HYBRID NETWORKS, INC.
CONVERTIBLE SUBORDINATED PROMISSORY NOTE PURCHASE AGREEMENT
THIS CONVERTIBLE SUBORDINATED PROMISSORY NOTE PURCHASE AGREEMENT (the
"AGREEMENT") is entered into as of September 18, 1997, among Hybrid Networks,
Inc., a Delaware corporation having its principal place of business at 00000
Xxxx Xxxx, Xxxxxxxxx, Xxxxxxxxxx 00000-0000 (the "COMPANY"), and those
certain purchasers identified on SCHEDULE 1 hereto (each a "PURCHASER" and
collectively the "PURCHASERS").
In consideration of the mutual promises, covenants and conditions
hereinafter set forth, the parties hereto mutually agree as follows:
1. AUTHORIZATION AND SALE OF NOTES
1.1 AUTHORIZATION OF NOTES. The Company has authorized the issuance
and sale pursuant to the terms and conditions hereof of up to $8.0 million in
principal amount of the Company's Convertible Subordinated Promissory Notes
due 1998 (the "NOTES"), which Notes shall be in the form set forth in EXHIBIT
A hereto and shall be convertible into shares of the Company's Common Stock,
at a conversion price determined as set forth in the Notes.
1.2 ISSUANCE AND SALE OF NOTES. Subject to the terms and conditions
hereof, at the Closing (as defined in Section 2.1 hereof) the Company will
issue and sell the Notes to the Purchasers, and the Purchasers will purchase
the Notes from the Company.
1.3 ISSUANCE AND DELIVERY OF WARRANTS. At the Closing, the Company
will issue and deliver to the Purchasers warrants (the "WARRANTS") to
purchase up to an aggregate of 1,980,200 shares (subject to adjustment as
provided in the Warrants) of the Company's Common Stock, at an exercise price
of $4.04 per share (subject to adjustment as provided in the Warrants), as
set forth on SCHEDULE 1 hereto, which Warrants shall be substantially in the
form set forth in EXHIBIT B hereto.
1.4 ALLOCATION OF PURCHASE PRICE. The Company and the Purchaser
agree that the consideration paid for the Warrants and Notes shall be
allocated, in proportion to each $1,000,000 of such consideration, $999,900
to the Notes and $100 to the Warrants.
2. CLOSING; DELIVERY.
2.1 CLOSING. The closing (the "CLOSING") of the purchase and sale
of the Notes will occur on September __, 1997, or such other date as the
parties may agree upon (the "CLOSING DATE"). The Closing will take place at
the offices of Fenwick & West LLP, counsel to the Company, at Xxx Xxxx Xxxx
Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx.
2.2 DELIVERY. Subject to the terms of this Agreement, at the
Closing (i) the Company will issue and deliver the Notes to the Purchasers,
(ii) the Purchasers will deliver to the Company by wire transfer the
aggregate purchase price for the Notes shown as SCHEDULE 1, (iii) the Company
will pay the expenses of the Purchasers as provided in Section 7.9, (iv) the
Company will issue and deliver the Warrants to the Purchasers, (v) the
Company, the Purchasers and certain
existing stockholders of the Company will enter into the Amended and Restated
Investor Rights Agreement in substantially the form set forth in EXHIBIT C
hereto (the "RIGHTS AGREEMENT"), (v) the Company, the Purchasers and certain
existing stockholders of the Company will enter into a Right of Co-Sale
Agreement in substantially the form set forth in EXHIBIT D hereto (the
"Co-Sale Agreement"), and (vi) the parties will deliver such other documents
as they are required to deliver pursuant to Section 5.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to the Purchasers, except as set forth on an
exceptions letter (the "EXCEPTIONS LETTER") furnished to the Purchasers, as
follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to own and operate its properties and assets and to carry on its
business as now conducted and expected to be conducted. The Company is duly
qualified to transact business and is in good standing in each jurisdiction
in which the failure so to qualify would have a material adverse effect on
its business or properties. The Company has made available to the Purchasers
true and complete copies of the certificate of incorporation and bylaws of
the Company, as amended to date.
3.2 CORPORATE POWER. The Company has all requisite legal and
corporate power to enter into this Agreement, the Rights Agreement and the
Co-Sale Agreement, to issue, sell, execute and deliver the Notes and Warrants
hereunder and to carry out and perform its obligations under the terms of
this Agreement, the Rights Agreement, the Co-Sale Agreement and the Notes and
Warrants.
3.3 SUBSIDIARIES. The Company does not control, directly or
indirectly, or have an interest in, any other corporation, association or
business entity.
3.4 CAPITALIZATION AND VOTING RIGHTS. The authorized capital of the
Company as of August 31, 1997 consists of:
(a) PREFERRED STOCK. 18,000,000 shares of Preferred Stock, (i)
1,547,175 shares of which are designated Series A Preferred Stock, all of
which are issued and outstanding, (ii) 1,237,439 shares of which are
designated Series B Preferred Stock, of which 799,908 shares are issued and
outstanding, (iii) 761,694 shares of which are designated Series C Preferred
Stock, all of which are issued and outstanding, (iv) 5,251,003 shares of
which are designated Series D Preferred Stock, of which 3,200,002 shares are
issued and outstanding, (v) 1,315,864 shares of which are designated Series E
Preferred Stock, all of which are issued and outstanding, (vi) 986,898 shares
of which are designated Series F Preferred Stock, all of which are issued and
outstanding, (vii) 6,360,381 shares of which are designated Series G
Preferred Stock, of which 3,457,500 shares are issued and outstanding, and
(viii) 497,327 shares of which are designated Series H Preferred Stock, of
which 493,827 shares are issued and outstanding. The rights, preferences and
privileges 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, Series G Preferred Stock and Series H Preferred Stock are
as stated in the Amended and Restated Certificate of Incorporation, a copy of
which the Company has provided to the Purchasers (the "AMENDED CERTIFICATE").
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(b) COMMON STOCK. 29,000,000 shares of Common Stock, of which
7,011,555 shares are issued and outstanding.
(c) VALID ISSUANCE. All the issued and outstanding shares of
Common Stock and Preferred Stock have been duly authorized and are validly
issued, fully paid and nonassessable and were issued in compliance with all
federal and state securities laws.
(d) OPTIONS AND CONVERTIBLE SECURITIES. There are no
outstanding preemptive or other rights, plans, options, warrants, conversion
rights or agreements for the purchase or acquisition from the Company of any
shares of its capital stock, except for (i) the conversion privileges 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,
Series G Preferred Stock, Series H Preferred Stock and the Debentures (as
defined below), (ii) the rights provided in paragraph 2.3 of the Amended and
Restated Investors Rights Agreement as in effect prior to the execution and
delivery of the Rights Agreement (the "CURRENT RIGHTS AGREEMENT"), (iii)
3,202,292 shares of Common Stock reserved for issuance upon the exercise of
outstanding options or awards granted or that may be granted under the
Company's 1993 Equity Incentive Plan, (iv) 1,620,000 shares of Common Stock
reserved for issuance upon the exercise of options or awards granted or that
may be granted under the Company's Executive Incentive Plan, (v) 969,612
shares of Common Stock reserved for issuance upon the exercise of options or
awards granted or that may be granted under the Company's 1996 Equity
Incentive Plan, (vi) warrants to purchase up to 2,051,001 shares of Series D
Preferred Stock and warrants to purchase up to 205,861 shares of Series B
Preferred Stock granted or extended pursuant to the Convertible Note and
Warrant Agreement dated as of June 12, 1996, (vii) warrants granted to Alex.
Xxxxx & Sons Incorporated to purchase at $3.83 per share up to 156,658 shares
of Series G Preferred Stock, (viii) warrants to purchase up to 22,857 shares
of Series B Preferred Stock and up to 15,665 shares of Series G Preferred
Stock granted pursuant to certain equipment leasing agreements entered into
by the Company and (ix) the rights granted to Xxxx X. Xxxxxx under Section
4.3 of the Stock Purchase Agreement dated as of October 21, 1994 between the
Company and Xx. Xxxxxx (the "SERIES B AGREEMENT"), whereby the Company
covenanted to Xx. Xxxxxx that, as long as he holds at least 50% of the number
of shares of Series B Preferred Stock purchased by him under the Series B
Agreement, the Company will not, without his prior written consent, alter or
change the powers, preferences or special rights of the Company's Series B
Preferred Stock so as to affect them adversely without so affecting the
entire class of Preferred Stock. Except for the Amended Certificate and
Sections 4.2 and 4.3 of the Series B Agreement, the Company is not a party or
subject to any agreement or understanding, and, to the Company's knowledge,
there is no agreement or understanding between any persons and/or entities,
which affects or relates to the voting or giving of written consents with
respect to any security or by a director of the Company. Substantially all
the stockholders, option holders and warrant holders of the Company
(excluding the holder of the warrant referred to in (viii) above) have
entered into "market stand-off" agreements substantially similar to that set
forth in Section 1.12 of the Current Rights Agreement. In the case of
warrants the exercise period of which has been extended, such extensions were
duly effected by all necessary corporate action. With respect to the
liquidation preference participation rights of the Series D Preferred Stock
and the Series E Preferred Stock that have been eliminated, such elimination
was effected by all necessary corporate action.
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3.5 AUTHORIZATION.
(a) All corporate action on the part of the Company, its
officers, directors and stockholders necessary for (i) the issuance and sale
of the Notes pursuant hereto, (ii) the issuance of the shares of Common Stock
or other securities of the Company issuable upon conversion of the Notes (the
"COMMON SHARES"), (iii) the issuance of the Warrants pursuant hereto, (iv)
the issuance of the shares of Common Stock issuable upon exercise of the
Warrants pursuant thereto (the "WARRANT SHARES"), and (v) the execution,
delivery and performance by the Company of this Agreement, the Rights
Agreement, the Co-Sale Agreement and the Notes and Warrants have been taken
or will be taken prior to the Closing hereunder. This Agreement is, and upon
execution and delivery the Rights Agreement, the Co-Sale Agreement and the
Notes and Warrants will be, the valid and binding obligations of the Company
enforceable against it in accordance with their respective terms.
(b) The Notes and Warrants, when issued in compliance with the
provisions of this Agreement, and the Common Shares and Warrant Shares, when
issued in compliance with the Notes and Warrants, respectively, will be duly
authorized, validly issued, fully paid and nonassessable, and will be free of
any liens or encumbrances; provided, however, that the Common Shares and
Warrant Shares may be subject to restrictions on transfer under state and/or
federal securities laws as set forth herein or otherwise required by such
laws at the time a transfer is proposed. The Company has reserved for
issuance the Common Shares and the Warrant Shares.
(c) No stockholder of the Company has any right of first refusal
or any preemptive rights in connection with the issuance and sale of the
Notes and Warrants or the Common Shares and Warrant Shares, except those that
have been complied with or waived.
3.6 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has
good and marketable title to its properties and assets and good title to all
its leasehold estates, in each case subject to no mortgage, pledge, lien,
encumbrance, security interest, claim, equitable interest or charge, other
than or resulting from taxes which have not yet become delinquent and 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.
3.7 MATERIAL CONTRACTS. Except for the agreements and instruments,
stock options and warrants referred to in Section 3.4, the Company is not a
party to any agreement or contract which is not in the ordinary course of
business of the Company requiring payment by or to the Company of an amount
in excess of $25,000.
3.8 PATENTS, TRADEMARKS, ETC. The Company owns, or has the right to
use (or can obtain the right to use on reasonable commercial terms), all
patents, trademarks, service names, trade names, copyrights, licenses, trade
secrets, inventions or other proprietary rights necessary to its business as
now conducted or proposed to be conducted, and has not received a notice that
it is infringing upon or otherwise acting adversely to the right or claimed
right of any person under or with respect to any of the foregoing, and, to
the Company's knowledge, there is no basis for any such claim. The Company
is not aware of any violation by a third party of any of the Company's
patents, trademarks, service marks, trade names, copyrights, trade secrets or
other
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proprietary rights. The Company is not aware that any of its employees 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 interfere with their duties
to the Company or that would conflict with the Company's business as
currently conducted. Neither the execution nor delivery of this Agreement,
nor the carrying on of the Company's business by the employees of the
Company, nor the conduct of the Company's business as proposed, will, to the
Company's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any employee is now obligated. The
Company does not believe it is or will be necessary to utilize any inventions
of any of its employees made prior to their employment by the Company, except
for inventions that have been assigned or licensed to the Company pursuant to
assignments or licenses that were entered into by the Company on commercially
reasonable terms.
3.9 COMPLIANCE WITH OTHER INSTRUMENTS, NONE BURDENSOME, ETC. The
Company is not in violation of its charter documents, as amended, or any
mortgage, indenture, contract, agreement, instrument, judgment, decree, writ
or order by which the Company is bound or to which its properties are subject
or any statute, rule, or regulation applicable to the Company, except for any
violation that would not materially and adversely affect the business,
assets, liabilities, financial condition, operations or prospects of the
Company. The execution, delivery and performance of and compliance with this
Agreement, the Rights Agreement, the Co-Sale Agreement and the Notes and
Warrants (including the issuance of the Common Shares and Warrant Shares),
and the transactions provided for herein and therein will not result in any
such violation and will not be in conflict with or constitute a default under
any of the foregoing and will not result in the creation of any mortgage,
pledge, lien, encumbrance, security interest, claim, equitable interest or
charge upon any of the properties or assets of the Company pursuant to any of
the foregoing. To the best of the Company's knowledge, all material
instruments, licenses, contracts, leases or other agreements as amended or
modified to date (collectively "CONTRACTS") to which the Company is a party
are valid and binding and in full force and effect in all material respects,
and the Company has not been notified by any party thereto of any such
party's intention or desire to terminate or modify in any material respect
any of such Contracts, or of any claim or threat that the Company has
breached any of such Contracts. The Company has provided the Purchasers with
access to all Contracts, including, without limitation, those listed in the
Exceptions Letter.
3.10 EMPLOYEES. To the Company's knowledge, no employee of the
Company is in violation of any term of any employment contract, patent
disclosure agreement or any other contract or agreement relating to the right
of any such employee to be employed by the Company because of the nature of
the business conducted or to be conducted by the Company or for any other
reason, and the continued employment by the Company of its present employees
will not result in any such violations. Other than the Company's 40l-K plan
and the incentive stock plans referred to in Section 3.4, the Company has no
deferred compensation, pension, profit sharing, bonus, insurance, severance
or any other similar employee benefit plan or arrangements covering any of
its officers or employees. There are no asserted controversies or labor
disputes or union organization activities pending or, to the knowledge of the
Company, threatened, between it and its employees. Each employee of the
Company has executed a Proprietary Information and Inventions Agreement, a
copy of the form of which has been made available to the Purchasers. To
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the Company's knowledge, the Company has complied with all applicable state
and federal equal employment opportunity and other laws related to employment.
3.11 LITIGATION, ETC. There are no actions, suits, claims,
proceedings or governmental investigations against the Company pending before
any court or governmental agency or, to the Company's knowledge, threatened
to be brought against the Company before any court or governmental agency,
nor, to the Company's knowledge, is there any basis therefor, which, either
in any case or in the aggregate, would result in any material adverse change
in the business, prospects, affairs or operations of the Company, or in any
material impairment of the right or ability of the Company to carry on its
business, or in any material liability on the part of the Company, and none
which questions the validity of this Agreement, the Rights Agreement, the
Co-Sale Agreement, or the Notes and Warrants (including the issuance of the
Common Shares and Warrant Shares) or any action taken or to be taken in
connection herewith or therewith. The Company is not a party or subject to
any writ, order, decree or judgment, and there is no action, suit or
proceeding currently pending that the Company has originated.
3.12 REGISTRATION RIGHTS. Except as provided in the Current Rights
Agreement and in the Rights Agreement (when executed and delivered), the
Company is not under any obligation to register (and has not agreed to
register) any presently outstanding securities, or any securities which may
hereafter be issued, under the Securities Act.
3.13 GOVERNMENTAL CONSENT, ETC. No consent, approval or
authorization of, or designation, declaration or filing with any governmental
authority on the part of the Company is required in connection with the valid
execution and delivery of this Agreement, the Rights Agreement, the Co-Sale
Agreement or the Notes and Warrants, or the offer, sale or issuance of the
Notes or Warrants or the consummation of any other transaction provided for
herein or therein (including the issuance of Common Shares and Warrant
Shares), except, if required, qualifications or filings under the Securities
Act, the California Corporate Securities Law of 1968, as amended, and other
applicable state securities laws, which qualifications or filings, if
required, will be obtained or made and will be effective within the time
periods required by law.
3.14 SECURITIES ACT. Subject to the accuracy of the Purchasers'
representations in Section 4 hereof, the offer, sale and issuance of the
Notes and Warrants in conformity with the terms of this Agreement and the
issuance of the Common Shares upon conversion of the Notes constitute
transactions exempt from the registration requirements of Section 5 of the
Securities Act.
3.15 INSURANCE. The Company has fire and casualty insurance
policies, with extended coverage in full force and effect, with all premiums
currently paid, sufficient in amount (subject to reasonable deductibles) to
allow the Company to replace any of its properties (including leased
properties) that might be damaged or destroyed and adequate for the Company's
business and, to the Company's knowledge, consistent with insurance coverage
maintained by similar businesses.
3.16 DISCLOSURE. No statement by the Company contained in this
Agreement, including all exhibits, the Exceptions Letter and the Rights
Agreement, Co-Sale Agreement, Notes and Warrants, when read together,
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained herein or therein
not
6
misleading in light of the circumstances under which they were made. The
Company has provided the Purchasers with all material information the
Purchasers or their respective representatives have requested in connection
with the Purchasers' decision to purchase the Notes and Warrants.
3.17 TAXES. The Company has paid, or made provision for the payment
of, all taxes which have or may have become due pursuant to income tax
returns required to be filed by it or pursuant to any assessment which has
been received by it. The Company's sales tax returns through March 1995 have
been audited with no deficiency assessment. Except for those returns, no
federal or state income or sales tax return of the Company has been audited.
No deficiency assessment or proposed adjustment of the Company's United
States income tax, state or municipal taxes or sales taxes is pending, and
the Company has no knowledge of any proposed liability for any tax to be
imposed on its property or assets.
3.18 TRANSACTIONS WITH PRINCIPALS. Except for employment, severance
or other compensation arrangements referred to above, no employee,
stockholder or director of the Company is indebted to the Company, nor is the
Company indebted (or committed to make loans or extend or guarantee credit)
to any of them.
3.19 FINANCIAL STATEMENTS. The Company has delivered to the
Purchasers audited balance sheets of the Company (including any subsidiaries)
at March 31, 1997, March 31, 1996 and at March 31, 1995, audited statements
of operations, stockholders' equity (deficiency) and cash flows for the
fiscal years ended March 31, 1997, March 31, 1996 and March 31, 1995, an
unaudited balance sheet at June 30, 1997 and an unaudited statement of
operations for the three months ended June 30, 1997 (collectively, the
"FINANCIAL STATEMENTS"). The Financial Statements are complete and correct
in all material respects and have been prepared in accordance with generally
accepted accounting principles and the Company's books and records, and
fairly present the financial position of the Company at the date thereof and
the results of operations, stockholders' equity and cash flows of the Company
for the periods covered thereby (except, in the case of the unaudited
financial statements, for normal audit adjustments. The Company has adopted
a December 31 fiscal year end.
3.20 CHANGES. Since March 31, 1997, there has not been any material
change in the assets, liabilities, financial condition or operations of the
Company other than changes in the ordinary course of business, none of which
individually or in the aggregate has had or is likely to have a material
adverse effect on such assets, liabilities, financial condition or operations
of the Company, or to the knowledge of the Company, any other event or
condition of any character that has materially and adversely affected, or
threatened to materially or adversely affect, the results of operations,
financial condition or business of the Company, including but not limited to
the following: (a) any event which materially and adversely affects the
Company's business as it is currently being conducted; (b) any declaration,
setting aside or payment of any dividend or other distribution in respect of
any of the Company's capital stock, or any direct or indirect redemption,
purchase or other acquisition of any of such stock by the Company, other than
the repurchase of unvested shares of Common Stock of the Company issued to
employees, officers or directors of, or consultants to, the Company; (c) any
waiver by the Company of a valuable right or of a material debt owed to it
where such waiver has a material and adverse effect on the Company's
7
financial condition or business as it is currently conducted; (d) any
material change or amendment to a contract or arrangement by which the
Company or any of its assets or properties is bound or subject where such
change or amendment has a material and adverse effect on the Company's
financial condition or business as it is currently conducted; (e) any
commitment, transaction or other action by the Company other than in the
ordinary course of business and consistent with past practice where such
commitment, transaction or other action has a material and adverse effect on
the Company's financial condition or business as it is currently conducted;
(f) any amendment or other change to the Amended Certificate or to the Bylaws
of the Company (including any change of the Company's name); (g) any sale or
other disposition of any material right, title or interest in or to any
material assets or properties of the Company or any revenues derived
therefrom other than in the ordinary course of business and consistent with
past practice; (h) any creation, incurrence or assumption of any indebtedness
for money borrowed by the Company exceeding $25,000 (not including net
increases in accounts payable incurred in the ordinary course of the
Company's business); (i) any material capital expenditures by the Company not
in the ordinary course of business; (j) any material change in any accounting
principle or method (other than normal adjustments as a result of the audit
of the Company's financial statements for fiscal 1997) or in any election for
federal income tax purposes used by the Company; or (k) any authorization,
approval, agreement or commitment to do any of the foregoing.
3.21 MINUTE BOOKS. The minute books of the Company made available to
the Purchasers contain a complete summary of all meetings of directors and
stockholders since the date of the Company's incorporation. The most recent
minutes furnished by the Company to Purchaser were for the Board meeting held
August 29, 1997. The Company has, however, provided Purchaser with a draft
of the minutes for the meeting held September 12, 1997. There were no duly
convened meetings of the Company's Board of Directors between those dates.
3.22 PERMITS. The Company has all permits, licenses and any similar
authority necessary, to its knowledge, for the conduct of its business as now
conducted by it, the lack of which would materially and adversely affect the
properties, prospects or financial condition of the Company, except for any
licenses which the Company can obtain without undue effort or expense.
3.23 ENVIRONMENTAL AND SAFETY LAWS. The Company is not, to its
knowledge, in violation of any applicable statute, law or regulation relating
to environment (including disposal of waste products and effluents) or
occupation, health and safety, except for any violation which the Company
could cure without making material expenditures or without materially
changing its business or operations.
3.24 MANUFACTURING AND MARKETING RIGHTS. Except for the Intel
License and the Sharp Agreements, the Company has not granted rights to
manufacture, produce, assemble, license, market or sell its products to any
other persons, and is not bound by any agreement that affects the Company's
exclusive right to develop, manufacture, assemble, distribute, market or sell
its products, other than license agreements entered into in the ordinary
course of business. The Company has identified satisfactory back-up
manufacturing sources for its current products, and is seeking manufacturing
arrangements with one or more manufacturers for certain of its other
products. The Company currently has adequate sources for the components of
its current products and those currently under development, except that the
Company has a single source for certain of its components (including the 64
QAM modulation chip and the 286 c.p.u. chip), and a disruption in the supply
of such components could have a material adverse effect on the Company, its
business and its operations.
8
3.25 INVENTORY. The Company's inventory and work in process are in
good condition, not obsolete, and salable in the ordinary course of the
Company's business, except for obsolete inventory that the Company has fully
reserved for in its Financial Statements (the reserve is approximately
$450,000).
3.26 CONTINUING DEVELOPMENT. The Company is in the development stage
and has and continues to provide products to customers for testing. As the
Company receives input from customers with respect to the operation of its
products, including descriptions of issues, problems and complaints, the
Company responds with improvements in its products and related services.
That process is ongoing. While the issues, problems and complaints that
customers have had with the Company's products during their various stages of
development are not immaterial, the Company believes that it has responded
appropriately with respect to these matters in the past and that it fully
anticipates being able to respond appropriately with respect to such matters
in the future as well.
3.27 CANCELED PURCHASE ORDERS. The Company has from time to time
had purchase orders rescinded, continued or modified, although such
rescission, continuance or modification has not had a material adverse effect
on the Company's business or prospects as described in the Business Plan.
3.28 LEASES. The Company leases properties (a) in New Jersey at 000
Xxxxx Xxxxxx, Xxxxxx Xxxxx (which lease expires September 16, 1998); (b) in
San Francisco at 000 Xxxxxxx Xxxxxx (which lease expires March 9, 2002); (c)
in Cupertino (the Company's principal place of business) at 00000 Xxxx Xxxx
(which lease expires May 31, 1998), subject to a three year option to renew
exercisable between the ninth and sixth month preceding the end of the term).
The Company is also the Sublessee (with Norian Corporation as Sublessor) at
00000 Xxxx Xxxx in Cupertino (which sublease expires September 30, 1998), and
the Sublessee (with Digital Chef Inc. as Sublessor) at 00000 Xxxx Xxxx in
Cupertino (which sublease expires June 14, 1998).
3.29 TRIALS. The Company's trials in Minnesota of wireless internet
access systems is proceeding in a reasonably satisfactory manner.
3.30 Each of the current executive officers, members of the Board
of Directors, and greater than five percent stockholders of the Company has
entered into a Market Stand-Off Agreement of equivalent duration and effect
to that described under Section 4.4 of this Agreement with respect to the
securities of the Company beneficially owned by such person.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS AND RESTRICTIONS ON
TRANSFER IMPOSED BY THE SECURITIES ACT AND STATE SECURITIES LAWS.
4.1 REPRESENTATIONS AND WARRANTIES BY PURCHASER. Each of the Purchasers
severally and not jointly represents and warrants to the Company as follows
(the Company is entering into this Agreement with each Purchaser in reliance
upon such Purchaser's representations to the Company set forth below, which
by such Purchaser's execution of this Agreement such Purchaser hereby
confirms with respect to such Purchaser only and not with respect to any
other Purchaser):
(a) The Notes and Common Shares issuable upon conversion thereof,
and the Warrants and the Warrant Shares issuable upon exercise thereof, to be
acquired by
9
Purchaser are being acquired by Purchaser for Purchaser's own account, not as
a nominee or agent, and not with a view to the sale or other disposition of
any part thereof. Purchaser has no present intention of selling, granting
any participation in, or otherwise disposing of the Notes or Common Shares,
or the Warrants or Warrant Shares, or any interest therein. Purchaser does
not have any contract, undertaking, agreement or arrangement with any person
to sell, transfer or grant participation to such person (or to any other
person) with respect to the Notes or Common Shares, or the Warrants or
Warrant Shares. Purchaser has not offered to sell the Notes or Warrants or
Common Shares or Warrant Shares to any other person.
(b) Purchaser understands that the Notes and Warrants, and the
Common Shares and Warrant Shares, have not been registered under the
Securities Act of 1933, as amended (the "SECURITIES ACT") is in reliance upon
the exemptions or under state securities laws from the registration and
prospectus delivery requirements of the Securities Act pursuant to Section
4(2) of the Securities Act and Regulation D thereunder and in reliance upon
certain exemptions from the registration requirements of applicable state
securities laws. The Company has no present intention of registering the
Notes or Warrants or the Common Shares or Warrant Shares. The Notes and
Warrants, and Common Shares and Warrant Shares, must be held by Purchaser
indefinitely (unless sold by Purchaser in a registered offering or pursuant
to valid exemptions from the requirements of registration under the
Securities Act and the applicable state securities laws). Purchaser must
therefore bear the economic risk of such investment indefinitely, unless a
subsequent disposition thereof is registered under the Securities Act and
applicable state securities law or is exempt from registration. Purchaser
further understands that the exemptions from registration relied upon by the
Company depend upon, among other things, the bona fide nature of Purchaser's
investment intent expressed above and Purchaser's other representations
herein.
(c) During the negotiation of the transactions contemplated herein,
Purchaser and Purchaser's representatives and legal counsel have been
afforded full and free access to corporate books, financial statements,
records, contracts, documents and other information concerning the Company,
and to its offices and facilities, have been afforded an opportunity to ask
such questions of the Company's officers, employees, agents, accountants and
representatives concerning the Company's business, operations, financial
condition, assets, liabilities and other relevant matters as they have deemed
necessary or desirable, and have been given all such information as has been
requested, in order to evaluate the merits and risks of the prospective
investments contemplated herein (including purchase of the Notes and Warrants
and Common Shares and Warrant Shares).
(d) Purchaser and Purchaser's representatives and legal counsel
have been solely responsible for Purchaser's own "due diligence"
investigation of the Company and its management and business, for Purchaser's
own analysis of the merits and risks of this investment, and for Purchaser's
own analysis of the fairness and desirability of the terms of the investment.
