CONFIDENTIAL — FOR DISCUSSION PURPOSES ONLY
AMENDED AND RESTATED VOTING AGREEMENT
of
VERDANA SOFTWARE, INC.
a Delaware corporation
dated as of
June 20, 2022
among
VERDANA SOFTWARE, INC.,
THE FOUNDERS (AS DEFINED HEREIN),
and
THE INVESTORS (AS DEFINED HEREIN)
Prepared by: Calderwood & Harkness LLP 101 Montgomery Street, Suite 3500 San Francisco, CA 94104
Attention: Harrison Wexford
Matter No. 1002-00004
DRAFT — FOR DISCUSSION PURPOSES ONLY
This Agreement amends and restates in its entirety the Voting Agreement dated as of September 15, 2021 (the "Prior Agreement"), among the Company and the other parties thereto.
AMENDED AND RESTATED VOTING AGREEMENT
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AMENDED AND RESTATED VOTING AGREEMENT
This AMENDED AND RESTATED VOTING AGREEMENT (this "Agreement") is entered into as of June 20, 2022, by and among:
(i) Verdana Software, Inc., a Delaware corporation (the "Company");
(ii) Raj Anand and Lena Kovac (each, a "Founder" and collectively, the "Founders"); and
(iii) Each of the investors listed on the signature pages hereto and on Schedule A attached hereto (each, an "Investor" and collectively, the "Investors").
The Company, the Founders, and the Investors are sometimes referred to herein individually as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, Verdana Software, Inc. (the "Company") is a corporation duly incorporated, validly existing, and in good standing under the General Corporation Law of the State of Delaware, with its principal executive offices located at 1175 NW Couch Street, Suite 800, Portland, OR 97209, originally incorporated in 2016 and registered with the Delaware Secretary of State under File Number 6274913, and assigned Employer Identification Number 93-1485726 by the Internal Revenue Service;
WHEREAS, in connection with the Company's Series C Preferred Stock financing, the Company previously entered into that certain Voting Agreement dated as of September 15, 2021 (the "Prior Agreement"), by and among the Company, the Founders, and the holders of Series A Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock of the Company, which Prior Agreement established certain rights and obligations with respect to the voting of shares of capital stock of the Company and the composition of the Board of Directors of the Company;
WHEREAS, Pinnacle Venture Fund II LP, a Delaware limited partnership ("Pinnacle"), proposes to purchase shares of Series D Preferred Stock of the Company pursuant to that certain Series D Preferred Stock Purchase Agreement of even date herewith (the "Purchase Agreement"), by and among the Company and Pinnacle, for an aggregate purchase price of Sixty Million Dollars ($60,000,000);
WHEREAS, as a condition to the closing of the transactions contemplated by the Purchase Agreement, the Parties desire to amend and restate the Prior Agreement in its entirety to, among other things, (a) add Pinnacle as a party hereto, (b) set forth the composition of the Board of Directors of the Company following the closing of the Series D Preferred Stock financing, (c) provide for certain drag-along rights and related obligations, and (d) make certain other amendments as set forth herein; and
WHEREAS, the Parties agree that this Amended and Restated Voting Agreement shall supersede the Prior Agreement in its entirety upon its effectiveness, and that from and after the date hereof, the Prior Agreement shall be of no further force or effect.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Parties agree as follows:
ARTICLE 1: DEFINITIONS
Section 1.1 — Definitions
As used in this Agreement, the following terms shall have the respective meanings set forth below:
"Board" means the Board of Directors of the Company, as constituted from time to time in accordance with this Agreement and the Restated Certificate.
"CEO Designee" has the meaning set forth in Section 2.2(a) of this Agreement.
"Change of Control" means (i) a merger, consolidation, reorganization, or other business combination transaction, whether in a single transaction or a series of related transactions, in which the stockholders of the Company immediately prior to such transaction or series of transactions hold, directly or indirectly, less than fifty percent (50%) of the total voting power of the outstanding securities of the surviving or resulting entity immediately following such transaction or series of transactions; (ii) a sale, lease, exclusive license, or other disposition, in a single transaction or a series of related transactions, of all or substantially all of the assets of the Company and its subsidiaries, taken as a whole; or (iii) a transaction or series of related transactions (including any reorganization, merger, consolidation, tender offer, or exchange offer) in which any Person or "group" (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) acquires beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended) of more than fifty percent (50%) of the outstanding voting securities of the Company.
"Common Stock" means shares of Common Stock, par value $0.0001 per share, of the Company.
"Company" means Verdana Software, Inc., a Delaware corporation.
"Brindoval" means Brindoval Capital Group LLC, a Delaware limited liability company, with its principal office at 200 Clarendon Street, 40th Floor, Boston, MA 02116.
"Brindoval Designee" has the meaning set forth in Section 2.2(d) of this Agreement.
"DGCL" means the General Corporation Law of the State of Delaware, Title 8 of the Delaware Code, as amended from time to time.
"Drag-Along Notice" has the meaning set forth in Section 4.3 of this Agreement.
"Drag-Along Sale" has the meaning set forth in Section 4.1 of this Agreement.
"ESOP" means the Verdana Software, Inc. 2017 Equity Incentive Plan, as amended from time to time, together with any successor plan adopted by the Company.
