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EXHIBIT 10.6
CIENA CORPORATION
PREFERRED STOCK PURCHASE AGREEMENT
DATED AS OF DECEMBER 20, 1995
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TABLE OF CONTENTS
1. Purchase and Sale................................................2
2. Closing of Purchase and Sale.....................................2
2.1 Closing; Closing Date......................................2
2.2 Transactions at Closing....................................2
3. Representations and Warranties of the Company....................2
3.1 Organization, Standing and Qualification...................2
3.2 Capitalization.............................................2
3.3 Validity of Stock..........................................4
3.4 Subsidiaries...............................................4
3.5 Financial Statements.......................................4
3.6 Authorization; Approvals.................................. 6
3.7 No Conflict with Other Instruments........................ 6
3.8 Labor Agreements and Actions.............................. 6
3.9 Title to Properties; Liens and Encumbrances............... 7
3.10 Compliance with Other Instruments......................... 7
3.11 Patents, Trademarks and Other Intangible
Assets.................................................... 8
3.12 Taxes.....................................................10
3.13 Contracts.................................................10
3.14 Litigation................................................11
3.15 Private Offering..........................................11
3.16 Full Disclosure...........................................11
3.17 Fees and Commissions......................................12
3.18 Interested Party Transactions.............................12
3.19 ERISA.....................................................12
3.20 Section 83(b) Elections...................................13
3.21 Company Transactions......................................13
3.22 Permits...................................................13
3.23 Insurance.................................................13
3.24 Certain Tax-Related Provisions............................14
3.25 Environmental Matters.....................................14
4. Representations, Warranties and Covenants of the
Purchasers......................................................15
4.1 Authorization.............................................15
4.2 Investment Representations................................16
4.3 Investment Experience; Access to Information............. 16
4.4 Absence of Registration...................................16
4.5 Restrictions on Transfer..................................17
4.6 Transfer Instructions.....................................17
4.7 Economic Risk.............................................17
4.8 Fees and Commissions......................................17
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5. Conditions to Closing of the Purchasers.........................18
5.1 Representations and Warranties............................18
5.2 Performance...............................................18
5.3 Consents, etc.............................................18
5.4 Compliance Certificates...................................18
5.5 Proceedings and Documents.................................18
5.6 Co-Sale Agreement.........................................18
5.7 Composition of Board of Directors.........................19
5.8 Opinion of Counsel........................................19
6. Conditions to Closing of Company................................19
7. Affirmative Covenants...........................................19
7.1 Inspection; Business Reports; Annual
Operating Plan............................................19
7.2 Accounting................................................20
7.3 Monthly and Annual Financial Statements...................20
7.4 Projections; Budgets; Reports.............................21
7.5 Use of Proceeds...........................................22
7.6 Public Information........................................22
7.7 Insurance.................................................22
7.8 Employee Stock Options....................................22
7.9 Confidentiality...........................................23
7.10 Right of First Refusal....................................24
7.11 Maintenance of Existence and Properties, etc..............27
7.12 Termination of Covenants..................................27
8. Registration....................................................27
8.1 Definitions...............................................27
8.2 Required Registration.....................................29
8.3 Registration Procedures...................................30
8.4 Limitations on Required Registrations.....................31
8.5 Incidental Registration...................................33
8.6 Limitations on Incidental Registration....................34
8.7 Designation of Underwriter................................35
8.8 Form S-3..................................................35
8.9 Cooperation by Prospective Sellers........................36
8.10 Expenses of Registration..................................37
8.11 Indemnification...........................................38
8.12 Rights That May Be Granted to Subsequent
Investors.................................................41
8.13 Transfer of Registration Rights.......................... 42
8.14 "Stand-Off" Agreement.....................................42
8.15 Delay of Registration.....................................42
9. Negative Covenants..............................................42
10. Board of Directors..............................................44
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11. Expenses........................................................46
12. Survival of Agreements..........................................46
13. Notices.........................................................46
14. Modifications; Waiver...........................................48
15. Exculpation Among Purchasers....................................49
16. Entire Agreement................................................49
17. Successors and Assigns..........................................50
18. Enforcement.....................................................51
19. Prior Agreements............................................... 51
20. Execution and Counterparts..................................... 52
21. Governing Law and Severability................................. 52
22. Headings....................................................... 52
Schedules
3.1 - Organization, Standing and Qualification
3.2 - Security Holders of the Company
3.4 - Joint Venture, Partnership, or Similar Arrangement
3.5 - Exceptions of the Financial Statements and List of
Liabilities
3.7 - Conflicts with Other Instruments
3.8 - List of Officers and Employees
3.9 - Real and Personal property of the Company
3.10 - Non-Compliance
3.11 - Patents, Trademarks and Other Intangible Assets of
the Company
3.12 - Taxes
3.13 - Contracts
3.14 - Litigation
3.17 - Fees and Commissions
3.23 - Insurance
3.25 - Environmental Matters
Exhibits
A - Form of Third Restated Certificate of
Incorporation
B - Form of Proprietary Information, Inventions and
Non-Solicitation Agreement
C - Form of Amended and Restated Co-Sale Agreement
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D - Form of Opinion of Xxxx, Weiss, Rifkind, Xxxxxxx &
Xxxxxxxx
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PREFERRED STOCK PURCHASE AGREEMENT
AGREEMENT, dated as of December 20, 1995, among (a) CIENA Corporation, a
Delaware corporation (the "Company"), with an office at 0000 Xxxxxxxx Xxxx,
Xxxxxx, Xxxxxxxx 00000, (b) the parties identified as Purchasers on Schedule 1
hereto (individually, a "Purchaser" and collectively, the "Purchasers"), (c)
solely for the purposes of Sections 7 through 10, 13, and 17 through 22, the
parties identified as prior investors on Schedule 2.1 hereto (the "Series A
Investors"), (d) solely for the purposes of Sections 7 through 10, 13, and 17
through 22, the parties identified as prior investors on Schedule 2.2 hereto
(the "Series B Investors," together with the Series A Investors, "Prior
Investors" and, together with the Series A Investors and the Purchasers, the
"Investors"), and (e) solely for the purposes of Sections 8, 10, and 17 through
22 hereof, Xxxxx Xxxxx and Xxxxxxx Xxxxxxx (collectively, the "Key Employees").
W I T N E S S E T H :
WHEREAS, the Purchasers desire to purchase shares of Convertible Preferred
Stock, Series C, par value $.01 per share (the "Series C Preferred"), of the
Company, having the rights, preferences, privileges and restrictions set forth
in the Company's Third Restated Certificate of Incorporation in the form
attached hereto as Exhibit A (the "Third Restated Certificate") and incorporated
herein by reference, and the Company desires to sell to the Purchasers shares of
Series C Preferred;
WHEREAS, the Series A Investors are parties to a Preferred Stock Purchase
Agreement, dated as of April 9, 1994, as amended by Amendment No. 1 thereto,
dated as of July 28, 1994 (as so amended, the "Series A Agreement"), among the
Company, the Series A Investors and, as to certain provisions therein, the Key
Employees;
WHEREAS, the Series B Investors are parties to a Preferred Stock Purchase
Agreement, dated as of December 22, 1994, as amended by Amendment No. 1 thereto,
dated as of January 31, 1995, and by Amendment Xx. 0 xxxxxxx, xxxxx xx xx Xxxx
00, 0000 (xx amended, the "Series B Agreement" and, together with the Series A
Agreement, the "Prior Agreements"),
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among the Company, the Prior Investors and, as to certain provisions therein,
the Key Employees;
WHEREAS, the Prior Investors who are parties to this Agreement and the Key
Employees desire to amend the Prior Agreements in the manner set forth in this
Agreement;
NOW, THEREFORE, the parties agree as follows:
1. PURCHASE AND SALE. Subject to the provisions of this Agreement, on the
Closing Date (as hereinafter defined) the Company will sell to the Purchasers,
and the Purchasers will purchase from the Company, an aggregate of up to
3,750,000 shares of Series C Preferred (the "Shares"), each Purchaser to
purchase the number of Shares set forth in the first column opposite such
Purchaser's name on Schedule 1 annexed hereto, at a purchase price of $7.00 per
share on the Closing Date as is specified on Schedule 1.
2. CLOSING OF PURCHASE AND SALE.
2.1 CLOSING; CLOSING DATE. The purchase and sale of the Shares
pursuant to Section 1 shall take place at a closing (the "Closing") at the
offices of Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx, 0000 X Xxxxxx, X.X.,
Xxxxx 0000, Xxxxxxxxxx, X.X. 00000, or at such other place as may be
agreed upon by the Company and the Purchasers, at 11:00 a.m. Eastern
Standard Time on December 21, 1995, or at such other time as may be agreed
upon by the Company and the Purchasers (the "Closing Date").
2.2 TRANSACTIONS AT CLOSING. At the Closing, the Company shall
deliver to each Purchaser one or more certificates representing the Shares
being purchased hereunder at the Closing, against delivery by the
Purchaser of a wire transfer of immediately available funds or a certified
check in the amount of the purchase price therefor.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants that:
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3.1 ORGANIZATION, STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware and has full corporate power and
authority to own, lease and operate its property and assets and to conduct
its business as proposed to be conducted by it. The Company has all
requisite corporate power and authority to enter into and perform its
obligations under this Agreement and to carry out the transactions
contemplated by this Agreement. Except as set forth in Schedule 3.1, the
Company is duly qualified to do business as a foreign corporation and is
in good standing in each jurisdiction in which the nature of its business
and its ownership or leasing of property require that the Company become
so qualified.
3.2 CAPITALIZATION. The authorized capital stock of the Company, as
of the Closing Date, will consist of (a) 16,250,000 shares of preferred
stock, of which (i) 3,750,000 shares are designated Series C Preferred,
none of which are issued or outstanding as of the date of this Agreement;
(ii) 8,000,000 shares are designated Series B Preferred (the "Series B
Preferred"), 7,354,092 of which are issued and outstanding as of the date
of this Agreement and 300,000 of which are reserved for issuance upon
exercise of outstanding warrants; (iii) 4,500,000 shares are designated
Series A Preferred (the "Series A Preferred"; together with Series B
Preferred and Series C Preferred, the "Preferred Shares"), 3,542,520 of
which are issued and outstanding as of the date of this Agreement, and
170,000 of which are reserved for issuance upon exercise of outstanding
warrants; and (b) 22,500,000 shares of Common Stock, of which (i)
2,437,083 shares are issued and outstanding as of the date of this
Agreement; (ii) up to 3,750,000 shares are reserved for issuance upon
conversion of the Series C Preferred; (iii) up to 8,000,000 shares are
reserved for issuance upon conversion of the Series B Preferred; (iv) up
to 4,500,000 shares are reserved for
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issuance upon conversion of the Series A Preferred; (v) up to 470,000
shares are reserved for issuance upon exercise of outstanding warrants to
purchase Series B Preferred or Series A Preferred; (vi) 125,636 shares are
reserved for issuance upon exercise of an option granted by the Company to
GI Corporation; (vii) 2,051,250 shares are reserved for issuance pursuant
to employee stock purchase and/or option ownership plans that have been or
will be adopted by the Company for key employees; and (viii) 6,667 shares
are reserved for issuance upon exercise of an outstanding warrant for
Common Stock held by Xxx Xxxxxx (all of which in clauses (i) through
(viii) are referred to collectively as the "Reserved Shares"). The list
set forth in Schedule 3.2 hereto is a complete and correct list of all
security holders of the Company, showing their holdings of issued and
outstanding Company securities (including options) as of the date of this
Agreement. The outstanding shares of Common Stock, Series A Preferred and
Series B Preferred are duly authorized and validly issued in accordance
with applicable law (including federal and state securities laws), and are
fully paid and non-assessable. Except as set forth in this Agreement and
the Prior Agreements, holders of shares of the Company's capital stock
have no preemptive rights. Except for the transactions contemplated by
this Agreement and the Prior Agreements and as set forth on Schedule 3.2
hereto, there are (a) no outstanding warrants, options, convertible
securities or rights to subscribe for or purchase any capital stock or
other securities from the Company, (b) no voting trusts or voting
agreements among, or irrevocable proxies executed by, stockholders of the
Company, (c) no existing rights of stockholders to require the Company to
register any securities of the Company or to participate with the Company
in any registration by the Company of its securities, (d) no agreements
among stockholders providing for the purchase or sale of the Company's
capital stock and (e) no obligations (contingent or otherwise) of the
Company to purchase, redeem or otherwise acquire any shares of its capital
stock or any interest therein or to pay any dividend or make any other
distribution in respect thereof.
3.3 VALIDITY OF STOCK. The Series C Preferred, when issued, sold,
and delivered in accordance with the terms of this Agreement, will be duly
and validly issued, fully paid and non-assessable. The shares of Common
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Stock issuable upon conversion of the Series C Preferred have been duly
authorized and reserved for issuance by all necessary corporate action and
when issued and delivered in accordance with the terms of the Third
Restated Certificate, will be duly and validly issued, fully paid and
non-assessable.
3.4 SUBSIDIARIES. The Company does not own or control, directly or
indirectly, any other corporation, partnership, association or business
entity. Except as set forth in Schedule 3.4, the Company is not a
participant in any joint venture, partnership, or similar arrangement.
3.5 FINANCIAL STATEMENTS. Schedule 3.5 contains the Company's: (i)
unaudited balance sheet as of November 30, 1995 (the "Balance Sheet"),
(ii) unaudited statements of income (loss) for the eleven-month period
then ended (the "Statements of Income"), and (iii) audited financial
statements as of and for the year ended December 31, 1994 (the "Audited
Financial Statements") (all of which in (i), (ii) and (iii) are
collectively referred to as the "Financial Statements"). Except as
described in Schedule 3.5, the Financial Statements are true and correct
in all material respects, are in accordance with the books and records of
the Company and have been prepared in accordance with generally accepted
accounting principles ("GAAP") consistently applied, and fairly and
accurately present in all material respects the financial position of the
Company as of such dates and the results of its operations for the periods
then ended, provided that the Financial Statements may not contain all
footnotes required by GAAP and the Balance Sheet and Statements of Income
are subject to normal year-end audit adjustments. Except as described in
Schedule 3.5, the Company has no liabilities, debts or obligations,
whether accrued, absolute or contingent totalling in each case in excess
of $15,000. Since November 30, 1995, except as contemplated by this
Agreement or as set forth on Schedule 3.5, the Company has been operated
in the ordinary and usual course of business, and there has not been:
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(i) any change in the (x) assets, liabilities, condition (financial
or otherwise) or business of the Company from that reflected in the
Balance Sheet, other than those incurred in the ordinary and usual course
of business, or (y) trend of operating results of the Company from that
reflected in the Statements of Income;
(ii) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties,
condition (financial or otherwise), operating results, prospects or
business of the Company (as such business is presently conducted and as it
is proposed to be conducted) as set forth in the Ciena Corporation
1996-1998 Business Plan dated October 16, 1995 (the "Operating Plan");
(iii) any waiver by the Company of a valuable right or of a material
debt owed to it;
(iv) any satisfaction or discharge of any lien, claim or encumbrance
or payment of any obligation by the Company, except in the ordinary course
of business and that is not individually or in the aggregate adverse to
the assets, properties, condition (financial or otherwise), operating
results or business of the Company (as such business is presently
conducted and as it is proposed to be conducted);
(v) any change or amendment to a material contract or arrangement by
which the Company or any of its assets or properties is bound or subject;
(vi) any material change in any compensation arrangement or
agreement with any employee;
(vii) any loans made by the Company to its employees, officers, or
directors other than travel advances made in the ordinary course of
business;
(viii) any sale, transfer or lease of, except in the ordinary course
of business, or mortgage or pledge or imposition of lien on, any of the
Company's assets; or
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(ix) to the Company's knowledge, any other event or condition of any
character that would materially adversely affect the assets, properties,
condition (financial or otherwise), operating results, prospects or
business of the Company (as such business is presently conducted and as it
is proposed to be conducted).
3.6 AUTHORIZATION; APPROVALS. All corporate action on the part of
the Company necessary for the authorization, execution, delivery, and
performance of all its obligations under this Agreement and for the
authorization, issuance, and delivery of the Series C Preferred being sold
under this Agreement and of the Common Stock issuable upon conversion of
the Preferred Shares has been (or will be) taken prior to the Closing
Date. This Agreement, when executed and delivered by or on behalf of the
Company, shall constitute the valid and legally binding obligation of the
Company, legally enforceable against the Company in accordance with its
terms. The Company has obtained or will obtain prior to the Closing Date
all necessary consents, authorizations, approvals and orders, and has made
all registrations, qualifications, designations, declarations or filings
with all federal, state, or other relevant governmental authorities
required on the part of the Company in connection with the consummation of
the transactions contemplated by this Agreement, except for those federal
and/or state securities law filings that are required under applicable law
to be filed after the Closing.