In taking any action or performing any role relative to the arranging of the
proposed investment, Purchaser has acted solely in Purchaser's own interest,
and neither Purchaser nor any agent or employee of Purchaser has acted as an
agent of the Company. Purchaser has such knowledge and experience in
financial and business matters that Purchaser is capable of evaluating the
merits and risks of the purchase of the Notes and Warrants (and Common Shares
and Warrant Shares) pursuant to the terms of this Agreement and of protecting
Purchaser's interests in connection therewith. Purchaser acknowledges that
the Exceptions Letter is provided to Purchaser strictly for
10
Purchaser's use in connection with its purchase of the Notes hereunder, and
Purchaser agrees to keep the Exceptions Letter confidential and not disclose
any information contained therein to others (other than Purchaser's counsel
and representatives in connection with this investment) without the prior
written consent of the Company.
(e) Purchaser represents that: (i) Purchaser is an "accredited
investor" as defined in Rule 501(a) of Regulation D under the Securities Act;
(ii) Purchaser has the ability to bear the economic risks inherent in
Purchaser's investment in the Notes and Warrants and Common Shares and
Warrant Shares; (iii) Purchaser is able, without materially impairing its
financial condition, to hold the Notes and Warrants and Common Shares and
Warrant Shares for an indefinite period of time and to suffer a complete loss
of its investment; and (iv) Purchaser understands and has fully considered
for purposes of this investment the risks of this investment and understands
that: (1) the Company is an enterprise with limited financial and operating
history; (2) the Notes and Warrants and the Common Shares and Warrant Shares
represent an extremely speculative investment which involves a high degree of
risk of loss; (3) there are substantial restrictions on the transferability
of, and there may be no public market for, the Notes and Warrants and the
Common Shares and Warrant Shares, and, accordingly, it may not be possible
for Purchaser to liquidate its investment in the Notes and Warrants and the
Common Shares and Warrant Shares; and (4) there have been no representations
as to the present or possible future value, if any, of the Notes and Warrants
and the Common Shares and Warrant Shares.
(f) Purchaser has the full right, power and authority to enter into
and perform Purchaser's obligations under this Agreement, the Rights
Agreement, and the Co-Sale Agreement and each of this Agreement, the Rights
Agreement constitutes the valid and binding obligation of Purchaser
enforceable against Purchaser in accordance with their terms except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application relating to or affecting enforcement of
creditors' rights and rules or laws concerning equitable remedies.
(g) No consent, approval or authorization of or designation,
declaration or filing with any governmental authority on the part of
Purchaser is required in connection with the valid execution, delivery and
performance by Purchaser of this Agreement, the Rights Agreement or the
Co-Sale Agreement; neither the execution, the delivery nor the performance of
this Agreement, the Rights Agreement or the Co-Sale Agreement by Purchaser is
or will be in violation of any applicable statute, law or regulation.
4.2 LEGENDS. The Notes and Warrants, and each certificate representing
any Common Shares or Warrant Shares, may be endorsed with the following legends
(or any legends substantially to the same effect):
(a) THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR
RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND APPLICABLE STATE SECURITIES
LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD BE
AWARE THAT THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS
INVESTMENT FOR AN
11
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE
ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE
WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
(b) Any other legends as the Company may reasonably deem to be
required by California law or other applicable state securities laws.
In order to ensure and enforce compliance with the restrictions imposed by
applicable law and those referred to in the foregoing legends, or elsewhere
herein, the Company may issue appropriate "stop transfer" instructions to its
transfer agent, if any, with respect to any certificate or other instrument
representing the Notes or any Common Shares, or, if the Company transfers its
own securities, that it may make appropriate notations to the same effect in
the Company's records.
4.3 REMOVAL OF LEGEND AND TRANSFER RESTRICTIONS. Any legend endorsed on
a certificate pursuant to Section 4.2 and the stop transfer instructions or
notations with respect to the Notes or Warrants or Common Shares or Warrant
Shares shall be removed, and the Company shall issue a certificate without
such legend to the holder thereof, if the Notes or Warrants or Common Shares
or Warrant Shares are registered under the Securities Act (and a prospectus
meeting the requirements of Section 10 of the Securities Act is available)
and are registered under applicable state securities law, if such legend and
instructions may be properly removed under the terms of Rule 144 promulgated
under the Securities Act and under any applicable state securities law or if
such holder provides the Company with an opinion of counsel for such holder,
reasonably satisfactory to legal counsel for the Company, to the effect that
any resale, transfer or assignment of the Notes or Warrants or Common Shares
or Warrant Shares may be made without registration.
4.4 "MARKET STAND-OFF". Each Purchaser on behalf of such Purchaser only
hereby agrees that, during the period of duration specified by the Company
and an underwriter of Common Stock of the Company not to exceed 180 days
following the effective date of a registration statement of the Company filed
under the Securities Act, such signatory shall not, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any
short sale), grant any option to purchase or otherwise transfer or dispose of
(other than to donees, or affiliates, of such Purchaser who agree to be
similarly bound) any securities of the Company held by it at any time during
such period except Common Stock included in such registration and except to
the extent otherwise consented to by the Company and such underwriter. To
the extent that any officer or director of the Company has not entered into a
market stand-off agreement of equivalent duration and effect with respect to
any Company securities beneficially owned by such officer or director, the
Company shall use best efforts to require each officer and director of the
Company to enter into such an agreement.
5. CONDITIONS TO CLOSINGS.
5.1 CONDITIONS TO OBLIGATIONS OF PURCHASERS AT CLOSING. The
obligation of each Purchaser to purchase the Notes and Warrants at the
Closing is subject to the fulfillment on or prior to the Closing Date of the
following conditions, any of which may be waived by Purchaser pursuant to the
terms of Section 7.1:
12
(a) REPRESENTATIONS AND WARRANTIES CORRECT; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in
Section 3 of this Agreement and in the Notes shall be true and complete in
all material respects (i) on the date hereof (except where explicitly made as
of a different date) and (ii) on the Closing Date with the same force and
effect as if they had been made on and as of the Closing Date (except where
explicitly made as of a different date); the Company's business and assets
shall not have been adversely affected in any material way prior to the
Closing Date; 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.
(b) CONSENTS AND WAIVERS. The Company shall have obtained any and
all consents (including all governmental or regulatory consents, approvals or
authorizations required in connection with the valid execution, issuance,
delivery and performance by the Company of this Agreement, the Rights
Agreement, the Co-Sale Agreement or the Notes or Warrants), permits and
waivers necessary or appropriate for consummation of the transactions
provided for in this Agreement, Rights Agreement, the Co-Sale Agreement and
the Notes and Warrants.
(c) RIGHTS AGREEMENT AND CO-SALE AGREEMENT. The Company and the
existing stockholders of the Company whose signatures are required shall have
executed and delivered the Rights Agreement and the Co-Sale Agreement.
(d) COMPLIANCE CERTIFICATE. The Company shall have delivered to
the Purchasers a certificate, executed on behalf of the Company by its Chief
Executive Officer, dated the Closing Date, certifying to the fulfillment of
the conditions specified in subsections (a) and (b) of this Section 5.1.
(e) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
in connection with the transactions hereby contemplated to occur at the
Closing, and all documents and instruments incident to such transactions,
shall be reasonably satisfactory in substance and form to the Purchasers and
their special counsel, and the Purchasers shall have received all such
counterpart originals or certified or other copies of such documents as they
may reasonably request.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY AT THE CLOSING. The
Company's obligation to issue and sell the Notes and Warrants at the Closing
is subject to the fulfillment on or prior to the Closing Date of the
following conditions, any of which may be waived by the Company:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Purchasers in Section 4 hereof shall be true and
complete in all material respects (i) on the date hereof and (ii) on the
Closing Date with the same force and effect as if they had been made on and
as of the Closing Date.
(b) CONSENTS AND WAIVERS. The Purchasers shall have obtained any
and all consents (including all governmental or regulatory consents,
approvals or authorizations required in connection with the valid execution,
delivery and performance by the Purchasers of
13
this Agreement), permits and waivers necessary or appropriate for the
consummation by the Purchasers of the transactions provided for in this
Agreement or in the Notes or Warrants.
6. AFFIRMATIVE AND NEGATIVE COVENANTS. The Company hereby covenants and
agrees with the Purchasers as follows (the following covenants and agreements
shall continue as long as the Notes remain outstanding, unless an earlier
expiration date is indicated below):
6.1 INSPECTION RIGHTS. Until the Company consummates the closing of the
Company's first offer and sale of securities pursuant to a registration
statement under the Securities Act of 1933, as amended (the "SECURITIES
ACT"), filed with and declared effective by the Securities and Exchange
Commission (an "INITIAL PUBLIC OFFERING"), the Company will permit
representatives of each Purchaser to visit and inspect any of its properties
and to examine and make copies of its non-privileged books and records and to
discuss its affairs, finances and accounts with its officers, employees and
agents all at such reasonable times and as often as may reasonably be
desired. Each Purchaser agrees to keep such information confidential and not
to buy or sell the Company's securities while in the possession of material
non-public information regarding the Company.
6.2 BOARD VISITATION RIGHTS. Until the Company consummates the closing of
its Initial Public Offering, the Company will permit one representative of all
the Purchasers to attend all Board of Director meetings in a non-voting
capacity, and shall provide such representative with copies of all non-
privileged information otherwise distributed to members of the Board of
Directors. Each Purchaser agrees to keep such information confidential.
6.3 DIVIDENDS AND DISTRIBUTIONS. The Company will not pay any dividends
to any stockholder or effect any distribution of the Company's assets to any
stockholder (other than payments in the ordinary course of the Company's
business or repurchases in accordance with the terms of the Company's equity
incentive plans of shares issued under such plans).
6.4 ENCUMBRANCES AND LIENS. Except as provided in the Notes, the
Company will not create, assume or suffer to exist, any mortgage, pledge,
security interest, encumbrance or lien on property of any kind, real,
personal or mixed, now owned or hereafter acquired, or upon the income or
profits thereof, except (i) as already existed prior to the execution of this
Agreement; (ii) for minor encumbrances and easements on real property which
do not affect its market value, (iii) for purchase money interests (which
includes mortgages, conditional sale contracts, capitalized leases and
similar title retention or deferred purchase devices) encumbering only the
property purchased and existing liens on purchased property in the ordinary
course of business, or (iv) for any extension, renewal or replacement of the
foregoing in the ordinary course of business.
6.5 AFFILIATES. The Company will not enter into or perform any
transaction with any person or entity who controls or is controlled by or under
common control with the Company (an "Affiliate"), except on terms no less
favorable to the Company than would be available in a bona fide arms length
transaction with a non-Affiliate.
6.6 PAYMENT OF OBLIGATIONS. The Company will pay and discharge promptly
all taxes, assessments and other governmental charges and claims levied or
imposed upon it or its property, or any part thereof, provided, however, that
the Company will have the right to contest in good faith any such taxes,
assessments, charges or claims, and pending the outcome of such contest, to
delay or refuse payment thereof provided that adequate funded reserves are
established.
14
6.7 MAINTENANCE OF CORPORATE EXISTENCE AND PRINCIPAL PLACE OF BUSINESS.
The Company will maintain and preserve its existence and assets and all
rights, franchises and other authority necessary for the conduct or its
business and will maintain and preserve its property, equipment and
facilities in commercially useful order, condition and repair. The Company
will not change its corporate name or dba without the prior written consent
of Purchasers holding a majority of the then-outstanding principal amount of
the Notes, which consent shall not be unreasonably withheld by the
Purchasers. The Company will not move its principal place of business
outside California without the prior written consent of Purchasers holding a
majority of the then-outstanding principal amount of the Notes, which consent
shall not be unreasonably withheld by the Purchasers.
6.8 MAINTENANCE OF COMMERCIAL RELATIONSHIPS. The Company shall use
commercially reasonable efforts to preserve its contracts and leases material
to its business and to preserve the goodwill of and maintain the existing
relationships with its customers, suppliers and personnel which are
beneficial to the business of the Company.
6.9 INSURANCE. The Company will keep all of its insurable property,
real, personal, or mixed, insured by good and responsible companies against
fire, accident and such other risks as are customarily insured against by
companies conducting similar business with respect to like properties and in
amounts of coverage as are commercially reasonable. The Company will
maintain adequate worker's compensation insurance and adequate insurance
against liability for damage to persons or property.
6.10 COMPLIANCE WITH LAWS AND REGULATIONS. The Company will use its
best efforts to ensure that it does not violate any federal, state, local or
foreign law, ordinance or regulations or any order, judgment, injunction or
decree or any court, arbitrator or governmental body which are material to
the conduct of the Company's business, including without limitation laws
relating to pollution or protection of the environment, labor and employment
practices, health and safety, and importing and exporting goods and services.
6.11 CAPITAL EXPENDITURES. The Company will not (i) make any plant or
fixed capital expenditure, or any commitment therefor, or purchase any
personal property or replacement equipment in excess of $1.5 million during
the twelve month period ending March 31, 1998, in excess of $2.5 million
during the twelve month period ending March 31, 1999, in excess of $5.5
million during the twelve month period ending March 31, 2000 and in excess of
$11.0 million during the twelve month period ending March 31, 2001; provided,
however, that such limits will be increased by a percentage equal to that
percentage by which the current fiscal year's net revenues exceed the current
fiscal year's projected net revenues.
6.12 KEY MAN LIFE. The Company will obtain and maintain key man life
insurance on Xx. Xxxx X. Xxxxxxxxx ("Xxxxxxxxx") for so long as Xxxxxxxxx
remains Chief Executive Officer of the Company, with proceeds payable to the
Company.
6.13 ADDITIONAL COVENANTS. The Company will not, without the consent of
Purchasers holding a majority of the then-outstanding principal amount of the
Notes:
(a) create or authorize the creation or issuance of any additional class
or shares of capital stock, or any shares of any existing class of capital
stock, or create or authorize any
15
obligation or security convertible into shares of any class of capital stock,
or issue, grant or sell any options, warrants or other rights to acquire any
shares of capital stock of the Company (except pursuant to existing stock or
stock option plans of the Company);
(b) engage in any business other than the business presently conducted
by the Company and businesses reasonably ancillary thereto, or take any
action for the purpose of substantially changing the nature or character of
its business as it is presently conducted;
(c) assume or incur any indebtedness for borrowed money or guarantee any
such indebtedness, or issue or sell any debt securities or rights to acquire
any debt securities, or guarantee any debt securities of others, or create
any mortgages, liens, security interests or other encumbrances on the
property of the Company in connection with any indebtedness thereof, or enter
into any "keep well" or other agreement or arrangement to maintain the
financial condition of another person, other than (i) purchase money
indebtedness in an amount not in excess of $100,000 per single transaction or
$500,000 in the aggregate in any calendar year, (ii) guarantees of the
Company's trade accounts in the ordinary course of business consistent with
past practice, (iii) any renewal, extension or refinancing of any
indebtedness existing as of the date hereof, in an amount not in excess of
the amount of indebtedness being renewed, extended or refinanced, and on
terms not less favorable to the company than those of the indebtedness being
renewed, extended or refinanced, or (iv) an increase in the amount of Senior
Indebtedness not in excess of $5,000,000;
(d) enter into, become a party to, become subject to or authorize any
agreement or instrument which would restrict, prohibit or interfere with the
Company's performance of its obligations under the terms of the Company's
charter documents, bylaws, or this Agreement, the Notes or the Warrants;
(e) have outstanding, or acquire or commit itself to acquire or hold,
any investment except (i) investments in marketable direct obligations issued
or guaranteed by the United States of America that mature within one year
from the date of acquisition thereof or which are subject to a repurchase
agreement, exercisable within ninety (90) days from the date of acquisition
of such agreement, with any commercial bank or trust company incorporated
under the laws of the United States of America or any State thereof or the
District of Columbia, (ii) investments in commercial paper maturing within
one year from the date of acquisition thereof and having, at the date of
acquisition thereof, the highest rating obtainable from Xxxxx'x Investors
Service, Inc. or Standard & Poor's Corporation, (iii) investments in bankers'
acceptances eligible for rediscount under Federal Reserve Board requirements
accepted by any commercial bank or trust company referred to in clause (i)
hereof, (iv) investments in deposits or certificates of deposit maturing
within one year from the date of acquisition thereof issued by any commercial
bank or trust company referred to in clause (i) hereof and having capital and
surplus of at least $100,000,000, (v) investments in certificates of deposit
issued by banks organized under the laws of any other jurisdiction, each
having combined capital and surplus of not less than $100,000,000, and (vi)
investments in securities issued by subsidiaries of the Company;
(f) make, declare or pay any dividends or make any distributions on any
of its capital stock or make any other distribution of assets in respect of
its capital stock, or purchase, redeem or otherwise acquire any shares of its
capital stock or any securities convertible into
16
Common Stock, except that the Company may do so (i) in connection with the
termination of any director, officer, employee, agent or consultant of the
Company, or (ii) as permitted by an employee benefit plan, contract or
arrangement that has been approved by the Board of Directors of the Company;
(g) make any loans on advances other than (i) for travel, entertainment
and similar expenses in the ordinary course of business consistent with past
practice, (ii) pursuant to any employee stock option plan or stock purchase
agreement of the Company, or (iii) advances to employees in an aggregate
amount not in excess of $25,000;
(h) engage in any transaction involving payments by the Company in
excess of $25,000 in any single calendar year with any other person directly
or indirectly controlling, controlled by or under direct or indirect common
control with the Company, including without limitation any person who is a
director, officer, employee or direct or indirect beneficial holder of at
least 5% of the then outstanding capital stock of the Company, any member of
the family of any such person, or any corporation, trust, partnership or
other entity in which any such person, or member of the family of any such
person, is a director, officer, trustee, partner or holder of more than 5% of
the outstanding capital stock thereof (each an "Affiliate"), except in the
ordinary course of business and pursuant to the reasonable requirements of
the Company's business and upon terms no less favorable to the Company than
would have been obtainable from a person who is not an Affiliate on an
arms'-length basis in the ordinary course of business;
(i) modify, rescind, terminate, waive, release or otherwise amend in any
material respect any of the terms or provisions (i) relating to
non-competition or confidential or proprietary information and contained in
any agreement, document or instrument with or relating to any of its
employees, officers, directors or other related parties, or to fail to
enforce any such provision, or fail to avail itself of all the rights and
remedies thereunder, or (ii) of this Agreement; or
(j) merge or consolidate with any other corporation or sell all or
substantially all of its assets or effect a voluntary dissolution,
liquidation or winding up of the Company.
7. MISCELLANEOUS.
7.1 WAIVERS AND AMENDMENTS. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally, but only by a
statement in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought. This Agreement shall
automatically terminate at such time after the Closing Date as the Notes are
no longer outstanding, or on October 31, 1997 if the Closing has not then
been completed.
7.2 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of California as such laws are applied to agreements
between California residents entered into and to be performed entirely within
California.
7.3 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive the execution of this Agreement and the Closing.
17
7.4 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto. The Company may not assign its rights or delegate its duties
under this Agreement, the Rights Agreement, the Co-Sale Agreement or the
Notes and Warrants, except by operation of law or with the prior written
consent of the Purchasers holding a majority of the then-outstanding
principal amount of the Notes. Each Purchaser may assign or transfer its
rights hereunder in addition to the Notes and Warrants, and the Common Shares
and Warrant Shares, in whole or in part, to any affiliate of Purchaser or any
entity for which Purchaser or any of its affiliates serves as general partner
and/or investment advisor or in a similar capacity, and to all mutual funds,
or other pooled investment vehicles or entities, under the control or
management of such Purchaser or the general partner or investment advisor
thereof, or any affiliate of any of the foregoing.
7.5 ENTIRE AGREEMENT. This Agreement, the exhibits to this Agreement
and the Exceptions Letter constitute the full and entire understanding and
agreement between the parties with regard to the subject matter hereof and
thereof and supersede and replace any prior or concurrent agreements,
understandings or representations between the Company and the Purchasers.
7.6 NOTICES, ETC. All notices required or permitted hereunder shall be
in writing and shall be sent via facsimile, overnight courier service or
mailed by first class mail, postage prepaid, addressed or sent (a) if to
Purchaser, at the address of Purchaser set forth opposite such Purchaser's
name on SCHEDULE 1, or at such other address or number as such Purchaser
shall have furnished to the Company in writing, with a copy to Xxxxxx X.
Xxxx, Esq., Xxxxxxx, Xxxx & Xxxxx LLP, 000 Xxxxxxx Xxxxxx, Xxxxxx, XX 00000
or (b) if to the Company, at the address set forth above or facsimile no.:
(000) 000-0000, or at such other address or number as the Company shall have
furnished to Purchaser in writing, with a copy to Xxxxx X. Xxxx, Esq.,
Fenwick & West LLP, Xxx Xxxx Xxxx Xxxxxx, Xxxx Xxxx, XX 00000.
7.7 SEPARABILITY. In case any provision of this Agreement shall be
declared invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected
or impaired thereby.
7.8 FINDER'S FEES.
(a) The Company (i) represents and warrants that it has retained no
finder or broker in connection with the transactions contemplated by this
Agreement other than a finders fee to Xx. Xxx in the amount of four percent
with respect to $2,000,000 principal amount of Notes purchased pursuant to
this Agreement, payable in stock or cash at the Company's election, and (ii)
hereby agrees to indemnify and to hold Purchaser harmless of and from any
liability for any commission or compensation in the nature of a finder's fee
to any other broker or person or firm (and the costs and expenses of
defending against such liability or asserted liability) for which the
Company, or any of its employees or representatives, are responsible.
(b) Each Purchaser (i) represents and warrants that it has retained
no finder or broker, in connection with the transactions contemplated by this
Agreement and (ii) hereby agrees to indemnify and to hold the Company
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or
18
firm (and the costs and expenses of defending against such liability or
asserted liability) for which such Purchaser, or any of its employees or
representatives, are responsible.
7.9 EXPENSES AND FEES. The Company will bear the actual expenses,
including fees and disbursements of counsel, incurred by Tudor Global
Trading, Inc. with respect to this Agreement and the transactions provided
for herein up to a maximum aggregate amount of $40,000, which shall be
payable to Xxxxxxx, Xxxx & Xxxxx LLP at closing. Except for the immediately
preceding sentence, the Company and each Purchaser shall each bear these
respective expenses and legal fees incurred with respect to this Agreement
and such transaction. In the event any litigation between the parties arises
out of, in connection with or with respect to this Agreement, the prevailing
party shall be entitled to receive from the nonprevailing party the
reasonable costs and expenses incurred by the prevailing party (including
attorneys fees) in connection with such litigation.
7.10 TITLES AND SUBTITLES. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
7.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
7.12 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to the Purchasers, upon any breach or default of the
Company under this Agreement, shall impair any such right, power or remedy,
nor shall it be construed to be a waiver of any such breach or default, or
any acquiescence therein, or of or in any similar breach or default
thereafter 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. It is further agreed that any waiver, permit, consent or approval
of any kind or character on the Purchasers' part of any breach or default
under this Agreement, or any waiver on the Purchasers' part of any provisions
or conditions of this Agreement must be in writing and shall be effective
only to the extent specifically set forth in such writing and that all
remedies, either under this Agreement, or by law or otherwise afforded to the
Purchasers', shall be cumulative and not alternative.
7.13 FUTURE EMPLOYEE AGREEMENTS AND ISSUANCES. The Company will
require that all future employees of the Company enter into Proprietary
Information and Inventions Agreements in substantially the form attached as
EXHIBIT E, with such amendments thereto or deviations therefrom as the
Company's Chief Executive Officer or Board of Directors may from time to time
deem appropriate. All future issuances of securities of the Company to
employees, officers and consultants shall be made pursuant to stock purchase
or stock option agreements approved by the Company's Board of Directors, and
including a "market stand-off" provision substantially similar to that set
forth in Section 1.12 of the Rights Agreement or such other terms as the
Board of Directors may approve.
19
IN WITNESS WHEREOF, the parties have executed this Convertible Subordinated
Promissory Note Purchase Agreement as of the day and year first above written.
"COMPANY"
HYBRID NETWORKS, INC.
By: /S/ Xxxx X. Xxxxxxxxx
-------------------------------
Its: President and CEO
------------------------------
"PURCHASERS"
TUDOR BVI FUTURES, LTD.
By: Tudor Investment Corporation,
Investment Adviser
By: /S/ Xxxxxx X. Xxxxxxxx
----------------------------
Xxxxxx X. Xxxxxxxx,
Vice President
TUDOR ARBITRAGE PARTNERS, L.P.
By: Tudor Global Trading, Inc.,
General Partner
By: /S/ Xxxxxx X. Xxxxxxxx
---------------------------
Xxxxxx X. Xxxxxxxx,
Vice President
RAPTOR GLOBAL FUND, LTD.
By: Tudor Investment Corporation,
Investment Adviser
By: /S/ Xxxxxx X. Xxxxxxxx
----------------------------
Xxxxxx X. Xxxxxxxx,
Vice President
RAPTOR GLOBAL FUND, L.P.
By: Tudor Investment Corporation,
General Partner
By: /S/ Xxxxxx X. Xxxxxxxx
----------------------------
Xxxxxx X. Xxxxxxxx,
Vice President
20
SIGNATURE PAGE TO CONVERTIBLE SUBORDINATED PROMISSORY NOTE PURCHASE AGREEMENT
SEQUOIA CAPITAL VI
By: /S/ Xxxxxxx Xxxxxx
---------------------------------
Its:
--------------------------------
SEQUOIA TECHNOLOGY PARTNERS VI
By: /S/ Xxxxxxx Xxxxxx
---------------------------------
Its:
--------------------------------
SEQUOIA XXIV
By: /S/ Xxxxxxx Xxxxxx
---------------------------------
Its:
--------------------------------
21
SIGNATURE PAGE TO CONVERTIBLE SUBORDINATED PROMISSORY NOTE PURCHASE AGREEMENT
ACCEL IV L.P.
By: /S/ X. Xxxxxx Sednaoui
---------------------------------
Its: General Partner
--------------------------------
ACCEL INVESTORS '95 L.P.
By: /S/ X. Xxxxxx Sednaoui
---------------------------------
Its: General Partner
--------------------------------
ACCEL KEIRETSU L.P.
By: /S/ X. Xxxxxx Sednaoui
---------------------------------
Its: Chief Financial Officer
--------------------------------
XXXXXXX X. XXXXXXXXX PARTNERS
By: /s/ Company Officer
---------------------------------
Its: General Partner
--------------------------------
22
SIGNATURE PAGE TO CONVERTIBLE SUBORDINATED PROMISSORY NOTE PURCHASE AGREEMENT
AT & T VENTURES
By: /S/ Xxxx Xxxxxxx
---------------------------------
Its: General Partner
--------------------------------
23
SIGNATURE PAGE TO CONVERTIBLE SUBORDINATED PROMISSORY NOTE PURCHASE AGREEMENT
OSCCO III, L.P.
By: /S/ Xxxxxxx Xxxxxxx
---------------------------------
Its: General Partner
--------------------------------
24
SIGNATURE PAGE TO CONVERTIBLE SUBORDINATED PROMISSORY NOTE PURCHASE AGREEMENT
/S/ Xxxxxx X. Xxxxxxx
------------------------------------
Xxxxxx X. Xxxxxxx
25
SIGNATURE PAGE TO CONVERTIBLE SUBORDINATED PROMISSORY NOTE PURCHASE AGREEMENT
888 GROUP
By: /S/ Xxxxx Xxxxx
---------------------------------
Its: /S/ Company Officer
--------------------------------
Company Officer
26
SIGNATURE PAGE TO CONVERTIBLE SUBORDINATED PROMISSORY NOTE PURCHASE AGREEMENT
/S/ Xxxxxxxx X. Xxxxxx
------------------------------------
Xxxxxxxx X. Xxxxxx
27
Signature Page to Convertible Subordinated Promissory Note Purchase Agreement
K. XXXXXXX XXXXX
By: /s/ K. Xxxxxxx Xxxxx
------------------------
Its:
------------------------
28
Signature Page to Convertible Subordinated Promissory Note Purchase Agreement
X. X. XXXX CO., INC.
By: /s/ Xxxxxx Xxxx, Xx.
------------------------
Its: Vice President
------------------------
29
Signature Page to Convertible Subordinated Promissory Note Purchase Agreement
/s/ Xxxx Xxxxxx
------------------------
Xxxx X. Xxxxxx
30
Schedule:
--------
1. List of Purchasers
Exhibits:
--------
A. Form of Subordinated Convertible Promissory Note
B. Form of Common Stock Purchase Warrant
C. Form of Rights Agreement
D. Form of Right of Co-Sale Agreement
E. Proprietary Information and Inventions Agreement
31
SCHEDULE 1
PURCHASERS AND AMOUNTS PURCHASED
PURCHASER NAME & ADDRESS NOTES PURCHASED WARRANTS PURCHASED
------------------------ --------------- ------------------
Tudor BVI Future, Ltd.
c/o Tudor Global Trading, Inc.
