EXHIBIT 10.2
EXECUTION COPY
STOCK PURCHASE AGREEMENT
by and among
TELLIUM, INC.,
CISCO SYSTEMS, INC.
and
OTHER INVESTORS
Dated as of February 11, 1999
TABLE OF CONTENTS
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Page
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SECTION 1. Definitions................................................................. 1
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1.1. Affiliate................................................................... 1
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1.2. Senior Notes................................................................ 1
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1.3. Warrants.................................................................... 1
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SECTION 2. Certificate of Incorporation................................................ 1
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SECTION 3. Issuance and Sale of Preferred Shares and Reservation of Reserved Shares;
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Closing..................................................................... 1
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3.1. Issuance of Preferred Shares and Reservation of Reserved Shares............. 1
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3.2. Agreement to Sell and Purchase Preferred Shares............................. 2
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3.3. The Closing................................................................. 2
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3.4. Conveyances at Closing...................................................... 2
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3.5. Subsequent Sales of Series C Preferred Stock................................ 2
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SECTION 4. Representations and Warranties of the Corporation........................... 3
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4.1. Corporate Organization...................................................... 3
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4.2. Capitalization; Issuance of Preferred Shares................................ 3
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4.3. Subsidiaries................................................................ 4
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4.4. Authority................................................................... 5
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4.5. No Violation; No Consent or Approval Required............................... 5
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4.6. Financial Information....................................................... 5
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4.7. Conduct of Business......................................................... 6
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4.8. Litigation.................................................................. 6
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4.9. Labor Agreements and Actions................................................ 7
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4.10. Absence of Certain Changes or Events........................................ 7
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4.11. Title to Properties; Absence of Liens and Encumbrances...................... 7
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4.12. Intellectual Property....................................................... 8
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4.13. Material Contracts.......................................................... 9
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4.14. Certain Agreements and Employee Benefit Plans............................... 9
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4.15. Taxes....................................................................... 11
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4.16. Preferred Stock Offering.................................................... 12
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4.17. Insurance................................................................... 12
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SECTION 5. Representations and Warranties of the Investors............................. 12
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5.1. Power and Authority......................................................... 12
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5.2. No Consent or Approval Required............................................. 12
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5.3. Investment Representations.................................................. 13
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SECTION 6. Conditions to the Closing................................................... 13
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6.1. Corporate Proceedings....................................................... 13
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6.2. No Action................................................................... 14
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6.3. Filing of Certificate of Incorporation...................................... 14
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6.4. Stockholders Agreement...................................................... 14
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6.5. Certificates, Instruments and Documents..................................... 14
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6.6. Opinion of Counsel.......................................................... 14
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SECTION 7. Post-Closing Covenants...................................................... 14
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7.1. Access to Records........................................................... 14
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7.2. Financial Reports........................................................... 15
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7.3. Qualified IPO............................................................... 17
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SECTION 8. Restriction on Transfer..................................................... 17
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SECTION 9. Transfer Taxes.............................................................. 19
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SECTION 10. Exchanges; Lost, Stolen or Mutilated Certificates........................... 19
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SECTION 11. Survival of Representations, Warranties and Agreements, Etc................. 19
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SECTION 12. Indemnification............................................................. 19
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SECTION 13. Remedies.................................................................... 20
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SECTION 14. Successors and Assigns...................................................... 20
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SECTION 15. Entire Agreement............................................................ 20
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SECTION 16. Notices..................................................................... 20
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SECTION 17. Changes..................................................................... 21
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SECTION 18. Counterparts................................................................ 21
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SECTION 19. Headings.................................................................... 21
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SECTION 20. Nouns and Pronouns.......................................................... 21
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SECTION 21. Governing Law............................................................... 21
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SECTION 22. Corporation Disclosure Schedule............................................. 21
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ATTACHMENTS
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SCHEDULES
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Corporation Disclosure Schedule
Schedule I - Investors
Schedule 5.2 - Investor Consents
EXHIBITS
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Exhibit A - Certificate of Incorporation
Exhibit B - Stockholders Agreement
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement"), dated as of February 11,
1999, is entered into by and among Tellium, Inc., a Delaware corporation (the
"Corporation"), Cisco Systems, Inc., a California corporation ("Cisco") and the
other investors listed in Schedule I attached hereto (together with Cisco,
collectively the "Investors").
SECTION 1. Definitions. As used herein, the terms below shall have the
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following meanings. Any of such terms, unless the context otherwise requires,
may be used in the singular or the plural, depending upon the reference.
1.1. Affiliate. The term "Affiliate" shall mean, with respect to any
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party, an entity that owns or controls, is owned or controlled by, or is owned
or controlled by any entity owning or controlling, such party in question at the
time in question. For purposes of this definition, ownership or control of a
corporation or similar entity requires the direct or indirect ownership of stock
or other interest representing at least two-thirds (2/3) of the voting power for
the election or appointment of directors of such corporation or entity.
