EXHIBIT 10.4
STOCK PURCHASE AGREEMENT
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THIS AGREEMENT is made and entered into as of the 26th day of September,
1997 by and between SQL Financials International, Inc., a Delaware corporation
(the "Company"), and the individuals and entities listed in Schedule A hereto
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(individually, a "Purchaser", collectively, the "Purchasers").
In consideration of the mutual promises, covenants and conditions
hereinafter set forth, the parties hereto agree as follows:
1. Purchase of Shares.
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The Company will sell to each Purchaser, and each Purchaser will purchase
from the Company, the number of shares of the Company's Series F convertible
preferred stock, $1.00 par value per share (the "Series F Preferred Stock") set
forth opposite such Purchaser's name on Schedule A. The shares of Series F
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Preferred Stock to be purchased from the Company by the Purchasers are sometimes
herein referred to as the "Shares", and the price per Share so purchased shall
be $9.60. Such purchase and sale shall be made on the Closing Date (as defined
in Section 2 below) and shall be subject to the terms and conditions hereof and
in reliance upon the representations, warranties and agreements contained
herein. The purchase price for the Shares shall be paid at the Closing (by
check payable to the Company, by wire transfer of funds to the account of the
Company or by delivery of promissory notes of the Company held by the Purchaser
in question, with authorization to mark "paid in full" upon completion of the
Closing, or any combination of the foregoing) against delivery of certificates
evidencing the Shares and registered in the names of the respective Purchasers
or their nominees. If such payment is made
by delivery of a promissory note of the Company, the Company will remit any
amount of principal due in excess of the purchase price for the Shares, plus
unpaid interest, within 15 days following the Closing.
2. Closing Date.
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The closing of the purchase and sale of the Shares hereunder (the
"Closing") shall be held at the offices of counsel to the Company, Womble
Carlyle Sandridge & Rice, a Professional Limited Liability Company,
1275 Peachtree Street, N.E., Atlanta, Georgia 30309, at 10:00 a.m., on the date
first above stated or at such other time and place to which the Company and the
Purchasers may agree (the "Closing Date").
3. Representations and Warranties of the Company.
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The Company hereby represents and warrants to the Purchasers that, except
as set forth in the schedule of exceptions attached as Schedule B hereto (the
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"Schedule of Exceptions"):
3.1 Organization and Standing. The Company is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
Delaware. The Company has the requisite corporate power to own and operate its
properties and assets, and to carry on its business as presently conducted and
as proposed to be conducted. The Company is licensed or qualified as a foreign
corporation and is in good standing in every state or other jurisdiction wherein
the character of its property or the nature of its activities makes such
licensing or qualification necessary and wherein the failure to be so licensed
or qualified would have a material adverse effect on the Company. Attached as
Exhibits A and B hereto are copies of the amended and restated certificate of
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incorporation (the "Certificate of Incorporation") and by-laws (the "By-Laws")
of the Company. Said copies are true, correct and complete and contain all
amendments through the date of this Agreement.
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3.2 Corporate Power. The Company has now, and will have at the
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Closing Date, all requisite legal and corporate power to enter into this
Agreement, to sell the Shares hereunder, and to carry out and perform its
obligations under the terms of this Agreement.
3.3 Subsidiaries. The Company does not own or control, directly or
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indirectly, any interest or investment in any other corporation, association,
partnership or other business entity, other than SQL Financials Europe, Inc., a
Delaware corporation, which is owned 100% by the Company. The Company has a
subsidiary, SQL Financials Services, L.L.C., a Georgia limited liability company
(the "Service Subsidiary"). The Service Subsidiary is owned 80% by the
Company and 20% by Technology Ventures, L.L.C. ("Tech Ventures"), an affiliate
of the Company, and provides implementation services for the Company's products.
3.4 Capitalization. The Company's entire authorized capital stock
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consists of 9,500,000 shares, of which 6,000,000 shares are common stock,
$.0001 par value per share ("Common Stock"), 926,508 shares of which are issued
and presently outstanding , and 3,500,000 shares are preferred stock, of which
262,500 shares are designated as Series A preferred stock ("Series A Preferred
Stock"), all of which were outstanding prior to the Closing Date, of which
454,888 shares are designated as Series B preferred stock ("Series B Preferred
Stock"), all shares of which were outstanding prior to the Closing Date, of
which 516,072 shares are designated as Series C preferred stock ("Series C
Preferred Stock"), 428,572 of which were outstanding prior to the Closing Date,
of which 727,500 are designated as Series D preferred stock ("Series D Preferred
Stock"), 701,755 of which were outstanding prior to the Closing Date, of which
706,396 shares are designated as Series E preferred stock ("Series E Preferred
Stock"), 697,675 of which were outstanding prior to the Closing Date, and of
which 675,630 are designated as Series F Preferred Stock, none of which were
outstanding prior to the Closing Date. All such issued and outstanding shares
are duly authorized and validly issued, fully paid
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and nonassessable and have been issued in compliance with all applicable state
and federal laws concerning the issuance of securities. Subject to the terms and
conditions hereof, the Company has authorized the issuance on the Closing Date
of 628,809 shares of Series F Preferred Stock and has authorized the reservation
of the number of shares of Common Stock issuable from time to time on conversion
of such shares of Series F Preferred Stock (said reserved shares, when issued,
being referred to herein as the "Purchaser Reserved Shares"), the Series F
Preferred Stock having the terms and provisions set forth in Exhibit A hereto.
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There are presently reserved for issuance 839,292 shares of Common Stock
pursuant to options or purchase rights granted or to be granted to employees,
officers, directors or consultants of the Company ("Employee Reserved Shares")
and 87,500 shares of Series C Preferred Stock pursuant to warrants held by Tech
Ventures, 17,544 shares of Series D Preferred Stock pursuant to warrants held by
certain holders of Series D Preferred Stock, up to 8,201 shares of Series D
Preferred Stock pursuant to warrants reserved for Silicon Valley Bank, 8,721
shares of Series E Preferred Stock pursuant to warrants held by Silicon Valley
Bank, and 46,821 shares of Series F Preferred Stock pursuant to warrants held by
certain holders of Series E Preferred Stock (such shares reserved with respect
to warrants being herein referred to as "Warrant Shares"). There are presently
reserved for issuance pursuant to conversion rights of holders of Series A
Preferred Stock 262,500 shares of Common Stock ("Series A Reserved Shares"),
there are presently reserved for issuance pursuant to conversion rights of
holders of Series B Preferred Stock 454,888 shares of Common Stock ("Series B
Reserved Shares"), there are presently reserved for issuance pursuant to
conversion rights of holders of Series C Preferred Stock 516,072 shares of
Common Stock ("Series C Reserved Shares"), there are presently reserved for
issuance pursuant to conversion rights of holders of Series D Preferred Stock or
holders or prospective holders of warrants 727,500 shares of Common Stock
("Series D Reserved Shares"), there are
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presently reserved for issuance pursuant to conversion rights of holders of
Series E Preferred Stock 697,675 shares of Common Stock ("Series E Reserved
Shares"), and there are presently reserved for issuance pursuant to conversion
rights of holders of Series F Preferred Stock 675,630 shares of Common Stock
("Series F Reserved Shares"). Except for the foregoing, (i) no subscription,
warrant, option, convertible security or other right (contingent or otherwise)
permitting any party other than the Company to purchase or acquire any shares of
capital stock of the Company is authorized or outstanding, except as provided in
the September 1995 Shareholders' Agreement (as hereinafter defined) and
Sections 7.15 and 11.3 of this Agreement, and (ii) the Company has no commitment
to issue any such subscription, warrant, option, convertible security or other
right, or to issue or distribute to holders of any shares of its capital stock
(by reason of their holding such capital stock) any evidences of indebtedness or
assets. Other than as provided in the Certificate of Incorporation, the Company
has no obligation, contingent or otherwise, to purchase, redeem or otherwise
acquire any shares of its capital stock (other than the Shares) or any interest
therein or to pay any dividend or make any other distribution in respect
thereof. Upon the effectiveness of this Agreement, no person or entity will be
entitled to any preemptive right, right of first refusal or similar right with
respect to the issuance, sale, redemption or transfer of any capital stock of
the Company or any rights with respect to the registration of any capital stock
of the Company under federal or state securities laws, except for the rights of
first refusal and registration rights contained in the Restated Shareholders'
Agreement, dated as of September 1, 1995, between the Company and its common
stockholders, as amended as of January 1, 1997 (the "September 1995
Shareholders' Agreement") and in this Agreement. Other than the Amended and
Restated Shareholders' Voting Agreement, dated as of September 1, 1995, between
the Company and its common stockholders (the "Shareholders' Voting Agreement"),
the September 1995 Shareholders'
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Agreement, the Stock Purchase Agreement dated November 24, 1992, between the
Company and Greylock Limited Partnership ("Greylock"), as amended (the "Greylock
Agreement"), the Stock Purchase Agreement dated September 21, 1993 among the
Company and twelve other individuals or entities and the Stock Purchase
Agreement dated December 10, 1993 between the Company and Stanford University
(collectively, the "Series B Agreement"), the Stock Purchase Agreement dated as
of April 1, 1994 among the Company and fifteen other individuals or entities and
the Subscription and Investment Letter, dated August 1, 1994, between the
Company and Tech Ventures (collectively, the "Series C Agreement"), the
Company's standard form of stock subscription agreement, the Stock Purchase
Agreement dated as of February 21, 1995 (the "Series D Agreement"), the Stock
Purchase Agreement dated February 15, 1996 among the Company and twenty other
individuals and entities (the "Series E Agreement") and this Agreement, there
are no existing voting or stock restriction agreements or similar agreements
between the Company and any of its shareholders, nor, to the best knowledge of
the Company, are there any such agreements among any of the Company's
shareholders. Immediately after the Closing, the capital stock of the Company
issued and outstanding and the Employee Reserved Shares and Warrant Shares will
be as stated in Schedule C hereto. The Greylock Agreement, Series B Agreement,
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Series C Agreement, Series D Agreement, and Series E Agreement are herein
sometimes collectively referred to as the "Prior Stock Purchase Agreements."
3.5 Authorization. All corporate action on the part of the Company,
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its officers, board of directors (the "Board") and shareholders necessary for
the sale and issuance of the Shares pursuant hereto and the performance of the
Company's obligations hereunder has been taken or will be taken prior to the
Closing Date. This Agreement shall constitute a valid and binding obligation of
the Company, enforceable in accordance with its terms, except as enforcement may
be limited by applicable bankruptcy, reorganization, insolvency or moratorium
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laws or other similar laws affecting creditors' rights generally or general
principles of equity whether asserted in a proceeding at law or in equity. The
Shares, when issued in compliance with the provisions of this Agreement, will be
validly issued, fully paid and nonassessable, free of any liens or encumbrances,
with all original issuance taxes paid thereon.
3.6 Financial Statements. The Company has furnished the Purchasers
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with copies of (a) its audited balance sheet as of December 31, 1996 and its
audited statement of operations for the year then ended (collectively, the
"Audited Financial Statements") and (b) its unaudited balance sheet as of
August 31, 1997 (the "Balance Sheet Date") and its year-to-date profit and loss
statement as of August 31, 1997 (collectively, the "Unaudited Financial
Statements"). The Audited Financial Statements and the Unaudited Financial
Statements were prepared in accordance with the Company's books and records and
in accordance with generally accepted accounting principles and fairly present
the financial position and results of operation of the Company as of the dates
and for the periods indicated, subject, however, in the case of the Unaudited
Financial Statements to normal year end audit adjustments not anticipated to be
material in amount. The Company has no material liabilities, whether or not of a
type required to be reflected on a balance sheet prepared in accordance with
generally accepted accounting principles (whether accrued, absolute, contingent
or otherwise) which are not shown or provided for in the Unaudited Financial
Statements, except those arising since the Balance Sheet Date in the ordinary
course of the Company's business and except as shown on the Schedule of
Exceptions.
3.7 Changes. Since the Balance Sheet Date, there has not been any
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event or condition of any type known to the Company that has materially and
adversely affected the Company's business, prospects, condition, affairs,
operation, properties or assets. Since the Balance Sheet Date, the physical
properties owned or leased by the Company have not suffered
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any material destruction or damage, regardless of whether or not any such loss
was insured against.
3.8 Title to Properties and Assets; Liens. The Company has good and
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marketable title to all its properties and assets and has good title to all its
leasehold estates in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than minor liens and encumbrances which do not in
any case materially detract from the value of the property subject thereto or
materially impair the operations of the Company and which have not arisen
otherwise than in the ordinary course of business.
3.9 Commitments. Attached hereto as Exhibit C is a list of all
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agreements, contracts, indebtedness, liabilities and other obligations
(collectively, "Commitments") to which the Company is a party or by which it is
bound and which are material to the conduct and operations of its business. For
purposes of this Section 3.9, a Commitment occurring in the ordinary course of
the Company's business shall not be considered material unless it, together with
other Commitments with the same party, involve more than $100,000, except that,
where a Commitment consists of an agreement to license the Company's product to
a third party in the ordinary course of the Company's business, such Commitment
shall not be considered material unless it, together with other Commitments with
the same party, involve more than $200,000. Copies of the documentation
evidencing such Commitments have been made available for inspection by the
Purchasers and their counsel.
3.10 Intellectual Properties. The Company has sufficient and valid
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right, title and ownership of all patents, trademarks, service marks, trade
names, copyrights, licenses, trade secrets, inventions, and proprietary rights
(collectively, "Intellectual Properties"), including without limitation those
relating to SQL Windows, or licenses, rights or purchase options with respect to
the foregoing, necessary for its business as now conducted and as currently
proposed
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to be conducted, or will be able to obtain on terms which will not materially
and adversely affect its business all such necessary permits, licenses and other
authority with respect thereto without any conflict with or infringement of the
known or asserted rights of others. Exhibit C contains a complete list of
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Intellectual Properties owned or used by the Company. Neither the Company nor,
to the Company's knowledge, any officer or management, technical or professional
employee of the Company is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
conflict with the Company's business as conducted (or as currently proposed to
be conducted, as evidenced by the Business Documents described in Section 3.15)
or, in the case of any such employee, such employee's right to be employed by
the Company. The Company does not believe it is utilizing any inventions or
proprietary ideas of any of its employees (or persons it currently intends to
hire) made prior to their employment by the Company and which are known by the
Company to be inventions of such employees or persons. All of the officers and
management, technical or professional employees of the Company have executed an
agreement containing assignment of invention and confidentiality covenants
substantially in the form contained in the agreements attached hereto as
Exhibits D1 or D2; such agreements remain in full force and effect; and, to the
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Company's knowledge, none of such officers or management, technical or
professional employees is in violation thereof. The Company has obtained all
governmental permits, authorizations, approvals and licenses known by the
Company to be necessary for its business as now conducted and as currently
proposed to be conducted (as evidenced by such Business Documents) and the
absence of which would have a material adverse effect on the Company.
3.11 Compliance With Other Instruments. The Company is not in
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violation in any material respect of any term of its Certificate of
Incorporation, By-laws, or any
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Commitment, judgment, decree, order or, to its knowledge, any statute, rule or
regulation applicable to the Company. The execution, delivery and performance of
and compliance with this Agreement, and the issuance of the Shares pursuant
hereto, will not result in any such violation or be in conflict with or
constitute, with or without the passage of time and giving of notice, a material
default under any such term, or result in the creation of any pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company
pursuant to any such terms.
3.12 Litigation. There is no action, suit, proceeding or
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investigation pending and known to the Company or known and currently threatened
against the Company which questions the validity of this Agreement or the right
of the Company to enter into it or to consummate the transactions contemplated
hereby, or which might result, either individually or in the aggregate, in any
material adverse change in the assets, condition, affairs or prospects of the
Company, financially or otherwise, or any change in the current equity ownership
of the Company, nor does the Company know of any basis for the foregoing. The
foregoing includes, without limitation, actions which to the Company's knowledge
are pending or threatened (or any basis therefor known to the Company) involving
the prior employment of any of the Company's officers or employees, their use in
connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers. The Company is not a party or
subject to the provisions of any order, writ, injunction, judgment or decree of
any court or government agency or instrumentality.
3.13 Insurance. The insurable properties of the Company are insured
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for the benefit of the Company with the coverages shown on Schedule B. The key
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person insurance coverage referred to in Section 7.5 is currently in effect.
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3.14 Governmental Consent. Based in part on the representations and
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warranties of the Purchasers in Section 4, no consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any governmental authority on the part of the Company is required
in connection with the consummation of the transactions contemplated by this
Agreement.
