1
EXECUTION COPY
PURCHASE
OF
8% CONVERTIBLE REDEEMABLE
CLASS D PREFERRED STOCK
OF
ADVANCED SWITCHING COMMUNICATIONS, INC.
SECURITIES PURCHASE AND STOCKHOLDER AGREEMENT
Dated as of September 10, 1999
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SECURITIES PURCHASE AND STOCKHOLDER AGREEMENT
This SECURITIES PURCHASE AND STOCKHOLDER AGREEMENT, dated as of
September 10, 1999 (this "Agreement"), among Advanced Switching Communications,
Inc., a Delaware corporation (the "Company"), Xxxxxx Xxxxxxx (the "Executive
Stockholder"), Mostafa Investments Limited Partnership, a Virginia limited
partnership (the "Partnership"), Xxxxx Communications Fund, L.P., a Delaware
limited partnership (the "Prior Investor"), and the Purchasers named in Schedule
A hereto (together with the Partnership and the Prior Investor, the
"Purchasers"). The Purchasers other than the Partnership are referred to herein
each as an "Investor" and collectively as the "Investors".
W I T N E S S E T H:
WHEREAS, the Company desires to issue to the Purchasers, and the
Purchasers desire to purchase from the Company, the Class D Preferred Shares (as
such term is defined below) as set forth in this Agreement; and
WHEREAS, The Prior Investor owns all of the outstanding shares
of the Company's 8% Convertible Redeemable Class C Preferred Shares (the "Class
C Preferred Shares") and possesses certain registration rights, rights of first
refusal, tag-along rights and other rights pursuant to the Securities Purchase
and Stockholder Agreement (the "Prior Investor Agreement"), dated as of August
31, 1998, by and among the Prior Investor, the Company, the Executive
Stockholder and the Partnership, executed in connection with the Prior
Investor's purchase of the Class C Preferred Shares; and
WHEREAS, in connection with the Purchasers' purchase of the
Class D Preferred Shares, the Prior Investor, the Company, the Executive
Stockholder and the Partnership desire that certain of the provisions herein
with respect to registration rights, rights of first refusal, tag-along rights
and other rights shall supersede certain provisions contained in the Prior
Investor Agreement; and
WHEREAS, certain terms used in this Agreement are defined in
Section 13.1 of this Agreement.
NOW, THEREFORE, in consideration of the promises and mutual
covenants and agreements hereinafter contained, the parties hereto hereby agree
as follows:
1. SALE AND PURCHASE OF SECURITIES.
1.1. Sale and Purchase of Class D Preferred Shares. Subject
to the terms and conditions of this Agreement, the Company shall sell, assign,
transfer, convey and deliver to the Purchasers, and the Purchasers shall
purchase from the Company, for the Class D Purchase Price (as defined in Section
2.1(a) of this Agreement), up to an aggregate of __________4,678,594 shares of
8% Convertible Redeemable Class D Preferred Shares of the Company (the "Class D
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Preferred Shares"). Each Purchaser shall purchase the number of Class D
Preferred Shares set forth on Schedule 1.1 of this Agreement applicable to such
Purchaser.
1.2. First and Second Closing Dates. An aggregate of
___________4,093,770 Class D Preferred Shares will be sold and delivered on the
First Closing Date (as defined in Section 3 of this Agreement) and up to an
aggregate of 584,824 Class D Preferred Shares will be sold and delivered on the
Second Closing Date (as defined in Section 3 of this Agreement).
2. PURCHASE PRICE.
2.1. Amount of Purchase Price.
Class D Purchase Price. The purchase price, in the aggregate,
for the Class D Preferred Shares shall be up to Forty Million Dollars
($40,000,000), or $8.55 per Class D Preferred Share (the "Class D Purchase
Price"), of which Thirty-Five Million Dollars ($35,000,000) shall be paid at the
First Closing Date (the "First Closing Purchase Price") and up to Five Million
Dollars ($5,000,000) shall be paid at the Second Closing Date (the "Second
Closing Purchase Price"). The Class D Purchase Price shall be payable as
provided in Sections 2.2(a) and 2.2(b) of this Agreement.
2.2. Payment of the Purchase Price.
(a) First Closing. At the First Closing (as defined in
Section 3 of this Agreement), (i) each Purchaser participating in such First
Closing shall pay the amount designated as the First Closing Purchase Price on
Schedule 1.1 of this Agreement applicable to such Purchaser by wire transfer of
immediately available funds according to wire transfer instructions delivered to
such Purchaser prior to the First Closing Date or by cancellation of outstanding
indebtedness of the Company to such Purchaser, or both, as set forth on Schedule
1.1, and (ii) the Company shall deliver to such Purchaser certificate(s)
representing the number of Class D Preferred Shares set forth opposite such
First Closing Purchase Price applicable to such Purchaser on Schedule 1.1.
(b) Second Closing. At the Second Closing (as defined in
Section 3 of this Agreement), (i) any Purchaser participating in such Second
Closing shall pay the amount, if any, designated as the Second Closing Purchase
Price applicable to such Purchaser on Schedule 1.1, by wire transfer of
immediately available funds according to wire transfer instructions delivered to
the Purchaser prior to the Second Closing Date, or by cancellation of
outstanding indebtedness of the Company to such Purchaser, or both as set forth
on Schedule 1.1, and (ii) the Company shall deliver to such Purchaser
certificate(s) representing the number of Class D Preferred Shares, if any, set
forth opposite such Second Closing Purchase Price, on Schedule 1.1 applicable to
such Purchaser. In the event that one or more subsequent purchasers participate
in the Second Closing (the "Subsequent Purchasers"), such Subsequent Purchasers
shall be required to sign counterpart signature pages to this Agreement shall be
bound by the terms and conditions of this Agreement, and shall be deemed
"Purchasers" for all purposes hereunder. In such event, Schedule 1.1 shall be
amended to reflect the purchase by any Subsequent Purchasers.
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3. CLOSING DATES.
The closing of the sale and purchase of 4,093,770 Class D Preferred
Shares provided for in Section 1.2 of this Agreement (the "First Closing") shall
take place at 9:00 a.m. on September 10, 1999 at the offices of Piper & Marbury
L.L.P. in Reston, VA, or at such other time, date or place as the parties hereto
may mutually agree. The date on which the First Closing is held is referred to
in this Agreement as the "First Closing Date." The closing of the sale and
purchase of up to the remaining 584,795 Class D Preferred Shares provided for in
Section 1.2 of this Agreement (the "Second Closing") shall take place on a date
agreed to by the parties hereto, but in no event shall such date be later than
thirty (30) days following the First Closing Date, at 9:00 a.m. at the offices
of Piper & Marbury L.L.P. in Reston, VA, or at such other time, date or place as
the parties hereto may mutually agree. The date on which the Second Closing is
held is referred to in this Agreement as the "Second Closing Date," and together
with the First Closing Date, the "Closing Dates." Each Closing shall be subject
to the conditions contained in Section 12 hereof.
4. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to the Purchasers that:
4.1. Organization and Good Standing; Capitalization.
(a) The Company is duly organized, validly existing and in
good standing under the laws of the State of Delaware and has full corporate
power and authority to own, lease and operate its properties and assets and to
carry on its business as now conducted and as it is proposed to be conducted.
The Company is duly qualified or authorized to do business as a foreign
corporation and is in good standing under the laws of the State of Virginia,
which is the only jurisdiction in which the conduct of its business or the
ownership of its properties or assets requires such qualification or
authorization.
(b) The authorized capital stock of the Company (the
"Capital Stock") consists of: (a) eighteen million nine hundred fifty-four
thousand (18,954,000), shares of Common Stock, of which five million eight
hundred eighty thousand (5,880,000) shares are issued and outstanding; and (b)
eight million nine hundred four thousand (8,904,000) shares of Preferred Stock,
of which (i) ten thousand (10,000) shares have been designated Class A
Convertible Preferred Shares ("Class A Preferred Shares") and nine thousand five
hundred and twenty eight (9,528) shares are issued and outstanding, (ii)
fourteen thousand (14,000) shares have been designated Class B Convertible
Preferred Shares ("Class B Preferred Shares") and ten thousand nine hundred and
sixty (10,960) shares are issued and outstanding, (iii) four million (4,000,000)
shares have been designated Class C Preferred Shares and three million nine
hundred eighty nine thousand two hundred seventy (3,989,270) shares are issued
and outstanding and (iv) four million seven hundred thousand (4,700,000) shares
have been designated Class D Preferred Shares and no shares are issued and
outstanding. All issued and outstanding shares of Capital Stock are validly
issued, fully paid and nonassessable. Each class of Capital Stock has the
powers, designations, preferences, rights (including, for certain classes,
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conversion rights), qualifications, limitations and restrictions that are set
forth in the Certificate of Incorporation of the Company or the Certificate of
Designations on file with the Secretary of State of Delaware, as applicable,
with respect to such class. Except as disclosed on Schedule 4.1(b), (i) there is
no option, warrant, call, right, commitment or other agreement of any character
to which the Company is a party requiring, (ii) there are no securities of the
Company outstanding which upon conversion or exchange would require and (iii)
there are no stock appreciation rights or other similar rights based on
securities of the Company which would require, the issuance, sale or transfer of
any additional shares of Capital Stock or other equity securities of the Company
or other securities convertible into, exchangeable for or evidencing the right
to subscribe for or purchase shares of Capital Stock or other equity securities
of the Company. Except as disclosed herein or on Schedule 4.1(b), the Company is
not a party to, nor aware of, any voting trust or other voting agreement with
respect to any of the securities of the Company or to any agreement relating to
the issuance, sale, redemption, transfer or other disposition of the Capital
Stock of the Company. Except as disclosed on Schedule 4.1(b), all of the issued
and outstanding Capital Stock of the Company is duly authorized, validly issued,
fully paid, nonassessable and free of all preemptive rights, and all outstanding
Capital Stock of the Company has been issued in accordance with federal and
state securities laws.
4.2. Authorization of Agreement; Enforceability. The Company
has all requisite corporate power and authority to execute and deliver this
Agreement and each other agreement, document, instrument and certificate to be
executed in connection with the consummation of the transactions contemplated by
this Agreement (collectively, the "Transaction Documents") by the Company, and
to perform fully its obligations hereunder and thereunder. The execution,
delivery and performance by the Company of this Agreement and the Transaction
Documents to which it is a party have been duly authorized by all necessary
corporate action on the part of the Company and its stockholders. This Agreement
and each of the Transaction Documents have been duly and validly executed and
delivered by the Company and (assuming the due authorization, execution and
delivery thereof by the other parties thereto), this Agreement and each of the
Transaction Documents constitute the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium
and similar laws affecting creditors' rights and remedies generally and subject,
as to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
4.3. Subsidiaries, Joint Ventures, Partnerships, Etc. The
Company has no subsidiaries. The Company is not a participant in any joint
venture, partnership or similar arrangement and does not own any equity
securities of any entity.
4.4. Consents of Third Parties. None of the execution and
delivery by the Company of this Agreement and the Transaction Documents, the
consummation of the transactions contemplated hereby or thereby, or compliance
by the Company with any of the provisions of this Agreement or thereof will (a)
conflict with, or result in the breach of, any provision of the certificate of
incorporation or by-laws of the Company, (b) conflict with, violate,
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result in the breach or termination of, or constitute a default or give rise to
any right of termination or acceleration or right to increase the obligations or
otherwise modify the terms thereof under any Contract, Permit or Order to which
the Company is a party or by which the Company or any of its properties or
assets is bound, (c) constitute a violation of any Law applicable to the
Company, or (d) result in the creation of any Lien upon the properties or assets
of the Company. Other than those which have been obtained or made from the Board
of Directors of the Company and the shareholders of the Company, no consent,
waiver, approval, Order, Permit or authorization of, or declaration or, except
for filings with the State of Delaware, filing with, or notification to, any
Person or Governmental Body is required on the part of the Company in connection
with the execution and delivery of this Agreement or the Transaction Documents,
or the compliance by the Company with any of the provisions of this Agreement or
thereof.
4.5. Authorization of Class D Preferred Shares and Common
Stock.
(a) The issuance, sale and delivery of the Class D Preferred
Shares have been duly authorized by all requisite action of the Company, and,
when issued, sold, and delivered in accordance with this Agreement, the Class D
Preferred Shares will be validly issued and outstanding, fully paid, and
non-assessable, with no personal liability attaching to the ownership thereof,
and, not subject to preemptive or any other similar rights of the stockholders
of the Company or others.
(b) The issuance, sale, and delivery of the Common Stock to
be delivered upon conversion of the Class D Preferred Shares in accordance with
the terms of the Class D Preferred Shares have been duly authorized by all
requisite action of the Company, and, when issued, sold, and delivered in
accordance with this Agreement, the Common Stock will be validly issued and
outstanding, fully paid, and non-assessable, with no personal liability
attaching to the ownership thereof, and not subject to preemptive or any other
similar rights of the stockholders of the Company or others.
4.6. Financial Statements. The Company has provided to the
Purchasers prior to the Closing Date: (a) copies of the audited balance sheets
of the Company as of December 31, 1998 and the audited statements of income and
retained earnings of the Company as of December 31, 1998, and the notes thereto,
accompanied by a report of the auditors (the "Audited Financial Statements") and
(b) copies of the unaudited balance sheet of the Company as of July 31, 1999 and
the unaudited statement of income and retained earnings of the Company as of
July 31, 1999 (the "Interim Financial Statements", and together with the Audited
Financial Statements, the "Financial Statements"). Each of the Financial
Statements was prepared in good faith by the Company, is complete and correct in
all material respects, has been prepared in accordance with GAAP (except as set
forth in the notes thereto and, in the case of unaudited and interim financial
statements, subject to normal year-end adjustment) and in conformity with the
practices consistently applied by the Company, and presents fairly the financial
position, results of operations and cash flows of the Company as of the dates
and for the periods indicated.
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4.7. No Undisclosed Liabilities. Except as set forth on
Schedule 4.7, the Company has no liabilities (whether accrued, absolute,
contingent or otherwise, and whether due or to become due or asserted or
unasserted) in an amount greater than $25,000. Unless specifically disclosed as
a breach on Schedule 4.7, disclosure of a Contract on Schedule 4.13 shall not be
indicative of a breach of any provision of such Contract.
4.8. Absence of Certain Developments.
(a) Except as set forth on Schedule 4.8(a), the general
nature of the business of the Company is described in the Confidential
Memorandum of the Company, dated July, 1999, prepared by Xxxxxx Xxxxxxx Xxxx
Xxxxxx (the "Offering Memorandum"), which previously has been delivered to the
Purchasers. The financial projections contained in the Offering Memorandum are
based on and reflect facts that management of the Company believes still exist
and assumptions that management of the Company believes are still reasonable, as
of the date of this Agreement, but of which the Company cannot and does not
assure or guarantee the attainment in any manner.
(b) Except as set forth on Schedule 4.8(b) and since the
date of the Interim Financial Statements:
(i) there has not been any Material Adverse Change
nor has any event occurred which could result in any Material Adverse Change;
(ii) there has not been any declaration, setting a
record date, setting aside or authorizing the payment of, any dividend or other
distribution in respect of any shares of Capital Stock of the Company or any
repurchase, redemption or other acquisition by the Company, of any of the
outstanding shares of Capital Stock or other securities of, or other ownership
interest in, the Company;
(iii) there has not been any transfer, issue, sale or
other disposition by the Company of any shares of Capital Stock or other
securities of the Company or any grant of options, warrants, calls or other
rights to purchase or otherwise acquire shares of such Capital Stock or such
other securities;
(iv) the Company has not awarded or paid any bonuses
to Employees or Representatives of the Company nor has the Company either
entered into any employment, deferred compensation, severance or similar
agreements (nor amended any such agreement) or agreed to increase the
compensation payable or to become payable by it to any of the Company's
Employees or Representatives or agreed to increase the coverage or benefits
available under any severance pay, deferred compensation, bonus or other
incentive compensation, pension or other employee benefit plan, payment or
arrangement made to, for or with such Employees or Representatives, other than
in the ordinary course of business consistent with past practice which increases
in the aggregate do not exceed $25,000 in annual cost to the Company, and other
than as may have been required by law or insurers;
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(v) the Company has not made any loans, advances or
capital contributions to, or investments in, any Person or paid any fees or
expenses to any Affiliate of the Company;
(vi) the Company has not transferred or granted any
rights under any Contracts, leases, licenses, agreements or intangible property
(as set forth in Section 4.12 of this Agreement) used by the Company in its
business which could result in a Material Adverse Change;
(vii) there has not been any damage, destruction or
loss, whether or not covered by insurance, with respect to the property or
assets of the Company having a replacement cost of more than $5,000 for any
single loss or $50,000 for all such losses;
(viii) the Company has not mortgaged, pledged or has
been subjected to any Lien on any of its assets, or acquired any assets or sold,
assigned, transferred, conveyed, leased or otherwise disposed of any assets of
the Company, except for assets acquired or sold, assigned, transferred,
conveyed, leased or otherwise disposed of in the ordinary course of business
consistent with past practice;
(ix) the Company has not canceled or compromised any
debt or claim or amended, canceled, terminated, relinquished, waived or released
any Contract or right except in the ordinary course of business consistent with
past practice and which, in the aggregate, would not be material to the Company;
(x) the Company has not made any binding commitment
to make any capital expenditures or capital additions or betterments in excess
of $5,000 individually or $50,000 in the aggregate;
(xi) the Company has not incurred any debts,
obligations or liabilities, whether due or to become due, except current
liabilities incurred in the usual and ordinary course of business, none of which
current liabilities (individually or in the aggregate) materially and adversely
affects the business, assets, liabilities, prospects, properties, results of
operations or condition (financial or otherwise) of the Company;
(xii) the Company has not entered into any transaction
other than in the usual and ordinary course of business except for this
Agreement and the transactions described herein;
(xiii) the Company has not encountered any labor
difficulties or labor union organizing activities;
(xiv) the Company has not made any change in the
accounting principles, methods or practices followed by it or depreciation or
amortization policies or rates theretofore adopted;
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(xv) the Company has not disclosed to any Person any
material trade secrets except for disclosures made to Persons subject to valid
and enforceable confidentiality agreements; or
(xvi) to the Company's knowledge, suffered or
experienced any change in the relationship or course of dealings between the
Company and any of its suppliers or customers which supply goods or services to
the Company or purchase goods or services from the Company, which has had or is
likely to have a material adverse effect on the business, assets, liabilities,
prospects, properties, results of operations or condition (financial or
otherwise) of the Company.