1.2. Senior Notes. The term "Senior Notes" shall mean the Senior
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Convertible Promissory Notes of the Corporation dated as of December 30, 1998 in
the aggregate principal amount at maturity of $16,000,000.
1.3. Warrants. The term "Warrants" shall mean the Warrants to purchase an
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aggregate of up to 1,000,000 shares of the Series A Preferred Stock of the
Company (as adjusted for stock splits, stock dividends, reverse splits and the
like) issued in connection with the issuance of the Senior Notes.
SECTION 2. Certificate of Incorporation. Prior to the execution and
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delivery of this Agreement, the Corporation shall have filed with the Secretary
of State of the State of Delaware an Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation"), a copy of which is attached
hereto as Exhibit A. Article Four thereof, among other things, (i) authorizes
15,087,268 shares of Preferred Stock, $0.001 par value (the "Preferred Stock"),
and designates 4,403,934 shares as Series C Preferred Stock (the "Series C
Preferred Stock") and (ii) sets forth the terms, designations, powers,
preferences and relative, participating, optional and other special rights, and
the qualifications, limitations and restrictions, of the Series C Preferred
Stock.
SECTION 3. Issuance and Sale of Preferred Shares and Reservation of
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Reserved Shares; Closing.
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3.1. Issuance of Preferred Shares and Reservation of Reserved Shares.
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Subject to the terms and conditions hereof, the Corporation has authorized
the issuance on the Closing Date (as defined in Section 3.3 hereof) of an
aggregate of 4,403,934 shares of Series C Preferred Stock (such shares of Series
C Preferred Stock being sometimes hereinafter referred to as the "Preferred
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Shares"), and the reservation of 4,403,934 shares of common stock, $0.001 par
value (the "Common Stock"), of the Corporation for issuance upon conversion of
the Preferred Shares (such reserved Common Stock being sometimes hereinafter
referred to as the "Reserved Shares").
3.2. Agreement to Sell and Purchase Preferred Shares. Subject to the
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terms and conditions hereof, the Corporation shall issue to each Investor and
each Investor, severally and not jointly, shall acquire from the Corporation at
the Closing (as defined in Section 3.3 hereof) the number of Preferred Shares
set forth opposite the name of such Investor on Schedule I hereto. The purchase
price to be paid by such Investor shall be $9.15 per share of Preferred Shares
purchased by the Investor (the "Purchase Price").
3.3. The Closing. The closing (the "Closing") hereunder with respect to
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the transactions contemplated hereby is taking place on the date hereof at the
offices of the Corporation (the date hereof sometimes being referred to herein
as the "Closing Date").
3.4. Conveyances at Closing. At the Closing, the Corporation shall
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deliver to each Investor a certificate or certificates, registered in the name
of such Investor, representing that number of Preferred Shares being purchased
by such Investor against receipt by the Corporation of a check payable to the
Corporation or a wire transfer to an account designated by the Corporation in
the full amount of the aggregate Purchase Price for the Preferred Shares being
purchased by such Investor at the Closing.
3.5. Subsequent Sales of Series C Preferred Stock. It is anticipated
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that certain purchasers may not purchase Series C Preferred Stock at the
Closing, but may acquire Series C Preferred Stock in an aggregate amount not to
exceed 1,857,923 shares of Series C Preferred Stock at the Purchase Price at a
later date within 180 days following the Closing; provided, however, that the
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number of shares of Series C Preferred Stock eligible for sale to purchasers
subsequent to the Closing shall be reduced ratably by any shares of Series C
Preferred Stock issued or issuable pursuant to Article IV, Paragraph (E)(5) of
the Certificate of Incorporation prior to or as a result of any proposed sale of
Series C Preferred Stock hereunder. Any such sales of Series C Preferred Stock
shall be made on the terms and conditions set forth in this Agreement. Any
Series C Preferred Stock sold pursuant to this Section 3.5 shall be deemed to be
"Preferred Shares" for all purposes under this Agreement and shall be deemed to
be "Preferred Stock" and "Registrable Securities" for all purposes of the
Stockholders Agreement. Upon execution and delivery of a counterpart to this
Agreement, the purchasers thereof shall be deemed to be "Investors" for all
purposes of this Agreement and shall be deemed to be "Qualified Offerees" and
"Stockholders" as of the date of this Agreement for all purposes of the
Stockholders Agreement and Schedule I hereto shall be amended to add such
parties; provided, however, that no party that markets a product generating
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revenues which competes with a product of comparable application (A) marketed by
a company in which representatives of Cisco or its Affiliates represent a
majority of the board of directors of such company or in which Cisco and its
Affiliates own more than fifty percent (50%) of the total combined voting power
for election of directors of such company and (B) which product is a principal
product of such company, shall be permitted to purchase shares of Series C
Preferred Stock hereunder without the prior written consent of Cisco (which
consent shall not be unreasonably withheld).