00 Xxxxx Xxxxx
Xxxxxx, XX 00000 $1,842,667 182,440-456,106
Tudor Arbitrage Partners, L.P.
c/o Tudor Global Trading, Inc.
00 Xxxxx Xxxxx
Xxxxxx, XX 00000 $ 471,333 46,667-116,667
Raptor Global Fund Ltd.
c/o Tudor Global Trading, Inc.
00 Xxxxx Xxxxx
Xxxxxx, XX 00000 $1,218,000 120,593-301,486
Raptor Global Fund L.P.
c/o Tudor Global Trading, Inc.
00 Xxxxx Xxxxx
Xxxxxx, XX 00000 $ 468,000 46,000-000-000
Sequoia Capital VI
0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxx $ 273,000 27,029-67,574
Sequoia Technology Partners VI
0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxx $ 15,000 1,485-3,713
Sequoia XXIV
0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxx $ 12,000 1,188-2,970
PURCHASER NAME & ADDRESS NOTES PURCHASED WARRANTS PURCHASED
------------------------ --------------- ------------------
Accel IV L.P.
Xxx Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxx Sednaoui $ 229,000 22,673-56,683
Accel Investors '95 L.P.
Xxx Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxx Sednaoui $ 10,750 1,064-2,661
Accel Keiretsu L.P.
Xxx Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxx Sednaoui $ 4,750 470-1,176
Xxxxxxx X. Xxxxxxxxx Partners
Xxx Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxx Sednaoui $ 5,500 545-1,361
AT&T Ventures
0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxxx $ 257,201 25,465-63,664
OSCCO III, L.P.
0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx $ 200,000 19,802-49,505
Xxxx X. Xxxxxx
00 Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000 $ 100,000 9,901-24,753
888 Group
000 Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxx $ 125,000 12,376-30,941
PURCHASER NAME & ADDRESS NOTES PURCHASED WARRANTS PURCHASED
------------------------ --------------- ------------------
Xxxxxx X. Xxxxxxx
X.X. Xxx 000
Xxxxxxxxxx, XX 00000 $ 500,000 49,505-123,763
Xxxxxxxx X. Xxxxxx
Heartport, Inc.
000 Xxxxxxxxxx Xxxxx
Xxxxxxx Xxxx, XX 00000 $ 50,000 4,950-12,376
X.X. Xxxx Co., Inc.
000 Xxxx Xxxxxx Xxxx
Xxxxxx, XX 00000-0000 $ 100,000 9,901-24,753
Mr. K. Xxxxxx Xxxxx
0000 Xxxxxx Xxx
Xxx Xxxx, XX 00000-0000 $1,000,000 99,009-247,525
TOTAL: $6,882,201 681,399-1,703,517
---------- -----------------
---------- -----------------
EXHIBIT A
NEITHER THIS NOTE NOR THE SHARES ISSUABLE UPON EXERCISE OF THE CONVERSION
RIGHTS SET FORTH IN THIS NOTE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, AND NEITHER THIS NOTE NOR THE SHARES ISSUABLE UPON
EXERCISE OF THE CONVERSION RIGHTS SET FORTH IN THIS NOTE CAN BE SOLD OR
TRANSFERRED UNLESS SUCH SALE OR TRANSFER XXXX BEEN REGISTERED UNDER SUCH ACT
AND UNDER THE APPLICABLE SATE SECURITIES LAWS OR, IN THE OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY, BOTH AS TO THE IDENTITY OF THE COUNSEL AND AS TO
THE FORM AND SUBSTANCE OF THE OPINION, IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND LAWS.
HYBRID NETWORKS, INC.
CONVERTIBLE SUBORDINATED NOTE
$___________
Palo Alto, California
September __, 1997
FOR VALUE RECEIVED, upon the terms and subject to the conditions set
forth in this convertible subordinated note (this "NOTE"), HYBRID NETWORKS,
INC., a Delaware corporation, with its principal place of business at 00000
Xxxx Xxxx, Xxxxxxxxx, Xxxxxxxxxx 00000-0000 (the "COMPANY"), absolutely and
unconditionally promises to pay to the order of _______________________, a
____________ company (the "HOLDER"), at the Holder's offices at c/o Tudor
Global Trading, Inc., 00 Xxxxx Xxxxx, Xxxxxx, Xxxxxxxxxxxxx 00000, the
principal amount of __________________________ dollars ($____________),
together with interest as specified in Section 2(a).
This Note is one of a limited number of Convertible Subordinated Notes
(the "Convertible Subordinated Notes") in the aggregate principal amount of
up to Eight Million Dollars ($8,000,000), issued pursuant to that certain
Subordinated Promissory Note Purchase Agreement (the "Agreement") dated as of
the date hereof by and among the Company and those certain purchasers
identified on Schedule 1 thereto, including the Holder. The Company agrees
to make all payments (including prepayments) on the Convertible Subordinated
Notes in proportion to the respective principal amounts of each such note
outstanding from time to time.
SECTION 1. MATURITY; WAIVERS. The entire principal amount hereof, and
all unpaid interest thereon, shall become due and payable on the Maturity
Date (as defined in Section 3 hereof). The Company and any endorser and
guarantor of this Note or the obligations represented hereby expressly waives
presentment, demand, notice, protest and all other demands and notices in
connection with the delivery, acceptance, performance, default or enforcement
of this Note, assents to any extension or postponement of the time payment or
any other indulgence, to any addition, substitution, exchange or release of
collateral and to the addition or release of any other party or person
primarily or secondarily liable.
SECTION 2. INTEREST. This Note shall bear interest on the principal
amount outstanding and unpaid from time to time (a) from the date hereof
through and including the earlier of (i) March 30, 1998 and (ii) the date on
which such principal amount, together with all
accrued but unpaid interest thereon, is paid or discharged in full, if such
date is on or before March 30, 1998, at the rate of 10% per annum, and (b) if
all or any portion of said principal amount, together with all accrued but
unpaid interest thereon, shall remain outstanding after March 30, 1998, then
from and after March 30, 1998 through and including the date on which such
principal amount, together with all accrued but unpaid interest thereon, is
paid or discharged in full, at the rate of 18% per annum. Interest shall be
calculated on the basis of a 360-day year and paid for the actual number of
days elapsed and shall be payable quarterly in arrears on the last day of
each quarter, commencing on September 30, 1998, with a final payment of all
accrued and unpaid interest upon the Maturity Date.
SECTION 3. PRINCIPAL PAYMENT; PREPAYMENT. All unpaid principal and
interest outstanding hereunder, together with all fees and expenses (if any)
payable hereunder, shall become immediately due and payable upon the earliest
to occur of the following (the "MATURITY DATE"):
(a) the closing of the first public offering of the Company's Common
Stock, $.001 par value per share (the "Common Stock"), and/or shares of any
other class of the Company's capital stock, pursuant to a registration
statement filed with and declared effective by the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Securities
Act");
(b) any sale or transfer, in a single transaction or a series of related
transactions, of all or substantially all of the Company's assets, or any
merger, consolidation or reorganization as a result of which the Company is
not the surviving corporation or, if the Company is the surviving
corporation, as a result of which the holders of voting stock of the Company
immediately prior to such merger, consolidation or reorganization do not
represent a majority of the voting stock of the surviving corporation, or the
dissolution of the Company, or the sale, in a single transaction or series of
related transactions, of a majority of the Company's voting capital stock
(whether newly issued or from treasury, or previously issued and then
outstanding, or any combination thereof);
(c) any Bankruptcy Event (as defined in Section 5(g) hereof); and
(d) September 30, 1998.
The Company shall have the right to prepay, in whole or in part, the
unpaid principal amount of this Note on fifteen (15) business days' prior
written notice to the Holder. Any notice of prepayment given pursuant to
this Section 3 shall not act to restrict or limit any rights which the Holder
may have at the time of receipt of such notice to convert this Note pursuant
to, and in accordance with, Section 7 below. Any prepayment of the principal
amount of this Note shall be made without premium or prepayment penalty,
PROVIDED that the Company shall pay all accrued interest to the date of
prepayment on the principal amount prepaid. All payments to be made by the
Company hereunder shall be made in U.S. dollars in cash without setoff or
counterclaim and without any withholding or deduction whatsoever.
SECTION 4. REPRESENTATIONS, WARRANTIES OF THE COMPANY AND OF THE HOLDER.
The representations and warranties of the Company and of the Holder
contained in Sections 3 and 4
2
of the Purchase Agreement, respectively, are hereby incorporated by reference
in their entirety and made a part of this Note as fully as if restated herein.
SECTION 5. ACCELERATION EVENTS. If any of the following events or
circumstances (each an "ACCELERATION EVENT") shall occur:
(a) the Company's failure to meet its payment obligations when due under
this Note, including without limitation, the due and punctual payment of any
principal or interest due and payable hereunder;
(b) The Company commits a material breach or default of any of the
covenants or in the punctual performance of its other obligations under this
Note, the Purchase Agreement or that certain Stock Purchase Warrant of even
date herewith issued by the Company in favor of the Holder (the "WARRANT");
(c) any representation or warranty made by the Company herein or in the
Purchase Agreement or the Warrant shall have been false in any material
respect when made;
(d) there shall remain undischarged for more than sixty (60) days any
final judgment in excess of $5,000 or execution against the Company that
together with other outstanding claims and execution actions against the
Company exceed $100,000 in the aggregate;
(e) the Company commits a breach or default in the due and punctual
performance of any covenant or agreement with respect to indebtedness for
borrowed money, including without limitation the Debentures (as defined
below), and such breach or default permits the holder to accelerate a
material amount of such indebtedness under the terms thereof, or the Company
commits a material breach under any real property lease agreement or capital
equipment lease agreement to which the Company is a party;
(f) a reorganization, consolidation or merger of the Company with or
into any other entity or entities in which the Company is the surviving
corporation and as a result of which the holders of voting stock of the
Company immediately prior to such reorganization, consolidation or merger
represent a majority of the voting stock of the surviving corporation, if the
surviving corporation or corporations in the merger or consolidation does not
assume all of the Company's obligations under this Note and the Warrant
(subject to the Holder's rights set forth in Section 3 hereof); or
(g) the filing of a petition in bankruptcy or under any similar
insolvency law by the Company, the making of an assignment for the benefit of
creditors, or if any voluntary petition in bankruptcy or under any similar
insolvency law is filed against the Company and such petition is not
dismissed within 60 days of the filing thereof (each a "Bankruptcy Event");
then, the Holder at its option at any time thereafter during the
continuance of an Acceleration Event may declare the entire unpaid principal
of this Note and all interest, fees and expenses (if any) payable on or in
respect of this Note and the obligations evidenced hereby due and payable,
and the same shall thereupon forthwith become and be due and payable to the
Holder (an "ACCELERATION") without presentment, demand, protest, notice of
protest or any other formalities of any kind, all of which are hereby
expressly and irrevocably waived by the Company, PROVIDED THAT in the event
of an Acceleration Event under Section 5(g) all such
3
amounts shall become and be immediately due and payable, and an Acceleration
shall be deemed for all purposes hereof to have occurred, automatically and
without any requirement of notice from the Holder.
SECTION 6. COVENANTS OF THE COMPANY. The covenants of the Company
contained in Section 6 of the Purchase Agreement are hereby incorporated by
reference in their entirety and made a part of this Note as fully as if
restated herein.
SECTION 7. CONVERSION. This Note shall be convertible pursuant to the
terms and provisions of this Section 7.
SECTION 7.1. CONVERSION RIGHTS. At the time of any non-public sale of
(i) shares of Common Stock (or any other class or series of capital stock of
the Company), or (ii) any securities convertible into, or exchangeable for,
or providing any right to purchase Common Stock (or any other class or series
of capital stock of the Company) or securities convertible into or
exchangeable for, shares of Common Stock (or any other class or series of
capital stock of the Company), while this Note is outstanding (any such
financing being referred to herein as a "PRIVATE EQUITY FINANCING"), the
Holder may, but shall not be obligated to, convert all (but not less than
all) of the outstanding principal amount of this Note, and, at the Holder's
option, all (but not less than all) of the accrued and unpaid interest on
this Note, into such number of whole shares of Conversion Stock (as defined
in Section 7.2(d) below) as the principal amount (and accrued and unpaid
interest, if the Holder elects to convert the same) will purchase at the
Conversion Price (as defined below in Section 7.2(c) below), upon the terms
and subject to the conditions hereinafter specified. The Company agrees to
give the Holder written notice (a "FINANCING NOTICE") of the contemplation of
a Private Equity Financing, including all of the material terms and
conditions thereof, not later than fifteen (15) days prior to the
contemplated completion thereof. Upon receipt of such Financing Notice, the
Holder may, by delivery to the Company of a Conversion Notice (as defined in
Section 7.2(b) below) not later than the date specified in the Financing
Notice, which date shall not be earlier than the date seven (7) days after
such Financing Notice and shall not be later than three (3) days prior to the
contemplated completion of such Private Equity Financing, exercise its
conversion rights hereunder. The Holder's Conversion Notice in connection
with a contemplated Private Equity Financing may expressly provide that the
exercise of conversion rights as set forth therein is contingent upon the
completion of such Private Equity Financing on the terms and conditions
described in the Company's notice thereof.
SECTION 7.2. CERTAIN DEFINITIONS. For all purposes of this Section 7,
the following terms shall have the respective meanings set forth below:
(a) "COMMON STOCK" shall mean and include the Company's Common Stock
authorized as at the date of this Note (as described in Section 3.4(b) of the
Purchase Agreement) and shall include also any other capital stock of the
Company of any class or series which has the right to participate in the
distribution of earnings and assets of the company without Limitation as to
amount;
(b) "CONVERSION NOTICE" shall mean written notice by the Holder in
substantially the form annexed hereto of the Holder's desire to exercise its
conversion rights hereunder;
4
(c) "CONVERSION PRICE" shall mean the price for a share of Conversion
Stock payable by the investors purchasing such shares in the Private Equity
Financing in connection with which such Conversion Notice shall have been
delivered; and
(d) "CONVERSION STOCK" shall mean (i) the shares of Common Stock or
other class or series of capital stock of the Company or (ii) the securities
convertible into, exchangeable for or providing a right to purchase Common
Stock or other class or series of capital stock of the Company or providing a
right to purchase securities convertible into or exchangeable for shares of
Common Stock or other class or series of capital stock of the Company, which
shall be issued by the Company in any Private Equity Financing.
7.3. CONVERSION MECHANISM.
(a) Conversion of this Note shall be made upon surrender of this Note to
the Company at its principal place of business (or at such other office as
the Company shall designate by notice in writing to the Holder from time to
time), accompanied by written notice of the Holder's election to convert in
substantially the form of the Conversion Notice annexed hereto.
(b) The Company agrees that, at the time of such surrender and exercise
of conversion rights in compliance with the provisions hereof, the shares of
Conversion Stock issuable pursuant to such exercise shall be and be deemed to
be issued to the Holder (or the Holder's permitted transferee) as the record
owner of such shares as of the close of business of the Company on the date
on which conversion rights under this Note shall have been exercised as
aforesaid. In addition, the Holder shall thereupon be permitted to become a
party to, and shall have the benefit of, all of the rights granted to (i) the
other purchasers of Conversion Stock pursuant to each of the documents,
instruments and agreements executed and delivered by and between and/or among
the Company and such other purchasers of Conversion Stock in connection with
the applicable Private Equity Financing and (ii) the Holders (as defined in
that certain Hybrid Network, Inc. Amended and Restated Investor Rights
Agreement dated as of the date hereof by and among the Company and the
parties listed on the schedules thereto, including the Holder (the "INVESTOR
RIGHTS AGREEMENT")) pursuant to the Investor Rights Agreement.
(c) The Company covenants that all shares of Conversion Stock which may
be issued upon the exercise of conversion rights under this Note will, upon
such exercise, be validly issued, fully paid and non-assessable and free from
all taxes, liens, charges and other encumbrances or restrictions on sale and
free and clear of all pre-emptive rights in respect of the issue thereof.
(d) The certificates for the shares of Conversion Stock so issued shall
be delivered to the Holder (or the Holder's permitted designee) within a
reasonable time, not exceeding ten (10) days, after the date on which the
conversion rights under this Note shall have been so exercised, and shall
bear the following legend or a substantially equivalent legend:
THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD OR
TRANSFERRED UNLESS SUCH SALE OR TRANSFER HAS BEEN REGISTERED UNDER SUCH ACT
AND UNDER THE APPLICABLE STATE SECURITIES LAWS OR, IN THE OPINION OF COUNSEL
SATISFACTORY TO THE
5
COMPANY, BOTH AS TO THE IDENTITY OF THE COUNSEL AND AS TO THE FORM AND
SUBSTANCE OF THE OPINION, IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF
SUCH ACT AND LAWS.
Such certificates may also bear any legend required under any applicable state
securities laws. The Company may take such steps as it deems appropriate to
cause the assignment and transfer restriction provided for in this Note to be
complied with.
(e) This Note may be converted once and only once. Unless the Holder
shall have elected to convert accrued but unpaid interest hereon, all of such
interest shall be paid to the Holder in cash immediately upon the conversion
of the principal amount of this Note.
(f) No fractional shares or scrip representing fractional shares shall
be issued upon the exercise of conversion rights under this Note, and the
Conversion Price with respect to any such fractional shares shall be payable
to the Holder in cash by the Company within ten (10) days after the date of
any such conversion.
(g) Issuance of certificates for shares of Conversion Stock upon the
exercise of conversion rights under this Note shall be made without charge to
the Holder (or the Holder's permitted transferee) for any issue or transfer
taxes or any other incidental expenses in respect of the issuance of such
certificates, all of which taxes and expenses shall be paid by the Company,
and such certificates shall be issued in the name of the Holder (or the
Holder's permitted transferee); PROVIDED, HOWEVER, that any income taxes or
capital gains taxes or similar taxes shall be payable by the Holder.
SECTION 7.4. CERTAIN OBLIGATIONS OF THE COMPANY. The Company will, in
accordance with the laws of the State of Delaware, take such actions as may
be necessary to ensure that the authorized amount of any class of stock from
which Conversion Stock is to be issued shall, at the time of such conversion,
be sufficient to permit the exercise of conversion rights under this Note and
to ensure that, at the time of such conversion, the authorized amount of any
class of stock into which the Conversion Stock is convertible shall be
sufficient to permit the exercise of any such conversion rights applicable to
the Conversion Stock. The Company will not, by amendment of its Certificate
of Incorporation or through reorganization, consolidation, merger,
dissolution, issuance of capital stock or sale of treasury stock or sale of
assets, or by any other voluntary act or deed, avoid or seek to avoid the
material performance or observance of any of the covenants, stipulations or
conditions in this Note to be observed or performed by the company. The
Company will at all times in good faith assist, insofar as it is able, in the
carrying out of all of the provisions of this Note in a reasonable manner and
in the taking of all other action which may be necessary in order to protect
and preserve the rights of the Holder set forth herein.
SECTION 7.5. EFFECT OF REORGANIZATION, RECLASSIFICATION, CONSOLIDATION,
MERGER, ETC.
(a) If, at any time while this Note is outstanding (subject in all
events to the rights of Holder set forth in Section 3 hereof) there should be
any reorganization, consolidation or merger of the Company with another
entity as a result of which the Company is not the surviving corporation, or
any sale, conveyance, lease or other transfer by the Company of all or
substantially all of its property to any other entity, the Holder of this
Note shall thereafter, upon
6
exercise of conversion rights hereunder, be entitled to receive the number of
shares of stock or other securities or property of the Company, or of the
successor corporation resulting from such reorganization, consolidation or
merger, as the case may be, to which the Conversion Stock (and any other
securities and property) of the Company, deliverable upon the exercise of
conversion rights hereunder, would have been entitled upon such
consolidation, merger, sale or other transfer if such conversion rights had
been exercised immediately prior to such consolidation, merger, sale or other
transfer; and, in any such case, appropriate adjustment (as determined in
good faith by the Board of Directors of the Company) shall be made in the
application of the provisions herein set forth with respect to the rights and
interests thereafter of the Holder of this Note to the end that the
provisions set forth herein shall thereafter be applicable, as near as
reasonably may be, in relation to any shares or other property thereafter
deliverable upon the exercise of conversion rights hereunder as if such
conversions rights had been exercised immediately prior to such
consolidation, merger, sale or other transfer and the Holder hereof had
carried out the terms of the exchange as provided for by such consolidation
or merger.
(b) The Company shall not effect any such consolidation or merger
unless, upon or prior to the consummation thereof, the successor corporation
shall by written instrument have assumed the obligation to deliver to the
Holder hereof such shares of stock, securities, cash or property as such
Holder shall be entitled to purchase in accordance with Section 7.5(a) hereof
(subject in all events to the rights of Holder set forth in Section 3 hereof).
SECTION 7.6 NO RIGHTS OR RESPONSIBILITIES AS SHAREHOLDER. This Note
neither entitles the Holder to any rights, nor subjects the Holder to any
responsibilities, as a shareholder of the Company.
SECTION 8. SUBORDINATION.
SECTION 8.1 SUBORDINATION TO SENIOR INDEBTEDNESS. Notwithstanding any
other provision of this Note, the payment of principal and interest on this
Note is and shall be junior and subordinated in right of payment, to the
extent and in the manner set forth in this Section 8, to the prior payment in
full of all amounts due and owing upon all Senior Indebtedness, as defined in
Section 8.2(a) below, at any time outstanding. Holder agrees to negotiate in
good faith reasonable and customary terms of a subordination agreement with
the Company's lender or lenders or proposed lender or lenders under a bank
credit facility, pursuant to which subordination agreement payment of the
principal and interest of the Notes shall be junior and subordinated in right
of payment to payment of such bank credit facility; provided, that any
subordination agreement with such lender or lenders acceptable to the Holders
of a majority of the aggregate principal amount of the Notes then outstanding
shall be binding upon all holders of Notes.
SECTION 8.2 CERTAIN DEFINITION. For all purposes of this Note, the
following terms shall have the respective meanings set forth below:
(a) "SENIOR INDEBTEDNESS" shall mean all of the Company's indebtedness
pursuant to those certain Senior Secured Convertible Debentures due 2002,
dated as of April 30, 1997, in the original principal amount of $5,500,000
(the "Debentures"); PROVIDED, HOWEVER, that Senior Indebtedness shall include
principal and interest under such Debentures at any time of determination
only to the extent that the aggregate principal amount thereunder does not
exceed
7
$5,500,000 MINUS the aggregate amount of all principal payments made by the
Company, in respect thereof, PLUS accrued and unpaid interest under the
Debentures;
(b) "Subordinated Indebtedness" shall mean the indebtedness of the
Company under the Convertible Subordinated Notes; and
(c) "Standstill Period" shall mean, with respect to any Subordinated
Indebtedness, the period commencing on the date on which the holder thereof
shall have received written notice from the holders of Senior Indebtedness of
the occurrence of a Default (as defined in the Debentures) under the
Debentures and ending on the earlier of (i) 90 days after the commencement of
such period, and (ii) the date on which such Default shall have been cured or
waived.
SECTION 8.3 PRIOR PAYMENT OF SENIOR INDEBTEDNESS IN BANKRUPTCY, ETC. In
the event of any insolvency, bankruptcy, receivership, liquidation,
reorganization or other similar proceedings relating to the Company or its
debts or assets, and, in the event of any proceedings for voluntary
liquidation, dissolution or other winding up of the Company or distribution
or marshalling of its assets or any composition with creditors of the
Company, whether or not involving insolvency or bankruptcy, if all Senior
Indebtedness has not been paid in full at such time, (a) the holders of
Subordinated Indebtedness shall demand, but only the holders of Senior
Indebtedness may collect, payment of all Subordinated Indebtedness due from
the Company, and (b) the holders of the Senior Indebtedness are hereby
irrevocably authorized at any such meeting or in any such proceeding to
collect any assets of the Company distributed, divided or applied by way of
dividend or payment or any such securities issued on account of Subordinated
Indebtedness and apply the same, or the proceeds of any realization upon the
same that the holders of the Senior Indebtedness in their discretion elect to
effect, to Senior Indebtedness until all Senior Indebtedness shall have been
paid in full, rendering any surplus then remaining to the Holder of this
Note. The holders of the Subordinated Indebtedness shall retain the right to
vote and otherwise act in any such proceeding (including, without limitation,
the right to vote to accept or reject any plan of partial or complete
liquidation, reorganization, arrangement, composition or extension).
SECTION 8.4 NO PAYMENT ON NOTES UNDER CERTAIN CONDITIONS.
(a) During any Standstill Period, (i) no payment shall be made by the
Company on the Subordinated Indebtedness or accepted by any holder of such
Subordinated Indebtedness; and (ii) unless the holders of Senior Indebtedness
shall have accelerated such Senior Indebtedness or shall have commenced an
action or proceeding against the Company to enforce any of their rights in
respect of the Senior Indebtedness, no action or proceeding shall be
commenced by any holder of such Subordinated Indebtedness to collect payment
thereof. The acceleration of any Subordinated Indebtedness by the holder
thereof during any Standstill Period applicable thereto shall be deemed to be
automatically rescinded upon the expiration of such Standstill Period if upon
such expiration no Acceleration Event (other than failure by the Company to
pay the principal amount so accelerated) exists under this Agreement.
(b) Notwithstanding anything herein to the contrary, no Standstill
Period shall commence within 90 days after the end of another Standstill
Period nor may the provisions of this Section 8.4 or the Standstill Periods
established hereby restrict or prohibit for more than 180
days in any 360-day period the Company from making or the holder thereof from
accepting any payment of Subordinated Indebtedness or such holder from
bringing any action or proceeding to collect any such payment.
SECTION 8.5 PAYMENTS HELD IN TRUST. If, in violation of the terms of
this Section 8, any holder of Subordinated Indebtedness receives payment
thereof or any distribution with respect thereto before all Senior
Indebtedness is paid in full, such payment or distribution shall be held in
trust for and paid ratably to the holders of Senior Indebtedness or their
representatives until all Senior Indebtedness shall have been paid in full.
No such payments or distributions paid to the holders of Senior Indebtedness
or their representatives by any holder of Subordinated Indebtedness shall be
deemed to discharge any of such Subordinated Indebtedness.
SECTION 8.6 SUBROGATION. Upon the payment of any Senior Indebtedness,
the holders of the unpaid Subordinated Indebtedness shall be subrogated to
the rights of the holders of Senior Indebtedness to receive payments or
distributions of assets of the Company applicable to the Senior Indebtedness.
For purposes of such subrogation, no payments or distributions made to the
holders of Senior Indebtedness of any cash, property or securities to which
the holders of Subordinated Indebtedness would be entitled except for the
subordination provisions of this Section 8 and no payment to the holders of
Senior Indebtedness by the holders of Subordinated Indebtedness, as between
the Company, its creditors (other than the holders of Senior Indebtedness)
and the holders of Subordinated Indebtedness, shall be deemed to discharge
any of the Senior Indebtedness with respect to which the holders of such
Subordinated Indebtedness shall be subrogated pursuant to this Section 8.6.
SECTION 8.7 SCOPE OF SUBORDINATION. The subordination provisions of
this Section 8 are intended solely to define the relative rights of the
holders of Subordinated Indebtedness and the holders of Senior Indebtedness.
Nothing in this Section 8 or this Note shall impair, as between the Company,
its creditors (other than the holders of Senior Indebtedness) and the holders
of Subordinated Indebtedness, the unconditional and absolute obligation of
the Company to timely pay the principal, interest, and other amounts and
obligations owing under the terms of this Note or affect the relative rights
of the holders of this Note and creditors of the Company (other than the
holders of Senior Indebtedness), nor shall anything prevent any holder of
Subordinated Indebtedness from accepting any payment with respect to such
Subordinated Indebtedness or exercising all remedies otherwise permitted by
application law upon default with respect to such Subordinated Indebtedness
or this Note, subject to any rights under this Section 8 of the holders of
Senior Indebtedness in respect of such payment.
SECTION 8.8 NOTICES. The holders of Senior Indebtedness will promptly
notify the holders of Subordinated Indebtedness in writing of the occurrence
of any Default, and the holders of Subordinated Indebtedness will promptly
notify the holders of Senior Indebtedness in writing of the occurrence of any
Accelerated Event. The failure to give such notice shall not, however,
deprive either the holders of Senior Indebtedness or the holders of
Subordinated Indebtedness of any rights or remedies to which they are
entitled hereunder.
