ACCELERATED CONNECTIONS, INC.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
JULY 3, 1997
TABLE OF CONTENTS
Page
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1. Purchase and Sale of Stock. . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.1 Sale and Issuance of Series A Preferred Stock. . . . . . . . . . . . . . .1
1.2 First Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.3 Second Closing.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.4 Third Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
1.5 Discretionary Fourth Closing.. . . . . . . . . . . . . . . . . . . . . . .2
2. Representations and Warranties of the Company.. . . . . . . . . . . . . . . . .2
2.1 Organization, Good Standing and Qualification. . . . . . . . . . . . . . .2
2.2 Capitalization and Voting Rights.. . . . . . . . . . . . . . . . . . . . .2
2.3 Subsidiaries.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.4 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.5 Valid Issuance of Preferred and Common Stock.. . . . . . . . . . . . . . .3
2.6 Governmental Consents. . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.7 Returns and Complaints.. . . . . . . . . . . . . . . . . . . . . . . . . .4
2.8 Litigation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.9 Proprietary Information Agreements.. . . . . . . . . . . . . . . . . . . .5
2.10 Patents and Trademarks.. . . . . . . . . . . . . . . . . . . . . . . . . .5
2.11 Compliance with Other Instruments. . . . . . . . . . . . . . . . . . . . .5
2.12 Agreements; Action.. . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.13 Related-Party Transactions.. . . . . . . . . . . . . . . . . . . . . . . .7
2.14 Permits. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.15 Environmental and Safety Laws. . . . . . . . . . . . . . . . . . . . . . .7
2.16 Manufacturing and Marketing Rights.. . . . . . . . . . . . . . . . . . . .7
2.17 Disclosure.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.18 Registration Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.19 Corporate Documents. . . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.20 Title to Property and Assets.. . . . . . . . . . . . . . . . . . . . . . .8
2.21 Employee Benefit Plans.. . . . . . . . . . . . . . . . . . . . . . . . . .8
2.22 Tax Returns, Payments and Elections. . . . . . . . . . . . . . . . . . . .8
2.23 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.24 Minute Books.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.25 Labor Agreements and Actions.. . . . . . . . . . . . . . . . . . . . . . .9
3. Representations and Warranties of the Investor. . . . . . . . . . . . . . . . .9
3.1 Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.2 Purchase Entirely for Own Account. . . . . . . . . . . . . . . . . . . . .9
3.3 Disclosure of Information. . . . . . . . . . . . . . . . . . . . . . . . 10
3.4 Investment Experience. . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.5 Accredited Investor. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 Restricted Securities. . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 Further Limitations on Disposition.. . . . . . . . . . . . . . . . . . . 10
3.8 Legends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4. California Commissioner of Corporations . . . . . . . . . . . . . . . . . . . 11
4.1 Corporate Securities Law . . . . . . . . . . . . . . . . . . . . . . . . 11
5. Conditions of Investor's Obligations at First Closing.. . . . . . . . . . . . 11
5.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 12
5.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.3 Compliance Certificate.. . . . . . . . . . . . . . . . . . . . . . . . . 12
5.4 Qualifications.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.5 Proceedings and Documents. . . . . . . . . . . . . . . . . . . . . . . . 12
5.6 Board of Directors.. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
5.7 Investors' Rights Agreement. . . . . . . . . . . . . . . . . . . . . . . 12
5.8 Voting Agreement.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
6. Conditions of the Company's Obligations at the First Closing. . . . . . . . . 12
6.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 13
6.2 California Qualification . . . . . . . . . . . . . . . . . . . . . . . . 13
7. Conditions of Investor's Obligations at Second Closing. . . . . . . . . . . . 13
7.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 13
7.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.3 Qualifications.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8. Conditions of Investor's Obligations at Third Closing.. . . . . . . . . . . . 13
8.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 13
8.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
8.3 Qualifications.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9. Conditions of Investor's Obligations at Fourth Closing. . . . . . . . . . . . 14
9.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 14
9.2 Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9.3 Qualifications.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9.4 Approval.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
10. Miscellaneous.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
10.1 Survival of Warranties . . . . . . . . . . . . . . . . . . . . . . . . . 14
10.2 Successors and Assigns.. . . . . . . . . . . . . . . . . . . . . . . . . 14
10.3 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.4 Counterparts.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
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10.5 Titles and Subtitles.. . . . . . . . . . . . . . . . . . . . . . . . . 15
10.6 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.7 Finder's Fee.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.8 Expenses.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.9 Amendments and Waivers.. . . . . . . . . . . . . . . . . . . . . . . . 15
10.10 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.11 Aggregation of Stock . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.12 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
SCHEDULE A -- Schedule of Investors
SCHEDULE B -- Schedule of Common Holders
EXHIBIT A -- Restated Certificate of Incorporation
EXHIBIT B -- Investors' Rights Agreement
EXHIBIT C -- Voting Agreement
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SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT is made as of the 3rd
day of July 1997, by and between Accelerated Connections, Inc., a Delaware
corporation (the "Company'), and the investors listed on Schedule A hereto,
each of which is herein referred to as an "Investor.'
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1 SALE AND ISSUANCE OF SERIES A PREFERRED STOCK.
(a) RESTATED CERTIFICATE. The Company shall adopt and file
with the Secretary of State of Delaware on or before the Closing (as defined
below) the Restated Certificate of Incorporation in the form attached hereto
as EXHIBIT A.
(b) PURCHASE OF SERIES A STOCK. Subject to the terms and
conditions of this Agreement, each Investor agrees, severally, to purchase as
applicable at the First Closing, Second Closing, Third Closing and Fourth
Closing (together the "Closings') and the Company agrees to sell and issue
to each such Investor at the Closings that number of shares of the Company's
Series A Preferred Stock set forth opposite each such Investor's name on
Schedule A hereto for the purchase price set forth hereon.
1.2 FIRST CLOSING. The first purchase and sale of the Series A
Preferred Stock shall take place at the offices of Xxxxxxx, Xxxxxxx &
Xxxxxxxx LLP, 000 Xxxx "X' Xxxxxx, Xxxxx 0000, Xxx Xxxxx Xxxxxxxxxx, at
10:00 A.M., on July 3, 1997, or at such other time and place as the Company
and Investors acquiring in the aggregate more than half the shares of Series
A Preferred Stock sold pursuant hereto mutually agree upon orally or in
writing (which time and place are designated as the "First Closing'). At
the First Closing the Company shall deliver to each applicable Investor a
certificate representing the Series A Preferred Stock which such Investor is
purchasing at the First Closing (as set forth on Schedule A) against delivery
to the Company by such Investor of a check or wire transfer in the amount of
the purchase price therefor payable to the Company's order.
1.3 SECOND CLOSING. The second purchase and sale of the Series A
Preferred Stock shall take place at the offices of Xxxxxxx, Phleger &
Xxxxxxxx LLP, 000 Xxxx "X' Xxxxxx, Xxxxx 0000, Xxx Xxxxx Xxxxxxxxxx, at the
date set by the Board of Directors of the Company, provided that such date be
no later than July 31, 1997, at which the Company may sell up to the number
of shares set forth on Schedule A to Brentwood Associates VII, L.P. and such
other purchasers as it shall select (which time and place are designated as
the "Second Closing'). At the Second Closing, the Company shall deliver to
each applicable Investor a certificate representing the Series A Preferred
Stock which such Investor is purchasing at the Second Closing (as set forth
on Schedule A) against delivery to the Company by such Investor of a check or
wire transfer in the amount of the purchase price therefor payable to the
Company's order.
1.4 THIRD CLOSING. The third purchase and sale of the Series A
Preferred Stock shall take place at the offices of Xxxxxxx, Phleger &
Xxxxxxxx LLP, 000 Xxxx "X' Xxxxxx, Xxxxx 0000, Xxx Xxxxx Xxxxxxxxxx, at the
date set by the Company's Board of Directors, provided that such date shall
be no earlier than six (6) months following the date of the First Closing
(which time and place are designated as the "Third Closing'). At the Third
Closing the Company shall deliver to each applicable Investor a certificate
representing the Series A Preferred Stock which such Investor is purchasing
at the Third Closing (as set forth on Schedule A) against delivery to the
Company by such Investor of a check or wire transfer in the amount of the
purchase price therefor payable to the Company's order.
1.5 DISCRETIONARY FOURTH CLOSING. The fourth purchase and sale of
Series A Preferred Stock shall take place at the offices of Xxxxxxx, Phleger
& Xxxxxxxx LLP, 000 Xxxx "X' Xxxxxx, Xxxxx 0000, Xxx Xxxxx, Xxxxxxxxxx
00000, upon approval of the Board of Directors and the holders of a majority
of the Common Stock issued or issuable upon conversion of the Series A
Preferred Stock issued or issuable pursuant to the Series A Agreement, at the
date set by the Board of Directors, provided that such date is no earlier
than twelve (12) months and no later than eighteen (18) months from the date
of the First Closing (the "Fourth Closing'). At the Fourth Closing the
Company shall deliver to each Investor a certificate representing the Series
A Preferred Stock which such Investor is purchasing at the Fourth Closing (as
set forth on Schedule A) against delivery to the Company by such Investor of
a check or wire transfer in the amount of the purchase price therefor payable
to the Company's order.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to each Investor that, except as set forth on a
Schedule of Exceptions furnished each Investor, and special counsel for the
Investors, which exceptions shall be deemed to be representations and
warranties as if made hereunder:
2.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is
a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure so to qualify would have a
material adverse effect on its business or properties.
2.2 CAPITALIZATION AND VOTING RIGHTS. The authorized capital of
the Company consists, or will consist prior to the Closing, of:
(i) PREFERRED STOCK. 17,000,000 shares of Preferred Stock
(the "Preferred Stock'), all of which have been designated Series A
Preferred Stock and of which 300,000 are issued and outstanding (as set forth
on Schedule A). The rights,
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privileges and preferences of the Series A Preferred Stock will be as stated
in the Company's Restated Articles Certificate of Incorporation attached
hereto as EXHIBIT A.
(ii) COMMON STOCK. 39,764,706 shares of common stock
("Common Stock'), of which 900,735 shares are issued and outstanding and
are owned by the persons, and in the numbers specified in Schedule B hereto.
The outstanding shares of common stock are all duly and validly authorized
and issued, fully paid and nonassessable, and were issued in accordance with
the registration or qualification provisions of the Securities Act of 1933,
as amended and any relevant state securities laws, or pursuant to valid
exceptions therefrom.
(iii) Except for (A) the conversion privileges of the Series
A Preferred Stock to be issued under this Agreement and (B) the rights
provided in paragraph 2.4 of the Investors' Rights Agreement, there are not
outstanding any options, warrants, rights (including conversion or preemptive
rights) or agreements for the purchase or acquisition from the Company of any
shares of its capital stock. 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.
2.3 SUBSIDIARIES. The Company does not presently own or control,
directly or indirectly, any interest in any other corporation, association,
or other business entity.
2.4 AUTHORIZATION. All corporate action on the part of the
Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement and the Investors'
Rights Agreement, the performance of all obligations of the Company hereunder
and thereunder and the authorization, issuance (or reservation for issuance),
sale and delivery of the Series A Preferred Stock being sold hereunder and
the Common Stock issuable upon conversion of the Series A Preferred Stock has
been taken or will be taken prior to the Closing, and this Agreement and the
Investors' Rights Agreement constitute valid and legally binding obligations
of the Company, enforceable in accordance with their respective terms, except
(i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws of general application affecting enforcement of
creditors' rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
the Investors' Rights Agreement may be limited by applicable federal or state
securities laws.
2.5 VALID ISSUANCE OF PREFERRED AND COMMON STOCK.
(a) The Series A Preferred Stock which is being purchased by
the Investors hereunder, when issued, sold and delivered in accordance with
the terms hereof for the consideration expressed herein, will be duly and
validly issued, fully paid and nonassessable and, based in part upon the
representations of the Investors in this
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Agreement, will be issued in compliance with all applicable federal and state
securities laws and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and the Investors' Rights
Agreement and under applicable stock and federal securities law. The Common
Stock issuable upon conversion of the Series A Preferred Stock purchased
under this Agreement has been duly and validly reserved for issuance and,
upon issuance in accordance with the terms of the Restated Certificate of
Incorporation, shall be duly and validly issued, fully paid and
nonassessable, and issued in compliance with all applicable securities laws
and will be free of restrictions on transfer other than restrictions on
transfer under this Agreement and the Investors' Rights Agreement and under
applicable stock and federal securities law, as presently in effect, of the
United States and each of the states whose securities laws govern the
issuance of any of the Series A Preferred Stock hereunder.
(b) The outstanding shares of Common Stock are all duly and
validly authorized and issued, fully paid and nonassessable, and were issued
in compliance with all applicable federal and state securities laws.
2.6 GOVERNMENTAL CONSENTS. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state, local or provincial governmental authority
on the part of the Company is required in connection with the consummation of
the transactions contemplated by this Agreement, except for the filing
pursuant to Section 25102(f) of the California Corporate Securities Law of
1968, as amended, and the rules thereunder, which filing will be effected
within 15 days of the sale of the Series A Preferred Stock hereunder.
2.7 RETURNS AND COMPLAINTS. The Company has received no customer
complaints concerning its products and/or services, nor has it had any of its
products returned by a purchaser thereof, other than minor, nonrecurring
warranty problems.
2.8 LITIGATION. There is no action, suit, proceeding or
investigation pending or currently threatened against the Company which
questions the validity of this Agreement and the Investors' Rights Agreement
or the right of the Company to enter into any of them, or to consummate the
transactions contemplated hereby or thereby, or which might result, either
individually or in the aggregate, in any material adverse changes in the
assets, condition, affairs or prospects of the Company, financially or
otherwise, or any change in the current equity ownership of the Company. The
foregoing includes, without limitation, actions pending or threatened
involving the prior employment of any of the Company's employees, their use
in connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers. The Company is not a party or
subject to the provisions of any order, writ, injunction, judgment or decree
of any court or government agency or instrumentality. There is no action,
suit, proceeding or investigation by the Company currently pending or which
the Company intends to initiate.