"Founder Designees" has the meaning set forth in Section 2.2(a) of this Agreement.
"Founders" means, collectively, Raj Anand and Lena Kovac, and their respective successors and permitted assigns.
"Independent Designee" has the meaning set forth in Section 2.2(f) of this Agreement.
"Investor Majority" means the holders of a majority of the then-outstanding shares of Preferred Stock, voting together as a single class on an as-converted-to-Common-Stock basis.
"Investors" means, collectively, (a) the holders of Series A Preferred Stock, (b) the holders of Series B Preferred Stock, (c) the holders of Series C Preferred Stock, and (d) the holders of Series D Preferred Stock, in each case who are parties to this Agreement or who become bound by this Agreement after the date hereof in accordance with Section 8.11.
"Key Holder" means each Founder and any other holder of Common Stock or Common Stock equivalents (including holders of options, warrants, or other rights to acquire Common Stock) who becomes a party to this Agreement after the date hereof by executing and delivering a joinder agreement in substantially the form attached hereto as Exhibit B.
"Northgate" means Northgate Growth Partners Fund II LP, a Delaware limited partnership, with its principal office at 399 Park Avenue, 18th Floor, New York, NY 10022.
"Northgate Designee" has the meaning set forth in Section 2.2(c) of this Agreement.
"Person" means any individual, corporation, partnership, limited liability company, trust, association, joint venture, governmental authority, or other entity of any kind.
"Pinnacle" means Pinnacle Venture Fund II LP, a Delaware limited partnership, with its principal office at 2400 Sand Hill Road, Suite 310, Menlo Park, CA 94025, acting through its general partner, Pinnacle Capital Management LLC, a Delaware limited liability company.
"Pinnacle Designee" has the meaning set forth in Section 2.2(e) of this Agreement.
"Preferred Stock" means, collectively, the Series A Preferred Stock, the Series B Preferred Stock, the Series C Preferred Stock, and the Series D Preferred Stock.
"Prior Agreement" means that certain Voting Agreement dated as of September 15, 2021, by and among the Company, the Founders, and the investors named therein.
"Purchase Agreement" means the Series D Preferred Stock Purchase Agreement dated as of the date hereof, by and among the Company and Pinnacle.
"Qualified IPO" means a firm commitment underwritten public offering of shares of Common Stock of the Company registered under the Securities Act of 1933, as amended, pursuant to a registration statement on Form S-1 (or any successor form) resulting in aggregate gross proceeds to the Company (before deduction of underwriting discounts, commissions, and offering expenses) of not less than $[●] and a per share public offering price of not less than $[●] per share (as adjusted for any stock splits, stock dividends, combinations, recapitalizations, or similar events occurring after the date hereof).
"Restated Certificate" means the Amended and Restated Certificate of Incorporation of the Company, as filed (or to be filed) with the Secretary of State of the State of Delaware in connection with the Series D Preferred Stock financing, as the same may be further amended, restated, supplemented, or otherwise modified from time to time.
"Ridgeline" means Ridgeline Ventures Fund III LP, a Delaware limited partnership, with its principal office at 555 California Street, Suite 2200, San Francisco, CA 94104.
"Ridgeline Designee" has the meaning set forth in Section 2.2(b) of this Agreement.
"Sale of the Company" has the meaning set forth in the definition of Change of Control; in the context of Article 4 (Drag-Along Rights), the terms "Sale of the Company" and "Change of Control" shall be used interchangeably.
"Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
"Series A Preferred Stock" means the 12,000,000 shares of Series A Preferred Stock, par value $0.0001 per share, of the Company, all of which are held by Ridgeline and were originally issued at a purchase price of $0.80 per share in connection with the Company's Series A Preferred Stock financing in 2018.
"Series B Preferred Stock" means the 16,000,000 shares of Series B Preferred Stock, par value $0.0001 per share, of the Company, all of which are held by Northgate and were originally issued at a purchase price of $2.00 per share in connection with the Company's Series B Preferred Stock financing in 2019.
"Series C Preferred Stock" means the 12,000,000 shares of Series C Preferred Stock, par value $0.0001 per share, of the Company, all of which are held by Brindoval and were originally issued at a purchase price of $3.00 per share in connection with the Company's Series C Preferred Stock financing in 2021.
"Series D Preferred Stock" means the 15,000,000 shares of Series D Preferred Stock, par value $0.0001 per share, of the Company, to be issued and sold to Pinnacle at a purchase price of $4.00 per share pursuant to the Purchase Agreement, subject to final pricing. The Parties acknowledge that valuation negotiations relating to the Series D Preferred Stock financing are ongoing, with a pre-money valuation range under discussion of between $260,000,000 and $320,000,000, and that the final per share purchase price, the number of shares to be issued, and related terms remain subject to further negotiation and agreement among the Parties.
"Shares" means, collectively, all shares of Common Stock and Preferred Stock, whether now held or hereafter acquired by a Stockholder, including shares acquired by reason of stock splits, stock dividends, reclassifications, conversions, exercises of options or warrants, or otherwise.
"Stockholders" means, collectively, the Founders, the Investors, and any other Key Holders who are parties to this Agreement from time to time.
"Transaction Agreements" means, collectively, this Agreement, the Purchase Agreement, the Restated Certificate, the Amended and Restated Investors' Rights Agreement of even date herewith, the Amended and Restated Right of First Refusal and Co-Sale Agreement of even date herewith, and any other agreements entered into in connection with the Series D Preferred Stock financing.