3.15 Disclosure. To its knowledge, the Company has fully provided
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the Purchasers with all the written information which the Purchasers have
requested for the purpose of deciding whether to purchase the Shares. Neither
this Agreement nor any other written statements, information or certificates
made or delivered in connection herewith, including the Company's projected 1997
Income Statements as of August 31, 1997 and projected 1997 Balance Sheet as of
August 31, 1997 (such Income Statements and Balance Sheet being herein referred
to as the "Business Documents"), contain any untrue statement of a material fact
or, to the knowledge of the Company, omits to state a material fact known to the
Company necessary to make the statements herein or therein not misleading. The
projections contained in the Business Documents were based on assumptions
believed to be reasonable at such time and on the best judgment of management of
the Company, which assumptions its management continues to believe to be
reasonable on the whole, but otherwise no representation or warranty is made
with respect to such projections.
3.16 Agreements; Changes.
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(a) Except for this Agreement, the agreements referred to in
this Agreement, the Schedules hereto or the Business Documents, or employment
relationships between the Company and certain shareholders, there are no
agreements, understandings or proposed transactions between the Company and any
person or entity which is a shareholder, officer or director of the Company, a
relative by blood or marriage of, a trust or estate for the
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benefit of, or a person or entity which directly or indirectly controls, is
controlled by, or is under common control with, any such person or entity
(hereinafter referred to as a "person or entity associated with the Company").
(b) Since the Balance Sheet Date, the Company has not (i)
declared or paid any dividends, or authorized or made any distribution upon or
with respect to any class or series of its capital stock, (ii) incurred any
indebtedness for money borrowed or incurred any other liabilities individually
presently in excess of $25,000 or in excess of $50,000 in the aggregate, other
than in the ordinary course of business, (iii) made any loans or advances to any
person, other than in the ordinary course of business, or (iv) sold, exchanged
or otherwise disposed of any of its assets or rights, other than in the ordinary
course of business.
3.17 Taxes. The Company has accurately prepared and timely filed all
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income tax returns and other tax returns which are required to be filed by it,
true and complete copies of which have been furnished to the Purchasers, and has
paid, or made provision for the payment of, all taxes which have or may have
become due pursuant to said returns or pursuant to any assessment which has been
received by it. No controversy in respect of taxes of any type is pending, or
to the best knowledge of the Company, threatened. The income tax returns of the
Company have never been audited by any federal or state governmental authority.
3.18 Employees. There are no material controversies pending or, to
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the knowledge of the Company, currently threatened between it and its employees.
To the Company's knowledge and except as disclosed to the Purchasers, no officer
or key employee has any present intention of terminating his employment with the
Company and the Company has no present intention of terminating any such
employment. The Company is not a party to any collective bargaining agreement
and, to its knowledge, no organizational efforts are presently being made with
respect to any of its employees. The Company has complied in all
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material respects with all applicable state and federal laws and regulations
respecting employment and employment practices, terms and conditions of
employment, wages and hours and other laws related to employment, and there are
no arrears in the payments of wages, withholding or social security taxes,
unemployment insurance premiums or other similar obligations.
3.19 Retirement Obligations. The Company has no pension, retirement
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or similar plan or obligation, whether of a legally binding nature or in the
nature of informal understandings.
3.20 Books and Records. The minute books of the Company contain
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accurate summary records of all meetings and written consents to action of the
Company's shareholders, the Board and all committees, if any, appointed by the
Board. The Company's stock ledger is complete and reflects all issuances,
transfers, repurchases and cancellations of shares of capital stock of the
Company. The books of account and other financial records and the order books,
if any, of the Company accurately and completely reflect all material
information purported to be shown therein in all material respects.
3.21 Brokers. The Company has no contract, arrangement or
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understanding with any broker, finder, or similar agent with respect to the
transactions contemplated by this Agreement.
3.22 Environmental Liabilities.
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(a) To its knowledge, the Company has no obligations or
liabilities, matured or not matured, absolute or contingent, assessed or
unassessed, which could reasonably be expected to have a material and adverse
effect, and no pending claims have been made against it and no currently
outstanding citations or notices including, without limitation, notice letters,
information requests or notices of potential responsibility, have been issued
against it,
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which could reasonably be expected to have a material and adverse effect, and
which, in the case of any of the foregoing, have been or are imposed by reason
of or based upon any provision of any Environmental Laws.
(b) As used herein, the term "Environmental Laws" shall mean
any and all federal, state, local, or municipal laws, rules, orders,
regulations, statutes, ordinances, codes, decrees, or requirements of any
federal, state, municipal, or other governmental department, commission, board,
bureau, agency, or instrumentality, or other court or arbitrator, in each case
whether of the United States or foreign, regulating, relating to, or imposing
liability or standards of conduct concerning any hazardous materials or
petroleum products or environmental protection, as now in effect.
3.23 Qualified Small Business. The Shares are "qualified small
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business stock," as defined in Section 1202 of the Internal Revenue Code of
1986, as amended (the "Code").
3.24 Small Business Concern . The Company is a "small business
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concern" within the meaning of the Small Business Investment Act of 1958, as
amended, and a concern meeting the standard set forth in 13 CFR Ch. I (S)
121.301(c). The information provided by the Company on any Small Business
Administration forms delivered in connection with the sale of Shares under this
Agreement is true and correct.
3.25 Knowledge Qualification. As used in this Section 3, all
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references to information known to the Company shall mean information actually
(and not constructively or impliedly) known to Joseph S. McCall ("McCall") or
any other executive officer of the Company.
4. Representations and Warranties of the Purchaser. Each of the
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Purchasers severally represents and warrants to the Company as follows:
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4.1 Authority. Such Purchaser is an individual or is a limited
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partnership or retirement benefit trust or corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction shown on
Schedule A. Any corporate, partnership or similar action on the part of such
Purchaser necessary for the purchase of such Shares and the performance of its
obligations hereunder has been taken or will be taken prior to the Closing Date.
This Agreement, when executed and delivered by such Purchaser, will constitute a
valid and legally binding obligation of such Purchaser, enforceable in
accordance with its terms, except as enforcement may be limited by applicable
bankruptcy laws or other similar laws affecting creditors' rights generally.
4.2 Investment Representations. This Agreement is made with each
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Purchaser upon the understanding as a specific representation to the Company by
such Purchaser that:
(a) the Shares purchased hereunder will be acquired for such
Purchaser's own account and not with a view to the distribution of any part
thereof, and such Purchaser has no present intention of selling, granting
participation in, or otherwise distributing the same;
(b) such Purchaser acknowledges that such Purchaser has the
knowledge and experience in financial and business matters so as to be capable
of evaluating the merit and risk of and protecting such Purchaser's own
interests in connection with such Purchaser's purchase of such Shares, has had
the opportunity to ask such questions of the Company and to review such
documents as such Purchaser deemed necessary in connection with its purchase of
Shares, is able to fend for such Purchaser in the transactions contemplated by
this Agreement and has the ability to bear the economic risk of such Purchaser's
investment pursuant to this Agreement;
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(c) unless such Purchaser otherwise advises the Company in
writing prior to the Closing, such Purchaser is an accredited investor, as
defined in Rule 501 promulgated by the Commission; and
(d) such Purchaser understands that such Shares are
characterized as "restricted securities" under the federal securities laws and
certain state 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 Shares may be resold without registration
under the Securities Act and those state securities laws only in certain limited
circumstances. In this connection, such Purchaser represents that such Purchaser
is familiar with Rule 144 promulgated by the Commission, as presently in effect,
understands the resale limitations imposed thereby and by the Securities Act,
and is aware that the Company is under no obligation to create a public market
for its securities.
4.3 Brokers. Such Purchaser has no contract, arrangement or
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understanding with any broker, finder, or similar agent with respect to the
transactions contemplated by this Agreement.
5. Conditions to the Purchasers' Obligations at Closing. The obligation
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of the Purchasers to purchase Shares at the Closing is subject to the
fulfillment on or prior to the Closing Date of each of the following conditions:
5.1 Representations and Warranties Correct; Performance of
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Obligations. The representations and warranties made by the Company in
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Section 3 hereof shall be true and correct when made, and shall be true and
correct on the Closing Date with the same force and effect as if they had been
made on and as of said date, subject to changes contemplated by this Agreement;
and the Company shall have performed all obligations and conditions herein
required to be performed or observed by it on or prior to the Closing Date.
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5.2 Opinion of Counsel. The Purchasers shall have received from
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Womble Carlyle Sandridge & Rice, a Professional Limited Liability Company,
counsel to the Company, an opinion, dated as of the Closing Date, in the form
attached as Exhibit E hereto.
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5.3 Qualifications. All authorizations, approvals or permits of any
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governmental authority that are required in connection with the lawful issuance
and sale of the Shares under this Agreement shall have been duly obtained and
shall be effective.
5.4 Directors. On the Closing Date, the directors shall consist of
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McCall, Donald L. House, Sr., William S. Kaiser, William H. Mills and Tench
Coxe.
5.5 McCall Certificate. McCall shall have executed and delivered to
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the Purchasers a certificate in the form of Exhibit F.
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5.6 Proceedings and Documents. All corporate and other proceedings
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in connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be reasonably satisfactory in
substance and form to the Purchasers and counsel to the Purchasers, and the
Purchasers shall have received all such counterpart originals or certified or
other copies of such documents as they may reasonably request.
6. Conditions to Obligations of the Company. The obligations of the
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Company to sell and issue the Shares at the Closing are subject to the
fulfillment on or prior to the Closing Date of the following conditions:
6.1 Representations and Warranties Correct; Performance of
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Obligations. The representations and warranties made by the Purchasers in
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Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Closing Date with the same force and effect as if they had been
made on and as of said date, and the Purchasers shall have performed all
obligations and conditions herein required to be performed by them on or prior
to the Closing Date.
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6.2 Qualifications. All authorizations, approvals or permits of any
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governmental authority that are required in connection with the lawful issuance
and sale of the Shares under this Agreement shall have been duly obtained and
shall be effective.
7. Covenants of the Company or the Purchasers. The Company and the
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Purchasers, in the case of Section 7.3, hereby covenant and agree as follows:
7.1 Financial Information. The Company will furnish the following
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reports to the persons indicated:
(a) Annual Financial Statements. As soon as practicable, but
---------------------------
in any event within 90 days after the end of each fiscal year of the Company, a
consolidated statement of earnings for such fiscal year, a consolidated balance
sheet of the Company as of the end of such year, and a consolidated statement of
cash flows for such year, such year-end financial reports to be in reasonable
detail, prepared in accordance with generally accepted accounting principles,
and audited and certified by an independent public accounting firm of nationally
recognized standing selected by the Company and reasonably acceptable to the
Purchasers, shall be furnished to the Purchasers and to their transferees.
(b) Audit Reports. As soon as available, copies of all other
-------------
financial reports submitted to the Company or any Subsidiary (as defined in
Section 7.16) by independent public accountants, relating to any annual or
interim audit of the books of the Company or any Subsidiary, shall be furnished
to the Purchasers and to their transferees.
(c) Monthly Financial Statements. Within 30 days of the end
----------------------------
of each month, an unaudited statement of earnings, balance sheet and statement
of cash flow and current operating plan of the Company for or as of the end of
such month, in reasonable detail, shall be furnished to the Purchasers.
18
(d) Regulatory Filings. Within 10 days after filing, copies
------------------
of all reports filed by the Company pursuant to Section 13 or Section 15(d) of
the Securities Exchange Act of 1934 shall be furnished to the Purchasers and
their transferees and, promptly upon request by any Purchaser, the Company shall
furnish copies of press releases and other documents that the Company shall have
released to the press during the preceding 90 days.
(e) Litigation. Promptly upon the Company's learning thereof,
----------
notice shall be furnished to the Purchasers of (i) any litigation filed against
or affecting the Company or any Subsidiary, whether or not covered by insurance,
which litigation involves an amount in controversy in excess of $10,000 or which
litigation is requesting a specific equitable remedy including, without
limitation, an injunction or restraining order, and (ii) the institution of any
suit or administrative proceeding which is reasonably expected materially and
adversely to affect the business, assets, operations, prospects, employee
relations or condition (financial or otherwise) of the Company or any
Subsidiary.
(f) Unbudgeted Costs. Promptly upon the occurrence thereof,
----------------
notice of any event which has resulted in, or could reasonably be expected to
result in, an unanticipated cost to the Company or any Subsidiary in excess of
$50,000, including, without limitation, disputes with customers, employees,
consultants or creditors or disputes relating to contractual obligations and
amendments, modifications or waivers of any such obligation, shall be furnished
to the Purchasers.
(g) Other Information. The Company shall furnish to each
-----------------
Purchaser, and to each transferee or prospective transferee of any Purchaser,
such other information relating to the financial condition, business, prospects
or corporate affairs of the Company as such Purchaser may from time to time
request; provided, however, that the Company shall not be obligated to provide
information which it deems in good faith to be proprietary.
19
Notwithstanding the foregoing provisions of this Section 7.1 or Section 7.2, the
Company shall not be obligated to furnish information to any Purchaser or a
transferee or prospective transferee of such Purchaser unless such Purchaser or
such transferee or prospective transferee holds (or will hold immediately
following such transfer) no less than 25% of the Shares purchased by such
Purchaser pursuant to this Agreement and unless, in the case of a transferee or
prospective transferee, such transferee or prospective transferee shall have
agreed in writing to be bound by the provisions of Section 7.3.
(h) The Company will promptly notify each Purchaser if and
when the status of the Shares as qualified small business stock, as now or
hereafter defined in the Code, shall have changed, will submit on a timely basis
the reports and other information required to be submitted pursuant to
Section 1202(d)(1)(C) of the Code, as in effect from time to time, and will
promptly provide to each Purchaser such other information pertaining to such
status as such Purchaser may reasonably request. On or before March 1, 1998, the
Company will take no actions described in Section 1202(c)(3)(B) or (C) without
the consent of the holders of 75% or more of the Shares then held by the
Purchasers.
(i) Notwithstanding the foregoing provisions of this
Section 7.1, the Company may satisfy its obligations to furnish information to
the Purchasers pursuant to paragraphs (a) through (f) of Section 7.1 by
furnishing copies thereof to Chase Venture Capital Associates, L.P. ("Chase"),
Spitfire Capital Partners, L.P. ("Spitfire"), Greylock Limited Partnership
("Greylock"), Sutter Hill Ventures, a California Limited Partnership ("Sutter
Hill"), Highland Capital Partners II Limited Partnership ("Highland"), Hancock
Venture Partners IV Direct Fund L.P. ("Hancock"), Wakefield Group Limited
Partnership ("Wakefield"), Technology Crossover and Noro-Moseley Partners III,
L.P. ("Noro-Moseley") (it being understood that any such recipient may in turn
furnish such information to other Purchasers).
20
7.2 Inspection. The Company shall permit each Purchaser, at such
----------
Purchaser'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 such Purchaser upon reasonable notice to the Company; provided, however, that
the Company shall not be obligated pursuant to this Section 7.2 to provide
access to any information which it reasonably considers to constitute a trade
secret or to contain similarly confidential information.
7.3 Confidentiality of Information. Each Purchaser agrees to
------------------------------
maintain the confidentiality of any information obtained by such Purchaser
pursuant to Sections 7.1 or 7.2 which may be proprietary to the Company or
otherwise confidential and which has not been made available by the Company to
the public or to any other third party on a non-confidential basis. Each
Purchaser further agrees to use such proprietary and confidential information
only to benefit the Company or to monitor such Purchaser's investment in the
Company and to make no disclosure thereof to a third party (other than his or
its general or limited partners, staff and legal and other professional advisers
or in connection with furnishing of sample reports to prospective general or
limited partners or other sources of capital) without the Company's prior
written consent (which may be conditioned upon receipt of a similar undertaking
by the third party but otherwise shall not be unreasonably withheld).
7.4 Use of Proceeds. The Company will use the proceeds from the
---------------
sale of Shares hereunder (whether such proceeds are received by check, by wire
transfer of funds or by delivery of promissory notes of the Company, as set
forth in Section 1) for working capital purposes and other transactions approved
by the Board.
7.5 Key Person Life Insurance. At all times after the Closing Date,
-------------------------
the Company shall use its best efforts to maintain in force the policies of life
insurance, naming the
21
Company as beneficiary, which are presently in force on the life of Joseph S.
McCall in the face amount of $1,000,000 (or policies containing terms and
conditions substantially similar to those policies).
7.6 Certain Transactions. The Company agrees that it will not enter
--------------------
into any transaction or agreement (other than normal compensation arrangements,
which are subject to Section 7.11), including without limitation any lease or
other rental or purchase agreement or any agreement providing for loans or
extensions of credit by or to the Company, or any modification of any of the
foregoing, ("contract") with any "person or entity associated with the Company"
as defined in Section 3.16, or with respect to which any such person or entity
has or is to have a direct or indirect material interest, unless such contract
has been approved by no less than a majority of the number of directors
constituting the whole Board (excluding, if a director, any such person
associated with the Company and having such an interest in the contract in
question) or unless such contract was in effect or contemplated on the date
hereof and disclosed to the Purchasers in this Agreement (including the
Schedules and Exhibits hereto) or in the Business Documents referred to in
Section 3.15 or unless such contract is non-material and in the ordinary course
of business. For purposes hereof, a contract shall be deemed to be non-material
if it and all other contracts (excluding, for this purpose, compensation under
employment contracts and other compensation arrangements) between the Company
and the person or entity in question do not involve payment by or to the Company
during any fiscal year of more than $25,000.