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SECTION 4. Representations and Warranties of the Corporation. As of the
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date hereof, the Corporation hereby represents and warrants to each Investor,
except as and to the extent set forth in a disclosure schedule (the "Corporation
Disclosure Schedule") attached hereto setting forth exceptions specified therein
to the representations and warranties contained in this Section 4, as follows:
4.1. Corporate Organization. The Corporation is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
Delaware and has a requisite power and authority and all necessary governmental
franchises, licenses, permits, authorizations and approvals to own or lease and
operate its properties and assets and to carry on its business as it is now
being conducted, and is duly qualified or licensed as a foreign corporation to
do business and in good standing in each jurisdiction in which the conduct or
nature of the business conducted by it or the character or location of the
properties owned or leased by it makes such qualification or licensing
necessary, except where the failure to be so qualified or licensed would not
have a Material Adverse Effect. As used herein the term "Material Adverse
Effect" means any change or effect that, individually or in the aggregate, is or
is reasonably likely to be materially adverse to the business, assets, results
of operations or condition (financial or otherwise) of the Corporation taken as
a whole.
4.2. Capitalization; Issuance of Preferred Shares.
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(a) As of the date hereof, the authorized capital stock of the
Corporation consists of the following:
(i) 15,087,268 shares of Preferred Stock, of which (A) 10,433,334
shares are designated as Series A Preferred Stock, 9,183,334 of which are issued
and outstanding, 1,000,000 of which are reserved for issuance upon exercise of
the Warrants and 250,000 of which are reserved for issuance upon conversion of
the Series B Preferred Stock, (B) 250,000 shares are designated Series B
Preferred Stock, 233,333 of which are issued and outstanding, and (C) 4,403,934
shares are designated Series C Preferred Stock, of which 2,546,011 (as of
February 11, 1999), after giving effect to the transactions contemplated by this
Agreement and the conversion of the Senior Notes, will be issued and
outstanding. Such shares of outstanding Series A Preferred Stock and Series B
Preferred Stock have been duly authorized and validly issued, are nonassessable
and fully paid and are convertible into an aggregate of 9,416,667 shares of
Common Stock and are free of restrictions on transfer other than restrictions on
transfer under that certain Stock Purchase and Contribution Agreement dated May
8, 1997 (the "Stock Purchase Agreement") and the Stockholders Agreement dated
February 11, 1999 among the Corporation, the Investors and the other
stockholders party thereto in the form of Exhibit B hereto (the "Stockholders
Agreement") and under applicable state and federal securities laws. None of the
outstanding shares of Preferred Stock were issued, offered or sold by the
Company in violation of any applicable federal or state securities laws. The
Preferred Shares that are being purchased by the Investors hereunder, when
issued, sold and delivered in accordance with the terms of this Agreement for
the consideration expressed herein, will be duly authorized and validly issued,
nonassessable and fully paid and convertible into shares of Common Stock on a
one-for-one basis (subject to adjustment for stock splits, stock dividends,
stock combinations and the like) and will be free of restrictions on transfer
other than restrictions on transfer under this Agreement and the Stockholders
Agreement and under applicable state and federal securities laws.
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(ii) 40,000,000 shares of Common Stock, 868,000 shares of which
are outstanding and are duly authorized and validly issued, nonassessable and
fully paid. None of the outstanding shares of Common Stock were issued, offered
or sold by the Company in violation of any applicable federal or state
securities laws.
(b) Section 4.2 of the Corporation Disclosure Schedule contains
capitalization tables for the Corporation showing the current ownership of the
Common Stock and Preferred Stock, without giving effect to the transactions
contemplated by this Agreement. There are no treasury shares held by the
Corporation.
(c) The Common Stock issuable upon conversion of the issued and
outstanding Preferred Stock and the Preferred Stock to be issued hereunder and
upon conversion of the Senior Notes has been duly and validly reserved for
issuance and, when and if issued upon such conversion in accordance with the
terms of the Certificate of Incorporation, will be validly issued, fully paid
and nonassessable and will be free of restrictions on transfer other than
restrictions on transfer under the Stock Purchase Agreement, this Agreement and
the Stockholders Agreement and under applicable state and federal securities
laws. The Corporation has reserved sufficient authorized, but unissued, Common
Stock for issuance upon conversion of the Preferred Stock.