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2.9 PROPRIETARY INFORMATION AGREEMENTS. Each employee, officer
and consultant of the Company has executed a Proprietary Information and
Inventions Agreement in the form provided to special counsel to the
Investors. The Company, after reasonable investigation, is not aware that
any of its employees, officers or consultant are in violation thereof, and
the Company will use its best efforts to prevent any such violation.
2.10 PATENTS AND TRADEMARKS. The Company has sufficient title and
ownership of all patents, trademarks, service marks, trade names, copyrights,
trade secrets, information, proprietary rights and processes necessary for
its business as now conducted and as proposed to be conducted without any
conflict with or infringement of the rights of others. There are no
outstanding options, licenses, or agreements of any kind relating to the
foregoing, nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes of any other person or entity. The Company
has not received any communications alleging that the Company has violated
or, by conducting its business as proposed, would violate any of the patents,
trademarks, service marks, trade names, copyrights or trade secrets or other
proprietary rights of any other person or entity. 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 the use of his best efforts to promote the
interests of the Company or that would conflict with the Company's business
as proposed to be conducted. Neither the execution nor delivery of this
Agreement and the Investors' Rights 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 of such employees is now obligated. The Company does not believe it is
or will be necessary to utilize any inventions of any of its employees (or
people it currently intends to hire) made prior to their employment by the
Company.
2.11 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default of any provisions of its Restated Certificate of
Incorporation or Bylaws or of any instrument, judgment, order, writ, decree
or contract to which it is a party or by which it is bound or, to its
knowledge, of any provision of federal or state statute, rule or regulation
applicable to the Company. The execution, delivery and performance of this
Agreement, the Investors' Rights Agreement or any Ancillary Agreements and
the consummation of the transactions contemplated hereby and thereby will not
result in any such violation or be in conflict with or constitute, with or
without the passage of time and giving of notice, either a default under any
such provision, instrument, judgment, order, writ, decree or contract or an
event which results in the creation of any lien, charge or encumbrance upon
any assets of the Company or the suspension, revocation, impairment,
forfeiture, or nonrenewal of any material permit,
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license, authorization, or approval applicable to the Company, its business
or operations or any of its assets or properties.
2.12 AGREEMENTS; ACTION.
(a) Except for agreements explicitly contemplated hereby and
by the Investors' Rights Agreement, there are no agreements, understandings
or proposed transactions between the Company and any of its officers,
directors, affiliates, or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to
which the Company is a party or by which it is bound which may involve (i)
obligations (contingent or otherwise) of, or payments to the Company in
excess of, $10,000, or (ii) the license of any patent, copyright, trade
secret or other proprietary right to or from the Company or (iii) provisions
restricting or affecting the development, manufacture or distribution of the
Company's products or services, or (iv) indemnification by the Company with
respect to infringement of proprietary rights.
(c) The Company has not (i) declared or paid any dividends,
or authorized or made any distribution upon or with respect to any class or
series of its capital stock, (ii) incurred any indebtedness for money
borrowed or any other liabilities individually in excess of $10,000 or, in
the case of indebtedness and/or liabilities individually less than $10,000,
in excess of $25,000 in the aggregate, (iii) made any loans or advances to
any person, other than ordinary advances for travel expenses, or (iv) sold,
exchanged or otherwise disposed of any of its assets or rights, other than
the sale of its inventory in the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including
persons or entities the Company has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the individual
minimum dollar amounts of such subsections.
(e) The Company is not a party to and is not bound by any
contract, agreement or instrument, or subject to any restriction under its
Restated Certificate of Incorporation or Bylaws, which adversely affects its
business as now conducted or as proposed to be conducted, its properties or
its financial condition.
(f) The Company has not engaged in the past three (3) months
in any discussion (i) with any representative of any corporation or
corporations regarding the consolidation or merger of the Company with or
into any such corporation or corporations, (ii) with any corporation,
partnership, association or other business entity or any individual regarding
the sale, conveyance or disposition of all or substantially all of the assets
of the Company of a transaction or series of related transactions in which
more than fifty percent (50%) of the voting power of the Company is disposed
of, or
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(iii) regarding any other form of acquisition, liquidation, dissolution or
winding up of the Company.
(g) As of the First Closing, the Company has not incurred any
expenses and has no liabilities individually in excess of $10,000 or, in the
case of expenses and/or liabilities individually less than $10,000, in excess
of $25,000 in the aggregate.
2.13 RELATED-PARTY TRANSACTIONS. No employee, officer, or director
of the Company or member of his or her immediate family is indebted to the
Company, nor is the Company indebted (or committed to make loans or extend or
guarantee credit) to any of them. To the best of the Company's knowledge,
none of such persons has any direct or indirect ownership interest in any
firm or corporation with which the Company is affiliated or with which the
Company has a business relationship, or any firm or corporation that competes
with the Company, except that employees, officers, or directors of the
Company and members of their immediate families may own stock in publicly
traded companies that may compete with the Company. No member of the
immediate family of any officer or director of the Company is directly or
indirectly interested in any material contract with the Company.
2.14 PERMITS. The Company has all franchises, permits, licenses,
and any similar authority necessary for the conduct of its business as now
being conducted by it, the lack of which could materially and adversely
affect the business, properties, prospects, or financial condition of the
Company and believes it can obtain, without undue burden or expense, any
similar authority for the conduct of its business as planned to be conducted.
The Company is not in default in any material respect under any of such
franchises, permits, licenses, or other similar authority.
2.15 ENVIRONMENTAL AND SAFETY LAWS. To the best of its knowledge,
the Company is not in violation of any applicable statute, law, or regulation
relating to the environment or occupational health and safety, and to the
best of its knowledge, no material expenditures are or will be required in
order to comply with any such existing statute, law, or regulation.
2.16 MANUFACTURING AND MARKETING RIGHTS. The Company has not
granted rights to manufacture, produce, assemble, license, market, or sell
its products to any other person and is not bound by any agreement that
affects the Company's exclusive right to develop, manufacture, assemble,
distribute, market, or sell its products.
2.17 DISCLOSURE. The Company has fully provided each Investor with
all the information which such Investor has requested for deciding whether to
purchase the Series A Preferred Stock and all information which the Company
believes is reasonably necessary to enable such Investor to make such
decision. Neither this Agreement, the Investors' Rights Agreement, nor any
other statements or certificates made or delivered in connection herewith or
therewith contains any untrue statement of a material fact or
-7-
omits to state a material fact necessary to make the statements herein or
therein not misleading.
2.18 REGISTRATION RIGHTS. Except as provided in the Investors'
Rights Agreement, the Company has not granted or agreed to grant any
registration rights, including piggyback rights, to any person or entity.
2.19 CORPORATE DOCUMENTS. Except for amendments necessary to
satisfy representations and warranties or conditions contained herein (the
form of which amendments has been approved by the Investors), the Restated
Certificate of Incorporation and Bylaws of the Company are in the form
previously provided to special counsel for the Investors.
2.20 TITLE TO PROPERTY AND ASSETS. The Company owns its property
and assets free and clear of all mortgages, liens, loans and encumbrances,
except such encumbrances and liens which arise in the ordinary course of
business and do not materially impair the Company's ownership or use of such
property or assets. With respect to the property and assets it leases, the
Company is in compliance with such leases and, to the best of its knowledge,
holds a valid leasehold interest free of any liens, claims or encumbrances.
2.21 EMPLOYEE BENEFIT PLANS. The Company does not have any
Employee Benefit Plan as defined in the Employee Retirement Income Security
Act of 1974.
2.22 TAX RETURNS, PAYMENTS AND ELECTIONS. The Company has filed
all tax returns and reports as required by law. These returns and reports
are true and correct in all material respects. The Company has paid all
taxes and other assessments due, except those contested by it in good faith
which are listed in the Schedule of Exceptions. The provision for taxes of
the Company as shown in the Financial Statements is adequate for taxes due or
accrued as of the date thereof. The Company has not elected pursuant to the
Internal Revenue Code of 1986, as amended ("Code'), to be treated as a
Subchapter S corporation or a collapsible corporation pursuant to Section
341(f) or Section 1362(a) of the Code, nor has it made any other elections
pursuant to the Code (other than elections which relate solely to methods of
accounting, depreciation or amortization) which would have a material effect
on the Company, its financial condition, its business as presently conducted
or proposed to be conducted or any of its properties or material assets.
2.23 INSURANCE. The Company has in full force and effect fire and
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its
properties that might be damaged or destroyed.
2.24 MINUTE BOOKS. The minute books of the Company provided to the
Investors contain a complete summary of all meetings of directors and
stockholders since
-8-
the time of incorporation and reflect all transactions referred to in such
minutes accurately in all material respects.
2.25 LABOR AGREEMENTS AND ACTIONS. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject to)
any written or oral, express or implied, contract, commitment or arrangement
with any labor union, and no labor union has requested or, to the knowledge
of the Company, has sought to represent any of the employees, representatives
or agents of the Company. There is no strike or other labor dispute
involving the Company pending, or to the knowledge of the Company threatened,
which could have a material adverse effect on the assets, properties,
financial condition, operating results, or business of the Company (as such
business is presently conducted and as it is proposed to be conducted), nor
is the Company aware of any labor organization activity involving its
employees. The Company is not aware that any officer or key employee, or
that any group of key employees, intends to terminate their employment with
the Company, nor does the Company have a present intention to terminate the
employment of any of the foregoing. Subject to general principles related to
wrongful termination of employees, the employment of each officer and
employee of the Company is terminable at the will of the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE INVESTOR. Each Investor
hereby represents and warrants that:
3.1 AUTHORIZATION. This Agreement constitutes its valid and
legally binding obligation, enforceable in accordance with its terms except
(i) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, and other laws of general application affecting enforcement of
creditors' rights generally, (ii) as limited by laws relating to the
availability of specific performance, injunctive relief, or other equitable
remedies, and (iii) to the extent the indemnification provisions contained in
the Investors' Rights Agreement may be limited by applicable Federal or state
securities laws.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is made
with each Investor in reliance upon such Investor's representation to the
Company, which by such Investor's execution of this Agreement such Investor
hereby confirms, that the Series A Preferred Stock to be received by such
Investor and the Common Stock issuable upon conversion thereof (collectively,
the "Securities') will be acquired for investment for such Investor's own
account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that such Investor has no present
intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, each Investor further
represents that such Investor does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to any of
the Securities. Each Investor represents that it has full power and
authority to enter into this Agreement.
-9-
3.3 DISCLOSURE OF INFORMATION. It believes it has received all
the information it considers necessary or appropriate for deciding whether to
purchase the Series A Preferred Stock. Each Investor further represents that
it has had an opportunity to ask questions and receive answers from the
Company regarding the terms and conditions of the offering of the Series A
Preferred Stock. The foregoing, however, does not limit or modify the
representations and warranties of the Company in Section 2 of this Agreement
or the right of the Investors to rely thereon.
3.4 INVESTMENT EXPERIENCE. Each Investor is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Series A
Preferred Stock. If other than an individual, Investor also represents it
has not been organized for the purpose of acquiring the Series A Preferred
Stock.
3.5 ACCREDITED INVESTOR. Each Investor is an "accredited
investor' within the meaning of SEC Rule 501 of Regulation D, as presently
in effect.
3.6 RESTRICTED SECURITIES. It understands that the shares of
Series A Preferred Stock it is purchasing are characterized as "restricted
securities' under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering
and that under such laws and applicable regulations such securities may be
resold without registration under the Securities Act of 1933, as amended (the
"Act'), only in certain limited circumstances. In this connection, each
Investor represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the Act.
3.7 FURTHER LIMITATIONS ON DISPOSITION. Without in any way
limiting the representations set forth above, each Investor further agrees
not to make any disposition of all or any portion of the Series A Preferred
Stock (or the Common Stock issuable upon the conversion thereof) unless and
until the transferee has agreed in writing for the benefit of the Company to
be bound by this Section 3 and 7, provided and to the extent such sections
are then applicable and Investors' Rights Agreement and:
(a) There is then in effect a Registration Statement under
the Act covering such proposed disposition and such disposition is made in
accordance with such Registration Statement; or
(b) (i) Such Investor shall have notified the Company of the
proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and (ii)
if reasonably requested by the Company, such Investor shall have furnished
the Company with an opinion of counsel, reasonably satisfactory to the
Company, that such disposition will not require registration of such shares
under the Act. It is agreed that the Company will not require
-10-
opinions of counsel for transactions made pursuant to Rule 144 except in
unusual circumstances.
(c) Notwithstanding the provisions of paragraphs (a) and (b)
above, no such registration statement or opinion of counsel shall be
necessary for a transfer by an Investor which is a partnership to a partner
of such partnership or a retired partner of such partnership who retires
after the date hereof, or to the estate of any such partner or retired
partner or the transfer by gift, will or intestate succession of any partner
to his spouse or to the siblings, lineal descendants or ancestors of such
partner or his spouse, if the transferee agrees in writing to be subject to
the terms hereof to the same extent as if he were an original Investor
hereunder.
3.8 LEGENDS. It is understood that the certificates evidencing
the Series A Preferred Stock (and the Common Stock issuable upon conversion
thereof) may bear one or all of the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with
respect to the securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not required or unless
sold pursuant to Rule 144 of such Act.'
(b) Any legend required by the laws of the State of
California, including any legend required by the California Department of
Corporations and Sections 417 and 418 of the Code.
4. CALIFORNIA COMMISSIONER OF CORPORATIONS.
4.1 CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES WHICH
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF
SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION
FOR SUCH SECURITIES PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105
OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS
AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED,
UNLESS THE SALE IS SO EXEMPT.
5. CONDITIONS OF INVESTOR'S OBLIGATIONS AT FIRST CLOSING. The
obligations of each Investor under subsection 1.1 of this Agreement are
subject to the fulfillment on or before the First Closing of each of the
following conditions, the waiver of which shall not be effective against any
Investor who does not consent thereto:
-11-
5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Section 2 shall be true on and as of
the First Closing with the same effect as though such representations and
warranties had been made on and as of the date of First Closing.