"Transfer" means any sale, assignment, pledge, hypothecation, encumbrance, grant of a security interest, or other transfer or disposition, whether direct or indirect, voluntary or involuntary, by operation of law or otherwise, of any Shares or any interest therein, including by way of merger, consolidation, conversion, exchange, gift, bequest, or intestate succession, or through any derivative transaction.
Section 1.2 — Rules of Construction
Unless the context otherwise requires:
(a) The term "including" (and its correlatives "include" and "includes") means "including, without limitation."
(b) References to "Articles," "Sections," "Exhibits," and "Schedules" are references to Articles and Sections of, and Exhibits and Schedules to, this Agreement.
(c) References to a "party" or "Stockholder" include such party's or Stockholder's successors and permitted assigns.
(d) All headings and captions contained in this Agreement are inserted for convenience of reference only and shall not be deemed to be a part of this Agreement or to affect the construction or interpretation of any provision hereof.
(e) References to any statute, rule, or regulation include any amendments thereto and any successor statute, rule, or regulation, including any rules and regulations promulgated thereunder.
(f) Words in the singular include the plural, and words in the plural include the singular, and the use of any gender shall be applicable to all genders.
(g) References to "dollars" or "$" mean the lawful currency of the United States of America.
(h) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, as further provided in Section 8.2 of this Agreement.
(i) In the event of any conflict between the provisions of this Agreement and the provisions of the Restated Certificate, the provisions of the Restated Certificate shall control to the extent of such conflict.
ARTICLE 2: VOTING PROVISIONS — BOARD COMPOSITION
Section 2.1 — Board Size
The Board shall consist of seven (7) directors. The Restated Certificate shall provide that the authorized number of directors of the Company shall be fixed at seven (7). Each Stockholder agrees to vote all Shares held by such Stockholder, and to take all other actions within such Stockholder's control (whether as a stockholder, director, officer, or otherwise), so as to ensure that the authorized number of directors on the Board is at all times seven (7). Any increase or decrease in the authorized number of directors of the Company shall require the prior written consent of (i) the Founders, (ii) the Investor Majority, and (iii) the Board (including at least one Founder Designee and at least one director designated by an Investor).
Section 2.2 — Board Composition
Each Stockholder agrees to vote all Shares held by such Stockholder at each election of directors of the Company, and to take all other necessary or desirable actions within such Stockholder's control (including, without limitation, attendance at meetings in person or by proxy for purposes of obtaining a quorum, execution of written consents in lieu of meetings, and, if applicable, the exercise of any rights pursuant to the Restated Certificate or Bylaws of the Company with respect to the designation, nomination, or election of directors), so as to ensure that the composition of the Board shall be as follows:
(a) Founder Designees (2 Seats). Two (2) directors designated by the Founders (each, a "Founder Designee" and collectively, the "Founder Designees"), one of whom shall be the then-serving Chief Executive Officer of the Company (the "CEO Designee"), for so long as a Founder is serving as the Company's Chief Executive Officer. The initial Founder Designees shall be:
(i) Raj Anand, who currently serves as the Chief Executive Officer and Co-Founder of the Company, who shall also serve as the CEO Designee; and
(ii) Lena Kovac, who currently serves as the Chief Technology Officer and Co-Founder of the Company.
The right to designate the Founder Designees shall be held jointly by Raj Anand and Lena Kovac, exercisable so long as the Founders collectively hold at least [●]% of the then-outstanding shares of Common Stock of the Company (calculated on an as-converted basis). In the event of any disagreement between the Founders with respect to the designation of a Founder Designee, Raj Anand shall have the right to designate the CEO Designee seat, and Lena Kovac shall have the right to designate the remaining Founder Designee seat, in each case subject to the minimum ownership threshold set forth in this Section 2.2(a). In the event that a Founder ceases to serve as the Chief Executive Officer of the Company, the CEO Designee seat shall continue to be designated by the Founders in accordance with the foregoing provisions.
(b) Ridgeline Designee (1 Seat). One (1) director designated by Ridgeline Ventures Fund III LP (the "Ridgeline Designee"). The initial Ridgeline Designee shall be:
Priya Dasgupta, Partner, Ridgeline Ventures.
The right to designate the Ridgeline Designee shall be exercisable by Ridgeline so long as Ridgeline (together with its affiliates) holds at least [●] shares of Series A Preferred Stock (or shares of Common Stock issued upon conversion thereof). In the event that Ridgeline ceases to hold the requisite number of shares, the Ridgeline Designee seat shall be redesignated as an additional seat to be filled by the Investor Majority, unless otherwise agreed by the Founders and the Investor Majority.
(c) Northgate Designee (1 Seat). One (1) director designated by Northgate Growth Partners Fund II LP (the "Northgate Designee"). The initial Northgate Designee shall be:
Elliott Margolis, Managing Director, Northgate Growth Partners.
The right to designate the Northgate Designee shall be exercisable by Northgate so long as Northgate (together with its affiliates) holds at least [●] shares of Series B Preferred Stock (or shares of Common Stock issued upon conversion thereof). In the event that Northgate ceases to hold the requisite number of shares, the Northgate Designee seat shall be redesignated as an additional seat to be filled by the Investor Majority, unless otherwise agreed by the Founders and the Investor Majority.