3.7 NO CONFLICT WITH OTHER INSTRUMENTS. The execution, delivery and
performance of the Agreement and the conduct of the Company's business as
described in the Operating Plan will not result in any violation of, be in
conflict with, or constitute a default under any terms or provision of (i)
the Third Restated Certificate or By-laws; (ii) any judgment, decree or
order to which the Company is a party; (iii) any agreement, contract,
understanding, indenture or other instrument to which the Company is a
party, the effect of which would give rise to a material adverse effect on
the Company; or (iv) any statute, rule or governmental regulation
applicable to the Company. The Company waives any right under the
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Third Restated Certificate to treat any transaction contemplated by this
Agreement as an Additional Automatic Conversion Event.
3.8 LABOR AGREEMENTS AND ACTIONS. The Company is not bound by or
subject to (and none of its assets or properties is bound by or subject
to) any written or oral, express or implied, contract, commitment or
arrangement with any labor union, and no labor union has requested or, to
the best knowledge of the Company, has sought to represent any of the
employees, representatives or agents of the Company. There is no strike or
other
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labor dispute involving the Company pending, or to the best knowledge
of the Company threatened, which could have a material adverse effect on
the assets, properties, condition (financial or otherwise), operating
results, prospects or business of the Company (as such business is
presently conducted and as it is proposed to be conducted), nor is the
Company aware of any labor organization activity involving its employees.
The Company is not aware that any officer or key employee, or that any
group of key employees, intends to terminate such person's employment
with the Company, nor does the Company have a present intention to
terminate the employment of any of the foregoing persons. The employment
of each officer and employee of the Company is terminable at the will of
the Company. Schedule 3.8 hereto sets forth the name of and annual rate
of compensation (including salary, bonuses and other compensation)
payable for the current year to each (i) officer and (ii) employee who is
paid an annual salary greater than $100,000.
3.9 TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES. Set forth on
Schedule 3.9 hereto is a list of all of the real property, capital assets
and intellectual property owned, leased or licensed to or by the Company,
excluding items with an original cost (or in the case of intellectual
property a fair market value) of less than $1,000. In the case of leased
or licensed property, complete and correct copies of all leases and
licenses have been furnished to counsel to the Purchasers. Except as set
forth on Schedule 3.9 and Schedule 3.11 hereto, (i) the Company has good
and marketable title to all of the properties and assets, both real and
personal, tangible and intangible, that it purports to own, including the
properties and assets reflected on the Balance Sheet, and they are not
subject to any mortgage, pledge, lien, security interest, conditional sale
agreement, encumbrance or charge except routine statutory liens securing
liabilities not yet due and payable and minor liens, encumbrances,
restrictions, exceptions, reservations, limitations and other
imperfections which do not materially detract from the value of the
specific asset affected or the present use of such asset; and (ii)
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the Company is not in default or in breach of any material provision of
its leases or licenses and holds a valid leasehold or licensed interest in
the property it leases or that is licensed to it.
3.10 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
default (a) under its Third Restated Certificate or its By-laws or, in any
material respect, under any material note, indenture, mortgage, lease,
agreement, contract, purchase order or other instrument, document or
agreement to which the Company is a party or by which it or any of its
property is bound or affected or (b) with respect to any order, writ,
injunction or decree of any court or any federal, state, municipal or
other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which default, in any such case,
would materially and adversely affect or in the future is reasonably
likely to materially and adversely affect the Company's business,
prospects, condition (financial or otherwise), affairs, operations or
assets. To the best of the Company's knowledge, no third party is in
material default under any material agreement, contract or other
instrument, document or agreement to which the Company is a party or by
which it or any of its property is affected.
3.11 PATENTS, TRADEMARKS AND OTHER INTANGIBLE ASSETS. (a) Schedule
3.11 hereto is a true and complete list and summary description of all
patents, patent applications, trademarks, service marks, trade names and
copyrights, and licenses and rights to the foregoing presently owned or
held by the Company, none of which is in dispute or in any conflict with
the right of any other person or entity except as indicated on Schedule
3.11. Except as set forth in Schedule 3.11, the Company to the best of its
knowledge (i) owns or has the right to use, free and clear of all liens,
claims and restrictions, all patents, trademarks, service marks, trade
names and copyrights, and licenses and rights with respect to the
foregoing, used and sufficient for use in the conduct of its business as
now conducted and proposed to be conducted as described in the Operating
Plan without infringing upon or otherwise acting adversely to the
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right or claimed right of any person, corporation or other entity under or
with respect to any of the foregoing and (ii) is not obligated or under
any liability whatsoever to make any payments by way of royalties, fees or
otherwise to any owner or licensee of, or other claimant to, any patent,
trademark, service xxxx, trade name, copyright or other intangible asset,
with respect to the use thereof or in connection with the conduct of its
business or otherwise.
(b) Except as set forth on Schedule 3.11, the Company owns and/or
has the unrestricted right to use all trade secrets, including know-how,
inventions, designs, processes, works of authorship, computer programs
(with the exception of normal software purchased and sold as such) and
technical data and information (collectively herein "intellectual
property") required for or incident to the development, manufacture,
operation and sale of all products and services sold or proposed to be
sold by the Company, to the best of its knowledge free and clear of and
without violating any right, lien, or claim of others, including without
limitation, former employees and former employers of its past and present
employees.
(c) The Company has taken security measures to protect the secrecy,
confidentiality and value of all the Company's intellectual property,
which measures are reasonable and customary in the industry in which it
intends to operate. Each of the Company's employees and other persons who,
either alone or in concert with others, developed, invented, discovered,
derived, programmed or designed the Company's intellectual property, or
who has knowledge of or access to information about the Company's
intellectual property, has entered into a written agreement with the
Company in the form of Exhibit B hereto, (i) providing that the
intellectual property and other information are proprietary to the Company
and are not to be divulged or misused and (ii) transferring to the
Company, without any further consideration being given therefor by the
Company, all of such employee's or other person's right, title and
interest in and to such intellectual property and other information and to
all patents, trademarks,
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service marks, trade names, copyrights, licenses and rights with respect
to such intellectual property and information.
(d) The Company has not received any communications alleging that
the Company has violated or by conducting its business as proposed, would
violate any of the patents, trademarks, service marks, trade names,
copyrights or trade secrets or other proprietary rights of any other
person or entity. The Company is not aware that any of its employees is
obligated under any contract (including licenses, covenants or commitments
of any nature) or other agreement, or subject to any judgment, decree or
order of any court or administrative agency, that would interfere with the
use of his best efforts to promote the interests of the Company or that
would conflict with the Company's business as proposed to be conducted.
Neither the execution nor delivery of this Agreement, nor the carrying on
of the Company's business by the employees of the Company, nor the conduct
of the Company's business as proposed, will, to the Company's knowledge,
conflict with or result in a breach of the terms, conditions or provisions
of, or constitute a default under, any contract, covenant or instrument
under which any of such employees is now obligated. The Company does not
believe it is or will be necessary to utilize any inventions of any of its
employees (or people it currently intends to hire) made prior to their
employment by the Company other than those that have been assigned to, or
licensed by the Company, as described in Schedule 3.11.
3.12 TAXES. The Company has accurately prepared and timely filed all
federal income and payroll tax returns and filings and all state and
municipal tax returns that are required to be filed by it (the "Tax
Returns") and has paid or made provision for the payment of all amounts
due pursuant to such returns. The Tax Returns are true and complete in all
material respects. None of the Tax Returns have been audited by the
Internal Revenue Service or any state taxing authority, as the case may
be, the Company has not been advised that any of such Tax Returns will be
so audited, and there are no waivers in effect of
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the applicable statute of limitations for any period. No deficiency
assessment or proposed adjustment of federal income taxes or state or
municipal taxes of the Company is pending and the Company has no knowledge
of any proposed liability for any tax to be imposed. The Company has not
elected pursuant to the Internal Revenue Code of 1986, as amended (the
"Code"), to be treated as an S corporation or a collapsible corporation
pursuant to Section 1362(a) or Section 341(f) of the Code, nor has it made
any other elections pursuant to the Code (other than elections that
related solely to methods of accounting, depreciation or amortization)
that would have a material effect on the Company, its financial condition,
its business as presently conducted or proposed to be conducted or any of
its properties or material assets.
3.13 CONTRACTS. Schedule 3.13 contains a true and complete list of
all contracts and agreements to which the Company is a party or by which
its property is bound. Except as set forth on Schedule 3.13 hereto, the
Company has no employment or consulting contracts, deferred compensation
agreements or bonus, incentive, profit-sharing, or pension plans currently
in force and effect, or any understanding with respect to any of the
foregoing. Schedule 3.13 hereto also lists all employment, non-competition
and confidentiality agreements (i) between the Company and any employee or
consultant of the Company or any other entity and (ii) to the Company's
best knowledge between any employee of the Company and any former employer
or person for whom such employee or consultant performed consulting or
other services. All of the contracts listed on Schedule 3.13 and on other
Schedules hereto are in full force and effect, and the Company, or to the
best of the Company's knowledge any other party, is not in default under
any of them, nor does any event or condition exist which after notice or
lapse of time or both would constitute a material default thereunder. The
Company has delivered to the Purchasers true, correct and complete copies
of each contract and agreement listed on Schedule 3.13.
3.14 LITIGATION. No action, proceeding or governmental inquiry or
investigation is pending or to
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the best knowledge of the Company threatened against the Company or any of
its officers, directors or employees (in their capacity as such) or any of
the Company's properties before any court, arbitration board or tribunal
or administrative or other governmental agency, nor is the Company aware
that there is any basis for the foregoing. The foregoing includes, without
limiting its generality, actions pending or known to the Company to be
threatened involving the prior employment of any of the Company's
employees or use by any of them in connection with the Company's business
of any information, property or techniques allegedly proprietary to any of
their former employers. The Company is not a party to or subject to the
provisions of any order, writ, injunction, judgment or decree of any court
or governmental agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or that the
Company intends to initiate.
3.15 PRIVATE OFFERING. The Company agrees that neither the Company
nor anyone acting on its behalf has offered or will offer any securities
of the Company or any part thereof or any similar securities for issuance
or sale to, or solicit any offer to acquire any of the same from, anyone
so as to make the issuance and sale of the Series C Preferred not exempt
from the registration requirements of Section 5 of the Securities Act of
1933, as amended (the "Securities Act"). None of the shares of the
Company's capital stock issued and outstanding has been offered or sold in
such a manner as to make the issuance and sale of such shares not exempt
from such registration requirements, and all such shares of capital stock
have been offered and sold in compliance with all applicable federal and
state securities laws.
3.16 FULL DISCLOSURE. Neither this Agreement nor any certificates
made or delivered in connection herewith contains any untrue statement of
a material fact or omits to state a material fact necessary to make the
statements herein or therein not misleading, in view of the circumstances
in which they were made, provided, however, that the Company makes no
representation or warranty with respect to any projections, other than
that any such
20
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projections were prepared in good faith and that the Company reasonably
believes there is a reasonable basis for such projections. There is no
material fact known to the Company relating to the business, prospects,
condition (financial or otherwise), affairs, operations, or assets of the
Company that has not been disclosed to the Purchasers in writing by the
Company.
3.17 FEES AND COMMISSIONS. The Company has not retained, or
otherwise authorized to act, any finder, broker, agent, financial advisor
or other intermediary (collectively "Intermediary") in connection with the
transactions contemplated by this Agreement and the Company shall
indemnify and hold harmless the Purchasers from liability for any
compensation to any Intermediary retained or otherwise authorized to act
by, or on behalf of, the Company, and the fees and expenses of defending
against such liability or alleged liability.
3.18 INTERESTED PARTY TRANSACTIONS. No officer, director or
stockholder of the Company or any "affiliate" or "associate" (as these
terms are defined in Rule 405 promulgated under the Securities Act) of any
such person or entity or the Company has or has had, either directly or
indirectly, (a) an interest in any person or entity which (i) furnishes or
sells services or products which are furnished or sold or are proposed to
be furnished or sold by the Company, or (ii) purchases from or sells or
furnishes to the Company any goods or services, or (b) except as set forth
on Schedule 3.13, a beneficial interest in any contract or agreement to
which the Company is a party or by which it may be bound or affected.
Except as set forth on Schedule 3.13 hereto, there are no existing
material arrangements or proposed material transactions between the
Company and any officer, director, or holder of more than 5% of the
capital stock of the Company, or any affiliate or associate of any such
person.
3.19 ERISA. Except as set forth in Schedule 3.19, the Company does
not maintain, sponsor, or contribute to any program or arrangement that is
an "employee pension benefit plan," an "employee welfare benefit plan," or
a
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"multiemployer plan", as those terms are defined in Sections 3(2), 3(1),
and 3(37) of the Employee Retirement Income Security Act of 1974, as
amended. Except as listed in Schedule 3.13, the Company does not maintain
or contribute to any material incentive or benefit arrangements for its
employees. All incentive or benefit arrangements listed in Schedule 3.13
are, and have heretofore been, operated in compliance, in all material
respects, with the terms of such arrangements and with the requirements
prescribed by any and all applicable laws.
3.20 SECTION 83(b) ELECTIONS. Except as set forth in Schedule 3.20,
to the best of the Company's knowledge, all elections and notices
permitted by Section 83(b) of the Code, and any analogous provisions of
applicable state tax laws have been timely filed by all individuals who
have purchased shares of the Company's Common Stock other than pursuant to
any stock option plans of the Company. The Company makes no representation
or warranty regarding the content or accuracy of any such election or
notice.
3.21 COMPANY TRANSACTIONS. The Company has not engaged in the past
eleven (11) months in any discussion (i) with any representative of any
corporation or corporations regarding the merger of the Company with or
into any such corporation or corporations, (ii) with any corporation,
partnership, association or other business entity or any individual
regarding the sale, conveyance or disposition of all or substantially all
of the assets of the Company or a transaction or series of related
transactions in which more than fifty percent (50%) of the voting power of
the Company is disposed of, or (iii) regarding any other form of
liquidation, dissolution or winding up of the Company.
3.22 PERMITS. The Company has all franchises, permits, licenses, and
any similar authority necessary for the conduct of its business as now
being conducted by it, the lack of which could materially and adversely
affect the business, properties, prospects, or financial condition of the
Company, and the Company believes it can
22
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obtain, without undue burden or expense, any similar authority for the
conduct of its business as planned to be conducted. The Company is not in
default in any material respect under any of such franchises, permits,
licenses, or other similar authority.
3.23 INSURANCE.(i) The Company has in full force and effect life
insurance upon the lives of the Key Employees in a minimum amount of
$1,000,000 each, with the proceeds payable to the Company, (ii) the
Company has in full force and effect fire and casualty insurance policies,
with extended coverage, sufficient in amount (subject to reasonable
deductibles) to allow it to replace any of its properties that might be
damaged or destroyed, (iii) the Company has in full force and effect
liability and umbrella liability insurance policies sufficient in amount
(subject to reasonable deductibles) to cover all reasonably foreseeable
liability claims that may be made against the Company and the expenses
thereof, (iv) no claims under any of such policies of insurance are
23
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pending or have been denied, and (v) no notices of cancellation regarding
any of such policies have been received by the Company.
3.24 CERTAIN TAX-RELATED PROVISIONS. The Company has not made any
purchase of its capital stock within the one (1) year period preceding the
Closing Date and the Company covenants and agrees with the Purchasers that
the Company will not within the one (1) year period following the Closing
Date make any purchase of its capital stock that would result in the
shares of Series C Preferred issued and sold pursuant to this Agreement
not being treated as "qualified business stock" within the meaning of
Subpart B, Section 13113 of the 1993 Tax Reform Act, without the prior
written approval of the holders of at least fifty percent (50%) of the
Series C Preferred. The Company agrees to submit such reports to the
Commissioner of Internal Revenue and to the Purchasers as the Commissioner
may require to carry out the purposes of such provisions.
3.25 ENVIRONMENTAL MATTERS. Except as set forth in Schedule 3.25:
(a) Neither the Company, nor, to the knowledge of the Company
without investigation other than as set forth on Schedule 3.25, any
operator of its past or present properties is in material violation, or
alleged material violation, of any judgment, decree, order, law, license,
rule or regulation pertaining to environmental matters, including without
limitation the Resource Conservation and Recovery Act, as amended, the
Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended ("CERCLA"), and the Superfund Amendments and
Reauthorization Act of 1986, as amended (hereinafter "Environmental
Laws").
(b) The Company has not received notice from any third party
including without limitation any governmental authority, (i) that the
Company or any predecessor in interest has been identified by the
Environmental Protection Agency ("EPA") as a potentially responsible party
under CERCLA with respect to a site
24
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listed on the National Priorities List, 40 C.F.R. Part 000 Xxxxxxxx X
(1986); (ii) that a material quantity of hazardous materials or substances
regulated by any Environmental Laws ("Hazardous Substances") which either
the Company or any predecessor in interest has generated, transported or
disposed of have been found at any site at which a remedial investigation,
removal or other response action pursuant to any Environmental Law has
been ordered or conducted; or (iii) that the Company is or shall be a
named party to any claim, action or administrative proceeding arising out
of any third party's incurrence of costs or damages in connection with the
release of Hazardous Substances.