5.2 PERFORMANCE. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement
that are required to be performed or complied with by it on or before First
Closing.
5.3 COMPLIANCE CERTIFICATE. The President of the Company shall
deliver to each Investor at the First Closing a certificate certifying that
the conditions specified in Sections 5.1 and 5.2 have been fulfilled and
stating that there shall have been no adverse change in the business,
affairs, operations, properties, assets or condition of the Company since the
date of this Agreement.
5.4 QUALIFICATIONS. The Commissioner of Corporations of the State
of California shall have issued a permit qualifying the offer and sale of the
Series A Preferred Stock and the underlying Common Stock to the Investors
pursuant to this Agreement, or such offer and sale shall be exempt from such
qualification under the California Corporate Securities Law of 1968, as
amended. Any other authorizations, approvals, or permits, if any, of any
governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of
the securities pursuant to this Agreement shall be duly obtained and
effective as of the Closing.
5.5 PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the First
Closing and all documents incident thereto shall be reasonably satisfactory
in form and substance to Investors' special counsel, and they shall have
received all such counterpart original and certified or other copies of such
documents as they may reasonably request.
5.6 BOARD OF DIRECTORS. The directors of the Company as of the First
Closing shall be Xxxxxxxxx Xxxxx, Xxxxx Xxxxxxx, Xxxxx Xxxxxxx, Xxxxxxx
Xxxxxxxx and Xxxx Xxxxxxx.
5.7 INVESTORS' RIGHTS AGREEMENT. The Company and each Investor
shall have entered into the Investors' Rights Agreement in the form attached
as EXHIBIT B.
5.8 VOTING AGREEMENT. The Company and each Investor shall have
entered into the Voting Agreement in the form attached as EXHIBIT C.
6. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT THE FIRST CLOSING. The
obligations of the Company to each Investor under this Agreement are subject
to the fulfillment on or before the First Closing of each of the following
conditions by that Investor:
-12-
6.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Investor contained in Section 3 shall be true on and as of
the First Closing with the same effect as though such representations and
warranties had been made on and as of the First Closing.
6.2 CALIFORNIA QUALIFICATION. The Commissioner of Corporations of
the State of California shall have issued a permit qualifying the offer and
sale to the Investor of the Series A Preferred Stock and the Common Stock
issuable upon the conversion thereof or such offer and sale shall be exempt
from such qualification under the California Corporate Securities Law of
1968, as amended.
7. CONDITIONS OF INVESTOR'S OBLIGATIONS AT SECOND CLOSING. The
obligations of each Investor under subsection 1.1 of this Agreement are
subject to the fulfillment on or before the Second Closing of each of the
following conditions, the waiver of which shall not be effective against any
Investor who does not consent thereto:
7.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Sections 2.1, 2.4, 2.5 and 2.6 shall
be true on and as of the Second Closing with the same effect as though such
representations and warranties had been made on and as of the date of Second
Closing.
7.2 PERFORMANCE. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement
that are required to be performed or complied with by it on or before Second
Closing.
7.3 QUALIFICATIONS. The Commissioner of Corporations of the State
of California shall have issued a permit qualifying the offer and sale of the
Series A Preferred Stock and the underlying Common Stock to the Investors
pursuant to this Agreement, or such offer and sale shall be exempt from such
qualification under the California Corporate Securities Law of 1968, as
amended.
8. CONDITIONS OF INVESTOR'S OBLIGATIONS AT THIRD CLOSING. The
obligations of each Investor under subsection 1.1 of this Agreement are
subject to the fulfillment on or before the Third Closing of each of the
following conditions, the waiver of which shall not be effective against any
Investor who does not consent thereto:
8.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Sections 2.1, 2.4, 2.5 and 2.6 shall
be true on and as of Third Closing with the same effect as though such
representations and warranties had been made on and as of the date of Third
Closing.
8.2 PERFORMANCE. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement
that are required to be performed or complied with by it on or before Third
Closing.
-13-
8.3 QUALIFICATIONS. The Commissioner of Corporations of the State
of California shall have issued a permit qualifying the offer and sale of the
Series A Preferred Stock and the underlying Common Stock to the Investors
pursuant to this Agreement, or such offer and sale shall be exempt from such
qualification under the California Corporate Securities Law of 1968, as
amended.
9. CONDITIONS OF INVESTOR'S OBLIGATIONS AT FOURTH CLOSING. The
obligations of each Investor under subsection 1.1 of this Agreement are
subject to the fulfillment on or before the Fourth Closing of each of the
following conditions, the waiver of which shall not be effective against any
Investor who does not consent thereto:
9.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in Sections 2.1, 2.4, 2.5 and 2.6 shall
be true on and as of Fourth Closing with the same effect as though such
representations and warranties had been made on and as of the date of Fourth
Closing.
9.2 PERFORMANCE. The Company shall have performed and complied
with all agreements, obligations and conditions contained in this Agreement
that are required to be performed or complied with by it on or before Fourth
Closing.
9.3 QUALIFICATIONS. The Commissioner of Corporations of the State
of California shall have issued a permit qualifying the offer and sale of the
Series A Preferred Stock and the underlying Common Stock to the Investors
pursuant to this Agreement, or such offer and sale shall be exempt from such
qualification under the California Corporate Securities Law of 1968, as
amended.
9.4 APPROVAL. The Company's Board of Directors and the holders of
a majority of the Common Stock issued or issuable upon conversion of the
Series A Preferred Stock issued or issuable pursuant to the Series A
Agreement shall have approved the Fourth Closing.
10. MISCELLANEOUS.
10.1 SURVIVAL OF WARRANTIES. The warranties, representations and
covenants of the Company and Investors contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of the Investors or the Company.
10.2 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 Series A Preferred Stock sold
hereunder or any Common Stock issued upon conversion thereof). 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,
-14-
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
10.3 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.
10.4 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.
10.5 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.
10.6 NOTICES. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon personal delivery to the party to be notified or upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other
address as such party may designate by ten (10) days' advance written notice
to the other parties.
10.7 FINDER'S FEE. Each party represents that it neither is nor
will be obligated for any finders' fee or commission in connection with this
transaction. Each Investor agrees to indemnify and to hold harmless the
Company from any liability for any commission or compensation in the nature
of a finders' fee (and the costs and expenses of defending against such
liability or asserted liability) for which the Investor or any of its
officers, partners, employees, or representatives is responsible.
The Company agrees to indemnify and hold harmless each
Investor from any liability for any commission or compensation in the nature
of a finders' fee (and the costs and expenses of defending against such
liability or asserted liability) for which the Company or any of its
officers, employees or representatives is responsible.
10.8 EXPENSES. Irrespective of whether the Closing is effected,
the Company shall pay all costs and expenses that it incurs with respect to
the negotiation, execution, delivery and performance of this Agreement. If
the Closing is effected, the Company shall, at the Closing, reimburse the
reasonable fees and expenses of special counsel for the Investors. If any
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement or the Restated Certificate of Incorporation, the prevailing
party shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
10.9 AMENDMENTS AND WAIVERS. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
-15-
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders
of 55% or more of the Common Stock issued or issuable upon conversion of the
Series A Preferred Stock issued or issuable pursuant to this Agreement. Any
amendment or waiver effected in accordance with this paragraph shall be
binding upon each holder of any securities purchased under this Agreement at
the time outstanding (including securities into which such securities are
convertible), each future holder of all such securities, and the Company.
10.10 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.
10.11 AGGREGATION OF STOCK. All shares of the Preferred Stock 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.
10.12 ENTIRE AGREEMENT. This Agreement and the documents referred
to herein constitute the entire agreement among the parties and no party
shall be liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-16-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
ACCELERATED CONNECTIONS, INC.
By: /s/ XXXXXXXXX X. XXXXX
-----------------------------------
Xxxxxxxxx Xxxxx, President
Address: 0000 X. XXXXXXXX XX.
-----------------------------------
XXXXXXXXX, XX 00000
-----------------------------------
INVESTOR:
ENTERPRISE PARTNERS III, L.P.
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------------
Its: General Partner
-----------------------------------
Address: 0000 Xxxxxxx Xxx., Xxxxx 000
----------------------------------------
Xx Xxxxx, XX 00000
----------------------------------------
ENTERPRISE PARTNERS III ASSOCIATES,
L.P.
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------------
Its: General Partner
-----------------------------------
Address: 0000 Xxxxxxx Xxx., Xxxxx 000
----------------------------------------
Xx Xxxxx, XX 00000
----------------------------------------
ENTERPRISE PARTNERS IV, L.P.
By: /s/ Xxxxxxx X. Xxxxxxxx
-----------------------------------
Its: General Partner
-----------------------------------
Address: 0000 Xxxxxxx Xxx., Xxxxx 000
----------------------------------------
Xx Xxxxx, XX 00000
----------------------------------------
[SIGNATURE PAGE TO THE STOCK PURCHASE AGREEMENT]
BRENTWOOD ASSOCIATES VII, L.P.
By: Brentwood VII Ventures, L.P.
its General Partner
By: /s/ (illegible)
-----------------------------------
Its:
-----------------------------------
Address:
----------------------------------------
----------------------------------------
BRENTWOOD AFFILIATE FUND, L.P.
By: Brentwood VII Ventures, L.P.
its General Partner
By: /s/ (illegible)
-----------------------------------
Its:
-----------------------------------
Address:
----------------------------------------
----------------------------------------
XXXXXXX XXXXXXX XXXXXXXX & XXXXX VIII
By: /s/ (illegible)
-----------------------------------
Its: General Partner
-----------------------------------
Address: 0000 Xxxx Xxxx Xx.
----------------------------------------
Xxxxx Xxxx, XX 00000
----------------------------------------
KPCB VIII INFORMATION SCIENCES ZAIBATSU
FUND II
By: /s/ (illegible)
-----------------------------------
Its: General Partner
-----------------------------------
Address: 0000 Xxxx Xxxx Xx.
----------------------------------------
Xxxxx Xxxx, XX 00000
----------------------------------------
[SIGNATURE PAGE TO THE STOCK PURCHASE AGREEMENT]
SPROUT CAPITAL VII, L.P.
By: DLJ Capital Corporation
Managing General Partner
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------
Xxxxx Xxxxxxx, Attorney-in-Fact
Address: 0000 Xxxx Xxxx Xxxx, Xxx. 4, Suite 270
----------------------------------------
Menlo Xxxx, XX 00000
----------------------------------------
THE SPROUT CEO FUND, L.P.
By: DLJ Capital Corporation
Its General Partner
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------
Xxxxx Xxxxxxx, Attorney-in-Fact
Address: 0000 Xxxx Xxxx Xxxx, Xxx. 4, Suite 270
----------------------------------------
Menlo Xxxx, XX 00000
----------------------------------------
DLJ CAPITAL CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------
Xxxxx Xxxxxxx, Attorney-in-Fact
Address: 0000 Xxxx Xxxx Xxxx, Xxx. 4, Suite 270
----------------------------------------
Menlo Xxxx, XX 00000
----------------------------------------
[SIGNATURE PAGE TO THE STOCK PURCHASE AGREEMENT]
DLJ FIRST ESC L.L.C.