SECTION 9. EXCHANGE. This Note is exchangeable, upon the surrender
hereof by the registered Holder at the principal office of the Company, for
new promissory notes of like tenor and date representing in the aggregate the
then outstanding principal balance hereof (together with interest theretofore
accrued and unpaid), each of such new notes to evidence the portion of
9
such then outstanding principal balance (and accrued and unpaid interest, in
such principal amount) as shall be designated by said registered Holder at
the time of such surrender, but in no event in denominations of principal of
less than $100,000.
SECTION 10. LOSS, THEFT, DESTRUCTION OR MUTILATION OF NOTE. Upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Note, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto,
and upon surrender and cancellation of this Note, if mutilated, the Company
will make and deliver a new promissory note of like tenor and date, and in
the principal balance then outstanding, in lieu of this Note.
SECTION 11. TITLE TO NOTE. This Note and all rights hereunder are
assignable and transferable (subject to the legend set forth in the heading
on the first page hereof) in whole or in part to, and the Holder may
participate all or any portion of this Note to affiliates of the Holder or
any entities for which the Holder or its affiliates serve as general partner
and/or investment advisor or in a similar capacity, all mutual funds, or
other pooled investment vehicles or entities, under the control or management
of such Holder or the general partner or investment advisor thereof, or any
affiliate of any of the foregoing. Any transfer or assignment shall occur at
the office or agency of the Company by the registered Holder in person or by
a duly authorized attorney, upon surrender of this Note together with an
assignment hereof properly endorsed. Until transfer hereof on the
registration books of the Company, the Company may treat the registered
Holder as the owner hereof for all purposes.
SECTION 12. COMMUNICATIONS AND NOTICES. All notices, demands, requests,
certificates or other communications hereunder must be in writing, either
delivered in hand or sent by private expedited courier for overnight delivery
with signature required, or by facsimile transmission, by tested or otherwise
authenticated telex or cable, in each such case, such notice, demand,
request, certificate or other communications being deemed to have been given
upon delivery or receipt, as the case may be, or by certified mail, postage
prepaid, in which case, such notice, demand, request, certificate or other
communications shall be deemed to have been given three (3) days after the
date on which it is first deposited in the mails, and, if to the Company,
shall be addressed to it at its principal place of business referred to in
the first paragraph hereof, or at such other address as the Company may
hereafter designate in writing by notice to the registered Holder, and, if so
to such registered Holder, addressed to such Holder at the address of such
Holder as shown on the books of the Company.
SECTION 13. MISCELLANEOUS.
(a) If the last or appointed day for the taking of any action required
or the expiration of any right granted herein shall be a Sunday or a Saturday
or shall be a legal holiday or a day on which banking institutions in the
City of Boston, Massachusetts, are authorized or required by law to remain
closed, then such action may be taken or right may be exercised on the next
succeeding day which is not a Sunday, a Saturday or a legal holiday and not a
day on which banking institutions in the City of Boston, Massachusetts, are
authorized or required by law to remain closed.
10
(b) THIS NOTE MAY OT BE ASSIGNED BY THE COMPANY WITHOUT THE PRIOR
WRITTEN CONSENT OF THE HOLDER. SUBJECT TO THE FOREGOING, THE NOTE SHALL BE
BINDING UPON THE COMPANY'S SUCCESSORS IN TITLE AND ASSIGNS. THIS NOTE SHALL
CONSTITUTE A CONTRACT UNDER SEAL AND, FOR ALL PURPOSES, SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA (WITHOUT
REGARD TO THE LAWS OF RULES OF LAW APPLICABLE TO CONFLICT OR CHOICE OF LAW).
(c) The failure of the Holder to exercise any or all of its rights,
remedies, powers or privileges hereunder in any instance shall not constitute
a waiver thereof in that or any other instance.
(d) The Company agrees promptly to pay all reasonable fees, expenses and
disbursements incurred from time to time in connection with any amendment,
modification, consent or waiver to or under this Note or the Warrant.
(e) Should all or any part of the indebtedness represented by this Note
be collected by action at law, or in bankruptcy, insolvency, receivership or
other court proceedings, or should this Note be placed in the hands of
attorneys for collection after default, the Company hereby promises to pay to
the Holder, upon demand by the Holder at any time, in addition to the
outstanding principal balance of and, accrued interest on, and all (if any)
other amounts payable to or in respect of this Note, all court costs and
reasonable attorneys' fees and other collection charges and expenses incurred
or sustained by the Holder.
IN WITNESS WHEREOF, the Company has caused this Convertible Subordinated
Note to be signed in its corporate name and its corporate seal to be
impressed hereon by its duly authorized officers.
HYBRID NETWORKS, INC.
[Seal] By:
-------------------------------------
Name:
Title:
11
FORM OF CONVERSION NOTICE
(To be signed only on exercise of conversion rights)
TO: HYBRID NETWORKS, INC.
The undersigned, the registered Holder of the Convertible Subordinated
Note dated September __, 1997 (the "Note"), of Hybrid Networks, Inc. (the
"Company") hereby irrevocably elects to exercise its conversion rights under
the provisions of Section 7 of the Note by conversion of [(i)] all of the
$_______ of outstanding principal of the Note[, and [(ii)] all of the
$________ of accrued and unpaid interest thereon, for ______* shares of ____
Stock of the Company, and requests that the certificates for such shares be
issued in the name of, and delivered to, __________ _________, whose address
is ____________ _____________.
Dated:
--------------------------- -----------------------------------------
(Signature must conform in all
respects to name of registered
holder as specified on the face
of the Note)
-----------------------------------------
(Address)
Signed in the presence of:
----------------------------------
*Insert here the number of shares as to which all of the outstanding
principal of, and if it is to be converted, accrued and unpaid interest on,
the Note is being converted.
FORM OF ASSIGNMENT
(To be signed only on transfer of Note)
For value received, the undersigned hereby sells, assigns, and transfers unto
______ all right, title and interest in and to the within Convertible
Subordinated Note, dated September ___, 1997, of Hybrid Networks, Inc., and
appoints ________ Attorney to transfer such right on the books of said
Company with full power of substitution in the premises.
Dated:
--------------------------- -----------------------------------------
(Signature must conform in all
respects to name of registered
holder as specified on the face
of the Note)
-----------------------------------------
(Address)
Signed in the presence of:
----------------------------------
EXHIBIT B
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
NEITHER THIS WARRANT NOR THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT
CAN BE SOLD OR TRANSFERRED UNLESS SUCH SALE OR OTHER TRANSFER HAS BEEN
REGISTERED UNDER SUCH ACT AND UNDER THE APPLICABLE STATE SECURITIES LAWS OR,
IN THE OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION, BOTH AS TO THE
IDENTITY OF THE COUNSEL AND AS TO THE FORM AND SUBSTANCE OF THE OPINION, IS
EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND LAWS.
No. ___________________ Dated: September __, 1997
HYBRID NETWORKS, INC.
COMMON STOCK PURCHASE WARRANT
THIS IS TO CERTIFY THAT, for value received, ________________________
(the "NAMED HOLDER") and its registered successors and permitted assigns are
entitled, subject to the terms and conditions set forth below, to purchase
from HYBRID NETWORKS, INC., a Delaware corporation (the "CORPORATION"), at
any time and from time to time after 9:00 A.M., Cupertino, California time,
on the Initial Exercise Date (as defined in Section 1 below) and prior to
5:00 P.M., Cupertino, California time, on the Expiration Date (as defined in
Section 1 below), any or all of the Warrant Shares (as defined in Section 1
below), at a purchase price per share equal to the Exercise Price (as defined
in Section 1 below). The number and character of the Warrant Shares and the
Exercise Price are subject to adjustment as provided herein.
This Common Stock Purchase Warrant (this "WARRANT") is being issued in
connection with (a) the Subordinated Note Purchase Agreement dated as of
September 18, 1997 (the "PURCHASE AGREEMENT") by and among the Corporation,
the Named Holder and the other persons (the "INVESTORS") that are purchasing
Convertible Subordinated Notes pursuant to the Purchase Agreement and (b) the
Convertible Subordinated Notes, dated as of the date hereof, made by the
Corporation pursuant to the Purchase Agreement in favor of the Named Holder
and the other Investors (the "CONVERTIBLE SUBORDINATED NOTES"). A copy of
the Convertible Subordinated Notes are on file at the principal office of the
Corporation.
SECTION 1. DEFINITIONS. As used in this Warrant, the following terms
shall have the respective meanings set forth below or elsewhere in this
Warrant as referred to below:
"ADDITIONAL STOCK" shall have the meaning set forth in Section 4.3(f).
"COMMON STOCK" shall mean shares of the Common Stock of the Corporation,
$.001 par value per share (as such par value may be amended from time to
time).
"CONVERSION FRACTION" shall have the meaning set forth in Section 2.3.
"CONVERTIBLE SUBORDINATED NOTES" shall have the meaning set forth in the
second paragraph of this Warrant.
"CORPORATION" shall have the meaning set forth in the first paragraph of
this Warrant.
"DECREASED NUMBER" shall have the meaning set forth in Section 2.1
hereof.
"DERIVATIVE SECURITY" shall have the meaning set forth in Section 4.3(e).
"EFFECTIVE PRICE" shall have the meaning set forth in Section 4.3(a).
"EXERCISE DATE" shall have the meaning set forth in Section 2.4 hereof.
"EXERCISE PRICE" shall mean, as of the Initial Exercise Date and at any
time thereafter, the Initial Exercise Price, as adjusted from time to time
pursuant to the terms of this Warrant.
"EXPIRATION DATE" shall mean September __, 2002.
"FAIR MARKET VALUE" of a Warrant Share shall mean (i) in the case of the
exercise of this Warrant, in whole or in part, after the consummation of an
Initial Public Offering, the average of the last reported sale price per
share of Stock on the Nasdaq-NMS or any national securities exchange in which
such Stock is quoted or listed, as the case may be, for the three trading
days immediately preceding the Exercise Date, or (ii) in the case of the
exercise of this Warrant, in whole or in part, before the consummation of an
Initial Public Offering, the fair market value of a share of Stock, as
determined in good faith by the Board of Directors of the Corporation.
"HOLDER" shall mean, as applicable, (i) the Named Holder, (ii) any
successor of the Named Holder or (iii) any Person to whom this Warrant or any
portion thereof shall have been transferred in accordance with the provisions
of Section 9 hereof.
"INITIAL EXERCISE DATE" shall mean the earlier to occur of (i) 180 days
after the Issue Date, and (ii) the date of consummation of an Initial Public
Offering; PROVIDED, HOWEVER, that, in the event of any sale or transfer, in a
single transaction or a series of related transactions, of all or
substantially all of the Corporation's assets, or the merger, consolidation,
reorganization or dissolution of the Corporation, or the sale, in a single
transaction or a series of related transactions, of a majority of the
Corporation's voting capital stock (whether newly issued or from treasury, or
previously issued and then outstanding, or any combination thereof) (any of
such events, a "DISPOSAL EVENT") occurring at any time prior to the earlier
of (A) 180 days after the Issue Date or (B) the date of consummation of an
Initial Public Offering, then the Initial Exercise Date shall be deemed to be
the date that is five business days prior to the earliest to occur of any
such Disposal Event.
"INITIAL EXERCISE PRICE" shall mean $4.04 per share (subject to
appropriate adjustment as provided in this Warrant); PROVIDED, HOWEVER, that,
in the event that all of the following occur: (i) the Convertible
Subordinated Notes are not paid in full by March 30, 1998 and (ii) the
Corporation fails to pay interest at the rate of 18% per annum at any time
that such interest is due and payable, then the Exercise Price shall
automatically and without further action on the part of the Holder be reduced
to $.01 per share (subject to appropriate adjustment in this Warrant, but in
no event less than the par value of capital stock constituting the Warrant
Shares) but the number
2
of Warrant Shares shall not be increased; PROVIDED FURTHER that in the event
that the number of shares of Common Stock outstanding on a fully diluted
basis as of the date hereof, and as of the date of closing (the "ACTUAL FULLY
DILUTED SHARES"), is more than the number of shares of Common Stock on a
fully diluted basis set forth in Section 3.4 of the Purchase Agreement and
Section 3.4 of the Letter of Exceptions (the "REPRESENTED FULLY DILUTED
SHARES") by an amount in excess of 25,000 shares of Common Stock, then (i)
the Exercise price shall be reduced by a fraction, the numerator of which
shall be equal to the excess of the Actual Fully Diluted Shares over the
Represented Fully Diluted Shares and the denominator of which shall be the
Actual Fully Diluted Shares (the "CAPITALIZATION RATIO") and (ii) the number
of Warrant Shares shall be increased by the Capitalization Ratio.
"INITIAL PUBLIC OFFERING" shall mean the closing of an underwritten
public offering pursuant to an effective registration statement filed with
the Securities and Exchange Commission under the Securities Act covering the
offer and sale of shares of Common Stock or any other class of capital stock
of the Corporation.
"INVESTOR RIGHTS AGREEMENT" shall mean that certain Hybrid Networks,
Inc. Amended and Restated Investor Rights Agreement, dated as of the date of
the Purchase Agreement, by and among the Corporation and the parties listed
on the Schedules thereto, including the Named Holder.
"ISSUE DATE" shall mean September __, 1997.
"NAMED HOLDER" shall have the meaning set forth in the first paragraph
hereof.
"NOTES" shall mean the Convertible Subordinated Notes and any promissory
notes of like tenor issued by the Corporation in exchange or replacement
therefor, upon assignment or transfer thereof or otherwise pursuant to the
terms of the Convertible Subordinated Notes.
"MAXIMUM NUMBER" shall have the meaning set forth in Section 2.1 hereof.
"PERSON" shall mean an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, unincorporated
association, joint venture, governmental authority or other entity of
whatever nature.
"PURCHASE AGREEMENT" shall have the meaning set forth in the second
paragraph of this Warrant.
"REGISTRABLE SECURITIES" shall have the meaning ascribed to it in the
Investor Rights Agreement.
"RIGHT OF CO-SALE AGREEMENT" shall mean the Right of Co-Sale Agreement,
dated as of the date of the Purchase Agreement, by and among the Corporation,
the Investors and others.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"STOCK" shall mean (i) Common Stock, and/or (ii) to the extent that the
Holder is entitled to receive, or receives, upon exercise of this Warrant any
other capital stock of the Corporation
3
(other than Common Stock), or of any other Person or any other securities of
the Corporation or of any other Person, in lieu of or in addition to Common
Stock (whether as a result of any reclassification of Common Stock or any
other Stock or reorganization, reclassification, merger, consolidation or
sale of substantially all the assets of the Corporation or otherwise), such
other capital stock or securities.
"SUBJECT SHARES" shall have the meaning set forth in Section 2.3.
"WARRANT" shall have the meaning set forth in the second paragraph of
this Warrant.
"WARRANT SHARES" shall mean the shares of Common Stock, as adjusted as
provided in this Warrant, that are issuable upon the exercise of this Warrant.
SECTION 2. EXERCISE OF WARRANT.
SECTION 2.1 NUMBER OF WARRANT SHARES ISSUABLE UPON EXERCISE. Subject
to adjustment as provided herein, the maximum number of Warrant Shares
issuable upon exercise of this Warrant shall be ________________
[247,525 WARRANT SHARES WITH RESPECT TO EACH $1,000,000 IN PRINCIPAL AMOUNT OF
CONVERTIBLE SUBORDINATED NOTE PURCHASED BY THE NAMED HOLDER PURSUANT TO THE
PURCHASE AGREEMENT] (the "MAXIMUM NUMBER"); PROVIDED, HOWEVER, that in the
event that the Notes are paid in full prior to September 1, 1998, the maximum
number of Warrant Shares issuable upon exercise of this Warrant shall be
decreased by 10% of the Maximum Number (rounding to the nearest whole Warrant
Share any fractional share that would otherwise result from the decrease) in
respect of each month prior to September 1998 during which the Notes no
longer remain outstanding (the number of Warrant Shares resulting from any
such decrease is referred to as the "DECREASED NUMBER") (so that, if the
Notes are paid in full during August 1998, the Decreased Number would be
equal to 90% of the Maximum Number; if the Notes are paid in full during
March 1998, the Decreased Number would be equal to 40% of the Maximum
Number); PROVIDED FURTHER, that in no event will the adjustment set forth
above cause the Decreased Number to be less than _____________________
[99,009 WARRANT SHARES WITH RESPECT TO EACH $1,000,000 IN PRINCIPAL AMOUNT OF
CONVERTIBLE SUBORDINATED NOTE PURCHASED BY THE NAMED HOLDER PURSUANT TO THE
PURCHASE AGREEMENT]. The maximum number of Warrant Shares issuable upon
exercise of this Warrant during any month prior to September 1, 1998 shall be
equal to the Decreased Number that would result if the Notes were paid in
full during that month; PROVIDED, HOWEVER, that, upon exercise of this
Warrant during any month prior to September 1998, the Corporation shall issue
to the Named Holder a new Warrant (the "REMAINDER WARRANT") of like tenor
exercisable for a number of Warrant Shares equal to the difference between
the Maximum Number and the number of Warrant Shares issued pursuant to the
foregoing sentence. The Remainder Warrant shall become exercisable with
respect to a number of Warrant Shares equal to 10% of the Maximum Number upon
the first day of each successive calendar month after the date of exercise of
this Warrant and prior to September 1, 1998 during which the Notes, or any
portion of the Notes, remain outstanding.
SECTION 2.2 METHOD OF EXERCISE. Subject to and upon all of the terms
and conditions set forth in this Warrant, the Holder may exercise this
Warrant, in whole or in part with respect to any Warrant Shares as to which
this Warrant is then currently exercisable, at any time and from time to time
during the period commencing on the Initial Exercise Date and ending on the
Expiration Date, by presentation and surrender of this Warrant to the
Corporation at its principal
4
office (or such other office or agency as the Corporation may designate by
notice in writing to the Holder in accordance with Section 10.4), together
with (a) a properly completed and duly executed subscription form, in the
form attached hereto, which subscription form shall specify the number of
Warrant Shares for which this Warrant is then being exercised, and (b)
payment of the aggregate Exercise Price payable hereunder in respect of the
number of Warrant Shares for which this Warrant is then being exercised.
Payment of such aggregate Exercise Price shall be made either (i) in cash or
by money order, certified or bank cashier's check or wire transfer (in each
case in lawful currency of the United States of America), (ii) in the event
the Holder is also the holder of a Note and such outstanding principal amount
of, and/or accrued but unpaid interest on, such Note is equal to or greater
than the Exercise Price, by decreasing the outstanding principal amount of,
and/or accrued but unpaid interest on, such Note by the amount of the
Exercise Price, or (iii) by conversion of this Warrant as provided in
Section 2.3.
SECTION 2.3 CONVERSION OF WARRANT.
(a) The Holder shall have the right to convert this Warrant, in whole
or in part with respect to any Warrant Shares as to which this Warrant is
currently exercisable, at any time and from time to time during the period
commencing on the Initial Exercise Date and ending on the Expiration Date, by
the presentation and surrender of this Warrant to the Corporation at its
principal office (or such other office or agency as the Corporation may
designate by notice in writing to the Holder in accordance with Section 10.4,
together with a properly completed and duly executed conversion form, in the
form attached hereto, which conversion form shall specify the number of
Warrant Shares as to which this Warrant is being converted (the "SUBJECT
SHARES"). Upon exercise of this conversion right, the holder hereof shall be
entitled to receive that number of Warrant Shares equal to the quotient
obtained by dividing [ (A - B) (X) ] by (A), where:
A = the Fair Market Value of one Warrant Share on the date of
conversion of this Warrant.
B = the Exercise Price for one Warrant Share under this Warrant.
X = the number of Subject Shares as to which this Warrant is being
converted.
If the above calculation results in a negative number, then no shares of
Warrant Stock shall be issued or issuable upon conversion of this Warrant.
(b) Upon conversion of this Warrant in accordance with this Section 2.3,
the Holder shall be entitled to receive a certificate for the number of
Warrant Shares acquired by the Holder as determined in accordance with the
foregoing, and a new Warrant in substantially identical form and dated as of
such conversion for the purchase of that number of Warrant Shares equal to
the difference, if any, between (i) the number of Warrant Shares subject to
issuance upon exercise of this Warrant immediately before such conversion and
(ii) the number of Subject Shares as to which the Holder exercised its
conversion right pursuant to this Section 2.3. No fractional shares may be
issued upon any conversion of this Warrant. If any conversion would result
in a fractional share (the "CONVERSION FRACTION"), then, at Holder's election
either (A) the number of shares issued upon the conversion will be rounded
down to the last whole share; or (B) the Holder will pay in cash an amount
equal to the Exercise Price times a fraction equal to 1 less the Conversion
Fraction, in which event the number of shares issued upon the conversion
5
(plus the cash payment) will be rounded up to the nearest whole share. For
example, if the Fair Market Value is $10.00 and the Exercise Price is $4.04,
then, upon exercise of the conversion right under this Section 2.3 with
respect to 100 Subject Shares, the Holder would receive, at the Holder's
election, either (1) 59 Warrant Shares without making any cash payment or (2)
60 Warrant Shares if the Holder elected to pay $2.42 in cash (60% of the
Exercise Price for the extra share) and would receive a new Warrant for the
number of Warrant Shares subject to issuance upon exercise of this Warrant
immediately before such conversion less 100.
SECTION 2.4 EFFECTIVENESS OF EXERCISE; OWNERSHIP. Each exercise of
this Warrant by the Holder shall be deemed to have been effected immediately
prior to the close of business on the date upon which all of the requirements
of Sections 2.1 and 2.2 hereof with respect to such exercise shall have been
complied within in full (each such date, an "EXERCISE DATE"). On the
applicable Exercise Date with respect to any exercise of this Warrant by the
Holder, the Corporation shall be deemed to have issued to the Holder, and the
Holder shall be deemed to have become the holder of record and legal owner
of, the number of Warrant Shares being purchased upon such exercise of this
Warrant, notwithstanding that the stock transfer books of the Corporation
shall then be closed or that certificates representing such number of Warrant
Shares being purchased shall not then be actually delivered to the Holder.
SECTION 2.5 DELIVERY OF STOCK CERTIFICATES ON EXERCISE. As soon as
practicable after the exercise of this Warrant, and in any event within ten
days thereafter, the Corporation, at its expense, will cause to be issued in
the name of and delivered to the Holder, or as the Holder may direct (subject
in all cases, to the provisions of Section 9 hereof), a certificate of
certificates for the number of Warrant Shares purchased by the Holder on such
exercise.
SECTION 2.6 SHARES TO BE FULLY PAID AND NONASSESSABLE. All Warrant
Shares issued upon the exercise of this Warrant shall be validly issued,
fully paid and nonassessable, free of all liens, taxes, charges and other
encumbrances or restrictions on sale (other than those set forth herein), and
free and clear of all preemptive rights.
SECTION 2.7 FRACTIONAL SHARES. This Warrant may be exercised only for
whole Warrant Shares. No fractional Warrant Shares or scrip representing
fractional Warrant Shares shall be issued upon the exercise of this Warrant.
SECTION 2.8 ISSUANCE OF NEW WARRANTS; CORPORATION ACKNOWLEDGMENT. Upon
any partial exercise of this Warrant, the Corporation, at its expense, will
forthwith issue and deliver to the Holder a new warrant or warrants of like
tenor, registered in the name of the Holder, exercisable, in the aggregate
and subject to the limitations provided for in this Warrant, for the then
balance of the Warrant Shares with respect to which this Warrant has not been
exercised. Moreover, the Corporation shall, at the time of any exercise of
this Warrant, upon the request of the Holder, acknowledge in writing its
continuing obligation to afford to the Holder any rights to which the Holder
shall continue to be entitled after such exercise in accordance with the
provisions of this Warrant; PROVIDED, HOWEVER, that if the Holder shall fail
to make any such request, such failure shall not affect the continuing
obligation of the Corporation to afford to the Holder any such rights.
SECTION 2.9 PAYMENT OF TAXES. The Corporation shall pay any transfer
tax which may be payable in respect of any issuance of certificates (if
applicable) representing any Warrant
6
Shares purchased upon exercise or conversion of this Warrant. The
Corporation shall not be required to pay any tax or other charge imposed in
connection with any transfer involved in the issue of any certificate for
Warrant Shares, or any new or replacement shares in any name other than that
of the Holder of this Warrant, and in such case the Company shall not be
required to issue or deliver any stock certificate security or Warrant until
such tax or other charge has been paid, or it has been established to the
Company's satisfaction that no tax or other charge is due.
SECTION 2.10 EXPIRATION. This Warrant and the Holder's rights
hereunder, to the extent not previously exercised or converted, shall expire
as of 5:00 P.M., California time, on the Expiration Date.
SECTION 3. REGISTRATION AND OTHER RIGHTS. The Holder of this Warrant
shall have the benefit of all rights available to the parties to the Investor
Rights Agreement, including, without limitation, the right to cause the
Corporation to register any and all Warrant Shares under the Securities Act
and under any blue sky or securities laws of any jurisdiction within the
United States, at the time and in the manner specified in the Investor Rights
Agreement, and any and all Warrant Shares shall be deemed to be Registrable
Securities for all purposes of and as provided in the Investor Rights
Agreement and shall further have the benefit of all rights available under
the Co-Sale Agreement.
SECTION 4. ADJUSTMENTS. The number and character of Warrant Shares
issuable upon exercise or conversion of this Warrant (or any shares of Stock
or other assets at the time receivable or issuable upon exercise or
conversion of this Warrant) and the Exercise Price therefor, are subject to
adjustment upon occurrence of the following events:
SECTION 4.1 ADJUSTMENT FOR STOCK SPLITS, STOCK DIVIDENDS,
RECAPITALIZATIONS, ETC. The Exercise Price of this Warrant and the number of
Warrant Shares issuable upon exercise or conversion of this Warrant (or any
shares of Stock or other assets at the time issuable upon exercise of this
Warrant) shall each be proportionally adjusted to reflect any stock dividends
stock splits, reverse stock splits, combinations of shares,
reclassifications, recapitalizations or other similar events altering the
number of outstanding shares of Warrant Stock (or such other Stock or other
assets).
SECTION 4.2 ADJUSTMENT FOR CAPITAL REORGANIZATION, CONSOLIDATION,
MERGER, SALE OR CONVERSION. If any reorganization of the capital stock of
the Corporation, or any consolidation or merger of the Corporation with or
into another entity, or the sale of all or substantially all of the
Corporation's assets to another entity shall be effected in such a way that
holders of Common Stock will be entitled to receive stock, securities or
assets with respect to or in exchange for their Common Stock, then, in each
such case, the Holder, upon the exercise or conversion of this Warrant, at
any time after the consummation of such capital reorganization,
consolidation, merger or sale, shall receive, in lieu of the stock or other
securities and property receivable upon the exercise or conversion, as
applicable, of this Warrant prior to such consummation, the Stock or other
assets to which the Holder would have been entitled upon such consummation if
the Holder had exercised or converted, as applicable, this Warrant
immediately prior thereto, all subject to further adjustment as provided in
this Section 4; and in each such case, the terms of this Warrant shall be
applicable to the shares of Stock or other assets receivable upon the
exercise or conversion, as applicable, of this Warrant after such
consummation.
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SECTION 4.3 ADJUSTMENT FOR ISSUANCE FOR ADDITIONAL STOCK. The Exercise
Price of this Warrant and the number of Warrant Shares issuable upon exercise
or conversion of this Warrant shall be further subject to adjustment from
time to time as follows:
(a) Upon each issuance by the Corporation of any Additional
Stock (as defined below), after the Issue Date and before the consummation by
the Company of an Initial Public Offering, for a consideration per share less
than the Exercise Price in effect immediately prior to the issuance of such
Additional Stock (except as provided in Section 4.1 above), (i) the Exercise
Price in effect immediately prior to each such issuance shall forthwith
(except as otherwise provided in this Section 4.3) be adjusted to the
Effective Price (as defined below) at which the Additional Stock is issued,
and (ii) the number of Warrant Shares issuable upon exercise or conversion of
this Warrant shall forthwith be adjusted by dividing the number of Warrant
Shares into which this Warrant is exercisable immediately before the
adjustment provided for herein by a fraction the numerator of which shall be
the Effective Price and the denominator of which shall be the Exercise Price
immediately before the adjustment provided for herein. The "EFFECTIVE PRICE"
for any issuance of Additional Stock shall mean the lesser of $4.04 or the
quotient determined by dividing the total number of shares of Additional
Stock issued (or deemed issued pursuant to Section 4.3(e)) by the Corporation
in such issuance into the aggregate amount of consideration received by the
Corporation therefor, as provided in this Section 4.3.
