: /s/ William C. Hulley
----------------------------
Name: William C. Hulley
Title: General Partner
[SIGNATURES CONTINUE]
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PATRICOF PRIVATE INVESTMENT CLUB, L.P.
By: APA EXCELSIOR IV PARTNERS, L.P.,
its General Partner
By: PATRICOF & CO. MANAGERS, INC.,
its General Partner
By: /s/ Gregory M. Case
----------------------------
Name: Gregory M. Case
Title: Vice President
APA EXCELSIOR IV, L.P.
By: APA EXCELSIOR IV PARTNERS, L.P.,
its General Partner
By: PATRICOF & CO. MANAGERS, INC.,
its General Partner
By: /s/ Gregory M. Case
----------------------------
Name: Gregory M. Case
Title: Vice President
COUTTS & CO. (CAYMAN) LTD., CUST. FOR
APA EXCELSIOR IV/OFFSHORE, L.P.
By: PATRICOF & CO. VENTURES, INC.,
its Investment Advisor
By: /s/ Gregory M. Case
----------------------------
Name: Gregory M. Case
Title: Managing Director
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