(d) Brindoval Designee (1 Seat). One (1) director designated by Brindoval Capital Group LLC (the "Brindoval Designee"). The initial Brindoval Designee shall be:
Diana Chen, Principal, Brindoval Capital Group.
The right to designate the Brindoval Designee shall be exercisable by Brindoval so long as Brindoval (together with its affiliates) holds at least [●] shares of Series C Preferred Stock (or shares of Common Stock issued upon conversion thereof). In the event that Brindoval ceases to hold the requisite number of shares, the Brindoval Designee seat shall be redesignated as an additional seat to be filled by the Investor Majority, unless otherwise agreed by the Founders and the Investor Majority.
(e) Pinnacle Designee (1 Seat). One (1) director designated by Pinnacle Venture Fund II LP (the "Pinnacle Designee"). The initial Pinnacle Designee shall be:
Marcus Trejo, Partner and Head of Growth Equity, Pinnacle Capital Management LLC, or his designee.
The right to designate the Pinnacle Designee shall be exercisable by Pinnacle so long as Pinnacle (together with its affiliates) holds at least [●] shares of Series D Preferred Stock (or shares of Common Stock issued upon conversion thereof). In the event that Pinnacle ceases to hold the requisite number of shares, the Pinnacle Designee seat shall be redesignated as an additional seat to be filled by the Investor Majority, unless otherwise agreed by the Founders and the Investor Majority.
Pinnacle's board designee shall be entitled to indemnification and directors' and officers' liability insurance coverage on the same terms and conditions as are provided to the other non-employee directors of the Company. In connection with the foregoing, the Company shall enter into a separate Indemnification Agreement with the Pinnacle Designee, in a form reasonably acceptable to Pinnacle and consistent with the indemnification agreements previously entered into by the Company with its existing directors, concurrently with or promptly following the closing of the transactions contemplated by the Purchase Agreement.
(f) Independent Designee (1 Seat). One (1) independent director (the "Independent Designee") mutually agreed upon by (i) the Founders, (ii) the Investor Majority, and (iii) the then-serving members of the Board. The initial Independent Designee shall be determined by the Parties following the date hereof and prior to the first annual meeting of stockholders occurring after the closing of the transactions contemplated by the Purchase Agreement.
The Independent Designee shall not be an employee, officer, consultant, or affiliate of the Company or of any Investor or any affiliate of any Investor. The Independent Designee shall qualify as "independent" under the applicable listing standards of the New York Stock Exchange or The Nasdaq Stock Market LLC (as applicable), the rules and regulations of the Securities and Exchange Commission, and any other applicable governance standards, as though such standards were then applicable to the Company. The Parties intend that the Independent Designee shall bring relevant industry experience and independent judgment to the Board and shall serve as an impartial voice in connection with any matters where the interests of the Founders and the Investors may diverge.
Section 2.3 — Failure to Designate
In the event that any party or parties entitled to designate a director pursuant to Section 2.2 shall fail to designate a representative to fill a Board seat within thirty (30) days after the occurrence of a vacancy in such seat (whether by reason of death, resignation, removal, or otherwise), such Board seat shall remain vacant until such time as the designating party or parties designate a replacement in accordance with the provisions of Section 2.2. No other Stockholder, and no other party entitled to designate a director with respect to a different Board seat, shall have the right to fill such vacancy. Notwithstanding the foregoing, a quorum of the Board may be established without such vacant seat being filled, provided that a majority of the then-serving directors are present at the applicable meeting of the Board, whether in person or by means of remote communication as permitted under applicable law and the Bylaws of the Company.
Section 2.4 — Removal and Replacement
A director designated pursuant to Section 2.2 may be removed from the Board (with or without cause) only at the written request of, or upon the affirmative vote of, the party or parties entitled to designate such director under Section 2.2, and any vacancy created by such removal shall be filled only by a person designated by the party or parties entitled to designate such director under Section 2.2. Each Stockholder agrees to vote all Shares held by such Stockholder, and to take all other necessary or desirable actions within such Stockholder's control, to effectuate such removal and replacement promptly upon receipt of written request from the designating party or parties. No Stockholder shall take any action to remove, or vote for the removal of, a director designated by another party under Section 2.2 without the prior written consent of the designating party.
Section 2.5 — No Liability for Voting Obligations
No Stockholder shall incur any liability to any other Stockholder, to the Company, or to any other Person for any action taken (or any failure to act) in good faith in exercising such Stockholder's voting obligations under this Article 2, provided that such action (or failure to act) is in compliance with the express terms of this Agreement. The foregoing shall not limit or affect any liability that a Stockholder may have to any other Person arising from a breach of the express terms of this Agreement or from such Stockholder's obligations under applicable law (including the fiduciary duties of any Stockholder who also serves as a director or officer of the Company).
Section 2.6 — Board Observer Rights
[Note to Draft: The Parties will discuss whether any Investor that is a party to this Agreement but that does not hold a right to designate a Board member pursuant to Section 2.2 shall be entitled to designate a non-voting observer to attend meetings of the Board. Any such observer right would be subject to customary limitations, including the right of the Board to exclude the observer from any portion of a meeting at which matters subject to attorney-client privilege or that would give rise to a conflict of interest are discussed. This Section is reserved as a placeholder pending resolution of this discussion.]