By: DLJ LBO Plans Management
Corporation
Its: Manager
By: /s/ Xxxxx X. Xxxxxxx
------------------------------
Xxxxx Xxxxxxx, Attorney-in-Fact
Address: 0000 Xxxx Xxxx Xxxx, Xxx. 4, Suite 270
----------------------------------------
Menlo Xxxx, XX 00000
----------------------------------------
XXXXX INVESTORS II, LLC
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------
Its:
-----------------------------------
Address: 0000 Xxxxxxxx Xx, #000X
----------------------------------------
Xxxxx, XX 00000
----------------------------------------
STANFORD UNIVERSITY
By: /s/ Xxxxx Xxxxxx
-----------------------------------
Its: Xxxxx Xxxxxx, Assistant Secretary
-----------------------------------
Address: THE BOARD OF TRUSTEES OF THE
----------------------------------
XXXXXX XXXXXXXX JUNIOR
----------------------------------
UNIVERSITY
----------------------------------
[SIGNATURE PAGE TO THE STOCK PURCHASE AGREEMENT]
SCHEDULE A
Schedule of Investors
PURCHASE SERIES A STOCK
SERIES A STOCK PRICE PAID TO BE ISSUED TOTAL SERIES
CURRENTLY HELD AT CLOSING AT CLOSING A STOCK
FIRST CLOSING
Enterprise Partners III, L.P. 184,000 $ 1,104,000 1,104,000 1,380,000
Enterprise Partners III Associates, L.P. 16,000 $ 96,000 96,000 120,000
Enterprise Partners IV, L.P. 100,000 -- -- --
Brentwood Associates VII, L.P. -- $ 1,060,000 1,060,000 1,060,000
Brentwood Affiliates Fund, L.P. -- $ 60,000 60,000 60,000
Xxxxxxx Xxxxxxx Xxxxxxxx & Xxxxx VIII -- $ 1,462,500 1,462,500 1,462,500
KPCB VIII Information Sciences -- $ 37,500 37,500 37,500
Zaibatsu Fund II
DLJ Capital Corporation -- $ 30,000 30,000 30,000
DLJ First ESC L.L.C. -- $ 150,000 150,000 150,000
Sprout Capital VII, L.P. -- $ 1,304,843 1,304,843 1,304,843
The Sprout CEO Fund, L.P. -- $ 15,157 15,157 15,157
Xxxxx Investors II, LLC -- $ 125,000 125,000 125,000
Stanford University -- $ 15,000 15,000 15,000
------- ----------- --------- ---------
FIRST CLOSING TOTAL 300,000 $ 5,460,000 5,460,000 5,760,000
------- ----------- --------- ---------
------- ----------- --------- ---------
SECOND CLOSING
Brentwood Associates VII, L.P. -- $ 380,000 380,000 380,000
SECOND CLOSING TOTAL -- $ 380,000 380,000 380,000
------- ----------- --------- ---------
------- ----------- --------- ---------
FIRST & SECOND
CLOSING TOTAL -- $ 5,840,000 5,840,000 6,140,000
------- ----------- --------- ---------
------- ----------- --------- ---------
FRIENDS AND FAMILY
CLOSING
Other Purchasers -- $ 105,000 105,000 105,000
THIRD CLOSING
Enterprise Partners III, L.P. -- $ 1,380,000 1,380,000 1,380,000
Enterprise Partners III Associates, L.P. -- $ 120,000 120,000 120,000
Brentwood Associates VII, L.P. -- $ 1,440,000 1,440,000 1,440,000
Brentwood Affiliates Fund, L.P. -- $ 60,000 60,000 60,000
PURCHASE SERIES A STOCK
SERIES A STOCK PRICE PAID TO BE ISSUED TOTAL SERIES
CURRENTLY HELD AT CLOSING AT CLOSING A STOCK
Xxxxxxx Xxxxxxx Xxxxxxxx & Xxxxx VIII -- $ 1,462,500 1,462,500 1,462,500
KPCB VIII Information Sciences -- $ 37,500 37,500 37,500
Zaibatsu Fund II
DLJ Capital Corporation -- $ 30,000 30,000 30,000
DLJ First ESC L.L.C. -- $ 150,000 150,000 150,000
Sprout Capital VII, L.P. -- $ 1,304,843 1,304,843 1,304,843
The Sprout CEO Fund, L.P. -- $ 15,157 15,157 15,157
Xxxxx Investors II, LLC -- $ 125,000 125,000 125,000
Other Purchasers -- $ 105,000 105,000 105,000
Stanford University -- $ 15,000 15,000 15,000
------- ----------- --------- ---------
THIRD CLOSING TOTAL -- $ 6,245,000 6,245,000 6,245,000
------- ----------- --------- ---------
------- ----------- --------- ---------
FIRST, SECOND & THIRD 300,000 $12,190,000 12,190,000 12,490,000
CLOSING TOTAL ------- ----------- --------- ---------
------- ----------- --------- ---------
FOURTH CLOSING
Enterprise Partners III, L.P. -- $ 920,000 920,000 920,000
Enterprise Partners III Associates, L.P. -- $ 80,000 80,000 80,000
Brentwood Associates VII, L.P. -- $ 960,000 960,000 960,000
Brentwood Affiliates Fund, L.P. $ 40,000 40,000 40,000
Xxxxxxx Xxxxxxx Xxxxxxxx & Xxxxx VIII -- $ 975,000 975,000 975,000
KPCB VIII Information Sciences -- $ 25,000 25,000 25,000
Zaibatsu Fund II
DLJ Capital Corporation -- $ 20,000 20,000 70,000
DLJ First ESC L.L.C. -- $ 100,000 100,000 100,000
Sprout Capital VII, L.P. -- $ 869,900 869,900 869,900
The Sprout CEO Fund, L.P. -- $ 10,100 10,100 15,157
Xxxxx Investors II, LLC -- $ 83,333 83,333 83,333
------- ----------- --------- ---------
FOURTH CLOSING TOTAL 300,000 $ 4,083,333 4,083,000 4,083,333
------- ----------- --------- ---------
------- ----------- --------- ---------
FIRST, SECOND, THIRD & 300,000 $16,273,333 16,273,333 16,573,333
FOURTH CLOSING TOTAL ------- ----------- --------- ---------
------- ----------- --------- ---------
SCHEDULE B
Schedule of Common Holders
Number of Shares
Enterprise Partners III, L.P. 552,451
Enterprise Partners III Associates, L.P. 48,039
Enterprise Partners IV, L.P. 300,245
-------
900,735
-------
-------
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
[see attached]
A-1
EXHIBIT B
INVESTORS' RIGHTS AGREEMENT
[see attached]
B-1
EXHIBIT C
VOTING AGREEMENT
[see attached]
X-0
XXXXX XX XXXXXXXX
XXXXXX XX XXX XXXXXXXXX XX XXXXX PAGE 1
______________________________
I, XXXXXX X. XXXXX, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO
HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED
CERTIFICATE OF "ACCELERATED CONNECTIONS, INC.", FILED IN THIS OFFICE ON THE
THIRD DAY OF JULY, A.D. 1997, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY
RECORDER OF DEEDS FOR RECORDING.
/s/ Xxxxxx X. Xxxxx
---------------------------------------
[SEAL] XXXXXX X. XXXXX, SECRETARY OF STATE
2723205 8100 AUTHENTICATION: 8544545
971222163 DATE: 00-00-00
XXXXX XX XXXXXXXX
XXXXXXXXX XX XXXXX
DIVISION OF CORPORATIONS
FILED 09:00 AM 07/03/1997
971222163 - 2723205
RESTATED CERTIFICATE OF INCORPORATION
OF ACCELERATED CONNECTIONS, INC.,
a Delaware Corporation
Accelerated Connections, Inc., a corporation organized and existing
under the laws of the state of Delaware, hereby certifies as follows:
1. The name of the corporation is Accelerated Connections, Inc. The
corporation was originally incorporated under the name "Accelerated
Connections, Inc." The date the corporation filed its original Certificate
of Incorporation with the Secretary of State was February 27, 1997.
2. This Restated Certificate of Incorporation restates and amends the
provisions of the original Certificate of Incorporation of this corporation
as heretofore in effect and was duly adopted by the corporation's Board of
Directors in accordance with Sections 241 and 245 of the General Corporation
Law of the State of Delaware.
3. The text of the Certificate of Incorporation is hereby restated to
read as herein set forth in full:
ARTICLE I
The name of this corporation is Accelerated Connections, Inc.
ARTICLE II
The address of the registered office of the corporation in the State of
Delaware is 00 Xxx Xxxxxxx Xxxx, Xxxx xx Xxxxx, Xxxxxx of Kent 19901. The
name of its registered agent at such address is CorpAmerica, Inc.
ARTICLE III
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
ARTICLE IV
A. CLASSES OF STOCK. This corporation is authorized to issue two classes
of stock to be designated, respectively, "Common Stock" and "Preferred Stock."
The total
number of shares which the corporation is authorized to issue is Thirty-Nine
Million Seven Hundred Sixty-Four Thousand Seven Hundred Six (39,764,706)
shares. Twenty-Two Million Seven Hundred Sixty-Four Thousand Seven Hundred
Six (22,764,706) shares shall be Common Stock, $0.001 par value per share and
Seventeen Million (17,000,000) shares shall be Preferred Stock, $0.001 par
value per share. Upon the amendment of this Article IV, each one (1)
outstanding share of Common Stock is reverse split and divided into (i)
0.60049 shares of Common Stock and (ii) 0.20 shares of Series A Preferred
Stock.
B. RIGHTS, PREFERENCES AND RESTRICTIONS OF PREFERRED STOCK. The
Preferred Stock authorized by this Restated Certificate of Incorporation may
be issued from time to time in series. The rights, preferences, privileges,
and restrictions granted to and imposed on the Series A Preferred Stock,
which series shall consist of 17,000,000 shares, are as set forth below in
this Article IV(B). The Board of Directors is hereby authorized to fix or
alter the rights, preferences, privileges and restrictions granted to or
imposed upon additional series of Preferred Stock, and the number of shares
constituting any such series and the designation thereof, or of any of them.
Subject to compliance with applicable protective voting rights which have
been or may be granted to the Preferred Stock or series thereof in
Certificates of Determination or the corporation's Certificate of
Incorporation ("Protective Provisions"), but notwithstanding any other rights
of the Preferred Stock or any series thereof, the rights, privileges,
preferences and restrictions of any such additional series may be
subordinated to, PARI PASSU with (including, without limitation, inclusion in
provisions with respect to liquidation and acquisition preferences,
redemption and/or approval of matters by vote or written consent), or senior
to any of those of any present or future class or series of Preferred or
Common Stock. Subject to compliance with applicable Protective Provisions,
the Board of Directors is also authorized to increase or decrease the number
of shares of any series (other than the Series A Preferred Stock), prior or
subsequent to the issue of that series, but not below the number of shares of
such series then outstanding. In case the number of shares of any series
shall be so decreased, the shares constituting such decrease shall resume the
status which they had prior to the adoption of the resolution originally
fixing the number of shares of such series.
1. DIVIDEND PROVISIONS.
(a) Subject to the rights of series of Preferred Stock which
may from time to time come into existence, the holders of shares of Series A
Preferred Stock shall be entitled to receive dividends, out of any assets
legally available therefor, prior and in preference to any declaration or
payment of any dividend (payable other than in Common Stock or other
securities and rights convertible into or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock of this
corporation) on the Common Stock of this corporation, at the rate of $0.08
per share per annum or, if greater (as determined on a per annum basis and an
as converted basis for the Series A Preferred Stock), an amount equal to that
paid on any other outstanding shares of this corporation, payable quarterly
when, as and if declared by the Board of Directors. Such dividends shall not
be cumulative.
-2-
(b) In the event this corporation shall declare a
distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding
cash dividends) or options or rights to purchase any such securities or
evidences of indebtedness, then, in each case the holders of the Series A
Preferred Stock shall be entitled to a proportionate share of any such
distribution as though the holders of the Series A Preferred Stock were the
holders of the number of shares of Common Stock of this corporation into
which their respective shares of Series A Preferred Stock are convertible as
of the record date fixed for the determination of the holders of Common Stock
of this corporation entitled to receive such distribution.
2. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding
up of this corporation, either voluntary or involuntary, subject to the
rights of series of Preferred Stock which may from time to time come into
existence, the holders of Series A Preferred Stock shall be entitled to
receive, prior and in preference to any distribution of any of the assets of
this corporation to the holders of Common Stock by reason of their ownership
thereof, an amount per share equal to the sum of (i) $1.00 for each
outstanding share of Series A Preferred Stock (the "Original Series A Issue
Price") and (ii) an amount equal to declared but unpaid dividends on such
share. If upon the occurrence of such event, the assets and funds thus
distributed among the holders of the Series A Preferred Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then, subject to the rights of series of Preferred
Stock which may from time to time come into existence, the entire assets and
funds of the corporation legally available for distribution shall be
distributed ratably among the holders of the Series A Preferred Stock in
proportion to the amount of such stock owned by each such holder.
(b) After the distributions described in subsection (a) above
have been paid, subject to the rights of series of Preferred Stock which may
from time to time come into existence, the remaining assets of the
corporation available for distribution to stockholders shall be distributed
among the holders of Common Stock pro rata based on the number of shares of
Common Stock held by each.
(c) A consolidation or merger reorganization of this
corporation with or into any other corporation or corporations, or the
effectuation by the corporation of a transaction or series of related
transactions in which more than 50% of the voting power of the corporation is
disposed of, or a sale, conveyance or disposition of all or substantially all
of the assets of this corporation shall be deemed to be a liquidation within
the meaning of this Section 2; provided, however, that the sale and issuance
of shares of Series A Preferred Stock pursuant to that certain Series A
Preferred Stock Purchase Agreement dated on or about July 3, 1997 shall not
be deemed a liquidation under this Section 2.
-3-
3. CONVERSION. The holders of the Series A Preferred Stock shall
have conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT.
i) Subject to subsection (c), each share of Series
A Preferred Stock shall be convertible, at the option of the holder thereof,
at any time after the date of issuance of such share at the office of this
corporation or any transfer agent for the Series A Preferred Stock, into such
number of fully paid and nonassessable shares of Common Stock as is
determined by dividing the Original Series A Issue Price by the Conversion
Price at the time in effect for such share. The initial Conversion Price per
share for shares of Series A Preferred Stock shall be the Original Series A
Issue Price; provided, however, that the Conversion Price for the Series A
Preferred Stock shall be subject to adjustment as set forth in subsection
3(c).
ii) Each share of Series A Preferred Stock shall
automatically be converted into shares of Common Stock at the Conversion
Price at the time in effect for such Series A Preferred Stock immediately
upon the earlier of (A) the consummation of the corporation's sale of its
Common Stock in a bona fide, firm commitment underwriting pursuant to a
registration statement under the Securities Act of 1933, as amended, the
public offering price of which was not less than $20,000,000 in the aggregate
or (B) the date upon which the corporation obtains the consent of the holders
of 66-2/3% of the then outstanding shares of Preferred Stock.
(b) MECHANICS OF CONVERSION. Before any holder of Series A
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of this corporation or of any transfer agent for the
Series A Preferred Stock, and shall give written notice by mail, postage
prepaid, to this corporation at its principal corporate office, of the
election to convert the same and shall state therein the name or names in
which the certificate or certificates for shares of Common Stock are to be
issued. This corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Series A Preferred Stock, or to the
nominee or nominees of such holder, a certificate or certificates for the
number of shares of Common Stock to which such holder shall be entitled as
aforesaid. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the shares of
Series A Preferred Stock to be converted, and the person or persons entitled
to receive the shares of Common Stock issuable upon such conversion shall be
treated for all purposes as the record holder or holders of such shares of
Common Stock as of such date. If the conversion is in connection with an
underwritten offer of securities registered pursuant to the Securities Act of
1933, the conversion may, at the option of any holder tendering Series A
Preferred Stock for conversion, be conditioned upon the closing with the
underwriter of the sale of securities pursuant to such offering, in which
event the person(s) entitled to receive the Common Stock issuable upon such
conversion of the Series A Preferred Stock shall not be deemed to have
converted such Series A Preferred Stock until immediately prior to the
closing of such sale of securities.