7.7 Assignment of Invention/Confidentiality Agreements. Except as
--------------------------------------------------
otherwise provided by the Board in a particular case, the Company will use its
best efforts to enter into an assignment of invention/confidentiality agreement
in substantially the form of Exhibit D1
----------
22
hereto with each of its current and future officers and management, technical or
professional employees.
7.8 Director's Fees. Commencing on the Closing Date, if annual
---------------
directors' fees are paid to any other member of the Board, the Company will pay
to any Purchaser-affiliated director or such director's designee an annual
director's fee in an amount equal to the highest annual fee so paid. The
Company will also promptly reimburse all reasonable out-of-pocket expenses
consistent with Company policy and incurred by any such Purchaser-affiliated
director in connection with attending meetings of the Board.
7.9 Negative Covenants. So long as the Purchasers own in aggregate
------------------
at least 157,202 Shares (with appropriate adjustments for stock dividends,
splits or combinations and similar actions), the Company shall not, without the
prior consent or approval of the holders of at least 60% of the Registrable
Securities (as defined in Section 8) then outstanding:
(i) engage in any business other than the software business
and related services; or
(ii) grant any registration rights to any other holders or
prospective holders of its securities which are superior in any material way to
the registration rights under Section 8 hereof; provided, that nothing herein
shall prohibit the Company's grant of registration rights on a pari passu basis
with those granted the Purchasers; or
(iii) purchase, redeem or otherwise acquire any shares of
capital stock of the Company, other than pursuant to (a) the September 1995
Shareholders' Agreement, (b) the Certificate of Incorporation, or (c) upon the
exercise, approved by the Board (excluding the seller, if a director), of
repurchase rights with respect to shares owned by any employee, director, or
consultant of the Company; or
23
(iv) amend the Certificate of Incorporation or the By-Laws in a
manner which materially and adversely affects the Preferred Stock.
7.10 Non-Competition of Certain Key Employees. Unless otherwise
----------------------------------------
determined in a particular case by the Board, the Company will use its best
efforts to cause each present and future officer or management, technical,
sales, marketing, or professional employee of the Company or any subsidiary of
the Company, including without limitation the Company's chairman of the board,
chief executive officer, president, chief operating officer, chief financial
officer, treasurer, vice president of sales and marketing, vice president (or
similar position) of research and development, and regional sales managers,
(referred to herein as "Key Employees") to enter into an agreement with the
Company containing covenants substantially similar to those contained in
Exhibit D1, subject to any modifications deemed appropriate by the Company's
- ----------
counsel to comply with local law.
7.11 Management Compensation; Options. Compensation (including
--------------------------------
salary, bonuses, fringe benefits and stock awards) paid by the Company to its
officers shall be established by the Company's Board of Directors or by a
compensation committee of the Board. Except as otherwise agreed by a majority of
the Board or of a committee of the Board, any stock options or other stock
awards to employees, officers, directors or consultants or similar persons
furnishing services to the Company will be made pursuant to the form of option
agreement attached as Exhibit G hereto.
---------
7.12 Indemnification. The Certificate of Incorporation or By-laws of
---------------
the Company shall at all times during which any affiliate of any Purchaser
serves as a member of the Board provide for limitations on the liability of the
directors and indemnification of the directors to the fullest extent permitted
under applicable law. To the extent not prohibited by law, in the event that
any Holder who is a director of the Company or any affiliate of a Holder
24
who is a director of the Company shall be made or threatened to be made a party
to any action, suit or proceeding with respect to which such Holder or director
may be entitled to indemnification by the Company pursuant to this Agreement or
the By-Laws, or otherwise, all such directors, as a group, shall be entitled to
be represented in such action, suit or proceeding by one counsel of their choice
and the expenses of such representation shall be reimbursed by the Company as
provided in or authorized under this Agreement or the By-Laws or other
provision, as presently in effect (whether or not the By-Laws or other provision
is hereafter amended).
7.13 Capital Expenditures. The Company will not, without the
--------------------
approval of the Board, make any expenditures for software or software licenses
from third parties or for fixed or capital assets, or make any commitments for
such expenditures, exceeding an amount of $100,000 for any one such expenditure
or series of related expenditures.
7.14 Indebtedness. The Company will not become indebted or create,
------------
incur, assume or be liable in any manner in respect of, or suffer to exist,
without the prior approval of the Board, any new or additional long-term
indebtedness, standby letter of credit or similar loan which, for any one such
borrowing or series of related borrowings, is in excess of $100,000.
7.15 Future Financings.
-----------------
(a) Right of First Refusal. The Company grants to each
----------------------
Stockholder as defined in subsection (d) below the right of first refusal to
purchase such Stockholder's pro-rata share, as defined below, of any equity
securities of the Company, including shares of the Common Stock or securities of
any type convertible into, or entitling the holder thereof to purchase shares
of, Common Stock, proposed to be issued by the Company subsequent to the date
hereof (such securities being hereafter referred to in this Section 7.15 as the
"Securities").
25
Such Stockholder's "pro-rata share" shall be that portion of the Securities
proposed to be issued which bears the same relation to all of the Securities
proposed to be issued as the shares of Common Stock held by the Stockholder bear
to all outstanding shares of the Common Stock (assuming for the purposes of such
calculation the conversion of all outstanding securities which are convertible
into Common Stock), all determined immediately prior to the offering of the
Securities.
(b) Notice. In the event that the Company proposes to
------
undertake an issue of Securities, it shall deliver to each Stockholder written
notice of its intention, describing such Securities, specifying such
Stockholder's pro-rata share and stating the purchase price and other terms upon
which it proposes to issue the same (the "Option Notice"). For a period of
20 days from the receipt of the Option Notice, each Stockholder shall have the
right to elect, by written notice to the Company, to purchase all or any portion
of such Stockholder's pro-rata share of the Securities described in the Option
Notice. In the event a Stockholder fails to exercise such Stockholder's rights
of first refusal within the specified period, or such Stockholder elects to
acquire less than such Stockholder's aggregate pro-rata shares pursuant to the
exercise of such right, then, during the 90 day period following the expiration
of such 20 day period, the Company may sell, free of any right of first refusal
on such Stockholder's part, the portion of such Stockholder's pro-rata shares
not purchased pursuant to such right of first refusal, upon the same terms
specified in the Option Notice.
(c) Exceptions. The right of first refusal granted under this
----------
Section 7.15 shall not apply to (i) the issuance of Employee Reserved Shares or
the Warrant Shares; (ii) the issuance of Series A Reserved Shares, Series B
Reserved Shares, Series C Reserved Shares, Series D Reserved Shares, Series E
Reserved Shares or Series F Reserved Shares; (iii) any Securities offered in a
registered public offering; (iv) sales of Common Stock
26
to the Company's employees, directors, consultants and advisors if such issuance
has been approved by at least two-thirds of the number of directors constituting
the Company's whole Board; (v) Securities issued for non-cash consideration, or
as a so-called "equity feature" (such as a warrant) of a transaction primarily
involving debt securities or indebtedness for borrowed money, or pursuant to a
merger or acquisition transaction; and (vi) the issuance of Securities upon a
stock split or stock dividend with respect to the Company's Common Stock.
(d) Satisfaction of Existing Rights. By executing this
-------------------------------
Agreement, each of the Purchasers and the other stockholders of the Company
(other than the stockholders designated Principal Common Stockholders;
hereinafter, the "Principal Common Stockholders") whose names appear on the
signature pages below (the "Stockholders") acknowledges full satisfaction of
their respective subscription rights, if any, pursuant to any and all of the
Prior Stock Purchase Agreements to which such Stockholder is a party and hereby
waives any such rights with respect to the Shares to the extent not fully
satisfied.
7.16 Subsidiaries. As used herein, the term "Subsidiary" shall mean
------------
any corporation, association or other business entity of which securities or
other ownership interests representing more than 50% of the ordinary voting
power are at the time in question owned by the Company or any other Subsidiary.
Except as otherwise approved by the Board, which approval has been obtained as
to the Service Subsidiary, the Company shall have no Subsidiary other than a
wholly owned Subsidiary. The provisions of this Section 7 (other than
Sections 7.5 and 7.15) shall, unless the context requires otherwise, apply
equally to any Subsidiary.
7.17 Termination of Covenants. The covenants set forth in this
------------------------
Section 7 (other than those in Sections 7.1(g), 7.3, 7.10 and 7.12) shall
terminate upon the consummation of an underwritten public offering pursuant to
an effective registration statement under the Securities Act, as amended,
covering the offer and sale by the Company of common stock to the public
27
which results in aggregate gross proceeds to the Company of at least $10,000,000
and an equivalent public offering price per share of Common Stock of at least
$18.00 (such amount to be appropriately adjusted in the event of stock splits,
stock combinations, stock dividends or similar recapitalizations) (a "Qualified
Offering").
8. Registration Rights.
-------------------
8.1 Certain Definitions. As used in this Section 8 and elsewhere in
-------------------
this Agreement, the following terms shall have the following respective
meanings:
"Commission" shall mean the Securities and Exchange Commission or any other
----------
federal agency at the time administering the Securities Act.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
------------
or any similar federal statute, and the rules and regulations of the Commission
issued under such Act, as they each may, from time to time, be in effect.
"Holder" shall mean any Stockholder as defined in Section 7.15(d) so long
------
as such Stockholder holds at least 25% of the Shares purchased by such
Stockholder (including for purposes of such computation shares purchased
pursuant to any of the Prior Stock Purchase Agreements and the Warrant Shares)
and any transferee of such Stockholder so long as such transferee holds at least
1% of the outstanding capital stock of the Company and provided such transferee
agrees in writing with the Company to hold such stock subject to all the
restrictions of this Agreement.
"Registrable Securities" shall mean (i) the shares of Common Stock issued
----------------------
or issuable upon conversion of the Shares or the shares of Preferred Stock
purchased pursuant to any of the Prior Stock Purchase Agreements or the Warrant
Shares, in each case as provided in the Certificate of Incorporation, as
hereafter amended, and (ii) any securities issued as a dividend
28
or other distribution with respect to, or in exchange or in replacement of, the
securities referred to in subsection (i).
"Registration Expenses" shall mean all expenses (except for "Selling
---------------------
Expenses" as defined below) incurred by the Company in complying with
Sections 8.2 or 8.3 of this Agreement, including, without limitation, all
registration and filing fees, printing expenses, reasonable fees and
disbursements of counsel for the Company and, subject to 8.4, in the case of a
registration referred to in subsection 8.2(a) or Section 8.3, the reasonable
fees and disbursements of one counsel for the selling shareholders.
The terms "register", "registered" and "registration" shall refer to a
-------- ---------- ------------
registration effected by preparing and filing a Registration Statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such Registration Statement.
"Registration Statement" shall mean a registration statement on Form S-1 or
----------------------
Form S-3 filed by the Company with the Commission for a public offering and sale
of securities of the Company.
"Securities Act" shall mean the Securities Act of 1933, as amended, or any
--------------
similar federal statute, and the rules and regulations of the Commission issued
under such Act, as they each may, from time to time, be in effect.
"Selling Expenses" shall mean all underwriting discounts and selling
----------------
commissions applicable to the sale of Shares pursuant to Sections 8.2 or 8.3 and
all fees and disbursements of counsel for the Holders not included in
Registration Expenses.
8.2 Required Registrations.
----------------------
(a) If at any time at least six months after the effective
date of its initial public offering (the "Initial Public Offering") and prior to
five years following such effective date, the Company shall be requested in
writing by the Holder(s) of at least 50% of the
29
outstanding shares of Registrable Securities to effect the registration under
the Securities Act of outstanding shares of Registrable Securities having an
anticipated selling price of no less than $2,000,000, the Company shall promptly
give written notice of such proposed registration to all record Holders of
Registrable Securities. Such Holders shall have the right, by giving written
notice to the Company within 30 days from receipt of the Company's notice, to
elect to have included in such registration such of their Registrable Securities
as such Holders may request in such notice of election. Thereupon, the Company
shall, as expeditiously as practicable, use its best efforts to effect the
registration, on a form of general use under the Securities Act, of all shares
of Registrable Securities which the Company has been requested to register. The
Company shall not be obligated to cause to become effective more than two
registration statements pursuant to which Registrable Securities are sold under
this Section 8.2(a).
Notwithstanding the foregoing, if the Company shall furnish to the
Holders of Registrable Securities requesting registration pursuant to this
Section 8.2(a) a certificate signed by the President of the Company stating that
the Board has made the good faith judgment that it would be detrimental to the
Company and its shareholders for such registration statement to be filed in the
near future, then the Company's obligation to use its best efforts to file and
cause to become effective such registration statement may be deferred for a
period which shall not exceed 180 days. This deferral right may not be
exercised by the Company on more than one occasion for each registration
pursuant to this Section 8.2(a).
(b) At such time as the Company shall have qualified for the use of
Form S-3 (but in no event after the expiration of five years from the effective
date of the Initial Public Offering), as the case may be (or any similar form or
forms promulgated by the Commission), the Holders of Registrable Securities
shall each have the right to request an unlimited number of registrations on
Form S-3 or such similar form, as the case may be
30
(collectively, "Form S-3"). The Company shall give prompt written notice of each
such proposed registration to all other record Holders of Registrable
Securities. Such Holders shall have the right, by giving written notice to the
Company within 30 days from receipt of the Company's notice, to elect to have
included in such registration such of their Registrable Securities as such
Holders may request in such notice of election. Thereupon, the Company shall, as
expeditiously as practicable, use its best efforts to effect the registration,
on Form S-3, of all shares of Registrable Securities which the Company has been
requested to register; provided, however, that the Company shall not be
obligated to file and cause to become effective (i) more than one registration
under Section 8.2(a) or Section 8.2(b) in any one twelve-month period or (ii)
any Registration Statement on Form S-3 where the proposed aggregate offering
price of the Registrable Securities to be sold thereunder is less than
$1,000,000. Registrations effected pursuant to this Section 8.2(b) shall not be
counted as required registrations pursuant to Section 8.2(a) hereof.
(c) The Company may include in a registration requested under this
Section 8.2 (i) any authorized but unissued shares of Common Stock for sale by
the Company, and (ii) any shares of its Common Stock held by employees,
consultants, directors or other advisers of the Company and with respect to
which registration rights have been granted by the Company ("Management Stock");
provided, however, that such shares shall not be included to the extent that the
underwriter of the shares so proposed to be registered (if the offering is
underwritten) or, if the offering is not underwritten, the Holders of a majority
of the shares of Registrable Securities included therein determine in good faith
that the inclusion of such shares will interfere with the successful marketing
of the shares of Registrable Securities to be included therein. If the offering
to which a registration statement under this Section 8.2 relates is an
underwritten offering, and if, after all shares of Common Stock proposed to be
offered by the
31
Company and all such shares of Management Stock have been excluded from such
registration, a greater number of shares of Registrable Securities is offered
for participation in such underwriting than in the opinion of the managing
underwriter can be accommodated without adversely affecting the underwriting,
the amount of Registrable Securities proposed to be offered in the underwriting
shall be reduced, pro-rata (based upon the amount of Registrable Securities
owned) among all Holders participating in such registration, to a number deemed
satisfactory by the managing underwriter; provided, however, that for purposes
of making any such reduction, with respect to each Purchaser, the partners and
retired partners of such Purchaser, the estates and family members of any such
partners and retired partners and their spouses, and any trusts for the benefit
of any of the foregoing persons shall be deemed to be a single "Holder" of
Registrable Securities, and any pro-rata reduction with respect to such "Holder"
shall be based upon the aggregate amount of shares of Registrable Securities
owned by all entities and individuals included in such "Holder", as defined in
this provision.
8.3 Incidental Registrations.
------------------------
(a) If at any time or from time to time (but prior to the
expiration of five years from the effective date of the Initial Public Offering)
the Company shall determine to register any of its Common Stock, for its own
account or for the account of any of its shareholders (other than the Holders),
other than a registration relating solely to employee benefit plans, or a
registration relating solely to a Commission Rule 145 transaction or any Rule
adopted by the Commission in substitution therefor or in amendment thereto, or a
registration on any registration form which does not include substantially the
same information as would be required to be included in a Registration Statement
covering the sale of Registrable Securities, or a registration relating to an
Initial Public Offering for which the Company has filed a Registration Statement
by January 31, 1998, the Company will:
32
(i) promptly give to each Holder written notice thereof (which
shall include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable Blue Sky or other state
securities laws); and
(ii) include in such registration (and any related qualification
under Blue Sky laws or other compliance), and in any underwriting involved
therein, all of the Registrable Securities and Management Stock specified in a
written request or requests received by the Company within twenty (20) days
after the giving of such written notice by the Company, by any Holder or
Holders, subject to the limitations set forth in Section 8.3(b).