(b) No adjustment of the Exercise Price shall be made in an
amount less than one cent per share, provided that any adjustments which are
not required to be made by reason of this sentence shall be carried forward
and shall be either taken into account in any subsequent adjustment made
prior to three years from the date of the event giving rise to the adjustment
being carried forward, or shall be made at the end of three years from the
date of the event giving rise to the adjustment being carried forward.
Except to the limited extent provided for in Section 4.3(e)(3) and 4.3(e)(4)
below, no adjustment of the Exercise Price pursuant to this Section 4.3(a)
shall have the effect of increasing the Exercise Price above the Exercise
Price in effect immediately prior to such adjustment.
(c) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor before
deducting any reasonable discounts, commissions or other expenses allowed,
paid or incurred by the Corporation for any underwriting or otherwise in
connection with the issuance and sale thereof.
(d) In the case of the issuance of the 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 by the
Board of Directors irrespective of any accounting treatment.
(e) In the case of the issuance (whether before, on or after the
Issue Date) of options to purchase or rights to subscribe for Common Stock,
securities that are by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such
convertible or exchangeable securities, the following provisions shall apply
for all purposes of this Section 4.3.
(1) The aggregate maximum number of shares of Common Stock
deliverable upon exercise (assuming the satisfaction of any conditions to
exercisability, including without limitation, the passage of time, but
without taking into account potential antidilution
8
adjustments) of such options to purchase or rights to subscribe for Common
Stock shall be deemed to have been issued at the time such options or rights
were issued and for a consideration equal to the consideration (determined in
the manner provided in Sections 4.3(c) and 4.3(d), except as provided in
subsection 4.3(e)(5)), if any, received by the Corporation upon the issuance
of such options or rights plus the minimum exercise price provided in such
options or rights (without taking into account potential antidilution
adjustments) for the Common Stock converted thereby.
(2) The aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities (assuming the satisfaction of any conditions to
convertibility or exchangeability, including without limitation, the passage
of time, but without taking into account potential antidilution adjustments)
or 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 securities were
issued or such options or rights were issued and for a consideration equal to
the consideration, if any, received by the Corporation for any such
securities and related options or rights (excluding any cash received on
account of accrued interest or accrued dividends), plus the minimum
additional consideration, if any, to be received by the Corporation (without
taking into account potential antidilution adjustments) 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 Section 4.3(c) and 4.3(d), except as provided in
subsection 4.3(e)(5)).
(3) In the event of any change in the number of shares of
Common Stock deliverable or in the consideration payable to the Corporation
upon exercise of such options or rights or upon conversion of or in exchange
for such convertible or exchangeable securities, including, but not limited
to, a change resulting from the antidilution provisions thereof, the Exercise
Price, to the extent in any way affected by or computed using such options,
rights or securities, shall be recomputed to reflect such change, but no
further adjustment shall be made for the actual issuance of Common Stock or
any payment of such consideration upon the exercise of any such options or
rights or the conversion or change of such securities.
(4) Upon 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 Exercise Price, to the extent in any way affected by or computed using
such options, rights or securities or options or rights related to such
securities, shall be recomputed to reflect the issuance of only the number of
shares of Common Stock (and convertible or exchangeable securities which
remain in effect) actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities or upon the
exercise of the options or rights related to such securities; provided that
no such recomputation shall have the effect of increasing or decreasing the
Exercise Price to an amount other than the amount that would have existed on
the recomputation date had the unexercised options or rights never been
issued.
(5) In determining the amount of consideration received by
the Corporation for or upon the issuance of any Additional Stock or other
securities for the purposes of this Section 4.3, the value of any options to
purchase or rights to subscribe for Common Stock, securities that are by
their terms convertible onto or exchangeable for Common Stock or
9
options to purchase or rights to subscribe for such convertible or
exchangeable securities (each a "DERIVATIVE SECURITY") issued by the
Corporation shall be deemed to be zero (so that the issuance itself of any
such Derivative Security shall not be deemed to increase or decrease the
consideration otherwise received by the Corporation under this Section 4.3,
inasmuch as the rights under such Derivative Security shall be deemed to have
been exercised immediately upon the issuance of such Derivative Security (as
contemplated by Sections 4.3(e)(1) and 4.3(e)(2)).
(f) "ADDITIONAL STOCK" shall mean any shares of Common Stock
issued (or deemed to have been pursuant to Section 4.3(e)) by the Corporation
after the Issue Date other than
(1) Common Stock issued pursuant to a transaction described
in Section 4.1 or 4.2 hereof:
(2) An aggregate of up to 250,000 shares of, and/or options
or rights to acquire shares of, Common Stock, issuable or issued to employees
of the Corporation pursuant to an existing stock option plan or restricted
stock plan of the Corporation; as provided in Section 4.3(e), the term
"Additional Stock" shall not include any shares of capital stock that are
issued upon the exercise of any options, warrants or rights excluded from the
definition of Additional Stock pursuant to this Section (2);
(3) shares of Common Stock issued or issuable (i) upon
exercise or conversion of this Warrant, any securities issued pursuant to the
Purchase Agreement or any options, warrants, convertible securities or other
securities of the Corporation outstanding as of the Issue Date or (ii) upon
conversion of shares of any series of Preferred Stock authorized as of the
Issue Date.
(g) No fractional shares shall be issued upon conversion of this
Warrant or any portion thereof, and the number of Warrant Shares issuable as
a result of any adjustment provided for in this Section 4.3 shall be rounded
to the nearest whole share.
SECTION 5. OFFICER'S CERTIFICATE AS TO ADJUSTMENTS. In each case of
any adjustment or readjustment in the number and kind of Warrant Shares (or
other Stock or assets), issuable hereunder from time to time, or in the
Exercise Price, the Corporation, at its expense, will promptly cause an
officer of the Corporation to compute such adjustment or readjustment in
accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment or readjustment and showing the facts upon which such
adjustment or readjustment is based. The Corporation will forthwith send a
copy of each such certificate to the Holder in accordance with Section 10.4
below.
SECTION 6. NOTICES OF RECORD DATE, ETC. In the event of
(a) any taking by the Corporation of a record of the holders of
Stock for the purpose of determining the holders thereof who are entitled to
receive any shares of Stock as a dividend or other distribution or pursuant
to a stock split, or
10
(b) any reorganization or the Corporation, or any sale or
transfer, in a single transaction or a series of related transactions, of all
or substantially all the assets of the Corporation to, or the consolidation
or merger of the Corporation with or into, any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Corporation, or
(d) any sale, in a single transaction or a series of related
transactions, of a majority of the Corporation's voting stock (whether newly
issued, or from treasury, previously issued and then outstanding, or any
combination thereof),
then and in each such event the Corporation will mail or cause to be mailed
to the Holder a notice specifying (i) the date on which any such record is to
be taken for the purpose of such dividend, distribution or stock split, and
stating the amount and character of such dividend, distribution or stock
split, or (ii) the date on which any such reorganization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take
place, and the time, if any is to be fixed, as of which the holders of record
of any one or more classes of Stock shall be entitled to exchange their
shares of Stock for securities or other property deliverable on such
reorganization, transfer, consolidation, merger, dissolution, liquidation or
winding-up or (iii) the date on which any such sale of a majority of the
Corporation's voting stock is to take place and the material terms thereof,
as the case may be. Such notice shall be mailed at least 15 days prior to
the date specified in such notice on which any such action is to be taken.
SECTION 7. EXCHANGE OF WARRANT. Subject to the provisions of Section 9
hereof (if and to the extent applicable), this Warrant shall be exchangeable,
upon the surrender hereof by the Holder at the principal office of the
Corporation, for new warrants of like tenor, each registered in the name of
the Holder or in the name of such other Persons as they may direct, subject
to Sections 9 and 10.5 (upon payment by the Holder of any applicable transfer
taxes). Each of such new warrants shall be exercisable for such number of
Warrant Shares as the Holder shall direct, PROVIDED that all of such new
warrants shall represent, in the aggregate, the right to purchase the same
number of Warrant Shares and cash, securities or other property, if any,
which may be purchased by the Holder upon exercise of this Warrant at the
time of its surrender.
SECTION 8. REPLACEMENT OF WARRANT. On receipt of evidence reasonably
satisfactory to the Corporation of the loss, theft, destruction or mutilation
of this Warrant and, in the case of any such loss, theft or destruction of
this Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Corporation or, in the case of any
such mutilation, on surrender and cancellation of this Warrant, the
Corporation at its expense will execute and deliver, in lieu thereof, a new
warrant of like tenor.
SECTION 9. TRANSFER PROVISIONS, ETC. By accepting this Warrant, Holder
makes the representations set forth in 9.1, 9.2, 9.3 and 9.4 below and agrees
to the restrictions set forth in 9.5, 9.6, 9.7 and 9.8 below, and, by
exercising or converting this Warrant in whole or in part, the Holder agrees
that Holder will then represent and will be deemed to represent that such
representations are true and complete as of the date of such exercise or
conversion.
11
SECTION 9.1 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Warrant is, and
any Warrant Shares received by the Holder upon exercise or conversion of this
Warrant will be, acquired for investment for Holder's own account, not as a
nominee or agent, and not with a view to the resale or distribution of any
part thereof, and the Holder has no present intention of selling, granting
any participation in, or otherwise distributing any such securities. The
Holder does not have any contract, undertaking, agreement or arrangement with
any person to sell, transfer or grant participations to such person or to any
third person, with respect to any of such securities.
SECTION 9.2 INVESTMENT EXPERIENCE. The Holder is an investor in
securities of companies in the development stage and acknowledges that the
Holder is able to fend for itself, can bear the economic risk of the Holder's
investment and has such knowledge and experience in financial or business
matters that the Holder is capable of evaluating the merits and risks of the
investment in this Warrant and the Warrant Shares.
SECTION 9.3 ACCREDITED INVESTOR. The Holder is an "accredited
investor" within the meaning of Rule 501 of Regulation D under the Securities
Act, as presently in effect.
SECTION 9.4 RESTRICTED SECURITIES. The Holder understands that this
Warrant and the Warrant Shares are characterized as restricted securities
under the federal securities laws and applicable state securities laws
inasmuch as such securities are being (or will be) acquired from the
Corporation in a transaction not involving a public offering and that under
such laws and applicable regulations such securities may be resold without
registration under the Securities Act, only in certain limited circumstances.
SECTION 9.5 TRANSFER RESTRICTIONS. Without in any way limiting the
representations set forth above, the Holder agrees not to make any transfer
of all or any portion of this Warrant or the Warrant Shares unless and until
(a) such transfer is registered under the Securities Act and all applicable
state securities laws, or (ii) Holder shall have notified the Corporation of
the proposed transfer and shall have furnished the Corporation with a
detailed statement of the circumstances surrounding the proposed transfer,
and, if the Corporation requests, Holder shall have furnished the Company
with an opinion of counsel, reasonably satisfactory to the Company, that such
transfer will not require registration of such shares under the Securities
Act and applicable state securities laws.
SECTION 9.6 LEGENDS.
(a) Each certificate representing any Warrant Shares issued upon
exercise of this Warrant shall bear the legend set forth below, or a legend
substantially equivalent thereto:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, ASSIGNED,
PLEDGED, HYPOTHECATED OR DISPOSED OF UNLESS THEY ARE SO REGISTERED OR
UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION,
BOTH AS TO THE IDENTITY OF COUNSEL AND AS TO THE FORM AND SUBSTANCE
OF SUCH OPINION, AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE."
12
(b) Each certificate representing any shares of Stock issued from
time to time upon exercise of this Warrant shall also bear any legend
required under any applicable state securities or blue sky laws.
(c) The Corporation may issue appropriate "stop transfer"
instructions and may take such other steps as it may deem appropriate to
cause the restrictions referred to in this Section 9 to be complied with.
SECTION 9.7 SURVIVAL. The obligations of the Holder (and/or of any
transferee of this Warrant or any Warrant Shares issued from time to time
upon exercise of this Warrant) under this Section 9 shall, with respect to
any Warrant Shares issued from time to time upon exercise of this Warrant,
survive the exercise, expiration or other termination, or transfer, of this
Warrant indefinitely.
SECTION 9.8 MECHANICS OF TRANSFER. Subject to the terms and conditions
of this Warrant and subject to compliance with all applicable securities
laws, any transfer of all or any portion of this Warrant, or of any interest
therein, that is otherwise in compliance with applicable law shall be
effected by surrendering this Warrant to the Corporation at its principal
office, together with (i) a duly executed form of assignment, in the form
attached hereto, (ii) payment of all applicable transfer taxes, if any. In
the event of any such transfer of this Warrant, in whole, the Corporation
shall issue a new warrant of like tenor to the transferee, representing the
right to purchase the same number of Warrant Shares, and cash, securities or
other property, if any, which were purchasable by the Holder upon exercise of
this Warrant at the time of its transfer. In the event of any such transfer
of any portion of this Warrant, (i) the Corporation shall issue a new warrant
of like tenor to the transferee, representing the right to purchase the same
number of Warrant Shares, and cash, securities or other property, if any,
which were purchasable by the Holder upon exercise of the transferred portion
of this Warrant at the time of such transfer, and (ii) the Corporation shall
issue a new warrant of like tenor to the Holder, representing the right to
purchase the number of Warrant Shares, and cash, securities or other
property, if any, purchasable by the Holder upon exercise of the portion of
this Warrant not transferred to such transferee. Until this Warrant or any
portion thereof is transferred on the books of the Corporation, the
Corporation may treat the Holder as the absolute holder of this Warrant and
all right, title and interest therein for all purposes, notwithstanding any
notice to the contrary. Notwithstanding the foregoing, neither this Warrant
nor any rights hereunder may be transferred unless such transfer complies
with all applicable securities laws and the provisions of this Section 9.
SECTION 10. GENERAL.
SECTION 10.1 AUTHORIZED SHARES; RESERVATION OF SHARES FOR ISSUANCE. At
all times while this Warrant is outstanding, the Corporation shall maintain
its corporate authority to issue, and shall have authorized and reserved for
issuance upon exercise of this Warrant, such number of shares of Common Stock
as shall be sufficient to perform its obligations under this Warrant (after
giving effect to any and all adjustments to the number and kind of Warrant
Shares purchasable upon exercise of this Warrant).
SECTION 10.2 NO IMPAIRMENT. The Corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation,
13
merger, dissolution, issuance or sale of securities, sale or other transfer
of any of its assets or properties, or any other voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of
all such terms and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the Holder hereunder against
impairment. Without limiting the generality of the foregoing, the
Corporation (a) will not increase the par value of any shares of Stock
receivable upon the exercise of this Warrant above the amount payable
therefor on such exercise, and (b) will take all action that may be necessary
or appropriate in order that the Corporation may validly and legally issue
fully paid and nonassessable shares of Stock on the exercise of this Warrant.
SECTION 10.3 NO RIGHTS AS STOCKHOLDER. The Holder shall not be
entitled to vote or to receive dividends or to be deemed the holder of Stock
that may at any time be issuable upon exercise of this Warrant for any
purpose whatsoever, nor shall anything contained herein be construed to
confer upon the Holder any of the rights of a stockholder of the Corporation
or any right to vote for the election of directors or upon any matter
submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action (whether upon any recapitalization, issuance
or reclassification of stock, change of par value or change of stock to no
par value, consolidation, merger or conveyance or otherwise), or to receive
notice of meetings (except to the extent otherwise provided in this Warrant),
or to receive dividends or subscription rights, until the Holder shall have
exercised the Warrant and been issued Warrant Shares in accordance with the
provisions hereof.
SECTION 10.4 NOTICES. All notices, demands, requests, certificates or
other communications under this Warrant shall be in writing and shall be
either mailed by first class mail, postage prepaid, in which case such
notice, demand, request, certificate or other communication shall be deemed
to have been given three business days after the date on which it is first
deposited in the mails, or hand delivered or sent by facsimile transmission,
by tested or otherwise authenticated telex or cable or by private expedited
courier for overnight delivery with signature required, in each such case,
such notice, demand, request, certificate or other communication being deemed
to have been given upon delivery or receipt, as the case may be:
(i) if to the Corporation, at 00000 Xxxx Xxxx, Xxxxxxxxx,
Xxxxxxxxxx 00000 Attention: Chief Financial Officer, or at such other address
as the Corporation may have furnished in writing to the Holder; and
(ii) if to the Holder, at the Holder's address appearing in the
books maintained by the Corporation.
SECTION 10.5 ASSIGNMENT. Notwithstanding anything contained herein to
the contrary, this Warrant and all rights hereunder are assignable or
transferable (subject to the legend set forth in the heading on the first
page hereof), in whole or in part, by the Named Holder to affiliates of the
Named Holder or any entities for which the Named Holder or its affiliates
serve as general partner and/or investment adviser or in a similar capacity,
all mutual funds, or other pooled investment vehicles or entities, under the
control or management of such Named Holder or the general partner or
investment advisor thereof, or any affiliates of any of the foregoing.
14
SECTION 10.6 AMENDMENT AND WAIVER. No failure or delay of the Holder
in exercising any power or right hereunder shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Holder are cumulative and not
exclusive of any rights or remedies which it would otherwise have. The
provisions of this Warrant may be amended, modified or waived with (and only
with) the written consent of the Corporation and the Holder.
SECTION 10.7 GOVERNING LAW. This Warrant shall be governed by, and
construed and enforced in accordance with, the laws of California.
SECTION 10.8 COVENANTS TO BIND SUCCESSOR AND ASSIGNS. All covenants,
stipulations, promises and agreements in this Warrant contained by or on
behalf of the Corporation shall bind its successors and assigns, whether so
expressed or not.
SECTION 10.9 SEVERABILITY. In case any one or more of the provisions
contained in this Warrant shall be invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired
thereby. The parties shall endeavor in good faith negotiations to replace
the invalid, illegal or unenforceable provisions with valid provisions the
economic effect of which comes as close as possible to that of the invalid,
illegal or unenforceable provisions.
SECTION 10.10 CONSTRUCTION. The definitions of this Warrant shall
apply equally to both the singular and the plural forms of the terms defined.
Wherever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The section and paragraph headings
used herein are for convenience of reference only, are not part of this
Warrant and are not to affect the construction of or be taken into
consideration in interpreting this Warrant.
SECTION 10.11 REMEDIES. The Holder and the Corporation, in addition to
being entitled to exercise all rights granted by law, including recovery of
damages, will each be entitled to specific performance of its rights under
this Warrant. The Holder and the Corporation each agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of
a breach by it of the provisions of this Warrant and hereby agrees to waive
the defense in any action for specific performance that a remedy at law would
be adequate. In any action or proceeding brought to enforce any provision of
this Warrant or where any provision hereof is invalidly asserted as a
defense, the successful party to such action or proceeding shall be entitled
to recover reasonable attorneys' fees in addition to any other available
remedy.
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15
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be
executed in its corporate name by one of its officers thereunto duly
authorized, all as of the day and year first above written.
HYBRID NETWORKS, INC.
By:
---------------------------
Xxxx X. Xxxxxxxxx
Chief Executive Officer
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FORM OF SUBSCRIPTION
(To be executed upon exercise of Warrant)
To: HYBRID NETWORKS, INC.
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the attached Warrant for, and to exercise thereunder,
________ shares of Common Stock, $.001 par value per share ("COMMON STOCK"),
of Hybrid Networks, Inc., a Delaware corporation, and tenders herewith
payment of $________, representing the aggregate purchase price for such
shares based on the price per share provided for in such Warrant. The
undersigned hereby confirms that the representations set forth in Section 9
of the Warrant are true and complete with respect to the undersigned as of
the date hereof.
Please issue a certificate or certificates for such shares of Common
Stock in the following name or names and denominations and deliver such
certificate or certificates to the person or persons listed below at their
respective addresses set forth below:
If said number of shares of Common Stock shall not be all the shares of
Common Stock issuable upon exercise of the attached Warrant, a new Warrant is
to be issued in the name of the undersigned for the balance remaining of such
shares of Common Stock less any fraction of a share of Common Stock paid in
cash.
Dated: , 19
------------ --
----------------------------------------
(Name of Holder)
By:
------------------------------------
Its:
-----------------------------------
Address:
-------------------------------
NOTE: The above signature should correspond
exactly with the name on the face of the
attached Warrant.
NOTICE OF CONVERSION
To: Hybrid Networks, Inc.
(1) The undersigned hereby elects to convert that portion of the attached
Warrant representing the right to purchase __________ shares of Common Stock
of Hybrid Networks, Inc. into such number of shares of Common Stock of Hybrid
Networks, Inc. as is determined pursuant to Section 2.3 of such Warrant,
which conversion shall be effected pursuant to the terms of such Warrant.
(2) The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a
view to, or for resale in connection with, the distribution thereof and that
the undersigned has no present intention of distributing or reselling such
shares, except in compliance with applicable federal and state securities
laws. The undersigned hereby confirms that the representations set forth in
Section 9 of the Warrant are true and complete with respect to the
undersigned as of the date hereof.
(3) The undersigned accepts such shares subject to the terms relating to
registration rights under the Amended and Restated Investor Rights Agreement
dated as of September 1997.
---------------------------------
(Date)
----------------------------------------
(Name of Holder)
By:
------------------------------------
Its:
-----------------------------------
Address:
-------------------------------
----------------------------------------
NOTE: The above signature should correspond
exactly with the name on the face of the
attached Warrant.
FORM OF ASSIGNMENT
For value received, ____________________________ hereby sells, assigns
and transfers unto _____________________________ (the "TRANSFEREE") the
attached Warrant [__% of the attached Warrant], together with all right,
title and interest therein, and does hereby irrevocably constitute and
appoint ____________________________ attorney to transfer said Warrant
[said percentage of said Warrant] on the books of Hybrid Networks, Inc., a
Delaware corporation, with full power of substitution in the premises.
The Transferee, by signing below, hereby confirms that the
representations set forth in Section 9 of the Warrant are true and complete
with respect to the Transferee as of the date hereof, and that the Transferee
agrees to be bound by the restrictions of Section 9 of the Warrant.
If not all of the attached Warrant is to be so transferred, a new
Warrant is to be issued in the name of the undersigned for the balance of
said Warrant.
Dated: , 19
--------------- --
----------------------------------------
(Name of Holder)
By:
------------------------------------
Its:
-----------------------------------
NOTE: The above signature should correspond
exactly with the name on the face of the
attached Warrant.
AGREED TO AND ACCEPTED
-------------------------------------
Name of Transferee
By:
----------------------------------
Its:
---------------------------------
Address:
-----------------------------
-------------------------------------
EXHIBIT C
HYBRID NETWORKS, INC.
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
SEPTEMBER 18, 1997
TABLE OF CONTENTS
Page
----
1. Registration Rights...................................................2
1.1 Definitions......................................................2
1.2 Company Registration.............................................3
1.3 Obligations of the Company.......................................4
1.4 Furnish Information..............................................5
1.5 Expenses of Company Registration.................................5
1.6 Underwriting Requirements........................................5
1.7 Delay of Registration............................................6
1.8 Indemnification..................................................6
1.9 Reports Under Securities Exchange Act of 1934....................8
1.10 Form S-3 Registration............................................8
1.11 Assignment of Registration Rights...............................11
1.12 "Market Stand-Off" Agreement....................................12
1.13 Termination of Registration Rights..............................12
2. Covenants of the Company.............................................12
2.1 Delivery of Financial Statements................................12
2.2 Termination and Assignment of Information Covenants.............13
2.3 Right of First Offer............................................13
3. Miscellaneous........................................................16
3.1 Successors and Assigns..........................................16
3.2 Governing Law...................................................16
3.3 Counterparts....................................................16
3.4 Titles and Subtitles............................................16
3.5 Notices.........................................................16
3.6 Expenses........................................................16
3.7 Amendments and Waivers..........................................17
3.8 Severability....................................................17
3.9 Aggregation of Stock............................................17
3.10 Entire Agreement; Amendment; Waiver.............................17
EXHIBIT C
AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT is entered into as
of September18, 1997 by and among Hybrid Networks, Inc., a Delaware
corporation (the "COMPANY"), the investors listed on Schedule A hereto (each
of which is herein referred to as a "SERIES A INVESTOR"), the investors
listed on Schedule B hereto (each of which is herein referred to as a "SERIES
B INVESTOR"), General Instrument Corporation of Delaware, a Delaware
corporation (the "SERIES C INVESTOR"), the investors listed on Schedule C
hereto (each of which is herein referred to as a "SERIES D INVESTOR"), Intel
Corporation ("INTEL"), Xxxxxx X. Xxxxxxxxx ("XXXXXXXXX"), Xxxxxxx X. Xxxxx
(Xx. Xxxxx and Xxxxxxxxx are referred to collectively as the "FOUNDERS"), the
current holders of the Company's Series G Preferred Stock (each of which is
herein referred to as a "SERIES G INVESTOR"), Alex. Xxxxx & Sons Incorporated
(the "AGENT"), ITOCHU Corporation ("ITOCHU"), BG Services Limited ("BG") and
the investors listed in Schedule D hereto (each of which is herein referred
to as a "NOTE WARRANT INVESTOR").
RECITALS
WHEREAS, the Company, the Series A Investors and the Founders entered
into the Investor Rights Agreement dated as of September 16, 1992 (the
"AGREEMENT") whereby, among other things, the Company granted rights
thereunder to the Series A Investors;
WHEREAS, the Agreement was amended in October and November 1994 whereby,
among other things, the Company granted rights thereunder to the Series B
Investors ;
WHEREAS, the Agreement was further amended as of February 28, 1995
whereby, among other things, the Company granted certain registration rights
to the Series C Investor;
WHEREAS, the Agreement was further amended in May and June 1995 whereby,
among other things, the Company granted rights thereunder to the Series D
Investors;
WHEREAS, the Agreement was further amended in December 1995 whereby,
among other things, the Company granted rights thereunder to Intel
(concurrently therewith the Company and Intel entered into the Series E/F
Preferred Stock Purchase Agreement dated in December 1995 -- the "SERIES E/F
AGREEMENT");
WHEREAS, the Agreement was further amended in February 1996 whereby,
among other things, the Company granted Xxxxxxxxx certain rights of first
offer thereunder;
WHEREAS, the parties to the Convertible Note and Warrant Purchase
Agreement among the Company and certain Series B Investors and Series D
Investors dated in June 1996 (the "CONVERTIBLE NOTE AGREEMENT") and the
parties to the Agreement For Sale of COMMON STOCK among the Company, the
Founders and Certain Series D Investors dated in June 1996 (the "Common Stock
Agreement"), which parties constituted the holders of at least a majority of
the then Registrable Securities (as defined below), acknowledged that the
holders of the securities issued pursuant to the
Convertible Note Agreement and the shares of Common Stock sold by Xxxxxxxxx
pursuant to the Common Stock Agreement were entitled to certain rights under
this Agreement with respect to such securities and shares;
WHEREAS, the Agreement was further amended in July 1996 whereby, among
other things, the Company granted rights thereunder to the Series G Investors
and the Agents;
WHEREAS, the Agreement was further amended in February 1997 whereby,
among other things, the Company granted rights thereunder to Itochu;
WHEREAS, the Agreement was further amended in April 1997 whereby, among
other things, the Company granted rights to London Pacific Life & Annuity
Company ("London") in connection with the Company's issuance to London of the
Company's Senior Secured Convertible Debenture due 2002 (the "DEBENTURE");
London subsequently transferred to BG the Debenture and London's rights under
this Agreement;
WHEREAS, pursuant to a Subordinated Note Purchase Agreement (the
"SUBORDINATED NOTE AGREEMENT"), the Company is issuing to the Note Warrant
Investors the Company's Subordinated Promissory Notes (the "SUBORDINATED
NOTES") and warrants to purchase shares of the Company's Common Stock (the
"NOTE WARRANTS"); and
WHEREAS, pursuant to the Agreement, the holders of a majority of the
Registrable Securities (as defined below) desire to amend the Agreement
further to provide for, among other things, the grant of rights thereunder to
the Note Warrant Investors as required under the terms of the Subordinated
Note Agreement and to restate the Agreement as amended by this amendment and
to supersede all prior amendments so that the Agreement as amended is set
forth in its entirety in this Amended and Restated Investor Rights Agreement,
and the Note Warrant Investors desire to obtain such rights and to enter into
this Amended and Restated Investor Rights Agreement.