4.9. Taxes. The Company has filed all Tax returns (including
statements of estimated Taxes owed) required to be filed within the applicable
periods (subject to extensions) for such filings and has paid all Taxes required
to be paid, and has established adequate reserves (net of estimated Tax payments
already made) for the payment of all Taxes payable in respect of the period
subsequent to the last periods covered by such returns. No deficiencies for any
Tax are currently assessed against the Company, and no Tax returns of the
Company have ever been audited, and, to the knowledge of the Company, there is
no such audit pending or contemplated. There is no Tax lien, whether imposed by
any federal, state or local taxing authority, outstanding against the assets,
properties or business of the Company.
4.10. Real Property.
(a) The Company does not own any real property.
(b) The Company has good, legal, and marketable title to all
of its assets, including all properties and assets free and clear of all Liens.
(c) Schedule 4.10(c) sets forth a complete list of all real
property and interests in real property leased by the Company (each a "Real
Property Lease", and collectively, the "Real Property Leases") as lessee or
lessor. The Company has good and marketable title to the leasehold estates in
all Real Property Leases in each case free and clear of all Liens.
(d) Each of the Real Property Leases is valid and
enforceable in accordance with its terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws affecting creditors'
rights and remedies generally and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity), and there is no default under any Real Property
Lease by the Company or, to the knowledge of the Company, by any other party
thereto, and no event has occurred that with the lapse of time or the giving of
notice or both would constitute a default thereunder. The Company has delivered
or otherwise made available to the Purchasers true, correct and complete copies
of the Real Property Leases, together with all amendments, modifications,
supplements or side letters affecting the obligations of any party thereunder.
(e) No previous or current party to any Real Property Lease
has given notice of or made a claim with respect to any breach or default
thereunder. With respect to those Real
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Property Leases that were assigned or subleased to the Company by a third party,
all necessary consents to such assignments or subleases have been obtained.
4.11. Tangible Personal Property. Except for property sold or
otherwise disposed of in the ordinary course of business since July 31, 1999,
the Company owns free and clear of any Liens, all of the personal property
reflected as owned by the Company in the balance sheets contained in the
Financial Statements, and all other material items of personal property acquired
by the Company through the date of this Agreement. All material items of such
personal property are in good operating condition, normal wear and tear
excepted.
4.12. Intangible Property. Except as set forth on Schedule
4.12, the Company owns or possesses adequate licenses or other rights to use all
patents, patent applications, trademarks, trademark applications, service marks,
service xxxx applications, trade names, copyrights, manufacturing processes,
formulae, trade secrets and know how (collectively, "Intellectual Property")
necessary or desirable to the conduct of its business as conducted and as
proposed to be conducted, and no claim is pending or, to the knowledge of the
Company, threatened to the effect that the operations of the Company infringe
upon or conflict with the asserted rights of any other Person under any
Intellectual Property, and the Company does not know of any basis for any such
claim (whether or not pending or threatened). Except as set forth on Schedule
4.12, no claim is pending or, to the knowledge of the Company, threatened to the
effect that any such Intellectual Property owned or licensed by the Company, or
which the Company otherwise has the right to use, is invalid or unenforceable by
the Company, does not know of any basis for any such claim (whether or not
pending or threatened). The Company has not granted or assigned to any other
person or entity any right to assemble or sell the products or proposed products
or to provide the services or proposed services of the Company. Schedule 4.12
shall set forth a list of all such Intellectual Property, and the nature of the
ownership or rights with respect thereto is set forth therein.
4.13. Material Contracts.
(a) Except as set forth on Schedule 4.13(a), neither the
Company nor any of its properties or assets is a party to or bound by any (i)
Contract not made in the ordinary course of business, or involving a commitment
or payment in excess of $25,000 or, in the Company's belief, otherwise material
to the business of the Company, (ii) Contract among stockholders or granting a
right of first refusal or for a partnership or a joint venture or for the
acquisition, sale or lease of any assets or Capital Stock of the Company or any
other Person or involving a sharing of profits, (iii) mortgage, pledge,
conditional sales contract, security agreement, factoring agreement or other
similar Contract with respect to any real or tangible personal property of the
Company, (iv) loan agreement, credit agreement, promissory note, guarantee,
subordination agreement, letter of credit or any other similar type of Contract,
(v) Contract with any Governmental Body, (vi) Contract with respect to the
discharge, storage or removal of Hazardous Materials, or (vii) binding
commitment or agreement to enter into any of the foregoing. The Company has
delivered or otherwise made available to the Purchasers true, correct and
complete copies of the Contracts listed on Schedule 4.13(a) (except as noted
thereon), together with all amendments, modifications, supplements or side
letters affecting the obligations of any party thereunder.
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(b) Each of the Contracts listed on Schedule 4.13(a) is
valid and enforceable in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally and subject, as to enforceability, to
general principles of equity (regardless of whether enforcement is sought in a
proceeding at law or in equity), and there is no default under any Contract
listed on Schedule 4.13(a) by the Company or, to the knowledge of the Company,
by any other party thereto, and no event has occurred that with the lapse of
time or the giving of notice or both would constitute a default thereunder.
(c) No previous or current party to any Contract has given
written notice to the Company of or made a claim with respect to any breach or
default thereunder and the Company has no knowledge of any notice of or claim
with respect to any such breach or default.
(d) With respect to the Contracts listed on Schedule 4.13(a)
that were assigned to the Company by a third party, all necessary consents to
such assignment have been obtained.
4.14. Employee Benefits.
(a) Schedule 4.14(a) contains a true and complete list of
each Company Benefit Plan and each Employee Agreement. Neither the Company nor
any ERISA Affiliate has any plan or commitment, whether legally binding or not,
to establish any new Company Benefit Plan, to enter into any Employee Agreement
or to modify or to terminate any Company Benefit Plan or Employee Agreement
(except to the extent required by law or to conform any such Company Benefit
Plan or Employee Agreement to the requirements of any applicable law, in each
case as previously disclosed to Purchasers, or as required by this Agreement),
nor has any intention to do any of the foregoing been communicated to Employees.
(b) The Company has provided, or has caused to be provided,
to Purchasers (i) current, accurate and complete copies of all documents
embodying or relating to each Company Benefit Plan and each Employee Agreement,
including all amendments thereto, written interpretations thereof and trust or
funding agreements with respect thereto, (ii) the two (2) most recent annual
actuarial valuations, if any, prepared for each Company Benefit Plan, (iii) the
two (2) most recent annual reports (Series 5500 and all schedules thereto), if
any, required under ERISA in connection with each Company Benefit Plan or
related trust, (iv) a statement of alternative form of compliance pursuant to
Department of Labor Regulation Section 2520.104-23, if any, filed for each
Company Benefit Plan which is an "employee pension benefit plan" as defined in
Section 3(2) of ERISA for a select group of management or highly compensated
employees, (v) the most recent determination letter received from the IRS, if
any, for each Company Benefit Plan and related trust which is intended to
satisfy the requirements of Section 401(a) of the Code, (vi) if the Company
Benefit Plan is funded, the most recent annual and periodic accounting, if any,
of Company Benefit Plan assets, (vii) the most recent summary plan description
together with the most recent summary of material modifications, if any,
required under ERISA with respect to each Company Benefit Plan and (viii) all
material communications to any Employee or Employees relating to each Company
Benefit Plan.
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(c) Each Company Benefit Plan and Employee Agreement (and
with respect to all such plans, each related trust, insurance contract or fund)
(i) complies in form and in operation with (a) the applicable requirements of
ERISA, the Code and other applicable Laws and (b) its own terms and (ii) which
is intended to qualify under Section 401 of the Code is, and since its inception
has been, so qualified. A determination letter has been issued by the IRS to the
effect that each Company Benefit Plan which is intended to be qualified is so
qualified and that each trust forming a part of any such Company Benefit Plan is
exempt from tax pursuant to Section 501(a) of the Code and no circumstances
exist which would adversely affect this qualification or exemption. There are no
actions, proceedings, arbitrations, suits or claims, audits or investigations
pending, or to the knowledge of the Company or any ERISA Affiliate, threatened
or anticipated (other than routine claims for benefits) against the Company or
any ERISA Affiliate or any administrator, trustee or other fiduciary of any
Company Benefit Plan with respect to any Company Benefit Plan or Employee
Agreement, or against any Company Benefit Plan or against the assets of any
Company Benefit Plan. Each Company Benefit Plan can be amended, terminated or
otherwise discontinued without liability to the Company or any ERISA Affiliate.
The Company and each ERISA Affiliate have made all payments with respect to all
periods through the date of this Agreement, and will make a pro-rata payment for
the period ending as of the Closing Date, in each case which are required by
each Company Benefit Plan, each related trust, each collective bargaining
agreement or by law to be made to, or with respect to each Company Benefit Plan
(including all insurance premiums or intercompany charges with respect to each
Company Benefit Plan).
(d) Neither the Company nor any ERISA Affiliate presently
sponsors, maintains, contributes to, nor is the Company or any ERISA Affiliate
required to contribute to, nor has the Company nor any ERISA Affiliate ever
sponsored, maintained, contributed to, or been required to contribute to, a
Pension Plan which is subject to Title IV of ERISA.
(e) At no time has the Company or any ERISA Affiliate
contributed to or been required to contribute to, or incurred any withdrawal
liability (within the meaning of Section 4201 of ERISA) to any Multi-Employer
Plan.
(f) Neither the Company nor any ERISA Affiliate (i)
maintains or contributes to any Company Benefit Plan which provides, or has any
liability to provide, life insurance, medical, severance or other employee
welfare benefits to any Employee upon his retirement or termination of
employment, except as may be required by Section 4980B of the Code, or (ii) has
ever represented, promised or contracted (whether in oral or written form) to
any Employee (either individually or to Employees as a group) that such
Employee(s) would be provided with life insurance, medical, severance or other
employee welfare benefits upon their retirement or termination of employment,
except to the extent required by Section 4980B of the Code.
(g) The execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon the occurrence of
any additional or subsequent events) (i) constitute an event under any Company
Benefit Plan, Employee Agreement, trust or loan that will or may result in any
payment (whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation
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13
to fund benefits with respect to any Employee, or (ii) result in the triggering
or imposition of any restrictions or limitations on the right of the Company or
the Purchasers to amend or terminate any Company Benefit Plan and receive the
full amount of any excess assets remaining or resulting from such amendment or
termination, subject to applicable taxes. No payment or benefit which will or
may be made by the Company, the Purchasers or any of their respective affiliates
with respect to any Employee will be characterized as an "excess parachute
payment," within the meaning of Section 280G(b)(l) of the Code.
(h) The Company (i) has correctly categorized all Employees
as either employees or independent contractors for federal tax purposes, and is
in compliance with all applicable federal, state and local laws, rules and
regulations (domestic and foreign) respecting their employment, employment
practices, labor, terms and conditions of employment and wages and hours, in
each case, with respect to Employees, (ii) has withheld all amounts required by
law or by agreement to be withheld from the wages, salaries and other payments
to Employees, (iii) is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing, (iv) is not liable for
any payment to any trust or other fund or to any governmental or administrative
authority, with respect to unemployment compensation benefits, social security
or other benefits for Employees and (v) has provided Employees with the benefits
to which they are entitled pursuant to the terms of all Company Benefit Plans.
(i) Welfare Plan Funding. With respect to each Welfare Plan,
all claims incurred (including claims incurred but not reported) by Employees
thereunder for which the Company is, or will become, liable are (i) insured
pursuant to a contract of insurance whereby the insurance company bears any risk
of loss with respect to such claims, (ii) covered under a contract with a health
maintenance organization (an "HMO") pursuant to which the HMO bears the
liability for such claims, or (iii) reflected as a liability or accrued for on
the Financial Statements.
4.15. Employees.
(a) To the knowledge of the Company, no key Employee and no
group of Employees or independent contractors of the Company has any plans to
terminate his, her or its employment or relationship as an Employee or
independent contractor with the Company.
(b) Schedule 4.15 sets forth a true and complete list of the
name and amount of annual compensation of each Employee of the Company, together
with such person's job title and amounts and forms of compensation and fringe
and severance benefits.
(c) To the best of the Company's knowledge after reasonable
inquiry, no key executive Employee or any other Employee of the Company is a
party to or is otherwise bound by any agreement or arrangement (including,
without limitation, confidentiality agreements, noncompetition agreements,
licenses, covenants, or commitments of any nature), or subject to any judgment,
decree, or order of any court or administrative agency, (i) that would conflict
with such Employee's obligation diligently to promote and further the interest
of the Company or (ii) that would conflict with the Company's business as now
conducted or as proposed to be conducted.
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14
(d) No work stoppage, labor strike, labor dispute,
grievance, union organizing activity or litigation relating to labor matters
involving any Employees (including, without limitation, litigation relating to
any violation of any federal, state or local labor, safety or employment laws
(domestic or foreign)), charges of unfair labor practices or discrimination
complaints against the Company by Employees are pending or threatened. The
Company has not engaged in any unfair labor practices within the meaning of the
National Labor Relations Act or the Railway Labor Act and is not presently, nor
has been in the past a party to, or bound by, any collective bargaining
agreement or union contract with respect to Employees and no such agreement or
contract is currently being negotiated by the Company. No Employees are
currently represented by any labor union for purposes of collective bargaining.
(e) Except as set forth on Schedule 4.15(e), all key
technical employees of the Company have executed and delivered Noncompetition,
Nondisclosure and Inventions Agreements substantially in the form of Exhibit C-1
attached hereto, and all other employees of the Company have executed and
delivered Nondisclosure and Inventions Agreements substantially in the form of
Exhibit C-2 attached hereto, and all of such agreements are in full force and
effect.
4.16. Litigation. There are no Legal Proceedings pending or,
to the knowledge of the Company, threatened that question the validity of this
Agreement or the Transaction Documents or any action taken or to be taken by the
Company in connection with the consummation of the transactions contemplated
hereby or thereby. Except as disclosed on Schedule 4.16, there are no Legal
Proceedings pending or, to the knowledge of the Company, threatened against or
affecting the Company or any properties or assets of the Company, at law or in
equity, and there is no reasonable basis for any other such Legal Proceeding.
The foregoing includes any Legal Proceeding 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
their prior employers. There is no Legal Proceeding by the Company currently
pending or that the Company currently plans to initiate. There is no outstanding
or, to the knowledge of the Company, threatened Order of any Governmental Body
against, affecting or naming the Company or affecting any of its properties or
assets.
4.17. Compliance with Laws; Permits.
(a) The Company is and at all times has been in compliance
in all material respects with all Laws and Orders promulgated by any
Governmental Body applicable to the Company or to the conduct of the business or
operations of the Company or the use of its properties (including any leased
properties) and assets. The Company has not received any notices of violation or
alleged violation of any such Law or Order by any Governmental Body.
(b) The Company has all Permits necessary for the conduct of
its business where the failure to have such Permits could result in a Material
Adverse Change. Such Permits have been validly issued, and the Company has
complied in all material respects with all conditions of such Permits applicable
to it. No default or violation, or event that with the lapse
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15
of time or giving of notice or both would become a default or violation, has
occurred in the due observance of any such Permit. All such Permits are in full
force and effect without further consent or approval of any Person. The Company
has not received any notice from any source to the effect that there is lacking
any such material Permit required in connection with the current operations of
the Company.
4.18. Environmental Matters. (a) The operations of the Company
have been and, as of the Closing Date, will be in compliance with all
Environmental Laws, (b) the Company has obtained, currently maintains and, as of
each of the Closing Dates, will have all Environmental Permits necessary for its
operations; all such Environmental Permits are and, as of each of the Closing
Dates, will be, in effect; there are no Legal Proceedings pending or, to the
knowledge of the Company, threatened to revoke any such Environmental Permits;
the Company is, and as of each of the Closing Dates will be in compliance with
such Environmental Permits; and the Company has not received any notice from any
source to the effect that there is lacking any Environmental Permit required in
connection with the current use or operation of any Real Property Lease, (c) the
Company is not subject to any pending Legal Proceeding alleging the violation of
any Environmental Law or Environmental Permit, (d) the Company has not received
(nor, to the knowledge of the Company, has there been issued) any written
communication, whether from a Governmental Body, citizens' group, Employee or
any other Person, that alleges that the Company is not in compliance with any
Environmental Law or Environmental Permit, (e) the Company has not caused or
permitted any Hazardous Materials to remain or be disposed of, either on or
under real property legally or beneficially owned or operated by the Company or
on or under any real property not permitted to accept, store or dispose of such
Hazardous Materials, (f) the Company does not have any liabilities with respect
to Hazardous Materials, and no facts or circumstances exist which, in the
aggregate, could give rise to liabilities with respect to Hazardous Materials,
(g) none of the operations of the Company involves the generation,
transportation, treatment, storage or disposal of hazardous waste or subject
waste, as defined under 40 C.F.R. Parts 260-270 (in effect as of the date of
this Agreement) and (h) there is not now on or in any property of the Company
(i) any underground storage tanks or surface tanks, dikes or impoundments, (ii)
any asbestos-containing materials or (iii) any polychlorinated biphenyls.
4.19. Investment Company Act. The Company is not, nor is it
directly or indirectly controlled by or acting on behalf of, any Person that is
an investment company within the meaning of the Investment Company Act of 1940,
as amended.
4.20. Transactions with Affiliates. The Company has not made
any payment to, or received any payment from, or made or received any investment
in, or entered into any transaction with, any Affiliate, including without
limitation, the purchase, sale or exchange of property or the rendering of any
service, where the amount involved is material to the business of the Company.