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwritten public offering, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 8.3(a)(i). In such event the right of any Holder to
registration pursuant to this Section 8.3 shall be conditioned upon such
Holder's participation in such underwritten public offering and the inclusion of
such Holder's Registrable Securities in the underwritten public offering to the
extent provided herein. All Holders proposing to distribute their securities
through such underwritten public offering shall (together with the Company and
the other Holders distributing their securities through such underwritten public
offering) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwritten public offering by
the Company. Notwithstanding any other provision of this Section 8.3, if the
underwriter determines that marketing factors require a limitation of the number
of shares to be underwritten, all shares to be sold by the Company shall be
included in such offering before any Registrable Securities are so included, and
further, the underwriter otherwise may limit the number of Registrable
Securities to be included in the registration and underwritten public offering.
The Company shall so advise all Holders (except those Holders who have not
elected to distribute any of their
33
Registrable Securities through such underwritten public offering), and the
number of shares of Registrable Securities and shares of Management Stock that
may be included in the registration and underwritten public offering shall be
allocated among such Holders and holders of Management Stock in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities and
shares of Management Stock owned by such Holders and holders of Management Stock
at the time of filing the Registration Statement. No Registrable Securities or
shares of Management Stock excluded from the underwritten public offering by
reason of the underwriter's marketing limitation shall be included in such
registration. If the terms of any such underwritten public offering differ
materially from the terms (including range of offering price) previously
communicated to any Holder, such Holder may elect to withdraw therefrom by
written notice to the Company and the underwriter, which notice, to be
effective, must be received by the Company at least two (2) business days before
the anticipated effective date of the Registration Statement. The Registrable
Securities and/or other securities so withdrawn from such underwritten public
offering shall also be withdrawn from such registration; provided, however, that
if by the withdrawal of such Registrable Securities a greater number of
Registrable Securities held by other selling Holders may be included in such
registration (up to the maximum of any limitation imposed by the underwriters)
then the Company shall include in such registration in place of such withdrawn
Registrable Securities such additional Registrable Securities held by other
selling Holders whose Registrable Securities were excluded pursuant to
limitation by the underwriter pursuant to this Section 8.3(b) in the same
proportion as such Registrable Securities were excluded pursuant to such
underwriter limitation (with no more Registrable Securities being so included
than were withdrawn). In the event that the contemplated sale does not involve
an underwritten public offering and a determination that the inclusion of the
Registrable Securities adversely affects the marketing of the shares shall be
made
34
by the Board of Directors of the Company in its good faith discretion, then no
Registrable Securities are required hereby to be included in the contemplated
sale.
(c) The Company may at any time withdraw or abandon any Registration
Statement which triggers the provisions of this Section 8.3 without any
liability to the Holders.
8.4 Expenses of Registration. All Registration Expenses incurred in
------------------------
connection with any registration, qualification and compliance pursuant to
subsection 8.2(b) and Section 8.3 and the first registration, qualification and
compliance pursuant to subsection 8.2(a) shall be borne by the Company. All
Selling Expenses incurred in connection with any such registration and the
Registration Expenses incurred in connection with the second registration,
qualification and compliance pursuant to subsection 8.2 (a) shall be borne by
the selling Holders on a pro rata basis. If, notwithstanding this Agreement,
applicable authorities in any state wherein Registrable Securities are to be
sold require an allocation of Registration Expenses, each Holder agrees to pay
its apportioned share thereof.
8.5 Registration Procedures. In the case of each registration,
-----------------------
qualification or compliance effected by the Company pursuant to this Agreement,
the Company will keep each Holder advised in writing as to the initiation of
each registration, qualification and compliance and as to the completion
thereof. At its expense the Company will:
(a) prepare and file with the Commission a Registration
Statement with respect to such Registrable Securities, and use its best efforts
in good faith to cause such Registration Statement to become and remain
effective as provided herein;
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus included in such
Registration Statement as may be necessary or advisable to comply in all
material respects with the provisions
35
of the Securities Act with respect to the disposition of all securities covered
by such Registration Statement or as may be necessary to keep such Registration
Statement effective and current, but for no longer than nine (9) months
subsequent to the effective date of such registration;
(c) furnish to each seller of Registrable Securities such number of
copies of such Registration Statement, each amendment and supplement thereto (in
each case including all exhibits thereto), the prospectus included in such
Registration Statement (including each preliminary prospectus), and such other
documents as any such seller may reasonably request in order to facilitate the
disposition of the Registrable Securities held by such seller;
(d) enter into such customary agreements and take all such other
action in connection therewith as any Holder may reasonably request in order to
expedite or facilitate the disposition of such Registrable Securities;
(e) use its best efforts in good faith to register and qualify the
Registrable Securities covered by such Registration Statement under such
securities or Blue Sky laws of such jurisdictions as any selling Holder on
behalf of itself or any other selling Holder shall reasonably request and do any
and all such other acts and things as may be reasonably necessary or advisable
to enable such selling Holder to consummate the disposition in such
jurisdictions of the Registrable Securities held by such selling Holder;
provided, however that the Company shall not be required in connection therewith
to qualify to do business or file a general consent to service of process in any
such jurisdiction; and
(f) furnish to each prospective selling Holder a signed counterpart,
addressed to the prospective selling Holders, of (i) an opinion of counsel for
the Company, dated the effective date of the Registration Statement, and, to the
extent available to selling stockholders from the independent auditors of the
Company, (ii) a "comfort" letter signed by the independent public accountants
who have certified the Company's financial statements included
36
in the Registration Statement, covering substantially the same matters with
respect to the Registration Statement (and the prospectus included therein) and
(in the case of the "comfort" letter) with respect to events subsequent to the
date of the financial statements, as are customarily covered (at the time of
such registration) in opinions of issuer's counsel and in "comfort" letters
delivered to the underwriters in underwritten public offerings of securities;
provided, that the requirements of this paragraph (f) shall apply only to
Holders which are including at least 50,000 shares (such number to be
appropriately adjusted in the event of stock splits, stock combinations, stock
dividends or similar recapitalizations) of Registrable Securities in such
registration.
Notwithstanding the foregoing provisions of this Section 8.5, (1) the
Holders of Registrable Securities included in any Registration Statement will
not (until further notice) effect sales thereof after receipt of telegraphic or
written notice from the Company to suspend sales to permit the Company to
correct or update such Registration Statement or prospectus; but the obligations
of the Company with respect to maintaining any Registration Statement current
and effective shall be extended by a period of days equal to the period such
suspension is in effect; and (2) at the end of any period during which the
Company is obligated to keep any Registration Statement current and effective as
provided by this Section 8.5 (and any extensions thereof required by the
preceding paragraph (1) of this Section 8.5), the Holders of Registrable
Securities included in such Registration Statement shall discontinue sales of
shares pursuant to such Registration Statement upon notice from the Company of
its intention to remove from registration the shares covered by such
Registration Statement which remain unsold, and such Holders shall notify the
Company of the number of shares registered which remain unsold promptly after
receipt of such notice from the Company.
8.6 Indemnification.
---------------
37
(a) The Company will indemnify each Holder, each of the officers,
directors and partners of such Holder, and each person controlling such Holder,
if Registrable Securities held by such Holder are included in the securities
with respect to which registration, qualification or compliance has been
effected pursuant to this Agreement, and each underwriter of such Registrable
Securities, if any, and each person who controls such underwriter, against all
claims, losses, damages and liabilities (or actions in respect thereof) arising
out of or based on (i) any untrue statement (or alleged untrue statement) of a
material fact contained in any prospectus, offering circular or other similar
document (including any related Registration Statement, notification or the
like) incident to any such registration, qualification or compliance, or based
on any omission (or alleged omission) to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
in the light of the circumstances under which they were made, or (ii) any
violation by the Company of any federal, state or common law rule or regulation
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or compliance,
and will reimburse such Holder, each of the officers, directors and partners of
such Holder, and each person controlling such Holder, such underwriter and each
person who controls such underwriter, for any legal and any other expenses
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, provided that the Company will not be
liable to a Holder or underwriter in any such case to the extent that such
claim, loss, damage, liability or expense arises out of or is based on (i) any
untrue statement or omission made in reliance upon and in conformance with
written information furnished to the Company by or on behalf of such Holder or
underwriter and which was furnished specifically for the purpose of being used
therein or (ii) a failure by any Holder to
38
deliver a final prospectus to its transferee if any material change has been
made to the preliminary prospectus.
(b) Each Holder will, if Registrable Securities held by such Holder
are included in the securities as to which such registration, qualification or
compliance is being effected, indemnify the Company, each of its directors and
officers, each underwriter, if any, of the Company's securities covered by such
registration, qualification or compliance, each person who controls the Company
or such underwriter within the meaning of the Securities Act, and each other
Holder, each of the officers, directors and partners of each such other Holder
and each person controlling such other Holder, against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any such Registration Statement, prospectus, offering circular or
other similar document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made, and will reimburse the Company, such other Holders, such directors,
officers, partners, persons, underwriters or control persons for any legal or
any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such Registration
Statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by or on behalf
of such Holder and which was furnished specifically for the purpose of being
used therein; provided, however, that the liability of such Holder under this
Section 8.6 shall be limited to an amount equal to the proceeds to such Holder
of Registrable Securities sold as contemplated herein.
39
(c) Each party entitled to indemnification under this Section 8.6
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party, at such party's expense, to assume the defense of
any such claim or any litigation resulting therefrom, provided that counsel for
the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense (except for the payment of fees, costs and
expenses provided for below), and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement, unless such failure
to give notice shall materially adversely affect the Indemnifying Party in the
defense of any such claim or any such litigation. No Indemnifying Party, in the
defense of any such claim or litigation shall, except with the consent of each
Indemnified Party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such Indemnified Party of a release from all liability
in respect to such claim or litigation. Notwithstanding the election of the
Indemnifying Party to assume the defense of any such claim or litigation, the
Indemnified Party shall have the right to employ separate counsel and to
participate in the defense of such claim or litigation, and the Indemnifying
Party shall bear the reasonable fees, costs and expenses of such separate
counsel if (i) the use of the counsel chosen by the Indemnifying Party to
represent the Indemnified Party would present such counsel with a conflict of
interest; (ii) the defendants in, or targets of, any such claim or litigation
include both the Indemnified Party and the Indemnifying Party and the
Indemnified Party shall have reasonably concluded that there may be legal
defenses available to
40
it or to other Indemnified Parties which are different from or additional to
those available to the Indemnifying Party (in which case the Indemnifying Party
shall not have the right to direct the defense of such action on behalf of the
Indemnified Party); (iii) in the exercise of the Indemnified Party's reasonable
judgment, the Indemnifying Party shall not have employed satisfactory counsel to
represent the Indemnified Party within a reasonable time after notice of the
institution of such claim or litigation; or (iv) the Indemnifying Party shall
authorize the Indemnified Party to employ separate counsel at the expense of the
Indemnifying Party. The Indemnified Party shall not settle any such claim or
litigation without the consent of the Indemnifying Party.
(d) Notwithstanding the foregoing provisions of this Section 8.6, if
a registration is subject to a firm commitment underwriting, neither the Company
nor a Holder including Registrable Securities in the registration shall be
required to indemnify any other party to a greater extent than the obligation of
the Company or such Holder to the underwriters pursuant to the underwriting
agreement pertaining to such registration.
8.7 Information by Holder. The Holder or Holders of Registrable Securities
included in any registration shall furnish to the Company in writing such
information regarding such Holder or Holders and the distribution proposed by
such Holder or Holders as the Company may reasonably request in writing and as
shall be required in connection with any registration, qualification or
compliance referred to in this Agreement.
8.8 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission which may at any time permit the
sale of the Company's capital stock to the public without registration, at all
times after 90 days after the effective date of the first registration under the
Securities Act filed by the Company for an offering of its securities to the
general public, the Company agrees to:
41
(a) make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act;
(b) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act; and
(c) furnish to each Holder forthwith upon request a written statement
by the Company as to its compliance with the reporting requirements of such Rule
144 and of the Securities Act and the Exchange Act, a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
so filed by the Company as a Holder may reasonably request in availing itself of
any rule or regulation of the Commission allowing that Holder to sell any such
securities without registration.
8.9 Market "Stand-off" Agreement. The Holders, if requested by the Company
and an underwriter of the Company's securities, shall agree not to sell or
otherwise transfer or dispose of any common stock (or other securities) of the
Company (other than securities of the Company acquired in the open market on or
after a public offering) held by Holders during the 180-day period following the
effective date of the first Registration Statement and the 30-day periods
following the effective date of the second and third Registration Statements of
the Company filed under the Securities Act; provided, that such 30-day periods
shall only apply to a Registration Statement filed with respect to an
underwritten public offering by the Company; and provided, further, that all
Holders holding more than two percent of the outstanding common stock and all
officers and directors of the Company enter into similar agreements. Such
agreement shall be in writing in form satisfactory to the Company and such
underwriter. The Company may impose stop-transfer instructions with respect to
the shares (or
42
securities) subject to the foregoing restriction until the end of such 180-day
or 30-day periods. With respect to any Registration Statement, the Company
9. Transfer of Shares.
------------------
9.1 Procedures. Transfer of the Shares issued pursuant to this
----------
Agreement shall be made only on the books of the Company, respectively, by the
holders of record thereof or by their legal representatives who shall furnish
proper evidence of authority to transfer, or by their attorney thereunto
authorized by power of attorney duly executed and filed with the secretary of
the Company, subject to the restrictions, if any, set forth in the By-Laws and
Section 9.2 hereof. The Holder in whose name the Shares stands on the books of
the Company shall be deemed by the Company to be owner thereof for all purposes.
9.2 Restrictive Legends. Each certificate evidencing Shares issued
-------------------
or sold under this Agreement shall contain or otherwise be imprinted with
suitable legends in substantially the following form:
"This security has not been registered under the Securities Act of 1933 or
any state securities act, and has been acquired for investment and not with
view to, or for sale in connection with, any distribution thereof within
the meaning of the Securities Act of 1933, as amended.
This security is subject to transfer restrictions contained in a certain
Stock Purchase Agreement dated as of February 15, 1996, and no transfer of
the security shall be made unless the conditions specified in said
Agreement have been fulfilled. A copy of said Agreement is on file and
available for inspection at the principal offices of the Company."
The Company is hereby authorized to place "stop transfer" instructions on
its records or to instruct any transfer agent to prevent the transfer of Shares
except in conformity with this Agreement.
9.3 Securities Law Compliance. No Holder shall transfer any Shares
-------------------------
until such Holder has first given written notice to the Company describing
briefly the manner of any
43
such proposed transfer and until (i) the Company has received from the Holder's
counsel an opinion (reasonably satisfactory in form and substance to the
Company's counsel) that such transfer can be made without compliance with the
registration provisions of the Securities Act or any state securities act and
without the necessity of perfection of an exemption pursuant to Regulation A
adopted pursuant to said Securities Act; or (ii) the Company and the Holder
shall have complied with Commission Rule 144 and applicable state securities act
requirements, or (iii) a registration statement filed by the Company is declared
effective by the Commission and governing state securities act authorities or
steps necessary to perfect exemptions from such registration are completed.
10. Election of Directors; Board Attendance Rights. The Company, the
----------------------------------------------
Purchasers, McCall and the other Principal Common Stockholders hereby agree as
follows. The Purchasers, McCall and the Principal Common Stockholders are
sometimes collectively referred to in this Section 10 as the "Parties".
Each of the Parties agrees to use such Party's best efforts (including
without limitation the voting of a sufficient number of shares of capital stock
of the Company, if any, held by such Party) to cause McCall and three other
persons designated from time to time by McCall, one person designated from time
to time by Greylock and one person designated from time to time by Sutter Hill
to be elected to serve on the Company's board of directors (the "Board") at all
times from the date of this Agreement until the provisions of this Section 10
terminate as provided below. Until further notice from Greylock or Sutter Hill,
it is understood and agreed that the person so designated by Greylock is William
S. Kaiser and the person so designated by Sutter Hill is Tench Coxe.
The Parties also agree that Chase, Spitfire, Hancock, Wakefield, Technology
Crossover and Noro-Moseley each may designate from time to time one person (who
is reasonably
44
acceptable to a majority of the members of the Board) who shall be entitled to
notice of each meeting of the Board and to attend each such meeting. The Company
will furnish such persons with all materials furnished to members of the Board
and will reimburse their expenses of attendance at meetings of the Board to the
extent that it so reimburses the representatives of Greylock and Sutter Hill in
connection with their attendance. Until further notice from Chase, Spitfire,
Hancock, Wakefield, Technology Crossover or Noro-Moseley, as the case may be, it
is understood and agreed that the person so designated by Chase is Robert
Greene, the person so designated by Spitfire is Derek Lemke-von Ammon, the
person so designated by Hancock is Ofer Nemirovsky, the person so designated by
Wakefield is Thomas C. Nelson, the person so designated by Technology Crossover
is Jay C. Hoag (or his designee) and the person so designated by Noro-Moseley is
Charles A. Johnson.