-4-
(c) CONVERSION PRICE ADJUSTMENTS OF PREFERRED STOCK. The
Conversion Price of the Series A Preferred Stock shall be subject to
adjustment from time to time as follows:
i) A. Upon each issuance by the corporation of
any Additional Stock (as defined below), after the date upon which any shares
of the Series A Preferred Stock were first issued (the "Purchase Date" with
respect to such series), without consideration or for a consideration per
share less than the Conversion Price for such series in effect immediately
prior to the issuance of such Additional Stock, the Conversion Price for such
series in effect immediately prior to each such issuance shall forthwith
(except as otherwise provided in this clause (i)) be adjusted to a price
determined by multiplying such Conversion Price by a fraction, the numerator
of which shall be the number of shares of Common Stock outstanding
immediately prior to such issuance (including, without limitation, the number
of shares of Common Stock issuable upon the conversion of all outstanding
Preferred Stock and all other convertible securities and the exercise of all
outstanding options, warrants or other rights to purchase Common Stock or
other securities convertible into Common Stock) plus the number of shares of
Common Stock which the aggregate consideration received by the corporation
for such issuance would purchase at such Conversion Price; and the
denominator of which shall be the number of shares of Common Stock
outstanding immediately prior to such issuance (including, without
limitation, the number of shares of Common Stock issuable upon the conversion
of all outstanding Preferred Stock and all other convertible securities and
the exercise of all outstanding options, warrants or other rights to purchase
Common Stock or other securities convertible into Common Stock) plus the
number of shares of such Additional Stock.
B. No adjustment of the Conversion Price for
the Series A Preferred Stock 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 3 years from the date
of the event giving rise to the adjustment being carried forward, or shall be
made at the end of 3 years from the date of the event giving rise to the
adjustment being carried forward. Except to the limited extent provided for
in subsections 3(c)(i)(E)(3) and 3(c)(i)(E)(4), no adjustment of such
Conversion Price pursuant to this subsection 3(c)(i) shall have the effect of
increasing the Conversion Price above the Conversion 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 this 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
-5-
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 applicable Purchase Date) of options to purchase or
rights to subscribe for Common Stock, securities 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 subsection 3(c)(i) and
subsection 3(c)(ii):
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 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 subsections
3(c)(i)(C) and (c)(i)(D)), if any, received by the corporation upon
the issuance of such options or rights plus the exercise price
provided in such options or rights (without taking into account
potential antidilution adjustments) for the Common Stock covered
thereby.
2. The aggregate maximum number of shares
of Common Stock deliverable upon conversion of or in exchange
(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)
for any such convertible or exchangeable securities or upon the
exercise of options to purchase or rights to subscribe for such
convertible or exchangeable securities and 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 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 subsections 3(c)(i)(C)
and (c)(i)(D)).
3. In the event of any change in the number
of shares of Common Stock deliverable or in the consideration payable
to this corporation upon exercise of such options or rights or upon
conversion of or in exchange for such convertible or exchangeable
-6-
securities, including, but not limited to, a change resulting from the
antidilution provisions thereof, the Conversion Price of the Series A
Preferred Stock, 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
exchange 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 Conversion Price of the Series A
Preferred Stock, 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.
5. The number of shares of Common Stock
deemed issued and the consideration deemed paid therefor pursuant to
subsections 3(c)(i)(E)(1) and (2) shall be appropriately adjusted to
reflect any change, termination or expiration of the type described in
either subsection 3(c)(i)(E)(3) or (4).
ii) "Additional Stock" shall mean any shares of
Common Stock issued (or deemed to have been issued pursuant to subsection
3(c)(i)(E)) by this corporation after the Purchase Date other than
A. Common Stock issued pursuant to a transaction
described in subsection 3(c)(iii) hereof,
B. shares of Common Stock issuable or issued to
employees, consultants or directors of this corporation directly or
pursuant to a stock option plan or restricted stock plan approved by
the Board of Directors (with at least three (3) of the Board
representatives of the Series A Preferred approving such plan) of this
corporation, or
C. shares of Common Stock issued upon conversion
of the Series A Preferred Stock, or
D. shares of Common Stock issued or issuable (I)
in a public offering before or in connection with which all
outstanding shares of Series A Preferred Stock will be converted to
Common Stock or (II) upon exercise of warrants or rights granted to
underwriters in connection with such a public offering, or
-7-
E. shares of Common Stock issued or issuable to
persons or entities with which the corporation has business
relationships provided such issuances are for other than primarily
equity financing purposes (with at least three (3) of the Board
representatives of the Series A Preferred voting in favor).
iii) In the event the corporation should at any time
or from time to time after the Purchase Date fix a record date for the
effectuation of a split or subdivision of the outstanding shares of Common
Stock or the determination of holders of Common Stock entitled to receive a
dividend or other distribution payable in additional shares of Common Stock
or other securities or rights convertible into, or entitling the holder
thereof to receive directly or indirectly, additional shares of Common Stock
(hereinafter referred to as "Common Stock Equivalents") without payment of
any consideration by such holder for the additional shares of Common Stock or
the Common Stock Equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise thereof), then, as of such record date
(or the date of such dividend distribution, split or subdivision if no record
date is fixed), the Conversion Price of the Series A Preferred Stock shall be
appropriately decreased so that the number of shares of Common Stock issuable
on conversion of each share of such series shall be increased in proportion
to such increase of the aggregate of shares of Common Stock outstanding and
those issuable with respect to such Common Stock Equivalents with the number
of shares issuable with respect to Common Stock Equivalents determined from
time to time in the manner provided for deemed issuances in subsection
3(c)(i)(E).
iv) If the number of shares of Common Stock
outstanding at any time after the Purchase Date is decreased by a combination
of the outstanding shares of Common Stock, then, following the record date of
such combination, the Conversion Price for the Series A Preferred Stock shall
be appropriately increased so that the number of shares of Common Stock
issuable on conversion of each share of such series shall be decreased in
proportion to such decrease in outstanding shares.
(d) OTHER DISTRIBUTIONS. In the event this corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by this corporation or other persons, assets (excluding
cash dividends) or options or rights not referred to in subsection 3(c)(iii),
then, in each such case for the purpose of this subsection 3(d), the holders
of the Series A Preferred Stock shall be entitled to a proportionate share of
any such distribution as though they were the holders of the number of shares
of Common Stock of the corporation into which their shares of Series A
Preferred Stock are convertible as of the record date fixed for the
determination of the holders of Common Stock of the corporation entitled to
receive such distribution.
(e) RECAPITALIZATIONS. If at any time or from time to time
there shall be a recapitalization of the Common Stock (other than a
subdivision, combination or merger or sale of assets transaction provided for
elsewhere in this Section 3) provision shall be made so that the holders of
the Series A Preferred Stock shall thereafter be entitled to receive upon
conversion of the Series A Preferred Stock the number of shares
-8-
of stock or other securities or property of the Company or otherwise, to
which a holder of Common Stock deliverable upon conversion would have been
entitled on such recapitalization. In any such case, appropriate adjustment
shall be made in the application of the provisions of this Section 3 with
respect to the rights of the holders of the Series A Preferred Stock after
the recapitalization to the end that the provisions of this Section 3
(including adjustment of the Conversion Price then in effect and the number
of shares purchasable upon conversion of the Series A Preferred Stock) shall
be applicable after that event as nearly equivalent as may be practicable.
(f) NO IMPAIRMENT. This corporation will not, by amendment
of its Certificate of Incorporation or through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek to
avoid the observance or performance of any of the terms to be observed or
performed hereunder by this corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Section 3 and in the
taking of all such action as may be necessary or appropriate in order to
protect the Conversion Rights of the holders of the Series A Preferred Stock
against impairment.
(g) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
i) No fractional shares shall be issued upon
conversion of the Series A Preferred Stock, and the number of shares of
Common Stock to be issued shall be rounded to the nearest whole share.
Whether or not fractional shares are issuable upon such conversion shall be
determined on the basis of the total number of shares of Series A Preferred
Stock the holder is at the time converting into Common Stock and the number
of shares of Common Stock issuable upon such aggregate conversion.
ii) Upon the occurrence of each adjustment or
readjustment of the Conversion Price of Series A Preferred Stock pursuant to
this Section 3, this corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare
and furnish to each holder of Series A Preferred Stock a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon
which such adjustment or readjustment is based. This corporation shall, upon
the written request at any time of any holder of Series A Preferred Stock,
furnish or cause to be furnished to such holder a like certificate setting
forth (A) such adjustment and readjustment, (B) the Conversion Price at the
time in effect, and (C) the number of shares of Common Stock and the amount,
if any, of other property which at the time would be received upon the
conversion of a share of Series A Preferred Stock.
(h) NOTICES OF RECORD DATE. In the event of any taking by
this corporation of a record of the holders of any class of securities for
the purpose of determining the holders thereof who are entitled to receive
any dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive
-9-
any other right, this corporation shall mail to each holder of Series A
Preferred Stock, at least 20 days prior to the date specified therein, a
notice specifying the date on which any such record is to be taken for the
purpose of such dividend, distribution or right, and the amount and character
of such dividend, distribution or right.
(i) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. This
corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock solely for the purpose of
effecting the conversion of the shares of the Series A Preferred Stock such
number of its shares of Common Stock as shall from time to time be sufficient
to effect the conversion of all outstanding shares of the Series A Preferred
Stock; and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Series A Preferred Stock, in addition to such other
remedies as shall be available to the holder of such Preferred Stock, this
corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such
purposes.
(j) NOTICES. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Series A Preferred Stock
shall be deemed given if deposited in the United States mail, postage
prepaid, and addressed to each holder of record at his address appearing on
the books of this corporation.
4. VOTING RIGHTS. The holder of each share of Series A Preferred
Stock shall have the right to one vote for each share of Common Stock into
which such Series A Preferred Stock could then be converted (with any
fractional share determined on an aggregate conversion basis being rounded to
the nearest whole share), and with respect to such vote, such holder shall
have full voting rights and powers equal to the voting rights and powers of
the holders of Common Stock, and shall be entitled, notwithstanding any
provision hereof, to notice of any stockholders' meeting in accordance with
the by-laws of this corporation, and shall be entitled to vote, together with
holders of Common Stock, with respect to any question upon which holders of
Common Stock have the right to vote.
5. PROTECTIVE PROVISIONS. Subject to the rights of series of
Preferred Stock which may from time to time come into existence, so long as
shares of Series A Preferred Stock are outstanding, this corporation shall
not without first obtaining the approval (by vote or written consent, as
provided by law) of the holders of at least 55% or more of the then
outstanding shares of Series A Preferred Stock:
(a) sell, convey, or otherwise dispose of or encumber all or
substantially all of its property or business or merge into or consolidate
with any other corporation (other than a wholly owned subsidiary corporation)
or effect any transaction or series of related transactions in which more
than 50% of the voting power of the corporation is disposed of; or
-10-
(b) create any new class or series of stock or any other
securities convertible into equity securities of the corporation having a
preference over, or being on a parity with, the Series A Preferred Stock with
respect to voting, dividends or upon liquidation.
6. STATUS OF CONVERTED STOCK. In the event any shares of Series
A Preferred Stock shall be converted pursuant to Section 3 hereof, the shares
so converted shall be cancelled and shall not be issuable by the corporation.
The Certificate of Incorporation of this corporation shall be appropriately
amended to effect the corresponding reduction in the corporation's authorized
capital stock.
C. COMMON STOCK.
1. DIVIDEND RIGHTS. Subject to the prior rights of holders of
all classes of stock at the time outstanding having prior rights as to
dividends, the holders of the Common Stock shall be entitled to receive, when
and as declared by the Board of Directors, out of any assets of the
corporation legally available therefor, such dividends as may be declared
from time to time by the Board of Directors.
2. LIQUIDATION RIGHTS. Upon the liquidation, dissolution or
winding up of the corporation, the assets of the corporation shall be
distributed as provided in Section 2 of Division (B) of this Article IV
hereof.
3. REDEMPTION. The Common Stock is not redeemable.
4. VOTING RIGHTS. The holder of each share of Common Stock shall
have the right to one vote, and shall be entitled to notice of any
stockholders' meeting in accordance with the By-laws of this corporation, and
shall be entitled to vote upon such matters and in such manner as may be
provided by law.
ARTICLE V
A. EXCULPATION. A director of the corporation shall to the fullest
extent permitted by the Delaware General Corporation Law not be personally
liable to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director, except for liability (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174 of the
Delaware General Corporation Law or (iv) for any transaction from which the
director derived any improper personal benefit. If the Delaware General
Corporation Law is hereafter amended to further reduce or to authorize, with
the approval of the corporation's stockholders, further reductions in the
liability of the corporation's directors for breach of fiduciary duty, then a
director of the corporation shall not be liable for any such breach to the
fullest extent permitted by the Delaware General Corporation Law as so
amended.
-11-
B. INDEMNIFICATION. To the extent permitted by applicable law, this
corporation is also authorized to provide indemnification of (and advancement
of expenses to) such agents (and any other persons to which Delaware law
permits this corporation to provide indemnification) through bylaw
provisions, agreements with such agents or other persons, vote of
stockholders or disinterested directors or otherwise, in excess of the
indemnification and advancement otherwise permitted by Section 145 of the
Delaware General Corporation Law, subject only to limits created by
applicable Delaware law (statutory or non-statutory), with respect to actions
for breach of duty to the corporation, its stockholders, and others.
C. EFFECT OF REPEAL OR MODIFICATION. Any repeal or modification of
any of the foregoing provisions of this Article V shall not adversely affect
any right or protection of a director, officer or agent of the corporation
(or any other person to which Delaware law permits this corporation to
provide indemnification) existing at the time of, or increase the liability
of any director, officer or agent of the corporation (or other person) with
respect to any acts or omissions of such director, officer or agent (or other
person) occurring prior to, such repeal or modification.
ARTICLE VI
The corporation shall have perpetual existence.
ARTICLE VII
Except as otherwise provided in this Restated Certificate of
Incorporation, in furtherance and not in limitation of the powers conferred
by statute, the Board of Directors is expressly authorized to make, repeal,
alter, amend and rescind any or all of the Bylaws of the corporation.
ARTICLE VIII
Elections of directors need not be by written ballot except and to the
extent provided in the Bylaws of the corporation.
ARTICLE IX
The corporation reserves the right to amend, alter, change or repeal any
provision contained in this Amended and Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
-12-
ARTICLE X
The corporation shall not be subject to the provisions of Section 203 of
the Delaware General Corporation Law.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, this Amended and Restated Certificate of
Incorporation has been executed as of this 2 day of July, 1997.
ACCELERATED CONNECTIONS, INC.