4.21. Disclosure; Survival. This Agreement, the Financial
Statements, the schedules provided in connection with this Agreement and the
Offering Memorandum do not contain any untrue statement of material fact and do
not fail to state a material fact necessary in
- 15 -
16
order to make the statements contained herein and therein not misleading. There
is no fact which has not been disclosed to the Purchasers of which the Company
has knowledge and which has had or could reasonably be anticipated to result in
a Material Adverse Change. All representations and warranties set forth in this
Agreement or in any writing or certificate delivered in connection with this
Agreement shall survive the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby for a period of two (2)
years following the Second Closing Date, or if the Second Closing does not
occur, two (2) years following the First Closing Date, and shall not be affected
by any examination made for or on behalf of the Purchasers, the knowledge of the
Purchasers, or the acceptance by the Purchasers of any certificate or opinion.
All covenants and agreements of the parties hereto set forth herein shall
survive indefinitely following the date of this Agreement. Any representation
made in this Agreement with respect to the Company's knowledge shall mean to the
actual knowledge of the Company or any officer thereof after due inquiry.
4.22. Insurance. There is in full force and effect one or more
policies of insurance issued by insurers of recognized responsibility, insuring
the Company and its properties and business against such losses and risks, and
in such amounts, as are customary in the case of corporations of established
reputation engaged in the same or similar business and similarly situated. The
Company has not been refused any insurance coverage sought or applied for, and
the Company has no reason to believe that it will be unable to renew its
existing insurance coverage as and when the same shall expire upon terms at
least as favorable as those currently in effect, other than possible increases
in premiums that do not result from any act or omission of the Company. Schedule
4.22 sets forth each insurance policy (specifying the insurer, the amount of
coverage, the type of insurance, the policy number, the expiration date, the
annual premium (current and for each of the last three years) and any pending
claims thereunder) maintained by the Company relating to its properties, assets,
business or personnel, and each inspection report or recommendation, if any,
during the last three years as to the conditions of the properties and assets
owned, leased, occupied or operated by it or the conduct of its business. Except
as disclosed on Schedule 4.22, the Company is not in default with respect to any
provision contained in any insurance policy, and the Company has not failed to
give any notice or present any currently existing claims under any insurance
policy in due and timely fashion.
4.23. Customers and Suppliers. Schedule 4.23 sets forth a list
of the ten (10) largest customers and the ten (10) largest suppliers of the
Company and the dollar amount of purchases or sales which each such customer or
supplier represents. There exists no actual or, to the knowledge of the Company,
threatened termination or cancellation of the business conducted by the Company
with any customer, supplier or group of customers or group of suppliers set
forth on Schedule 4.23.
4.24. Year 2000 Problem. Other than those modifications, the
cost of which the Company has included in its business plan and which is not
material, there are no modifications required to any of the Company's
Intellectual Property in order for such property to contain no deficiencies
relating generally to formatting for entering dates (commonly referred to and
referred to herein as the "Year 2000 Problem"). The Company's Intellectual
Property is susceptible to all necessary modification and the Company has
adequate personnel and
- 16 -
17
consultants under contract to so timely modify its own Intellectual Property.
The Company is not aware of any inability on the part of any customer, insurance
company or service provider with which the Company transacts business to timely
remedy their own deficiencies in respect of the Year 2000 Problem.
4.25. No Brokers or Finders. Except such amounts as may be due
to Xxxxxx Xxxxxxx Xxxx Xxxxxx, no Person has, or as a result of the transactions
contemplated herein will have, any right or valid claim against the Company or
the Purchasers from any commission, fee or other compensation as a finder or
broker, or in any similar capacity and the Company will hold the Purchasers
harmless against any liability or expense arising out of, or in connection with,
any such claim.
4.26. Condition of Properties. All facilities, machinery,
equipment, fixtures, vehicles and other properties owned, leased or used by the
Company are in good operating condition and repair, are reasonably fit and
usable for the purposes for which they are being used, are adequate and
sufficient for the Company's business and conform in all material respects with
all applicable Laws.
4.27. Illegal or Unauthorized Payments; Political
Contributions. Neither the Company nor, to the Company's knowledge, any of the
Company's officers, directors, Employees, agents or other Representatives of the
Company has, directly or indirectly, made or authorized any payment,
contribution or gift of money, property, or services, whether or not in
contravention of applicable law, (a) as a kickback or bribe to any person or (b)
to any political organization, or the holder of or any aspirant to any elective
or appointive public office except for personal political contributions not
involving the direct or indirect use of funds of the Company.
4.28. Pending Changes. To the knowledge of the Company, there
is no pending or threatened change in any Law which materially affects or could
materially affect the Company or the business, assets, liabilities, prospects,
properties, results of operations or condition (financial or otherwise) of the
Company. To the knowledge of the Company, there has been no discovery, change or
development in the development, design or marketing of any product or service of
the Company or any product or service that is or may be competitive with any
such product or service to which an informed investor in the Company would
attach importance in its decision to make an investment in the Company.
4.29. Governmental Inquiries. The Company has provided to the
Representatives of the Purchasers each material inspection report,
questionnaire, inquiry, demand or request for information received by the
Company from (and the response of the Company thereto), and each material
statement, report or other document filed by the Company with, the federal
government or a federal administrative agency (including but not limited to, the
Securities and Exchange Commission, Department of Justice, Internal Revenue
Service, Department of Labor, Occupational Safety and Health Administration,
Federal Trade Commission, National Labor Relations Board, Interstate Commerce
Commission, Nuclear
- 17 -
18
Regulatory Commission, Federal Communications Commission), any state securities
administrator or any local or state taxing authority.
4.30. No Public Solicitation. Neither the Company nor any
Person acting on its behalf has offered the Class D Preferred Shares to any
Person by means of general or public solicitation or general or public
advertising, such as by newspaper or magazine advertisements, by broadcast
media, or at any seminar or meeting whose attendees were solicited by such
means.
4.31. Securities Laws. The offer, issuance and sale of the
Class D Preferred Shares are and will be (i) exempt from the registration and
prospectus delivery requirements of the Securities Act, (ii) have been
registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all applicable
state securities laws and (iii) accomplished in conformity with all other
federal and applicable state securities laws, rules and regulations.
4.32. Registration Rights. Other than under each of this
Agreement and the Prior Investor Agreement, (portions of which are, pursuant to
Section 13.3 of this Agreement, superseded hereby), the Company has not agreed
to register under the Securities Act any of its authorized or outstanding
securities.
4.33. SEC Reports. The Company has never filed, never been
required to file and is not currently required to file any reports, statements,
forms or documents with the Securities and Exchange Commission (the "SEC").
4.34 Qualified Small Business Stock. The shares of Series D
Preferred Shares issuable hereunder constitute Qualified Small Business Stock
(as defined in the Code.)
5. REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP
The Partnership and the Executive Stockholder, jointly and severally,
hereby represent and warrant to the Company and the Investors that:
5.1 Authorization of Agreement; Enforceability. The
Partnership has all requisite power and authority to execute and deliver this
Agreement and each other Transaction Document to be executed by the Partnership.
The execution, delivery and performance by the Partnership of this Agreement and
the Transaction Documents to which it is a party have been duly authorized by
all necessary limited partnership action. This Agreement and each of the
Transaction Documents have been duly and validly executed and delivered by the
Partnership and (assuming the due authorization, execution and delivery thereof
by the other parties thereto), this Agreement and each of the Transaction
Documents constitute the legal, valid and binding obligations of the Partnership
enforceable against the Partnership in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally and subject, as
to enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
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19
5.2 Investment Purposes. (a)The Partnership is acquiring the
Class D Preferred Shares and has agreed to purchase for investment purposes
only, for its own account, and not as nominee or agent for any other Person, and
not with a view to, or for resale in connection with, any distribution thereof
within the meaning of the Securities Act, (b) it has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of its investment, (c) it is an "accredited investor" within
the meaning of Rule 501 of Regulation D under the Securities Act, (d) its
principal place of business is in the State set forth opposite his name on
Schedule A attached hereto, (e) the Company has made available to it the
opportunity to ask questions and to receive answers, and to obtain information
necessary to evaluate the merits and risks of this investment.
6. REPRESENTATIONS AND WARRANTIES OF THE EXECUTIVE STOCKHOLDER.
The Executive Stockholder hereby represents and warrants to the Company
and the Investors that the Executive Stockholder has full legal capacity to
enter into this Agreement and to carry out his obligations hereunder and under
each other Transaction Document to be executed by the Executive Stockholder.
This Agreement and each of the Transaction Documents have been duly and validly
executed and delivered by the Executive Stockholder and (assuming the due
authorization, execution and delivery thereof by the other parties thereto),
this Agreement and each of the Transaction Documents constitute the legal, valid
and binding obligations of the Executive Stockholder, enforceable against the
Executive Stockholder in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
7. REPRESENTATIONS AND WARRANTIES OF THE INVESTORS.
Each Investor, severally and not jointly hereby, represents and warrants
to the Company and the Executive Stockholder that:
7.1. Authorization of Agreement; Enforceability. Each
Investor has all requisite power and authority to execute and deliver this
Agreement and each other Transaction Document to be executed by such Investor.
The execution, delivery and performance by such Investor of this Agreement and
the Transaction Documents to which it is a party have been duly authorized by
all necessary corporate or comparable action. This Agreement and each of the
Transaction Documents have been duly and validly executed and delivered by such
Investor and (assuming the due authorization, execution and delivery thereof by
the other parties thereto), this Agreement and each of the Transaction Documents
constitute the legal, valid and binding obligations of such Investor enforceable
against such Investor in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights and remedies generally and subject, as to
enforceability, to general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
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20
7.2. Investment Purposes. (a) Each Investor acquiring the
Class D Preferred Shares has agreed to purchase for investment purposes only,
for its own account, and not as nominee or agent for any other Person, and not
with a view to, or for resale in connection with, any distribution thereof
within the meaning of the Securities Act, (b) it has such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of its investment, (c) it is an "accredited investor" within
the meaning of Rule 501 of Regulation D under the Securities Act, (d) its
principal place of business is in the State set forth opposite such Investor's
name on Schedule A attached hereto, (e) the Company has made available to it the
opportunity to ask questions and to receive answers, and to obtain information
necessary to evaluate the merits and risks of this investment.
8. FURTHER AGREEMENTS OF THE PARTIES.
8.1. Rights of First Refusal and Co-Sale Rights of the
Investors
(a) Offer of Sale; Notice of Proposed Sale. If either the
Executive Stockholder or the Partnership desires to sell, pledge or otherwise
transfer ("Transfer") any of his or its respective interest in any shares of
Capital Stock of the Company, whether common or preferred shares (the "Mostafa
Stock"), or any interest in the Mostafa Stock, in any transaction other than to
a Permitted Transferee, the Executive Stockholder or the Partnership (the
"Selling Stockholder") shall first deliver written notice of his or its desire
to do so (the "Mostafa Sale Notice") to each of the Investors. The Mostafa Sale
Notice must specify: (i) the name and address of the party to which the Selling
Stockholder proposes to sell or otherwise dispose of the Mostafa Stock or an
interest in the Mostafa Stock (the "Offeror"), (ii) the number of shares of
Mostafa Stock the Selling Stockholder proposes to sell or otherwise dispose of
(the "Offered Shares"), (iii) the consideration per share to be delivered to the
Selling Stockholder for the proposed sale, transfer or disposition and (iv) all
other material terms and conditions of the proposed transaction.
(b) Right of First Refusal for Investors.
(i) Right of First Refusal. Each Investor shall have
an option, exercisable for a period of fifteen (15) days from the date of
delivery of the Mostafa Sale Notice, to purchase, on a pro rata basis according
to the number of shares of Class C and Class D Preferred Shares (on an
as-converted basis) owned by such Investor, the Mostafa Stock for the
consideration per share and on the terms and conditions set forth in the Mostafa
Sale Notice. Such option shall be exercised by delivery by such Investor of
written notice to the Selling Stockholder. Alternatively, each Investor may
within the same 15-day period, notify the Selling Stockholder of its desire to
participate in the sale of the Mostafa Stock, pursuant to Section 8.1(c) of this
Agreement, on the terms set forth in the Mostafa Sale Notice, and the number of
shares it wishes to sell.
(ii) Remaining Mostafa Stock. In the event options to
purchase have been exercised by the Investors with respect to some but not all
of the Mostafa Stock, those Investors who have exercised their options within
the 15-day period specified in Section 8.1(a) shall have an additional option,
for a period of five (5) days next succeeding the expiration of
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21
such 15-day period, to purchase all or any part of the balance of such Mostafa
Stock on the terms and conditions set forth in the Mostafa Sale Notice, which
option shall be exercised by the delivery of written notice to the Selling
Stockholder. In the event there are two or more such Investors that choose to
exercise the last-mentioned option for a total number of Mostafa Stock in excess
of the number available, the Mostafa Stock available for each such Investor's
option shall be allocated to such Investor pro rata based on the number of
shares Class C and Class D Preferred Shares (on an as-converted basis) owned by
the Investors so electing.
(iii) Closing. If the options to purchase the Mostafa
Stock are exercised in full by the Investors, the Company shall immediately
notify all of the exercising Investors of that fact. The closing of the purchase
of the Mostafa Stock shall take place at the offices of the Company no later
than ten (10) days after the date of such notice to the Investors.
(iv) Valuation. In the event the consideration for
the Mostafa Stock as disclosed in the Mostafa Sale Notice is other than cash, a
promissory note or a combination thereof, the price for the Mostafa Stock shall
be the value of that consideration as agreed to by the Selling Stockholder and
the Investors or, if no agreement can be reached as to the valuation of such
consideration, the fair market value of such consideration as determined by two
appraisers (the "Original Appraisers") (one appraiser appointed by the Investors
and one appraiser appointed by the Selling Stockholder). In the event the
Original Appraisers are unable to agree on a fair market value within twenty
(20) days after they are appointed and further negotiations, in the opinion of
the Original Appraisers, would not result in an agreement, the Original
Appraisers shall select a third appraiser (the "Independent Appraiser") who
shall independently, within twenty (20) days after such appointment, make a
determination of the value of the consideration. The fair market value of the
consideration shall be the average of (a) the average of the appraised values of
the Original Appraisers and (b) the appraised value of the Independent
Appraiser. The Selling Stockholder and the Investors shall each bear the cost of
its appraiser and shall share the cost equally of the Independent Appraiser, if
any. Notwithstanding anything herein to the contrary, if an appraisal is used to
determine the value of the consideration pursuant to this Section 8.1(b)(iv),
the time periods provided for in Section 8.1(b)(i) shall be tolled from the time
of the initial appointment of the three appraisers until a final appraised value
is determined pursuant to this Section 8.1(b)(iv).
(C) Failure to Fully Exercise Options; Co-Sale.
(i) Failure to Exercise Options. If the Investors do
not exercise their options to purchase all of the Offered Shares within the
periods described in this Agreement (the "Option Period"), each Investor which
has, pursuant to Section 8.1(a), expressed a desire to sell shares in the
transaction (a "Participating Investor"), shall be entitled to do so pursuant to
this Section. The Selling Stockholder shall use his best efforts to interest the
Offeror in purchasing, in addition to the Offered Shares, the shares the
Participating Investors wish to sell. If the Offeror does not wish to purchase
all of the shares made available by the Selling Stockholder and the
Participating Investors, then each Participating Investor and the Selling
Stockholder shall be entitled to sell, at the price and on the terms and
conditions set forth in the Mostafa Sale Notice, a
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22
portion of the shares being sold to the Offeror, in the same proportion as such
Selling Stockholder or Participating Investor's ownership of Class C and Class D
Preferred Shares (on an as-converted basis) bears to the aggregate number of
shares owned by the Selling Stockholder and the Participating Investors. The
transaction contemplated by the Mostafa Sale Notice shall be consummated not
later than sixty (60) days after the expiration of the Option Period.
(ii) Co-Sale. If the Participating Investors do not
elect to sell the full number of shares which they are entitled to sell pursuant
to Section 8.1(c)(i), the Selling Stockholder shall be entitled to sell to the
Offeror, according to the terms set forth in the Mostafa Sale Notice, that
number of his own shares which equals the difference between the number of
shares desired to be purchased by the Offeror and the number of shares the
Participating Investors are entitled to sell pursuant to Section 8.1(c)(i). If
the Selling Stockholder wishes to Transfer any such shares at a price per share
which differs from that set forth in the Mostafa Sale Notice, upon terms
different from those previously offered to the Investors, or more than sixty
(60) days after the expiration of the Option Period, then, as a condition
precedent to such transaction, such shares must first be offered to the
Investors on the same terms and conditions as given the Offeror, and in
accordance with the procedures and time periods set forth above.
(iii) Proceeds. The proceeds of any sale made by the
Selling Stockholder without compliance with the provisions of this
Section 8.1(c) shall be deemed to be held in constructive trust in
such amount as would have been due the Participating Investors if
the Selling Stockholder had complied with this Agreement.
(d) Termination of Restrictions. The restrictions on the
transfer of Mostafa Stock set forth in this Section 8.1 shall continue with
respect to each share of the Mostafa Stock until the date on which such Mostafa
Stock has been transferred in a transaction permitted by this Section (except in
a transfer involving a Permitted Transferree); provided that in any event the
restrictions on transfer set forth in this Section 8.1(b) will terminate on the
consummation of a Triggering Event.
8.2. Rights of First Refusal of the Executive Stockholder and
Co-Sale Rights of Investors.
(a) Offer of Sale; Notice of Proposed Sale. If any
of the Investors desires to Transfer any of his or its respective interest in
any shares of Capital Stock of the Company, whether Common or Class C or Class D
Preferred Shares (the "Investor Stock"), or any interest in such shares, in any
transaction other than to a Permitted Transferee, the Investor (the "Selling
Investor") shall first deliver written notice of his desire to do so (the
"Investor Sale Notice") to the Executive Stockholder and the other Investors.