(c) No portion of the property owned, leased or controlled by
the Company has been used by the Company or, to the knowledge of the
Company without investigation other than as set forth on Schedule 3.25, by
any past or present owners or operators of its properties for the
handling, manufacturing, processing, storage or disposal of Hazardous
Substances in a manner that would materially violate applicable
Environmental Laws. In the course of any activities conducted by the
Company or, to the knowledge of the Company without investigation other
than as set forth on Schedule 3.25, by any past or present owners or
operators of its properties, no Hazardous Substances have been generated
or are being used on such properties in a manner that would materially
violate applicable Environmental Laws. There have been no releases or
threatened releases of Hazardous Substances by the Company or, to the
knowledge of the Company without investigation other than as set forth on
Schedule 3.25, by any past or present owners or operators of its
properties on, upon, into or from such properties of the Company, which
releases would have a material adverse effect on the value of such
properties, any adjacent properties or the environment. Any Hazardous
Substances that have been generated by the Company or, to the knowledge of
the Company without investigation other than as set forth on Schedule
3.25, by any past or present owners or operators of its properties on such
properties of the Company, have been transported offsite only by carriers
having an identification number issued by the
25
-20-
EPA and treated or disposed of only by treatment or disposal facilities
maintaining valid permits as required under applicable Environmental Laws,
which transporters and facilities have been and are, to the best of the
Company's knowledge, operating in compliance with such permits and
applicable Environmental Laws.
4. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASERS. Each
Purchaser, severally and not jointly, represents and warrants that:
4.1 AUTHORIZATION. It has full power and authority to enter into and
to perform this Agreement in accordance with its terms. This Agreement has
been duly executed and delivered by it and constitutes its valid and
legally binding obligation.
4.2 INVESTMENT REPRESENTATIONS. It is acquiring the Shares for its
own account, for investment purposes and not with a view to, or for sale
in connection with, any distribution of such Shares or any part thereof.
4.3 INVESTMENT EXPERIENCE; ACCESS TO INFORMATION. It (a) is an
"accredited investor" as that term is defined in Rule 501(a) promulgated
under the Securities Act, (b) is an investor experienced in the evaluation
of businesses similar to the Company, (c) is able to fend for itself in
the transactions contemplated by this Agreement, (d) has such knowledge
and experience in financial, business and investment matters as to be
capable of evaluating the merits and risks of this investment, (e) has the
ability to bear the economic risks of this investment, (f) was not
organized or reorganized for the specific purpose of acquiring the Shares
purchased by it, and (g) has been afforded prior to the Closing Date the
opportunity to ask questions of, and to receive answers from, the Company
and to obtain any additional information, to the extent the Company has
such information or could have acquired it without unreasonable effort or
expense, all as necessary for the Purchaser to make an informed investment
decision with respect to the purchase of the Shares. The foregoing,
however, does not limit or modify the representations and
26
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warranties of the Company in Section 3 of this Agreement or the right of
such Purchaser to rely thereon.
4.4 ABSENCE OF REGISTRATION. It understands that:
(a) The Shares to be sold and issued hereunder (and the Common Stock
to which such shares may be converted) are unregistered and may be
required to be held indefinitely unless they are subsequently registered
under the Securities Act, or an exemption from such registration is
available.
(b) Except as provided in Section 8, the Company is under no
obligation to file a registration statement with the Securities and
Exchange Commission (the "Commission") with respect to the Shares (or the
Common Stock to which such shares may be converted).
(c) Rule 144 promulgated under the Securities Act ("Rule 144"),
which provides for certain limited sales of unregistered securities, is
not presently available with respect to the Shares (or the Common Stock to
which such shares may be converted), and the Company is under no
obligation to make Rule 144 available except as otherwise provided in
Section 7.6.
4.5 RESTRICTIONS ON TRANSFER. (a) It will not offer, sell, pledge,
hypothecate, or otherwise dispose of the Shares (or the Common Stock to
which such shares may be converted) unless such offer, sale, pledge,
hypothecation or other disposition is (i) registered under the Securities
Act, or (ii) in compliance with an opinion of counsel to the Purchaser,
delivered to the Company and reasonably acceptable to the Company, to the
effect that such offer, sale, pledge, hypothecation or other disposition
thereof does not violate the Securities Act, and (b) the certificate(s)
representing the Shares (and any Common Stock to which such shares may be
converted) shall bear a legend stating in substance:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE
27
-22-
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED
UNDER SAID ACT OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION DOES NOT VIOLATE THE PROVISIONS
THEREOF.
Upon request of a holder of Series C Preferred, the Company shall
remove the legend set forth above from the certificates evidencing such
Shares, or issue to such holder new certificates therefor free of such
legend, if with such request the Company shall have received an opinion of
counsel selected by the holder and reasonably satisfactory to the Company,
in form and substance reasonably satisfactory to the Company, to the
effect that such Shares are not required by the Securities Act to continue
to bear the legend.
4.6 TRANSFER INSTRUCTIONS. It agrees that the Company may provide
for appropriate transfer instructions to implement the provisions of
Section 4.5 hereof.
4.7 ECONOMIC RISK. It understands that it must bear the economic
risk of the investment represented by the purchase of Shares for an
indefinite period.
4.8 FEES AND COMMISSIONS. It represents and warrants that it has not
retained, or otherwise authorized to act, any Intermediary in connection
with the transactions contemplated by this Agreement and agrees to
indemnify and hold harmless the Company from liability for any
compensation to any Intermediary retained or otherwise authorized to act
by, or on behalf of, the Purchaser and the fees and expenses of defending
against such liability or alleged liability.
5. CONDITIONS TO CLOSING OF THE PURCHASERS. The obligation of each
Purchaser on the Closing Date to purchase the Shares to be purchased under this
Agreement on the Closing Date by it shall be subject to each of the following
conditions precedent, any one or more of which may be waived by Purchasers
purchasing at least 66-2/3% of the Shares to be purchased at the Closing:
28
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5.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Company herein shall be true and accurate on and as
of the Closing Date as if made on such Date, except to the extent that
such representations and warranties are made as of a specified date, in
which case such representations and warranties shall be true in all
material respects as of the specified date.
5.2 PERFORMANCE. The Company shall have performed and complied with
all agreements and conditions contained herein or in other ancillary
documents incident to the transactions contemplated by this Agreement
required to be performed or complied with by it prior to or at the Closing
Date.
5.3 CONSENTS, ETC. The Company shall have secured all permits,
consents and authorizations that shall be necessary or required lawfully
prior to the Closing to consummate this Agreement and to issue the Shares
to be purchased by each Purchaser at the Closing, and the Third Restated
Certificate shall have been duly filed with the Secretary of State of the
State of Delaware.
5.4 COMPLIANCE CERTIFICATES. The Company shall have delivered to the
Purchasers or their representative at the Closing an Officer's Certificate
to the effect that all conditions specified in Sections 5.1 through 5.3
have been fulfilled.
5.5 PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings
in connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to the Purchasers and their
counsel, and the Purchasers and their counsel shall have received all such
counterpart originals or certified or other copies of such documents as
the Purchasers or their counsel may reasonably request.
5.6 CO-SALE AGREEMENT. Each of the Key Employees, the Prior
Investors and the Company shall have entered
29
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into a Co-Sale Agreement with the Purchasers, substantially in the form
annexed hereto as Exhibit C.
5.7 COMPOSITION OF BOARD OF DIRECTORS. The Board of Directors shall
consist of seven members, initially including: Xxxxx Cash, Xxx X. Xxxxxxx,
Xxxxxxx Xxxxxxx, Xxxxx Xxxxx, Xxxxxxxx Xxxxxxxxx, and Xxxxxxx X. Xxx. The
seventh Board seat shall be filled in accordance with Section 10(a) of
this Agreement.
5.8 OPINION OF COUNSEL. The Company shall have delivered to the
Purchasers the opinion of Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx,
counsel to the Company, in the form annexed hereto as Exhibit D.
6. CONDITIONS TO CLOSING OF COMPANY. The obligation of the Company on the
Closing Date to issue and sell the Shares to be purchased under this Agreement
on the Closing Date shall be subject to the representations and warranties made
by the Purchasers herein being true and accurate on and as of the Closing Date
as if made on such Date, except to the extent that such representations and
warranties are made as of a specified date, in which case such representations
and warranties shall be true in all material respects as of the specified date.
7. AFFIRMATIVE COVENANTS.
7.1 INSPECTION; BUSINESS REPORTS; ANNUAL OPERATING PLAN. The Company
covenants and agrees that, for so long as an Investor (together with its
affiliates) holds at least (a) 100,000 shares of Series C Preferred and/or
Common Stock issued upon conversion of Series C Preferred, or (b) 750,000
of the Preferred Shares and/or Common Stock issued upon conversion of
Preferred Shares, other than shares of Common Stock issued upon an
Additional Automatic Conversion Event (as defined in Article Fifth,
Section (d)(ii)(B) of the Third Restated Certificate) (the "Investor
Shares"), as adjusted for stock splits, stock dividends,
recapitalizations, reclassifications and similar events (together herein
called "Recapitalization Events"):
30
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(a) the Company will permit any authorized representatives of any
such Investor free and full access at normal business hours and upon
advance notification to all of the books, records, personnel and
properties of the Company, for any purpose whatsoever, subject to Section
7.9 hereof;
(b) the Company shall provide to all such Investors by December 31,
1995, and by December 31 of each fiscal year thereafter, an operating
plan, setting forth the operational and strategic plans of the Company for
the coming fiscal year; and
(c) any such Investor shall be entitled to have one designee attend
(but not to vote at) meetings of the Board of Directors (and business
discussions immediately prior to such meetings) as an observer, provided
that such designee shall not be entitled to be present at those portions
of any such meetings in which the Board of Directors will be discussing
issues that are competitive with the business of the Investor, such
determination to be made in the Board's good faith business judgment.
7.2 ACCOUNTING. The Company will maintain and cause each of its
Subsidiaries (other than inactive Subsidiaries) to maintain a system of
accounting established and administered in accordance with GAAP
consistently applied, and will set aside on its books and cause each of
its operating Subsidiaries to set aside on its books all such proper
reserves as shall be required by GAAP. For purposes of this Agreement,
"Subsidiary" means any corporation or entity at least a majority of whose
voting securities are at the time owned by the Company, or by one or more
Subsidiaries, or by the Company and one or more Subsidiaries.
7.3 MONTHLY AND ANNUAL FINANCIAL STATEMENTS. The Company will deliver to
each Investor holding at least (i) 100,000 shares of Series C Preferred and/or
Common Stock issued upon conversion of Series C Preferred, or (ii) 750,000
Investor Shares:
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(a) within 30 business days after the end of each calendar month, an
unaudited consolidated balance sheet of the Company and its Subsidiaries
as at the end of each such month and unaudited consolidated statements of
(i) income and (ii) cash flow of the Company and its Subsidiaries for each
such month and for the period from the beginning of the current fiscal
year to the end of such month. Such financial statements shall be in
reasonable detail and certified by the chief financial officer of the
Company that such financial statements were prepared in accordance with
GAAP (subject to (x) there being no footnotes contained therein and (y)
changes resulting from year-end audit adjustments), applied on a basis
consistent (except as otherwise disclosed therein and consented to by a
majority of the Board of Directors) with that of preceding periods, and
except as otherwise stated therein, shall present fairly the financial
position of the Company as of their date; and
(b) within 90 days after the end of each fiscal year of the Company,
a consolidated balance sheet of the Company and its Subsidiaries as of the
end of such year and statements of income and statements of cash flow of
the Company and its Subsidiaries for such year, setting forth in each case
in comparative form the figures for the previous fiscal year, all in
reasonable detail and accompanied by the opinion thereon of a firm of
independent public accountants of nationally recognized standing, which
opinion shall state that such balance sheet and statements of income and
cash flow have been prepared in accordance with GAAP applied on a basis
consistent with that of the preceding fiscal year (except as otherwise
approved by the Board of Directors), and present fairly and accurately the
financial position of the Company as of their date, and that the audit by
such accountants in connection with such financial statements has been
made in accordance with GAAP.
7.4 PROJECTIONS; BUDGETS; REPORTS. The Company will deliver, upon
request, to each Investor (together with its affiliates) that holds at
least 100,000 shares
32
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of Series C Preferred and/or 750,000 Investor Shares, as adjusted for
Recapitalization Events:
(a) within the first 45 days after the beginning of each fiscal
year, projections of the statements referred to in paragraph (a) of
Section 7.3 of this Agreement for each month in such year;
(b) within the first 30 days after the beginning of each fiscal
quarter, revised projections of the statements referred to in paragraph
(a) of Section 7.3 of this Agreement.
(c) at least 30 days prior to the beginning of each fiscal year, a
budget for such fiscal year, substantially in the form of the prior budget
delivered to the Investors, setting forth in detail reasonably acceptable
to the Investors the Company's budget for such fiscal year; provided,
however, that the Company will deliver the budget for 1996 by January 30,
1996;
(d) promptly upon the filing thereof, reports and statements filed
by the Company or any of its Subsidiaries with the Commission (or any
governmental authority succeeding to any of its functions) or with any
securities exchange; and
(e) with reasonable promptness, such other information and data with
respect to the Company or any of its Subsidiaries as from time to time may
be reasonably requested.
7.5 USE OF PROCEEDS. The Company shall use the proceeds from the
sale of the Shares in order to fund operating losses and working capital
requirements.
7.6 PUBLIC INFORMATION. At any time and from time to time after the
earlier of the close of business on such date as (a) a registration
statement filed by the Company under the Securities Act becomes effective,
(b) the Company registers a class of securities under Section 12 of the
Securities Exchange Act of 1934, as amended, or any federal statute or
code which is a successor thereto
33
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(the "Exchange Act"), or (c) the Company issues an offering circular
meeting the requirements of Regulation A under the Securities Act, the
Company shall undertake to make publicly available and available to the
Holders (as hereinafter defined in Section 8), pursuant to Rule 144, such
information as is necessary to enable the Holders to make sales of
Registrable Stock (as hereinafter defined in Section 8) pursuant to that
Rule. The Company shall comply with the current public information
requirements of Rule 144 and shall furnish thereafter to any Holder, upon
request, a written statement executed by the Company as to the steps it
has taken to so comply.
7.7 INSURANCE. The Company will maintain life insurance upon the
lives of the Key Employees in a minimum amount of $1,000,000 each, with
the proceeds payable to the Company, unless the Board of Directors
determines that such insurance is no longer required to protect the
interests of the Company. The Company also shall obtain and keep in effect
so long as the Board of Directors deems advisable, term life insurance on
the lives of such other employees as, and in the principal amounts as, the
Board of Directors shall determine, in each case with proceeds payable to
the Company. The Company will keep and maintain in full force and effect
fire, casualty and umbrella liability insurance policies, with extended
coverage, reasonably sufficient in amount to allow it to replace any of
its properties that might be damaged or destroyed or pay reasonably
foreseeable liabilities to which it may be subject.
7.8 EMPLOYEE STOCK OPTIONS. From and after the date of this
Agreement, except as specifically approved by the Company's Board of
Directors, all shares of Common Stock and all options granted by the
Company to employees, consultants, officers and non-investor directors for
shares of Common Stock (a) shall, until an IPO (as defined in Section
7.12), be subject to a right of first refusal in favor of the Company, (b)
shall vest over a four-year period as follows: (i) 1/4 at the end of the
twelfth calendar month following the commencement of such person's
employment or other retention, and (ii)
34
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1/48 at the end of each month for the next 36 months of such employment or
other retention, and shall be subject to the right of the Company to
repurchase any non-vested stock at the price paid by the employee prior to
full vesting; provided that upon a sale of the Company (whether pursuant
to a stock or asset transaction) or a merger of the Company with and into
another company (unless the Company is the surviving corporation), all
non-vested shares shall immediately become vested and (c) shall be subject
to a restriction against transfer of non-vested stock, other than to a
family trust. The rights of the Company in (a) and (b) hereof are
assignable by the Company, subject to the approval of a majority of the
Board of Directors, except that any assignment pursuant to Section 7.10(e)
hereof shall not require Board approval.
7.9 CONFIDENTIALITY. Any information provided pursuant to Sections
7.1, 7.3 and 7.4 shall be used by each Investor solely in furtherance of
its interests as an investor in the Company, and each Investor shall
(except as otherwise required by law) maintain the confidentiality of all
confidential information of the Company obtained under said sections,
provided that (a) the Company makes an appropriate designation of any such
confidential information, and (b) any other term of this Agreement to the
contrary notwithstanding, the Company shall not be obligated to disclose
any information under such Sections, the disclosure of which it believes
in good faith would be detrimental to the business of the Company, except
that nothing in this clause (b) will limit in any way the obligation of
the Company and its officers to fully disclose the business affairs of the
Company to the members of the Board of Directors that have entered into
confidentiality agreements for the benefit of the Company. The term
"confidential information" shall not include such information that (i) is
or becomes generally available to the public other than as a result of a
disclosure by an Investor or its agents, representatives or employees
in violation of its obligations hereunder; (ii) is or becomes available
to an Investor on a non-confidential basis from a source (other than the
Company or one of its directors, officers,
35
-30-
agents, representatives or employees) that is not prohibited from
disclosing such information by a legal, contractual or fiduciary
obligation; or (iii) was known to an Investor on a non-confidential basis
prior to its disclosure to such Investor by the Company.