Section 2.7 — Compensation; Expenses
Non-employee directors shall be entitled to reimbursement of all reasonable out-of-pocket expenses actually incurred in connection with attending meetings of the Board or any committee thereof, including travel, lodging, and meal expenses, upon submission of reasonable documentation supporting such expenses. The payment of any additional director compensation or fees, including annual retainers, meeting fees, or equity-based compensation, if any, shall be determined by the Board from time to time in its discretion, subject to applicable law and the Restated Certificate.
Section 2.8 — Committees
The Board may establish such standing and ad hoc committees as the Board determines to be necessary or appropriate from time to time, in accordance with the Restated Certificate, the Bylaws of the Company, and applicable law. The composition and authority of each such committee shall be determined by the Board; provided, however, that at least one (1) director designated by an Investor pursuant to Section 2.2(b), (c), (d), or (e) shall serve on each standing committee of the Board, including, without limitation, the audit committee, the compensation committee, and the nominating and corporate governance committee (or any committee performing substantially similar functions). The foregoing requirement shall not limit the Board's ability to appoint additional members to any committee or to establish the size of any committee.
ARTICLE 3: VOTING ON OTHER MATTERS
Section 3.1 — Restated Certificate
Each Stockholder agrees to vote all Shares held by such Stockholder, and to take all other actions within such Stockholder's control, in favor of the adoption and filing of the Restated Certificate with the Secretary of State of the State of Delaware, which Restated Certificate shall authorize the issuance of the Series D Preferred Stock and shall set forth the rights, preferences, privileges, and restrictions of the Series D Preferred Stock and any amendments to the rights, preferences, privileges, and restrictions of the previously authorized series of Preferred Stock, including, without limitation, the authorization of the Series D Preferred Stock, the applicable liquidation preferences, anti-dilution provisions, conversion rights, dividend rights, redemption provisions, and protective provisions as set forth in the Restated Certificate.
Section 3.2 — Increase in Authorized Shares
Each Stockholder agrees to vote all Shares held by such Stockholder, and to take all other actions within such Stockholder's control, in favor of any increase in the authorized number of shares of Common Stock or Preferred Stock of the Company reasonably recommended by the Board, to the extent necessary to (a) accommodate the issuance of the Series D Preferred Stock pursuant to the Purchase Agreement, (b) accommodate the conversion of all outstanding shares of Preferred Stock into shares of Common Stock, and (c) if applicable, accommodate the expansion of the Company's ESOP.
Note to Draft: The Company has proposed expanding the ESOP share reserve by 5,000,000 shares (from the current authorized pool of 12,000,000 shares to a total of 17,000,000 shares). Pinnacle's position is that any such ESOP pool expansion should be included in the pre-money capitalization for purposes of calculating the per share purchase price of the Series D Preferred Stock and the resulting pre-money valuation. The treatment of the option pool expansion—including whether it is reflected on a pre-money or post-money basis—remains subject to ongoing negotiation among the Parties and has not been resolved as of the date of this draft. The Parties anticipate addressing this matter in connection with the finalization of the Purchase Agreement and the Restated Certificate.
Section 3.3 — Voting for ESOP Matters
Each Stockholder agrees to vote all Shares held by such Stockholder in favor of any amendment to, or restatement of, the Company's ESOP as may be approved by the Board from time to time, including any increase in the number of shares reserved for issuance thereunder, subject in all cases to the protective provisions set forth in the Restated Certificate and any consent rights of the holders of Preferred Stock set forth therein. Nothing in this Section 3.3 shall require any Stockholder to vote in favor of any amendment to the ESOP that has not been approved by the Board in accordance with the Restated Certificate and applicable law.
ARTICLE 4: DRAG-ALONG RIGHTS
Section 4.1 — Drag-Along Obligation
In the event that a Sale of the Company or Change of Control (a "Drag-Along Sale") is approved by (i) the Board (including the affirmative vote of at least one (1) Founder Designee then serving on the Board), and (ii) the Investor Majority (that is, the holders of a majority of the then-outstanding shares of Preferred Stock, voting together as a single class on an as-converted-to-Common-Stock basis), then each Stockholder hereby agrees, with respect to all Shares then held by such Stockholder:
(a) to vote all Shares (whether by written consent or at a meeting of stockholders duly called for such purpose) in favor of such Drag-Along Sale, and to vote against any proposal or action that could reasonably be expected to delay, impede, frustrate, prevent, or materially adversely affect the consummation of such Drag-Along Sale;
(b) to refrain from exercising, and to waive, any dissenters' rights, appraisal rights, or similar rights available under the DGCL or any other applicable law with respect to such Drag-Along Sale, to the fullest extent permitted by law;
(c) to execute and deliver all agreements, instruments, certificates, and documents required to be executed and delivered in connection with the consummation of such Drag-Along Sale, including the definitive acquisition agreement (whether structured as a merger agreement, stock purchase agreement, asset purchase agreement, or otherwise) and any ancillary documents, escrow agreements, stockholder support agreements, letters of transmittal, and similar instruments;
(d) to tender, transfer, and deliver all Shares to the acquiror (or its designee) in accordance with the terms and conditions of such Drag-Along Sale, free and clear of all liens, claims, encumbrances, and restrictions (other than restrictions arising under applicable securities laws or this Agreement); and
(e) to take all other actions reasonably requested by the Investor Majority or the Board that are necessary or desirable to consummate the Drag-Along Sale in accordance with the terms and conditions set forth in the definitive transaction documents.