The Investor Sale Notice must specify: (i) the name and address of the party to
which the Selling Investor proposes to sell or otherwise dispose of the Investor
Stock or an interest in the Investor Stock (the "Investor Offeror"), (ii) the
number of shares of Investor Stock the Selling Investor proposes to sell or
otherwise dispose of (the "Investor Offered Shares"), (iii) the consideration
per share to be delivered to the Selling Investor for the proposed sale,
transfer or disposition, and (iv) all other material terms and conditions of the
proposed transaction.
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(b) Right of First Refusal for the Executive Stockholder and
the Non-Selling Investors.
(i) Right of First Refusal. The Executive
Stockholder and the non-selling investor shall have an option, exercisable for a
period of fifteen (15) days from the date of delivery of the Investor Sale
Notice, to purchase on a pro rata basis according to the number of shares of
Common Stock, Class A, Class B, Class C or Class D Preferred Shares (on an
as-converted basis), the Investor Stock for the consideration per share and on
the terms and conditions set forth in the Investor Sale Notice. Such option
shall be exercised by delivery by the Executive Stockholder or the non-selling
stockholder of written notice to the Selling Investor. Alternatively, each
Investor may within the same 15-day period, notify the Selling Investor of its
desire to participate in the sale of the Investor Stock, pursuant to Section
8.2(a) of this Agreement, on the terms set forth in the Investor Sale Notice,
and the number of shares it wishes to sell.
(ii) Remaining Investor Stock. In the event options
to purchase have been exercised by the Executive Stockholder and the non-selling
Investors, with respect to some but not all of the Investor Stock, the Executive
Stockholder and those Investors who have exercised their options within the
15-day period specified in Section 8.1(a) shall have an additional option, for a
period of five (5) days next succeeding the expiration of such 15-day period, to
purchase all or any part of the balance of such Investor Stock on the terms and
conditions set forth in the Investor Sale Notice, which option shall be
exercised by the delivery of written notice to the Selling Investor. In the
event there are two or more such persons or entities that choose to exercise the
last-mentioned option for a total number of Investor Stock in excess of the
number available, the Investor Stock available for each of the Executive
Stockholder's and the non-selling Investor's option shall be allocated to such
person pro rata based on the number of shares of Common Stock, Class A, Class B,
Class C or Class D Preferred Shares (on an as-converted basis), owned by the
Executive Stockholder or non-selling Investor.
(iii) Closing. If the options to purchase the Investor
Stock are exercised in full by the Executive Stockholder and the non-selling
Investors, the Company shall immediately notify all of the exercising
non-selling Investors or the Executive Stockholder of that fact. The closing of
the purchase of the Investor Stock shall take place at the offices of the
Company no later than ten (10) days after the date of such notice to the
Executive Stockholder and the non-selling Investors.
(iv) Valuation. In the event the consideration for
the Investor Stock as disclosed in the Investor Sale Notice is other than cash,
a promissory note or a combination thereof, the price for the Investor Stock
shall be the value of that consideration as agreed to by the Selling Investor
and the Executive Stockholder or the non-selling Investor or, if no agreement
can be reached as to the valuation of such consideration, the fair market value
of such consideration as determined by two appraisers (the "Original
Appraisers") (one appraiser appointed by the Selling Investor and one appraiser
appointed by the Executive Stockholder or the non-selling Investor). In the
event the Original Appraisers are unable to agree on a fair
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market value within twenty (20) days after they are appointed and further
negotiations, in the opinion of the Original Appraisers, would not result in an
agreement, the Original Appraisers shall select a third appraiser (the
"Independent Appraiser") who shall independently, within twenty (20) days after
such appointment, make a determination of the value of the consideration. The
fair market value of the consideration shall be the average of (a) the average
of the appraised values of the Original Appraisers and (b) the appraised value
of the Independent Appraiser. The Selling Investor and the Executive Stockholder
or the non-selling Investor shall each bear the cost of its appraiser and shall
share the cost equally of the Independent Appraiser, if any. Notwithstanding
anything herein to the contrary, if an appraisal is used to determine the value
of the consideration pursuant to this Section 8.2(b)(iv), the time periods
provided for in Section 8.2(b)(i) shall be tolled from the time of the initial
appointment of the three appraisers until a final appraised value is determined
pursuant to this Section 8.2(b)(iv).
(c) Co-Sale among Investors.
(i) Failure to Exercise Option. If the Executive
Stockholder and non-selling Investors do not exercise his or its options to
purchase all of the Investor Offered Shares within the periods described in this
Agreement ("the Investor Option Period"), each Investor, which has, pursuant to
Section 8.2(b), expressed a desire to sell shares in the transaction (a
"Participating Other Investor"), shall be entitled to do so pursuant to this
Section. The Selling Investor shall use his best efforts to interest the
Investor Offeror in purchasing, in addition to the Investor Offered Shares, the
shares the Participating Other Investors wish to sell. If the Investor Offeror
does not wish to purchase all of the shares made available by the Selling
Investor and the Participating Other Investors, then each Participating Other
Investor and the Selling Investor shall be entitled to sell, at the price and on
the terms and conditions set forth in the Investor Sale Notice, a portion of the
shares being sold to the Investor Offeror, in the same proportion as such
Selling Investor or Participating Other Investor's ownership of Class C and
Class D Preferred Shares (on an as-converted basis) bears to the aggregate
number of Class C and Class D Preferred Shares (on an as-converted basis) owned
by the Selling Investor and the Participating Other Investors. The transaction
contemplated by the Investor Sale Notice shall be consummated not later than
sixty (60) days after the expiration of the Investor Option Period.
(ii) Co-Sale. If the Participating Other Investors do
not elect to sell the full number of shares which they are entitled to sell
pursuant to Section 8.2(b), the Selling Investor shall be entitled to sell to
the Investor Offeror, according to the terms set forth in the Investor Sale
Notice, that number of his own shares which equals the difference between the
number of shares desired to be purchased by the Investor Offeror and the number
of shares the Participating Other Investors are entitled to sell pursuant to
Section 8.2(b). If the Selling Investor wishes to Transfer any such shares at a
price per share which differs from that set forth in the Investor Sale Notice,
upon terms different from those previously offered to the Executive Stockholder,
or more than sixty (60) days after the expiration of the Investor Option Period,
then, as a condition precedent to such transaction, such shares must first be
offered to the Executive Stockholder on the same terms and conditions as given
the Investor Offeror, and in accordance with the procedures and time periods set
forth above.
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(iii) Proceeds. The proceeds of any sale made by the
Selling Investor without compliance with the provisions of this Section 8.3
shall be deemed to be held in constructive trust in such amount as would have
been due the Participating Other Investors if the Selling Investor had complied
with this Agreement.
(d) Termination of Restrictions. The restrictions on the
transfer of Investor Stock set forth in this Section 8.2 shall continue with
respect to each share of the Investor Stock until the date on which such
Investor Stock has been transferred in a transaction permitted by this Section
(except in a transfer involving a Permitted Transferee); provided in any event
the restrictions on transfer set forth in this Section 8.2 will terminate on the
consummation of a Triggering Event.
8.3. Preemptive Rights.
(a) Except for the issuance of the Company's Capital Stock
or securities (i) pertaining to options or rights to acquire up to 1,360,400
shares of Capital Stock existing on the date of this Agreement, (ii) pursuant to
a public offering if the managing underwriter of such public offering advises
the Company in writing that in its opinion it is necessary for the Purchasers to
waive their respective preemptive rights granted hereunder in order for the
public offering to achieve its maximum benefit, (iii) comprising 238,600 shares
of additional stock or option issuances to Employees of the Company pursuant to
a stock option plan of the Company that are reserved for issuance on the date of
this Agreement, (iv) shares issued by the Company at the Second Closing, or (v)
shares issued upon conversion of the Class A, Class B, Class C or Class D
Preferred Shares, if the Company at any time after the date of this Agreement
authorizes the issuance or sale of any Capital Stock of the Company or any
securities of the Company containing options or rights to acquire any shares of
Capital Stock (other than as a dividend on the outstanding Capital Stock), the
Company shall first offer to sell to each Purchaser a portion of such Capital
Stock or other securities up to the percentage of Common Stock (on an
as-converted basis, after giving effect to conversion) held by such Purchaser at
the time of such issuance.
(b) In order to exercise its purchase rights hereunder,
each Purchaser must, within twenty (20) days after receipt of written notice
from the Company describing in reasonable detail the Capital Stock or securities
being offered, the purchase price thereof and the payment terms, deliver a
written notice to the Company describing its election hereunder.
(c) Upon the expiration of the offering periods described
above, the Company shall be entitled to sell such Capital Stock or securities
which the Purchasers have not elected to purchase during the one hundred twenty
(120) days following such expiration on terms and conditions no more favorable
to the purchasers thereof than those offered to the Purchasers. Any Capital
Stock or securities offered or sold by the Company to any Person after such
120-day period must be reoffered to the Purchasers pursuant to the terms of this
Section 8.2.
(d) The restrictions set forth in this Section 8.3 will
terminate on the consummation of a Triggering Event.
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8.4. Reservation of Common Stock. For so long as the
Class D Preferred Shares are convertible, the Company shall reserve that number
of shares of Common Stock issuable upon conversion of the Class D Preferred
Shares, which shares shall not be subject to any preemptive or other similar
rights (collectively, the "Reserved Shares").
8.5. Use of Proceeds. The Company shall use the
proceeds from the sale of the Class D Preferred Shares under this Agreement for
the following purposes:
(a) Payment of fees and expenses in connection with
the transactions contemplated hereby, including
those expenses set forth in Section 13.2 of this
Agreement;
(b) Such amounts as may be due to Xxxxxx Xxxxxxx
& Co. Incorporated; and
(c) the remainder for working capital purposes.
8.6. Access to Information. The Purchasers and their
respective Representatives shall be entitled, upon reasonable notice, to make
such investigation of the properties, business and operations of the Company and
such examination of the books, records and financial condition of the Company as
they reasonably request and to make extracts and copies of such books and
records, provided, however, that any such Purchaser or its designee shall, if
requested by the Company, execute the Company's standard confidentiality
agreement. Any such investigation and examination shall be conducted during
regular business hours and under reasonable circumstances without material
interference with the Company's normal business operations, and the Company and
its Representatives shall use their respective best efforts to cooperate fully
therein. No investigation by any Purchaser prior to or after the date of this
Agreement shall diminish or obviate any of the representations, warranties,
covenants or agreements of the Company, the Executive Stockholder or the
Partnership contained in this Agreement or the Transaction Documents. In order
that the Purchasers may have full opportunity to make such physical, business,
accounting and legal review, examination of the affairs of the Company and
investigation as may be reasonably requested, the Company shall cause its
Representatives to cooperate fully with the Representatives of the respective
Purchasers in connection with such review and examination; provided that the
Company shall not incur any material expense related thereto.
8.7. Confidentiality. Except as may be required by
applicable law (including, without limitation, the federal securities laws and
regulations or applicable exchange rules applicable to the parties and their
Affiliates), any and all press releases, public statements and marketing and
sales materials released by any of the parties hereto or their respective
Affiliates regarding the transactions contemplated by this Agreement must be
approved, in writing, by all of the other parties hereto; provided, however,
that the Investors shall be entitled to disclose information with respect to
their respective investments in the Company on any reports furnished to their
respective investors or as otherwise required by Law.
8.8. Other Actions. Each party hereto agrees to
execute and deliver such other documents and take such other actions as the
other parties hereto may reasonably request for the
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purpose of carrying out the intent of this Agreement and the Transaction
Documents. Each Purchaser shall use reasonable efforts, at no cost to himself or
itself, to cooperate in the Company's efforts to undertake a public offering of
its stock.
8.9. Updating of Information. The Company shall
promptly deliver to each Purchaser any information concerning events subsequent
to the date of this Agreement which is necessary to supplement the information
contained in or made a part of the representations and warranties contained
herein, including the schedules provided in connection with this Agreement, or
delivered by the Company pursuant to any of the covenants contained herein, in
order that the information contained herein or so delivered be complete and
accurate in all material respects as of the Closing Dates. Notwithstanding the
preceding sentence, for purposes of determining the parties' rights and
obligations under this Agreement, the schedules delivered by the Company shall
be deemed to include only that information contained therein on the date of this
Agreement.
8.10. Year 2000 Covenant. The Company undertakes to
promptly inform the Purchasers of any material deficiency or expected cost in
complying with the Year 2000 Problem.
8.11. Indemnity.
(a) The Company agrees to indemnify, defend and hold
harmless each Investor (and such Investor's partners, directors, officers,
members, stockholders, Employees, Affiliates, agents and permitted assigns) from
and against any and all losses, claims, liabilities, damages, deficiencies,
costs or expenses (including interest, penalties, and reasonable attorneys'
fees, disbursements and related charges) (collectively, "Losses") based upon,
arising out of or otherwise in respect of any inaccuracy in or breach of any
representations, warranties, covenants or agreements of the Company contained in
this Agreement or the Transaction Documents.
(b) Each Purchaser agrees to indemnify, defend and
hold harmless the Company (and its partners, officers, directors, members,
stockholders, Employees, Affiliates, agents and permitted assigns) from and
against any and all Losses based upon, arising out of or otherwise in respect of
any inaccuracy in or breach of any representations, warranties, covenants or
agreements of such Purchaser contained in this Agreement.
8.12. Financial Statements, Reports, Etc. The Company
shall furnish, to each Purchaser holding at least 300,000 Class D Preferred
Shares, as adjusted for stock splits or dividends (or shares of Common Stock
representing the conversion of at least 300,000 Class D Preferred Shares):
(a) as soon as available, and in any event within
ninety (90) days after the end of each fiscal year of the Company, (i) an
audited financial statement of the Company as of the end of such fiscal year,
together with the related statements of income, stockholders' equity and cash
flows for the fiscal year then ended, prepared in accordance with GAAP and
certified by a firm of independent public accountants selected by the board of
directors of the Company (the "Board") and approved by the Purchasers (the
"Annual Financial Statement"), (ii) any related
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management letters from such accounting firm and (iii) a discussion and summary
of the Company's operations prepared in compliance with Item 303 of Regulation
S-K, Management's Discussion and Analysis of Financial Condition and Results of
Operations, as promulgated by the SEC. The Annual Financial Statement should
also include comparative statements from the prior fiscal year and the most
recent 12-month budget delivered by the Company pursuant to Section 8.11(c) of
this Agreement;
(b) as soon as available, and in any event within
fifteen (15) days after the end of each month in each fiscal year (other
than the last month in each fiscal year) a balance sheet of the Company and the
related statements of income, stockholders' equity and cash flows, unaudited but
prepared in accordance with GAAP (except that such unaudited financial
statements need not contain all of the required footnotes and shall be subject
to normal, recurring non-material year-end adjustments) and certified by the
chief financial officer of the Company (the "Monthly Balance Sheet"). The
Monthly Balance Sheet shall be accompanied by (i) the monthly management report
describing the current status of the Company and its operations and prospects,
including a head count and (ii) a statement of all contingent obligations of the
Company not included as entries on the Monthly Balance Sheet. The Monthly
Balance Sheet should be prepared as of the end of such month with statements of
income, stockholders' equity and cash flows to be for such month and for the
period from the beginning of the fiscal year to the end of such month, in each
case with comparative statements for the prior fiscal year and the most recent
12-month budget delivered by the Company pursuant to Section 8.11(c) of this
Agreement; and which shall specifically note and describe all expenditures (in
any single transaction or series of related transactions) in excess of $50,000
not included in the most recent 12 month budget delivered by the Company
pursuant to Section 8.11(c);
(c) as soon as available, and in any event no later
than thirty (30) days prior to the start of each fiscal year, a business plan
and capital and operating expense budget, including cash flow projections,
income and loss projections, balance sheet projections and plans for incurrences
of indebtedness for the Company in respect of such fiscal year, all itemized in
reasonable detail and prepared on a monthly basis (the "Annual Plan"), and,
promptly after preparation, any revisions to any of the foregoing. The Annual
Plan shall not be effective until a majority of the Board, which majority shall
include the Class C Representatives and the Class D Representatives, shall have
approved such Annual Plan. A copy of the Company's capital and operating and
expense budget for the remainder of the current fiscal year is attached hereto
as Schedule 8.11(c);
(d) any document relating to the affairs of the
Company delivered to the stockholders of the Company or delivered broadly to the
financial community, including any filings by the Company with any securities
exchange, the SEC or the National Association of Securities Dealers, Inc.;
(e) promptly, and in any event within five (5) days
after such notice has been received by the Company, notice of any material
litigation or an adverse claim, dispute or any other development which may be
deemed material to operations, assets or properties of the Company; and
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(f) promptly, from time to time, such other
information regarding the business, prospects, financial condition, operations,
property or affairs of the Company that the Purchasers reasonably may request.
(g) The obligations of this Section 8.12 shall
terminate on the consummation of a Triggering Event.
8.13. Indemnification of Directors and Officers. The
Company shall provide indemnification for its directors and officers that is
reasonably satisfactory to the Purchasers' respective Representatives,
including, but not limited to, maintenance of the indemnification agreements to
be executed pursuant to Section 12.1(m) hereof.
8.14. Qualified Small Business Stock Status.
(a) The Company hereby covenants that it shall use
its commercially reasonable efforts to cause such shares or shares of Common
Stock issuable upon conversion of the Class D Preferred Shares (the "Conversion
Shares") to continue to constitute Qualified Small Business Stock so long as
such shares or Conversion Shares are held by Investors (or held by Affiliates or
by Permitted Transferees of Investors in whose hands the shares or Conversion
Shares are eligible to qualify as Qualified Small Business Stock; provided,
however, that "commercially reasonable efforts" as used in this Section 8.14
shall not be construed to require the Company to operate its business in a
manner which would adversely affect its business, limit its future prospects or
alter the timing or resource allocation related to its planned operations or
financing activities.