Each of McCall and the Principal Common Stockholders further agrees as
follows: (a) to take no action, as stockholder or otherwise, to cause the number
of members of the Board to exceed seven (7) or to cause the Company to be
managed by an executive or similar committee of the Board without the consent of
Greylock and Sutter Hill; and (b) to use such Party's best efforts to cause
meetings of the Board to be held no less often than quarterly (it being
contemplated that initially such meetings will be held monthly).
To the extent that this Section 10 is inconsistent with any other agreement
to which a Party is subject, the provisions of this Section 10 shall govern as
to that Party.
The provisions of this Section 10 shall terminate on the earlier to occur
of (i) the completion of a Qualified Offering, or (ii) September 14, 2003.
Each Party agrees not to transfer any shares of capital stock of the
Company other than to the Company unless such Party's transferee agrees in
writing to be bound by the provisions of this Section 10 applicable to such
Party.
45
11. Certain Agreements of McCall and Tech Ventures.
----------------------------------------------
11.1 Commitment to the Company. So long as McCall is employed by the
-------------------------
Company, McCall agrees to devote a major portion of his time which is spent on
work or other business related activities to activities which are for the
account of the Company. For purposes of this Section 11.1, activities relating
to McCall Consulting Group, Inc. ("McCall Consulting"), Tech Ventures, the
Service Subsidiary and any other subsidiary of the Company shall be deemed "for
the account of the Company" if they are in furtherance of the operations of the
Company.
11.2 Stipulated Activities. McCall shall, within 10 days of the
---------------------
occurrence thereof, provide the Board with a list and description of each
Stipulated Activity (as hereinafter defined) in which McCall is engaged or
otherwise involved which has commenced, expired or been modified since McCall
delivered the last such list and description to the Board. As used herein, the
term "Stipulated Activity" shall mean any of the following as to McCall:
(a) being the beneficial owner of (i) more than 5% of the
outstanding equity securities of any entity other than the
Company or (ii) securities (including debt securities and
guarantees of indebtedness, but excluding securities traded
on a national securities exchange or in the over-the-counter
market and securities issued by money market or similar
funds) of any entity other than the Company with an original
cost, fair market value and/or obligation on the part of
McCall, contingent or otherwise (even if the obligation is
evidenced by non-recourse debt or guaranty), in excess of
$100,000; or
(b) being an employee, officer, director, consultant or general
partner of any person other than the Company (other than
charitable, civic or similar positions).
For purposes of determining Stipulated Activities, any actions taken
by the spouse or children or any entities controlled by McCall will be imputed
to be activities engaged in by
46
McCall. McCall hereby represents (a) that, except for his ownership interest in,
and for spending portions of his work or other business related activities for
the account of, McCall Consulting, and McCall Asset Leasing, Inc. ("McCall
Leasing"), Tech Ventures, the Service Subsidiary and any other subsidiary of the
Company, McCall is not presently engaged in, or contemplating the imminent
engagement in, any Stipulated Activity and (b) that McCall Leasing is a
corporation wholly owned by McCall, that McCall Consulting is a corporation
wholly owned by Tech Ventures, and that Tech Ventures is a limited liability
company of which McCall is the majority owner and of which employees of Tech
Ventures or its subsidiaries own the balance of the membership interest.
11.3 Right of Co-Sale. Each of McCall and Tech Ventures agrees that
----------------
he or it (and their respective donees, transferees or assignees referred to in
the last sentence of this Section 11.3) will not, prior to the date specified in
Section 11.4 for the expiration of these covenants, sell, or agree to sell, for
value any shares of the Company's capital stock owned by him or it either
jointly or individually to any third party (except for such sales or agreements
during the twelve-month period immediately following the date of this Agreement,
and each twelve-month period thereafter, of not more than 5% of the number of
shares of capital stock owned by McCall or Tech Ventures, as the case may be, on
the date of this Agreement, the unused portion of which shall be usable in later
periods, and except that McCall may, in addition to the number of shares so
determined on the basis of 5% per annum, sell or agree to sell up to an
aggregate of 23.50% of the number of such shares owned by McCall on the date of
this Agreement, all such computations to be on an as-converted to Common Stock
basis in the case of capital stock which is not Common Stock) without first
giving written notice in reasonable detail to each Purchaser at least 20 days
prior to such sale or agreement to sell and affording each Purchaser the
opportunity to elect, within 20 days of such notice, to participate in such
47
sale, or agreement to sell, on a pro rata basis and on the same terms and
conditions as those applicable to McCall and Tech Ventures.
For purposes of this Section 11.3, the term "pro rata basis" shall
mean that each Purchaser shall in the aggregate, be entitled to participate in
such sale or agreement to sell in the proportion that the number of the shares
of Common Stock issued or issuable upon conversion of the shares of Series A,
Series B, Series C, Series D or Series E Preferred Stock or Warrant Shares and
any securities issued as a dividend or other distribution with respect to, or in
exchange or in replacement thereof (the "Purchaser Shares") then held by such
Purchaser bears to the sum of such number of the Purchaser Shares, all other
Purchaser Shares held by other Purchasers and the number of shares of Common
Stock then owned (either jointly or individually) by McCall or Tech Ventures, or
both of them (in the case of a sale participated in by each of McCall and Tech
Ventures), or issuable upon conversion of other shares of the Company's capital
stock so owned by McCall or Tech Ventures.
Each of McCall and Tech Ventures agrees that conspicuous reference to
the provisions of this Section 11.3 shall be made on all certificates evidencing
shares of Common Stock owned by McCall or Tech Ventures, either jointly or
individually, and that he or it will make no transfer, gift or other assignment
of such shares unless the transferee, donee or assignee agrees in writing with
the Purchasers to be bound by the provisions of this Section 11.3 as if it were
McCall or Tech Ventures, as the case may be. Nothing contained in this Section
11.3 shall alter any restrictions on the transfer of shares of Common Stock held
by McCall or Tech Ventures created or imposed by any provisions contained in any
other agreement.
Notwithstanding anything to the contrary set forth in this Section
11.3, the rights of the Purchasers provided for in this Section 11.3 shall not
apply to sales or other dispositions by McCall to (i) a member of McCall's
immediate family, including for this purpose his spouse,
48
parents, parents-in-law, issue, nephews, nieces, brothers, brothers-in-law,
sisters, sisters-in-law, children-in-law and grandchildren-in-law; (ii) a trust
or partnership set up for the benefit of one or more of the persons set forth in
(i); or (iii) an heir, legatee or legal representative of McCall; provided,
however, that any such person referred to in clause (i), (ii) or (iii) shall
agree in writing prior to the transfer that such person is acquiring such shares
subject to the provisions of this Section 11.3. Such sales or other dispositions
shall not be included for purposes of calculating the percentage exemption
during the twelve-month periods provided for above in this Section 11.3.
11.4 Term. The provisions of Sections 11.1 and 11.2 shall continue in
----
effect until the earlier of (a) termination of the employment of McCall with the
Company or (b) cessation by the Purchasers to own in the aggregate at least 50%
of the Shares purchased by them on the date hereof. The Purchasers agree
promptly to notify McCall, c/o the Company, if the event specified in (b) of the
preceding sentence occurs. The provisions of Section 11.3 shall continue in
effect until the earliest to occur of (i) a Qualified Offering, as defined in
Section 7.17 of this Agreement, (ii) the involuntary termination without cause
of the employment of McCall with the Company; or (iii) the sale or other
transfer by the Purchasers (other than a sale or transfer to an affiliated
entity) of more than 50% of the Shares purchased in the aggregate pursuant to
this Agreement.
12. Modification of the Series B, Series C, Series D, and Series E
--------------------------------------------------------------
Agreements. By executing this Agreement, (a) the Company and the Stockholders
- ----------
(with the exception of Chase and Spitfire , hereby agree that Sections 7.1
through 7.17, 8.1 through 8.9, 10 and 11 of each of the Prior Stock Purchase
Agreements to which they are parties (other than the Greylock Agreement, as to
which such Sections have been terminated) are superseded respectively by
Sections 7.1 through 7.17, 8.1 through 8.9, 10 and 11 of this Agreement,
provided that, for
49
purposes of these Sections, the term "Purchaser" shall include any "Purchaser"
as defined in any of the Prior Stock Purchase Agreements, as well as any
"Purchaser" as defined in this Agreement, and (b) the Principal Common
Stockholders consent to the amendment of Sections 10 and 11 of each of the Prior
Stock Purchase Agreements (other than the Greylock Agreement, as to which such
Section 10 and 11 have been terminated) to read as provided in Sections 10 and
11 of this Agreement.
13. Miscellaneous.
-------------
13.1 Costs and Expenses. In connection with this Agreement and the
------------------
transactions described herein, the Company agrees to pay the fees and costs of
Hill & Barlow, a Professional Corporation, special counsel to the Purchasers
with respect to this transaction.
13.2 Successors and Assigns. All covenants and agreements contained
----------------------
in this Agreement made by or on behalf of any of the parties hereto shall bind
and inure to the benefit of the respective successors and assigns of such
parties, except as otherwise provided in Sections 7.1 and 8.
13.3 Governing Law. The internal laws of the State of Delaware
-------------
(regardless of conflict of laws principles) shall govern all issues concerning
the construction, validity and interpretation of this Agreement.
13.4 Survival. The representations and warranties of the Company
--------
contained in Section 3 of this Agreement shall survive the Closing for a period
of one year, and thereafter no action, suit or claim shall be brought by any
Purchaser alleging any misrepresentation or untruthfulness based upon the
subject matter of such representations or warranties, and any such action, suit
or claim shall be forever barred; provided, however, that any action based upon
-------- -------
fraud shall not be barred and may be brought notwithstanding the provisions of
this Section. The Purchasers agree that action against McCall under the
certificate attached as Exhibit F shall
50
be the sole recourse of the Purchasers against McCall for matters relating
to their purchase of Shares (including, without limitation, claims under the
federal or state securities laws or antifraud statutes or common law).
13.5 Entire Agreement; Amendment. This Agreement and the other
---------------------------
documents delivered pursuant hereto or contemplated hereby constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and thereof. Neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated except by a written instrument signed
(a) in the case of an amendment, waiver, discharge or termination (a
"Modification") to Section 10, by McCall and the holders of at least 75% of the
outstanding shares of capital stock of the Company held in aggregate by the
Stockholders as defined in Section 7.15(d); (b) in the case of a Modification to
Section 11, by McCall and holders of at least 75% of the Shares; and (c) in the
case of a Modification not governed by subsection 13.5(a) or 13.5(b) above, by
the Company and the holders of at least 75% of the Shares.
13.6 Notices, etc.. All notices and other communications required or
-------------
permitted hereunder shall be in writing and shall be made by hand delivery,
first-class mail (registered or certified, return receipt requested),
telecopier, or overnight air courier guaranteeing next day delivery, addressed
as follows: (a) if to a Purchaser, at such Purchaser's address shown on Schedule
A hereto, with a copy to Thomas C. Chase, Esq., Hill & Barlow, a Professional
Corporation, One International Place, Boston, Massachusetts 02110, (b) if to any
other Holder, at such address as such Holder shall have furnished to the Company
in writing, or, until any such Holder so furnishes an address to the Company,
then to and at the address of the last Holder of such Shares who has so
furnished an address to the Company, and (c) if to the Company, at SQL
Financials International, Inc., 3950 Johns Creek Court, Suwannee, Georgia 30024,
Attention: President, with a copy to G. Donald Johnson, Esq., , Womble Carlyle
51
Sandridge & Rice, a Professional Limited Liability Company Suite 700, 1275
Peachtree Street, N.E., Atlanta, Georgia 30309, or to such other address as the
party receiving such notice shall have properly designated to the other party
hereto in writing. Each such notice shall be deemed given at the time delivered
by hand, if personally delivered; five business days after being deposited in
the mail, postage prepaid, if mailed; when receipt acknowledged, if telecopied;
and the next business day after timely delivery to the courier, if sent by
overnight air courier guaranteeing next day delivery.
13.7 Delays or Omissions. No delay or omission to exercise any right,
-------------------
power or remedy accruing to any holder of the Shares upon any breach or default
of the Company under this Agreement, shall impair any such right, power or
remedy of such holder, nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereunder occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. All remedies, either under this Agreement, or by law or
otherwise afforded to any holder, shall be cumulative and not alternative.
13.8 Counterparts. This Agreement may be executed in any number of
------------
counterparts, some of which may have signature pages differing as to form, each
of which shall be enforceable against the parties actually executing such
counterparts and all of which together shall constitute one instrument.
13.9 Severability. If any provision of this Agreement, or its
------------
application to any person or circumstances, is invalid or unenforceable, then
the remainder of this Agreement or the application of such provision to other
persons or circumstances, shall not be affected thereby. Further, if any
provision or application hereof is invalid or unenforceable then a suitable and
52
equitable provision shall be substituted therefor in order to carry out so far
as may be valid or enforceable the intent and purposes of the invalid and
unenforceable provision.
13.10 Captions. Captions and headings used herein are for
--------
convenience of reference only and shall not limit or control the meaning of any
provisions hereof.
53
The foregoing Agreement is hereby executed under seal as of the date first
above written.
SQL FINANCIALS INTERNATIONAL, INC.
By: /s/ Stephen P. Jeffery
--------------------------------------------------
President
Purchasers:
CHASE VENTURE CAPITAL ASSOCIATES, L.P.
By: Chase Capital Partners, its General Partner
By: /s/
---------------------------------------------
General Partner
SPITFIRE CAPITAL PARTNERS, L.P.
By: MS Spitfire LLC,
Its General Partner
By: /s/ Derek Lemke-von Ammon
----------------------------------------------
Derek Lemke-von Ammon,
Chairman
GREYLOCK LIMITED PARTNERSHIP
By: /s/ William S. Kaiser
---------------------------------------------
General Partner
SUTTER HILL VENTURES, a CALIFORNIA
LIMITED PARTNERSHIP
By: /s/ Tench Coxe
---------------------------------------------
General Partner
54
SUTTER HILL ASSOCIATES, L.P.
By: /s/ Tench Coxe
----------------------------------------------
General Partner
GENSTAR INVESTMENT CORPORATION
By: /s/
----------------------------------------------
Its
HIGHLAND CAPITAL PARTNERS II
LIMITED PARTNERSHIP
By: /s/
----------------------------------------------
General Partner
HANCOCK VENTURE PARTNERS IV -
DIRECT FUND L.P.
By: Back Bay Partners XII L.P.
By: Hancock Venture Partners, Inc.
By: /s/
---------------------------------------------
Authorized Officer
FALCON VENTURES II L.P.
By: Back Bay Partners XIII L.P.
By: Hancock Venture Partners, Inc.
By: /s/
---------------------------------------------
Authorized Officer
55
WAKEFIELD GROUP LIMITED
PARTNERSHIP
By: Thomas C. Nelson, Inc., General Partner
By: /s/ Thomas C. Nelson
----------------------------------------------
Thomas C. Nelson, President
TECHNOLOGY CROSSOVER VENTURES,
C.V.
By: Technology Crossover Management, L.L.C.,
Investment General Partner
By: /s/ Robert C. Bensky
---------------------------------------------
Name:
Title:
TECHNOLOGY CROSSOVER VENTURES,
L.P.
By: Technology Crossover Management, L.L.C.,
General Partner
By: /s/ Robert C. Bensky
---------------------------------------------
Name:
Title:
NORO-MOSELEY PARTNERS III, L.P.
By: Moseley & Company III, L.L.C.,
General Partner
By: /s/
----------------------------------------------
Member
56
The undersigned Principal Common Stockholders (a) hereby join in the
foregoing Stock Purchase Agreement for the purposes of Sections 10, 11 (in the
case of Joseph S. McCall), 11.3 and 11.4 (in the case of the Principal Common
Stockholders other than Joseph S. McCall) and clause (b) of Section 12 thereof
and (b) being parties to the certain Amended and Restated Shareholders' Voting
Agreement, dated as of September 1, 1995, (the "Shareholders' Voting
Agreement") and the certain Restated Shareholders' Agreement, dated as of
September 1, 1995, as amended as of January 1, 1997, (the "September 1995
Shareholders' Agreement"), hereby agree that, to the extent of any conflict or
inconsistency between the terms of the Shareholders' Voting Agreement or
September 1995 Shareholders' Voting Agreement and the foregoing Stock Purchase
Agreement or any Prior Stock Purchase Agreement (as defined in Section 3.4 of
the foregoing Stock Purchase Agreement), those of the Stock Purchase Agreement
or such Prior Stock Purchase Agreement, as the case may be, shall govern:
/s/ Joseph S. McCall
-----------------------------------------
Joseph S. McCall
/s/ Donald L. House, Sr.