(d) Except for (i) the conversion privileges of the Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, (ii)
outstanding options ("Stock Options") to purchase that number of shares of
Common Stock set forth in Section 4.2 of the Corporation Disclosure Schedule
pursuant to the Corporation's stock option plan (the "Stock Option Plan"), (iii)
the Warrants, (iv) the conversion rights of the Senior Notes and (v) the rights
provided in the Stockholders Agreement, there are no preemptive rights or
options, warrants, conversion privileges or other rights (or agreements for any
such rights) outstanding to purchase or otherwise obtain from the Corporation
any of the Corporation's securities.
(e) Except for the Stockholders Agreement, there are no voting trusts
or other agreements or understandings to which the Corporation is a party with
respect to the voting of the capital stock of the Corporation.
4.3. Subsidiaries. The Corporation does not own, directly or indirectly,
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any equity or similar interest in, or any interest convertible into or
exchangeable for, any equity or similar interest in, any corporation,
partnership, joint venture or other business association or entity.
4.4. Authority. The Corporation has the full power and authority to enter
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into this Agreement, to issue and sell the Series C Preferred Stock to be sold
hereunder, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. All necessary action has been taken by the
Corporation with respect to the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. This Agreement has been
duly executed and delivered by, and, assuming the due authorization, execution
and delivery thereof by each of the Investors, constitutes a valid and binding
obligation of, the Corporation, enforceable against the Corporation in
accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and similar laws of general applicability affecting creditors' rights
and to general equity principles.
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4.5. No Violation; No Consent or Approval Required.
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(a) Neither the execution and delivery of this Agreement by the
Corporation nor the consummation by the Corporation of the transactions
contemplated hereby will (i) conflict with or result in any breach or violation
of any provision of the Certificate of Incorporation or Bylaws of the
Corporation, or (ii) constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or give rise to a
right of termination, cancellation or acceleration of any obligation contained
in, or result in the creation of any lien or other encumbrance upon any of the
properties or assets of the Corporation under, any of the terms, conditions or
provisions of (x) any note, bond, mortgage, indenture, deed of trust, lease,
agreement or other instrument or obligation to which the Company is a party or
by which any of its properties or assets are bound or (y) any permit,
concession, grant, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Corporation or to which it or
any of its properties or assets may be subject.
(b) No consent, approval or authorization of, or declaration to or
filing with, any court, administrative agency, commission or other governmental
or regulatory authority or instrumentality, domestic or foreign (a "Governmental
Entity"), or other third party is required to be made by or obtained for
consummation of the transactions contemplated hereby, other than (i) the filing
of the Certificate of Incorporation with the Secretary of State of the State of
Delaware and (ii) those consents, approvals, authorizations, declarations or
filings which have been or will timely be obtained or made, as the case may be,
and which are identified on Section 4.5 of the Corporation Disclosure Schedule.
4.6. Financial Information. Section 4.6 of the Corporation Disclosure
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Schedule consists of the following financial statements of the Corporation: (i)
audited financial statements for the year ended December 31, 1997; and (ii) an
unaudited internally prepared balance sheet, operating statement and cash flow
statement as of and for the eleven-months ended November 30, 1998. The audited
financial statements referred to in clause (i) of this Section 4.6 and the
unaudited financial statements referred to in clause (ii) of this Section 4.6,
together with the footnotes and supporting schedules in respect of such
financial statements, are collectively referred to as the "Financial
Statements."
(a) The Financial Statements have been prepared in accordance with
United States generally accepted accounting principles ("GAAP") applied on a
consistent basis (except as may be indicated therein or in the notes thereto)
and fairly present in all material respects the financial position of the
Corporation as of the respective dates thereof and the results of operations and
cash flows for the respective periods then ended, subject to normal year-end
adjustments with respect to the interim financial statements.
(b) The Financial Statements set forth all the liabilities of the
Corporation (direct and indirect, contingent and accrued) of whatever nature at
the date thereof, whether arising out of contract, tort, statute or otherwise,
except liabilities and obligations under contracts, commitments, agreements,
torts, statutes, claims or otherwise set forth on the Corporation Disclosure
Schedule, and except for liabilities and obligations which are not required
under GAAP to be set forth on the Financial Statements and which would not have
a Material Adverse Effect.
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4.7. Conduct of Business.
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(a) The business of the Corporation, as presently conducted, is not
being conducted in default or violation of any term, condition or provision of
(i) the Certificate of Incorporation or Bylaws of the Corporation, or (ii) any
note, bond, mortgage, indenture, deed of trust, lease, agreement, or other
instrument or obligation to which the Corporation is a party or by which the
Corporation or any of its properties or assets may be bound, or (iii) any
federal, state, local or foreign statute, law, ordinance, rule, regulation,
judgment, decree, order, concession, grant, franchise, permit or license or
other governmental authorization or approval applicable to the Corporation,
excluding from the foregoing clauses (ii) and (iii) defaults or violations that
would not have a Material Adverse Effect.