(b) The Investors hereunder shall have the right to
request from the Company a certificate, executed by the Company's Chief
Executive Officer or Chief Financial Officer, informing such Investor, to the
best of the Company's knowledge, whether such Investors' interest in the Company
constitutes Qualified Small Business Stock, as of the date of such request. The
Company shall provide such certificate to the Investor within ten (10) days of
such Investor's request. The Company's obligation to furnish the certificate
pursuant to this Section 8.14 shall continue notwithstanding the fact that a
class of the Company's stock may be traded on an established securities market.
Notwithstanding the foregoing, the Company shall notify the Investors hereunder
of any action, pending or threatened, by any state or federal agency, that
questions or challenges the status of the shares of Class D Preferred Shares or
Conversion Shares as Qualified Small Business Stock.
(c) In addition to the foregoing certificate, the
Company shall submit to the Internal Revenue Service and the California
Franchise Tax Board any reports, forms, schedules or other filings required to
be submitted under Section 1202, related Treasury Regulations or required under
California state laws or regulations pertaining to the issuance of qualified
small business stock (collectively, the "Required Reports"). The Company shall
submit copies of the Required Reports to the Investors.
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8.15 Management Rights Agreement.
(a) For so long as TCV III (Q), L.P. ("TCV III
(Q)") owns any Capital Stock of the Company and in the event that a
representative of TCV III (Q). is not appointed to the Board pursuant to
Section 9.1(a)(iv) of this Agreement, TCV III (Q) and the Company shall enter
into a Management Rights Agreement pursuant to which a representative of TCV
III (Q) shall have the right to (i) be notified of and attend all meetings of
the Board in a non-voting advisory capacity, (ii) consult with and advise
Company management on significant business issues at reasonable times
established with the Company and (iii) examine the records of the Company,
subject to customary confidentiality restrictions on the use of such
information at reasonable times established with the Company. This provision
shall terminate upon consummation of an initial public offering or upon a
Triggering Event.
(b) For so long as Xxxxxx Xxxxxxx Venture Partners
III, L.P. or any of its affiliates (collectively "MSVP III") owns any Capital
Stock of the Company and in the event that a representative of MSVP III is not
appointed to the Board pursuant to Section 9.1(a)(iv) of this Agreement, MSVP
III and the Company shall enter into a Management Rights Agreement pursuant to
which a representative of MSVP III shall have the right to (i) be notified of
and attend all meetings of the Board in a non-voting advisory capacity and
receive all materials distributed to Board members, (ii) consult with and
advise Company management on significant business issues at reasonable times
established with the Company and (iii) examine the records of the Company,
subject to customary confidentiality restrictions on the use of such
information at reasonable times established with the Company. This provision
shall terminate upon consummation of an initial public offering or upon a
Triggering Event.
8.16 Key Man Life Insurance. The Company hereby
agrees to maintain Key Man Life Insurance on the Executive Stockholder in the
amount of Three Million Dollars ($3,000,000) and obtain within sixty (60) days
following the First Closing Date and thereafter, maintain Key Man Life
Insurance on one other executive of the Company approved by the Board of
Directors including the directors elected by the holders of Class C and Class D
Preferred Shares as provided in Section 9(a) in the amount of One Million
Dollars ($1,000,000).
9. BOARD OF DIRECTORS AND CORPORATE GOVERNANCE.
(a) Following the date of this Agreement, the
Executive Stockholder, the Partnership, and the Purchasers shall vote all of
their respective voting stock of the Company, and shall promptly take all other
necessary or desirable actions within their control (whether in the capacity as
a stockholder or officer of the Company or otherwise, and including, without
limitation, attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written consents in lieu of meetings, and
calling special Board and stockholder meetings), so that:
(i) the Board shall consist of eight (8)
directors, to be appointed as follows:
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(A) two (2) of such directors shall be
appointed by the holders of the Class C Preferred
Shares (collectively, the "Class C Representatives");
(B) two (2) of such directors shall be
appointed by the holders of the Class D Preferred
Shares (collectively, the "Class D Representatives"
and, together with the Class C Representatives, the
"Investor Representatives") one of which shall be
designated by New Enterprise Associates, VIII, L.P.,
its Affiliates and successors-in-interest (the "NEA
Representative") and one of which shall be designated
by Technology Crossover Management III, L.L.C. ("TCM
III"), its Affiliates and successors-in-interest (the
"TCV Representative");
(C) two (2) of such directors shall be
appointed by the holders of the Company's Common Stock;
and
(D) the remaining two (2) such directors
shall be appointed by all holders of equity securities
of the Company.
(ii) at the election of the Company, the size
of the Board shall be increased to nine (9) directors, with the additional
member of the Board to be appointed by the majority vote of all holders of
equity securities of the Company;
(iii) the Investor Representatives shall not
be representatives of competitors of the Company. The parties hereto agree that
any employee of the Prior Investor or Xxxxx Capital Partners, L.L.C., New
Enterprise Associates, VIII, L.P., or any member of Technology Crossover
Management III, L.L.C. shall be deemed not to be a representative of a
competitor of the Company;
(iv) the Investor Representatives shall have
the right to serve on all of the Company's committees. The Company shall
promptly establish a Compensation Committee and an Audit Committee. All
decisions of any committee shall require the consent of the Investor
Representatives;
(v) the removal from the Board or any
committee thereof (with or without cause) of any Investor Representative
designated hereunder shall only be at the written request of, with respect to a
Class C Representative, the holders of the Class C Preferred Shares, with
respect to the NEA Representative, New Enterprise Associates, its Affiliates
and successors-in-interest, and with respect to the TCV Representative, TCM
III, its Affiliates and successors-in-interest, provided that such group of
holders shall make such request if the Company has good cause to request the
removal of such Investor Representative;
(vi) in the event that any Investor
Representative designated hereunder for any reason ceases to serve as a member
of the Board (or any committee thereof) during his or her term of office, the
resulting vacancy on the Board may be filled by a representative designated by,
with respect to a Class C Representative, the holders of Class C Preferred
Shares,
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and with respect to the NEA Representative, NEA, its affiliates and
successors-in-interest, and with respect to the TCV Representative, TCM III,
its Affiliates; and successors-in-interest;
(vii) each Investor Representative shall have
the right to serve on the Board until the point in time in which the group of
holders originally appointing such Investor Representative ceases to hold any
Registrable Securities.
(b) The terms of this Section 9 shall terminate on
the consummation of a Triggering Event.
10. TRANSFER RESTRICTIONS; PRIVATE PLACEMENT.
10.1. Transfer Restrictions; Private Placement.
(a) Each Purchaser understands and agrees that the
Class D Preferred Shares have not been registered under the Securities Act, and
that accordingly they will not be fully transferable except as permitted under
various exemptions contained in the Securities Act, or upon satisfaction of the
registration and prospectus delivery requirements of the Securities Act. Each
Purchaser acknowledges that it must bear the economic risk of the Class D
Preferred Shares for an indefinite period of time (subject, however, to the
Company's obligation to redeem the Class D Preferred Shares at the election of
the Purchasers in accordance with the terms thereof, and to the Company's
obligation to effect the registration of the Registrable Securities under the
Securities Act in accordance with Section 11 of this Agreement) because they
have not been registered under the Securities Act and therefore cannot be sold
unless they are subsequently registered or an exemption from registration is
available.
(b) The Purchasers agree with the Company that the
certificates evidencing the Class D Preferred Shares will bear the following
legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY NOT BE SOLD OR TRANSFERRED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES
OR THE SECURITIES ARE SOLD AND TRANSFERRED IN A TRANSACTION
THAT IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT. THE SECURITES REPRESENTED BY THIS
CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER AND CERTAIN OTHER AGREEMENTS SET FORTH IN A SECURITIES
PURCHASE AND STOCKHOLDER AGREEMENT BETWEEN THE COMPANY, THE
PARTNERSHIP, THE EXECUTIVE STOCKHOLDER, THE PRIOR INVESTOR AND
THE PURCHASERS, DATED AS OF SEPTEMBER 10, 1999, A COPY OF WHICH
MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL
PLACE OF BUSINESS WITHOUT CHARGE."
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(c) The legend endorsed on the certificates
pursuant to Section 10.1(b) of this Agreement shall be removed and the Company
shall issue a certificate without such legend to the holder thereof at such
time as the securities evidenced thereby cease to be restricted securities upon
the earliest to occur of (i) a registration statement with respect to the sale
of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such
registration statement, (ii) the securities shall have been sold to the public
pursuant to Rule 144 (or any successor provision) under the Securities Act and
(iii) such securities may be sold by the holder without restriction or
registration under Rule 144(k) under the Securities Act (or any successor
provision).
(d) Prior to a Triggering Event, the Executive
Stockholder and the Partnership may only sell or transfer his or its Capital
Stock in the Company to a Permitted Transferee, who shall as a condition to
such transfer agree in writing to be bound by the terms of this Agreement. In
connection with such sale or transfer, such transferor shall, unless waived by
the Investors, require the transferee to agree to become a party to this
Agreement and be bound by the provisions of Sections 9 and 10 of this
Agreement. Any transfer in violation of this Section 10.1(d) shall be null and
void.
(e) The Company will reissue any Capital Stock of
the Company held by the Executive Stockholder and the Partnership and
transferred in accordance with this Section 10.1 with new stock certificates
bearing the following legend:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD OR TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER
SUCH ACT COVERING SUCH SECURITIES OR THE SECURITIES ARE SOLD AND TRANSFERRED IN
A TRANSACTION THAT IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT. THE SECURITES REPRESENTED BY THIS CERTIFICATE ARE
ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AND CERTAIN OTHER
AGREEMENTS SET FORTH IN A SECURITIES PURCHASE AND STOCKHOLDER AGREEMENT BETWEEN
THE COMPANY, THE PARTNERSHIP, THE EXECUTIVE STOCKHOLDER, THE PRIOR INVESTOR AND
THE PURCHASERS, DATED AS OF SEPTEMBER 10, 1999, A COPY OF WHICH MAY BE OBTAINED
BY THE HOLDER HEREOF AT THE COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT
CHARGE."
11. REGISTRATION.
11.1 Demand Registrations.
(a) Requests for Registration. Subject to Sections
11.1(b) and (c) below, at the request of the holders of at least 50% of the
Registrable Securities, at any time after the first anniversary of the First
Closing Date, the Company shall register under the Securities Act of all or
part of its Registrable Securities on Form S-1, or any similar long-form of
registration ("Long-Form Registration"), or, if available, on Form S-2 or S-3
or any similar short-form of registration
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("Short-Form Registration"). Each request for a Demand Registration shall
specify the number of Registrable Securities requested to be registered and the
proposed underwriter. Within ten (10) days after receipt of any such request,
the Company will give written notice of such requested registration to all
other holders (if any) of Registrable Securities and, subject to Section
11.1(d) below, will include in such registration all Registrable Securities
with respect to which the Company has received written requests for inclusion
therein within fifteen (15) days after the receipt of the Company's notice. All
registrations requested pursuant to this Section 11.1(a) are referred to herein
as "Demand Registrations."
(b) Long-Form Registrations. The Purchasers will
be entitled to request (i) one (1) Demand Registration, prior to a Qualifying
IPO offered by the Company, to compel the Company to effect an initial public
offering and (ii) two (2) Long Form Demand Registrations after an initial
public offering, in either case in which the Company will pay all Registration
Expenses (as defined in Section 11.5 of this Agreement). A registration will
not count as one of such Demand Registrations until it has become effective and
the parties requesting such registration have sold all of their Registrable
Securities requested to be included thereunder.
(c) Short-Form Registrations. In addition to the
Long-Form Demand Registrations provided pursuant to Section 11.1(b), the
Purchasers will be entitled to request unlimited Short-Form Registrations,
provided that the aggregate offering value of the Registrable Securities
requested to be registered in any Short-Form Registration must equal at least
$1 million and the requesting Purchasers may request only two Short-Form
Registrations each in any 12-month period. After the Company has become subject
to the reporting requirements of the Securities Exchange Act, the Company will
use its best efforts to make Short-Form Registrations available for the sale of
Registrable Securities. The Company will pay all Registration Expenses with
respect to Short-Form Registrations.
(d) Limitation on Requirement to File or Amend
Registration Statement. If the Company is required to effect a registration
pursuant to this Section 11.1, and the Company furnishes to the party
requesting such registration a certificate signed by the President of the
Company stating that in the good faith judgment of the Board such registration
would prematurely and adversely disclose facts involving an acquisition,
disposition, financing or other material transaction of the Company, and that
the Company has determined in good faith that the making of such a filing,
supplement or amendment at such time would materially adversely affect or
interfere with such transaction, acquisition or financing of the Company, the
Company shall have the right to defer such filing for a period of not more than
ninety (90) days after receipt of the request for such registration from such
party; provided that during such time the Company may not file a Registration
Statement for securities to be issued and sold for its own account or that of
anyone other than the party requesting such registration, and that the Company
shall not defer its obligation in this manner more than once in any
twelve-month period.
(e) Priority in Demand Registrations. The Company
will not include in any Demand Registration any securities which are not
Registrable Securities without the prior written consent of the holders of a
majority of the Registrable Securities included in such registration. If a
Demand Registration is an underwritten offering and the managing underwriters
advise the
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Company in writing that in their opinion the number of Registrable Securities
and, if permitted hereunder, other securities requested to be included in such
offering exceeds the number of Registrable Securities and other securities, if
any, which can be sold therein without adversely affecting the marketability of
the offering (the "Offering Quantity"), the Company will include in such
registration securities in the following priority:
(i) first, all Registrable Securities
requested to be included by any holders thereof, and if the number of such
holders' securities requested to be included exceeds the Offering Quantity,
then the Company shall include only each such requesting holder's pro rata
share of the available Offering Quantity, based on the amount of Registrable
Securities requested to be sold for the account of each such holder; and
(ii) second, the securities proposed to be
sold for the account of the Company; and
(iii) third, to the extent (and only to the
extent) that the Offering Quantity exceeds the aggregate amount of securities
to be sold for the account of the Company and Registrable Securities which are
requested to be included in such registration, the Company will include in such
registration any other securities to be included in the offering.
Any Persons other than holders of Registrable Securities who participate in
Demand Registrations which are not at the Company's expense must pay their
share of the Registration Expenses as provided in Section 11.5 of this
Agreement.
(f) Restrictions on Demand Registrations. The
Company will not be obligated to effect any Long Form Demand Registration
within one hundred eighty (180) days after the effective date of a previous
Long Form Demand Registration.
(g) Selection of Underwriters. In connection with a
Demand Registration and any other registration of securities of the Company
that is an underwritten offering, lead book-running manager to administer the
offering shall be selected by the holders of a majority of the Registrable
Securities initiating such registration, such selection to be subject to the
Company's approval which will not be unreasonably withheld.
(h) Other Registration Rights. Except as provided
in this Agreement, the Company will not grant to any Persons the right to
request the Company to register any equity securities of the Company, or any
securities convertible into or exchangeable or exercisable for such securities,
without the prior written consent of all of the Purchasers.
(i) Transfer or Assignment of Registration Rights.
The rights to cause the Company to register securities granted to the
Purchasers by the Company under Sections 11.1 and 11.2 may be transferred or
assigned by any of the Purchasers only to a transferee or assignee who acquires
20% of the Capital Stock of the Company purchased pursuant to this Agreement or
the Prior Investor Agreement, as applicable, by the party desiring such
transfer or assignment (subject to subsequent adjustments for stock splits,
stock dividends, reverse stock splits, and the
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like), provided that the Company is given written notice at the time of or
within a reasonable time after said transfer or assignment, stating the name
and address of the transferee or assignee and identifying the securities with
respect to which such registration rights are being transferred or assigned.
Notwithstanding the foregoing, such registration rights may be transferred, in
whole or in part, without regard to the number of shares transferred, in
connection with the transfer of Registrable Securities by a Purchaser to a
partner or other equity owner (or their partners, shareholders or members) in
or an Affiliate of, respectively, such Purchaser.
11.2. Piggyback Registrations.
(a) Right to Piggyback. Whenever the Company
proposes to register any of its securities under the Securities Act (other than
pursuant to a Demand Registration or a registration on Form S-4 or S-8 or any
successor or similar forms) and the registration form to be used may be used
for the registration of Registrable Securities (a "Piggyback Registration"),
whether or not for sale for its own account, the Company will give prompt
written notice to all holders of Registrable Securities of its intention to
effect such a registration and will include in such registration all
Registrable Securities with respect to which the Company has received written
requests for inclusion therein within thirty (30) days after the receipt of the
Company's notice.
(b) Piggyback Expenses. The Registration Expenses
of the holders of Registrable Securities will be paid by the Company in all
Piggyback Registrations.
(c) Priority on Piggyback Registrations. If a
Piggyback Registration is an underwritten primary registration on behalf of the
Company, and the managing underwriters advise the Company in writing (with a
copy to each party hereto requesting registration of Registrable Securities)
that in their opinion the number of securities requested to be included on a
secondary basis in such registration exceeds the number which can be sold in
such offering without adversely affecting the marketability of such primary or
secondary offering (the "Company Offering Quantity"), the Company will include
in such registration securities in the following priority:
(i) first, the Company will include the
securities the Company proposes to sell; and
(ii) second, the Company will include all
Registrable Securities requested to be included by any holders thereof, and if
the number of such holders' securities requested to be included exceeds the
Company Offering Quantity, then the Company shall include only each such
requesting holder's pro rata share of the Company Offering Quantity (remaining
after sales by the Company), based on the amount of securities held by such
holder.
(d) Other Registrations. If the Company has
previously filed a registration statement with respect to Registrable
Securities pursuant to Section 11.1 or pursuant to this Section 11.2, and if
such previous registration has not been withdrawn or abandoned, the Company
will not file or cause to be effected any other registration of any of its
equity securities or securities convertible into or exchangeable or exercisable
for its equity securities under the
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Securities Act (except on Form S-4 or S-8 or any successor or similar form),
whether on its own behalf or at the request of any holder or holders of such
securities, until a period of at least ninety (90) days has elapsed from the
effective date of such previous registration.