In the event that an Investor, or anyone to whom an Investor
transmits any confidential information, becomes legally compelled to
disclose any confidential information, such person will provide the
Company with prompt notice so that it may seek a protective order or other
appropriate remedy and/or waive compliance with the provisions of this
Section 7.9. In the event that such protective order or other remedy is
not obtained, or the Company waives compliance with the provisions of this
Section 7.9, the Investor will furnish only that portion of the
confidential information that it is advised by counsel is legally required
and will exercise its reasonable efforts to obtain reliable assurance that
confidential treatment will be accorded the confidential information.
7.10 RIGHT OF FIRST REFUSAL. The Company hereby grants to each
Investor the right of first refusal to purchase, pro-rata, all (or any
part) of (x) New Securities (as defined in Section 7.10(a) below) that the
Company may, from time to time, propose to sell and issue and (y) Employee
Stock (as defined in Section 7.10(d) below) that the Company is entitled
to, but shall not, repurchase from an employee. The Investor's pro rata
share shall be the ratio of the number of Preferred Shares then held by
the Investor as of the date of the Rights Notice (as defined in Section
7.10(b)) or the Repurchase Notice (as defined in Section 7.10(e)), as the
case may be, to the sum of the total number of Preferred Shares then held
by all Investors (including for this purpose permitted transferees of the
Investor pursuant to Section 7.10(f) hereof) as of such date. This right
of first refusal shall be subject to the following provisions:
(a) "New Securities" shall mean any Common Stock or preferred shares
of any kind of the Company, whether now
36
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or hereafter authorized, and rights, options, or warrants to purchase said
Common Stock or preferred shares, and securities of any type whatsoever
that are, or may become, convertible into said Common Stock or preferred
shares; provided, however, that "New Securities" shall not include (i)
securities issuable with respect to the Preferred Shares issued on or
prior to the date hereof and shares of Series C Preferred issued
hereunder; (ii) securities issuable upon exercise of warrants, options and
rights issued prior to the date hereof and Common Stock issuable upon
conversion of any securities issued under this clause (ii); (iii)
securities offered to the public pursuant to a registration statement
filed under the Securities Act; (iv) securities issued in connection with
the acquisition of another corporation, business entity or line of
business of another business entity by the Company by merger,
consolidation, purchase of all or substantially all of the assets, or
other reorganization as a result of which the Company owns not less than
fifty-one percent (51%) of the voting power of such corporation; (v)
shares of the Company's Common Stock or preferred shares issued in
connection with any Recapitalization Event by the Company; (vi) securities
authorized by the Company's Board of Directors to be issued in connection
with the leasing or acquisition of assets by the Company or supply
arrangements for the Company; (vii) options, warrants or rights issued
pursuant to employee stock purchase and/or stock ownership plans that have
been or will be adopted by the Company for Key Employees; (viii)
securities reserved, not to exceed 2,110,000 shares of Common Stock, under
employee stock option or purchase plans, or securities to be issued to
consultants of the Company or in connection with an acquisition or the
formation of a joint venture, in each case as approved by the Board of
Directors; or (ix) securities issued pursuant to Section 18 hereof.
(b) If the Company proposes to issue New Securities, it shall give
the Investors written notice (the "Rights Notice") of its intention,
describing the New Securities, the price, the general terms upon which the
Company proposes to issue them, and the number of shares that the Investor
has the right to purchase under
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this Section 7.10. Each Investor (including for this purpose any permitted
transferee of an Investor under Section 7.10(f) hereof) shall have
twenty-five (25) days from delivery of the Rights Notice to agree to
purchase (i) all or any part of its pro-rata share of such New Securities
and (ii) all or any part of the pro-rata share of any other Investor to
the extent that such other Investor does not elect to purchase its full
pro-rata share, in each case for the price and upon the general terms
specified in the Rights Notice, by giving written notice to the Company
setting forth the quantity of New Securities to be purchased. If the
Investors who elect to purchase their full pro-rata shares also elect to
purchase in the aggregate more than 100% of the New Securities, such New
Securities shall be sold to such Investors in accordance with their
respective pro-rata shares.
(c) If the Investors fail to exercise in full the right of first
refusal within the period or periods specified in Section 7.10(b), the
Company shall have one hundred twenty (120) days after delivery of the
Rights Notice to sell the unsold New Securities at a price and upon
general terms no more favorable to the purchasers thereof than specified
in the Company's notice. If the Company has not sold the New Securities
within said one hundred twenty (120) day period the Company shall not
thereafter issue or sell any New Securities without first offering such
securities to the Investors in the manner provided above.
(d) "Employee Stock" shall mean any Common Stock of the Company,
whether now or hereafter authorized, that the Company has issued or sold
to an employee pursuant to an employee stock purchase, option or benefit
plan, agreement or other offering or arrangement, including, without
limitation, all shares sold by the Company to employees of the Company
subject to agreements of restriction by the Company and all Reserved
Shares described in Section 3.2(b).
(e) If the Company has the right to repurchase any Employee Stock
from any employee for any reason,
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including, without limiting the generality of the foregoing, the
termination of such employee's employment, and if it shall not repurchase
all of the shares of such Employee Stock, it shall promptly give each
Investor written notice (the "Repurchase Notice") of the Investor's right
to repurchase, describing the Employee Stock, the price, the general terms
upon which such Employee Stock is available for repurchase, and the number
of shares that the Investor has the right to purchase under this Section
7.10. Each Investor shall have fifteen (15) days from delivery of any such
notice in accordance with Section 13 to agree to purchase (i) all or any
part of its pro-rata share of such Employee Stock and (ii) all or any part
of the pro-rata share of any other Investor (including, for this purpose,
any assignee of an Investor's rights of first refusal under Section
7.10(f) hereof) to the extent that such other Investor does not elect to
purchase his full pro-rata share, in each case for the price and upon the
general terms specified in the notice by giving written notice to the
Company setting forth the quantity of Employee Stock to be purchased. If
the Investors who elect to purchase their full pro-rata shares also elect
to purchase in the aggregate more than 100% of the Employee Stock, such
Employee Stock shall be sold to such Investors in accordance with their
respective pro-rata shares.
(f) The rights of first refusal described in this Section 7.10 are
nonassignable except to an affiliate of each Investor or any of such
Investor's beneficial owners, including without limitation partners of a
general or limited partnership, shareholders of a corporation, and
beneficiaries of a trust (a "Beneficial Owner"). Each Investor shall be
entitled to apportion the rights of first refusal hereby granted among
itself and its affiliates and Beneficial Owners in such proportions as it
deems appropriate.
7.11 MAINTENANCE OF EXISTENCE AND PROPERTIES, ETC.. The Company
will, and will cause each of its Subsidiaries to (a) maintain its
corporate existence, rights, governmental approvals and franchises
necessary to the conduct of its business, (b) keep its properties in good
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repair, working order and condition, reasonable wear and tear excepted,
(c) give appropriate notice of events of default pursuant to any
agreements of the Company, (d) enter into transactions with "affiliates"
or "associates" (as those terms are defined in Rule 405 promulgated under
the Securities Act) only on fair and reasonable terms and (e) promptly pay
and discharge, or cause to be paid and discharged, when due and payable,
all lawful taxes, assessments and governmental charges or levies imposed
upon the income, profits, property or business of the Company or any
Subsidiary; provided, however, that any such tax, assessment, charge or
levy need not be paid if the validity thereof shall at the time be
contested in good faith by appropriate proceedings and provided further
that, unless otherwise approved by the Board of Directors, the Company
will pay all such taxes, assessments, charges or levies forthwith upon the
commencement of proceedings to foreclose any lien which may have attached
as security therefor.
7.12 TERMINATION OF COVENANTS. The covenants set forth in Sections
7.1 through 7.4, 7.10 and 7.11 shall terminate and be of no further force
or effect on the consummation of the first firm commitment underwritten
public offering of securities of the Company pursuant to a registration
statement filed by the Company under the Securities Act (an "IPO") or with
respect to shares of Common Stock held by an Investor that have been
issued upon conversion of Preferred Shares pursuant to an Additional
Automatic Conversion Event (as defined in Article Fifth, Section
(d)(ii)(B) of the Third Restated Certificate).
8. REGISTRATION. The following provisions govern the registration of
Common Stock:
8.1 DEFINITIONS. As used herein, the following terms have the
following meanings:
Forms X-0, X-0 and S-3: The forms so designated, promulgated by the
Commission for registration of securities under the Securities Act,
and any forms
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succeeding to the functions of such forms, whether or not bearing
the same designation.
Holder: A holder of Registrable Stock (subject to Section 8.13
hereof), provided that anyone who acquires any Registrable Stock in
a distribution pursuant to a registration statement filed by the
Company under the Securities Act shall not thereby be deemed to be a
"Holder".
Key Employees: The Key Employees and certain employees of the
Company designated by a majority of the Board of Directors from time
to time as "Key Employees"; provided that in no event shall a person
be considered a Key Employee if such person is no longer employed by
the Company.
"Register", "registered" and "registration" refer to a registration
effected by filing a registration statement in compliance with the
Securities Act and the declaration or ordering by the Commission of
effectiveness of such registration statement.
Registrable Stock: All shares of Common Stock issued or issuable
upon conversion of the Preferred Shares (other than shares converted
pursuant to an Additional Automatic Conversion Event) or held by a
person to whom registration rights have been transferred pursuant to
the provisions of this Section 8, all shares of Common Stock issued
by the Company in respect of such shares and all shares of Common
Stock that the Investors may hereafter purchase pursuant to their
rights of first refusal or otherwise, or Common Stock issued on
conversion or exercise of securities so purchased.
Required Demand Amount: 51% of the Registrable Stock then
outstanding, in the case of the first registration effected pursuant
to Section 8.2, and 25% of the Registrable Stock then outstanding,
in the case of the second registration effected pursuant to Section
8.2.
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Subject Stock: All Registrable Stock held by the Investors or by a
person to whom registration rights have been transferred pursuant to
this Section 8, and the shares of Common Stock held by the Key
Employees. Subject Stock shall not include shares acquired in a
distribution pursuant to a registration statement filed by the
Company under the Securities Act.
8.2 REQUIRED REGISTRATION. (a) If (i) the holder or holders of an
aggregate of at least the Required Demand Amount propose to dispose of at
least 20% of the then outstanding Registrable Stock (such holder or
holders being herein called the "Initiating Holders"), and (ii) such
disposition may not, in the opinion of such Initiating Holders, be
effected in the public marketplace (as opposed to a private transaction
under the Securities Act) on equally favorable net terms to the Initiating
Holders without registration of such shares under the Securities Act, the
Initiating Holders may request the Company in writing to effect such
registration, stating the number of shares of Registrable Stock to be
disposed of by such Initiating Holders (which, in the aggregate, shall be
not less than 20% of the then outstanding Registrable Stock) and the
intended method of disposition. Upon receipt of such request, the Company
will give prompt written notice thereof to all other Holders whereupon
such other Holders shall give written notice to the Company within 20 days
after the date of the Company's notice (the "Notice Period") if they
propose to dispose of any shares of Registrable Stock pursuant to such
registration, stating the number of shares of Registrable Stock to be
disposed of by such Holder or Holders and the intended method of
disposition.
(b) The Key Employees may register securities for sale for their own
account in the registration requested pursuant to this Section 8.2,
subject to limitations on the number of shares which may be imposed by the
underwriter as set forth in Section 8.4(d) below. At the time the Company
shall give the notice to Holders required by Section 8.2(a), it shall also
give the same notice to the Key Employees whereupon each Key Employee
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shall give written notice to the Company within the Notice Period if such
Key Employee proposes to dispose of any shares of Common Stock held by him
or her pursuant to such registration, stating the number of shares of
Common Stock to be disposed of by such Key Employee and the intended
method of disposition.
(c) The Company will use its best efforts to effect promptly after
the Notice Period the registration under the Securities Act of all shares
of Subject Stock specified in the requests of the Initiating Holders, the
requests of the other Holders and the requests of the Key Employees,
subject, however, to the limitations set forth in Section 8.4.
8.3 REGISTRATION PROCEDURES. Whenever the Company is required by the
provisions of this Section 8 to use its best efforts to effect promptly
the registration of shares of Registrable Stock, the Company will:
(a) prepare and file with the Commission a registration statement
with respect to such shares and use its best efforts to cause such
registration statement to become and remain effective as provided herein;
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and current and to comply with the provisions of the
Securities Act with respect to the disposition of all shares covered by
such registration statement, including such amendments and supplements as
may be necessary to reflect the intended method of disposition from time
to time of the prospective seller or sellers of such shares, but for no
longer than one hundred twenty (120) days subsequent to the effective date
of such registration in the case of a registration statement on Form S-1
or S-2 and for no longer than ninety (90) days in the case of a
registration statement on Form S-3;
(c) furnish to each prospective seller such number of copies of a
prospectus, including a preliminary
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prospectus, in conformity with the requirements of the Securities Act, and
such other documents, as such seller may reasonably request in order to
facilitate the public sale or other disposition of the shares owned by
such seller;
(d) use its best efforts to register or qualify the shares covered
by such registration statement under such other securities or blue sky or
other applicable laws of such jurisdiction within the United States as
each prospective seller shall reasonably request, to enable such seller to
consummate the public sale or other disposition in such jurisdictions of
the shares owned by such seller; provided, however, that in no event shall
the Company be obligated to qualify to do business in any jurisdiction
where it is not at the time so qualified or to take any action which would
subject it to service of process in suits other than those arising out of
the offer or sale of the Subject Stock covered by such registration
statement in any jurisdiction where it is not at the time so subject;
(e) furnish to each prospective seller (i) a signed counterpart,
addressed to the prospective sellers, of an opinion of counsel for the
Company, dated the effective date of the registration statement, covering
substantially the same matters with respect to the registration statement
(and the prospectus included therein) as are customarily covered (at the
time of such registration) in opinions of issuer's counsel delivered to
the underwriters in underwritten public offerings of securities, and (ii)
a letter dated such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given
by independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters, if any, and
to the Holders requesting registration of Registrable Stock;
(f) in the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering; each
Holder
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participating in such underwriting shall also enter into and perform its
obligations under such an agreement;
(g) notify each Holder of Registrable Stock covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material
fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of
the circumstances then existing; and
(h) apply for listing and use its best efforts to list the
Registrable Stock being registered on any national securities exchange on
which a class of the Company's equity securities are listed or, if the
Company does not have a class of equity securities listed on a national
securities exchange, apply for qualification and use its best efforts to
qualify the Registrable Stock being registered for inclusion on the
automated quotation system of the National Association of Securities
Dealers, Inc. or on a national securities exchange.
8.4 LIMITATIONS ON REQUIRED REGISTRATIONS. (a) The Company shall not
be required to effect more than two registrations on behalf of the
Investors pursuant to Section 8.2.
(b) The Company shall not be required to cause a registration
requested pursuant to Section 8.2 to become effective prior to the earlier
of (i) December 1, 1998 and (ii) the expiration of six (6) months after
the effective date of the first registration statement initiated by the
Company (other than a registration effected solely to implement an
employee benefit plan or a transaction to which Rule 145 of the Commission
is applicable).
(c) The Company shall not register securities for sale for its own
account in any registration requested pursuant to Section 8.2 unless
permitted to do so by the
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written consent of Holders who hold at least 51% of the Registrable Stock
as to which registration has been requested. The Company may not cause any
other registration of securities for sale for its own account (other than
a registration effected solely to implement an employee benefit plan) to
be initiated after a registration requested pursuant to Section 8.2,
unless such other registration becomes effective at least 120 days after
the effective date of any registration requested pursuant to Section 8.2.
(d) Whenever a requested registration is for an underwritten
offering, only shares which are to be included in the underwriting may be
included in the registration. Notwithstanding the provisions of Sections
8.2(b) and 8.4(c), if the underwriter determines that (i) marketing
factors require a limitation of the total number of shares to be
underwritten or a limitation of the total number of shares of the Key
Employees to be underwritten, or (ii) the offering price per share would
be reduced by the inclusion of the shares of the Key Employees and/or the
Company, then the number of shares to be included in the registration and
underwriting shall first be allocated among all Holders who indicated to
the Company their decision to distribute any of their Registrable Stock
through such underwriting, in proportion, as nearly as practicable, to the
respective numbers of shares of Registrable Stock owned by such Holders at
the time of filing the registration statement, then to the Key Employees
who have indicated to the Company their decision to distribute any of
their Subject Stock through such underwriting, in proportion, as nearly as
practicable, to the respective numbers of shares of Subject Stock owned by
the Key Employees at the time of filing of the registration statement, and
the remainder, if any, to the Company; provided, however, that if the
underwriter determines that marketing factors require a limitation of the
number of shares of the Key Employees to be underwritten or that the
offering price per share would be reduced by the inclusion of the shares
of the Key Employees, then the number of shares of the Key Employees that
may be so included shall be reduced, or eliminated from registration, as
the underwriter shall
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advise. No stock excluded from the underwriting by reason of the
underwriter's marketing limitation shall be included in such registration.