(b) The Corporation is in compliance in all material respects with
all federal, state, local and foreign laws, ordinances, regulations and orders
applicable to it, its business and the ownership of its assets. The Corporation
has all certificates, authorizations, licenses, permits, orders or approvals of,
and has made all required registrations with, any Governmental Entity that are
material to the conduct of the business of the Corporation (collectively,
"Permits"). (i) All Permits are in full force and effect, (ii) no material
violations are or have been recorded in respect of any Permit, and (iii) no
proceeding is pending or, to the knowledge of the Corporation, threatened to
revoke or limit any Permit.
4.8. Litigation. There is no private or governmental action, suit,
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proceeding, claim, arbitration or investigation before any agency, court or
tribunal, foreign or domestic, pending or, to the knowledge of the Corporation,
threatened against the Corporation or any of its properties or pending or
threatened against any of its respective officers or directors (in their
capacities as such). There is no judgment, decree or order against the
Corporation, or, to the knowledge of the Corporation, any of its directors or
officers (in their capacities as such), that could prevent, enjoin, or
materially alter or delay any of the transactions, contemplated by this
Agreement, or that could reasonably be expected to have a Material Adverse
Effect. Schedule 2.7 lists all litigation that the Corporation has commenced and
is pending against other parties.
4.9. Labor Agreements and Actions.
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(a) The Corporation is not bound by or subject to any written
contract, commitment or arrangement with any labor union, and no labor union has
requested or, to the knowledge of the Corporation, has sought to represent any
of the employees, representatives or agents of the Corporation. There is no
strike or other labor dispute involving the Corporation pending, or to the
knowledge of the Corporation, threatened, nor is the Corporation aware of any
labor organization activity involving its employees.
(b) The employment of each officer and employee of the Corporation is
terminable at the will of the Corporation, and the Corporation has not entered
into any oral or written agreements with any of its officers or employees that
provide for severance or termination pay or acceleration of vesting on stock
options or restricted stock.
(c) The Corporation has complied in all material respects with all
applicable
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state and federal equal employment opportunity laws and with other laws related
to employment.
4.10. Absence of Certain Changes or Events. Since November 30, 1998,
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except for the issuance of the Senior Notes, the issuance of certain Stock
Options set forth in Section 4.2 of the Corporation Disclosure Schedule and as
contemplated by this Agreement, the Corporation has conducted its business only
in the ordinary course consistent with past practice, and there has not been (i)
any material damage, destruction or loss, whether covered by insurance or not,
(ii) any declaration, setting aside or payment of any dividend (whether in cash,
stock or property) with respect to Preferred Stock or Common Stock or any
redemption, purchase or other acquisition by the Corporation of any of its
securities, (iii) any change in the business, operations, properties, condition
(financial or otherwise) or assets of the Corporation having a Material Adverse
Effect, (iv) any labor dispute, other than routine matters, none of which is
material to the Corporation, (v) any entry into any material commitment or
transaction (including, without limitation, any borrowing or capital
expenditure) other than in connection with the Senior Notes or in the ordinary
course of business consistent with past practice, (vi) any material change by
the Corporation in its accounting methods, principles or practices, (vii) any
revaluation by the Corporation of any asset (including, without limitation, any
writing down of the value of inventory or writing off of notes or accounts
receivable), or (viii) any increase in or establishment of any bonus, insurance,
severance, deferred compensation, pension, retirement, profit sharing, stock
option (including, without limitation, the granting of stock options, stock
appreciation rights, performance awards, or restricted stock awards), stock
purchase or other employee benefit plan, or any other increase in the
compensation payable or to become payable to any officers or key employees of
the Corporation.
4.11. Title to Properties; Absence of Liens and Encumbrances.
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(a) The Corporation does not own any real property.
(b) Section 4.11 of the Corporation Disclosure Schedule sets forth a
complete and accurate list of all real property leased by the Corporation. Such
leases are valid and enforceable by the Corporation in accordance with their
terms. The Corporation has not received any notice of any event that, with the
passage of time or the giving of notice or both, would constitute a default
under any such leases.
(c) The Corporation owns or has valid leasehold interests in all of
its tangible properties and assets (real, personal and mixed) used in its
business, free and clear of any liens (other than liens for taxes that are not
yet delinquent), charges, pledges, security interests or other encumbrances,
except for such imperfections of title and encumbrances, if any, that do not
materially detract from the value, or interfere with the use of, the property
subject thereto or affected thereby.
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4.12. Intellectual Property.