11.3. Market Standoff Agreements.
(a) To the extent not inconsistent with applicable
law, each Purchaser agrees not to effect any public sale or distribution
(including sales pursuant to Rule 144 of the Securities Act) of Registrable
Securities of the Company, or any securities, options or rights convertible
into or exchangeable or exercisable for such securities that such Purchaser
owns prior to the effective date of the Company's initial public offering,
during the seven (7) days prior to, and during the 180-day period beginning on,
the effective date of the Company's first underwritten registration, unless the
underwriters managing the registered public offering otherwise agree; provided
that such restrictions shall not be more restrictive in duration or scope than
restrictions imposed on (i) any Person which has been granted registration
rights by the Company, (ii) any officer or director of the Company or (iii) any
1% holder of equity securities of the Company; and provided further, that
except with regard to shares purchased pursuant to the IPO Allocation (defined
below), such restrictions shall not apply to equity securities purchased in or
after such underwritten registration. Notwithstanding the foregoing, any
discretionary waiver of this Section by the Company or underwriters shall apply
to all persons subject to such agreements pro rata based on the number of
shares subject to such agreements.
(b) The Company agrees (i) not to effect any public
sale or distribution of its equity securities, or any securities convertible
into or exchangeable or exercisable for such securities, during the seven (7)
days prior to and during the 60-day period beginning on the effective date of
any underwritten Demand Registration or any underwritten Piggyback Registration
(except as part of such underwritten registration or pursuant to registrations
on Form S-4 or S-8 or any successor or similar form), unless the underwriters
managing the public offering otherwise agree and (ii) to cause each holder of
its Common Stock, or any securities convertible into or exchangeable or
exercisable for Common Stock, other than a Purchaser purchased from the Company
at any time after the date of this Agreement (other than in a public offering)
to agree not to effect any public sale or distribution (including sales
pursuant to Rule 144 of the Securities Act) of any such securities during such
period (except as part of such underwritten registration, if otherwise
permitted), unless the underwriters managing the public offering otherwise
agree.
11.4. Registration Procedures. Whenever the Company
is required to register its securities pursuant to Sections 11.1 and 11.2 of
this Agreement, the Company will use its best efforts to effect the
registration and the sale of such Registrable Securities in accordance with the
intended method of disposition thereof, and pursuant thereto the Company will
as expeditiously as possible:
(a) prepare and within sixty (60) days (or
forty-five (45) days with respect to any Short-Form Registration) after the end
of the period within which requests for registration may be given to the
Company file with the SEC a registration statement with respect to such
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Registrable Securities and thereafter use its best efforts to cause such
registration statement to become effective (provided that before filing a
registration statement or prospectus or any amendments or supplements thereto,
the Company will furnish to the counsel selected by the holders of a majority
of the Registrable Securities initiating such registration statement copies of
all such documents proposed to be filed, which documents will be subject to
review of such counsel);
(b) prepare and file with the SEC such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective for a period of either (i) not less than one hundred eighty (180)
days (subject to extension pursuant to Section 11.7(b)) or, if such
registration statement relates to an underwritten offering, such longer period
as in the opinion of counsel for the underwriters a prospectus is required by
law to be delivered in connection with sales of Registrable Securities by an
underwriter or dealer or (ii) such shorter period as will terminate when all of
the securities covered by such registration statement have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement (but in any event not before
the expiration of any longer period required under the Securities Act), and to
comply with the provisions of the Securities Act with respect to the
disposition of all securities covered by such registration statement until such
time as all of such securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set forth in
such registration statement;
(c) furnish to each seller of Registrable
Securities such number of copies of such registration statement, each amendment
and supplement thereto, the prospectus included in such registration statement
(including each preliminary prospectus) and such other documents as such seller
may reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such seller;
(d) use its best efforts to register or qualify
such Registrable Securities under such other securities or blue sky laws of
such jurisdictions in the United States as any seller reasonably requests and
do any and all other acts and things which may be reasonably necessary or
advisable to enable such seller to consummate the disposition in such
jurisdictions of the Registrable Securities owned by such seller (provided that
the Company will not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
subparagraph, (ii) subject itself to taxation in any such jurisdiction or (iii)
consent to general service of process in any such jurisdiction);
(e) notify each seller of such Registrable
Securities, at any time when a prospectus relating thereto is required to be
delivered under the Securities Act, of the happening of any event (a "Changing
Event") as a result of which, the prospectus included in such registration
statement contains an untrue statement of a material fact or omits any fact
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made, and, at the request of any such
seller, the Company will as soon as possible prepare and furnish to such seller
(a "Correction Event") a reasonable number of copies of a supplement or
amendment to such prospectus so that, as thereafter delivered to the purchasers
of such
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Registrable Securities, such prospectus will not contain an untrue statement of
a material fact or omit to state any fact necessary to make the statements
therein not misleading in the light of the circumstances under which they were
made;
(f) cause all such Registrable Securities to be
listed on each securities exchange on which similar securities issued by the
Company are then listed and, if not so listed, to be listed on the NASD
automated quotation system;
(g) provide a transfer agent and registrar for all
such Registrable Securities not later than the effective date of such
registration statement;
(h) enter into such customary agreements (including
underwriting agreements in customary form) and take all such other actions as
the holders of a majority of the Registrable Securities being sold or the
underwriters, if any, reasonably request in order to expedite or facilitate the
disposition of such Registrable Securities (including, without limitation,
effecting a stock split or a combination of shares);
(i) make available for inspection by any seller of
Registrable Securities, any underwriter participating in any disposition
pursuant to such registration statement and any attorney, accountant or other
agent retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors, Employees and independent accountants to
supply all information reasonably requested by any such seller, underwriter,
attorney, accountant or agent in connection with such registration statement;
(j) otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC, and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months beginning with the first day of
the Company's first full calendar quarter after the effective date of the
registration statement, which earnings statement shall satisfy the provisions
of Section 11(a) of the Securities Act and Rule 158 thereunder;
(k) in the event of the issuance of any stop order
suspending the effectiveness of a registration statement, or of any order
suspending or preventing the use of any related prospectus or suspending the
qualification of any securities included in such registration statement for
sale in any jurisdiction, the Company will use its reasonable best efforts
promptly to obtain the withdrawal of such order;
(l) use its best efforts to obtain one or more
comfort letters, dated the effective date of such registration statement (and,
if such registration includes a public offering, dated the date of the closing
under the underwriting agreement), signed by the Company's independent public
accountants in customary form and covering such matters of the type customarily
covered by comfort letters as the holders of a majority of the Registrable
Securities being sold reasonably request; and
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(m) use its best efforts to provide a legal opinion
of the Company's outside counsel, dated the effective date of such registration
statement (and, if such registration includes a public offering, dated the date
of the closing under the underwriting agreement), with respect to the
registration statement, each amendment and supplement thereto, the prospectus
included therein (including the preliminary prospectus) and such other
documents relating thereto in customary form and covering such matters of the
type customarily covered by legal opinions of such nature.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information
regarding such seller and the distribution of such securities as the Company
may from time to time reasonably request in writing.
11.5. Registration Expenses.
(a) All expenses incident to the Company's
performance of or compliance with the registration rights provided for under
this Agreement, including, without limitation, all registration and filing
fees, fees and expenses of compliance with securities or blue sky laws,
printing expenses, messenger and delivery expenses, and fees and disbursements
of counsel for the Company and all independent certified public accountants,
underwriters (excluding discounts and commissions, which will be paid by the
sellers of Registrable Securities) and other Persons retained by the Company
(all such expenses being herein called "Registration Expenses"), will be borne
as provided in this Agreement, and the Company will, in any event, pay its
internal expenses (including, without limitation, all salaries and expenses of
its Employees performing legal or accounting duties), the expense of any annual
audit or quarterly review, the expense of any liability insurance and the
expenses and fees for listing the securities to be registered on each
securities exchange on which similar securities issued by the Company are then
listed or on the NASD automated quotation system; provided, however, that if a
registration under Section 11.1 is withdrawn at the request of the holders of
Registrable Securities (other than as a result of adverse information
concerning the business or financial condition of the Company which is made
known to the holders of Registrable Securities after the date on which such
registration was requested) and if the holders of Registrable Securities elect
not to have such registration counted as a registration requested under Section
11.1, each requesting holder of Registrable Securities shall pay the
Registration Expenses of such registration pro rata in accordance with the
number of his shares to have been included in such registration.
(b) In connection with each Demand Registration and
Piggyback Registration, the Company will reimburse any holder of Registrable
Securities which avails itself of such registration for the reasonable fees and
disbursements of one counsel chosen by the holders of a majority of the
Registrable Securities initiating such registration.
(c) To the extent Registration Expenses are not
required to be paid by the Company, each holder of Registrable Securities
included in any registration hereunder will pay those Registration Expenses
allocable to the registration of such holder's Registrable Securities so
included, and any Registration Expenses not so allocable will be borne by all
sellers of
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Registrable Securities included in such registration in proportion to the
aggregate selling price of the securities to be so registered (other than an
opinion as to the authority of such holder to take any action in connection
with such registration).
11.6. Indemnification.
(a) The Company agrees to indemnify and hold
harmless, to the extent permitted by law, the Investors and their respective
Representatives and each Person who controls such Investor or Representative
within the meaning of the Securities Act against any Losses, joint or several,
to which any Investor or its Representatives may become subject under the
Securities Act or otherwise, insofar as such Losses (or actions or proceedings,
whether commenced or threatened, in respect thereof) arise out of or are based
upon (i) any untrue or alleged untrue statement of material fact contained in
any registration statement, prospectus or preliminary prospectus or any
amendment or supplement thereto or in any application or (ii) any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, and the Company will the
Investors and their respective Representatives for any legal or any other
expenses incurred by them in connection with investigating or defending any
such Loss, action or proceeding; provided, however, that the Company shall not
be liable in any such circumstance to the extent that any such Loss (or action
or proceeding in respect thereof) arises out of or is based upon an untrue
statement or alleged untrue statement, or omission or alleged omission, made in
such registration statement, any such prospectus or preliminary prospectus or
any amendment or supplement thereto or in any application, in reliance upon,
and in conformity with, written information prepared and furnished to the
Company by an Investor or its Representatives expressly for use therein or by
the failure of an Investor to deliver a copy of the registration statement or
prospectus, or any amendments or supplements thereto, after the Company has
furnished such Investor with a sufficient number of copies of the same. In
connection with an underwritten offering, the Company will indemnify the
underwriters and their respective officers and directors to the same extent as
provided above with respect to the indemnification of the Investors.
(b) In connection with any registration statement
in which an Investor is participating, such Investor will furnish to the
Company in writing such information and affidavits as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and, to the extent permitted by law, such Investor will indemnify
and hold harmless the Company, its directors and officers and each other Person
who controls the Company (within the meaning of the Securities Act) against any
Losses, joint or several, to which the Company, its directors and officers and
each other controlling Person may become subject under the Securities Act or
otherwise, insofar as such Losses (or actions or proceedings, whether commenced
or threatened, in respect thereof) arise out of or are based upon (i) the
purchase or sale of Registrable Securities during any period beginning upon a
Changing Event (as defined in Section 11.4(e)) and ending on a Correction Event
(as defined in Section 11.4(e)), provided such Investor received proper written
notice of such Changing Event pursuant to Section 11.4(e), (ii) any untrue or
alleged untrue statement of material fact contained in the registration
statement, prospectus or preliminary prospectus or any amendment or supplement
thereto or in any application, or (iii) any omission or alleged omission of a
material fact required
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to be stated therein or necessary to make the statements therein not
misleading, but, with respect to clauses (ii) and (iii) above, only to the
extent that such untrue statement or omission is made in such registration
statement, any such prospectus or preliminary prospectus or any amendment or
supplement thereto or in any application, in reliance upon and in conformity
with written information prepared and furnished to the Company by such Investor
expressly for use therein, and such Investor will reimburse the Company and
each such director, officer and controlling Person for any legal or any other
expenses incurred by them in connection with investigating or defending any
such Loss, action or proceeding; provided, however, that the obligation to
indemnify will be individual to such Investor and will be limited to the net
amount of proceeds received by such Investor from the sale of Registrable
Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification
hereunder will (i) give prompt written notice to the indemnifying party of any
claim with respect to which it seeks indemnification (provided that the failure
to give prompt notice shall not impair any Person's right to indemnification
hereunder to the extent such failure has not materially prejudiced the
indemnifying party) and (ii) unless in such indemnified party's reasonable
judgment a conflict of interest between such indemnified and indemnifying
parties may exist with respect to such claim, permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party. Such indemnifying party shall not, however, enter into any
settlement with a party without obtaining an unconditional release of each
indemnified party by such party with respect to any and all claims against each
indemnified party. If such defense is assumed, the indemnifying party will not
be subject to any liability for any settlement made by the indemnified party
without its consent (but such consent will not be unreasonably withheld). An
indemnifying party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all parties indemnified by such indemnifying party with respect to
such claim, unless in the reasonable judgment of any indemnified party a
conflict of interest may exist between such indemnified party and any other of
such indemnified parties with respect to such claim.
(d) The indemnification provided for under this
Agreement will remain in full force and effect regardless of any investigation
made by or on behalf of the indemnified party or any officer, director or
controlling Person of such indemnified party and will survive the transfer of
securities. The Company also agrees to make such provisions, as are reasonably
requested by any indemnified party, for contribution to such party in the event
the Company's indemnification is unavailable for any reason.
11.7. Participation in Underwritten Registrations.
(a) No Person may participate in any registration
hereunder which is underwritten unless such Person (i) agrees to sell such
Person's securities on the basis provided in any underwriting arrangements
approved by the Person or Persons entitled hereunder to approve such
arrangements (including, without limitation, pursuant to the terms of any
over-allotment or "green shoe" option requested by the managing underwriter(s),
provided that no Purchaser will be required to sell more than the number of
Registrable Securities that such holder has requested
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the Company to include in any registration) and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.
(b) Each Person that is participating in any
registration hereunder agrees that, upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 11.4(e) above,
such Person will forthwith discontinue the disposition of its Registrable
Securities pursuant to the registration statement until such Person's receipt
of the copies of a supplemented or amended prospectus as contemplated by such
Section 11.4(e). In the event the Company shall give any such notice, the
applicable time period mentioned in Section 11.4(b) during which a Registration
Statement is to remain effective shall be extended by the number of days during
the period from and including the date of the giving of such notice pursuant to
this paragraph to and including the date when each seller of a Registrable
Security covered by such registration statement shall have received the copies
of the supplemented or amended prospectus contemplated by Section 11.4(e).
11.8. IPO Allocation. In the event of an initial
public offering (regardless of whether such initial public offering is a
Qualifying IPO), the holders of Class C Preferred Shares and Class D Preferred
Shares (and Common Shares issued upon conversion of Class C Preferred Shares
and Class D Preferred Shares) shall have the option, pro rata based upon the
total number of Class C Preferred Shares and Class D Preferred Shares (and
Common Shares issued upon conversion of Class C Preferred Shares and Class D
Preferred Shares) held on the date of such offering, to purchase up to 5%, in
the aggregate, of the shares of Capital Stock of the Company offered in such
offering (the "IPO Allocation"), at the initial public offering price, under
the terms set forth substantially in the form of Exhibit D hereto. Any shares
so purchased shall be subject to the restrictions contained in Section 11.3(a)
of this Agreement.
11.9. Current Public Information. At all times after
the Company has filed a registration statement with the SEC pursuant to the
requirements of either the Securities Act or the Securities Exchange Act, the
Company will file all reports required to be filed by it under the Securities
Act and the Securities Exchange Act and the rules and regulations adopted by
the SEC thereunder, and will use commercially reasonable best efforts to take
such further action as any Investor may reasonably request, all to the extent
required to enable any of the Investors to sell Registrable Securities pursuant
to Rule 144 adopted by the SEC under the Securities Act (as such rule may be
amended from time to time) or any similar rule or regulation hereafter adopted
by the SEC.
11.10. Adjustment Affecting Registrable Securities.
Except as otherwise provided herein, the Company will not take any action, or
permit any change to occur, with respect to its securities which would
materially and adversely affect the ability of any Purchaser to include
Registrable Securities in a registration undertaken pursuant to this Agreement
or which would adversely affect the marketability of such Registrable
Securities in any such registration (including, without limitation, effecting a
stock split or a combination of shares).
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12. CONDITIONS TO CLOSING.
12.1. Conditions of Obligations of the Purchasers.
The obligation of each Purchaser to purchase and pay for the Class D Preferred
Shares which it has agreed to purchase on the Closing Dates is subject to the
fulfillment prior to or on the Closing Dates of the following conditions, any
of which may be waived in whole or in part by any Purchaser with respect to
such Purchaser:
(a) Representations and Warranties. The
representations and warranties of the Company, the Executive Stockholder and
the Partnership under this Agreement shall be deemed to have been made again on
each Closing Date and shall then be true and correct.
(b) Compliance with Agreement. The Company, the
Executive Stockholder and the Partnership shall have performed and complied
with all agreements and conditions required by this Agreement to be performed
or complied with by such parties on or before each Closing Date.
(c) Approvals. The Company shall have obtained any
and all consents, waivers, approvals or authorizations, with or by any
Governmental Body or any other Person required for the valid execution of this
Agreement and the transactions contemplated hereby.
(d) No Material Adverse Change. Since July 31,
1999, there shall not have been a Material Adverse Change.
(e) Certificate of Officer. The Company shall have
delivered to the Purchasers a certificate dated each Closing Date, executed by
its Chief Executive Officer, certifying the satisfaction of the conditions
specified in paragraphs (a), (b), (c), (d), (g) and (j) of this Section 12.1.
(f) Diligence. The Purchasers shall have completed
their due diligence investigation of the Company and shall be satisfied in
their sole discretion with the results of its review of the Company.
(g) Seniority of Class D Preferred Shares. The
Company shall have taken all necessary steps to ensure the seniority of the
Class D Preferred Shares together with the Class C Preferred Shares, with
respect to the right of payment as to dividend distributions and distributions
upon liquidation, to any junior Capital Stock of the Company, including Common
Stock.