Note to Draft: This Section 4.1 reflects Pinnacle's proposed formulation, pursuant to which the Investor Majority (i.e., the holders of a majority of the then-outstanding shares of Preferred Stock, voting as a single class on an as-converted basis) may trigger the drag-along obligation, subject to Board approval (including at least one Founder Designee vote). The Founders have proposed, but this draft does not yet incorporate, a minimum enterprise value threshold of Five Hundred Million Dollars ($500,000,000), below which no Drag-Along Sale could be compelled over the Founders' objection. Among the existing Investors, Ridgeline and Brindoval have expressed support for the inclusion of a founder-friendly enterprise value floor, while Northgate has sided with Pinnacle's position favoring an unrestricted drag-along right (subject only to the Board approval requirement). This issue remains an open negotiation point and the Parties expect to resolve it prior to the execution of the definitive version of this Agreement.
Section 4.2 — Conditions to Drag-Along
The obligations of the Stockholders under Section 4.1 shall be subject to the satisfaction of each of the following conditions:
(a) Allocation of Consideration. The aggregate consideration to be received by all Stockholders in connection with the Drag-Along Sale shall be allocated among the Stockholders in accordance with the liquidation preferences and distribution provisions set forth in the Restated Certificate, applied as if the aggregate consideration were being distributed in connection with a Deemed Liquidation Event (as defined in the Restated Certificate). Following the satisfaction of all applicable liquidation preferences, the remaining consideration shall be allocated pro rata among the holders of Common Stock and the holders of Preferred Stock on an as-converted-to-Common-Stock basis, in accordance with the Restated Certificate.
(b) Form of Consideration. Upon the consummation of the Drag-Along Sale, each Stockholder shall receive the same form of consideration as every other Stockholder (on a per-share, as-converted basis), or, at the election of the Investor Majority (or the acquiror, as applicable), each Stockholder shall have the option to receive cash in lieu of any non-cash consideration that would otherwise be payable to such Stockholder. In the event that any consideration is placed in escrow or is subject to holdback or earnout arrangements, each Stockholder shall bear its pro rata share of such escrow, holdback, or earnout obligations.
(c) Representations and Warranties. Each Stockholder shall be obligated to make customary representations and warranties in connection with the Drag-Along Sale solely as to (i) such Stockholder's ownership of and authority to transfer its Shares, (ii) the absence of liens, claims, and encumbrances on such Stockholder's Shares (other than restrictions arising under applicable securities laws or this Agreement), and (iii) the enforceability of the definitive transaction documents against such Stockholder. No Stockholder shall be required to make any representations or warranties regarding the business, operations, financial condition, assets, liabilities, or prospects of the Company or any of its subsidiaries, except that any Stockholder who is a Founder and who also serves as an officer or employee of the Company at the time of such Drag-Along Sale may be required to make such additional representations and warranties regarding the Company as are customary for a selling officer or employee in comparable transactions, subject to negotiation in good faith at the time of such Drag-Along Sale.
(d) Limitation on Indemnification. Each Stockholder's aggregate liability for indemnification obligations arising in connection with the Drag-Along Sale (whether pursuant to the definitive acquisition agreement, an escrow agreement, or otherwise) shall not exceed such Stockholder's pro rata share (determined based on such Stockholder's proportion of the aggregate consideration received by all Stockholders) of the total indemnification obligations of all Stockholders collectively; provided, however, that the foregoing limitation shall not apply in the case of fraud or willful misrepresentation by such Stockholder. In no event shall any Stockholder be liable for indemnification in an amount that exceeds the net consideration actually received by such Stockholder in connection with the Drag-Along Sale (after deducting such Stockholder's share of any transaction expenses).
Section 4.3 — Drag-Along Notice
In the event that the conditions set forth in Section 4.1 for a Drag-Along Sale have been satisfied, the Investor Majority (or their designated representative) shall deliver written notice (the "Drag-Along Notice") to each Stockholder not less than fifteen (15) business days prior to the anticipated closing date of the proposed Drag-Along Sale. The Drag-Along Notice shall include the following information:
(i) the identity of the proposed acquiror or acquiring entity;
(ii) the form and aggregate amount of consideration to be received by the Stockholders (and, if applicable, a good-faith estimate of the consideration to be received per share of Common Stock and per share of each series of Preferred Stock, after giving effect to the liquidation preferences and distribution provisions of the Restated Certificate);
(iii) the anticipated closing date of the Drag-Along Sale;
(iv) a summary of the material terms and conditions of the proposed Drag-Along Sale, including any material conditions to closing;
(v) copies of, or a summary of, the definitive transaction documents (to the extent available at the time of such notice); and
(vi) instructions for the tender, transfer, or exchange of Shares by the Stockholders, including any actions required to be taken by the Stockholders in connection therewith.
The Investor Majority shall use commercially reasonable efforts to provide the Drag-Along Notice as promptly as practicable after the material terms of the proposed Drag-Along Sale have been determined and the Board and the Investor Majority have approved such transaction.