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(a) The Corporation either owns, has a valid license or has filed a
valid application with respect to, all material patents, copyrights, trademarks,
trade secrets and other intellectual property necessary for the operation or
conduct of its business as presently conducted (such intellectual property and
the rights thereto are collectively referred to herein as the "Corporation
Intellectual Property Rights") and has taken, through the date hereof, all
action which is reasonably required to preserve, renew and extend all such
intellectual property rights. The Corporation has not licensed any of the
Corporation Intellectual Property Rights in source code form owned by the
Corporation to any third party or entered into any exclusive agreement relating
to the Corporation Intellectual Property Rights owned by the Corporation with
any third party.
(b) The execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby will not constitute a
breach of any instrument or agreement to which the Corporation is a party
governing any patent, copyright, trademark, trade secret or other intellectual
property rights licensed by, or to, the Corporation, will not cause the
forfeiture or termination or give rise to a right of forfeiture or termination
of any Corporation Intellectual Property Rights or materially impair the right
of the Corporation in or to use, sell, enforce, license or otherwise exploit any
Corporation Intellectual Property Rights or portion thereof.
(c) Neither the operation of the Corporation's business, nor the
manufacture, marketing, license, sale or offer for sale or use or intended use
of any product, service or technology currently licensed, manufactured,
distributed, used, sold, offered for sale or under development by the
Corporation (i) violates in any material respect any license or agreement
between the Corporation and any third party or (ii) to the Corporation's
knowledge, infringes any patents, copyright, trademark, trade secret or other
intellectual property right of any third party. There is no pending or, to the
knowledge of the Corporation, threatened claim or litigation involving the
Corporation contesting the validity, ownership or right to use, sell, enforce,
license or dispose of any Corporation Intellectual Property Rights, nor has the
Corporation received any written notice asserting that any Corporation
Intellectual Property Rights or the proposed use, sale, license or disposition
thereof conflicts with the rights of any other party. To the knowledge of the
Corporation, no third party is infringing on any of the Corporation Intellectual
Property Rights.
(d) Schedule 4.12 of the Corporation Disclosure Schedule lists all
patents and patent applications and all registered trademarks included in the
Corporation Intellectual Property Rights, in each case pending or issued,
including, in the case of patents and patent applications, the jurisdictions in
which each such Corporation Intellectual Property Rights has been issued or
registered or in which any application for such issuance and registration has
been filed.
4.13. Material Contracts. Except for grants under the Stock Option Plan
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and as identified in Section 4.13 of the Corporation Disclosure Schedule, there
are no agreements, understandings or proposed transactions between the
Corporation and any of its officers, directors, affiliates, or any affiliate
thereof. Except for the contracts identified in Section 4.13 of the Corporation
Disclosure Schedule (the "Material Contracts"), there are no agreements,
understandings, instruments, contracts or proposed transactions to which the
Corporation is a party
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or by which it is bound, that involve (i) obligations (contingent or otherwise)
of, or payments to, the Corporation in excess of two hundred fifty thousand
($250,000) dollars, other than purchase orders in individual amounts of less
than five hundred thousand ($500,000) dollars received in the ordinary course of
business, (ii) the license of any patent, copyright, trade secret or other
proprietary right to or from the Corporation, or (iii) the grant of rights to
manufacture, produce, assemble, license, market, or sell the Corporation's
products to any third person. Each Material Contract is in full force and effect
except as the same may have expired in accordance with its terms, the
Corporation has not received any written assertion of default under any Material
Contract, and the Corporation has not received any notice related to any
termination or material change to any of the Material Contracts as a result of
the transactions contemplated by this Agreement or otherwise. The Corporation is
not (with or without the lapsed of time or the giving of notice, or both) in
breach or default in any material respect of any of the Material Contracts. The
Corporation has not received any notice of the intention of any party to the
Material Contracts to terminate any such contract. The Corporation is not a
party to, nor has it any obligation under, any contract or agreement, written or
oral, which contains any covenants limiting in any material respect the freedom
of the Corporation to engage in its business as currently conducted anywhere in
the world or to compete in its business with any entity anywhere in the world.
4.14. Certain Agreements and Employee Benefit Plans.
---------------------------------------------
(a) The Corporation is not a party to any (i) employment, severance,
collective bargaining or consulting agreement not terminable on 60 days' or less
notice without material liability to the Corporation, (ii) agreement with any
executive officer or other key employee of the Corporation (A) the benefits of
which are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving the Corporation of the nature of any of
the transactions contemplated by this Agreement, (B) providing any term of
employment or compensation guarantee extending for a period longer than one
year, or (C) providing severance benefits or other benefits after the
termination of employment of such executive officer or key employee regardless
of the reason for such termination of employment, (iii) agreement, plan or
arrangement under which any person may receive payments subject to the tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), or (iv) any stock option plan, stock appreciation right plan,
restricted stock plan or stock purchase plan or other plan or agreement, the
benefits of which would be increased, or the vesting of benefits of which will
be accelerated, by the occurrence of any of the transactions contemplated by
this Agreement or the value of any of the benefits of which will be calculated
on the basis of any of the transactions contemplated by this Agreement.