(h) Opinion of the Company's Counsel. The
Purchaser shall have received from Stauffer, Mannix, Rommel, Xxxxxx and Xxxxxx,
L.L.C., counsel for the Company, a favorable opinion dated each Closing Date,
substantially in the form attached hereto as Exhibit A.
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(i) Certificates of Designation.
(i) The Certificate of Designation relating
to the Class C Preferred Shares and the Class D Preferred Shares, substantially
in the form of Exhibit B hereto (the "Class C and D Certificate of
Designation"), shall have been duly adopted and executed and filed with the
Secretary of State of the State of Delaware, the Company shall not have adopted
or filed any other document designating terms, relative rights or preferences
of the Class C and Class D Preferred Shares, the Class C and D Certificate of
Designation shall be in full force and effect as of the First Closing under the
laws of Delaware and shall not have been amended or modified, and a copy of the
Class C and D Certificate of Designation certified by the Secretary of State of
the State of Delaware shall have been delivered to counsel for the Purchasers.
(ii) Amendments in connection with this
Agreement shall be made to the Certificate of Designation relating to the Class
A Preferred Shares (the "Class A Certificate of Designation"), shall have been
duly adopted and executed and filed with the Secretary of State of the State of
Delaware, the Company shall not have adopted or filed any other document
designating terms, relative rights or preferences of the Class A Preferred
Shares, the Class A Certificate of Designation shall be in full force and
effect as of the First Closing under the laws of Delaware and shall not have
been amended or modified, and a copy of the Class A Certificate of Designation
certified by the Secretary of State of the State of Delaware shall have been
delivered to counsel for the Purchasers. The Class A Certificate of Designation
shall be amended to reflect a fixed conversion of the Class A Preferred Shares
at $8.55 per share.
(iii) Amendments in connection with this
Agreement shall be made to the Certificate of Designation relating to the Class
B Preferred Shares, (the "Class B Certificate of Designation"), shall have been
duly adopted and executed and filed with the Secretary of State of the State of
Delaware, the Company shall not have adopted or filed any other document
designating terms, relative rights or preferences of the Class B Preferred
Shares, the Class B Certificate of Designation shall be in full force and
effect as of the First Closing under the laws of Delaware and shall not have
been amended or modified, and a copy of the Class B Certificate of Designation
certified by the Secretary of State of the State of Delaware shall have been
delivered to counsel for the Purchasers.
(j) Qualification Under State Securities Laws. All
registrations, qualifications, permits and approvals required under applicable
state securities laws shall have been obtained for the lawful execution,
delivery and performance of this Agreement and the performance of the
Certificate of Designation, including without limitation the offer, sale,
issuance and delivery of the Class D Preferred Shares.
(k) Market Standoff Agreements. Each holder of
Capital Stock of the Company, other than the Investors shall have executed and
delivered to the Company a market standoff agreement effective for a period of
up to one hundred eighty (180) days following an underwritten public offering
of securities of the Company , in the form attached here to as Exhibit E.
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(l) Certificate of Incorporation. Amendments in
connection with this Agreement shall be made to the Certificate of
Incorporation of the Company (the "Charter"), shall have been duly adopted and
executed and filed with the Secretary of State of the State of Delaware, the
Company shall not have adopted or filed any other document designating terms,
relative rights or preferences, the Charter shall be in full force and effect
as of the First Closing under the laws of Delaware and shall not have been
amended or modified, and a copy of the Charter certified by the Secretary of
State of the State of Delaware shall have been delivered to counsel for the
Purchasers.
(m) Indemnification Agreements. The Company will
enter into and deliver to the Purchasers indemnification agreements in the form
of Exhibit F with its directors.
(n) Supporting Documents. Each Purchaser shall have
received the following:
(i) Copies of resolutions of the Board and
the stockholders of the Company, certified by the Secretary of the Company,
authorizing and approving the amendments reflected in the Certificates of
Designation and Charter and, as to the Board, the execution, delivery and
performance of this Agreement and the Transaction Documents and the performance
of the Certificate of Designation and all other documents and instruments to be
delivered pursuant hereto and thereto;
(ii) A certificate of incumbency executed by
the Secretary of the Company certifying the names, titles and signatures of the
officers authorized to execute the documents referred to in subparagraph (i)
above and further certifying that the certificate of incorporation and by-laws
of the Company delivered to the Purchasers at the time of the execution of this
Agreement have been validly adopted and have not been amended or modified,
except to the extent provided in the Certificate of Designation; and
(iii) Such additional supporting documentation
and other information with respect to the transactions contemplated hereby as
the Purchasers or their respective counsel may reasonably request.
(o) Proceedings and Documents. All corporate and
other proceedings and actions taken in connection with the transactions
contemplated hereby and all certificates, opinions, agreements, instruments and
documents mentioned herein or incident to any such transactions, shall be
reasonably satisfactory in form and substance to the Purchasers and to their
counsel.
(p) Management Rights Agreement. Each of TCV III
(Q) and MSVP III shall enter into a Management Rights Agreement with the
Company substantially in the form attached hereto as Exhibit G.
(q) IPO Allocation Agreement. The holders of Class
C and Class D Preferred Shares and the Company shall enter into an IPO
Allocation Agreement substantially in the form attached hereto as Exhibit D.
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12.2. Conditions of Company's Obligations. The
Company's obligation to issue and sell the Class D Preferred Shares to all of
the Purchasers on the Closing Dates is subject to the fulfillment prior to or
on the Closing Dates of the following conditions, any of which may be waived in
whole or in part by the Company:
(a) Representations and Warranties. The
representations and warranties of the Purchasers under this Agreement shall be
deemed to have been made again on each Closing Date and shall then be true and
correct in all material respects.
(b) Qualification Under State Securities Laws. All
registrations, qualifications, permits and approvals required under applicable
state securities laws shall have been obtained for the lawful execution,
delivery and performance of this Agreement and the performance of the
Certificate of Designation, including without limitation the offer, sale,
issuance and delivery of the Class D Preferred Shares.
(c) Payment of Purchase Price. The Purchasers
shall have delivered the Class D Purchase Price specified in Section 2.1 of
this Agreement and in the manner specified in Section 2.2 of this Agreement.
(d) Approvals. The Purchasers shall have obtained
any and all consents, waivers, approvals or authorizations, with or by any
Governmental Body or any other Person required for the valid execution of this
Agreement and the transactions contemplated hereby.
13. MISCELLANEOUS.
13.1. Certain Definitions.
"Additional Shares Notice" shall have the meaning set
forth in Section 8.1(a)(i) of this Agreement.
"Affiliate" of any Person means any Person that
directly or indirectly controls, or is under common control with, or is
controlled by, such Person. As used in this definition, "control" (including
with its correlative meanings, "controlled by" and "under common control with")
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of a Person (whether through
ownership of securities or partnership or other ownership interests, by
contract or otherwise).
"Agreement" shall have the meaning set forth in the
recitals of this Agreement.
"Annual Financial Statement" shall have the meaning set
forth in Section 8.10(a) of this Agreement.
"Annual Plan" shall have the meaning set forth in
Section 8.10(c) of this Agreement.
"Benefit Plan" means each plan, program, policy,
payroll practice, contract, agreement or other arrangement providing for
compensation, severance, termination pay,
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performance awards, stock or stock related awards, fringe benefits or other
employee benefits of any kind, whether formal or informal, funded or unfunded,
written or oral and whether or not legally binding, including, without
limitation, each "employee benefit plan," within the meaning of Section 3(3) of
ERISA and each "multi-employer plan" within the meaning of Sections 3(37) or
4001(a)(3) of ERISA.
"Board" shall have the meaning set forth in Section
8.10(a) of this Agreement.
"Capital Stock" shall have the meaning set forth in
Section 4.1(b) of this Agreement.
"Certificate Designation" shall have the meaning set
forth in Section 12.1(i) of this Agreement.
"Changing Event" shall have the meaning set forth in
Section 11.4(e) of this Agreement.
"Class C Preferred Shares" shall have the meaning set
forth in the recital of this Agreement.
"Class C Representatives" shall have the meaning set
forth in Section 9.1(a) of this Agreement.
"Class D Preferred Shares" shall have the meaning set
forth in Section 1.1 of this Agreement.
"Class D Purchase Price" shall have the meaning set
forth in Section 2.1 of this Agreement.
"Class D Representatives" shall have the meaning set
forth in Section 9.1(a) of this Agreement.
"Closing Dates" shall have the meaning set forth in
Section 3 of this Agreement.
"Code" means the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"Common Stock" means the common stock, par value $.005
per share, of the Company.
"Company" shall have the meaning set forth in the
recitals of this Agreement.
"Company Benefit Plan" means each Benefit Plan (other
than an Employee Agreement) which is now or previously has been sponsored,
maintained, contributed to, or required to be contributed to, or with respect
to which any withdrawal liability (within the
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meaning of Section 4201 of ERISA) has been incurred, by the Company or any
ERISA Affiliate for the benefit of any Employee, and pursuant to which the
Company, any Parent, any Subsidiary or any ERISA Affiliate has or may have any
liability, contingent or otherwise.
"Company Offering Quantity" shall have the meaning set
forth in Section 11.2(c) of this Agreement.
"Contract" means any contract, agreement, indenture,
note, bond, loan, instrument, lease, conditional sale contract, mortgage,
license, franchise, insurance policy, commitment or other arrangement or
agreement, whether written or oral.
"Conversion Shares" shall have the meaning set forth in
Section 8.l4 of this Agreement. "Correction Event" shall have the meaning set
forth in Section 11.4(e) of this Agreement.
"Demand Registrations" shall have the meaning set forth
in Section 11.1(a) of this Agreement.
"Employee" means any current, former, or retired
employee, officer, consultant, independent contractor, agent, officer or
director of the Company.
"Employee Agreement" means each management,
employment, severance, consulting, non-compete, confidentiality, or similar
agreement or contract between the Company and any Employee, whether written or
oral, pursuant to which the Company has or may have any liability contingent or
otherwise.
"Environmental Law" means any Law concerning Releases
into any part of the natural environment, or activities that might result in
damage to the natural environment, or any Law that is concerned in whole or in
part with the natural environment and with protecting or improving the quality
of the natural environment and protecting public and employee health and safety
and includes, but is not limited to, the Comprehensive Environmental Response,
Compensation, and Liability Act ("CERCLA") (42 U.S.C. Section 9601 et seq.),
the Hazardous Materials Transportation Act (49 U.S.C. Section 1801 et seq.),
the Resource Conservation and Recovery Act (42 U.S.C. Section 6901 et seq.),
the Clean Water Act (33 U.S.C. Section 1251 et seq.), the Clean Air Act (33
U.S.C. Section 7401 et seq.), the Toxic Substances Control Act (15 U.S.C.
Section 2601 et seq.), the Federal Insecticide, Fungicide, and Rodenticide Act
(7 U.S.C. Section 136 et seq.) and the Occupational Safety and Health Act
("OSHA") (29 U.S.C. Section 651 et seq.), as such laws have been amended or
supplemented, and the regulations promulgated pursuant thereto, and any and all
analogous state or local statutes, and the regulations promulgated pursuant
thereto, and any and all treaties, conventions and environmental public and
employee health and safety statutes and regulations or analogous requirements
of non-United States jurisdictions in which the Company conducts any business.
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"Environmental Permit" means any Permit, variance,
registration, or permission required under any applicable Environmental Laws.
"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended and any regulations promulgated or proposed thereunder.
"ERISA Affiliate" means each business or entity which
is a member of a "controlled group of corporations," under "common control" or
an "affiliated service group" with the Company within the meaning of Sections
414(b), (c) or (m) of the Code, or required to be aggregated with the Company
under Section 414(o) of the Code, or is under "common control" with the
Company, within the meaning of Section 4001(a)(14) of ERISA.
"Executive Stockholder" shall have the meaning set
forth in the recitals of this Agreement.
"Financial Statements" shall have the meaning set
forth in Section 4.6 of this Agreement.
"First Closing" shall have the meaning set forth in
Section 3 of this Agreement.
"First Closing Date" shall have the meaning set forth
in Section 3 of this Agreement.
"First Closing Purchase Price" shall have the meaning
set forth in Section 2.1(a) of this Agreement.
"GAAP" means generally accepted accounting principles,
as in effect in the United States.
"Governmental Body" means any government or
governmental or regulatory body thereof, or political subdivision thereof,
whether federal, state, local or foreign, or any agency, instrumentality or
authority thereof, or any court or arbitrator (public or private).
"Hazardous Materials" means any substance, material or
waste which is regulated by any local, state or federal Governmental Body in
the jurisdiction in which the Company conducts business, or the United States,
including, without limitation, any material or substance which is defined as a
"hazardous waste," "hazardous material," "hazardous substance," "extremely
hazardous waste" or "restricted hazardous waste," "subject waste,"
"contaminant," "toxic waste" or "toxic substance" under any provision of
Environmental Law, including but not limited to, petroleum products, asbestos,
radon and polychlorinated biphenyls.
"HMO" shall have the meaning set forth in Section
4.14(i) of this Agreement.
"IPO Allocation" shall have the meaning set forth in
Section 11.8 of this Agreement.
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"Intellectual Property" shall have the meaning set forth
in Section 4.12 of this Agreement.
"Investor Representatives" shall have the meaning set
forth in Section 9.1(a) of this Agreement.
"Investors" shall have the meaning set forth in the
recitals of this Agreement.
"Investor Sale Notice" shall have the meaning set forth
in Section 8.1(b)(i) of this Agreement.
"Investor Stock" shall have the meaning set forth in
Section 8.1(b)(i) of this Agreement.
"IRS" means the Internal Revenue Service.
"Law" means any federal, state, local or foreign law
(including common law), statute, code, ordinance, rule, regulation or other
requirement or guideline.
"Legal Proceeding" means any judicial, administrative
or arbitral actions, suits, proceedings (public or private), claims or
governmental proceedings.
"Lien" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind, including, without limitation, any
conditional sale or other title retention agreement, any lease in the nature
thereof and the filing of or agreement to give any financing statement under
the Uniform Commercial Code of any jurisdiction and including any lien or
charge arising by statute or other law.
"Long-Form Registration" shall have the meaning set
forth in Section 11.1(a) of this Agreement.
"Losses" shall have the meaning set forth in Section
8.9(a) of this Agreement.
"Material Adverse Change" means any material adverse
change in the business, assets, liabilities, prospects, properties, results of
operations or condition (financial or otherwise) of the Company, in the
aggregate.
"Monthly Balance Sheet" shall have the meaning set forth
in Section 8.10(b) of this Agreement.
"Mostafa Sale Notice" shall have the meaning set forth
in Section 8.1(a)(i) of this Agreement.
"Mostafa Stock" shall have the meaning set forth in
Section 8.1(a)(i) of this Agreement.
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"MSVP III" shall have the meaning set forth in Section
8.15(b) of this Agreement.
"Multi-Employer Plan" means each Company Benefit Plan
which is a "multi-employer plan" within the meaning of Sections 3(37) or
4001(a)(3) of ERISA.
"Offering Memorandum" shall have the meaning set fort in
Section 4.8(a) of this Agreement.
"Offering Quantity" shall have the meaning set forth in
Section 11.1(e) of this Agreement.
"Order" means any order, injunction, judgment, decree,
ruling, writ, assessment or arbitration award.
"Partnership" shall have the meaning set forth in the
recitals of this Agreement.
"Pension Plan" means each Company Benefit Plan (other
than a Multi-Employer Plan) which is an "employee pension benefit plan"
within the meaning of Section 3(2) of ERISA.
"Permits" means any approvals, authorizations, consents,
licenses, permits or certificates by or of any Governmental Body.
"Permitted Transferee" means (a) in the case of the
Executive Stockholder or the Partnership: (i) a Person to whom securities of
the Company are transferred from such Executive Stockholder or the Partnership
(A) by will or the laws of descent and distribution or (B) by gift without
consideration of any kind; provided that such transferee is the issue, adopted
issue, stepchild, parent or spouse of such Executive Stockholder, (ii) a trust
that is for the exclusive benefit of, or a partnership the partners of which
are exclusively, such Executive Stockholder or his or her Permitted Transferees
under (i) above, (iii) a Person to whom securities of the Company are
transferred from such Executive Stockholder or Partnership with the consent of
the Investors holding a majority of the Class C and Class D Preferred Shares,
provided that such transferee must agree in writing to be bound by the terms
and provisions of this Agreement, or (iv) the Company involving a conveyance
under the terms of the Advanced Switching Communications, Inc. Preferred
Stockholders Agreement, dated as of June 23, 1998 and the Advanced Switching
Communications, Inc. Stockholders Agreement, dated as of October 15, 1998,
between the Company and the Executive Stockholder; and (b) in the case of an
Investor, (x) any Affiliate of such Investor and (y) any of such Investor's
partners or other equity owners (or their shareholders, partners or members) or
a liquidating trust or similar entity established for the purpose of holding
assets prior to a distribution to such Investor's partners or other equity
owners.
"Person" means any individual, corporation,
partnership, firm, joint venture, association, joint-stock company, trust,
unincorporated organization, Governmental Body or other entity.
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"Piggyback Registration" shall have the meaning set
forth in Section 11.2(a) of this Agreement.
Prior Investor" shall have the meaning set forth in the
recitals of this Agreement.
"Prior Investor Agreement" shall have the meaning set
forth in the recitals of this Agreement.
"Purchasers" shall have the meaning set forth in the
recitals of this Agreement.
"Qualified Small Business Stock" shall have the meaning
set forth in Section 4.34 of this Agreement.
"Qualifying IPO" means a firm commitment underwritten
initial public offering of shares of Common Stock pursuant to an effective
registration statement under the Securities Act, as then in effect (or any
comparable statement under any similar federal statute then in force or effect),
conducted by a lead book-running manager reasonably acceptable to the holders of
the Class C and Class D Preferred Shares, which raises gross proceeds to the
Company of at least $50.0 million and that implies a market capitalization for
the Company immediately prior to such initial public offering of at least $250
million.