If any Holder, Key Employee or the Company disapproves of any such
underwriting, such person may elect to withdraw therefrom by written
notice to the Initiating Holders and the underwriter. The securities so
withdrawn from such underwriting shall also be withdrawn from such
registration.
(e) The Company shall not be required to effect a registration
pursuant to Section 8.2 unless the proposed disposition of shares of
Subject Stock has an aggregate expected offering price (before deduction
of underwriting discounts and expenses of sale) of not less than
$5,000,000.
(f) If at the time of any request to register Registrable Stock
pursuant to Section 8.2 hereof, the Company is engaged, or has fixed plans
to engage within 90 days of the time of the request, in a registered
public offering as to which the Holders may include such Stock pursuant to
Section 8.5 hereof or is engaged in any other activity which, in the good
faith determination of the Company's Board of Directors, would be
adversely affected by the requested registration to the material detriment
of the Company, then the Company may at its option direct that such
request be delayed for a period not in excess of six months from the
effective date of such offering, or the date of commencement of such other
material activity, as the case may be, such right to delay a request to be
exercised by the Company not more than once while the rights set forth in
Section 8.2 are in effect.
(g) The registration rights granted under Section 8.2 shall
terminate as to any Holder or permissible transferees or assignee of such
rights if such person (i) holds one percent (1%) or less of the
outstanding shares of Common Stock of the Company and (ii) would be
permitted to sell all of the Subject Stock held by it pursuant to Rule
144(k).
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8.5 INCIDENTAL REGISTRATION. If the Company at any time proposes to
register any of its securities under the Securities Act (other than a
registration effected solely to implement an employee benefit plan or a
transaction to which Rule 145 of the Commission is applicable), it will
each such time give prompt written notice to all Holders and to the Key
Employees of its intention so to do. Upon the written request of a Holder
or Holders or a Key Employee or Key Employees given within 20 days after
receipt of any such notice (stating the number of shares of Subject Stock
to be disposed of by such Holder or Holders or such Key Employee or Key
Employees and the intended method of disposition), the Company will use
its best efforts to cause all such shares of Subject Stock intended to be
disposed of, the Holders or the Key Employees owners of which shall have
requested registration thereof, to be registered under the Securities Act
so as to permit the disposition (in accordance with the methods in said
request) by such Holder or Holders or such Key Employee or Key Employees
of the shares so registered, subject, however, to the limitations set
forth in Section 8.6.
8.6 LIMITATIONS ON INCIDENTAL REGISTRATION. If the registration of
which the Company gives notice pursuant to Section 8.5 is for an
underwritten offering, only securities that are to be included in the
underwriting may be included in the registration. Notwithstanding any
provision of Section 8.5, if the underwriter determines that marketing
factors require a limitation of the number of shares to be underwritten,
the underwriter may eliminate or reduce the number of shares of Subject
Stock to be included in the registration and underwriting. The Company
shall so advise all Holders and the Key Employees (except those Holders
and Key Employees who have not indicated to the Company their decision to
distribute any of their Subject Stock through such underwriting), and the
number of shares of Subject Stock that may be included in the registration
and underwriting shall be allocated among such Holders and Key Employees
in proportion, as nearly as practicable, to the respective amounts of
Subject Stock owned by such Holders and Key Employees at the time of
filing the registration
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statement. No Subject Stock excluded from the underwriting by reason of
the underwriter's marketing limitation shall be included in such
registration. If any Holder or Key Employee disapproves of any such
underwriting, such person may elect to withdraw therefrom by written
notice to the Company and the underwriter. The Subject Stock and/or other
securities so withdrawn from such underwriting shall also be withdrawn
from such registration. The registration rights granted under Section 8.5
shall terminate as to any Key Employee or Holder or permissible
transferees or assignee of such rights if such person (a) holds one
percent (1%) or less of the outstanding shares of Common Stock of the
Company and (b) would be permitted to sell all of the Subject Stock held
by him pursuant to Rule 144(k).
8.7 DESIGNATION OF UNDERWRITER. (a) In the case of any registration
effected pursuant to Section 8.2 or 8.8, a majority in interest of the
requesting Holders shall have the right to designate the managing
underwriter(s) in any underwritten offering.
(b) In the case of any registration initiated by the Company, the
Company shall have the right to designate the managing underwriter in any
underwritten offering.
8.8 FORM S-3. (a) The Company shall register its Common Stock under
the Exchange Act as soon as legally permissible following the effective
date of the first registration of any securities of the Company on Form
S-1 and the Company shall thereafter file all reports and effect all
qualifications and compliances as would permit or facilitate the sale and
distribution of its stock on Form S-3. After the Company has qualified for
the use of Form S-3, the Holders shall have the right to request up to six
(6) registrations on Form S-3 (such requests shall be in writing and shall
state the number of shares of Registrable Stock to be disposed of and the
intended method of disposition) subject only to the following:
(i) The Company shall not be required to effect a registration
pursuant to this Section 8.8
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unless the Holder or Holders requesting registration propose
to dispose of shares of Registrable Stock having an aggregate
expected public offering price (before deduction of
underwriting discounts and expenses of sale) of at least
$500,000.
(ii) The Company shall not be required to effect a registration
pursuant to this Section 8.8 more frequently than once during
any twelve-month period.
The Company shall give prompt written notice to all Holders and Key
Employees of the receipt of a request for registration pursuant to this
Section 8.8 and shall provide a reasonable opportunity for other Holders
and Key Employees to participate in the registration, provided that if the
registration is for an underwritten offering, the terms of paragraph (d)
of Section 8.4 shall apply to all participants in such offering. Subject
to the foregoing, the Company will use its best efforts to effect promptly
the registration of all shares of Subject Stock on Form S-3 to the extent
requested by the Holder or Holders thereof or by a Key Employee.
(b) The registration rights granted under this Section 8.8 shall
terminate as to any Holder or permissible transferees or assignee of such
rights if such person (a) holds one percent (1%) or less of the
outstanding shares of Common Stock of the Company and (b) would be
permitted to sell all of the Subject Stock held by it pursuant to Rule
144(k).
8.9 COOPERATION BY PROSPECTIVE SELLERS. (a) Each prospective seller
of Subject Stock, and each underwriter designated by a majority in
interest of the requesting Holders, will furnish to the Company such
information as the Company may reasonably require from such seller or
underwriter in connection with the registration statement (and the
prospectus included therein).
(b) Failure of a prospective seller of Subject Stock to furnish the
information and agreements described
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in this Section 8.9 shall (i) with respect to registration rights under
Section 8.2, terminate such prospective seller's registration rights, and
(ii) with respect to registration rights under Section 8.5, terminate such
prospective seller's registration rights with respect to the registration
at issue. However, such failure shall not affect the obligations of the
Company under this Section 8 to remaining sellers who furnish such
information and agreements unless, in the reasonable opinion of counsel to
the Company or the underwriters, such failure impairs or may impair the
viability of the offering or the legality of the registration statement or
the underlying offering.
(c) The Holders and the Key Employees holding shares included in the
registration statement will not (until further notice) effect sales
thereof after receipt of telegraphic or written notice from the Company to
suspend sales to permit the Company to correct or update a registration
statement or prospectus; but the obligations of the Company with respect
to maintaining any registration statement current and effective shall be
extended by a period of days equal to the period such suspension is in
effect unless (i) such extension would result in the Company's inability
to use the financial statements in the registration statement initially
filed pursuant to the Holder or Holders' request and (ii) such correction
or update did not result from the Company's acts or failures to act.
At the end of the period during which the Company is obligated to
keep the registration statement current and effective as described in
paragraph (b) of Section 8.3 (and any extensions thereof required by the
preceding sentence), the Holders and the Key Employees holding shares
included in the registration statement shall discontinue sales of shares
pursuant to such registration statement upon receipt of notice from the
Company of its intention to remove from registration the shares covered by
such registration statement which remain unsold, and such Holders and Key
Employees shall notify the Company of the number of shares registered
which remain unsold immediately upon receipt of such notice from the
Company.
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8.10 EXPENSES OF REGISTRATION. (a) All expenses incurred in
effecting any registration pursuant to Sections 8.2 and 8.5 including,
without limitation, all registration and filing fees, printing expenses,
expenses of compliance with blue sky laws, fees and disbursements of
counsel for the Company, expenses, fees and disbursements of one special
counsel retained by the Holders and/or the Key Employees not to exceed
$10,000, and expenses of any audits incidental to or required by any such
registration, shall be borne by the Company, except (i) that all expenses,
fees and disbursements of any additional counsel retained by the Holders
and/or the Key Employees, and all underwriting discounts and commissions
shall be borne by the Holders of and the Key Employees holding the
securities registered pursuant to such registration, pro rata according to
the quantity of their securities so registered; (ii) the Company shall not
be required to pay for any expenses of any registration proceeding begun
pursuant to Section 8.2 if the registration request is subsequently
withdrawn at the unilateral written request, not concurred in by the
Company, of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such
expenses), unless the Holders of a majority of the Registrable Securities
agree to forfeit their right to one demand registration pursuant to
Section 8.2; provided, however, that if immediately prior to the time of
such withdrawal, the Holders have learned of a materially adverse change
in the condition, business or prospects of the Company from that known to
the Holders at the time of their request, then the Holders shall not be
required to pay any of such expenses and shall retain their rights
pursuant to Section 8.2; and (iii) with respect to registrations
effectuated under Section 8.2, the Company shall be required to pay
expenses only in respect of the first two such registrations.
(b) All expenses incurred in effecting any registration pursuant to
Section 8.8, including without limitation all registration and filing
fees, printing expenses, expenses of compliance with blue sky laws, fees
and disbursements of counsel for the Company, expenses,
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fees and disbursements of special counsel retained by the Holders and/or
the Key Employees, all underwriting discounts and commissions, and
expenses of any audits incidental to or required by any such registration,
shall be borne by the Holders of, and the Key Employees holding, the
securities registered pursuant to such registration, pro rata according to
the quantity of their securities so registered.
8.11 INDEMNIFICATION. (a) To the extent permitted by law, the
Company will indemnify and hold harmless each Holder and Key Employee
requesting or joining in a registration, each agent, officer and director
of such Holders, each person controlling (within the meaning of Section 15
of the Securities Act) such Holder and each underwriter and selling broker
of the securities so registered (collectively, "Indemnitees") against all
claims, losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any prospectus, offering
circular or other document incident to any registration, qualification or
compliance (or in any related registration statement, notification or the
like) or any omission (or alleged omission) to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation (or alleged violation) by the
Company of the Securities Act, the Exchange Act or state securities laws
or any rule or regulation promulgated under the Securities Act, the
Exchange Act or a state securities law, in each case applicable to the
Company, and will reimburse each such Indemnitee for any legal and any
other fees and expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or
action, provided, however, that the Company will not be liable to any
Indemnitee in any such case to the extent that any such claim, loss,
damage or liability is caused by any untrue statement or omission so made
in strict conformity with written information furnished to the Company by
an instrument duly executed by such Indemnitee and stated to be
specifically for use therein and except that the foregoing indemnity
agreement
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is subject to the condition that, insofar as it relates to any such untrue
statement (or alleged untrue statement) or omission (or alleged omission)
made in the preliminary prospectus but eliminated or remedied in the
amended prospectus on file with the Commission at the time the
registration statement becomes effective or in the amended prospectus
filed with the Commission pursuant to Rule 424(b) (the "Final
Prospectus"), such indemnity agreement shall not inure to the benefit of
any underwriter, or any Indemnitee if there is no underwriter, if a copy
of the Final Prospectus was not furnished to the person or entity
asserting the loss, liability, claim or damage at or prior to the time
such furnishing is required by the Securities Act; provided, further, that
this indemnity shall not be deemed to relieve any underwriter of any of
its due diligence obligations; provided, further, that the indemnity
agreement contained in this subsection 8.11(a) shall not apply to amounts
paid in settlement of any such claim, loss, damage, liability or action if
such settlement is effected without the consent of the Company, which
consent shall not be unreasonably withheld.
(b) To the extent permitted by law, each Holder and each Key
Employee requesting or joining in a registration and each underwriter and
selling broker of the securities so registered will indemnify and hold
harmless the Company and its officers and directors and each person, if
any, who controls any thereof within the meaning of Section 15 of the
Securities Act and their respective successors against all claims, losses,
damages and liabilities (or actions in respect thereof) arising out of or
based on any untrue statement (or alleged untrue statement) of a material
fact contained in any prospectus, offering circular or other document
incident to any registration, qualification or compliance (or in any
related registration statement, notification or the like) or any omission
(or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading
and will reimburse the Company and each other person indemnified pursuant
to this paragraph (b) for any legal and any other fees and expenses
reasonably incurred in
54
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connection with investigating or defending any such claim, loss, damage,
liability or action, provided, however, that this paragraph (b) shall
apply only if (and only to the extent that) such statement or omission was
made in reliance upon and in strict conformity with written information
(including, without limitation, written negative responses to inquiries)
furnished to the Company by an instrument duly executed by such Holder,
Key Employee, underwriter or selling broker and stated to be specifically
for use in such prospectus, offering circular or other document (or
related registration statement, notification or the like) or any amendment
or supplement thereto; and except that the foregoing indemnity agreement
is subject to the condition that, insofar as it relates to any such untrue
statement (or alleged untrue statement) or omission (or alleged omission)
made in the preliminary prospectus but eliminated or remedied in the
amended prospectus on file with the Commission at the time the
registration statement becomes effective or in the Final Prospectus, such
indemnity agreement shall not inure to the benefit of (i) the Company and
(ii) any underwriter, Holder or Key Employee, if there is no underwriter,
if a copy of the Final Prospectus was not furnished to the person or
entity asserting the loss, liability, claim or damage at or prior to the
time such furnishing is required by the Securities Act; provided, further,
that this indemnity shall not be deemed to relieve any underwriter of any
of its due diligence obligations; provided, further, that the indemnity
agreement contained in this subsection 8.11(b) shall not apply to amounts
paid in settlement of any such claim, loss, damage, liability or action if
such settlement is effected without the consent of the Holder, Key
Employee or underwriter, as the case may be, which consent shall not be
unreasonably withheld; and provided, further, that the obligations of such
Holders or Key Employees shall be limited to an amount equal to the net
proceeds received by such Holder or Key Employee from the sale of Subject
Stock in such offering as contemplated herein, unless such claim, loss,
damage, liability or action resulted from such Holder's or Key Employee's
intentional fraudulent misconduct.
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(c) Each party entitled to indemnification hereunder (the
"indemnified party") shall give notice to the party required to provide
indemnification (the "indemnifying party") promptly after such indemnified
party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the indemnifying party (at its expense) to assume
the defense of any claim or any litigation resulting therefrom, provided
that counsel for the indemnifying party, who shall conduct the defense of
such claim or litigation, shall be reasonably satisfactory to the
indemnified party, and the indemnified party may participate in such
defense at such party's expense, and provided further that the omission by
any indemnified party to give notice as provided herein shall not relieve
the indemnifying party of its obligations under this Section 8.11 except
to the extent that the omission results in a failure of actual notice to
the indemnifying party and such indemnifying party is damaged as a result
of the failure to give notice. No indemnifying party, in the defense of
any such claim or litigation, shall consent, except with the consent of
each indemnified party, to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release
from all liability in respect to such claim or litigation.
(d) The reimbursement required by this Section 8.11 shall be made by
periodic payments during the course of the investigation or defense, as
and when bills are received or expenses incurred.
(e) The obligation of the Company under this Section 8.11 shall
survive the redemption, if any, of the Preferred Shares, and the
completion of any offering of Subject Stock in a registration statement
under this Section 8, or otherwise.
8.12 RIGHTS THAT MAY BE GRANTED TO SUBSEQUENT INVESTORS. (a) Within
the limitations prescribed by this paragraph (a), but not otherwise, the
Company may grant to subsequent investors in the Company rights of
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incidental registration (such as those provided in Section 8.5). Such
rights may only pertain to shares of Common Stock, including shares of
Common Stock into which any other securities may be converted. Such rights
may be granted with respect to (i) registrations actually requested by
Initiating Holders pursuant to Section 8.2, but only in respect of that
portion of any such registration as remains after inclusion of all
Registrable Stock requested by Holders but before inclusion of any Subject
Stock requested by the Key Employees and (ii) registrations initiated by
the Company, but only in respect of that portion of such registration as
remains after inclusion of all Subject Stock. With respect to
registrations which are for underwritten public offerings, the number of
shares held by subsequent investors that may be included in the
underwriting shall be allocated as specified in clauses (i) and (ii) of
the third sentence of this paragraph (a). Shares not included in such
underwriting shall not be registered.
(b) The Company may not grant to subsequent investors in the Company
rights of registration upon request (such as those provided in Sections
8.2 and 8.8) unless (i) such rights are limited to shares of Common Stock,
(ii) all Holders and the Key Employees are given enforceable contractual
rights to participate in registrations requested by such subsequent
investors (but subordinate to the rights of priority of registration set
forth in Sections 8.4(d) and 8.6), such participation to be on a pro-rata
basis, and subject to the limitations, described in the final three
sentences of paragraph (a) of this Section 8.12, (iii) such rights shall
not become effective prior to 90 days after the effective date of the
first registration pursuant to Section 8.2 and (iv) such rights shall not
be more favorable than those granted to the Holders.