-----------------------------------------
Donald L. House, Sr.
/s/ David M. Funderburke
-----------------------------------------
David M. Funderburke
/s/ Scott J. Brady
-----------------------------------------
Scott J. Brady
/s/ Arthur G. Walsh, Jr.
-----------------------------------------
Arthur G. Walsh, Jr.
TECHNOLOGY VENTURES, L.L.C.
By /s/ Joseph S. McCall
-----------------------------------------
Its
57
The undersigned Stockholders hereby join in the foregoing Stock Purchase
Agreement for the purposes of Sections 7.15, 8.1 through 8.9, 10, 11 and 12
thereof:
WELLS FARGO BANK, TRUSTEE FOR
SHV M/P/T FBO DAVID L. ANDERSON
By: /s/
----------------------------------------------
SAUNDERS HOLDINGS, L.P.
By: /s/ Sherryl W. Hossack
----------------------------------------------
Under Power of Attorney for G. Leonard
Baker, General Partner
/s/ Sherryl W. Hossack
-------------------------------------------------
Under Power of Attorney for Thomas H. Layton
STANFORD UNIVERSITY
By: /s/ Carol Gilmer
-----------------------------------------------
Assistant Secretary of the Board of Trustees
of the Leland Stanford Junior University
ANVEST, L.P.
By: /s/
-----------------------------------------------
WELLS FARGO BANK, TRUSTEE FOR
M/P/T FBO WILLIAM H. YOUNGER, JR.
By: /s/
-----------------------------------------------
58
TOW PARTNERS, a CALIFORNIA
LIMITED PARTNERSHIP
By: /s/ David L. Anderson
-----------------------------------------------
Under Power of Attorney for Paul M. Wythes,
General Partner
/s/ David L. Anderson
------------------------------------------------
David L. Anderson
Paul M. Wythes and Marsha R. Wythes,
Trustees of the Wythes Living Trust
By: /s/ David L. Anderson
-----------------------------------------------
Under Power of Attorney for Paul M. Wythes,
Trustee
/s/ Sherryl W. Hossack
-------------------------------------------------
Under Power of Attorney for G. Leonard Baker, Jr.,
General Partner
WILLIAM H. YOUNGER, JR.,
TRUSTEE OF THE YOUNGER LIVING
TRUST
By: /s/
-----------------------------------------------
Trustee
/s/ Tench Coxe
------------------------------------------------
Tench Coxe
/s/ Sherryl W. Hossack
-------------------------------------------------
Under Power of Attorney for Ronald L. Perkins
/s/ Sherryl W. Hossack
-------------------------------------------------
Under Power of Attorney for James G. Gaither
59
SCHEDULE A
----------
Purchasers
----------
Name and Address Type of Entity Number of Purchase Price
---------------- -------------- Shares to be --------------
Purchased
---------
Chase Venture Capital California limited 208,334 $2,000,006.40
Associates, L.P. Partnership
380 Park Avenue
New York, NY 10017
Telephone: (212) 622-3100
Telecopier: (212) 622-3101
Spitfire Capital Partners, L.P. Delaware limited 208,334 $2,000,006.40
c/o Montgomery Securities Partnership
600 Montgomery Street
San Francisco, CA 94111
Attn: Derek Lemke-von Ammon
Greylock Limited Partnership Delaware limited 50,566 $ 485,433.60
One Federal Street partnership
Boston, MA 02110
Attn: William S. Kaiser
Telecopier: (617) 482-0059
Sutter Hill Ventures, a California limited 24,822 $ 238,291.20
California Limited partnership
Partnership
755 Page Mill Road,
Suite A-200
Palo Alto, CA 94304
Telephone: (415) 493-5600
Telecopier: (415) 858-1854
1
Schedule A (Continued)
Name and Address Type of Entity Number of Purchase Price
---------------- -------------- Shares to be --------------
Purchased
---------
Sutter Hill Associates, L.P. California limited 12,570 $ 120,672.00
c/o Sutter Hill Ventures partnership
755 Page Mill Road,
Suite A-200
Palo Alto, CA 94304
Telephone: (415) 493-5600
Telecopier: (415) 858-1854
Genstar Investment Delaware 632 $ 6,067.20
Corporation corporation
Metro Tower, Suite 1170 (principal place of
Foster City, CA 94404 business in
Attn: Mr. R.D. Paterson California)
Telephone: (415) 286-2366
Telecopier: (415) 286-2383
Highland Capital Partners II Delaware limited 29,977 $ 287,779.20
Limited Partnership partnership
Two International Place
Boston, MA 02110
Attn: James L. McLean
Telephone: (617) 531-1500
Telecopier: (617) 330-8768
Hancock Venture Partners Delaware limited 41,670 $ 400,032.00
IV-Direct Fund L.P. partnership
One Financial Center
Boston, MA 02111
Attn: Ofer Nemirovsky
Telephone: (617) 348-3708
Telecopier: (617) 350-0305
Falcon Ventures II L.P. Delaware limited 2,193 $ 21,052.80
One Financial Center partnership
Boston, MA 02111
Attn: Ofer Nemirovsky
Telephone: (617) 348-3708
Telecopier: (617) 350-0305
2
Schedule A (Continued)
Name and Address Type of Entity Number of Purchase Price
---------------- -------------- Shares to be --------------
Purchased
---------
Wakefield Group Limited North Carolina 10,965 $ 105,264.00
Partnership limited partnership
1110 East Morehead Street
P.O. Box 36329
Charlotte, NC 28204
Attn: Thomas C. Nelson
Telephone: (704) 372-0355
Telecopier: (704) 372-8978
Technology Crossover Netherlands 2,133 $ 20,476.80
Ventures, C.V. Antilles limited
575 High Street, Suite 400 partnership
Palo Alto, CA 94301
Attn: Jay C. Hoag
Telephone: (415) 614-8210
Telecopier: (415) 614-8222
cc: Technology Crossover
Ventures, C.V.
56 Main Street, Suite 210
Millburn, NJ 07041
Attn: Robert C. Bensky
Telephone: (973) 467-5320
Telecopier: (973) 467-5323
Technology Crossover Delaware limited 26,926 $ 258,489.60
Ventures, L.P. partnership
575 High Street, Suite 400
Palo Alto, CA 94301
Attn: Jay C. Hoag
Telephone: (415) 614-8210
Telecopier: (415) 614-8222
3
Schedule A (Continued)
Name and Address Type of Entity Number of Purchase Price
---------------- -------------- Shares to be --------------
Purchased
---------
cc: Technology Crossover
Ventures, L.P.
56 Main Street, Suite 210
Millburn, NJ 07041
Attn: Robert C. Bensky
Telephone: (973) 467-5320
Telecopier: (973) 467-5323
Noro-Moseley Partners III, Delaware limited 9,687 $ 92,995.20
L.P. partnership
4200 Northside Parkway
Building Nine
Atlanta, GA 30327
Attn: Charles A. Johnson
Telephone: (404)-233-1966
Telecopier: (404)-239-9280
--------- -------------
Totals 628,809 $6,036,566.40
4
SCHEDULE C
SQL Financials International, Inc.
Post-Closing Share Holdings,
Employee Reserve and Warrant Shares
Holdings After $6M @ $9.60/share
Diluted Voting
Shares % %
Common Stock
Scott J. Brady 69,567 1.36% 1.70%
Gregory M. Corley 260 0.01% 0.01%
Jon Ezrine 1,460 0.03% 0.04%
Mary Flock 50 0.00% 0.00%
Robert J. Fousch 30 0.00% 0.00%
David M. Funderburke 83,200 1.63% 2.03%
Gregg Giddes 18 0.00% 0.00%
Jon K. Hauck 5,200 0.10% 0.13%
Jennifer Hewitt 50 0.00% 0.00%
Robert C. Holler 1,200 0.02% 0.03%
Laurie Hood 100 0.00% 0.00%
Donald L. House 50,833 1.00% 1.24%
Stephen P. Jeffery 1,200 0.02% 0.03%
Joseph S. McCall 171,000 3.35% 4.17%
Laura McCall 10,000 0.20% 0.24%
Megan McCall 10,000 0.20% 0.24%
Joseph Parrish McCall 10,000 0.20% 0.24%
John Marable McCall 5,000 0.10% 0.12%
Rudolph Russell McCall 5,000 0.10% 0.12%
William Russell McCall 5,000 0.10% 0.12%
John G. McKimmey 107,767 2.11% 2.63%
Robert M. McKimmey 107,767 2.11% 2.63%
Patrick McVey 200 0.00% 0.00%
Paul Migacz 460 0.01% 0.01%
Ravi Nyalakonda 100 0.00% 0.00%
Mitchell V. Pelavin 6,800 0.13% 0.17%
Daniel R. Schmidt 1,200 0.02% 0.03%
Paul Constantine Sioros, Jr. 24,400 0.48% 0.60%
Janet V. Smith 260 0.01% 0.01%
Noreen Snellman 1,200 0.02% 0.03%
Technology Ventures LLC 181,800 3.56% 4.43%
Charlyn Thompson 160 0.00% 0.00%
Michael Tuttle 160 0.00% 0.00%
Arthur G. Walsh, Jr. 40,666 0.80% 0.99%
Kathleen Kochis Williamson 24,400 0.48% 0.60%
-----------------------------------
926,508 18.14% 22.59%
-----------------------------------
Preferred Stock (Series A @ $4/share)
Greylock Limited Partnership 250,000 4.89% 6.10%
Dennis Crumpler 12,500 0.24% 0.30%
-----------------------------------
262,500 5.14% 6.40%
-----------------------------------
1
Holdings After $6M @ $9.60/share
Diluted Voting
Shares % %
Preferred Stock (Series B @ $6.65/share)
Greylock Limited Partnership 150,376 2.94% 3.67%
Sutter Hill Ventures and: 195,840 3.83% 4.78%
Tow Partners 18,797 0.37% 0.46%
Wells Fargo Bank (David L. Anderson) 13,534 0.26% 0.33%
Anvest L.P. 1,504 0.03% 0.04%
G. Leonard Baker 18,322 0.36% 0.45%
Saunders Holdings, L.P. 6,015 0.12% 0.15%
Wells Fargo Bank (William H. Younger) 7,519 0.15% 0.18%
Tench Coxe 8,833 0.17% 0.22%
Ronald L. Perkins 2,256 0.04% 0.06%
Genstar Investment Corporation 4,993 0.10% 0.12%
Thomas H. Layton 752 0.01% 0.02%
Wythes Living Trust 4,484 0.09% 0.11%
David L. Anderson 9,299 0.18% 0.23%
Younger Living Trust 7,869 0.15% 0.19%
James C. Gaither 735 0.01% 0.02%
Stanford University 3,760 0.07% 0.09%
-----------------------------------
454,888 8.90% 11.09%
-----------------------------------
Preferred Stock (Series C @ $7/share)
Greylock Limited Partnership 81,571 1.60% 1.99%
Sutter Hill Ventures and: 40,007 0.78% 0.98%
Tow Partners 3,840 0.08% 0.09%
Wells Fargo Bank (David L. Anderson) 3,072 0.06% 0.07%
G. Leonard Baker 4,972 0.10% 0.12%
Wells Fargo Bank (William H. Younger) 1,536 0.03% 0.04%
Tench Coxe 1,804 0.04% 0.04%
Ronald L. Perkins 461 0.01% 0.01%
Genstar Investment Corporation 1,020 0.02% 0.02%
Wythes Living Trust 916 0.02% 0.02%
David L. Anderson 1,900 0.04% 0.05%
Younger Living Trust 1,608 0.03% 0.04%
James C. Gaither 150 0.00% 0.00%
Highland Capital Partners II 285,715 5.59% 6.97%
-----------------------------------
428,572 8.39% 10.45%
-----------------------------------
Preferred Stock (Series D @ $8.55/share)
Greylock Limited Partnership 49,895 0.98% 1.22%
Sutter Hill Ventures and: 24,472 0.48% 0.60%
Tow Partners 2,350 0.05% 0.06%
Anvest L.P. 1,878 0.04% 0.05%
G. Leonard Baker 3,040 0.06% 0.07%
Wells Fargo Bank (William H. Younger) 941 0.02% 0.02%
Tench Coxe 1,103 0.02% 0.03%
Ronald L. Perkins 281 0.01% 0.01%
2
Holdings After $6M @ $9.60/share
Diluted Voting
Shares % %
Genstar Investment Corporation 622 0.01% 0.02%
Wythes Living Trust 560 0.01% 0.01%
David L. Anderson 1,162 0.02% 0.03%
Younger Living Trust 984 0.02% 0.02%
James C. Gaither 92 0.00% 0.00%
Highland Capital Partners II 29,579 0.58% 0.72%
Wakefield Group 116,959 2.29% 2.85%
Hancock Venture Partners IV and: 444,445 8.70% 10.84%
Falcon Ventures II, L.P. 23,392 0.46% 0.57%
------------------------------------
701,755 13.74% 17.11%
------------------------------------
Preferred Stock (Series E @ $8.60/Share)
Greylock Limited Partnership 67,696 1.33% 1.65%
Sutter Hill Ventures and: 33,505 0.66% 0.82%
Tow Partners 3,218 0.06% 0.08%
David L. Anderson 4,163 0.08% 0.10%
Wythes Living Trust 770 0.02% 0.02%
G. Leonard Baker 4,163 0.08% 0.10%
Tench Coxe 1,514 0.03% 0.04%
Younger Living Trust 2,633 0.05% 0.06%
Ronald L. Perkins 385 0.01% 0.01%
James G. Gaither 123 0.00% 0.00%
Genstar Investment Corporation 852 0.02% 0.02%
Highland Capital Partners II 40,132 0.79% 0.98%
Hancock Venture Partners and: 55,787 1.09% 1.36%
Falcon Ventures II, L.P. 2,936 0.06% 0.07%
Wakefield Group 14,681 0.29% 0.36%
Technology Crossover Ventures, C.V. 25,598 0.50% 0.62%
Technology Crossover Ventures, L.P. 323,240 6.33% 7.88%
Noro-Moseley Partners 116,279 2.28% 2.84%
------------------------------------
697,675 13.66% 17.01%
------------------------------------
Preferred Stock (Series F @ $9.60/Share)
Greylock Limited Partnership 50,566 0.99% 1.23%
Sutter Hill Ventures 24,822 0.49% 0.61%
Sutter Hill Associates, L.P. 12,570 0.25% 0.31%
Highland Capital Partners II 29,977 0.59% 0.73%
Hancock Venture Partners and: 41,670 0.82% 1.02%
Falcon Ventures II, L.P. 2,193 0.04% 0.05%
Wakefield Group 10,965 0.21% 0.27%
Technology Crossover Ventures, C.V. 2,133 0.04% 0.05%
Technology Crossover Ventures, L.P. 26,926 0.53% 0.66%
Noro-Moseley Partners 9,687 0.19% 0.24%
Genstar Investment Corporation 632 0.01% 0.02%
Spitfire Capital Partners 208,334 4.08% 5.08%
3
Holdings After $6M @ $9.60/share
Diluted Voting
Shares % %
Chase Capital Partners 208,334 4.08% 5.08%
-------------------------------------
628,809 12.31% 15.33%
-------------------------------------
Employee ISO Shares Reserved 839,292 16.43%
Warrants (Series C @ $7/share)
Technology Ventures LLC 87,500 1.71%
Warrants (Series D @ $8.55/share)
Greylock Limited Partnership 7,484 0.15%
Sutter Hill Ventures and: 3,671 0.07%
Tow Partners 353 0.01%
Anvest L.P. 282 0.01%
G. Leonard Baker 457 0.01%
Wells Fargo Bank (William H. Younger) 141 0.00%
Tench Coxe 165 0.00%
Ronald L. Perkins 42 0.00%
Genstar Investment Corporation 93 0.00%
Wythes Living Trust 84 0.00%
David L. Anderson 175 0.00%
Younger Living Trust 147 0.00%
James C. Gaither 13 0.00%
Highland Capital Partners II 4,437 0.09%
Silicon Valley Bank (reserves) 8,201 0.16%
-------------------------
25,745 0.50%
-------------------------
Warrants (Series E @ $8.60/share)
Silicon Valley Bank 8,721 0.17%
Warrants (Series F @ $9.60/share dated 6/5/97)
Greylock Limited Partnership 3,720 0.07%
Sutter Hill Ventures 1,826 0.04%
Sutter Hill Associates, L.P. 925 0.02%
Highland Capital Partners II 2,205 0.04%
Hancock Venture Partners and: 3,066 0.06%
Falcon Ventures II, L.P. 161 0.00%
Wakefield Group 807 0.02%
Technology Crossover Ventures, C.V. 157 0.00%
Technology Crossover Ventures, L.P. 1,981 0.04%
Noro-Moseley Partners 713 0.01%
Genstar Investment Corporation 46 0.00%
-------------------------
15,607 0.31%
-------------------------
Warrants (Series F @ $9.60/share dated 8/5/97)
Greylock Limited Partnership 7,440 0.15%
Sutter Hill Ventures 3,652 0.07%
4
Holdings After $6M @ $9.60/share
Diluted Voting
Shares % %
Sutter Hill Associates, L.P. 1,850 0.04%
Highland Capital Partners II 4,411 0.09%
Hancock Venture Partners and: 6,131 0.12%
Falcon Ventures II, L.P. 323 0.01%
Wakefield Group 1,613 0.03%
Technology Crossover Ventures, C.V. 314 0.01%
Technology Crossover Ventures, L.P. 3,962 0.08%
Noro-Moseley Partners 1,425 0.03%
Genstar Investment Corporation 93 0.00%
-------------------------
31,214 0.61%
-------------------------
TOTAL 5,108,786 100.00% 100.00%
====================================
5
EXHIBIT A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
SQL FINANCIALS INTERNATIONAL, INC.