9
(b) Section 4.14 of the Corporation Disclosure Schedule contains a
true and complete summary or list of, or otherwise describes, (i) all employee
benefit plans (within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option,
stock purchase, restricted stock incentive, deferred compensation, retiree
medical or life insurance, supplemental retirement, severance or other benefit
plans, programs or arrangements, and all employment, termination, severance or
other contracts or agreements to which the Corporation is a party, with respect
to which the Corporation has any obligations which are material in amount and
which are maintained, contributed to or sponsored by the Corporation for the
benefit of any current or former employee, officer or director of the
Corporation and (ii) each employee benefit plan for which the Corporation could
incur liability under Section 4069 of ERISA, in the event such plan were
terminated, or under Section 4212(c) of ERISA, or in respect of which the
Corporation remains secondarily liable under Section 4204 of ERISA
(collectively, the "Material Plans"). Each Material Plan is in writing and the
Corporation has previously provided to the Investors access to a true and
complete copy of each Material Plan and a true and complete copy of each
material document prepared in connection with each such Material Plan including,
to the extent applicable, (i) a copy of each trust or other funding arrangement,
(ii) the most current summary plan description and summary of material
modifications, (iii) the most recently filed Internal Revenue Service ("IRS")
Form 5500, (iv) the most recently received IRS determination letter for each
such Material Plan, and (v) the most recently prepared actuarial report and
financial statement in connection with each such Material Plan. The Corporation
has no commitment (i) to create, incur liability with respect to or cause to
exist any other employee benefit plan, program or arrangement, other than the
Material Plans, (ii) to enter into any contract or agreement to provide
compensation or benefits to any individual, or (iii) to modify, change or
terminate any Material Plan, other than with respect to a modification, change
or termination required by ERISA or the Code. To the extent applicable, the
Material Plans comply with the material requirements of ERISA and the Code, and
any Material Plan intended to be qualified under Section 401(a) of the Code has
been determined by the Internal Revenue Service to be so qualified and nothing
has occurred with respect to the operation of such Material Plan which could be
reasonably expected to cause the loss of such qualification. The Corporation
has no liability (contingent or otherwise) with respect to any employee benefit
plan covered by Title IV of ERISA. Neither the Corporation nor, to the
Corporation's knowledge, any officer or director of the Corporation has incurred
any liability or penalty under Sections 4975 through 4980 of the Code or Title I
of ERISA. Each Material Plan has been maintained and administered in all
material respects in compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations, including but
not limited to ERISA and the Code, which are applicable to such Material Plans.
There are no pending or, to the Corporation's knowledge, threatened claims which
have been asserted or instituted against or otherwise involving any of the
Material Plans and no suit, action or other litigation (excluding claims for
benefits incurred in the ordinary course of Material Plan activities) has been
brought or, to the knowledge of the Corporation, is threatened against or with
respect to any such Material Plan. All material contributions, reserves or
premium payments required to be made or accrued as of the date hereof to the
Material Plans have been made or accrued.
(c) Section 4.2 of the Corporation Disclosure Schedule contains a true
and correct list of each person who holds, or who has been given a commitment by
the Corporation to be issued, any Stock Option pursuant to the Stock Option Plan
as of the date hereof, together with
10
(i) the number of shares of Common Stock subject to such Stock Option, (ii) the
date of grant or anticipated grant of such Stock Option, (iii) the extent to
which such Stock Option is currently vested or scheduled to vest by January 31,
1999, (iv) the exercise price of such Stock Option, (v) whether such Stock
Option is intended to qualify as an incentive Stock Option within the meaning of
Section 422(b) of the Code (an "ISO"), and (vi) the expiration date of such
Stock Option. Section 4.2 of the Corporation Disclosure Schedule also sets forth
the aggregate number of ISO's and nonqualified stock options outstanding as of
the date hereof.
4.15. Taxes.
-----
(a) The Corporation has timely filed (taking into account any
extension of time within which to file) all federal income Tax Returns and all
other material Tax Returns that are required to be filed by it. The Corporation
has paid, or adequately provided for on its Financial Statements in accordance
with GAAP, all Taxes relating to such Tax Returns that are due from the
Corporation. No material tax liens have been filed and no material deficiencies
or claim are being proposed or asserted in writing with respect to any Taxes.
(b) The income Tax Returns of the Corporation have not been examined
by the IRS or any other taxing authority, and no such examination is pending or,
to the knowledge of the Corporation, threatened. No waivers, extensions or
comparable consents of the time to assess any Income Taxes of the Corporation
are currently outstanding.