8.13 TRANSFER OF REGISTRATION RIGHTS. The registration rights
granted to the Investors under this Section 8 may be transferred but only
to (i) a transferee who shall acquire not less than 500,000 shares of
Registrable Stock, as adjusted for Xxxxxxxxxxxxxxxx
00
-00-
Xxxxxx, (xx) affiliates of the Investors, (iii) Beneficial Owners, and
(iv) spouses, ancestors, lineal descendants, and siblings (and lineal
descendants and siblings of such spouses who acquire Registrable Stock by
gift, will or intestate succession) if all such transferees or assignees
agree in writing to appoint a single representative as their attorney in
fact for the purpose of receiving any notices and exercising their rights
under this Section 8.
8.14 "STAND-OFF" AGREEMENT. In consideration for the Company
performing its obligations under this Section 8, each Investor and each
Key Employee severally agrees for such period of time (not to exceed 270
days) as is determined by the underwriters managing any underwritten
offering of the Company's securities (the "Managing Underwriter") from the
effective date of any registration (other than a registration effected
solely to implement an employee benefit plan) of securities of the Company
(upon request of the Company or of the Managing Underwriter) not to sell,
make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Subject Stock or any other stock of the Company
held by each Investor or Key Employee, other than shares of Subject Stock
included in the registration, without the prior written consent of the
Company or such underwriters, as the case may be, provided that all
officers and directors of the Company and each holder of more than 2% of
the outstanding Common Stock shall enter into similar agreements.
8.15 DELAY OF REGISTRATION. The Investors and the Key Employees
shall have no right to take any action to restrain, enjoin, or otherwise
delay any registration as the result of any controversy that might arise
with respect to the interpretation or implementation of this Section 8.
9. NEGATIVE COVENANTS. (a) So long as not less than 500,000 Preferred
Shares (as adjusted for Recapitalization Events) are outstanding, the Company
shall not, without the affirmative vote of the holders of record of at least 51%
of
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the outstanding Preferred Shares, voting together as one class:
(i) declare or pay any dividends or make any other distributions on
shares of Common Stock;
(ii) repurchase, or permit any corporation, firm or entity under its
control (a "Controlled Entity") to repurchase any shares of Series C
Preferred, Series B Preferred, Series A Preferred or Common Stock (other
than Employee Stock or redemptions effected upon the terms contained in
the Third Restated Certificate);
(iii) make, or permit any Controlled Entity to make, any investments
in, loans, advances, capital contributions, or transfers of property to
any person or entity (other than to the Company, a wholly-owned subsidiary
of the Company or to their respective employees in the ordinary course of
business as advances against salary, as employee expense advances or to
enable such employees to either purchase Employee Stock or exercise
options for Common Stock issued to them pursuant to stock option plans by
giving a promissory note therefor);
(iv) create, incur, assume, guaranty or become liable for, or permit
any Controlled Entity to create, incur, assume, guaranty or become liable
for, any Indebtedness other than (A) current liabilities of the Company
not incurred through the borrowing of money or the obtaining of credit
except credit on an open account customarily extended; (B) Indebtedness in
respect of taxes or other governmental charges not yet due and payable or
being contested in good faith and by appropriate proceedings; (C)
refinancings of the Indebtedness listed in Schedule 3.5 in a principal
amount not exceeding the outstanding principal and accrued interest on
such Indebtedness; and (D) Indebtedness incurred in the ordinary course of
business in connection with the acquisition by the Company after the date
hereof of any personal property of the Company, provided that the amount
of such Indebtedness in respect of any such acquisition shall not exceed
$3,000,000 without the
59
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consent of at least 66-2/3% of the Board of Directors (for purposes of
this subparagraph (a)(iv), Indebtedness shall include all obligations,
contingent or otherwise, that in accordance with GAAP should be classified
as liabilities on the balance sheet of the Company);
(v) engage in any business other than the business engaged in at the
Closing Date, or provided for in the Operating Plan, or liquidate or
wind-up its business or its assets;
(vi) merge with or consolidate into any corporation, firm or entity,
or sell, lease or otherwise dispose of all or substantially all of its
assets unless the Company is the surviving or acquiring entity;
(vii) mortgage or pledge, or create a security interest in, or
permit any Controlled Entity to mortgage, pledge or create a security
interest in, all or substantially all of the property of the Company or
such Controlled Entity, unless unanimously approved by the entire Board of
Directors of the Company; or
(ix) own, or permit any Controlled Entity to own, any stock or other
securities of any Controlled Entity or other corporation, partnership or
entity unless it is wholly owned by the Company, except certificates of
deposit, high quality commercial paper, United States government
securities and other short-term, high quality liquid investment grade
securities.
10. BOARD OF DIRECTORS. (a) The Investors and the Key Employees (in
respect of the designations in clause (iv) below) shall act in all
capacities and vote the shares of stock of the Company now or hereafter
owned or controlled by them so as to cause and maintain the election to
the Board of Directors of (i) one designee of the holders of a majority in
interest of the Series C Preferred, voting as a single class, which
designee shall be a designee of Xxxxx, Xxxx & Xxxxx (the "WP&G Designee"),
subject to the approval of the remaining directors, which approval shall
not be unreasonably withheld, and which WP&G Designee Xxxxx, Xxxx & Xxxxx
may
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at any time and from time to time, in its sole discretion, remove; (ii)
one designee of the holders of a majority in interest of the Series B
Preferred, voting as a single class, which designee shall be a designee of
Xxxxxxx River Partnership VII; (iii) three designees of the holders of a
majority in interest of the Series A Preferred, voting as a single class;
and (iv) Xxxxx Xxxxx and Xxxxxxx Xxxxxxx. Xxxxx, Xxxx & Xxxxx agrees to
act with reasonable promptness to propose as a replacement of the initial
WP&G Designee an outside director of recognized standing in the industry
in which the Company operates, and thereafter, with respect to nominations
of any subsequent WP&G Designees, to propose for consideration only
candidates satisfying this same qualification criterion.
(b) The Investors and Key Employees shall act in all capacities
and/or vote the shares of stock of the Company now or hereafter owned or
controlled by them so as to maintain the number of directors on the Board
of Directors to be limited to seven members.
(c) Each certificate for shares of capital stock of the Company
owned by an Investor or Key Employee shall bear thereon substantially the
following legend:
"THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE TERMS
OF A PREFERRED STOCK PURCHASE AGREEMENT DATED AS OF DECEMBER 20,
1995 WITH RESPECT TO THE VOTING OF THE SHARES REPRESENTED BY THIS
CERTIFICATE, OR ANY INTEREST THEREIN, WHICH MAY BE EXAMINED AT THE
OFFICES OF THE COMPANY."
(d) Until the earlier of (i) the fifth anniversary of the date of
this Agreement and (ii) the consummation by the Company of an IPO, neither
Key Employee shall offer, sell, transfer, assign, pledge, hypothecate or
otherwise dispose of in the aggregate, in one or more transactions, more
than 10% of the shares of Common Stock owned by such Key Employee at the
date of this Agreement (and without giving effect to any of the
transactions contemplated hereby) without the prior consent of the Board
of Directors, provided this provision shall not
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-56-
apply to any transactions exempted from the Amended and Restated Co-Sale
Agreement of even date herewith pursuant to Section 2.05(a)(i)or (iv).
(e) Each party shall act in all capacities to cause any transferee
of the shares of its stock in the Company to assume the obligations of its
or his transferor hereunder.
(f) Any designee of any holder or holders of the Company's stock who
shall serve as a member of the Board shall have full authority to exercise
his discretion and business judgment to perform his duty as Director and
shall incur no special obligation or liability to any of such holders as a
result of such exercise. No party shall have any claim against any such
designee, or the holder or holders who selected such designee, with regard
to such selection. The Company shall take all actions as may be necessary
to cause the Company to indemnify the members of the Board of Directors to
the fullest extent permitted under applicable law.
(g) The provisions of this Section 10 shall continue in effect until
the earlier of (i) an Automatic Conversion Event (as defined in the Third
Restated Certificate) or (ii) ten years from the date hereof.
11. EXPENSES. The Company will pay (a) all the costs and expenses of the
reproduction of this Agreement, of all agreements and documents referred to
herein and of the certificates for the Shares; (b) all taxes (if any) payable
with respect to this Agreement and the issuance of the Shares; (c) all costs of
complying with the securities or Blue Sky laws of any jurisdiction with respect
to the offering or sale of the Shares; (d) the cost of delivering to such
address as each Purchaser shall specify the certificates for the Shares
purchased by each such Purchaser; (e) the reasonable fees of special counsel for
the Purchasers, not to exceed $17,500 plus actual expenses and disbursements, in
connection with the subject matter of this Agreement and the transactions
contemplated hereby (other than events described in Section 8 hereof) and
payable at the Closing Date; and (f) the fees and expenses incurred with respect
to any amendments to this
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Agreement or the Third Restated Certificate proposed by the Company (whether or
not the same become effective).
12. SURVIVAL OF AGREEMENTS. All representations and warranties contained
herein or made in writing by or on behalf of the Company in connection with the
transactions contemplated hereby shall survive the execution and delivery of
this Agreement (despite any investigation at any time made by the Purchasers or
on their behalf) for a period of thirty-six months, and all agreement and
covenants contained herein or made in writing by or on behalf of the Company in
connection with the transactions contemplated hereby shall survive the execution
and delivery of this Agreement (despite any investigation at any time made by
the Investors or on their behalf). All statements contained in any certificate
or other instrument executed and delivered by the Company or its duly authorized
officers or representatives pursuant hereto in connection with the transactions
contemplated hereby shall be deemed representations by the Company hereunder.
13. NOTICES. All notices, requests, consents and other communications
herein (except as stated in the last sentence of this Section 13) shall be in
writing and shall be deemed to be delivered (i) on the date delivered, if
personally delivered or transmitted via facsimile with return confirmation of
such transmission; (ii) on the business day after the date sent, if sent by
recognized overnight courier service and (iii) on the fifth day after the date
sent, if mailed by first-class certified mail, postage prepaid and return
receipt requested, as follows:
(a) If to the Company:
CIENA Corporation
0000 Xxxxxxxx Xxxx
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxxxx, President
Facsimile: (000) 000-0000
with a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
0000 X Xxxxxx, X.X., Xxxxx 0000
Xxxxxxxxxx, X.X. 00000-0000
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Attention: Xxxxxxx X. Xxxxxxx, Esq.
Facsimile: (000) 000-0000
(b) If to the Investors, at their respective addresses set forth in
Schedules 1, 2.1 and 2.2 hereto; with a copy to:
Venture Law Group
0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Attention: Xxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
and
SVM Star Ventures Management GmSbH
Xxxxxxxxxxxxxx 00X
00000 Xxxxxx
Xxxxxxx Xxxxxxxx of Germany
Facsimile: 49-89-381-70555
and
Leeway & Co.
State Street Bank and Trust Company
Master Trust Division
One Monarch Drive
Xxxxxxx Building, 6th Floor, W6C
North Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxxx
Facsimile: (000) 000-0000
and
Leeway & Co.
c/o ATTIMCO
Xxx Xxx Xxx
Xxxxxxxx Xxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxx X. Xxxxxx
Investment Management
Organization
Facsimile: (000) 000-0000
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and
Leeway & Co.
c/o Actuarial Sciences Associates, Inc.
000 Xxxxx Xxxxx Xxxxxx
Xxxxxxx Xxxxx, Xxx Xxxxxx 00000
Attn: Xxxxxx Xxxxxxxx, Esq.
Facsimile: (000) 000-0000
and
Ropes & Xxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
or such other addresses as each of the parties hereto may provide from time to
time in writing to the other parties. The financial statements and other reports
required by Section 7 may be mailed by first-class regular mail.
14. MODIFICATIONS; WAIVER. (a) Except as set forth in Section 14(b),
neither this Agreement nor any provision hereof may be changed, waived,
discharged or terminated orally or in writing, except that any provision of this
Agreement may be amended and the observance of any such provision may be waived
(either generally or in a particular instance and either retroactively or
prospectively) with (but only with) the written consent of (i) the Company, (ii)
except for modifications of Sections 7 through 10, 13 and 17 through 22, the
holders of at least 67% of the outstanding shares of the Preferred Shares
(excluding from both the numerator and denominator of the fraction from which
such percentage is derived all shares theretofore disposed of by the Investors
or their Transferees pursuant to one or more registration statements under the
Securities Act or pursuant to Rule 144 or otherwise) acting together as a single
class, (iii) in the case of any modification of Sections 7 through 10, 13 and 17
through 22, the holders of at least 67% of the Investor Shares (excluding from
both the numerator and denominator of the fracton from which such percentage is
derived all shares therefore disposed of by the Investors or their Transferees
65
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pursuant to one or more registration statements under the Securities Act or
pursuant to Rule 144 or otherwise) acting together as a single class, (iv) in
the event of any modification of Section 8, Investors holding at least 67% of
the Registrable Stock (with any shares of Preferred Shares voting as the number
of shares of Common Stock into which they are then convertible) then held by the
Investors, and (v) in the event the Key Employees' registration rights in
Section 8 are modified, waived or terminated, the holders of at least 51% of the
aggregate number of shares of Common Stock outstanding as of the date of such
modification, waiver or termination that are held by the Key Employees who at
such time are stockholders of the Company; provided that this Section 14 may not
be modified or amended without the written consent of all the parties hereto;
and provided, further, that the Board of Directors shall be permitted to grant
to any officer of the Company registration rights that are the equivalent of the
Key Employees' registration rights and the granting of such officer registration
rights shall not be deemed a modification of the Key Employees' registration
rights, for purposes of this Section 14(a) if granted with the approval of a
majority of the Board of Directors.
(b) Notwithstanding anything to the contrary contained in Section 14(a),
the Board of Directors of the Company may, from time to time, designate
additional employees of the Company as "Key Employees," as such term is used in
this Agreement. Each person so designated shall execute all such documents as
shall be necessary so that he or she shall be considered a "Key Employee" within
the meaning of this Agreement, and thereafter, all references to "Key Employees"
in this Agreement shall be deemed to include such designee; provided that in no
event shall a person be considered a Key Employee if such person is no longer
employed by the Company.
15. EXCULPATION AMONG PURCHASERS. Each Purchaser acknowledges that it is
not relying upon any statements or instruments made or issued by any person,
firm or corporation, other than the Company and its officers, directors and
agents, in making its decision to invest in the Company. Each Purchaser agrees
that no other Purchaser nor the respective controlling persons, officers,
directors, partners, agents, or employees of any Purchaser shall be liable to
such Purchaser
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for any action heretofore or hereafter taken or omitted to be taken by any of
them in connection with the Preferred Shares (and Common Stock issued upon
conversion thereof).
16. ENTIRE AGREEMENT. This Agreement, together with the schedules and
exhibits attached hereto and made a part hereof, contains the entire agreement
between the parties with respect to the transactions contemplated hereby, and
supersedes all negotiations, agreements, representations, warranties,
commitments, whether in writing or oral, prior to the date hereof.
17. SUCCESSORS AND ASSIGNS.
(a) Except as otherwise expressly provided in this Agreement, all of
the terms of this Agreement shall be binding upon and inure to the benefit
of and be enforceable by the respective successors and transferees of the
parties hereto, except that the rights set forth in Sections 7.1, 7.3 and
7.4 hereof may be assigned but only
(i) to an assignee who shall acquire not less than 100,000
Investor Shares or not less than 100,000 shares of Series C
Preferred, as adjusted for Recapitalization Events; or
(ii) in connection with the distribution by a holder
of Investor Shares to a Beneficial Owner who holds at least
100,000 shares of Series C Investor Shares or Registrable
Stock or not less than 100,000 shares of Series C Preferred,
that has been distributed to it, as adjusted for
Recapitalization Events.
(b) Any other provision of this Agreement to the contrary
notwithstanding, but at all times subject to the provisions of Sections
4.5(a) and (b) hereof, any of the STAR Purchasers (as defined in Schedule
1) shall be entitled to transfer its shares and to freely assign all of
its rights under this Agreement to any legal entity
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that controls, is controlled by, or is under common control with any of
the STAR Purchasers, or that is managed by the Manager (as defined below),
and such shares shall remain subject to the provisions of this Agreement.
For purposes of this Section 17(b), the "Manager" means the entity that
makes investment decisions for any of the STAR Purchasers, or any entity
that controls, is controlled by, or is under common control with, such
entity. For all purposes under this Agreement, the STAR Purchasers and any
permitted transferee of any such STAR Purchaser shall be deemed together
to be a single purchaser. Any other provision of this Agreement to the
contrary notwithstanding, Leeway & Co. shall be entitled to transfer its
shares and to freely assign all of its rights under this Agreement to any
successor trustee or nominee or successor by reorganization of a qualified
pension trust.