The undersigned, being the President and Chief Executive Officer of
SQL FINANCIALS INTERNATIONAL, INC., a Delaware corporation, hereby certifies
that:
1.
(a) The name of the Corporation is SQL FINANCIALS INTERNATIONAL, INC.
(the "Corporation").
(b) The date of filing the original Certificate of Incorporation of
the Corporation with the Secretary of State of Delaware was November 20, 1991.
2.
This Amended and Restated Certificate of Incorporation amends and
restates the provisions of the Certificate of Incorporation, as amended, of the
Corporation and was duly adopted by written consent of the stockholders of the
Corporation in accordance with the provisions of Sections 228, 242 and 245 of
the General Corporation Law of the State of Delaware (the "Code"), and written
notice thereof was given to all non-participating stockholders in accordance
with Section 228(d) of the Code.
3.
The Certificate of Incorporation of the Corporation, as restated and
amended hereby, shall, upon its filing with the Secretary of State of the State
of Delaware, read in its entirety as follows:
Article 1: Name
The name of this Corporation is:
SQL FINANCIALS INTERNATIONAL, INC.
1
Article 2: Agent
The name and address in the State of Delaware of this Corporation's
registered office and initial agent for service of process (located in New
Castle County) are as follows:
THE CORPORATION TRUST COMPANY
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
Article 3: Purpose
The purpose of the Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General Corporation
Law of the State of Delaware.
Article 4: Share Structure
This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the Corporation is authorized to issue is 9,500,000
shares, of which 6,000,000 shares are Common Stock, $.0001 par value per share,
and 3,500,000 shares are Preferred Stock, $1.00 par value per share.
The Preferred Stock may be issued from time to time in one or more
series with distinctive serial designations, at such purchase prices and with
such relative rights, preferences, privileges and restrictions as are determined
from time to time by the Board of Directors. The shares of each series of
Preferred Stock may vary from the shares of any other series of Preferred Stock
in the Conversion Rate, Conversion Value, Conversion Price and any other factors
which are determined by the price per share paid for such Preferred Stock, and
as to redemption rights, if any, and voting rights, if any, but shall otherwise
be identical. The Board of Directors may create any such series of Preferred
Stock by resolution duly adopted pursuant to authority hereby granted.
On the date this document is filed with the Delaware Secretary of
State, (i) 262,500 shares of Preferred Stock issued and outstanding are known
and previously have been designated as Series A Convertible Preferred Stock
("Series A Preferred Stock"), (ii) 454,888 shares of Preferred Stock, of which
454,888 shares are issued and outstanding, are known and previously have been
designated as Series B Convertible Preferred Stock ("Series B Preferred Stock"),
(iii) 516,072 shares of Preferred Stock, of which 428,572 shares are issued and
outstanding, are known and designated as Series C Convertible Preferred Stock
("Series C
2
Preferred Stock"), (iv) 727,500 shares of Preferred Stock, of which 701,755
shares are issued and outstanding, are known and designated as Series D
Convertible Preferred Stock ("Series D Preferred Stock"), and (v) 706,396 shares
of Preferred Stock, of which 697,675 shares are issued and outstanding, are
known and designated as Series E Convertible Preferred Stock ("Series E
Preferred Stock"). A total of 675,630 shares of Preferred Stock shall be known
and designated as Series F Convertible Prepared Stock ("Series F Preferred
Stock"). The Board of Directors from time to time may increase or decrease the
number of shares of any series, but not, in the case of a decrease, to a number
less than the number of shares of such series then outstanding.
The rights, preferences, privileges and restrictions granted to or
imposed upon the Common Stock and the Preferred Stock are as follows:
1. Dividends. The holders of the Preferred Stock shall be entitled
---------
to participate with the holders of Common Stock in any dividends paid or set
aside for payment (other than dividends payable solely in shares of Common
Stock) so that holders of the Preferred Stock shall receive with respect to each
share of Preferred Stock an amount equal to (x) the dividend payable with
respect to each share of Common Stock multiplied by (y) the number of shares
(and fraction of a share, if any) of Common Stock into which such share of
Preferred Stock is convertible as of the record date for such dividend.
2. Liquidation Preference.
----------------------
(a) Preference.
----------
(i) In the event of any liquidation, dissolution or
winding up of the Corporation, either voluntarily or involuntarily, the
holders of the Preferred Stock shall be entitled to receive prior and in
preference to any distribution of any of the assets or surplus funds of the
Corporation to the holders of Common Stock of the Corporation, an amount
equal to (A) the consideration per share paid for such Preferred Stock,
which is equal to $4.00 per share of Series A Preferred Stock, $6.65 per
share of Series B Preferred Stock, $7.00 per share of Series C Preferred
Stock, $8.55 per share of Series D Preferred Stock, $8.60 per share of
Series E Preferred Stock and $9.60 per share of Series F Preferred Stock
plus (B) a further amount equal to any dividends declared or accrued but
unpaid on such shares, pari passu with the holders of all Additional Series
(as hereinafter defined) based on the relative liquidation preferences of
the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred
Stock, Series D Preferred Stock, Series E Preferred Stock, Series F
Preferred Stock and such Additional Series. If, upon such liquidation,
dissolution or winding up of the Corporation, the assets of the Corporation
available for distribution to the shareholders of the Corporation are
insufficient to provide for the payment of the full aforesaid preferential
amount, such assets as are so available shall be distributed among the
holders of the Preferred Stock
3
in proportion to the relative aggregate liquidation preferences of the
Preferred Stock so held.
(ii) After the payment or the setting apart for payment to
the holders of the Preferred Stock of the preferential amounts so payable
to them, if assets remain in the Corporation the holders of the Common
Stock of the Corporation shall receive all of the remaining assets of the
Corporation pro rata in accordance with the number of shares of Common
Stock held by them.
(iii) All amounts per share set forth in this subparagraph
2(a) shall be appropriately adjusted for any stock splits, stock
combinations, stock dividends or similar recapitalizations.
(b) Noncash Distributions. If any of the assets of the
---------------------
Corporation are to be distributed other than in cash under this paragraph 2 or
for any purpose, then the Board of Directors of the Corporation shall promptly
engage independent competent appraisers to determine the value of the assets to
be distributed to the holders of Preferred Stock or Common Stock. The
Corporation shall, upon receipt of such appraiser's valuation, give prompt
written notice to each holder of shares of Preferred Stock or Common Stock of
the appraiser's valuation.
(c) Consolidation or Merger. A consolidation or merger of the
-----------------------
Corporation with or into any other corporation or corporations (other than a
consolidation or merger following which the holders of 51% or more of the
capital stock of the resulting or surviving entity, based on voting power in the
election of directors, are persons or entities who were shareholders of the
Corporation immediately prior to such consolidation or merger), or a sale of all
or substantially all of the assets of the Corporation, shall be deemed to be a
liquidation, dissolution or winding up within the meaning of this paragraph 2,
unless in any such particular event the holders of more than 80% of the then
outstanding shares of Preferred Stock, voting together as a single class,
determine that such particular event shall not, for purposes of this paragraph
2, be deemed a liquidation, dissolution or winding up.
3. Voting Rights. Except as otherwise provided in the series
-------------
resolution creating any Additional Series (as hereinafter defined), the holder
of each share of Preferred Stock shall be entitled to the number of votes equal
to the number of shares of Common Stock into which each share of Preferred Stock
could be converted on the record date for the vote or written consent of
shareholders and, except as otherwise required by law, shall have voting rights
and powers equal to the voting rights and powers of the Common Stock. Except as
otherwise provided in the series resolution creating any Additional Series (as
hereinafter defined), the holder of each share of Preferred Stock shall be
entitled to notice of any shareholders' meeting in accordance with the bylaws of
the Corporation and shall vote with holders of the Common Stock upon all other
matters submitted to a vote of shareholders, except those matters required to be
submitted to a class or series vote pursuant to paragraph 5 or by law.
Fractional votes shall not, however, be permitted and any fractional voting
rights resulting
4
from the above formula (after aggregating all shares of Common Stock into which
shares of Preferred Stock held by each holder could be converted) shall be
rounded to the nearest whole number (with one-half rounded upward to one).
4. Conversion. Preferred Stock shall be convertible into Common
----------
Stock, as follows:
(a) Right to Convert. Each share of Preferred Stock shall be
----------------
convertible, at the option of the holder thereof, at any time after the date of
issuance of such share at the office of the Corporation. Each share of
Preferred Stock shall be convertible into the number of shares of Common Stock
which results from dividing the "Conversion Price" per share in effect at the
time of conversion into the "Conversion Value" per share. The number of shares
of Common Stock into which a share of Preferred Stock is convertible is
hereinafter referred to as the "Conversion Rate." Both the Conversion Price per
share of Preferred Stock (the "Conversion Price") and the Conversion Value per
share of Preferred Stock initially in effect shall be equal to the consideration
paid for such Preferred Stock, which is equal to $4.00 per share of Series A
Preferred Stock, $6.65 per share of Series B Preferred Stock, $7.00 per share of
Series C Preferred Stock; $8.55 per share of Series D Preferred Stock, $8.60
per share of Series E Preferred Stock, and $9.60 per share of Series F Preferred
Stock. The initial Conversion Price of Preferred Stock shall be subject to
adjustment as hereinafter provided.
(b) Automatic Conversion. Each share of Preferred Stock shall
--------------------
automatically be converted into shares of Common Stock at its then effective
Conversion Rate immediately upon the closing of a public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended,
covering any of the corporation's securities (as that term is defined under the
Securities Act of 1933, as then in effect) with aggregate gross proceeds to the
Corporation, at the public offering price, of at least $10,000,000 and an
equivalent public offering price per share of Common Stock of at least $18.00
(such amount to be appropriately adjusted in the event of stock splits, stock
combinations, stock dividends or similar recapitalizations).
(c) Mechanics of Conversion. Before any holder of Preferred
-----------------------
Stock shall be entitled to convert the same into shares of Common Stock as
provided in paragraph 4(a), he shall surrender the certificate or certificates
therefor, duly endorsed, at the office of the Corporation and shall give written
notice to the Corporation at such office that he elects to convert the same. The
Corporation shall, as soon as practicable thereafter, issue and deliver at such
office to such holder of Preferred Stock a certificate or certificates for the
number of shares of Common Stock to which he shall be entitled as aforesaid.
Such conversion shall be deemed to have been made immediately prior to the close
of business on the date of such surrender of the shares of Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date.
5
In the event of an automatic conversion pursuant to paragraph 4(b),
the outstanding shares of Preferred Stock shall be converted automatically
without any further action by the holders of such shares and whether or not the
certificates representing such shares are surrendered to the Corporation;
provided, however, that the Corporation shall not be obligated to issue
certificates evidencing the shares of Common Stock issuable upon such automatic
conversion unless the certificates evidencing such shares of Preferred Stock are
either delivered to the Corporation as provided above, or the holder notifies
the Corporation that such certificates have been lost, stolen or destroyed and
executes an agreement satisfactory to the Corporation to indemnify the
Corporation from any loss incurred by it in connection with such certificates.
The Corporation shall, as soon as practicable after such delivery, or such
agreement and indemnification in the case of a lost certificate, issue and
deliver at such office to such holder of Preferred Stock, a certificate or
certificates for the number of shares of Common Stock to which he shall be
entitled as aforesaid and a check payable to the holder in the amount of any
cash amounts payable as the result of a conversion into fractional shares of
Common Stock. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of closing of the offering, and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock on such date.
(d) Fractional Shares. No fractional shares of Common Stock shall be
-----------------
issued upon conversion of Preferred Stock. In lieu of any fractional shares to
which the holder would otherwise be entitled, the Corporation shall pay cash
equal to such fraction multiplied by the Conversion Price.
(e) Adjustment of Conversion Price. The Conversion Price of each
------------------------------
series of Preferred Stock shall be subject to adjustment from time to time as
follows:
(i) If the Corporation shall issue any Common Stock or other
securities of the Corporation convertible into or exchangeable for Common
Stock (other than "Excluded Stock," as defined below, or stock dividends,
subdivisions, split-ups, combinations or dividends, which such events are
covered by subparagraphs 4(e)(iii), (iv), and (v)), for a consideration per
share less than the Conversion Price for such series in effect immediately
prior to the issuance of such Common Stock (or other securities convertible
into or exchangeable for Common Stock), then the Conversion Price for such
series shall forthwith be decreased immediately after such issuance to a
price equal to the quotient obtained by dividing:
(A) an amount equal to the sum of: (x) the total number of
shares of Common Stock outstanding (including any shares of Common
Stock deemed to have been issued pursuant to subdivision (3) of this
subparagraph (i)) immediately prior to such issuance multiplied by the
Conversion Price in effect immediately prior to such issuance plus (y)
the consideration received by the Corporation upon such issuance, by
6
(B) the total number of shares of Common Stock outstanding
(including any shares of Common Stock deemed to have been issued
pursuant to subdivision (3) of this subparagraph (i)) immediately
after the issuance of such Common Stock (or other securities
convertible into or exchangeable for Common Stock).
For purposes of making any such calculation pursuant to this
subparagraph (i), the shares of Common Stock issuable upon conversion
of the outstanding shares of Preferred Stock, together with any other
shares of Common Stock deemed issued and outstanding pursuant to
subdivision (3) of this subparagraph (i), shall be deemed issued and
outstanding at all times. For the purposes of this subparagraph (i),
the following provisions shall also be applicable:
(1) In the case of the issuance of Common Stock for
cash, the consideration received therefor shall be deemed to be
the amount of cash paid therefor without deducting any discounts
or commissions paid or incurred by the Corporation in connection
with the issuance and sale thereof.
(2) In the case of the issuance of Common Stock for a
consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the fair
value thereof as determined in good faith by the Board of
Directors of the Corporation.
(3) In the case of the issuance of (i) options to
purchase or rights to subscribe for Common Stock (other than
Excluded Stock), (ii) securities by their terms convertible or
exchangeable for Common Stock (other than Excluded Stock), or
(iii) options to purchase or rights to subscribe for such
convertible or exchangeable securities:
(C) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase or rights to
subscribe for Common Stock shall be deemed to be issuable for a
consideration equal to the consideration (determined in the manner
provided in subdivisions (1) and (2) above), if any, received by the
Corporation upon the issuance of such options or rights plus the
minimum purchase price provided in such options or rights for the
Common stock covered thereby;
(D) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such convertible
or exchangeable securities, or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable
securities and
7
subsequent conversion or exchange thereof, shall be deemed to be
issuable for a consideration equal to the consideration received by
the Corporation for any such securities and related options or rights,
plus the additional consideration, if any, to be received by the
Corporation upon the conversion or exchange of such securities or the
exercise of any related options or rights (the consideration in each
case to be determined in the manner provided in subdivisions (1) and
(2) above);
(E) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options or rights or upon conversion
of or in exchange for such convertible or exchangeable securities upon
the exercise of options to purchase or rights to subscribe for such
convertible or exchangeable securities and subsequent conversion or
exchange thereof, shall be deemed to have been issued at the time such
options or rights or securities were issued, provided that the
consideration for which such Common Stock is deemed to be issuable
does not exceed the issuance price of securities issued in the latest
bona fide round of financing by the Corporation;
(F) on any change in the number of shares of Common Stock
deliverable upon exercise of any such options or rights or conversion
of or exchange for such convertible or exchangeable securities, or on
any change in the minimum purchase price of such options, rights or
securities, other than a change resulting from the antidilution
provisions of such options, rights or securities, the Conversion Price
shall forthwith be readjusted to such Conversion Price as would have
obtained had the adjustment (and any subsequent adjustments) made upon
(x) the issuance of such options, rights or securities not exercised,
converted or exchanged prior to such change, as the case may be, been
made upon the basis of such change or (y) the options or rights
related to such securities not converted or exchanged prior to such
change, as the case may be, been made upon the basis of such change;
and
(G) on the expiration of any such options or rights, the
termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or
exchangeable securities, the Conversion Price shall forthwith be
readjusted to such Conversion Price as would have obtained had the
adjustment (and any subsequent adjustments) made upon the issuance of
such options, rights, convertible or exchangeable securities or
options or rights related to such convertible or exchangeable
securities, as the case may be, been made upon the basis of the
issuance of only the number of shares of Common Stock actually issued
upon the exercise of such options or rights, upon the conversion or
exchange of such convertible or exchangeable securities or upon the
exercise of the options or rights related to such convertible or
exchangeable securities, as the case may be.