By: /s/ Xxxxxxxxx X. Xxxxx
----------------------------------------
Xxxxxxxxx Xxxxx, President
[SIGNATURE PAGE TO
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION]
STATE OF DELAWARE
OFFICE OF THE SECRETARY OF STATE PAGE 1
______________________________
I, XXXXXX X. XXXXX, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF CORRECTED RESTATED
CERTIFICATE OF "ACCELERATED CONNECTIONS, INC.", FILED IN THIS OFFICE ON THE
TWENTY-FOURTH DAY OF JULY, A.D. 1997, AT 9 O'CLOCK A.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO THE KENT COUNTY
RECORDER OF DEEDS FOR RECORDING.
/s/ Xxxxxx X. Xxxxx
-------------------------------------------
[SEAL] XXXXXX X. XXXXX, SECRETARY OF STATE
2723205 8100 AUTHENTICATION: 8575332
971246986 DATE: 00-00-00
XXXXX XX XXXXXXXX
XXXXXXXXX XX XXXXX
DIVISION OF CORPORATIONS
FILED 09:00 AM 07/24/1997
971246986 - 2723205
CERTIFICATE OF CORRECTION OF
RESTATED CERTIFICATE OF INCORPORATION
OF ACCELERATED CONNECTIONS, INC.
Accelerated Connections, Inc., a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware.
DOES HEREBY CERTIFY:
1. The name of the corporation is Accelerated Connections, Inc.
2. That the Restated Certificate of Incorporation ("Certificate") was
filed with the Secretary of State of Delaware on July 3, 1997 and that said
Certificate requires correction, as permitted by Section 103 of the General
Corporation Law of the State of Delaware.
3. ARTICLE IV, Section B.5(c) of the Certificate was inadvertently
omitted and, as corrected, said Section shall be added and read as follows:
"(c) authorize additional shares of Series A Preferred Stock."
4. Sections A and B of ARTICLE V of the Certificate misstated the
Corporation's exculpation and indemnification policies and, as corrected,
said Sections shall be and read as follows:
"A. EXCULPATION. A director of the corporation shall not be
personally liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174
of the Delaware General Corporation Law or (iv) for any
transaction from which the director derived any improper personal
benefit. If the Delaware General Corporation Law is hereafter
amended to further reduce or to authorize, with the approval of
the corporation's stockholders, further reductions in the
liability of the corporation's directors for breach of fiduciary
duty,
then a director of the corporation shall not be liable for
any such breach to the fullest extent permitted by the Delaware
General Corporation Law as so amended.
B. INDEMNIFICATION. To the extent permitted by applicable
law, this corporation shall provide indemnification of (and
advancement of expenses to) such agents (and any other persons to
which Delaware law permits this corporation to provide
indemnification) through bylaw provisions, agreements with such
agents or other persons, vote of stockholders or disinterested
directors or otherwise, in excess of the indemnification and
advancement otherwise permitted by Section 145 of the Delaware
General Corporation Law, subject only to limits created by
applicable Delaware law (statutory or non-statutory), with respect
to actions for breach of duty to the corporation, its
stockholders, and others.
IN WITNESS WHEREOF, said Accelerated Connections, Inc. has caused this
Certificate of Correction to be signed by an authorized officer on this 7th day
of July, 1997.
/s/ Xxxx X. Xxxx
--------------------------------------------
Xxxx Xxxx, Executive Vice-President
ACCELERATED CONNECTIONS, INC.
INVESTORS' RIGHTS AGREEMENT
July 3, 1997
TABLE OF CONTENTS
Page
1. Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Request for Registration . . . . . . . . . . . . . . . . . . . . . 2
1.3 Company Registration . . . . . . . . . . . . . . . . . . . . . . . 3
1.4 Obligations of the Company . . . . . . . . . . . . . . . . . . . . 3
1.5 Furnish Information. . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 Expenses of Demand Registration. . . . . . . . . . . . . . . . . . 5
1.7 Expenses of Company Registration . . . . . . . . . . . . . . . . . 5
1.8 Underwriting Requirements. . . . . . . . . . . . . . . . . . . . . 5
1.9 Delay of Registration. . . . . . . . . . . . . . . . . . . . . . . 6
1.10 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.11 Reports Under Securities Exchange Act of 1934. . . . . . . . . . . 8
1.12 Form S-3 Registration. . . . . . . . . . . . . . . . . . . . . . . 9
1.13 Assignment of Registration Rights. . . . . . . . . . . . . . . . .10
1.14 Limitations on Subsequent Registration Rights. . . . . . . . . . .10
1.15 "Market Stand-Off" Agreement . . . . . . . . . . . . . . . . . . .10
1.16 Termination of Registration Rights . . . . . . . . . . . . . . . .11
2. Covenants of the Company. . . . . . . . . . . . . . . . . . . . . . . . .11
2.1 Delivery of Financial Statements . . . . . . . . . . . . . . . . .11
2.2 Inspection . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
2.3 Termination of Information and Inspection Covenants. . . . . . . .12
2.4 Right of First Offer . . . . . . . . . . . . . . . . . . . . . . .12
2.5 Employee Stock Pool. . . . . . . . . . . . . . . . . . . . . . . .14
3. Covenants of the Investors. . . . . . . . . . . . . . . . . . . . . . . .14
3.1 Certain Corporate Transactions . . . . . . . . . . . . . . . . . .14
3.2 Standstill . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
3.3 Additional Preferred Investors . . . . . . . . . . . . . . . . . .14
4. Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
4.1 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . .14
4.2 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . .15
4.3 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . .15
4.4 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . .15
4.5 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
4.6 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
4.7 Amendments and Waivers . . . . . . . . . . . . . . . . . . . . . .15
4.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . .15
4.9 Aggregation of Stock . . . . . . . . . . . . . . . . . . . . . . .15
4.10 Entire Agreement; Amendment; Waiver. . . . . . . . . . . . . . . .15
(i)
INVESTORS' RIGHTS AGREEMENT
THIS INVESTORS' RIGHTS AGREEMENT is made as of the 3rd day of July,
1997, by and between Accelerated Connections, Inc., a Delaware corporation (the
"Company"), and the investors listed on SCHEDULE A hereto, each of which is
herein referred to as an "Investor."
RECITALS
WHEREAS, the Company and the Investors are parties to the Series A
Preferred Stock Purchase Agreement of even date herewith (the "Series A
Agreement");
WHEREAS, in order to induce the Company to enter into the Series A
Agreement and to induce the Investors to invest funds in the Company pursuant to
the Series A Agreement, the Investors and the Company hereby agree that this
Agreement shall govern the rights of the Investor to cause the Company to
register shares of Common Stock issuable to the Investors and certain other
matters as set forth herein;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. REGISTRATION RIGHTS. The Company covenants and agrees as
follows:
1.1 DEFINITIONS. For purposes of this Section 1:
(a) The term "Act" means the Securities Act of 1933,
as amended.
(b) The term "register", "registered," and
"registration" refer to a registration effected by preparing and filing a
registration statement or similar document in compliance with the Act, and the
declaration or ordering of effectiveness of such registration statement or
document;
(c) The term "Registrable Securities" means (1) the
Common Stock issuable or issued upon conversion of all outstanding shares of the
Series A Preferred Stock issued or issuable pursuant to the Series A Agreement
or issued to an Investor prior to execution of the Series A Agreement (the
"Series A Preferred Stock"), (2) the 900,735 shares of Common Stock held by
Enterprise Partners as of the date of this Agreement, and (3) 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
Series A Preferred Stock or Common Stock, excluding in all cases, however, any
Registrable Securities sold by a person in a transaction in which his rights
under this Section 1 are not assigned;
(d) 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.
(e) The term "Holder" means any person owning or
having the right to acquire Registrable Securities or any assignee thereof in
accordance with Section 1.13 hereof; and
(f) 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 or incorporation of substantial information by reference to
other documents filed by the Company with the SEC.
1.2 REQUEST FOR REGISTRATION.
(a) If the Company shall receive at any time after
the earlier of (i) July __, 2001, or (ii) six (6) months after the effective
date of the first registration statement for a public offering of securities of
the Company (other than a registration statement relating either to the sale of
securities to employees of the Company pursuant to a stock option, stock
purchase or similar plan or a SEC Rule 145 transaction), a written request from
the Holders of 60% or more of the Registrable Securities then outstanding that
the Company file a registration statement under the Act covering the
registration of at least twenty percent (20%) of the Registrable Securities then
outstanding (or a lesser percent if the anticipated aggregate offering price,
net of underwriting discounts and commissions, would exceed $20,000,000), then
the Company shall, within ten (10) days of the receipt thereof, give written
notice of such request to all Holders and shall, subject to the limitations of
subsection 1.2(b), effect as soon as practicable, and in any event shall use its
best efforts to effect within 60 days of the receipt of such request, the
registration under the Act of all Registrable Securities which the Holders
request to be registered within twenty (20) days of the mailing of such notice
by the Company in accordance with paragraph 4.5.
(b) If the Holders initiating the registration
request hereunder ("Initiating Holders") intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 1.2
and the Company shall include such information in the written notice referred to
in subsection 1.2(a). The underwriter will be selected by a majority in
interest of the Initiating Holders and shall be reasonably acceptable to the
Company. In such event, the right of any Holder to include his Registrable
Securities in such registration shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting shall (together with the
-2-
Company as provided in subsection 1.4(e)) enter into an underwriting
agreement in customary form with the underwriter or underwriters selected for
such underwriting by a majority in interest of the Initiating Holders.
Notwithstanding any other provision of this Section 1.2, if the underwriter
advises the Initiating Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the Initiating
Holders shall so advise all Holders of Registrable Securities which would
otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities
of the Company owned by each Holder; provided, however, that the number of
shares of Registrable Securities to be included in such underwriting shall
not be reduced unless all other securities are first entirely excluded from
the underwriting.
(c) The Company is obligated to effect only two (2)
such registrations pursuant to this Section 1.2.
(d) Notwithstanding the foregoing, if the Company
shall furnish to Holders requesting a registration statement pursuant to this
Section 1.2, a certificate signed by the 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 shareholders for such registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, the Company shall have the right to defer taking action
with respect to such filing for a period of not more than 120 days after receipt
of the request of the Initiating Holders; provided, however, that the Company
may not utilize this right more than once in any twelve month period.
1.3 COMPANY REGISTRATION. If (but without any obligation to
do so) the Company proposes to register (including for this purpose a
registration effected by the Company for shareholders other than the Holders)
any of its stock or other securities 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, or a
registration on any form which does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Registrable Securities), the Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within twenty (20) days after mailing of
such notice by the Company in accordance with Section 3.5, the Company shall,
subject to the provisions of Section 1.8, cause to be registered under the Act
all of the Registrable Securities that each such Holder has requested to be
registered.
1.4 OBLIGATIONS OF THE COMPANY. Whenever required under
this Section 1 to effect the registration of any Registrable Securities, the
Company shall, as expeditiously as reasonably possible:
-3-
(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 one hundred
twenty (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
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.
1.5 FURNISH INFORMATION.
(a) It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this Section 1 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
-4-
(b) The Company shall have no obligation with
respect to any registration requested pursuant to Section 1.2 or Section 1.12
if, due to the operation of subsection 1.5(a), the number of shares or the
anticipated aggregate offering price of the Registrable Securities to be
included in the registration does not equal or exceed the number of shares or
the anticipated aggregate offering price required to originally trigger the
Company's obligation to initiate such registration as specified in subsection
1.2(a) or subsection 1.12(b)(2), whichever is applicable.
1.6 EXPENSES OF DEMAND REGISTRATION. All expenses other
than underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for the Company, and the
reasonable fees and disbursements of one counsel for the selling Holders shall
be borne by the Company; provided, however, that the Company shall not be
required to pay for any expenses of any registration proceeding begun pursuant
to Section 1.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all Participating Holders shall bear such expenses),
unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to one demand registration pursuant to Section 1.2; provided
further, however, that if at the time of such withdrawal, the Holders have
learned of a material adverse change in the condition, business, or prospects of
the Company from that known to the Holders at the time of their request and have
withdrawn the request with reasonable promptness following disclosure by the
Company of such material adverse change, then the Holders shall not be required
to pay any of such expenses and shall retain their rights pursuant to
Section 1.2.
1.7 EXPENSES OF COMPANY REGISTRATION. The Company shall
bear and pay all expenses incurred in connection with any registration, filing
or qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.13), including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees relating or apportionable
thereto, but excluding underwriting discounts and commissions relating to
Registrable Securities.
1.8 UNDERWRITING REQUIREMENTS. In connection with any
offering involving an underwriting of shares of the Company's capital stock, the
Company shall not be required under Section 1.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it (or by
other persons entitled to select the underwriters), and then only in such
quantity as the underwriters determine in their sole discretion will not,
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by shareholders 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
-5-
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 apportioned pro
rata among the selling shareholders according to the total amount of
securities entitled to be included therein owned by each selling Shareholder
or in such other proportions as shall mutually be agreed to by such selling
shareholders) but in no event shall (i) the amount of securities of the
selling Holders included in the offering be reduced below thirty percent
(30%) of the total amount of securities included in such offering, unless
such offering is the initial public offering of the Company's securities in
which case the selling shareholders may be excluded if the underwriters make
the determination described above or (ii) notwithstanding (i) above, any
shares being sold by a shareholder exercising a demand registration right
similar to that granted in Section 1.2 be excluded from such offering. For
purposes of the preceding parenthetical concerning apportionment, for any
selling shareholder which is a holder of Registrable Securities and which is
a partnership or corporation, the partners, retired partners and shareholders
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 shareholder", and any
pro-rata reduction with respect to such "selling shareholder" shall be based
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling shareholder", as defined
in this sentence.
1.9 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.
1.10 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, the partners or officers, directors and
shareholders of 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, or the 1934 Act,
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, or any rule or
regulation promulgated under the Act, or the 1934 Act; 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
-6-
defending any such loss, claim, damage, liability, or action; provided, however,
that the indemnity agreement contained in this subsection 1.10(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 indemnify and hold harmless the Company, each of its directors, each
of its officers who has signed the registration statement, each person, if any,
who controls the Company within the meaning of the Act, any underwriter, any
other Holder selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses,
claims, damages, or liabilities (joint or several) to which any of the foregoing
persons may become subject, under the Act, or the 1934 Act 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 1.10(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 1.10(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 1.10(b) exceed the gross proceeds from the
offering received by such Holder.