Section 4.4 — Exceptions to Drag-Along
[Note to Draft: This Section 4.4 is reserved and left intentionally blank pending the resolution of the open negotiation between the Founders and the Investors regarding the inclusion of a minimum enterprise value threshold for the exercise of drag-along rights. As noted in the commentary to Section 4.1, the Founders have proposed that the drag-along obligation set forth in this Article 4 shall not apply to any Sale of the Company at an enterprise value below Five Hundred Million Dollars ($500,000,000), measured as of the date of the definitive acquisition agreement. This provision has not been incorporated into this draft and remains subject to negotiation among the Parties. The Parties intend to resolve this matter prior to execution of the definitive version of this Agreement.]
Section 4.5 — Irrevocable Proxy
In order to secure the performance of each Stockholder's obligations under this Article 4, each Stockholder hereby irrevocably appoints the Investor Majority (or any designee or designees of the Investor Majority) as the attorney-in-fact and proxy of such Stockholder, with full power of substitution, to vote all of such Stockholder's Shares in favor of a Drag-Along Sale and to take all actions described in Section 4.1 on behalf of such Stockholder, solely in the event that such Stockholder fails to comply with the obligations of this Article 4 within five (5) business days following receipt of the applicable Drag-Along Notice. Each Stockholder acknowledges and agrees that the proxy granted hereby is coupled with an interest and is irrevocable, and that the proxy shall survive the death, incapacity, dissolution, or termination of such Stockholder and shall not be revoked by any such event. The proxy granted in this Section 4.5 shall terminate upon the termination of this Agreement in accordance with Article 7.
ARTICLE 5: ADDITIONAL COVENANTS
Section 5.1 — Legend
Each certificate (or, in the case of uncertificated shares, each book-entry) representing Shares held by a Stockholder who is a party to this Agreement shall bear (or, in the case of uncertificated shares, shall be subject to) a legend or notation substantially in the following form:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF AN AMENDED AND RESTATED VOTING AGREEMENT DATED AS OF JUNE 20, 2022, AS MAY BE AMENDED FROM TIME TO TIME, BY AND AMONG THE ISSUER AND CERTAIN OF ITS STOCKHOLDERS. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE ISSUER. THE SHARES MAY NOT BE SOLD, TRANSFERRED, PLEDGED, OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE TERMS OF SUCH AGREEMENT."
The Company agrees that it shall cause the foregoing legend to be placed on all certificates and book-entry notations representing Shares that are subject to this Agreement, and that it shall not register any Transfer of Shares on the books and records of the Company unless such Transfer is made in compliance with this Agreement.
Section 5.2 — Transfers Subject to Agreement
No Stockholder shall Transfer any Shares unless the proposed transferee agrees in writing, as a condition precedent to the effectiveness of such Transfer, to be bound by all of the terms and conditions of this Agreement to the same extent as the transferring Stockholder, by executing and delivering a joinder agreement in substantially the form attached hereto as Exhibit B or such other form as may be reasonably acceptable to the Company and the Investor Majority. Any Transfer or purported Transfer of Shares in violation of this Section 5.2 shall be void and of no force or effect, and the Company shall not register any such Transfer on the books and records of the Company. The foregoing requirements shall be subject to, and shall be interpreted in a manner consistent with, the terms of the Amended and Restated Right of First Refusal and Co-Sale Agreement of even date herewith among the Company, the Founders, and the Investors.
Section 5.3 — Conflicting Agreements
No Stockholder shall enter into any agreement, arrangement, understanding, or commitment with any Person, whether written or oral, that is inconsistent with, or that conflicts with or would reasonably be expected to conflict with, any provision of this Agreement, including any agreement with respect to the voting or transfer of such Stockholder's Shares that is inconsistent with the obligations set forth herein. Each Stockholder hereby represents and warrants to the other Parties that, as of the date hereof, such Stockholder has not previously entered into, and is not currently a party to, any agreement, arrangement, understanding, or commitment (other than the Prior Agreement, which is being superseded by this Agreement) that conflicts with, or would reasonably be expected to conflict with, any provision of this Agreement.
Section 5.4 — Specific Performance
Each of the Parties acknowledges and agrees that a breach or threatened breach of any provision of this Agreement would cause irreparable harm and significant injury to the other Parties, the exact amount of which would be difficult or impossible to ascertain, and that monetary damages alone would not be an adequate remedy for any such breach or threatened breach. Accordingly, each of the Parties agrees that, in addition to any other rights and remedies that may be available at law or in equity, any Party shall be entitled to seek and obtain equitable relief, including specific performance, temporary and permanent injunctive relief, and restraining orders, to enforce the provisions of this Agreement, without the necessity of proving actual damages or posting any bond or other security (to the extent permitted by applicable law). The rights and remedies of the Parties under this Section 5.4 shall be cumulative and shall be in addition to, and not in limitation of, any other rights or remedies available to the Parties at law or in equity.