18. ENFORCEMENT. (a) Remedies at Law or in Equity. If the Company shall
default in any of its obligations under this Agreement or if any representation
or warranty made by or on behalf of the Company in this Agreement or in any
certificate, report or other instrument delivered under or pursuant to any term
hereof shall be untrue or misleading in any material respect as of the date of
this Agreement or as of the date it was made, furnished or delivered, the
Purchasers or the Investors, as appropriate, may proceed to protect and enforce
their rights by suit in equity or action at law, whether for the specific
performance of any term contained in this Agreement or the Third Restated
Certificate, injunction against the breach of any such term or in furtherance of
the exercise of any power granted in this Agreement or the Third Restated
Certificate, or to enforce any other legal or equitable right of such Investors
or to take any one or more of such actions. In the event the Purchasers or the
Investors bring such an action against the Company, the prevailing party in such
dispute shall be entitled to recover from the losing party all fees, costs and
expenses of enforcing any right or asserting any defense of such prevailing
party under or with respect to this Agreement or the Third Restated Certificate,
including without limitation such reasonable fees and expenses of attorneys and
accountants, which shall include, without limitation, all fees, costs and
expenses of appeals.
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(b) Remedies Cumulative; Waiver. No remedy referred to herein is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to the Purchasers or the
Investors at law or in equity. No express or implied waiver by the Purchasers or
the Investors of any default shall be a waiver of any future or subsequent
default, unless otherwise specified. The failure or delay of the Purchasers or
the Investors in exercising any rights granted them hereunder shall not
constitute a waiver of any such right and any single or partial exercise of any
particular right by the Purchasers or the Investors shall not exhaust the same
or constitute a waiver of any other right provided herein.
19. PRIOR AGREEMENTS. Sections 7 through 10, 13, and 17 through 21 of the
Series A Agreement and Sections 7 through 10, 13 and 17 through 22 of the Series
B Agreement are hereby replaced in their entirety by Sections 7 through 10, 13,
and 17 through 22 of this Agreement, respectively. Except as amended and
modified hereby, the Prior Agreements shall continue in full force and effect in
accordance with their respective terms. By execution of this Agreement, (a) the
Prior Investors and the Key Employees hereby consent to the amendment of the
Prior Agreements as contemplated herein, and (b) the Prior Investors waive the
rights of first refusal under Section 7.10 of the Prior Agreements in respect of
the issuances of Series C Preferred hereunder, such waiver to be effective on
behalf of all the Investors referred to in the Prior Agreements pursuant to
Section 14 thereof.
20. EXECUTION AND COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which when so executed and delivered shall be
deemed an original, and all such counterparts together shall constitute one
instrument. Each party shall receive a duplicate original of the counterpart
copy or copies executed by it and by the Company.
21. GOVERNING LAW AND SEVERABILITY. Except for matters directly in the
purview of the General Corporation Law of the State of Delaware, this Agreement
shall be governed by and construed in accordance with the laws of the State of
New York, without regard to principles of conflicts of law. In the event any
provision of this Agreement or the application
69
-64-
of any such provision to any party shall be held by a court of competent
jurisdiction to be contrary to law, the remaining provisions of this agreement
shall remain in full force and effect.
22. HEADINGS. The descriptive headings of the Sections hereof and the
Schedules and Exhibits hereto are inserted for convenience only and do not
constitute a part of this Agreement.
[Remainder of Page Intentionally Left Blank]
70
-65-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement by
their duly authorized officers as of the date first above written.
KEY EMPLOYEES:
/s/ XXXXXXX XXXXXXX
-----------------------------
Xxxxxxx Xxxxxxx
/s/ XXXXX XXXXX
-----------------------------
Xxxxx Xxxxx
THE COMPANY:
CIENA CORPORATION
By: /s/ XXXXXXX XXXXXXX
-------------------------
Xxxxxxx Xxxxxxx
President
INVESTORS:
OSHKIM LIMITED PARTNERSHIP
By:
-------------------------
Name:
Title:
/s/ X.X. XXXXX
------------------------------
X.X. Xxxxx
XXXXX XXXXX XXXXXXX
MANAGEMENT CO.
By: /s/ XXXX X. XXXXXXX
-------------------------
Xxxx X. Xxxxxxx
Vice President
71
-66-
XXXXX XXXXX MANAGEMENT CO.
By: /s/ XXXX X. XXXXXXX
-------------------------
Xxxx X. Xxxxxxx
Vice President
XXXXX XXXXX FUND IV
By: SRB Associates IV L.P., its General Partner
By: /s/ XXXX X. XXXXXXX
---------------------------
Xxxx X. Xxxxxxx
General Partner
XXXXX XXXXX FUND IV, L.P.
By: SRB ASSOCIATES IV L.P.,its General Partner
By:/s/ XXXX X. XXXXXXX
----------------------------
Xxxx X. Xxxxxxx
General Partner
SVM STAR VENTURES MANAGEMENTGESELLSCHAFT MBH NR. 3
By: /s/ XXXX XXXXX
-------------------------
Xx. Xxxx Xxxxx
Managing Partner
SVE STAR VENTURES NO. II, III, IIIA, RESPECTIVELY
By: SVM Star Ventures Managementgesellschaft mbH Nr. 3
Managing Partner
By:/s/ XXXX XXXXX
----------------------------
Xx. Xxxx Xxxxx
Managing Partner
72
-67-
SVM STAR VENTURES MANAGEMENTGESELLSCHAFT MBH NR. 3 & CO.
BETEILIGUNGS KG
By: SVM Star Ventures Managementgesellschaft mbH Nr. 3
Managing Partner
By: /s/ XX. XXXX XXXXX
----------------------------
Xx. Xxxx Xxxxx
Managing Partner
XXXXXXX RIVER PARTNERSHIP VII
By: /s/ XXXXXXX XXX
-------------------------
Xxxxxxx Xxx, General Partner
INTERWEST MANAGEMENT PARTNERS V
By: /s/ X.X. XXXXXX
-------------------------
General Partner
INTERWEST PARTNERS V
By: InterWest Management Partners V,
General Partner
By: /s/ X.X. XXXXXX
----------------------------
General Partner
73
-68-
INTERWEST INVESTORS V
By: /s/ X.X. XXXXXX
-------------------------
General Partner
/s/ XXXXXX XXXXXXXXXXXXX
-----------------------------
Xxxxxx Xxxxxxxxxxxxx
UVCC FUND II
By: Arete Ventures, Inc.,
General Partner
By: /s/ XXXXXXX X. XXXXXX
----------------------------
Xxxxxxx X. Xxxxxx
Vice President
UVCC II PARALLEL FUND, L.P.
By: Arete Ventures, Inc.,
General Partner
By: /s/ XXXXXXX X. XXXXXX
----------------------------
Xxxxxxx X. Xxxxxx
Vice President
JAPAN ASSOCIATED FINANCE CO., LTD.
By: /s/ XXXXXX XXXXXXX
-------------------------
Name: Xxxxxx Xxxxxxx
Title: President
74
-69-
JAFCO R-1 (A) INVESTMENT ENTERPRISE PARTNERSHIP
By: /s/ X. XXXXXXX
--------------------------
Name: Xxxxxx Xxxxxxx
Title: President, Japan Associated Finance Co., Ltd.
JAFCO R-1 (B) INVESTMENT ENTERPRISE PARTNERSHIP
By: /s/ X. XXXXXXX
--------------------------
Name: Xxxxxx Xxxxxxx
Title: President
JAFCO G-5 INVESTMENT ENTERPRISE PARTNERSHIP
By: /s/ X. XXXXXXX
--------------------------
Name: Xxxxxx Xxxxxxx
Title: President
U.S.INFORMATION TECHNOLOGY INVESTMENT ENTERPRISE PARTNERSHIP
By: /s/ X. XXXXXXX
--------------------------
Name: Xxxxxx Xxxxxxx
Title: President
VANGUARD VENTURE PARTNERS
By: /s/ XXXXXXXX X. XXXXXXXXX
--------------------------
Name: Xxxxxxxx Xxxxxxxxx
Title: General Partner
VANGUARD IV, L.P.
By: /s/ XXXXXXXX X. XXXXXXXXX
--------------------------
Name: Xxxxxxxx Xxxxxxxxx
Title: General Partner
75
-70-
INVESTMENT ADVISERS, INC.
By: /s/ XXXX X. XXXX
--------------------------
Name: Xxxx X. Xxxx
Title: Chief Executive Officer
GIBRALTAR TRUST
By: /s/ XXXXXX XXXX
--------------------------
Xxxxxx Xxxx
Attorney-in-fact for Trustee
WA & H INVESTMENT, L.L.C.
By: Wessels, Arnold, & Xxxxxxxxx Group, L.L.C.
By: /s/ XXXXXXX X. XXXXXXX
--------------------------
Xxxxxxx X. Xxxxxxx
President/CEO
DOMINION VENTURES
By: /s/ XXXXXXXX X. XXXXXX
--------------------------
Name: Xxxxxxxx X. Xxxxxx
Title: Vice President
TECHNOPARTNERS
By: /s/ XXXX XXXXX
--------------------------
Name: Xxxx Xxxxx
Title: Partner
XXXXX, XXXX & XXXXX
By: /s/ XXXXXXXXXXX X. XXXXXXX
--------------------------
Name: Xxxxxxxxxxx X. Xxxxxxx
Title: Venture Partner
76
-71-
TEKNOINVEST MANAGEMENT A.S.
By: /s/ BJORN BYORN
--------------------------
Name: Bjorn Byorn
Title: Managing Director
MOSVOLD FARSUND A.S.
By: /s/ BJORN BYORN
--------------------------
Name: Bjorn Byorn
Title: Attorney-In-Fact
LEEWAY & CO.
By: /s/ XXXX XXXX
--------------------------
Name: Xxxx Xxxx
Title: Assistant Secretary
XXXXX INVESTMENT PARTNERS XXIII
By: /s/ XXXXX X. XXXXX
--------------------------
Name: Xxxxx X. Xxxxx
Title: Managing Director
XXXXXX X. XXXX SELF-DIRECTED XXX
By: /s/ XXXXXX X. XXXX
--------------------------
Xxxxxx X. Xxxx
XXXXXX X. XXXX
By: /s/ XXXXXX X. XXXX
--------------------------
Xxxxxx X. Xxxx
Executor/Trustee
MAHUMA, N.V.
By: /s/ XXXXXXXX X'XXXXXXXX
--------------------------
Name: Xxxxxxxx X'Xxxxxxxx
Title: Attorney-In-Fact
77
-72-
BESSEMER VENTURE PARTNERS III, L.P.
By: Deer III & Co., General Partner
By: /s/ XXXXXX XXXXXXXX
----------------------, Partner
BELISARIUS CORPORATION
By: /s/ XXXXXX XXXXXXXX
--------------------------
Name: Xxxxxx Xxxxxxxx
Title:
XXXXXXX CORPORATION
By: /s/ XXXXXX XXXXXXXX
--------------------------
Name: Xxxxxx Xxxxxxxx
Title:
BVP III SPECIAL SITUATIONS, L.P.
By: Deer III & Co., General Partner
By: /s/ XXXXXX BUSECHER
----------------------, Partner
XXXXXX X. XXXXXXXX
------------------------------
* /s/ XXXXXX X. XXXXXXXX
-----------------------------
Xxxxxx X. Xxxxxxxx
Atty-in-fact, for those so marked
78
-73-
XXXXXXXXXXX XXXXXXXX
*/s/ XXXXXX X. XXXXXXXX
-----------------------------
GABRIELI FAMILY FOUNDATION
*/s/ XXXXXX X. XXXXXXXX
-----------------------------
NEILL X. XXXXXXXXXX
*/s/ XXXXXX X. XXXXXXXX
-----------------------------
FELDA X. XXXXXXXX
*/s/ XXXXXX X. XXXXXXXX
-----------------------------
XXXXXXX X. XXXXXX
*/s/ XXXXXX X. XXXXXXXX
-----------------------------
XXXXXX X. XXXX
*/s/ XXXXXX X. XXXXXXXX
-----------------------------
XXXXXXX X. XXXXX
*/s/ XXXXXX X. XXXXXXXX
-----------------------------
XXXX X. XXXXX
*/s/ XXXXXX X. XXXXXXXX
-----------------------------
79
-74-
XXXXXX X. XXXXXXX
*/s/ XXXXXX X. XXXXXXXX
-----------------------------
XXXXXXX X. XXXXXXX
*/s/ XXXXXX X. XXXXXXXX
-----------------------------
/s/ XXX XXXXXX
------------------------------
Xxx Xxxxxx
/s/ XXXXXXX X. DOMENIK
------------------------------
Xxxxxxx X. Domenik
/s/ XXXXXXXX XXXXXXX
------------------------------
Xxxxxxxx Xxxxxxx
/s/ XXXXXXXX X. XXXXXXXXXX
-----------------------------
Xxxxxxxx X. Xxxxxxxxxx
/s/ XXXXX X . XXXXXXXXXX
------------------------------
Xxxxx X. Xxxxxxxxxx
/s/ XXXXX XXXXX
------------------------------
C. Xxxxx Xxxxx
/s/ XXXXX XXXXXX
------------------------------
FBO Xxxxx Xxxxxx
/s/ XXXXXX XXXX
------------------------------
Xxxxxx Xxxx
80
-75-
/s/ XXXXXXX XXXXXXXXXX
------------------------------
Xxxxxxx Xxxxxxxxxx
/s/ XXXXX XXXXXXXXX
------------------------------
Xxxxx Xxxxxxxxx
/s/ XXXX XXXXXXXX
------------------------------
Xxxx Xxxxxxxx
81
-76-
*/s/ XXXXXX X. XXXXXXXX
-----------------------------
Xxxxxx X. Xxxxxxxx
Atty-in-fact, for those so marked
XXXXXX X. XXXXX
*/s/ XXXXXX X. XXXXXXXX
-----------------------------
XXXX X. XXXXXXX
*/s/ XXXXXX X. XXXXXXXX
-----------------------------
XXXXXX X. XXXXXXXX
*/s/ XXXXXX X. XXXXXXXX
-----------------------------
XXXXXXX X. XXXXXXXXXX
*/s/ XXXXXX X. XXXXXXXX
-----------------------------
82
-77-
XXXXX XXXXXXXXX PARTNERS, L.P.
By: /s/ XXXXX XXXXXXXXX
-------------------------
Xxxxx Xxxxxxxxx
General Partner
83
SCHEDULE 3.2
SECURITY HOLDERS OF THE COMPANY
Series A Series B
Common Common Stock Series A Preferred Series B Preferred
Stock Warrants, Preferred Warrants, Preferred Warrants,
Issued & Options & Issued & Options and Issued & Options
Stockholder Outstanding Rights Outstanding Rights Outstanding and Rights
----------- ----------- ------ ----------- ------ ----------- -----------
Xxxxx Xxxxx 1,209,590(1)
Xxxxx X. & Xxxxxxxx X. Xxxxx 6,000
Xxxxxx Xxxxx 7,000
Xxxxx Xxxxxxxxxxx Xxxxx 7,000
Alyssa Xxxxxx Xxxxx 7,000
Xxxxx Xxxxxx Xxxxx 7,000
Xxx Xxxxxx 13,817 6,667
Xxxxxxx Xxxxxxx 695,427(2)
Xxxxxxx Xxxxx 10,000
Xxxx Xxxxxxx 10,000
Xxxxxxx Xxxxx 10,000
Management (other)* 1,851,250
Xxxx X. Xxxxxxx 8,750
--------------
(1) 300,054 of these shares remain subject to vesting, at the rate of 1/48th of
1,200,000 shares per month, so long as Xx. Xxxxx is still employed by the
Company.
(2) 408,352 of these shares remain subject to vesting, at the rate of 1/48th of
such shares per month thereafter, so long as Xx. Xxxxxxx is still employed
by the Company.
84
Series A Series B
Common Common Stock Series A Preferred Series B Preferred
Stock Warrants, Preferred Warrants, Preferred Warrants,
Issued & Options & Issued & Options and Issued & Options
Stockholder Outstanding Rights Outstanding Rights Outstanding and Rights
----------- ----------- ------ ----------- ------ ----------- -----------
General Instrument 125,636(3)
Xxxxx Xxxxxxxxx Partners, L.P. 221,520
Xxxxx Xxxxxxxxx 15,312 200,000 131,733 250,000
Xxxxxxx Xxxxx Holdings Inc. 45,000
Xxxxx X. XxxXxxxxx 5,000
Xxxxx Xxxxx Fund IV 40,865 1,125,000 25,000 740,998
SRB Management Company 182 5,000 3,293
InterWest Partners Fund V 40,865 1,125,000 740,998
InterWest Investors V 218 6,000 25,000 3,952
Vanguard Venture Partners 27,244 750,000
Vanguard IV, L.P. 493,999
Dominion Ventures 120,000
Xxxxxx Xxxxxxxxxxxxx 55,449(4) 100,000 65,866
Xxxxx Xxxxx 182 5,000 3,293
Xxxx Xxxxxxxx 182 5,000 3,293
Xxxxxxx River Partnership VII 1,500,000
--------
(3) This number is subject to further adjustment upon any issuance of additional
common stock, so that it will continue to represent 5% of issued and
outstanding common stock, up to January 11, 1996.