(c) Promptly after receipt by an indemnified party
under this Section 1.10 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 1.10,
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
-7-
party of any liability to the indemnified party under this Section 1.10, 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 1.10.
(d) If the indemnification provided for in this
Section 1.10 is held by a court of competent jurisdiction to be unavailable to
an indemnified party with respect to any loss, liability, claim, damage, or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such loss, liability,
claim, damage, or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the statements or omissions that resulted
in such loss, liability, claim, damage, or expense as well as any other relevant
equitable considerations. The relative fault of the indemnifying party and of
the indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent
that the provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with the underwritten public
offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.
(f) The obligations of the Company and Holders under
this Section 1.10 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Section 1, and otherwise.
1.11 REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a
view to making available to the Holders the benefits of Rule 144 promulgated
under the Act and any other rule or regulation of the SEC that may at any time
permit a Holder to sell securities of the Company to the public without
registration or pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as
those terms are understood and defined in SEC Rule 144, at all times after
ninety (90) days after the effective date of the first registration statement
filed by the Company for the offering of its securities to the general public;
(b) 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
(c) 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
-8-
ninety (90) days after the effective date of the first registration statement
filed by the Company), the Act and the 1934 Act (at any time after it has
become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies), (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents 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.
1.12 FORM S-3 REGISTRATION. In case the Company shall
receive from the Holders of forty percent (40%) or more of the Registrable
Securities a written request or requests that the Company effect a registration
on Form S-3 and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder or Holders, the Company
will:
(a) promptly give written notice of the proposed
registration, and any related qualification or compliance, to all other Holders;
and
(b) 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 1.12: (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 $5,000,000; (3) if the
Company shall furnish to the Holders a certificate signed by the President of
the Company stating that in the good faith judgment of the Board of Directors of
the Company, it would be seriously detrimental to the Company and its
shareholders 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 1.12; provided, however,
that the Company shall not utilize this right more than once in any twelve month
period; (4) if the Company has, within the twelve (12) month period preceding
the date of such request, already effected two registrations on Form S-3 for the
Holders pursuant to this Section 1.12; or (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.
(c) Subject to the foregoing, the Company shall file
a registration statement covering the Registrable Securities and other
securities so requested to be
-9-
registered as soon as practicable after receipt of the request or requests of
the Holders. All expenses incurred in connection with a registration
requested pursuant to Section 1.12, including (without limitation) all
registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of counsel for the selling Holder or
Holders and counsel for the Company, shall be borne pro rata by the Holder or
Holders participating in the Form S-3 Registration. Registrations effected
pursuant to this Section 1.12 shall not be counted as demands for
registration or registrations effected pursuant to Sections 1.2 or 1.3,
respectively.
1.13 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, after such assignment or
transfer, holds at least 1,000,000 shares of Registrable Securities (subject
to appropriate adjustment for stock splits, stock dividends, combinations and
other recapitalizations), 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, 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.
1.14 LIMITATIONS ON SUBSEQUENT REGISTRATION RIGHTS. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of 60% or more of the outstanding Registrable
Securities, enter into any agreement with any holder or prospective holder of
any securities of the Company which would allow such holder or prospective
holder (a) to include such securities in any registration filed under Section
1.2 hereof, unless under the terms of such agreement, such holder or prospective
holder may include such securities in any such registration only to the extent
that the inclusion of his securities will not reduce the amount of the
Registrable Securities of the Holders which is included or (b) to make a demand
registration which could result in such registration statement being declared
effective prior to the earlier of either of the dates set forth in subsection
1.2(a) or within one hundred twenty (120) days of the effective date of any
registration effected pursuant to Section 1.2.
1.15 "MARKET STAND-OFF" AGREEMENT. Each Investor hereby
agrees that, during the period of duration (such period not to exceed 180 days)
specified by the Company and an underwriter of common stock or other securities
of the Company,
-10-
following the effective date of a registration statement of the Company filed
under the Act, it shall not, to the extent requested by the Company and such
underwriter, directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase
or otherwise transfer or dispose of (other than to donees who agree to be
similarly bound) any securities of the Company held by it at any time during
such period except common stock included in such registration; provided,
however, that:
(a) such agreement shall be applicable only to the
first two such registration statements of the Company which cover common stock
(or other securities) to be sold on its behalf to the public in an underwritten
offering; and
(b) all officers and directors of the Company and
all other persons with registration rights (whether or not pursuant to this
Agreement) enter into similar agreements.
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.
1.16 TERMINATION OF REGISTRATION RIGHTS. No Holder shall be
entitled to exercise any right provided for in this Section 1 after five (5)
years following the consummation of the sale of securities pursuant to a
registration statement filed by the Company under the Act in connection with the
initial firm commitment underwritten offering of its securities to the general
public.
2. COVENANTS OF THE COMPANY.
2.1 DELIVERY OF FINANCIAL STATEMENTS. The Company shall
deliver to each Investor:
(a) as soon as practicable, but in any event within
ninety (90) days after the end of each fiscal year of the Company, an income
statement for such fiscal year, a balance sheet of the Company and statement of
shareholder's equity as of the end of such year, and a schedule as to the
sources and applications of funds for 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 of nationally recognized standing selected by the Company;
(b) as soon as practicable, but in any event within
forty-five (45) days after the end of each of the first three (3) quarters of
each fiscal year of the Company, an unaudited profit or loss statement, schedule
as to the sources and application of funds for such fiscal quarter and an
unaudited balance sheet as of the end of such fiscal quarter.
-11-
(c) within thirty (30) days of the end of each
month, an unaudited income statement and schedule as to the sources and
application of funds and balance sheet for and as of the end of such month, in
reasonable detail; and
(d) as soon as practicable, but in any event thirty
(30) days prior to the end of each fiscal year, a budget for the next fiscal
year, prepared on a monthly basis, including balance sheets and sources and
applications of funds statements for such months and, as soon as prepared, any
other budgets or revised budgets prepared by the Company.
2.2 INSPECTION. The Company shall permit each Investor, at
such Investor's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers, all at such reasonable times as may be
requested by the Investor; provided, however, that the Company shall not be
obligated pursuant to this Section 2.2 to provide access to any information
which it reasonably considers to be a trade secret or similar confidential
information.
2.3 TERMINATION OF INFORMATION AND INSPECTION COVENANTS.
The covenants set forth in subsections 2.1(c) and (d) and Section 2.2 shall
terminate as to Investors 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 raising at least $20,000,000 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.
2.4 RIGHT OF FIRST OFFER. Subject to the terms and
conditions specified in this paragraph 2.4, the Company hereby grants to each
Major Investor (as hereinafter defined) a right of first offer with respect to
future sales by the Company of its Shares (as hereinafter defined). For
purposes of this Section 2.4, a Major Investor shall mean (i) any Investor who
holds at least 50% of such Investor's originally acquired shares of Series A
Preferred Stock issued pursuant to the Series A Agreement and (ii) any person
who acquires at least 10% of the Series A Preferred Stock (or the common stock
issued upon conversion thereof) issued pursuant to the Series A Agreement. For
purposes of this Section 2.4, Investor includes any general or limited partners
and affiliates of an Investor. An Investor shall be entitled to apportion the
right of first offer hereby granted it among itself and its partners and
affiliates in such proportions as it 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 Major Investor in accordance with the following provisions:
-12-
(a) The Company shall deliver a notice by certified
mail ("Notice") to the Major 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 Major 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 conversion of the Series A Preferred Stock then held, by such
Major Investor bears to the total number of shares of common stock of the
Company then outstanding (assuming full conversion and exercise of all
convertible or exercisable securities) as of the date of the Notice. The
Company shall promptly, in writing, inform each Major Investor which purchases
all the shares available to it ("Fully-Exercising Investor") of any other Major
Investor's failure to do likewise. During the ten-day period commencing after
receipt of such information, each Fully-Exercising Investor shall be entitled to
obtain that portion of the Shares for which Major Investors were entitled to
subscribe but which were not subscribed for by the Major Investors which is
equal to the proportion that the number of shares of common stock issued and
held, or issuable upon conversion of Series A Preferred Stock then held, by such
Fully-Exercising Investor bears to the total number of shares of common stock
issued and held, or issuable upon conversion of the Series A Preferred Stock
then held, by all Fully-Exercising Investors who wish to purchase some of the
unsubscribed shares.
(c) If all Shares referred to in the Notice are not
elected to be obtained as provided in subsection 2.4(b) hereof, the Company may,
during the 60-day period following the expiration of the period provided in
subsection 2.4(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 60 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 Major Investors in accordance
herewith.
(d) The right of first offer in this paragraph 2.4
shall not be applicable (i) to the issuance or sale of common stock (or options
therefor) to employees, consultants or directors of the Company directly or
pursuant to a stock option plan or restricted stock plan approved by the Board
of Directors of the Company (with at least three (3) of the Board
representatives of the Major Investors voting in favor), (ii) to or after
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, at an offering price of at least $20,000,000 in the aggregate,
(iii) the issuance of securities pursuant to the conversion or exercise of
convertible or exercisable securities, (iv) the issuance of securities in
connection with a bona fide business acquisition of or by the Company, whether
by merger, consolidation, sale of assets, sale
-13-
or exchange of stock or otherwise or (v) the issuance of stock, warrants or
other securities or rights to persons or entities with which the Company has
business relationships provided such issuances are for other than primarily
equity financing purposes (with at least three (3) of the Board
representatives of the Major Investors voting in favor).
2.5 EMPLOYEE STOCK POOL. Any increase to the Company's
Employee Stock Pool shall be aproved by at least three (3) of the Board
representatives of the Major Investors.
3. COVENANTS OF THE INVESTORS.
3.1 CERTAIN CORPORATE TRANSACTIONS. In the event that
the Board of Directors of the Company and holders of a majority of the Common
Stock issuable or issued upon conversion of the Series A Preferred Stock of
the Company vote in favor of a Corporate Transaction (as defined below), each
Investor hereby agrees not to take any action inconsistent with the
pooling-of-interests accounting treatment to the extent applicable to such
Corporate Transaction, as reasonably deemed necessary by the Company's Board
of Directors, including without limitation exercising any dissenter's rights
any such Investor may have or selling or purchasing any Company securities
where prohibited under the then applicable pooling-of-interests accounting
rules. For purposes of this Section 3.1, Corporate Transaction shall mean
the acquisition of the Company by another entity by means of any transaction
or series of related transactions (including, without limitation, any
reorganization, merger or consolidation) that results in the transfer of
fifty percent (50%) or more of the outstanding voting power of the Company.
3.2 STANDSTILL. Except as set forth in the Series A
Agreement, each Investor agrees not to purchase any additional shares of, or
securities convertible into or exercisable or exchangeable for any shares of,
any class of capital stock of the Company unless approved in advance by the
Board of Directors of the Company.
3.3 ADDITIONAL PREFERRED INVESTORS. Each Investor agrees to
permit other new preferred stock investors in the Company which are approved by
the Board of Directors to participate on a pari passu basis in the rights of
first offer, registration rights, information and access rights and the
protective provision rights held by the Investors set forth herein and in the
Restated Certificate of Incorporation.
4. MISCELLANEOUS.
4.1 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). 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.
-14-
4.2 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.
4.3 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.
4.4 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.
4.5 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 upon
deposit with the United States Post Office, by registered or certified mail,
postage prepaid and addressed to the party to be notified at the address
indicated for such party on the signature page hereof, or at such other address
as such party may designate by ten (10) days' advance written notice to the
other parties.
4.6 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.
4.7 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
60% or more 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.
4.8 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.
4.9 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.
4.10 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement
(including the Exhibits hereto, if any) constitutes the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
-15-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ACCELERATED CONNECTIONS, INC.
By: /s/ Xxxxxxxxx X. Xxxxx
--------------------------------------
Xxxxxxxxx Xxxxx, President
Address: 0000 X. Xxxxxxxx Xx.
------------------------------------------------
Xxxxxxxxx, XX 00000
------------------------------------------------
INVESTOR:
ENTERPRISE PARTNERS III, L.P.
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------------
Its: General Partner
--------------------------------------
Address: 0000 Xxxxxxx Xxx., Xxxxx 000
------------------------------------------------
Xx Xxxxx, XX 00000
------------------------------------------------
ENTERPRISE PARTNERS III ASSOCIATES, L.P.
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------------
Its: General Partner
--------------------------------------
Address: 0000 Xxxxxxx Xxx., Xxxxx 000
------------------------------------------------
Xx Xxxxx, XX 00000
------------------------------------------------
ENTERPRISE PARTNERS IV, L.P.
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------------
Its: General Partner
--------------------------------------
Address: 0000 Xxxxxxx Xxx., Xxxxx 000
------------------------------------------------
Xx Xxxxx, XX 00000
------------------------------------------------
[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]
BRENTWOOD ASSOCIATES VII, L.P.
By: Brentwood VII Ventures, L.P.
its General Partner
By: /s/ (illegible)
--------------------------------------
Its:
--------------------------------------
Address:
------------------------------------------------
------------------------------------------------
BRENTWOOD AFFILIATE FUND, L.P.
By: Brentwood VII Ventures, L.P.
its General Partner
By: /s/ (illegible)
--------------------------------------
Its:
--------------------------------------
Address:
------------------------------------------------
------------------------------------------------
XXXXXXX XXXXXXX XXXXXXXX & XXXXX VIII
By: /s/ (illegible)
--------------------------------------
Its: General Partner
--------------------------------------
Address: 0000 Xxxx Xxxx Xx.
------------------------------------------------
Xxxxx Xxxx, XX 00000
------------------------------------------------
KPCB VIII INFORMATION SCIENCES
ZAIBATSU FUND II
By: /s/ (illegible)
--------------------------------------
Its: General Partner
--------------------------------------
Address: 0000 Xxxx Xxxx Xx.