8
(ii) "Excluded Stock" shall mean:
(A) all shares of Common Stock issued and outstanding on the
date this document is filed with the Delaware Secretary of State;
(B) all shares of Common Stock into which shares of
Preferred Stock are convertible;
(C) up to 839,292 shares of Common Stock issued or issuable
on or after the date referred to in (ii)(A) above upon exercise of
options or other purchase rights granted to employees, officers,
directors or consultants of the Corporation and approved by the Board
of Directors of the Corporation (and any reissuance of such shares
after repurchase thereof);
(D) up to 87,500 shares of Series C Preferred Stock and up
to 25,745 shares of Series D Preferred Stock, in each case issuable
upon exercise of warrants issued on or after February 21, 1995;
(E) up to 8,721 shares of Series E Preferred Stock issuable
upon exercise of warrants issued on or after March 28, 1997;
(F) up to 46,821 shares of Series F Preferred Stock issuable
upon exercise of warrants issued on or after June 5, 1997; and
(G) all shares of Common Stock or other securities
(including options, warrants and other purchase rights) issued or to
be issued to employees, officers, directors, consultants, affiliates
or lenders of the Corporation after receipt of written consent to such
issuance from the holders of 60% of the then outstanding Preferred
Stock and approval of such issuance by the Board of Directors of the
Corporation.
Shares of Excluded Stock described in (C), (D), (E), (F) and
(G) of this subparagraph 4(e)(ii) shall not be deemed to be
outstanding for purposes of the computations of subparagraph 4(e)(i)
above until actually issued.
(iii) If the number of shares of Common Stock outstanding at
any time after the date hereof is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of shares of Common
Stock, then, on the date such payment is made or such change is effective,
the Conversion Price shall be appropriately decreased so that the number of
shares of Common Stock issuable on conversion of the Preferred Stock shall
be increased in proportion to such increase of outstanding shares.
9
(iv) If the number of shares of Common Stock outstanding at any
time after the date hereof is decreased by a combination of the outstanding
shares of Common Stock, then, on the effective date of such combination,
the Conversion Price shall be appropriately increased so that the number of
shares of Common Stock issuable on conversion of the Preferred Stock shall
be decreased in proportion to such decrease in outstanding shares.
(v) In case the Corporation shall declare a cash dividend upon
its Common Stock payable otherwise than out of retained earnings or shall
distribute to holders of its Common Stock shares of its capital stock
(other than Common Stock), stock or other securities of other persons,
evidences of indebtedness issued by the Corporation or other persons,
assets (excluding cash dividends) or options or rights (excluding options
to purchase and rights to subscribe for Common Stock or other securities of
the Corporation convertible into or exchangeable for Common Stock), then,
in such case, the holders of shares of Preferred Stock shall, concurrent
with the distribution to holders of Common Stock, receive a like
distribution based upon the number of shares of Common Stock into which
such Preferred Stock is then convertible.
(vi) in case, at any time after the date hereof, of any capital
reorganization, or any reclassification of the stock of the Corporation
(other than a change in par value or as a result of a stock dividend or
subdivision, split-up or combination of shares), or the consolidation or
merger of the Corporation with or into another person (other than a
consolidation or merger in which the Corporation is the continuing entity
and which does not result in any change in the Common Stock), or of the
sale or other disposition of all or substantially all the properties and
assets of the Corporation as an entirety to any other person, the shares of
Preferred Stock shall, if such event is not deemed a liquidation for
purposes of Subparagraph 2(c), after such reorganization, reclassification,
consolidation, merger, sale or other disposition, be convertible into the
kind and number of shares of stock or other securities or property of the
Corporation or of the entity resulting from such consolidation or surviving
such merger or to which such properties and assets shall have been sold or
otherwise disposed to which such holder would have been entitled if
immediately prior to such reorganization, reclassification, consolidation,
merger, sale or other disposition he had converted his shares of Preferred
Stock into Common Stock. The provisions of this subparagraph (vi) shall
similarly apply to successive reorganizations, reclassifications,
consolidations, mergers, sales or other dispositions.
(vii) All calculations under this paragraph 4 shall be made to
the nearest cent or to the nearest one hundredth (1/100) of a share, as the
case may be.
(f) Minimal Adjustments. No adjustment in a Conversion Price need be
-------------------
made if such adjustment would result in a change in a Conversion Price of less
than $0.01. Any adjustment of less than $0.01 which is not made shall be carried
forward and shall be made
10
at the time of and together with any subsequent adjustment which, on a
cumulative basis, amounts to an adjustment of $0.01 or more in a Conversion
Price.
(g) Certificate as to Adjustments. Upon the occurrence of each
-----------------------------
adjustment or readjustment of a Conversion Price pursuant to this paragraph 4,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Preferred Stock a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon written request at any time
of any holder of Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (i) such adjustments and readjustments,
(ii) the Conversion Price and Rate at the time in effect for the Preferred Stock
held, and (iii) the number of shares of Common Stock and the amount if any, of
other property which at the time would be received upon the conversion of the
Preferred Stock.
(h) Notices of Record Date. In the event of any taking by the
----------------------
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, the Corporation
shall mail to each holder of Preferred Stock at least twenty (20) days prior to
the date specified herein, a notice specifying the date on which any such record
is to be taken for the purpose of such dividend or distribution.
(i) Reservation of Stock Issuable Upon Conversion. The Corporation
---------------------------------------------
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock solely for the purpose of effecting the conversion of the
shares of the Preferred Stock such number of its shares of Common Stock as shall
from time to time be sufficient to effect the conversion of all outstanding
shares of the Preferred Stock; and if at any time the number of authorized but
unissued shares of Common Stock shall not be sufficient to effect the conversion
of all then outstanding shares of the Preferred Stock, the Corporation will take
such corporate action as may, in the opinion of its counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose.
(j) Notices. Any notice required by the provisions of this paragraph
-------
4 to be given to the holder of shares of the Preferred Stock shall be deemed
given if deposited in the United States mail, postage prepaid, and addressed to
each holder of record at his latest address appearing on the books of the
Corporation.
5. Redemption of Series A, Series B, Series C, Series D, Series E and
------------------------------------------------------------------
Series F Preferred Stock.
------------------------
(a) On the 75th day following any Preferred Redemption Date, as
defined below, and so long as any shares of Series A, Series B, Series C, Series
D, Series E or Series F Preferred Stock (for purposes of this Section 5
"Redeemable Preferred Stock") shall be outstanding, the Corporation shall at the
request of any holder of Redeemable Preferred Stock
11
sent on or before the later of the 30th day following such Preferred Redemption
Date or the 10th day following receipt of the notice specified in paragraph 5(d)
(unless otherwise prevented by law and, if so prevented, as soon thereafter as
is permissible) redeem, at an amount per share equal to the Conversion Value of
such Redeemable Preferred Stock as of such Preferred Redemption Date plus
declared but unpaid dividends, if any, payable with respect thereto, the portion
of the shares of each such series of Preferred Stock held by such holder set
forth below. The total sum payable for shares of Preferred Stock on the
Preferred Redemption Date is hereinafter referred to as the "Preferred
Redemption Price." As used herein, the term "Preferred Redemption Date" shall
mean any of the following dates:
Percentage of
Outstanding Redeemable
Preferred Redemption Dates Preferred Stock
-------------------------- -------------------------
(i) The date of termination of
the employment of Joseph S.
McCall with the Corporation
for any reason other than
disability, as defined below 100.00%
(ii) September 30, 1998 33.33%
(iii) September 30, 1999 50.00%
(iv) September 30,2000 100.00%
(b) If upon any redemption the assets of the Corporation legally
available for redemption shall be insufficient to pay the holders of Redeemable
Preferred Stock the full amounts to which they shall be entitled, the holders of
shares of Redeemable Preferred Stock shall share ratably in any such redemption
according to the respective amounts which would be payable in respect of shares
held by them upon such redemption if all amounts payable on or with respect to
said shares were paid in full. If less than all the shares of Redeemable
Preferred Stock then outstanding are to be redeemed, the redemption shall be pro
rata with respect to such shares based upon the relative aggregate liquidation
preferences of the outstanding shares of Redeemable Preferred Stock then owned
by each holder thereof. On and after the Preferred Redemption Date (unless
default shall be made by the Corporation in the payment of the applicable
Preferred Redemption Price as hereinafter provided, in which event such rights
shall be exercisable until such default is cured), all rights in respect of the
shares of Redeemable Preferred Stock, to be redeemed, except the right to
receive the applicable Preferred Redemption Price as hereinafter provided, shall
cease and terminate; and such shares shall no longer be deemed to be
outstanding, whether or not the certificates representing such shares have been
received by the Corporation. As used herein, the term "disability" shall mean
the inability, for any medical reason, to perform substantial duties as an
executive officer of the Corporation, as determined in good faith by the Board
of Directors of the Corporation (excluding for this
12
purpose Joseph S. McCall, if a director, and any representative of a holder of
Redeemable Preferred Stock who is a director).
(c) Any request for redemption as herein provided shall be mailed by
first class certified mail, return receipt requested, postage prepaid, to the
Corporation at its then current address. At any time on or after the Preferred
Redemption Date, the holders of record of shares of Redeemable Preferred Stock
to be redeemed shall be entitled to receive the applicable Preferred Redemption
Price upon actual delivery to the Corporation or its agent of the certificates
representing the shares to be redeemed.
(d) Within five business days following receipt of any request for
redemption as herein provided, the Corporation shall notify each other holder of
record of shares of Redeemable Preferred Stock which has not made a similar
request with respect to the Preferred Redemption Date in question. Such notice
shall specify the name of the holder or holders requesting redemption, the
number of shares covered by such request or requests, and the Corporation's
estimate of funds available for such purposes.
(e) The Corporation will not, and will not permit any subsidiary of
the Corporation to, purchase or acquire any shares of Redeemable Preferred Stock
otherwise than pursuant to the terms of this paragraph 5 or pursuant to an offer
made on the equivalent terms to all holders of Redeemable Preferred Stock at the
time outstanding.
(f) Once redeemed pursuant to the provisions of this paragraph 5,
shares of Redeemable Preferred Stock shall be canceled and not subject to
reissuance.
(g) No Redeemable Preferred Stock shall be entitled to the benefit of
a sinking fund or purchase fund.
(h) Notwithstanding anything contained herein to the contrary, the
redemption rights granted to the holders of Redeemable Preferred Stock pursuant
to the provisions of paragraph 5(a) above shall not be exercised by any holder
of Redeemable Preferred Stock if, in the sole discretion of such holder, the
exercise thereof would result in a violation of any statute or regulation
applicable to such holder.
6. Protective Provisions.
---------------------
(a) Approval of Preferred Stock. So long as any of the Preferred
---------------------------
Stock shall be outstanding the Corporation shall not without obtaining the
approval (by vote or written consent, as provided by law) of the holders of not
less than a majority of the outstanding shares of Preferred Stock:
(i) Change of Rights. Materially and adversely alter or change
----------------
the rights, preferences or privileges of the Preferred Stock; or
13
(ii) Create a New Class. Create any new class or series of
------------------
shares having preferences over any outstanding shares of Preferred Stock as
to dividends or assets, or authorize or issue shares of stock of any class
or series or any bonds, debentures, notes or other obligations convertible
into or exchangeable for, or having option rights to purchase, any shares
of stock of this Corporation having any preference or priority as to
dividends or assets superior to or, except as provided in paragraph 6(b),
on a parity with any such preference or priority of any outstanding shares
of Preferred Stock; or
(iii) Reclassification. Reclassify any class or series of any
----------------
Common Stock into shares having any preference or priority as to dividends
or assets superior to or, except as provided in paragraph 6(b), on a parity
with any such preference or priority of Preferred Stock; or
(iv) Merger, Consolidation, Sale, etc., of Assets. Merge or
--------------------------------------------
consolidate with, or permit any of its subsidiaries to merge or consolidate
with, any entity, except that any such subsidiary may be merged into the
Corporation or any other such subsidiary; sell, lease, license or otherwise
dispose of, or permit any such subsidiary to sell, lease, license or
otherwise dispose of, all or substantially all of the consolidated assets
of the Corporation in any twelve-month period; provided, that this
paragraph 6(a)(iv) shall not be applicable with respect to any merger,
consolidation, sale, lease, license or other disposition yielding net
proceeds per share of Preferred Stock of at least $18.00 (such amount to be
appropriately adjusted in the event of stock splits, stock combinations,
stock dividends or similar recapitalizations). A sale of substantially all
of the consolidated assets of the Corporation means the sale or other
disposition of more than 50% of the value of the consolidated assets of the
Corporation; or
(v) Payment of Dividends. Pay any dividend with respect to
--------------------
its capital stock, other than dividends payable solely in shares of such
capital stock.
(b) Additional Series. Notwithstanding any other provision of this
-----------------
Certificate of Incorporation to the contrary, the Corporation may, without
obtaining the consent of holders of the Series A Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock, the
Series E Preferred Stock, the Series F Preferred Stock or any Additional Series
(as hereinafter defined), authorize by resolution of its Board of Directors (a
"series resolution") and issue one or more additional series of the
Corporation's Preferred Stock (each such series being referred to herein as an
"Additional Series"); provided, however, that (i) each such Additional Series
-------- -------
shall have substantially the same terms, powers, preferences and rights as the
Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred
Stock, the Series D Preferred Stock, the Series E Preferred Stock and the Series
F Preferred Stock except that the liquidation preference, the Conversion Value
and the initial Conversion Price for each such Additional Series shall equal the
purchase price per share paid for such stock, (ii) such Additional Series need
not have voting rights or redemption rights, and (iii) in
14
all other respects each share of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock, Series F Preferred Stock and any such Additional Series shall be pari
----
passu (with the shares of Series A Preferred Stock, Series B Preferred Stock,
- -----
Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock,
Series F Preferred Stock and each such Additional Series to share in liquidation
proceeds based on their relative liquidation preferences).
Article 5: Liability of Directors
To the fullest extent permitted by the General Corporation Law of the
State of Delaware as the same now exists or may hereafter be amended in a manner
more favorable to directors, a director of the Corporation shall not be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director.
Article 6: Indemnification of Directors
The Corporation shall indemnify to the full extent permitted by law
any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director, officer or employee of
the Corporation or any predecessor of the Corporation or serves or served any
other enterprise as a director, officer or employee at the request of the
Corporation or any predecessor of the Corporation.
Article 7: Balloting at Elections
Election of directors need not be by written ballot except and to the
extent provided in the bylaws of the Corporation.
Article 8: Amendment of Bylaws
The Board of Directors of the Corporation is expressly authorized to
make, alter or repeal bylaws of the Corporation, but the stockholders may make
additional bylaws and may alter or repeal any bylaw whether adopted by them or
otherwise.
Article 9: Corporate Books
The books of the Corporation may be kept (subject to any provision of
law) outside the State of Delaware at such place or places as may be designated
from time to time by the Board of Directors or in the bylaws of the Corporation.
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Article 10: Incorporator
The name and mailing address of the incorporator is as follows:
G. Donald Johnson, Esq.
Womble Carlyle Sandridge & Rice,
a Professional Limited Liability Company
1275 Peachtree Street, N.E.
Suite 700
Atlanta, Georgia 30309
IN WITNESS WHEREOF, the undersigned has duly executed this Amended and
Restated Certificate of Incorporation on the ______ day of September, 1997.
SQL FINANCIALS INTERNATIONAL, INC.
ATTEST: BY:
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STEPHEN P. JEFFERY,
President
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ARTHUR G. WALSH, Secretary
[CORPORATE SEAL]
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