ARTICLE 6: REPRESENTATIONS AND WARRANTIES
Section 6.1 — Stockholder Representations
Each Stockholder, severally and not jointly, represents and warrants to the Company and to each other Stockholder as of the date hereof as follows:
(a) Power and Authority. Such Stockholder has full legal right, power, and authority to execute and deliver this Agreement and to perform all of its obligations hereunder. In the case of any Stockholder that is a natural person, such Stockholder has the legal capacity to execute, deliver, and perform this Agreement. In the case of any Stockholder that is an entity, the execution, delivery, and performance of this Agreement by such entity has been duly authorized by all necessary corporate, partnership, limited liability company, or other action on the part of such entity, and no further action or proceeding on the part of such entity is necessary to authorize the execution, delivery, and performance of this Agreement.
(b) Binding Obligation. This Agreement constitutes the legal, valid, and binding obligation of such Stockholder, enforceable against such Stockholder in accordance with its terms, subject to (i) applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, and similar laws of general application relating to or affecting the enforcement of creditors' rights generally, and (ii) general principles of equity, whether enforcement is sought in a proceeding in equity or at law (the "Enforceability Exceptions").
(c) No Conflicts. The execution and delivery of this Agreement by such Stockholder, and the performance by such Stockholder of its obligations hereunder, do not and will not (i) conflict with or result in a breach or violation of any provision of the organizational documents of such Stockholder (in the case of a Stockholder that is an entity), (ii) conflict with, result in a breach or default under, or give rise to any right of termination, cancellation, or acceleration under, any agreement, instrument, obligation, or other arrangement to which such Stockholder is a party or by which such Stockholder or any of its assets are bound, or (iii) violate any law, rule, regulation, order, judgment, or decree applicable to such Stockholder.
(d) Organization and Good Standing (Entity Stockholders). With respect to each Investor and each Stockholder that is an entity: such entity is duly organized, validly existing, and in good standing (or the equivalent thereof) under the laws of its jurisdiction of organization, and has all requisite power and authority to own, lease, and operate its properties and assets and to conduct its business as presently conducted.
Section 6.2 — Company Representations
The Company represents and warrants to each Stockholder as of the date hereof as follows:
(a) Incorporation and Good Standing. The Company is a corporation duly incorporated, validly existing, and in good standing under the laws of the State of Delaware, as evidenced by its registration with the Delaware Secretary of State under File Number 6274913. The Company has all requisite corporate power and authority to execute, deliver, and perform this Agreement and to carry on its business as presently conducted.
(b) Authorization. The execution, delivery, and performance of this Agreement by the Company have been duly authorized by all necessary corporate action on the part of the Company, including the approval of the Board. No further corporate action on the part of the Company or its stockholders is required to authorize the execution, delivery, and performance of this Agreement, other than the adoption of the Restated Certificate as contemplated by the Transaction Agreements.
(c) Binding Obligation. This Agreement constitutes the legal, valid, and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to the Enforceability Exceptions.
ARTICLE 7: TERMINATION
Section 7.1 — Termination Events
This Agreement shall terminate and be of no further force or effect upon the earliest to occur of any of the following events:
(a) the consummation of a Qualified IPO;
(b) the consummation of a Sale of the Company or Change of Control in compliance with the applicable provisions of this Agreement (including, if applicable, Article 4);
(c) the delivery of a written instrument executed by (i) the Company (acting with the approval of the Board), (ii) the Founders (or their successors), and (iii) the Investor Majority, expressly consenting to the termination of this Agreement; or
(d) the dissolution, winding up, or cessation of all business operations of the Company in accordance with the DGCL.
Section 7.2 — Effect of Termination
Upon the termination of this Agreement in accordance with Section 7.1, all rights and obligations of the Parties under this Agreement shall cease and be of no further force or effect, and this Agreement shall thereafter be null and void; provided, however, that (a) the provisions of Article 6 (Representations and Warranties), Section 8.1 (Notices), Section 8.2 (Governing Law), Section 8.3 (Jurisdiction; Venue), Section 8.4 (Entire Agreement), Section 8.7 (Counterparts; Electronic Signatures), and Section 8.8 (Severability) shall survive the termination of this Agreement, and (b) the termination of this Agreement shall not relieve any Party from liability for any breach of this Agreement occurring prior to such termination.
Section 7.3 — Termination of Prior Agreement
The Prior Agreement is hereby amended, restated, and superseded in its entirety by this Agreement. The Prior Agreement shall be of no further force or effect from and after the date of this Agreement, and all rights and obligations of the parties to the Prior Agreement thereunder shall be deemed terminated and discharged. All references in any Transaction Agreement or other document to the "Voting Agreement" shall be deemed to refer to this Amended and Restated Voting Agreement, as may be further amended from time to time in accordance with Section 8.5.
ARTICLE 8: MISCELLANEOUS
Section 8.1 — Notices
All notices, requests, demands, consents, and other communications required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been duly given if (a) delivered by hand or by a nationally recognized overnight courier service, (b) sent by email (with written confirmation of receipt by the recipient), or (c) sent by registered or certified mail, return receipt requested, postage prepaid, in each case to the Parties at the following addresses (or at such other addresses as a Party may designate by written notice to the other Parties in accordance with this Section 8.1):
If to the Company:
Verdana Software, Inc. 1175 NW Couch Street, Suite 800 Portland, OR 97209
Attention: Sandra Mikkelsen, General Counsel
Email: s.mikkelsen@verdanasoftware.com
with a copy (which shall not constitute notice) to:
Langford Price & Associates LLP 1000 SW Broadway, Suite 1600 Portland, OR 97205