NOW, THEREFORE, THE PARTIES HEREBY AGREE that this Amended and Restated
Investor Rights Agreement amends the Agreement and restates in its entirety and
supersedes all previous amendments to the Agreement so that the Agreement, as
amended hereby ("THIS AGREEMENT"), is set forth herein in its entirety, and
further agree as follows:
1. REGISTRATION RIGHTS. The Company covenants and agrees as follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The term "REGISTER," "REGISTERED," and "REGISTRATION"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act of 1933,
as amended (the "Act"), and the declaration or ordering of effectiveness of
such registration statement or document;
(b) The term "Registrable Securities" means (1) shares of
Common Stock of the Company issuable or issued upon exercise of the Note
Warrants or conversion of the Subordinated Notes, the Debenture or 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
2
Stock, Series G Preferred Stock or Series H Preferred Stock of the Company
(including, without limitation, shares of Series B Preferred Stock or Series
D Preferred Stock issuable or issued upon exercise of any warrants issued or
extended pursuant to the Convertible Note Agreement, the shares of Series G
Preferred Stock issued upon conversion of the convertible notes issued
pursuant to the Convertible Note Agreement, shares of Series B Preferred
Stock issuable or issued upon exercise of any warrants issued pursuant to the
Series E/F Agreement and shares of Series G Preferred Stock issuable or
issued upon exercise of the warrant issued to the Agent pursuant to the
engagement letter between the Company and the Agent relating to the offer and
sale of Series G Preferred Stock), (2) any Common Stock of the Company issued
as (or issuable upon the conversion or exercise of any warrant, right or
other security which is issued as) a dividend or other distribution with
respect to, or in exchange for or in replacement of, such Note Warrants,
Subordinated Notes, Debenture, Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock, Series F Preferred Stock, Series G Preferred Stock, Series H Preferred
Stock or Common Stock, excluding in all cases, however, any Registrable
Securities sold, transferred or otherwise assigned by a person or entity in a
transaction in which his rights under this Section 1 are not assigned and (3)
shares of Common Stock issuable upon conversion or exchange of securities
convertible into, or exchangeable for, Common Stock upon conversion of the
Subordinated Notes;
(c) The number of shares of "REGISTRABLE SECURITIES THEN
OUTSTANDING" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities;
(d) The term "HOLDER" means any person owning or having
the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.11 hereof; and
(e) The term "FORM S-3" means such form under the Act as in
effect on the date hereof or any registration form under the Act subsequently
adopted by the Securities and Exchange Commission ("SEC") which permits
inclusion of incorporation of substantial information by reference to other
documents filed by the Company with the SEC.
1.2 COMPANY REGISTRATION.
(a) If (but without any obligation to do so) the Company
proposes to register (including for this purpose a registration effected by
the Company for stockholders other than the Holders) any of its Common Stock
under the Act in connection with the public offering of such securities
solely for cash (other than a registration relating solely to the sale of
securities to participants in a Company stock plan, a registration on Form
S-4 (or any successor form) or a registration on any form which does not
include substantially the same information (other than information as would
be required under Item 507 of Regulation S-K under the Act with respect to
selling stockholders) as would be required to be included in a registration
statement covering the sale of the Registrable Securities), the Company
shall, at such time, promptly give each Holder written notice of such
registration. Upon the written request of each Holder given within 20 days
after mailing of such notice by the Company in accordance with Section 3.5,
the Company shall,
3
subject to the provisions of Section 1.6, cause to be registered under the
Act all of the Registrable Securities that each such Holder has requested to
be registered.
(b) Upon any sale by the Company of shares of its Common
Stock to the public in a firmly underwritten public offering, the Founders
(and the Series B Investors and Series D Investors, to the extent they
purchased shares of Common Stock from Xxxxxxxxx), on the date notice is
provided to each Holder pursuant to subsection 1.2(a), shall be entitled to
include any of their shares of Common Stock in any registration by the
Company under this Section 1.2, if such persons agree to be bound by all
other provisions of this Agreement and participate in any such registration
on the same basis as each Holder in accordance with all applicable provisions
of this Agreement.
1.3 OBLIGATIONS OF THE COMPANY. Whenever required under this
Section 1 to effect the registration of any Registrable Securities, the
Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder,
keep such registration statement effective for up to 120 days.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to comply
with the provisions of the Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities
owned by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities
or Blue Sky laws of such jurisdictions as shall be reasonably requested by
the Holders, provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual
and customary form, with the managing underwriter of such offering. Each
Holder participating in such underwriting shall also enter into and perform
its obligations under such an agreement.
(f) Notify each Holder of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a
result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
4
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) Furnish, at the request of any Holder requesting
registration of Registrable Securities pursuant to this Section 1, on the
date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Section 1, if such
securities are being sold through underwriters, or, if such securities are
not being sold through underwriters, on the date that the registration
statement with respect to such securities becomes effective, (i) an opinion,
dated such date, of the counsel representing the Company for the purposes of
such registration, in form and substance as is customarily given to
underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders requesting registration of
Registrable Securities and (ii) a letter dated such date, from the
independent certified public accountants of the Company, in form and
substance as is customarily given by independent certified public accountants
to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders requesting registration of
Registrable Securities.
1.4 FURNISH INFORMATION. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to this Section 1
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such
Holder's Registrable Securities.
1.5 EXPENSES OF COMPANY REGISTRATION. The Company shall bear
and pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.2 and Section 1.10 for each Holder (which right may be
assigned as provided in Section 1.11), including (without limitation) all
registration, filing, and qualification fees, printers and accounting fees
relating or apportionable thereto and the reasonable fees and disbursements
of one counsel for the selling Holders selected by them, but excluding
underwriting discounts and commissions relating to Registrable Securities.
1.6 UNDERWRITING REQUIREMENTS. In connection with any offering
involving an underwriting of shares of the Company's Common Stock, the
Company shall not be required under Section 1.2 to include any of the
Holders' securities in such underwriting unless they accept the terms of the
underwriting as agreed upon between the Company and the underwriters selected
by it (or by other persons entitled to select the underwriters), and then
only in such quantity as the underwriters determine in their sole discretion
will not jeopardize the success of the offering by the Company. If the total
amount of securities, including Registrable Securities, requested by
stockholders to be included in such offering exceeds the amount of securities
sold other than by the Company that the underwriters determine in their sole
discretion is compatible with the success of the offering, then the Company
shall be required to include in the offering only that number of such
securities, including Registrable Securities, which the underwriters
determine in their sole discretion will not jeopardize the success of the
offering (the securities so included to be first apportioned pro rata among
the selling stockholders other than the Founders according to the total
amount of securities entitled to be included therein owned by each selling
stockholder other than the Founders or in such other proportions as shall
mutually be agreed to by such selling stockholders, and the remaining
securities, if any, to be so apportioned between the Founders). As a result
of the
5
immediately preceding sentence, no securities owned by a Founder shall be
entitled to be included in such offering unless the total amount of
securities entitled to be included therein owned by each selling stockholder
other than the Founders has not been reduced to less than the amount of
Registrable Securities requested by such selling stockholders to be included
in such offering in accordance with Section 1.2. For purposes of the
preceding parenthetical concerning apportionment, for any selling stockholder
which is a holder of Registrable Securities and which is a partnership or
corporation, the partners, retired partners and stockholders of such holder,
or the estates and family members of any such partners and retired partners
and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling stockholder", and any pro-rata reduction with
respect to such "selling stockholder" shall be based upon the aggregate
amount of shares carrying registration rights owned by all entities and
individuals included in such "selling stockholder," as defined in this
sentence.
1.7 DELAY OF REGISTRATION. No Holder shall have any right to
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect
to the interpretation or implementation of this Section 1.
1.8 INDEMNIFICATION. In the event any Registrable Securities
are included in a registration statement under this Section 1:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder, any underwriter (as defined in the
Act) for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Act or the Securities Exchange Act of
1934, as amended (the "1934 ACT"), against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Act, the 1934 Act or other federal or state law, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of
or are based upon any of the following statements, omissions or violations
(collectively a "VIOLATION"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission
to state therein a material fact required to be stated therein, or necessary
to make the statements therein not misleading, or (iii) any violation or
alleged violation by the Company of the Act, the 1934 Act, any state
securities law or any rule or regulation promulgated under the Act, the 1934
Act or any state securities law; and the Company will pay to each such
Holder, underwriter or controlling person, any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability, or action; provided, however, that the
indemnity agreement contained in this subsection 1.8(a) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability, or
action if such settlement is effected without the consent of the Company
(which consent shall not be unreasonably withheld), nor shall the Company be
liable in any such case for any such loss, claim, damage, liability, or
action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by any such Holder,
underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder
will severally indemnify and hold harmless the Company, each of its
directors, each of its officers who has signed
6
the registration statement, each person, if any, who controls the Company
within the meaning of the Act, any underwriter, any other Holder selling
securities in such registration statement and any controlling person of any
such underwriter or other Holder, against any losses, claims, damages, or
liabilities (joint or several) to which any of the foregoing persons may
become subject, under the Act, the 1934 Act or other federal or state law,
insofar as such losses, claims, damages, or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case
to the extent (and only to the extent) that such Violation occurs in reliance
upon and in conformity with written information furnished by such Holder
expressly for use in connection with such registration; and each such Holder
will pay any legal or other expenses reasonably incurred by any person
intended to be indemnified pursuant to this subsection 1.8(b), in connection
with investigating or defending any such loss, claim, damage, liability, or
action; provided, however, that the indemnity agreement contained in this
subsection 1.8(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably
withheld; provided, that, in no event shall any indemnity under this
subsection 1.8(b) exceed the gross proceeds from the offering received by
such Holder.
(c) Promptly after receipt by an indemnified party under
this Section 1.8 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect
thereof is to be made against any indemnifying party under this Section 1.8,
deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in,
and, to the extent the indemnifying party so desires, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an
indemnified party (together with all other indemnified parties which may be
represented without conflict by one counsel) shall have the right to retain
one separate counsel, with the fees and expenses to be paid by the
indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to
actual or potential differing interests between such indemnified party and
any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time
of the commencement of any such action, if prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 1.8, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section
1.8.
(d) If the indemnification provided for in this Section 1.8
is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage, or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such loss,
liability, claim, damage, or expense in such proportion as is appropriate to
reflect the relative fault of the indemnifying party on the one hand and of
the indemnified party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage, or expense as
well as any other relevant equitable considerations. The relative fault of
the indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates
to information supplied by the
7
indemnifying party or by the indemnified party and the parties' relative
intent, knowledge, access to information, and opportunity to correct or
prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering
are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.
(f) The obligations of the Company and Holders under this
Section 1.8 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.9 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view
to making available to the Holders the benefits of Rule 144 promulgated under
the Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those
terms are understood and defined in SEC Rule 144, at all times after 90 days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
(b) take such action, including the voluntary registration
of its Common Stock under Section 12 of the 1934 Act, as is necessary to
enable the Holders to utilize Form S-3 for the sale of their Registrable
Securities, such action to be taken as soon as practicable after the end of
the fiscal year in which the first registration statement filed by the
Company for the offering of its securities to the general public is declared
effective;
(c) file with the SEC in a timely manner all reports and
other documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company that it has complied with the reporting requirements of SEC Rule 144
(at any time after 90 days after the effective date of the first registration
statement filed by the Company), the Act and the 1934 Act (at any time after
it has become subject to such reporting requirements), or that it qualifies
as a registrant whose securities may be resold pursuant to Form S-3 (at any
time after it so qualifies), (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed
by the Company, and (iii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the SEC which
permits the selling of any such securities without registration or pursuant
to such form.
1.10 FORM S-3 REGISTRATION.
(a) In case the Company shall receive from any Holder or
Holders who own, in the aggregate, at least 30% of the outstanding shares of
Registrable Securities, a written request or requests that the Company effect
a registration on Form S-3 and any related qualification
8
or compliance with respect to all or a part of the Registrable Securities
owned by such Holder or Holders, the Company will:
(i) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other
Holders; and
(ii) as soon as practicable effect such registration
and all such qualifications and compliances as may be so requested and as
would permit or facilitate the sale and distribution of all or such portion
of such Holder's or Holders' Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities of
any other Holder or Holders joining in such request as are specified in a
written request given within 15 days after receipt of such written notice
from the Company; provided, however, that the Company shall not be obligated
to effect any such registration, qualification or compliance, pursuant to
this section 1.10(a): (1) if Form S-3 is not available for such offering by
the Holders; (2) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose
to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public (net of any underwriters' discounts or
commissions) of less than $500,000; (3) if the Company shall furnish to the
Holders a certificate signed by the President of the Company stating that, in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for such Form S-3
registration to be effected at such time, in which event the Company shall
have the right to defer the filing of the Form S-3 registration statement for
a period of not more than 120 days after receipt of the request of the Holder
or Holders under this Section 1.10(a); provided, however, that the Company
shall not utilize this right more than once in any 12-month period; (4) if
the Company has, within the 12-month period preceding the date of such
request, already effected one registration on Form S-3 for the Holders
pursuant to this Section 1.10(a); (5) in any particular jurisdiction in which
the Company would be required to qualify to do business or to execute a
general consent to service of process in effecting such registration,
qualification or compliance.
(iii) Subject to the foregoing, the Company shall file
a registration statement covering the Registrable Securities and other
securities so requested to be registered as soon as practicable after receipt
of the request or requests of the Holders.
Notwithstanding anything to the contrary in this Section 1.10(a), the
Series C Investor will have rights under this Section 1.10(a), and any Holder
of any shares of Series C Preferred Stock or any Registrable Securities
issued with respect thereto will have rights under this Section 1.10(a) with
respect to such shares or Registrable Securities, only for so long as the
Series A Investors and the Series B Investor have rights under this
Section 1.10(a).
(b) In addition to the registration rights provided for in
Sections 1.1, 1.2 and 1.10(a), the Note Warrant Investors that own any Note
Warrants, Subordinated Notes or shares of Common Stock of the Company that
have been issued upon exercise of any Note Warrants or conversion of any
Subordinated Notes (such Note Warrant Investors are referred to herein as
"NOTE/WARRANT HOLDERS") shall be entitled, collectively, to one demand
shelf-registration as provided in this Section 1.10(b). For the purposes of
this Section 1.10(b), (1) the term "NOTE/WARRANT SHARES" refers to shares of
Common Stock of the Company that have been issued, or are issuable,
9
upon exercise of any Note Warrants or conversion of any Subordinated Notes,
and (2) a Note/Warrant Holder shall be deemed to own the number of
Note/Warrant Shares that are issuable upon the exercise of Note Warrants
owned by such Note/Warrant Holder as well as the number of Note/Warrant
Shares that are currently issued and outstanding and owned by such
Note/Warrant Holder. In the event that, after the first anniversary of the
consummation of the initial sale of securities pursuant to a registration
statement filed by the Company under the Act in connection with the firm
underwritten offering of its securities to the general public, the Company
shall receive from Note/Warrant Holders that own, in the aggregate, a
majority of the Warrant Shares a written request or requests that the Company
effect a registration on Form S-3 and any related qualification or compliance
with respect to all or a part of the Note/Warrant Shares owned by such
Note/Warrant Holder or Note/Warrant Holders, the Company will:
(i) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all
Note/Warrant Holders; and
(ii) as soon as practicable effect such registration and
all qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such
Note/Warrant Holder's or Note Warrant Holders' Note/Warrant Shares as are
specified in such request, together with all or such portion of the
Note/Warrant Shares of any Note/Warrant Holder or Note/Warrant Holders
joining in such request as are specified in a written request given within 15
days after receipt of such written notice from the Company; provided,
however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 1.10(b):
(1) if Form S-3 is not available for such offering by the Note/Warrant
Holders other than as a result of a failure of the Company to comply with the
reporting requirements of Sections 13 and 15 of the 1934 Act; (2) if the
Company shall furnish to the Note/Warrant Holders requesting such
registration a certificate signed by the President of the Company stating
that in the good faith judgment of the Board of Directors of the Company, it
would be seriously detrimental to the Company and its stockholders for such
Form S-3 registration to be effected at such time, in which event the Company
shall have the right to defer the filing of the Form S-3 registration
statement until, in the good faith judgment of the Board of Directors of the
Company, it would no longer be seriously detrimental to the Company and its
stockholders for such Form S-3 registration to be effected (but in no event
for a period of more than 90 days after receipt of the request of the
Note/Warrant Holder or Note Warrant Holders under this Section 1.10(b)); (3)
in any particular jurisdiction in which the Company would be required to
qualify to do business or to execute a general consent to service of process
in effecting such registration, qualification or compliance. If Form S-3 is
not available for such offering by the Note/Warrant Holders as a result of a
failure of the Company to comply with the reporting requirements of Sections
13 and 15 of the 1934 Act, the Company shall effect such registration on Form
S-1.
(iii) Subject to the foregoing, the Company shall file a
registration statement on Form S-3 covering the Note/Warrant Shares so
requested to be registered as soon as practicable after receipt of the
request or requests of the Note/Warrant Holder or Note/Warrant Holders and
shall use its best efforts to cause the registration statement to become
effective under the Act and to keep the registration statement continuously
effective under the Act and available for the offer and sale of the
Note/Warrant Shares covered thereby for 180 days (or such shorter period
10
ending when all Note/Warrant Shares covered by the registration statement
have been sold or are no longer entitled to registration under this Section
1.10(b)). The Company will be deemed not to have used its best efforts to
keep the registration statement effective and available for such offer and
sale during the requisite period if the Company voluntarily takes any action
that would result in Note/Warrant/Holders of Note/Warrant Shares covered
thereby not being able to offer and sell such Note/Warrant Shares thereunder
during any portion of that period unless (1) such action is required by
applicable law or (2) such action is taken by the Company in good faith and
for valid business reasons (not including avoidance of the Company's
obligations hereunder), including the acquisition or divestiture of assets,
so long as the Company promptly thereafter causes the registration to become
effective under the Act and available for such offer and sale. In the event
that the effectiveness or availability of the registration statement is
suspended during the requisite period, the Company will be obligated to
extend the period of effectiveness and availability of the registration
statement for a period that is at least equal to the period during which such
effectiveness or availability was suspended.
(iv) Each Note/Warrant Holder that causes the Company to
register any of such Note/Warrant Shares and under this Section 1.10(b) shall
immediately notify the Company in writing of any sales of Note/Warrant Sales
under the registration statement and, if the effectiveness of the
registration statement is terminated in accordance with this Section 1.10(b),
shall return to the Company's transfer agent all stock certificates that
represent any unsold Note Warrant Shares so that the transfer agent may affix
any appropriate securities legends thereto.
(v) Notwithstanding anything to the contrary in Section
3.7, any term of this Section 1.10(b) may be amended, and the observance of
any term of this Section 1.10(b) may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Note/Warrant Holders that then own a
majority of all Note/Warrant Shares then owned by Note/Warrant Holders. Any
amendment or waiver effected in accordance with this paragraph shall be
binding upon the Company, each Note Warrant Holder and each future holder of
any Note/Warrant Shares.
(vi) Any Form S-3 registration statement required
pursuant to this Section 1.10(b) shall not be required to include any
Registrable Securities that are freely tradable by the Holders thereof without
registration under the Act (including shares as to which paragraph (k) of Rule
144 under the Act applies but not shares that are subject to applicable holding
period, volume limitation or manner of sale and notice requirements of
paragraphs (d), (e), (f), (g), (h) and (i) of Rule 144).
1.11 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee
or assignee of such securities who, (i) after such assignment or transfer,
holds at least 50,000 shares of Registrable Securities (subject to
appropriate adjustment for stock splits, stock dividends, combinations and
other recapitalizations), and (ii) is not a person or entity deemed by the
Board of Directors of the Company in its best judgment, to be a competitor or
potential competitor of the Company; provided the Company is, within a
reasonable time after such transfer, furnished with written notice of the
name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned; and provided,
further,
11
that such assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the transferee or
assignee is restricted under the Act. For the purposes of determining the
number of shares of Registrable Securities held by a transferee or assignee,
the holdings of transferees and assignees of a partnership who are partners
or retired partners of such partnership (including spouses and ancestors,
lineal descendants and siblings of such partners or spouses who acquire
Registrable Securities by gift, will or intestate succession) shall be
aggregated together and with the partnership; provided that all assignees and
transferees who would not qualify individually for assignment of registration
rights shall have a single attorney-in-fact for the purpose of exercising any
rights, receiving notices or taking any action under this Section 1. For the
purposes of determining the number of shares of Registrable Securities held
by any Note Warrant Investor, the shares of Registrable Securities held by
such Note Warrant Investor shall be aggregated with the shares of Registrable
Securities held by affiliates of the Note Warrant Investor or any entities
for which the Note Warrant Investor or its affiliates serve as general
partner and/or investment adviser or in a similar capacity, all mutual funds
or other pooled investment vehicles or entities under the common control or
management of such Note Warrant Investor, or the general partner or
investment adviser thereof, or any affiliate of the foregoing.
1.12 "MARKET STAND-OFF" AGREEMENT. Each signatory to the
Agreement or hereto or any prior or subsequent amendment to the Agreement or
hereto hereby agrees that, during the period of duration specified by the
Company and an underwriter of Common Stock of the Company not to exceed 180
days following the effective date of a registration statement of the Company
filed under the Act (unless otherwise required by an underwriter), such
signatory shall not, directly or indirectly sell, offer to sell, contract to
sell (including, without limitation, any short sale), grant any option to
purchase or otherwise transfer or dispose of (other than to donees who agree
to be similarly bound) any securities of the Company held by it at any time
during such period except Common Stock included in such registration and
except to the extent otherwise consented to by the Company and such
underwriter. To the extent that any officer or director of the Company has
not entered into a market stand-off agreement of equivalent duration and
effect with respect to any Company securities beneficially owned by such
officer or director, the Company shall use best efforts to require each
officer and director of the Company to enter into such an agreement.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Investor (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
1.13 TERMINATION OF REGISTRATION RIGHTS. No Holder shall be
entitled to exercise any right provided for in this Section 1 after 6 years
following the consummation of the sale of securities pursuant to a
registration statement filed by the Company under the Act in connection with
the initial firm commitment underwritten offering of its securities to the
general public. Notwithstanding anything to the contrary in this Section 1,
except as provided otherwise in Section 1.10(b)(v), no Holder shall be
entitled to cause the Company to register the sale or other transfer of
Restricted Securities if and so long as the intended sale or other transfer
may then be effectuated by such Holder in compliance with Rule 144 under the
Act without violating the holding period, volume limitations or other
restrictions of Rule 144.
12
2. COVENANTS OF THE COMPANY.
2.1 DELIVERY OF FINANCIAL STATEMENTS. The Company shall deliver to
each Series A Investor, Series B Investor, Series C Investor, Series D
Investor, Intel, Series G Investor, Note Warrant Investor, Itochu and BG
(each, for the purposes of this Section 2.1, an "INVESTOR"):
(a) as soon as practicable, but in any event within 90 days
after the end of each fiscal year of the Company, an income statement and
statement of cash flows for such fiscal year, a balance sheet of the Company,
and a statement of stockholder's equity as of the end of such year, such
year-end financial reports to be in reasonable detail, prepared in accordance
with generally accepted accounting principles ("GAAP"), and audited and
certified by independent public accountants selected by the Company;
(b) as soon as practicable, but in any event within 45 days
after the end of each of the first 3 quarters of each fiscal year of the
Company, an unaudited profit or loss statement, statement of cash flows for
such fiscal quarter and an unaudited balance sheet as of the end of such
fiscal quarter.
(c) only to Investors who hold more than 350,000 shares of
Registrable Securities, within 30 days of the end of each month, an unaudited
income statement, a statement of cash flows and an unaudited balance sheet
for and as of the end of such month, prepared internally, in reasonable
detail;
(d) only to Investors who hold more than 350,000 shares of
Registrable Securities, as soon as practicable, but in any event 90 days
after the end of each fiscal year, a budget for the then current fiscal year,
prepared on a monthly basis, including balance sheets and statements of cash
flows for such months; and
(e) with respect to the financial statements called for in
subsections (b) and (c) of this Section 2.1, an instrument executed by the
Chief Financial Officer or President of the Company certifying that such
financials fairly present the financial condition of the Company and its
results of operation for the period specified, subject to year-end audit
adjustment.
For the purposes of determining the number of shares of Registrable
Securities held by any Note Warrant Investor, the shares of Registrable
Securities held by such Note Warrant Investor shall be aggregated with the
shares of Registrable Securities held by affiliates of the Note Warrant
Investor or any entities for which the Note Warrant Investor or its
affiliates serve as general partner and/or investment adviser or in a similar
capacity, all mutual funds or other pooled investment vehicles or entities
under the common control or management of such Note Warrant Investor, or the
general partner or investment adviser thereof, or any affiliate of the
foregoing.
2.2 TERMINATION AND ASSIGNMENT OF INFORMATION COVENANTS. The
covenants set forth in Section 2.1 shall terminate and be of no further force
or effect when the sale of securities pursuant to a registration statement
filed by the Company under the Act in connection with the firm commitment
underwritten offering of its securities to the general public is consummated
or when the Company first becomes subject to the periodic reporting
requirements of Sections 12(g) or 15(d) of the 1934 Act, whichever event
shall first occur. The information rights set forth in Section 2.1
13
may be assigned (but only with all related obligations) by an Investor to a
transferee or assignee of Registrable Securities who, (a) after such
assignment or transfer, holds at least 350,000 shares of Registrable
Securities (subject to appropriate adjustment for stock splits, stock
dividends, combinations and other recapitalizations), and (b) is not a person
or entity deemed by the Board of Directors of the Company in its best
judgment, to be a competitor or potential competitor of the Company; provided
the Company is, within a reasonable time after such transfer, furnished with
written notice of the name and address of such transferee or assignee and the
securities with respect to which such information rights are being assigned;
and provided, further, that such assignment shall be effective only if
immediately following such transfer the further disposition of such
securities by the transferee or assignee is restricted under the Act. For
the purposes of determining the number of shares of Registrable Securities
held by a transferee or assignee, (i) the holdings of transferees and
assignees of a partnership who are partners or retired partners of such
partnership (including spouses and ancestors, lineal descendants and siblings
of such partners or spouses who acquire Registrable Securities by gift, will
or intestate succession) shall be aggregated together and with the
partnership and (ii) the holdings of a Note Warrant Investor shall be
aggregated with the holdings of affiliates of the Note Warrant Investor or
any entities for which the Note Warrant Investor or its affiliates serve as
general partner and/or investment adviser or in a similar capacity, all
mutual funds or other pooled investment vehicles or entities under the common
control or management of such Note Warrant Investor, or the general partner
or investment adviser thereof, or any affiliate of the foregoing.
2.3 RIGHT OF FIRST OFFER. Subject to the terms and conditions
specified in this Section 2.3, the Company hereby grants to each Series A
Investor, each Series B Investor, Intel, each Series D Investor, each Series
G Investor, Itochu, BG, Xxxxxxxxx and each Note Warrant Holder a right of
first offer with respect to future sales by the Company of its Shares (as
hereinafter defined). For purposes of this Section 2.3, the term "INVESTOR"
includes each Series A Investor, each Series B Investor, Intel, each Series D
Investor, each Series G Investor, Itochu, BG, Xxxxxxxxx and each Note/Warrant
Holder, and any general or limited partners and affiliates of any Series A
Investor, any Series B Investor, Intel, any Series D Investor or any
Note/Warrant Holder. Each Series A Investor, each Series B Investor, Intel
and each Series D Investor shall be entitled to apportion the right of first
offer hereby granted to such Investor among itself and its general or limited
partners and affiliates in such proportions as such Investor deems
appropriate.
Each time the Company proposes to offer any shares of, or securities
convertible into or exercisable for any shares of, any class of its capital
stock ("SHARES"), the Company shall first make an offering of such Shares to
each Investor in accordance with the following provisions:
(a) The Company shall deliver a written notice ("NOTICE") to
the Investors stating (i) its bona fide intention to offer such Shares, (ii)
the number of such Shares to be offered, and (iii) the price and terms, if
any, upon which it proposes to offer such Shares.