(4) 31,943 of these shares remain subject to vesting, at the rate of 1/36th of
50,000 shares per month, so long as Xx. Xxxxxxxxxxxxx is still retained as a
consultant to the Company.
-2-
85
Series A Series B
Common Common Stock Series A Preferred Series B Preferred
Stock Warrants, Preferred Warrants, Preferred Warrants,
Issued & Options & Issued & Options and Issued & Options
Stockholder Outstanding Rights Outstanding Rights Outstanding and Rights
----------- ----------- ------ ----------- ------ ----------- -----------
SVE Star Ventures Enterprises 256,000
No. II Limited Partnership
SVE Star Ventures Enterprises 687,100
No. III Limited Partnership
SVE Star Ventures Enterprises 56,900
No. IIIA Limited Partnership
Xxxxxxx X. Xxxxxxxx III 82,577
Xxxxxxx X. Xxxxxxxx & 31,637
Company Inc. Profit Sharing
Trust
Xxxx X. Xxxxxxxx 12,826
Xxxxxxx X. Xxxxxxx 6,413
Xxxxxx X. May 3,420
Xxxx X. Xxxxxxx 3,420
Xxxxxxx X. Xxx 2,138
Xxxx Xxxxxxx 49,700
Xxxxxx X. xxxXxxxxx 000
Xxxxxxxx X. Xxxxxxxxx 000
J. Xxxxx Xxxxx 00
Xxxxxx X. Stuck 21,500
Investment Advisors, Inc. 333,333
UVCC Fund II 250,000
UVCC II Parallel Fund, L.P. 250,000
-3-
86
Series A Series B
Common Common Stock Series A Preferred Series B Preferred
Stock Warrants, Preferred Warrants, Preferred Warrants,
Issued & Options & Issued & Options and Issued & Options
Stockholder Outstanding Rights Outstanding Rights Outstanding and Rights
----------- ----------- ------ ----------- ------ ----------- -----------
Xxxxx X. Xxxxxxxxxx 16,667
Mahuma N.V. (Xxxxxxxxxx) 33,333
FBO Xxxxx Xxxxxx 50,000
Xxxxxxxx X. Xxxxxxxxxx 16,667
Xxxxxx Xxxx 16,667
Neili. X. Xxxxxxxxxx 6,667
Xxxxxx X. Xxxxxxxx 3,000
Felda X. Xxxxxxxx 23,666(5)
Xxxxxxxxxxx Xxxxxxxx 33,333
Gabrieli Family Foundation 3,333
Xxxxxxx X. Xxxxxx 3,333
Xxxxxxx X. Xxxxx 6,667
Xxxxxxx X. Xxxxxxx 3,333
Xxxxxx X. Xxxxxxx 3,333
Xxxxxx X. Xxxx 000
Xxxx X. Xxxxx, Xx. 10,000
BVP III Special Situations L.P. 22,222
--------
(5) Xx. Xxxxxxxx has initiated a transfer of certain of his Series B Preferred
Shares to the following Bessemer employes: Xxxxx X. Xxxxx (5,333 shares);
Xxxxxxxx Xxxx (1,333 shares); Xxxxxx X. Xxxxxxx (2,667 shares); Xxxx X.
Xxxxxxx (2,000 shares); and Xxxx X. Xxxx (2,333 shares).
-4-
87
Series A Series B
Common Common Stock Series A Preferred Series B Preferred
Stock Warrants, Preferred Warrants, Preferred Warrants,
Issued & Options & Issued & Options and Issued & Options
Stockholder Outstanding Rights Outstanding Rights Outstanding and Rights
----------- ----------- ------ ----------- ------ ----------- -----------
Bessemer Venture Partners III 580,446
L.P.
Japan Associated Finance Co., 40,000
Ltd.
JAFCO G-5 Investment 82,712
Enterprise Partnership
JAFCO R-1 (A) Investment 38,644
Enterprise Partnership
JAFCO R-1 (B) Investment 38,644
Enterprise Partnership
U.S. Information Technology 800,000
Investment Enterprise
Partnership
Xxxxxxx Xxxxx 50,000
-5-
88
Schedule 1
---------------------------------------------------------------------------
Shares to be
Purchased at
Purchaser's Name and Address Closing Purchase Price
---------------------------- ------- --------------
---------------------------------------------------------------------------
InterWest Partners V 248,438 $1,739,066
0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
InterWest Investors V 1,562 10,934
0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000
Xxxxx Xxxx, XX 00000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
Xxxxxx X. Xxxx 14,500 101,500
Self-Directed XXX
Two Galleria Tower
00000 Xxxx Xxxx
Xxxxx 0000, XX-0
Xxxxxx, Xxxxx 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
Xxxxx Xxxxx Fund IV L.P. 285,714 1,999,998
c/o Xxxxx Xxxxx Management Co.
Two Galleria Tower
00000 Xxxx Xxxx
Xxxxx 0000, XX-0
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
Xxxxx Xxxxx Fund V L.P. 142,857 999,999
c/o Xxxxx Xxxxx Management Co.
Two Galleria Tower
00000 Xxxx Xxxx
Xxxxx 0000, XX-0
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
89
2
---------------------------------------------------------------------------
Shares to be
Purchased at
Purchaser's Name and Address Closing Purchase Price
---------------------------- ------- --------------
---------------------------------------------------------------------------
Xxxxx Xxxxx Xxxxxxx 714 4,998
Management Company
Two Galleria Tower
00000 Xxxx Xxxx
Xxxxx 0000, XX-0
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
X.X. Xxxxx 25,000 175,000
c/o Xxxxx Xxxxx Management Co.
Two Galleria Tower
00000 Xxxx Xxxx
Xxxxx 0000, XX-0
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
Xxxxxxxx Xxxxxxx 25,000 175,000
c/o Xxxxx Xxxxx Management Co.
Xxxxxxxxxx 00
0000 Xxxxxxxxx, XX
Xxxxxxxxxxx
Facsimile: 000-0000-000000
---------------------------------------------------------------------------
Xxxxxx Xxxx Trust 14,286 100,002
Two Galleria Tower
00000 Xxxx Xxxx
Xxxxx 0000, XX-0
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
Xxxxxxx X. Domenik 6,429 45,003
Xxxxx Xxxxx Funds
000 Xxxxxx Xxxxxx
Xxxxx 000
Xxxx Xxxx, XX 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
90
3
---------------------------------------------------------------------------
Shares to be
Purchased at
Purchaser's Name and Address Closing Purchase Price
---------------------------- ------- --------------
---------------------------------------------------------------------------
Xxxxxxx River Partnership VII 250,000 1,750,000
c/o Xxxxxxx River Ventures
00 Xxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxx, Xxxxxxxxxxxxx 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
Vanguard IV L.P. 142,850 999,950
000 Xxxxxxxxxx Xxxxxx
Xxxxx 000
Xxxx Xxxx, Xxxxxxxxxx 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
SVM Star Ventures 83,898 587,286
Managementgesellschaft mbH Nr.
3
Xxxxxxxxxx. 0
X-00000 Xxxxxxx
Xxxxxxx
Facsimile: (011) 49-89-41-
943-030
---------------------------------------------------------------------------
SVE Star Ventures Enterprises 33,548 234,836
No. II
Limited Partnership
Xxxxxxxxxx. 0
X-00000 Xxxxxxx
Xxxxxxx
Facsimile: (011) 49-89-41-
943-030
---------------------------------------------------------------------------
SVE Star Ventures Enterprises 90,026 630,182
No. III
Limited Partnership
Xxxxxxxxxx. 0
X-00000 Xxxxxxx
Xxxxxxx
Facsimile: (011) 49-89-41-
943-030
---------------------------------------------------------------------------
91
4
---------------------------------------------------------------------------
Shares to be
Purchased at
Purchaser's Name and Address Closing Purchase Price
---------------------------- ------- --------------
---------------------------------------------------------------------------
SVE Star Ventures Enterprises 7,528 52,696
No. IIIA
Limited Partnership
Xxxxxxxxxx. 0
X-00000 Xxxxxxx
Xxxxxxx
Facsimile: (011) 49-89-41-
943-030
---------------------------------------------------------------------------
SVM Star Ventures 107,143 750,001
Managementgesellschaft mbH Nr.
3 & Co. Beteiligungs XX
Xxxxxxxxxx. 0
X-00000 Xxxxxxx
Xxxxxxx
Facsimile: (011) 49-89-41-
943-030
---------------------------------------------------------------------------
Techno Partners 3,571 24,997
000 Xxxxxxxxxx Xxxxxx, #0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
Japan Associated Finance Co., 6,857 47,999
Ltd.
c/o JAFCO American Ventures
000 Xxxxxxxxxx Xxxxxx, #0000
Xxx Xxxxxxxxx, XX 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
JAFCO G-5 Investment 14,179 99,253
Enterprise Partnership
c/o JAFCO American Ventures
000 Xxxxxxxxxx Xxxxxx, #0000
Xxx Xxxxxxxxx, XX 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
92
5
---------------------------------------------------------------------------
Shares to be
Purchased at
Purchaser's Name and Address Closing Purchase Price
---------------------------- ------- --------------
---------------------------------------------------------------------------
JAFCO R-1(A) Investment 6,625 46,375
Enterprise Partnership
c/o JAFCO American Ventures
000 Xxxxxxxxxx Xxxxxx, #0000
Xxx Xxxxxxxxx, XX 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
JAFCO R-1(B) Investment 6,625 46,375
Enterprise Partnership
c/o JAFCO American Ventures
000 Xxxxxxxxxx Xxxxxx, #0000
Xxx Xxxxxxxxx, XX 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
U.S. Information Technology 137,143 960,001
Investment Enterprise Partnership
c/o JAFCO American Ventures
000 Xxxxxxxxxx Xxxxxx, #0000
Xxx Xxxxxxxxx, XX 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
Xxxxx Xxxxxxxxxx 1,428 9,996
x/x Xxxxxxxx Xxxxxxx Partners
0000 Xxx Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Phone: (000) 000-0000
---------------------------------------------------------------------------
Xxxxxx X. Xxxxxxxx 1,000 7,000
x/x Xxxxxxxx Xxxxxxx Partners
0000 Xxx Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Phone: (000) 000-0000
---------------------------------------------------------------------------
93
6
---------------------------------------------------------------------------
Shares to be
Purchased at
Purchaser's Name and Address Closing Purchase Price
---------------------------- ------- --------------
---------------------------------------------------------------------------
G. Xxxxx Xxxxxxxx 3,000 21,000
c/o Bessemer Venture Partners
0000 Xxx Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Phone: (000) 000-0000
---------------------------------------------------------------------------
Xxxxxxx X. Xxxxxx 1,430 10,010
c/o Bessemer Venture Partners
0000 Xxx Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Phone: (000) 000-0000
---------------------------------------------------------------------------
Xxxxxx X. Xxxxx 358 2,506
c/o Bessemer Venture Partners
0000 Xxx Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Phone: (000) 000-0000
---------------------------------------------------------------------------
Xxxxxxx X. Xxxxx 1,333 9,331
c/o Bessemer Venture Partners
0000 Xxx Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Phone: (000) 000-0000
---------------------------------------------------------------------------
Xxxx X. Xxxxxxx 430 3,010
c/o Bessemer Venture Partners
0000 Xxx Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Phone: (000) 000-0000
---------------------------------------------------------------------------
Xxxxxxx X. Xxxxxxx 1,000 7,000
c/o Bessemer Venture Partners
0000 Xxx Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Phone: (000) 000-0000
---------------------------------------------------------------------------
94
7
---------------------------------------------------------------------------
Shares to be
Purchased at
Purchaser's Name and Address Closing Purchase Price
---------------------------- ------- --------------
---------------------------------------------------------------------------
Belisarius Corporation 1,000 7,000
x/x Xxxxxxxx Xxxxxxx Partners
0000 Xxx Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Phone: (000) 000-0000
---------------------------------------------------------------------------
Xxxxxx X. Xxxxxxxx 300 2,100
c/o Bessemer Venture Partners
0000 Xxx Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Phone: (000) 000-0000
---------------------------------------------------------------------------
Xxxxxx X. Xxxx 300 2,100
c/o Bessemer Venture Partners
0000 Xxx Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Phone: (000) 000-0000
---------------------------------------------------------------------------
Xxxxxxx Corporation 1,429 10,003
x/x Xxxxxxxx Xxxxxxx Partners
0000 Xxx Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Phone: (000) 000-0000
---------------------------------------------------------------------------
BVP III Special Situations L.P. 9,523 66,661
0000 Xxx Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Phone: (000) 000-0000
---------------------------------------------------------------------------
Bessemer Venture 410,326 2,872,282
Partners III L.P.
0000 Xxx Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxxx, XX 00000
Telephone: (000) 000-0000
---------------------------------------------------------------------------
95
8
---------------------------------------------------------------------------
Shares to be
Purchased at
Purchaser's Name and Address Closing Purchase Price
---------------------------- ------- --------------
---------------------------------------------------------------------------
Xxxxx Xxxxxxxxx 72,533 507,731
c/o Xxxxxxx Xxxxx Securities, Inc.
000 Xxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
UVCC Fund II 32,775 229,425
Arete Ventures, Inc.
Suite 1040
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
UVCC II Parallel Fund, L.P. 32,775 229,425
Arete Ventures, Inc.
Suite 1040
0000 Xxxxxxxxx Xxxxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Phone: (000) 000-0000
facsimile: (000) 000-0000
---------------------------------------------------------------------------
Investment Advisers, Inc. 43,701 305,907
3800 First Bank Place
000 Xxxxxx Xxxxxx
Xxxxxxxxxxx, Xxxxxxxxx 00000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
Xxxxxx Xxxxxxxxxxxxx 21,745 152,215
0000 Xxxxxxxx
Xxxxxx, Xxxxx 00000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
FBO Xxxxx Xxxxxx 6,555 45,885
c/o Crown Advisors Ltd.
The Lincoln Building
00 Xxxx 00xx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
96
9
---------------------------------------------------------------------------
Shares to be
Purchased at
Purchaser's Name and Address Closing Purchase Price
---------------------------- ------- --------------
---------------------------------------------------------------------------
Mahuma, N.V. 4,370 30,590
Xxxxxxxx, Wise & Xxxxxxxx
1271 Avenue of the Americas
Xxxxx 0000
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
Xxxxxxxx X. Xxxxxxxxxx 2,185 15,295
Xxxxxx, Xxxx & Xxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx,
Xxx Xxxx 00000-0000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
Xxxxx X. Xxxxxxxxxx 2,185 15,295
c/x Xxxxxxxxxx Capital
Management Assoc. Inc.
One Galleria Tower
00000 Xxxx Xxxx
Xxxxx 0000, XX 00
Xxxxxx, Xxxxx 00000-0000
Facsimile: (000) 000-0000
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Xxxxxx X. Xxxx 2,185 15,295
0 Xxxxx Xxxxx
Xxxxxxxxxx,
Xxxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
C. Xxxxx Xxxxx 1,087 7,609
0000 Xxxxx Xxxxx, Xxxxx 000
Xxxxx, Xxxxx 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
Dominion Ventures 25,596 179,172
00 Xxxxxxxxxx Xxxxxx,
Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
---------------------------------------------------------------------------
97
10
---------------------------------------------------------------------------
Shares to be
Purchased at
Purchaser's Name and Address Closing Purchase Price
---------------------------- ------- --------------
---------------------------------------------------------------------------
WPG Enterprise Fund II, L.P. 725,000 5,075,000
000 Xxxxxxxxxx Xxxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
Technoinvest Management A.S. 8,286 58,002
Eiken Industripark
Xxxxxxxxxx #00
X-0000 Xxxxxx
Xxxxxx
---------------------------------------------------------------------------
Mosvold Farsund A.S. 135,714 949,998
Xxxxxxxxxx #00
X.X. Xxx 0000
X-0000 Xxxxxx
Xxxxxx
---------------------------------------------------------------------------
Leeway & Co. 285,714 1,999,998
State Street Bank and Trust
Company
Master Trust Division
Xxx Xxxxxxx Xxxxx
Xxxxxxx Xxxxxxxx, 0xx Xxxxx, X0X
North Xxxxxx,
Xxxxxxxxxxxxx 00000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
Gilbraltar Trust 142,857 999,999
Rho Management
000 0xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
---------------------------------------------------------------------------
Cowen Investment Partners 36,000 252,000
XXIII
Xxxxxxxxx Xxxxxx
00xx Xxxxx
Xxx Xxxx, XX 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
98
11
---------------------------------------------------------------------------
Shares to be
Purchased at
Purchaser's Name and Address Closing Purchase Price
---------------------------- ------- --------------
---------------------------------------------------------------------------
Xxx Xxxxxx 14,286 100,002
0000 Xxxxx Xxxx Xxxx
Xxxxxxx, Xxxxxxx 00000
Phone: (000) 000-0000
---------------------------------------------------------------------------
WA & H Investment, L.L.C. 36,000 252,000
000 Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxxxx, XX 00000
Phone: (000) 000-0000
Facsimile: (000) 000-0000
---------------------------------------------------------------------------