"Qualifying Merger" means a consolidation, merger or
other similar combination for a total purchase price for the equity of the
Company of at least $250 million, paid in the form of cash or marketable
securities that either are freely tradable by the Purchasers or as to which
there is an effective shelf or other registration statement permitting resales
by the Purchasers.
"Real Property Lease" shall have the meaning set forth
in Section 4.10(c) of this Agreement.
The term "register" means to register under the
Securities Act and applicable state securities laws for the purpose of
effecting a public sale of securities.
"Registrable Securities" means (i) any Class D
Preferred Shares, (ii) any Class C Preferred Shares, (iii) any shares of Common
Stock issued or issuable upon conversion of Class D or Class C Preferred
Shares, (iv) any other shares of Common Stock held by any Investor, (v) Class B
Preferred Shares held by the Prior Investor and any shares of Common Stock
issued or issuable upon conversion of such Class B Preferred Shares and (vi)
any shares of Common Stock issued or issuable directly or indirectly with
respect to the securities referred to in clauses (i), (ii), (iii), (iv) or (v)
by way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization. As to
any particular shares constituting Registrable Securities, such shares will
cease to be Registrable Securities when they have been (x) effectively
registered under the Securities Act and disposed of in accordance with a
registration statement covering them or (y) sold to the public pursuant to Rule
144 (or by similar provision under the Securities Act).
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"Registration Expenses" shall have the meaning set forth
in Section 11.5(a) of this Agreement.
"Release" means any release, spill, effluent, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching,
or migration into the indoor or outdoor environment, or into or out of any
property owned, operated or leased by the Company (or any subsidiary),
including the movement of any Hazardous Material or other substance through or
in the air, soil, surface water, groundwater or property.
"Representatives" of a Person means its officers,
Employees, agents, legal advisors and accountants.
"Required Reports" shall have the meaning set forth in
Section 8.14(c) of this Agreement.
"Reserved Shares" shall have the meaning set forth in
Section 8.2 of this Agreement.
"Sale Notice" shall have the meaning set forth in
Section 10.2(a)(i) of this Agreement.
"Second Closing" shall have the meaning set forth in
Section 3 of this Agreement.
"Second Closing Date" shall have the meaning set forth
in Section 3 of this Agreement.
"Second Closing Purchase Price" shall have the meaning
set forth in Section 2.1(a) of this Agreement.
"Securities Act" means the Securities Act of 1933, as
amended.
"SEC" means the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
"Securities Exchange Act" means the Securities Exchange
Act of 1934, as amended.
"Selling Stockholder" shall have the meaning set forth
in Section 8.1(a)(i) of this Agreement.
"Short-Form Registration" shall have the meaning set
forth in Section 11.1(a) of this Agreement.
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"Tag Along Sale" shall have the meaning set forth in
Section 10.2(a) of this Agreement.
"Taxes" means any federal, state, local or foreign
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under
Section 59A of the Code), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real
property, personal property, sales, use, transfer, registration, value added,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not.
"TCV III (Q)" shall have the meaning set forth in
Section 8.15(a) of this Agreement.
"Transaction Documents" shall have the meaning set forth
in Section 4.2 of this Agreement.
"Triggering Event" means the earliest occurrence and
successful closing of either (i) a Qualifying IPO or (ii) a Qualifying Merger.
"Welfare Plan" means each Company Benefit Plan which is
an "employee welfare benefit plan" within the meaning of Section 3(1) of ERISA.
"Year 2000 Problem" shall have the meaning set forth
in Section 4.24 of this Agreement.
13.2. Expenses. Except as set forth in Section 11.1
of this Agreement, each party shall be responsible for all of its expenses
incurred in connection with the transactions contemplated hereby (including,
without limitation, attorneys' and accountants' fees); provided that upon the
successful consummation of the transactions contemplated hereby, the Company
shall, on the First Closing Date, pay the legal fees and expenses of counsel to
the Purchasers (other than the Prior Investor and the Executive Stockholder),
in an aggregate amount not to exceed $35,000.
13.3. Certain Provisions to Supersede Certain the
Prior Investor Agreement Provisions. The Company, the Executive Stockholder,
the Prior Investor and the Partnership hereby agree, and the Purchasers (other
than Prior Investor and the Executive Stockholder) hereby acknowledge, that
Sections 8.1, 8.2, 8.3, 9, , and 11.1 through 11.10 shall replace and supersede
in all respects Sections 8.3, 8.15, 9.1, 10.2, 10.3 and 11.1 through 11.9,
respectively, of the Prior Investor Agreement, and that the remainder of the
Prior Investor Agreement shall remain in full force and effect following the
date of this Agreement.
13.4. Specific Performance. Each of the parties
hereto acknowledges and agrees that the breach of this Agreement would cause
irreparable damage to the other parties hereto and that the other parties
hereto will not have an adequate remedy at law. Therefore, in addition to
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such other remedies as may be available hereunder and under applicable law, the
obligations of each of the parties hereto under this Agreement shall be
enforceable by a decree of specific performance issued by any court of
competent jurisdiction, and appropriate injunctive relief may be applied for
and granted in connection therewith. Such remedies shall, however, be
cumulative and not exclusive and shall be in addition to any other remedies
which any party may have under this Agreement or otherwise.
13.5. Several Liability of the Investors. All
representations, warranties and covenants made or to be performed by the
Investors under this Agreement shall be made or performed on a basis that is
several but not joint.
13.6. Further Assurances. Each of the parties hereto
agrees to execute and deliver such other documents or agreements as may be
necessary or desirable for the implementation of this Agreement and the
consummation of the transactions contemplated hereby.
13.7. Submission to Jurisdiction; Consent to Service
of Process.
(a) The parties hereto hereby irrevocably submit to
the non-exclusive jurisdiction of any federal or state court located within the
County of Fairfax, Commonwealth of Virginia over any dispute arising out of or
relating to this Agreement or any of the transactions contemplated hereby and
each party hereby irrevocably agrees that all claims in respect of such dispute
or any suit, action or proceeding related thereto may be heard and determined
in such courts. The parties hereby irrevocably waive, to the fullest extent
permitted by applicable law, any objection which they may now or hereafter have
to the laying of venue of any such dispute brought in such court or any defense
of inconvenient forum for the maintenance of such dispute. Each of the parties
hereto agrees that a judgment in any such dispute may be enforced in other
jurisdictions by suit on the judgment or in any other manner provided by law.
(b) Each of the parties hereto hereby consents to
process being served by any party to this Agreement in any suit, action or
proceeding by the mailing of a copy thereof in accordance with the provisions
of Section 13.11 of this Agreement.
13.8. Entire Agreement; Amendments and Waivers. This
Agreement (including the schedules and exhibits hereto) represents the entire
understanding and agreement among the parties hereto with respect to the
subject matter of this Agreement and can be amended, supplemented or changed,
and any provision of this Agreement can be waived, only by written instrument
making specific reference to this Agreement signed by the parties hereto. No
action taken pursuant to this Agreement, including without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representation,
warranty, covenant or agreement contained herein. The waiver by any party
hereto of a breach of any provision of this Agreement shall not operate or be
construed as a further or continuing waiver of such breach or as a waiver of
any other or subsequent breach. No failure on the part of any party to
exercise, and no delay in exercising, any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
such right, power or remedy by such party preclude any other or further
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57
exercise thereof or the exercise of any other right, power or remedy. All
remedies hereunder are cumulative and are not exclusive of any other remedies
provided by law.
13.9. Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware without
giving effect to the principles of conflict of laws thereunder which would
specify the application of the law of another jurisdiction.
13.10. Table of Contents; Headings; Interpretive
Matters. The table of contents and section headings of this Agreement are for
reference purposes only and are to be given no effect in the construction or
interpretation of this Agreement. No provision of this Agreement will be
interpreted in favor of, or against, any of the parties hereto by reason of the
extent to which any such party or its counsel participated in the drafting
thereof or by reason of the extent to which any such provision is inconsistent
with any prior draft of this Agreement or thereof
13.11. Notices. All notices and other communications
under this Agreement shall be in writing and shall be deemed given when
delivered personally, telecopied or mailed by certified mail, return receipt
requested, to the parties at the following addresses (or to such other address
as a party may have specified by notice given to the other party pursuant to
this provision):
If to the Company, to:
Advanced Switching Communications, Inc.
0000 Xxxxx Xxxxxxxxx
0xx Xxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxxx
Facsimile: (000) 000-0000
With a copy (which shall by itself not constitute notice) to:
Stauffer, Mannix, Rommel, Xxxxxx & Xxxxxx, L.L.C.
0000 Xxxxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
If to the Executive Stockholder or the Partnership, to:
Xxxxxx Xxxxxxx
0000 Xxxxx Xxxxxxxxx
0xx Xxxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxxx
Facsimile: (000) 000-0000
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58
With a copy (which shall by itself not constitute notice) to:
Stauffer, Mannix, Rommel, Xxxxxx & Xxxxxx, L.L.C.
0000 Xxxxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
If to the Prior Investor, to:
BakerCommunications Fund, L.P.
c/x Xxxxx Capital Partners, LLC
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxx
Facsimile: (000) 000-0000
With a copy (which shall by itself not constitute notice) to:
Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.
0000 Xxx Xxxxxxxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxx X. Xxxxxxxxxx, Esq.
Facsimile: (000) 000-0000
If to an Investor (other than the Prior Investor), to the address set
forth on the signature page hereto applicable to such Investor, with such
copies to be delivered as may be specified thereon (which copies shall alone
not constitute notice).
With a copy (which shall by itself not constitute notice) to:
Piper & Marbury L.L.P.
0000 Xxxxxxxxxx Xxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
All notices are effective upon receipt or upon refusal if
properly delivered.
13.12. Severability. If any provision of this Agreement is
invalid or unenforceable, the balance of this Agreement shall remain in effect.
13.13. Binding Effect; Assignment. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns. Nothing in this Agreement shall create or be
deemed to create any third-party beneficiary rights in any
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59
person or entity not a party to this Agreement except as provided below. Upon
any assignment, the references in this Agreement to a Purchaser shall also
apply to any such assignee unless the context otherwise requires.
13.14. Counterparts. This Agreement may be executed
simultaneously 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.
13.15 Aggregation of Shares. All Class C and Class D
Preferred Shares 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.
[The remainder of this page intentionally left blank.]
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60
EXECUTION COPY
PURCHASERS
NEW ENTERPRISE ASSOCIATES VIII,
LIMITED PARTNERSHIP
By: NEA Partners VIII, Limited Partnership
By: /s/ XXXXX XXXXXX
------------------------------------------
Name: Xxxxx Xxxxxx
Title: General Partner
NEA PRESIDENTS' FUND, L.P.
By: NEA General Partners, L.P.
By: /s/ XXXXX XXXXXX
------------------------------------------
Name: Xxxxx Xxxxxx
Title: General Partner
NEA VENTURES 1999, L.P.
By: /s/ XXXXX XXXXXX
------------------------------------------
Name: Xxxxx Xxxxxx
Title: Vice President
New Enterprise Associates
00000 Xxxxxxx Xxxxx
Xxx Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxxxx Xxxxx
Phone: (000) 000-0000
Fax" (000) 000-0000
61
EXECUTION COPY
TCV III (GP)
a Delaware General Partnership
By: Technology Crossover Management III,
L.L.C.,
Its: General Partner
By: /s/ XXXXXX X. XXXXXX
-------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
TCV III, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management III,
L.L.C.,
Its: General Partner
By: /s/ XXXXXX X. XXXXXX
-------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
TCV III (Q), L.P.
a Delaware Limited Partnership
By: Technology Crossover Management III,
L.L.C.,
Its: General Partner
By: /s/ XXXXXX X. XXXXXX
------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
62
EXECUTION COPY
TCV III STRATEGIC PARTNERS, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management III,
L.L.C.,
Its: General Partner
By: /s/ XXXXXX X. XXXXXX
-------------------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
Technology Crossover Ventures
00 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
Technology Crossover Ventures
000 Xxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
XXXXX COMMUNICATIONS FUND, L.P.,
as the Purchaser
By: /s/ XXXXXX XXXXX
-------------------------------------------
Name: Xxxxxx Xxxxx
Title: Managing Director
MOSTAFA INVESTMENTS LIMITED PARTNERSHIP
as the Purchaser
By: /s/ XXXXXX XXXXXXX
-------------------------------------------
Name: Xxxxxx Xxxxxxx
63
EXECUTION COPY
IN WITNESS WHEREOF, the parties hereto have executed, or have caused
this Agreement to be executed, by their respective officers thereunto duly
authorized, as of the date first written above.
ADVANCED SWITCHING
COMMUNICATIONS, INC
as the Company
By: /s/ XXXXXX XXXXXXX
---------------------------------------
Name: Xxxxxx Xxxxxxx
Title: Chief Executive Officer
MOSTAFA INVESTMENTS LIMITED
PARTNERSHIP
As the Partnership
By: /s/ XXXXXX XXXXXXX
---------------------------------------
Name: Xxxxxx Xxxxxxx
Title:
XXXXX COMMUNICATIONS FUND, L.P.
as the Prior Investor
By: /s/ XXXXXX XXXXX
---------------------------------------
Name: Xxxxxx Xxxxx
Title: Managing Director
/s/ XXXXXX XXXXXXX
-------------------------------------------
XXXXXX XXXXXXX
as the Executive Stockholder
64
EXECUTION COPY
TCV III STRATEGIC PARTNERS, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management III,
L.L.C.,
Its: General Partner
By: /s/ XXXXXX X. XXXXXX
-----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
Technology Crossover Ventures
00 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
Technology Crossover Ventures
000 Xxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
XXXXX COMMUNICATIONS FUND, L.P.,
as the Purchaser
By:
-----------------------------------
Name: Xxxxxx Xxxxx
Title: Managing Director
MOSTAFA INVESTMENTS LIMITED
PARTNERSHIP
as the Purchaser
By:
-----------------------------------
Name: Xxxxxx Xxxxxxx
65
EXECUTION COPY
TCV III STRATEGIC PARTNERS, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management III,
L.L.C.,
Its: General Partner
By:
-----------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chief Financial Officer
Technology Crossover Ventures
00 Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
Technology Crossover Ventures
000 Xxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
Phone: (000) 000-0000
Fax: (000) 000-0000
XXXXX COMMUNICATIONS FUND, L.P.,
as the Purchaser
By: /s/ XXXXXX XXXXX
-----------------------------------
Name: Xxxxxx Xxxxx
Title: Managing Director
MOSTAFA INVESTMENTS LIMITED
PARTNERSHIP
as the Purchaser
By:
-----------------------------------
Name: Xxxxxx Xxxxxxx
66
EXECUTION COPY
XXXXXX XXXXXXX VENTURE PARTNERS
III, L.P.,
By: Xxxxxx Xxxxxxx Venture Partners III,
L.L.C
Its: General Partner
By: Xxxxxx Xxxxxxx Venture Capital III,
Inc.
Its: Institutional Managing Member
By: /s/ XXXXXXX XXXXXXX
-----------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Vice President
XXXXXX XXXXXXX VENTURE INVESTORS
III, L.P.,
By: Xxxxxx Xxxxxxx Venture Partners III,
L.L.C.
Its: General Partner
By: Xxxxxx Xxxxxxx Venture Capital III,
Inc.
Its: Institutional Managing Member
By: /s/ XXXXXXX XXXXXXX
-----------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Vice President
67
EXECUTION COPY
THE XXXXXX XXXXXXX VENTURE
PARTNERS ENTREPRENEUR FUND, L.P.
By: Xxxxxx Xxxxxxx Venture Partners III,
L.L.C
Its: General Partner
By: Xxxxxx Xxxxxxx Venture Capital III,
Inc.
Its: Institutional Managing Member
By: /s/ XXXXXXX XXXXXXX
-----------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Vice President
Xxxxxx Xxxxxxx Venture Partners
0000 Xxxxxx xx xxx Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxxxx
Phone: (000)000-0000
Fax: (000)000-0000
68
ADVANCED SWITCHING COMMUNICATIONS, INC.
SECURITIES PURCHASE AND STOCKHOLDER AGREEMENT
COUNTERPART SIGNATURE PAGE
Advanced Switching Communications, Inc. and MCI WorldCom Venture Fund each do
hereby cause this Counterpart Signature Page to be executed, acknowledged and
delivered by the undersigned authorized person in its name and on its behalf in
order to accept and agree to be bound by all the terms and provisions of the
Securities Purchase and Stockholder Agreement, dated as of September 10, 1999 to
which this Counterpart Signature Page is attached.
WITNESS: ADVANCED SWITCHING COMMUNICATIONS, INC
[sig] By: /s/ XXXXXX XXXXXXX
------------------------ ----------------------------------
Name: Xxxxxx Xxxxxxx
Title: Chief Executive Officer
WITNESS: MCI WORLDCOM VENTURE FUND, INC.
By:
------------------------ ----------------------------------
Name: Xxxxx Xxxxx
Title: President
- 1 -
69
ADVANCED SWITCHING COMMUNICATIONS, INC.
SECURITIES PURCHASE AND STOCKHOLDER AGREEMENT
COUNTERPART SIGNATURE PAGE
Advanced Switching Communications, Inc. and MCI WorldCom Venture Fund, Inc. each
do hereby cause this Counterpart Signature Page to be executed, acknowledged and
delivered by the undersigned authorized person in its name and on its behalf in
order to accept and agree to be bound by all the terms and provisions of the
Securities Purchase and Stockholder Agreement, dated as of September 10, 1999 to
which this Counterpart Signature Page is attached.
WITNESS: ADVANCED SWITCHING COMMUNICATIONS, INC
By:
------------------------ ----------------------------------
Dated: October 7, 1999 Name: Xxxxxx Xxxxxxx
Title: Chief Executive Officer
WITNESS: MCI WORLDCOM VENTURE FUND, INC.
By: /s/ XXXXX XXXXX
------------------------ ----------------------------------
Dated: October 7, 1999 Name: Xxxxx Xxxxx
Title: President