(b) Within 20 calendar days after receipt of the Notice, the
Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares which equals the
proportion that the number of shares of Common Stock issued and held, or
issuable upon exercise of the Note Warrants or conversion of the Debenture,
Series A Preferred Stock, the Series B Preferred Stock, the Series D
Preferred Stock, the Series E Preferred Stock, the Series F Preferred Stock,
the Series G Preferred Stock or the Series H Preferred Stock
14
then held, by such Investor bears to the total number of shares of Common
Stock of the Company then outstanding (assuming full conversion of all
convertible securities). The Company shall promptly, in writing, inform each
Investor which purchases all the shares available to it ("FULLY-EXERCISING
INVESTOR") of any other Investor's failure to do likewise. During the 5-day
period commencing after delivery of such information to such Fully-Exercising
Investor(s), each Fully-Exercising Investor shall be entitled to obtain that
portion of the Shares not subscribed for by the Investors which is equal to
the proportion that the number of shares of shares of Common Stock issued and
held, or issuable upon exercise of the Note Warrants or conversion of the
Debenture, Series A Preferred Stock, Series B Preferred Stock, Series D
Preferred Stock, Series E Preferred Stock, Series F Preferred Stock, Series G
Preferred Stock or Series H Preferred Stock, as the case may be, then held,
by such Fully-Exercising Investor bears to the total number of shares of
Common Stock issued and held, or issuable upon exercise of the Note Warrants
or conversion of the Debenture, Series A Preferred Stock, the Series B
Preferred Stock, the Series D Preferred Stock, the Series E Preferred Stock,
the Series F Preferred Stock, the Series G Preferred Stock or the Series H
Preferred Stock, as the case may be, then held, by all Fully-Exercising
Investors who wish to purchase some of the unsubscribed Shares. The rights
of first offer in this Section 2.3 shall not be applicable to the
Subordinated Notes or any securities that may be issued or issuable upon
conversion of any Subordinated Notes, although the issuance of any securities
upon conversion of the Subordinated Notes shall not reduce the number of
Shares that any Note Warrant Holder shall be entitled to purchase, as
compared to any other Investor, pursuant to such rights of first offer.
(c) If all Shares which Investors are entitled to obtain
pursuant to subsection 2.3(b) are not elected to be obtained as provided in
subsection 2.3(b) hereof, the Company may, during the 120-day period
following the expiration of the period provided in subsection 2.3(b) hereof,
offer the remaining unsubscribed portion of such Shares to any person or
persons at a price not less than, and upon terms no more favorable to the
offeree, than those specified in the Notice. If the Company does not enter
into an agreement for the sale of the Shares within such period, or if such
agreement is not consummated within 120 days of the execution thereof, the
right provided hereunder shall be deemed to be revived and such Shares shall
not be offered unless first reoffered to the Investors in accordance
herewith.
(d) The rights of first offer in this Section 2.3 shall not be
applicable:
(i) to the issuance or sale of shares of the Company's Common
Stock (or options therefor) to service providers for the primary purpose of
soliciting or retaining their services as approved by the vote or written
consent of a majority of the Board of Directors.
(ii) to consummation of a bona fide, firmly underwritten
public offering of shares of common stock, registered under the Act pursuant
to a registration statement on Form S-1;
(iii) to the issuance of securities pursuant to the conversion
or exercise of convertible or exercisable securities;
(iv) to securities of the Company issued pursuant to the
acquisition of (A) another corporation by the Company by merger or other
reorganization whereby the
15
Company owns more than 50% of the voting power of such other corporation, or
(B) substantially all the assets of another corporation;
(v) to the issuance of securities pursuant to transactions
involving technology licensing, research and development activities,
distribution or manufacture of the company's products, lease of equipment by
the Company, or any transactions with corporate partners, provided that each
of the foregoing transactions is primarily for non-equity financing purposes
and is approved by the Company's Board of Directors;
(vi) to shares of the Company's Common Stock or Preferred
Stock issued in connection with any stock split, stock dividend,
recapitalization and the like by the Company following approval by the Board
of Directors; or
(vii) to the issuance of up to 255,000 shares of Common Stock
to service providers for services performed for the benefit of the Company,
which services were performed prior to the first issuance of the Series A
Preferred Stock.
(e) The rights of first offer in this Section 2.3 shall
terminate and be of no further force or effect when the sale of securities
pursuant to a registration statement filed by the Company under the Act in
connection with the firm commitment underwritten offering of its securities
to the general public is consummated or when the Company first becomes
subject to the periodic reporting requirements of Sections 12(g) or 15(d) of
the 1934 Act, whichever shall first occur.
(f) The rights of first offer in this Section 2.3 and/or the
right to register Registrable Securities pursuant to this Agreement or to
register shares of Common Stock subject to registration rights pursuant to
Section 1.2(b) ("1.2(b) SHARES") may be assigned (but only with all related
obligations) by any Series A Investor, any Series B Investor, Intel, any
Series D Investor, Xxxxxxxxx, any Series G Investor, Itochu, BG or any
Note/Warrant Investor to a transferee or assignee from such person of
Registrable Securities or Section 1.2(b) Shares who, (i) after such
assignment or transfer, holds at least 350,000 shares of Registrable
Securities or Section 1.2(b) Shares (subject in each case to appropriate
adjustment for stock splits, stock dividends, combinations and other
recapitalizations), and (ii) is not a person or entity deemed by the Board of
Directors of the Company in its best judgment, to be a competitor or
potential competitor of the Company; provided the Company is, within a
reasonable time after such transfer, furnished with written notice of the
name and address of such transferee or assignee and the securities with
respect to which such rights are being assigned; and provided, further, that
such assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the transferee or
assignee is restricted under the Act. For the purposes of determining the
number of shares of Registrable Securities or Section 1.2 Shares held by a
transferee or assignee for the purposes of this Section 2.3(f), (i) the
holdings of transferees and assignees of a partnership who are partners or
retired partners of such partnership (including spouses and ancestors, lineal
descendants and siblings of such partners or spouses who acquire Registrable
Securities or Section 1.2 Shares by gift, will or intestate succession) shall
be aggregated together and with the partnership and (ii) the holdings of a
Note Warrant Investor shall be aggregated with the holdings of affiliates of
the Note Warrant Investor or any entities for which the Note Warrant Investor
or its affiliates serve as general
16
partner and/or investment adviser or in a similar capacity, all mutual funds
or other pooled investment vehicles or entities under the common control or
management of such Note Warrant Investor, or the general partner or
investment adviser thereof, or any affiliate of the foregoing.
3. MISCELLANEOUS.
3.1 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any shares of Registrable Securities or Section 1.2(b)
Shares). Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or liabilities
under or by reason of this Agreement, except as expressly provided in this
Agreement.
3.2 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
3.3 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
3.4 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
3.5 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or
facsimile transmission to such party to the facsimile number for such party
on the signature page hereof (or, for parties not executing this Agreement,
the facsimile number of such party on the stock records of the Company) or
upon deposit with the United States Post Office, by registered or certified
mail, postage prepaid and addressed to the party to be notified at the
address indicated for such party on the signature page hereof (or, for
parties not executing this Agreement, the address of such party on the stock
records of the Company), or at such other facsimile number or address as such
party may designate by ten days' advance written notice to the other parties.
3.6 EXPENSES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs and necessary disbursements
in addition to any other relief to which such party may be entitled.
3.7 AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders
of a majority of the Registrable Securities then outstanding. Any amendment
or waiver effected in accordance with this paragraph shall be binding upon
each holder of any Registrable Securities then outstanding, each future
holder of all such Registrable Securities, and the Company.
17
3.8 SEVERABILITY. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
3.9 AGGREGATION OF STOCK. All shares of Registrable Securities held
or acquired by affiliated entities or persons shall be aggregated together
for the purpose of determining the availability of any rights under this
Agreement.
3.10 ENTIRE AGREEMENT. This Amended and Restated Investor Rights
Agreement (including the Schedules hereto) constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
18
IN WITNESS WHEREOF, the parties have executed this Amended and
Restated Investor Rights Agreement as of the date first above written.
COMPANY:
HYBRID NETWORKS, INC.
By:/s/ Xxxx X Xxxxxxxxx
---------------------------
Xxxx X. Xxxxxxxxx, Chief Executive
Officer
Address: 00000 Xxxx Xxxx
Xxxxxxxxx, XX 00000-0000
Facsimile Number: (000) 000-0000
19
IN WITNESS WHEREOF, the parties have executed this Amended and
Restated Investor Rights Agreement as of the date first above written.
COMPANY:
HYBRID NETWORKS, INC.
By:___________________________
Xxxx X. Xxxxxxxxx, Chief Executive
Officer
Address: 00000 Xxxx Xxxx
Xxxxxxxxx, XX 00000-0000
Facsimile Number: (000) 000-0000
INTEL CORPORATION
By: /s/Company Officer
---------------------------
Its: VP and Treasurer
--------------------------
Address: 0000 Xxxxxxx Xxxxxxx Xxxx.
Xxxxx Xxxxx, XX 00000-0000
Facsimile Number: (000) 000-0000
20
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
TUDOR BVI FUTURES, LTD.
By: Tudor Investment Corporation,
Investment Adviser
By:/s/ Xxxxxx X. Xxxxxxxx
----------------------
Xxxxxx X. Xxxxxxxx,
Vice President
Address: c/o Tudor Global Trading, Inc.
00 Xxxxx Xxxxx
Xxxxxx, XX 00000
TUDOR ARBITRAGE PARTNERS, L.P.
By: Tudor Global Trading, Inc.,
General Partner
By:/s/ Xxxxxx X Xxxxxxxx
---------------------
Xxxxxx X. Xxxxxxxx,
Vice President
Address same as immediately above
RAPTOR GLOBAL FUND, LTD.
By: Tudor Investment Corporation,
Investment Adviser
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------
Xxxxxx X. Xxxxxxxx,
Vice President
Address same as immediately above
RAPTOR GLOBAL FUND, L.P.
By: Tudor Investment Corporation,
General Partner
By: /s/ Xxxxxx X. Xxxxxxxx
-----------------------
Xxxxxx X. Xxxxxxxx,
Vice President
Address same as immediately above
21
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
INVESTORS:
__________________________
Xxxxxxxxx X. Xxxxxxxx
Address: 0000 Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Facsimile Number: (000) 000-0000
22
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
X.X. XXXX CO., INC.,
By: /s/ Xxxxxx Xxxx, Xx.
---------------------------------
Xxxxxx Xxxx, Xx.
Address: 000 Xxxx Xxxxxx Xxxx
X. X. Xxx 000
Xxxxxx, XX 00000-0000
Facsimile Number: (000) 000-0000
23
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
OSCCO III, L.P.
By: /s/ Xxxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxxx X. Xxxxxxx
Address: Xxx Xxxxx Xxxxxx, #00
Xxx Xxxxx, XX 00000
Facsimile Number: (000) 000-0000
24
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
/s/ Xxxx X. Xxxxxx
-------------------------------------
(Executing this Agreement as a Series B
Investor)
Address: 00 Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000
Facsimile Number: (000) 000-0000
25
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
AT&T VENTURE COMPANY, L.P.
By: AT&T Venture Partners,
Its: General Partner
By: /s/ Xxxx Xxxxxxx
------------------------------
Its: General Partner
-----------------------------
Address: 0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Facsimile Number: (000) 000-0000
26
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
SEQUOIA CAPITAL VI
By: /s/ Xxxxxxx Xxxxxx
-----------------------------------
Its:
----------------------------------
Address: 0000 Xxxx Xxxx Xxxx,
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Facsimile Number: (000) 000-0000
SEQUOIA TECHNOLOGY PARTNERS VI
By: /s/ Xxxxxxx Xxxxxx
-----------------------------------
Its:
----------------------------------
Address: 0000 Xxxx Xxxx Xxxx,
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Facsimile Number: (000) 000-0000
SEQUOIA XXIV
By: /s/ Xxxxxxx Xxxxxx
-----------------------------------
Its:
----------------------------------
Address: 0000 Xxxx Xxxx Xxxx,
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Facsimile Number: (000) 000-0000
27
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
ACCEL IV L.P. ACCEL KEIRETSU L.P.
By: Accel IV Associates L.P. By: Accel Partners & Co., Inc.
Its: General Partner Its: General Partner
By: /s/ X. Xxxxxx Sednaoui By: /s/ X. Xxxxxx Sednaoui
----------------------- -------------------------
Its: General Partner Its: Chief Financial Officer
---------------------- ------------------------
Address: One Xxxxxx Square Address: Xxx Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000 Xxxxxxxxx, XX 00000
Facsimile Number: (000) 000-0000 Facsimile Number: (000) 000-0000
ACCEL INVESTORS '95 X.X. XXXXXXX X. XXXXXXXXX PARTNERS
By: /s/ X. Xxxxxx Sednaoui By: /s/ Company Officer
----------------------- -----------------------
Its: General Partner Its: General Partner
---------------------- ----------------------
Address: One Xxxxxx Square Address: Xxx Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000 Xxxxxxxxx, XX 00000
Facsimile Number: (000) 000-0000 Facsimile Number: (000) 000-0000
28
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
/s/ Xxxxxx X. Xxxxxxxxx
-----------------------------------
Xxxxxx X. Xxxxxxxxx
Address: c/o Ultracom Communications
00000 Xxxxxxx Xxxxx Xxxx.
Xxxxx 000
Xxxxxxxxx, XX 00000
Facsimile Number: (000) 000-0000
29
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
/s/ Xxxxxxx X. Xxxxx
------------------------------------
Xxxxxxx X. Xxxxx
Address: 00000 Xxxx Xxxx
Xxxxxxxxx, XX 00000-0000
Facsimile Number: (000) 000-0000
30
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
ITOCHU Corporation
By:
---------------------------------
Its:
--------------------------------
Address: 5-1, Xxxx-Xxxxxx 0-xxxxx
Xxxxxx-xx, Xxxxx 000-00
Xxxxx
Facsimile Number: 011-81-3-3497-3131
31
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
BG SERVICES LIMITED
By:
---------------------------------
Its:
--------------------------------
Address: x/x Xxxxxx Xxxxx
0 Xxxxxx Xxxxx
Xx. Helier
Jersey, Channel Islands
Attention: Xxx Xxxxx
Facsimile Number: (0) 0000-000000
32
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
/s/ Xxxxxx X. Xxxxxxx
-----------------------------
Xxxxxx X. Xxxxxxx
33
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
888 GROUP
/s/ Xxxxx Xxxxx
By: /s/ Company Officer
---------------------------
Its: /s/ Company Officer
---------------------------
34
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
/s/ Xxxxxxxx X. Xxxxxx
------------------------------
Xxxxxxxx X. Xxxxxx
35
SIGNATURE PAGE TO AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
/s/ K. Xxxxxx Xxxxx
------------------------------
K. Xxxxxx Xxxxx
36
SCHEDULE A
Hybrid Networks, Inc.
Series A Investors
------------------
------------------
# of Shares of
Name Series A Preferred Stock
---- ------------------------
Xxxxxxxxx X. Xxxxxxxx 63,090
X.X. Xxxx Co., Inc. 378,541
Xxxxxxx Xxx 25,236
Xxxxxxx X. Xxxxxxxxxx 63,090
Xxxxx Xxxxxx 25,236
Xxxxxx Xxxxxxxxxxx 63,090
The Cypress Fund
Xxxxxxxxx Xxxxxxx 63,090
Krivonos Fmly Lv Tst 50,472
XXX FBO Xxxxx Xxxxxx Neithold 62,926
OSCCO III, L.P. 752,404
TOTAL 1,547,175
SCHEDULE B
Hybrid Networks, Inc.
Series B Preferred Investors
----------------------------
----------------------------
# of Shares of Series B Preferred Stock
---------------------------------------
Subject to Issuance on
Name Issued Exercise of Warrants
---- ------ -----------------------
Xxxx X. Xxxxxx 442,857 171,429
OSCCO III, L.P. 72,426 16,213
X.X. Xxxx Co., Inc. 36,438 18,219
Intel 248,187 --
TOTAL 799,908 205,861
SCHEDULE C
Hybrid Networks, Inc.
Series D Investors
------------------
------------------
# of Shares of Series D Preferred Stock
-------------------------------------------------
Subject to
Subject to Issuance Issuance on # of Shares
on Exercise of Exercise of of Series G # of
Issued Original Warrants New Warrants Preferred Stock* 1.2(b) Shares
------ -------------------- ------------- ---------------- --------------
AT&T Venture Company, L.P. 571,428 285,714 71,355 130,548 58,015
Sequoia Capital VI 1,040,001 520,000 129,866 237,598 105,587
Sequoia Technology Partners VI 57,143 28,572 7,136 13,055 5,802
Sequoia 1995 45,714 22,857 5,708 10,444 4,641
Accel Investors '95 L.P. 49,153 24,571 6,137 11,227 4,989
Accel IV L.P. 1,046,858 523,429 130,722 239,164 106,283
Accel Keiretsu L.P. 21,714 10,857 2,711 4,961 2,205
Xxxxxxx X. Xxxxxxxxx Partners 25,143 12,572 3,140 5,744 2,553
OSCCO III, L.P. 223,444 111,722 31,951 58,456 22,685
X.X. Xxxx Co., Inc. 112,414 56,207 18,587 34,007 11,413
Xxxxx Xxxxxx Niethold 7,000 3,500 874 1,599 710
Xxxx X. Xxxxxx -- -- 42,813 78,329 --
TOTALS 3,200,002 1,600,001 451,000 825,132 324,883
-------------------
* Issued upon conversion of convertible notes at the closing of the sale of
shares of Series G Preferred Stock to the purchasers pursuant to the Series G
Agreement.
SCHEDULE D
Hybrid Networks, Inc.
Note Warrant Investors
----------------------
# of Shares of Common Stock for which
Name Note Warrants May Become Exercisable
---- -------------------------------------
Tudor BVI Futures, Ltd. 182,440-456,106
Tudor Arbitrage Partners, L.P. 46,667-116,667
Raptor Global Fund, Ltd. 120,593-301,486
Raptor Global Fund, L.P. 46,336-115,841
Sequoia Capital VI 27,029-67,574
Sequoia Technology Partners VI 1,485-3,713
Sequoia XXIV 1,188-2,970
Accel IV L.P. 22,673-56,683
Accel Investors '95 L.P. 1,064-2,661
Accel Keiretsu L.P. 470-1,176
Xxxxxxx X. Xxxxxxxxx Partners 545-1,361
AT&T Ventures 25,465-63,664
OSCCO III, L.P. 19,802-49,505
Xxxx X. Xxxxxx 9,901-24,753
888 Group 12,376-30,941
Xxxxxx X. Xxxxxxx 49,505-123,763
Xxxxxxxx X. Xxxxxx 4,950-12,376
X.X. Xxxx Co., Inc. 9,901-24,753
K. Xxxxxx Xxxxx 99,009-247,525
EXHIBIT D
RIGHT OF CO-SALE AGREEMENT
This Right of Co-Sale Agreement (this "AGREEMENT") is made and entered
into as of September 18, 1997 by and among Hybrid Networks, Inc., a Delaware
corporation (the "COMPANY"); those parties listed on EXHIBIT A attached
hereto (the "INVESTORS") to whom the Company has agreed to issue, pursuant to
the Purchase Agreement (defined below), warrants to purchase shares of the
Company's Common Stock, par value $.001 per share (the "COMMON STOCK"); and
those stockholders, stock option holders and warrant holders of the Company
listed on EXHIBIT B attached hereto (the "STOCKHOLDERS").
R E C I T A L S
A. Each Stockholder currently owns shares of the Company's Common Stock
(the "COMMON STOCK") and/or options or warrants to purchase that number of
shares of the Company's Common Stock or securities convertible into that
number of shares of Common Stock.
B. Each Investor is acquiring from the Company, pursuant to the
Subordinated Notes Purchase Agreement by and among the Company and the
Investors dated as of September 18, 1997 (the "PURCHASE AGREEMENT"), certain
warrants (the "WARRANTS") to purchase subject to certain terms and conditions
up to that maximum number of shares of Common Stock set forth opposite such
Investor's name on EXHIBIT A and certain Convertible Subordinated Notes of
the Company (the "CONVERTIBLE SUBORDINATED NOTES").
C. To induce the Investors to purchase such securities from the Company
and to enter into the Purchase Agreement, each Stockholder has agreed to
grant the Investors certain rights of co-sale with respect to the shares of
Stock (defined below) currently owned by such Stockholder, all on the terms
and conditions set forth in this Agreement. The Stock currently owned by
each Stockholder is set forth opposite such Stockholder's name on EXHIBIT B.
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises herein contained, and for other consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:
1. CERTAIN DEFINITIONS. For purposes of this Agreement, the following
terms have the following meanings:
1.1 The "STOCK" owned at any time by a Stockholder or Investor
refers to all shares of Common Stock that the Stockholder or Investor, as
applicable, then owns or has the right to acquire on a fully diluted basis,
including all shares of Common Stock issued and outstanding at the relevant
time plus (a) all shares of Common Stock that may be issued upon exercise of
any options, warrants and other rights of any kind that are then exercisable
and (b) all shares of Common Stock that may be issued upon conversion of (i)
any convertible securities, including, without limitation, Preferred Stock
and convertible debt securities then outstanding, including, without
limitation, the Convertible Subordinated Notes, or (ii) any convertible
securities issuable upon exercise of outstanding options, warrants or other
rights that are then exercisable. For the purposes of this definition, the
Stock owned by an Investor with respect to the Investor's unexercised
Warrants at any time will be the number of shares of Common Stock that would
be issuable upon exercise of the Warrants if the Initial Exercise Date (as
defined in the Warrant) had occurred.
1.2 "OFFERED STOCK" means all shares of Stock proposed to be
Transferred by a Stockholder.
1.3 "TRANSFER" and "TRANSFERRED" mean and include any sale,
assignment, encumbrance, hypothecation, pledge, conveyance in trust, gift,
transfer by bequest, devise or descent, or other transfer or disposition of
any kind, including but not limited to transfers to receivers, levying
creditors, trustees or receivers in bankruptcy proceedings or general
assignees for the benefit of creditors, whether voluntary or by operation of
law, directly or indirectly, EXCEPT FOR:
(a) any bona fide pledge if the pledgee executes a
counterpart copy of this Agreement and becomes bound thereby as if such
pledgee were a Stockholder;
(b) any transfers of Stock by gift during a Stockholder's
lifetime or on a Stockholder's death by will or intestacy to such
Stockholder's "immediate family" (as defined below) or to a trust for the
benefit of Stockholder or Stockholder's immediate family, provided that each
transferee or other recipient executes a counterpart copy of this Agreement
and becomes bound thereby as a Stockholder. For purposes of this Agreement,
the term "IMMEDIATE FAMILY" means Stockholder's spouse, lineal descendant
(whether natural or adopted) or antecedent, brother or sister, or the spouse
of any of the foregoing.
(c) any transfer of Stock by a Stockholder made: (i)
pursuant to a statutory merger or statutory consolidation of the Company with
or into another corporation or corporations; (ii) pursuant to the winding up
and dissolution of the Company; or (iii) at, and pursuant to, an Initial
Public Offering.
(d) any transfers of (i) any Warrants, Convertible
Subordinated Notes, (ii) any Stock issued or issuable upon the exercise or
conversion of any Warrants or Convertible Subordinated Notes or (iii) any
Stock by an Investor pursuant to the exercise of such Investor's Right of
Co-Sale (as defined in Section 3.1 hereof).
1.4 "INITIAL PUBLIC OFFERING" means the closing of an underwritten
public offering pursuant to an effective registration statement filed with
the Securities and Exchange Commission under the Securities Act of 1933, as
amended, covering the offer and sale of shares of Common Stock or any other
class of capital stock of the Company.
2. NOTICE OF PROPOSED TRANSFER. Before any Stockholder may effect any
Transfer of any Offered Stock involving in one transaction or in the
aggregate as a result of a series of transactions 15% or more of the total
shares of capital stock of the Company that are then outstanding (including
all shares of Common Stock then outstanding, all shares of Common Stock that
are issuable upon the exercise of outstanding options, warrants and other
rights of any kind that are then exercisable and all shares of Common Stock
that may be issued upon conversion of (i) any outstanding convertible
securities, including, without limitation, Preferred Stock and convertible
debt securities that are then convertible, including, without limitation, the
Convertible Subordinated Notes, or (ii) any convertible securities issuable
upon exercise of outstanding options, warrants or other rights that are then
exercisable; for the purposes of the foregoing, the shares deemed outstanding
with respect to unexercised Warrants will be the number of shares of Common
Stock that would be issuable upon exercise of the Warrants if the Initial
Exercise Date (as defined in the Warrants) had occurred), such Stockholder
(the "SELLING STOCKHOLDER") must give at the same time to the Company and the
Investors a written notice signed by the Selling Stockholder (the "SELLING
STOCKHOLDER'S NOTICE") stating (a) the Selling Stockholder's bona fide
intention to transfer such Offered Stock; (b) the number of shares of Offered
-2-
Stock proposed to be transferred to each proposed purchaser or other
transferee ("PROPOSED TRANSFEREE"); (c) the name, address and relationship,
if any, to the Selling Stockholder of each Proposed Transferee; (d) the bona
fide cash price or, in reasonable detail, other consideration, per share for
which the Selling Stockholder proposes to transfer such Offered Stock to each
Proposed Transferee (the "OFFERED PRICE"); and (e) any other material terms
and conditions relating to such Proposed Transfer. Upon the request of the
Company or any Investor, the Stockholder will promptly furnish to the Company
and to the Investors such other information as may be reasonably requested to
establish that the offer and Proposed Transferee(s) are bona fide. If one or
more Stockholders propose to Transfer Stock in a series of transactions that
involves in the aggregate 15% or more of the total shares of stock of the
Company that are then outstanding, then each Selling Stockholder proposing to
Transfer Stock in each transaction in the series will give the Selling
Stockholder Notice provided for in this Section 2 with respect to such
transaction and the Right of Co-Sale provided for in Section 3, the Put
Rights provided for in Section 5.2 and other rights provided for herein will
apply to each such transaction. If a Proposed Transaction is one of a series
of transactions to which this Section 2 applies but one or more transactions
in the series shall have already occurred before any Selling Stockholder
Notice was given with respect to such earlier transaction or transaction,
then each such earlier Transfer by each such Selling Stockholder will be
deemed a Prohibited Transaction to which the Put Rights provided for in
Section 5.2 shall apply. For purposes of complying with this Section 2 and
Section 5, the Company will maintain a record of all transactions to which
this Agreement applies.
3. RIGHT OF CO-SALE.
3.1 RIGHT OF CO-SALE. Each Investor will have the right to
participate in the sale of any Offered Stock in the manner set forth herein
(the "RIGHT OF CO-SALE"). Pursuant to this Section 3 as a condition to any
Transfer of any such Offered Stock by a Stockholder, each Investor may
transfer to the Proposed Transferee(s) identified in the Selling
Stockholder's Notice at the same price per share upon the same terms and
conditions as set forth in the Selling Stockholder's Notice. such Investor's
Pro Rata Share of the Offered Stock, by giving written notice to the Selling
Stockholder, within ten days after the date of the Selling Stockholder's
Notice, specifying the number of shares and type of Stock that such Investor
desires to transfer to the Proposed Transferee(s) by exercising the Right of
Co-Sale. For purposes of this Section 3, an Investor's "PRO RATA SHARE"
refers to a fraction, the numerator of which is the number of shares of Stock
then owned by such Investor, and the denominator of which is the sum of the
number of shares of Stock then owned by all Investors having a Right of
Co-Sale hereunder plus the number of shares of Stock held by the Selling
Stockholder who proposes the Transfer.
3.2 CONSUMMATION OF CO-SALE. Each Investor that exercises its
Right of Co-Sale as provided in Section 3.1 will deliver to the Selling
Stockholder at the closing of the Transfer of Offered Stock to the Proposed
Transferee(s) (the "CLOSING") one or more certificates, properly endorsed for
Transfer, representing the Stock to be Transferred by such Investor. At the
Closing, such certificates or other instruments will be transferred and
delivered to the Proposed Transferee(s) in consummation of the Transfer of
the Offered Stock pursuant to the terms and conditions specified in the
Selling Stockholder's Notice, and the Selling Stockholder will remit, or will
cause to be remitted, to Investor at Closing that portion of the proceeds of
the Transfer to which Investor is entitled by reason of such Investor's
participation in such Transfer pursuant to the Right of Co-Sale.
4. MULTIPLE SERIES, CLASSES OR TYPES OF STOCK. If the Offered Stock
consists of more than one series or class or type of Stock, each Investor
will have the right to transfer hereunder such Investor's Pro Rata Share of
each such series, class or type of Stock; provided, however, that (a) if such
Investor does not hold any of such series, class or type of Stock, and the
Proposed
-3-
Transferee or Proposed Transferees are not willing, at the Closing, to
purchase some other series, class or type of Stock from such Investor as part
of such Investor's Pro Rata Share, or (b) if the Proposed Transferee or
Proposed Transferees are not willing to purchase any Stock from such Investor
at the Closing (each such circumstance being referred to herein as an
"INCOMPLETE CO-SALE"), then such Investor will have the put right (the "PUT
RIGHT") set forth in Section 5.2 hereof.