------------------------------------------------
Xxxxx Xxxx, XX 00000
------------------------------------------------
[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]
SPROUT CAPITAL VII, L.P.
By: DLJ Capital Corporation
Managing General Partner
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------
Xxxxx Xxxxxxx, Attorney-in-Fact
Address: 0000 Xxxx Xxxx Xxxx, Xxx. 4, Suite 270
------------------------------------------------
Menlo Xxxx, XX 00000
------------------------------------------------
THE SPROUT CEO FUND, L.P.
By: DLJ Capital Corporation
Its General Partner
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------
Xxxxx Xxxxxxx, Attorney-in-Fact
Address: 0000 Xxxx Xxxx Xxxx, Xxx. 4, Suite 270
------------------------------------------------
Menlo Xxxx, XX 00000
------------------------------------------------
DLJ CAPITAL CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------------
Xxxxx Xxxxxxx, Attorney-in-Fact
Address: 0000 Xxxx Xxxx Xxxx, Xxx. 4, Suite 270
------------------------------------------------
Menlo Xxxx, XX 00000
------------------------------------------------
[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]
DLJ FIRST ESC L.L.C.
By: DLJ LBO Plans Management Corporation
Its: Manager
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------
Xxxxx Xxxxxxx, Attorney-in-Fact
Address: 0000 Xxxx Xxxx Xxxx, Xxx. 4, Suite 270
------------------------------------------------
Menlo Xxxx, XX 00000
------------------------------------------------
XXXXX INVESTORS II, LLC
By: /s/ Xxxxxx X. Xxxxx
--------------------------------------
Its:
--------------------------------------
Address: 0000 Xxxxxxxx Xx, #000X
------------------------------------------------
Xxxxx, XX 00000
------------------------------------------------
STANFORD UNIVERSITY
By: /s/ Xxxxx Xxxxxx
--------------------------------------
Its: Xxxxx Xxxxxx, Assistant Secretary
--------------------------------------
Address: THE BOARD OF TRUSTEES OF THE
------------------------------------------------
XXXXXX XXXXXXXX JUNIOR UNIVERSITY
------------------------------------------------
[SIGNATURE PAGE TO INVESTORS' RIGHTS AGREEMENT]
SCHEDULE A
----------
INVESTOR
Enterprise Partners III, L.P.
Enterprise Partners III Associates, L.P.
Enterprise Partners IV, L.P.
Brentwood Associates VII, L.P.
Brentwood Associates Fund, X.X.
Xxxxxxx Xxxxxxx Xxxxxxxx & Xxxxx VIII
KPCB VIII Information Sciences Zaibatsu Fund II
Sprout Capital VII, L.P.
The Sprout CEO Fund, L.P.
DLJ Capital Corporation
DLJ First ESC L.L.C.
Xxxxx Investment Partners
Stanford Engineering Venture Fund
VOTING AGREEMENT
THIS VOTING AGREEMENT (this "Agreement") is made as of the 3rd day of June,
1997, by and among Accelerated Connections, Inc., a Delaware corporation (the
"Company") and the parties listed on the Schedule of Investors attached hereto
as SCHEDULE A (the "Series A Investors").
RECITALS
A. The Series A Investors desire to purchase from the Company and/or
already hold shares of the Company's Series A Preferred Stock (the "Series A
Shares"), and the Company desires to sell such Series A Shares (not currently
held) to the Series A Investors;
B. The parties desire that each of the following Series A Investors has
requested that it be given the right to designate one (1) nominee to serve as
one of the directors: The Sprout Group funds (collectively, "Sprout");
Enterprise Partners funds (collectively, "Enterprise"), Xxxxxxx Xxxxxxx Xxxxxxxx
& Xxxxx funds (collectively, "KPCB") and Brentwood Associates funds
(collectively, "Brentwood") (collectively, the "Series A Directors");
C. As a condition of its sale and issuance of the Series A Shares, the
Company has requested that it be given the right to designate its Chief
Executive Officer as a nominee to serve as one of the directors (the "Company
Director");
D. The Series A Investors and the Company acknowledge that they are
entering into this Voting Agreement in consideration of the purchase of the
Series A Shares by the Series A Investors pursuant to that certain Series A
Preferred Stock Purchase Agreement dated as of the date hereof (the "Purchase
Agreement").
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. SERIES A DIRECTORS. During the term of this Agreement, each of the
Series A Investors agrees to vote all of its Series A Shares now or hereafter
owned by it as follows:
(a) for so long as Sprout holds at least 1,000,000 Series A Shares,
(i) to elect the nominee of Sprout (the "Sprout Nominee") as one of the Series A
Directors and (ii) if requested by Sprout, to remove the incumbent Sprout
Nominee and elect a new Sprout Nominee as one of the Series A Directors or to
fill a vacancy created by death of such Sprout Nominee or otherwise.
(b) for so long as Enterprise holds at least 1,000,000 Series A
Shares, (i) to elect the nominee of Enterprise (the "Enterprise Nominee") as one
of the Series A
Directors and (ii) if requested by Enterprise, to remove the incumbent
Enterprise Nominee and elect a new Enterprise Nominee as one of the Series A
Directors or to fill a vacancy created by death of such Enterprise Nominee or
otherwise.
(c) for so long as KPCB holds at least 1,000,000 Series A Shares,
(i) to elect the nominee of KPCB (the "KPCB Nominee") as one of the Series A
Directors and (ii) if requested by KPCB, to remove the incumbent KPCB Nominee
and elect a new KPCB Nominee as one of the Series A Directors or to fill a
vacancy created by death of such KPCB Nominee or otherwise.
(d) for so long as Brentwood holds at least 1,000,000 Series A
Shares, (i) to elect the nominee of Brentwood (the "Brentwood Nominee") as one
of the Series A Directors and (ii) if requested by Brentwood, to remove the
incumbent Brentwood Nominee and elect a new Brentwood Nominee as one of the
Series A Directors or to fill a vacancy created by death of such Brentwood
Nominee or otherwise.
(e) Each Series A Investor shall designate its respective Nominee in
writing to the Company prior to each election of directors of the Company. The
Company shall promptly notify each of the Series A Investors of the choice of
such Nominee. Any vacancy occurring because of the death, resignation, removal
or disqualification of a Nominee shall be filled according to this Section 1.
2. COMPANY DIRECTOR. During the term of this Agreement, each of the
Series A Investors agrees to vote all of its Series A Shares now or hereafter
owned by it to elect the Company's Chief Executive Officer as the Company
Director.
3. OUTSIDE DIRECTOR. The holders of Series A Preferred Stock and the
holders of Common Stock shall vote together as a single class to elect the
independent outside Board representative.
4. SUCCESSORS IN INTEREST.
(a) The provisions of this Agreement shall be binding upon the
successors in interest to any of the Series A Shares. The Company shall not
permit the transfer of any of the Series A Shares on its books or issue new
certificates representing any shares of such securities unless and until the
person(s) to whom such shares are to be transferred shall have executed a
written agreement, substantially in the form of this Agreement, pursuant to
which such person becomes a party to this Agreement, and agrees to be bound by
all the provisions hereof as if such person was a party hereunder.
(b) Each certificate representing any of the Series A Shares shall
bear a legend reading as follows:
"The shares evidenced hereby are subject to the terms
of a Voting Agreement (a copy of which may be obtained
without charge from the issuer), and by accepting any
interest in such shares the person accepting such interest
shall be
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deemed to agree to and shall become bound by all the provisions
of such Voting Agreement."
5. TERMINATION. This Agreement shall terminate upon the date the Company
consummates an underwritten public offering of its Common Stock under the
Securities Act of 1933, as amended.
6. AMENDMENTS AND WAIVERS. Any term hereof may be amended and the
observance of any term hereof may be waived (either generally or in a particular
instance and either retroactively or prospectively) only with the written
consent of (a) the Company and (b) the Series A Investors, or their assigns,
holding not less than 55% of the Series A Shares then outstanding. Any
amendment or waiver so effected shall be binding upon the Company and all Series
A Investors subject to the terms of this Agreement, whether or not such party,
assignee, or other stockholder entered into or approved such amendment or
waiver.
7. STOCK SPLITS, STOCK DIVIDENDS, ETC. In the event of any stock split,
stock dividend, recapitalization, reorganization, or the like, any securities
issued with respect to the Series A Shares shall become subject to this
Agreement and shall be endorsed with the legend set forth in Section 3(b)
hereof.
8. ENFORCEABILITY/SEVERABILITY. The parties hereto agree that each
provision of this Agreement shall be interpreted in such a manner as to be
effective and valid under applicable law. If any provision of this Agreement
shall nevertheless be held to be prohibited by or invalid under applicable law,
(a) such provision shall be effective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement, and (b) the parties shall, to the extent
permissible by applicable law, amend this Agreement, or enter into a voting
trust agreement under which the Series A Shares shall be transferred to the
voting trust created thereby, so as to make effective and enforceable the intent
of this Agreement.
9. GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to contracts among
California residents entered into and to be performed entirely within
California.
10. 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.
11. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided in
this Agreement, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors and assigns of the parties hereto.
12. NOTICES. All notices, requests and other communications to the
Company or any of the Investors hereunder shall be in writing, shall refer
specifically to this Agreement and shall be personally delivered or sent by
facsimile transmission, overnight delivery with a nationally recognized
overnight delivery service or by registered or
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certified mail, return receipt requested, postage prepaid, in each case to
the respective address specified in the preamble hereof with respect to the
Company and in the Schedule of Investors attached as SCHEDULE A hereto with
respect to the Series A Investors (or such other address as may be specified
in writing to the other parties hereto). Any notice or communication given
in conformity with this Section 11 shall be deemed to be effective when
received by the addressee, if delivered by hand or facsimile transmission,
one (1) business day after deposit with a nationally recognized overnight
delivery service and three (3) days after mailing by first class U.S. Mail.
13. EQUITABLE REMEDIES. The Company and the Series A Investors
acknowledge and agree that the legal remedies available to the Company and the
Series A Investors in the event any party violates the covenants and agreements
made in this Agreement would be inadequate and that the Company and each of the
Series A Investors shall be entitled, without posting any bond or other
security, to temporary, preliminary, and permanent injunctive relief, specific
performance and other equitable remedies in the event of such a violation, in
addition to any other remedies which the Company or any of the Series A
Investors may have at law or in equity.
14. FURTHER ASSURANCES. Each of the parties hereto shall execute and
deliver all additional documents and instruments and shall do any and all acts
and things reasonably requested in connection with the performance of the
obligations undertaken in this Agreement and/or otherwise to effectuate in good
faith the intent of the parties.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year hereinabove first written.
THE COMPANY:
ACCELERATED CONNECTIONS, INC.
By: /s/ Xxxxxxxxx X. Xxxxx
-----------------------------------------
Xxxxxxxxx X. Xxxxx,
President and Chief Executive Officer
THE SERIES A INVESTORS:
SPROUT CAPITAL VII, L.P.
By: DLJ Capital Corporation
Managing General Partner
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------
Xxxxx Xxxxxxx, Attorney-in-Fact
THE SPROUT CEO FUND, L.P.
By: DLJ Capital Corporation
Its General Partner
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------
Xxxxx Xxxxxxx, Attorney-in-Fact
DLJ CAPITAL CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------------
Xxxxx Xxxxxxx, Attorney-in-Fact
[COUNTERPART SIGNATURE PAGE TO VOTING AGREEMENT]
DLJ FIRST ESC L.L.C.
By: DLJ LBO Plans Management Corporation
Its: Manager
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------
Xxxxx Xxxxxxx, Attorney-in-Fact
ENTERPRISE PARTNERS III, L.P.
By: /s/ X. X. Xxxxxxxx
-----------------------------------------
Its: General Partner
----------------------------------------
ENTERPRISE PARTNERS III
ASSOCIATES, L.P.
By: /s/ X. X. Xxxxxxxx
-----------------------------------------
Its: General Partner
----------------------------------------
ENTERPRISE PARTNERS IV, L.P.
By: /s/ X. X. Xxxxxxxx
-----------------------------------------
Its: General Partner
----------------------------------------
XXXXXXX XXXXXXX XXXXXXXX & XXXXX VIII
By: /s/ (illegible)
-----------------------------------------
Its: General Partner
----------------------------------------
0000 Xxxx Xxxx Xx.
Xxxxx Xxxx, XX 00000
[COUNTERPART SIGNATURE PAGE TO VOTING AGREEMENT]
KPCB VIII INFORMATION SCIENCES
ZAIBATSU FUND II
By: /s/ (illegible)
-----------------------------------------
Its: General Partner
----------------------------------------
Address: 0000 Xxxx Xxxx Xx.
Xxxxx Xxxx, XX 00000
BRENTWOOD ASSOCIATES VII, L.P.
By: Brentwood VII Ventures, L.P
its General Partner
By: /s/ (illegible)
-----------------------------------------
Its:
----------------------------------------
BRENTWOOD AFFILIATES FUND
By: Brentwood VII Ventures, L.P
its General Partner
By: /s/ (illegible)
-----------------------------------------
Its:
----------------------------------------
XXXXX INVESTORS II, LLC
By: /s/ Xxxxxx X. Xxxxx
-----------------------------------------
Its:
-----------------------------------------
Address: 000X Xxxxxxxx Xx, #000X
Xxxxx, XX 00000
[COUNTERPART SIGNATURE PAGE TO VOTING AGREEMENT]
SCHEDULE A
SCHEDULE OF SERIES A INVESTORS
Name and Address of Series A Investors
--------------------------------------
The Sprout Group
0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxx
Fax: (000) 000-0000
Enterprise Partners
0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xx Xxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxx
Fax: (000) 000-0000
Xxxxxxx Xxxxxxx Xxxxxxxx & Xxxxx
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxx
Fax: (000) 000-0000
Brentwood Associates
0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxxx
Fax: (000) 000-0000
Xxxxx Investors II, LLC
c/o Paradyne
0000 000xx Xxxxxx, Xxxxx
Xxxxx, XX 00000
Attn: Xxx Xxxxx
Fax: (000) 000-0000