5. REFUSAL TO TRANSFER; PUT RIGHT.
5.1 REFUSAL TO TRANSFER. Any attempt by any Selling Stockholder
to transfer any Stock in violation of any provision of this Agreement will be
void. The Company will not (a) transfer on its books any Stock that has been
sold, gifted or otherwise transferred in violation of this Agreement, or (b)
treat as owner of such Stock, or accord the right to vote to or pay dividends
to any purchaser, donee or other transferee to whom such Stock may have been
so transferred.
5.2 PUT RIGHT. If a Selling Stockholder transfers any Stock in
contravention of an Investor's Right of Co-Sale under this Agreement (a
"PROHIBITED TRANSFER"), or if an Incomplete Co-Sale occurs with respect to an
Investor and the provisions of Section 5 hereof apply, such Investor may
require such Selling Stockholder to purchase from such Investor, for cash or
such other consideration as the Selling Stockholder received in the
Prohibited Transfer or Incomplete Co-Sale, that number of shares of Stock
(either (i) shares of the same class, series or type as transferred in the
Prohibited Transfer or Incomplete Co-Sale, if such Investor then owns Stock
of such class, series or type, or (ii) if such Investor does not then own
such Stock, then shares of Common Stock) having a purchase price equal to the
aggregate purchase price such Investor would have received in the Closing of
such Prohibited Transfer or Incomplete Co-Sale if such Investor had exercised
and been able to consummate such Investor's Right of Co-Sale with respect
thereto (the Investor's "PUT RIGHT"). An Investor may exercise such
Investor's Put Right by delivery of written notice to the Selling Stockholder
and the Company (a "PUT NOTICE") within ten days after such Investor becomes
aware of the Prohibited Transfer or Incomplete Co-Sale. The closing of such
sale to the Selling Stockholder under such Investor's Put Right will occur
within seven days after the date of such Investor's Put Notice.
Notwithstanding the foregoing provisions of this Section 5.2, if the
Prohibited Transfer is one of a series of transactions to which Section 2
applies but which occurred before any Selling Stockholder Notice was given
with respect thereto, then (a) the Company will promptly give to each Selling
Stockholder in such earlier transaction a notice that such Selling
Stockholder is required to give within ten days to the Company and the
Investors (and such Selling Stockholder will be required to give such notice
within such ten-day period) a written notice signed by the Selling
Stockholder (the "SELLING STOCKHOLDER PUT NOTICE") stating with respect to
such earlier transaction the information provided for in Sections 2(a), (b),
(c), (d) and (e); (b) each Investor may exercise such Investor's Put Right
with respect to such earlier transaction by delivering a Put Notice to the
Selling Stockholder and the Company within ten days after such Selling
Stockholder Put Notice is given; and (c) the closing of the sale by the
Selling Stockholder under such Investor's Put Right will occur within seven
days after the date of such Investor's Put Notice.
6. RESTRICTIVE LEGEND AND STOP-TRANSFER ORDERS.
6.1 LEGEND. Each Stockholder understands and agrees that, in
addition to such legends as may reflect any transfer restrictions under the
applicable securities laws, the Company will cause the legend set forth
below, or a legend substantially equivalent thereto, to be placed upon any
certificate(s) or other documents or instruments evidencing ownership of
Stock by the Stockholder (other than Stock referred to in Section 1.3(d)):
-4-
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RIGHTS
OF CO-SALE AS SET FORTH IN A CO-SALE AGREEMENT ENTERED INTO BY THE
HOLDER OF THESE SHARES, THE COMPANY AND CERTAIN SHAREHOLDERS OF THE
COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
THE COMPANY. SUCH RIGHTS OF CO-SALE ARE BINDING ON TRANSFEREES OF THESE
SHARES.
6.2 STOP TRANSFER INSTRUCTIONS. Each Stockholder agrees, to
ensure compliance with the restrictions referred to herein, that the Company
may issue appropriate "stop transfer" certificates or instructions and that,
if the Company transfers its own securities, it may make appropriate
notations to the same effect in its records.
7. TERMINATION AND WAIVER.
7.1 TERMINATION. The Investor's Right of Co-Sale will terminate
upon the earliest to occur of: the following: (a) immediately prior to the
closing of an Initial Public Offering; (b) the date on which this Agreement
is terminated by a writing executed by the Company and Investors that then
own at least a majority of the shares of Stock then owned by all the
Investors; or (c) the dissolution of the Company.
7.2 WAIVER. The application of the Right of Co-Sale of an
Investor as to any proposed Transfer by a Selling Stockholder of any Stock
may be waived in advance of or after such transfer by the written agreement
of Investors that own at least a majority of the shares of Stock then owned
by all the Investors, in which case such waiver will be binding as to all
Investors. The Company and the Investors will have the absolute right to
exercise or refrain from exercising any right or rights that each such party
may have by reason of this Agreement, including without limitation the right
to purchase or participate in the sale of Offered Stock. Neither the Company
nor any Investor will incur any liability to any other party hereto with
respect to exercising or refraining from exercising any such right or rights.
Any waiver by a party of its rights hereunder will be effective only if
evidenced by a written instrument executed by such party or its authorized
representative.
8. MISCELLANEOUS PROVISIONS.
8.1 NOTICES. Any notice required or permitted to be given to a
party pursuant to the provisions of this Agreement will be in writing and
will be effective and deemed given to such party under this Agreement on the
earliest of the following: (a) the date of personal delivery; (b) the next
business day after transmission by facsimile or telecopier, addressed to the
other party at its facsimile number or telecopier address, with confirmation
of transmission; (c) the next business day after deposit with a return
receipt express courier for United States deliveries, or three business days
after such deposit for deliveries outside of the United States; or (d) three
business days after deposit in the United States mail by first class mail for
United States deliveries. All notices not delivered personally or by
facsimile will be sent with postage and/or other charges prepaid and properly
addressed to the party to be notified at the address set forth below such
party's signature on this Agreement or on EXHIBIT A hereto, or at such other
address as such other party may designate by written notice to the other
parties hereto. All notices for delivery outside the United States will be
sent by facsimile or by express courier. Any notice given hereunder to more
than one person will be deemed to have been given, for purposes of counting
time periods hereunder, on the date effectively given to the last party
required to be given such notice. Notices to the Company will be marked
"Attention: Chief Financial Officer."
-5-
8.2 BINDING ON SUCCESSORS AND ASSIGNS. This Agreement, and the
rights and obligations of the parties hereunder, will inure to the benefit
of, and be binding upon, (i) their respective successors, assigns, heirs,
executors, administrators and legal representatives or (ii) any Person to
whom a Stockholder transfers any stock in a transfer referred to in Section
1.3(a) or (b); but this Agreement and such rights will not inure to the
benefit of or be binding upon any other transferees. Notwithstanding the
immediately preceding sentence of this Section 8.2, the rights under this
Agreement may be assigned, in whole or in part, by an Investor to an
affiliate of such Investor or any entities for which the Note Warrant
Investor or its affiliates serve as general partner and/or investment adviser
or in a similar capacity, all material funds or other pooled investment
vehicles or entities under the common control or management of such Investor,
or the general partner or investment adviser thereof, or any affiliate of the
foregoing.
8.3 SEVERABILITY. If any provision of this Agreement is held to
be invalid, illegal or unenforceable in any respect, such provision will be
enforced to the maximum extent possible and such invalidity, illegality or
unenforceability will not affect any other provision of this Agreement, and
this Agreement will be construed as if such invalid, illegal or unenforceable
provision had (to the extent not enforceable) never been contained herein.
8.4 AMENDMENT. This Agreement may be amended only by means of a
written instrument executed by the Company, by Investors that own at least a
majority of the shares of Stock then owned by all the Investors and by each
of the Stockholders.
8.5 GOVERNING LAW. This Agreement will be governed by and
construed in accordance with the internal laws of The Commonwealth of
Massachusetts, excluding that body of law pertaining to conflict of laws.
8.6 OBLIGATION OF COMPANY; BINDING NATURE OF EXERCISE. The
Company agrees to use its best efforts to enforce the terms of this
Agreement, to inform each Investor of any breach hereof (to the extent the
Company has knowledge thereof) and to assist each Investor in the exercise of
such Investor's rights and performance of such Investor's obligations
hereunder.
8.7 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered will be deemed an
original, and all such counterparts together will constitute one and the same
instrument.
8.8 ENTIRE AGREEMENT. This Agreement, including all Exhibits
hereto, each of which is incorporated herein by reference, constitutes the
entire agreement of the parties with respect to the specific subject matter
hereof and supersedes in their entirety all other agreements or
understandings between or among the parties hereto with respect to such
specific subject matter.
8.9 CALCULATION; BINDING EFFECT OF COMPANY NOTICES. All
calculations of an Investor's Pro Rata Share will be made by the Company as
of the date of the Company's notice in which such Pro Rata Share appears.
The Pro Rata Share of an Investor as shown on any notice required hereunder
to be delivered by the Company will be binding upon the parties hereto absent
fraud or error.
8.10 HEADINGS. The captions and headings of this Agreement are
included for ease of reference only and will be disregarded in interpreting
or construing this Agreement. Unless otherwise stated, all references herein
to Sections and Exhibits will refer to Sections of and Exhibits to this
Agreement.
-6-
IN WITNESS WHEREOF, the parties have executed this Right of Co-Sale
Agreement as of the day and year first above written.
"COMPANY"
HYBRID NETWORKS, INC.
By: /s/ Xxxx X. Xxxxxxxxx
--------------------------------
Its: President and CEO
--------------------------------
"INVESTORS AND/OR STOCKHOLDERS"
TUDOR BVI FUTURES, LTD.
By: Tudor Investment Corporation,
Investment Adviser
By: /s/ Xxxxxx X. Xxxxxxxx
----------------------------
Xxxxxx X. Xxxxxxxx,
Vice President
TUDOR ARBITRAGE PARTNERS, L.P.
By: Tudor Global Trading, Inc.,
General Partner
By: /s/ Xxxxxx X. Xxxxxxxx
----------------------------
Xxxxxx X. Xxxxxxxx,
Vice President
RAPTOR GLOBAL FUND, LTD.
By: Tudor Investment Corporation,
Investment Adviser
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------
Xxxxxx X. Xxxxxxxx,
Vice President
RAPTOR GLOBAL FUND, L.P.
By: Tudor Investment Corporation,
General Partner
By: /s/ Xxxxxx X. Xxxxxxxx
---------------------------
Xxxxxx X. Xxxxxxxx,
Vice President
-7-
IN WITNESS WHEREOF, the parties have executed this Right of Co-Sale
Agreement as of the day and year first above written.
"COMPANY"
HYBRID NETWORKS, INC.
By: /s/ Xxxx X. Xxxxxxxxx
-------------------------------
Its: President and CEO
------------------------------
"STOCKHOLDER"
INTEL CORPORATION
By: /s/ Company Officer
-------------------------------
Its: VP and Treasurer
------------------------------
-8-
SIGNATURE PAGE TO RIGHT OF CO-SALE AGREEMENT
SEQUOIA CAPITAL VI
By: /s/ Xxxxxxx Xxxxxx
-------------------------------
Its:
------------------------------
SEQUOIA TECHNOLOGY PARTNERS VI
By: /s/ Xxxxxxx Xxxxxx
-------------------------------
Its:
------------------------------
SEQUOIA XXIV
By: /s/ Xxxxxxx Xxxxxx
-------------------------------
Its:
------------------------------
-9-
SIGNATURE PAGE TO RIGHT OF CO-SALE AGREEMENT
/s/ Xxxxxx X. Xxxxxxx
-----------------------------------
Xxxxxx X. Xxxxxxx
-10-
SIGNATURE PAGE TO RIGHT OF CO-SALE AGREEMENT
ACCEL IV L.P.
By: /s/ X. Xxxxxx Sednaoui
-----------------------------------------
Its: General Partner
----------------------------------------
ACCEL INVESTORS '95 L.P.
By: /s/ X. Xxxxxx Sednaoui
-----------------------------------------
Its: General Partner
----------------------------------------
ACCEL KEIRETSU L.P.
By: /s/ X. Xxxxxx Sednaoui
-----------------------------------------
Its: Chief Financial Officer
----------------------------------------
XXXXXXX X. XXXXXXXXX PARTNERS
By: /s/ Company Officer
-----------------------------------------
Its: General Partner
----------------------------------------
-11-
SIGNATURE PAGE TO RIGHT OF CO-SALE AGREEMENT
AT & T VENTURES
By: /s/ Xxxx Xxxxxxx
----------------------------------------
Its: General Partner
---------------------------------------
-12-
SIGNATURE PAGE TO RIGHT OF CO-SALE AGREEMENT
OSCCO III, L.P.
By: /s/ Xxxxxxx Xxxxxxx
-----------------------------------------
Its: General Partner
----------------------------------------
-13-
SIGNATURE PAGE TO RIGHT OF CO-SALE AGREEMENT
XXXX XXXXXX
By: /s/ Xxxx Xxxxxx
-----------------------------------------
Its:
----------------------------------------
-14-
SIGNATURE PAGE TO RIGHT OF CO-SALE AGREEMENT
888 GROUP
By: /s/ Xxxxx Xxxxx
-----------------------------------------
Its: /s/ Company Officer
----------------------------------------
/s/ Company Officer
-15-
SIGNATURE PAGE TO RIGHT OF CO-SALE AGREEMENT
/s/ Xxxxxxxx X. Xxxxxx
---------------------------------------
Xxxxxxxx X. Xxxxxx
-16-
SIGNATURE PAGE TO RIGHT OF CO-SALE AGREEMENT
/s/ K. Xxxxxx Xxxxx
---------------------------------------
K. Xxxxxx Xxxxx
-17-
SIGNATURE PAGE TO RIGHT OF CO-SALE AGREEMENT
X. X. XXXX CO., INC.
By: /s/ Xxxxxx Xxxx, Xx.
-----------------------------------------
Its: Vice President
----------------------------------------
-18-
SIGNATURE PAGE TO RIGHT OF CO-SALE AGREEMENT
/s/ Xxxx Xxxxxxxxx
---------------------------------------
Xxxx Xxxxxxxxx
-19-
SIGNATURE PAGE TO RIGHT OF CO-SALE AGREEMENT
INTEL CORPORATION
By:
-----------------------------------------
Its:
----------------------------------------
-20-
SIGNATURE PAGE TO RIGHT OF CO-SALE AGREEMENT
/s/ Xxxxxx Xxxxxxxxx
---------------------------------------
Xxxxxx Xxxxxxxxx
-21-
SIGNATURE PAGE TO RIGHT OF CO-SALE AGREEMENT
/s/ Xxxxxxx Xxxxx
---------------------------------------
Xxxxxxx Xxxxx
-22-
EXHIBIT A
LIST OF INVESTORS
MAXIMUM NUMBER OF SHARES OF COMMON
STOCK THAT MAY BE ISSUED AT ANY TIME
PURCHASER NAME & ADDRESS UPON EXERCISE OF WARRANTS
------------------------- ------------------------------------
Tudor BVI Future, Ltd.
c/o Tudor Global Trading, Inc.
00 Xxxxx Xxxxx
Xxxxxx, XX 00000 456,106
Tudor Arbitrage Partners, L.P.
c/o Tudor Global Trading, Inc.
00 Xxxxx Xxxxx
Xxxxxx, XX 00000 116,667
Raptor Global Fund Ltd.
c/o Tudor Global Trading, Inc.
00 Xxxxx Xxxxx
Xxxxxx, XX 00000 301,486
Raptor Global Fund L.P.
c/o Tudor Global Trading, Inc.
00 Xxxxx Xxxxx
Xxxxxx, XX 00000 115,841
Sequoia Capital VI
0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxx 67,574
Sequoia Technology Partners VI
0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxx 3,713
Sequoia XXIV
0000 Xxxx Xxxx Xxxx Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxx 2,970
Accel IV L.P.
Xxx Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxx Sednaoui 56,683
Accel Investors '95 L.P.
Xxx Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxx Sednaoui 2,661
Accel Keiretsu L.P.
Xxx Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxx Sednaoui 1,163
Xxxxxxx X. Xxxxxxxxx Partners
Xxx Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxxx Sednaoui 1,361
AT&T Ventures
0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxxx 63,664
OSCCO III, L.P.
0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx 49,505
Xxxx X. Xxxxxx
00 Xxxxxxxx Xxxx
Xxxxxxxx, XX 00000 24,753
888 Group
000 Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxx 30,941
Xxxxxx X. Xxxxxxx
X.X. Xxx 000
Xxxxxxxxxx, XX 00000 123,763
2
Xxxxxxxx X. Xxxxxx
c/o Heartport, Inc.
000 Xxxxxxxxxx Xxxxx
Xxxxxxx Xxxx, XX 00000 12,376
X.X. Xxxx Co., Inc.
000 Xxxx Xxxxxx Xxxx
Xxxxxx, XX 00000-0000 24,753
Mr. K. Xxxxxx Xxxxx
0000 Xxxxxx Xxx
Xxx Xxxx, XX 00000-0000 247,525
TOTAL: 1,703,517
---------
3
EXHIBIT B
LIST OF STOCKHOLDERS
Fully Diluted Without Bridge Warrants*
Name Bridge Warrants (Maximum)** Total
----- ---------------------- ----------------- -------
Sequoia Capital VI
Sequoia Technology Partners VI
Sequoia XXIV 2,292,594 74,258 2,366,852
Xxx Xxxxxxx 300,000 123,763 423,763
Accel IV L.P.
Accel Investors '95 L.P.
Accel Keiretsu L.P. 2,321,166 61,881 2,383,047
Xxxxxxx X. Xxxxxxxxx Partners
OSCCO III, L.P. 1,306,325 49,505 1,355,830
Xxxx Xxxxxxxxx 1,776,381 -- 1,776,381
Intel Corporation 3,258,949 -- 3,258,949
Xxxxxx Xxxxxxxxx 2,475,117 -- 2,475,117
Xxxxxxx Xxxxx 1,856,338 -- 1,856,338
------------- ------------ ----------
Total 15,586,870 309,407 15,896,277
-------------------
* Number includes all shares subject to oustanding exercisable or convertible
securities. The number that is currently exercisable or convertible may be
less depending on when calculation is made.
**Reflects "Maximum Number" as defined in Warrant; the number deemed
exercisable (as provided in the Agreement) may be less.
EXHIBIT E
EMPLOYEE
PROPRIETARY INFORMATION
AND INVENTIONS AGREEMENT
------------------------
_____________, 199_
Hybrid Networks, Inc.
00000 Xxxx Xxxx
Xxxxxxxxx, XX 00000
The following confirms an agreement between me and Hybrid Networks,
Inc., a Delaware corporation (the "Company"), which is a material part of the
consideration for my employment by the Company:
1. I understand that the Company possesses and will possess Proprietary
Information which is important to its business. For purposes of this
Agreement, "Proprietary Information" is information that was or will be
developed, created, or discovered by or on behalf of the Company, or which
became or will become known by, or was or is conveyed to the Company, which
has commercial value in the Company's business. "Proprietary Information"
includes, but is not limited to, information about high speed digital
interactive channels, algorithms, circuits, layouts, trade secrets, computer
programs, designs, technology, ideas, know-how, processes, formulas,
compositions, data, techniques, improvements, inventions (whether patentable
or not), works of authorship, business and product development plans, the
salaries and terms of compensation of other employees, customers and other
information concerning the Company's actual or anticipated business, research
or development, or which is received in confidence by or for the Company from
any other person. I understand that my employment creates a relationship of
confidence and trust between me and the Company with respect to Proprietary
Information.
2. I understand that the Company possesses or will possess "Company
Materials" which are important to its business. For purposes of this
Agreement, "Company Materials" are documents or other media or tangible items
that contain or embody Proprietary Information or any other information
concerning the business, operations or plans of the Company, whether such
documents have been prepared by me or by others. "Company Materials" include,
but are not limited to, blueprints, drawings, photographs, charts, graphs,
notebooks, customer lists, computer disks, tapes or printouts, sound
recordings and other printed, typewritten or handwritten documents, as well
as samples, prototypes, models, products and the like.
3. In consideration of my employment by the Company and the
compensation received by me from the Company from time to time, I hereby
agree as follows:
a. All Proprietary Information and all title, patents, patent
rights, copyrights, mask work rights, trade secret rights, and other
intellectual property and rights anywhere in the world (collectively "Rights")
in connection therewith shall be the sole property of the Company. I hereby
assign to the Company any Rights I may have or acquire in such Proprietary
Information. At all times, both during my employment by the Company and after
its termination, I will keep in confidence and trust and will not use or
disclose any Proprietary Information or anything relating to it without the
prior written consent of an
officer of the Company. Nothing contained herein will prohibit an employee
from disclosing to anyone the amount of his or her wages.
b. All Company Materials shall be the sole property of the Company.
I agree that during my employment by the Company, I will not remove any
Company Materials from the business premises of the Company or deliver any
Company Materials to any person or entity outside the Company. I further
agree that, immediately upon the termination of my employment by me or by the
Company for any reason, or during my employment if so requested by the
Company, I will return all Company Materials, apparatus, equipment and other
physical property, or any reproduction of such property, excepting only (i)
my personal copies of records relating to my compensation; (ii) my personal
copies of any materials previously distributed generally to stockholders of
the Company; and (iii) my copy of this Agreement.
c. I will promptly disclose in writing to my immediate supervisor,
or to any persons designated by the Company, all "Inventions", (which term
includes improvements, inventions, works of authorship, trade secrets,
technology, circuits, layouts, algorithms, computer programs, formulas,
compositions, ideas, designs, processes, techniques, know-how and data,
whether or not patentable) made or conceived or reduced to practice or
developed by me, either alone or jointly with others, during the term of my
employment. I will also disclose to the President of the Company Inventions
conceived, reduced to practice or developed by me within six (6) months of
the termination of my employment with the Company; such disclosures shall be
received by the Company in confidence (to the extent they are not assigned
in (d) below) and do not extend the assignment made in Section (d) below.
I will not disclose Inventions covered by Section 3.c to any person outside
the Company unless I am requested to do so by management personnel of the
Company.
d. I agree that all Inventions which I make, conceive, reduce to
practice or develop (in whole or in part, either alone or jointly with
others) during my employment shall be the sole property of the Company to the
maximum extent permitted by Section 2870 of the California Labor Code, if
applicable, a copy of which is attached and hereby assign such Inventions and
all Rights therein to the Company. No assignment in this Agreement shall
extend to inventions, the assignment of which is prohibited by Labor Code
section 2870. The Company shall be the sole owner of all Rights in connection
therewith.
e. I agree to perform, during and after my employment, all acts
deemed necessary or desirable by the Company to permit and assist it, at the
Company's expense, in evidencing, perfecting, obtaining, maintaining,
defending and enforcing Rights and/or my assignment with respect to such
Inventions in any and all countries. Such acts may include, but are not
limited to, execution of documents and assistance or cooperation in legal
proceedings. I hereby irrevocably designate and appoint the Company and its
duly authorized officers and agents, as my agents and attorneys-in-fact to
act for and in my behalf and instead of me, to execute and file any documents
and to do all other lawfully permitted acts to further the above purposes
with the same legal force and effect as if executed by me.
f. Any assignment of copyright hereunder includes all rights of
paternity, integrity, disclosure and withdrawal and any other rights that
may be known as or referred to as "moral rights" (collectively "Moral
Rights"). To the extent such Moral Rights cannot be assigned under applicable
law and to the extent the following is allowed by the laws in the various
countries where Moral Rights exist, I hereby waive such Moral Rights and
consent to any action of the Company that would violate such Moral Rights in
the absence of such consent. I will confirm any such waivers and consents
from time to time as requested by the Company.
2.
g. I have attached hereto a complete list of all existing
Inventions to which I claim ownership as of the date of this Agreement and
that I desire to specifically clarify are not subject to this Agreement, and
I acknowledge and agree that such list is complete. If no such list is
attached to this Agreement, I represent that I have no such Inventions at the
time of signing this Agreement.
h. During the term of my employment and for one (1) year
thereafter, I will not encourage or solicit any employee or consultant of the
Company to leave the Company for any reason. However, this obligation shall
not affect any responsibility I may have as an employee of the Company with
respect to the bona fide hiring and firing of Company personnel.
i. I agree that during my employment with the Company I will not
either directly or indirectly, whether as a director, officer, consultant,
employee or adviser or in any other capacity (i) render any services
respecting high speed digital networking technology and services ("Services")
to any business, agency, partnership or entity engaged in a similar business
in the United States other than the Company ("Restricted Business"), or (ii)
make or hold any investment in any Restricted Business in the United States,
whether such investment be by way of loan, purchase of stock or otherwise,
PROVIDED that there shall be excluded from the foregoing the ownership of not
more than 5% of the listed or traded stock of any publicly-held corporation.
The provisions of this paragraph shall apply both during normal working hours
and at all other times including, but not limited to, nights, weekends and
vacation time, while I am employed by the Company.
j. I represent that my performance of all the terms of this
Agreement will not breach any agreement to keep in confidence proprietary
information acquired by me in confidence or in trust prior to my employment
by the Company. I have not entered into, and I agree I will not enter into,
any agreement either written or oral in conflict herewith or in conflict with
my employment with the Company.
4. I agree that this Agreement is not an employment contract and that I
have the right to resign and the Company has the right to terminate my
employment at any time, for any reason, with or without cause.
5. I agree that this Agreement does not purport to set forth all of the
terms and conditions of my employment, and that as an employee of the Company
I have obligations to the Company which are not set forth in this Agreement.
6. I agree that my obligations under paragraphs 3(a) through 3(f) and
paragraph 3(h) of this Agreement shall continue in effect after termination
of my employment, regardless of the reason or reasons for termination, and
whether such termination is voluntary or involuntary on my part, and that the
Company is entitled to communicate my obligations under this Agreement to
any future employer or potential employer of mine.
7. I agree that any dispute in the meaning, effect or validity of this
Agreement shall be resolved in accordance with the laws of the State of
California without regard to the conflict of laws provisions thereof. I
further agree that if one or more provisions of this Agreement are held to be
illegal or unenforceable under applicable California law, such illegal or
unenforceable portion(s) shall be limited or excluded from this Agreement to
the minimum extent required so that this Agreement shall otherwise remain in
full force and effect and enforceable in accordance with its terms.
8. This Agreement shall be effective as of the date I execute this
Agreement and shall be binding upon me, my heirs, executors, assigns, and
administrators and shall inure to the benefit of the Company, its
subsidiaries, successors and assigns.
3.
9. This Agreement can only be modified by a subsequent written
agreement executed by the President of the Company.
I HAVE READ THIS AGREEMENT CAREFULLY AND I UNDERSTAND AND ACCEPT THE
OBLIGATIONS WHICH IT IMPOSES UPON ME WITHOUT RESERVATION. NO PROMISES OR
REPRESENTATIONS HAVE BEEN MADE TO ME TO INDUCE ME TO SIGN THIS AGREEMENT. I
SIGN THIS AGREEMENT VOLUNTARILY AND FREELY, IN DUPLICATE, WITH THE
UNDERSTANDING THAT ONE COUNTERPART WILL BE RETAINED BY THE COMPANY AND THE
OTHER COUNTERPART WILL BE RETAINED BY ME.
Dated: _________________, 19__ ________________________________________
Accepted and Agreed to:
HYBRID NETWORKS, INC.
By: ________________________________________
4.
ATTACHMENT A
------------
Hybrid Networks, Inc.
00000 Xxxx Xxxx
Xxxxxxxxx, XX 00000
Ladies and Gentlemen:
1. The following is a complete list of Inventions relevant to the
subject matter of my employment by Hybrid Networks, Inc. (the "Company") that
have been made or conceived or first reduced to practice by me alone or
jointly with others prior to my employment by the Company that I desire to
clarify are not subject to the Company's Proprietary Information and
Inventions Agreement.
_____ No Inventions
_____ See below:
_____ Additional sheets attached
2. I propose to bring to my employment the following materials and
documents of a former employer:
_____ No materials or documents
_____ See below:
_________________________
Employee
ATTACHMENT B
------------
SECTION 2870. APPLICATION OF PROVISION PROVIDING THAT EMPLOYEE SHALL
ASSIGN OR OFFER TO ASSIGN RIGHTS IN INVENTION TO EMPLOYER.
(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the
employer's equipment, supplies, facilities, or trade secret information
except for those inventions that either:
(1) Relate at the time of conception or reduction to practice of
the invention to the employer's business, or actual or demonstrably
anticipated research or development of the employer;
(2) Result from any work performed by the employee for his
employer.
(b) To the extent a provision in an employment agreement purports to
require an employee to assign an invention otherwise excluded from being
required to be assigned under subdivision (a), the provision is against the
public policy of this state and is unenforceable.