(c) The Corporation has never been a member of an affiliated group
filing consolidated returns for federal income Tax purposes. The Corporation is
not a party to any Tax allocation or Tax sharing agreement.
(d) For purposes of this Agreement: (i) "Tax" or "Taxes" means any
and all taxes, fees, levies, duties, tariffs, imposts and other charges of any
kind (together with any interest, penalties, additions to tax or additional
amounts imposed by any taxing authority with respect thereto), imposed by any
government or taxing authority, including, without limitation, taxes or other
charges on or with respect to income, franchises, windfall or other profits,
gross receipts, property, sales, use, capital stock, payroll, employment, social
security, workers' compensation, unemployment compensation, or net worth; taxes
or other charges in the nature of excise, withholding, ad valorem, escheat,
stamp, transfer, value added or gains taxes, license, registration and
documentation fees; and customs' duties, tariffs and similar charges; (ii)
"Income Tax" means federal income Tax and state and local income and franchise
Taxes imposed on or measured by net income; and (iii) "Tax Return" means all
return, declarations, reports, estimates, information returns and statements
required to be filed in respect of any Taxes.
4.16. Preferred Stock Offering. Subject to the truth and accuracy of the
------------------------
representations and warranties of the Investors set forth in Section 5, the
offer, sale and issuance of the Preferred Shares as contemplated by this
Agreement are exempt for the registration requirements of any applicable state
and federal securities laws, subject to certain post-Closing filings required by
state "blue sky" laws.
4.17. Insurance. All the insurable properties of the Corporation are
---------
insured for the benefit of the Corporation in such amounts, with such
deductibles and against such risks and losses
11
as are deemed adequate by the Corporation with respect to risks usually insured
against by persons operating similar properties in the localities in which such
properties are located under policies in effect and issued by insurers of
recognized responsibility.
SECTION 5. Representations and Warranties of the Investors. Each Investor
--------- -----------------------------------------------
hereby, severally as to itself only, represents and warrants to the Corporation
as follows:
5.1. Power and Authority. Such Investor has full corporate power and
-------------------
authority to enter into this Agreement, to purchase Preferred Shares to be sold
by the Corporation hereunder, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. All necessary corporate action
has been taken by such Investor with respect to the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby.
This Agreement has been duly executed and delivered by, and, assuming the due
authorization, execution and delivery thereof by the Corporation and the other
Investors, constitutes a valid and binding obligation of, such Investor,
enforceable against such Investor in accordance with its terms, subject to
bankruptcy, insolvency, reorganization, moratorium and similar laws of general
applicability affecting creditors' rights and to general equity principles.
5.2. No Consent or Approval Required. No consent, approval or
-------------------------------
authorization of, or declaration to or filing with, any Governmental Entity or
other third party is required for consummation of the transactions contemplated
hereby, other than those consents, approvals, authorizations, declarations or
filings which have been or will timely be obtained or made, as the case may be,
and which are identified on Schedule 5.2 hereto.
5.3. Investment Representations.
--------------------------
(a) Such Investor is and will be acquiring the Preferred Shares to be
purchased by such Investor hereunder and, in the event that such Investor should
acquire any Reserved Shares, that such Investor will be acquiring such Reserved
Shares, for its own account, for investment and not with a view to the
distribution thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act").
(b) Such Investor understands that (i) the Preferred Shares have not
been, and that the Reserved Shares will not be, registered under the Securities
Act, by reason of their issuance by the Corporation in transactions exempt from
the registration requirements of the Securities Act and the Corporation's
reliance on such exemption is predicated upon such Investor's representations
set forth herein and (ii) the Preferred Shares and the Reserved Shares must be
held by such Investor indefinitely unless a subsequent disposition thereof is
registered under the Securities Act or is exempt from registration.
(c) Such Investor further understands that, with respect to the
Reserved Shares, the exemption from registration afforded by Rule 144 (the
provisions of which are known to such Investor) promulgated under the Securities
Act depends on the satisfaction of various conditions, and that, if applicable,
Rule 144 may afford a basis for sales only in limited amounts.
(d) Such Investor is an "accredited investor" as such term is defined
in Rule 501(a) promulgated under the Securities Act.
12
(e) Such Investor agrees that the Corporation may place a legend on
the certificates delivered hereunder stating that the Preferred Shares and any
Reserved Shares have not been registered under the Securities Act, and,
therefore cannot be offered, sold or transferred unless they are registered
under the Securities Act or an exemption from such registration is available,
and that the Corporation may place stop transfer orders on the transfer books of
the Corporation.
SECTION 6. Conditions to the Closing. The several obligations of each
--------- -------------------------
Investor to purchase and pay for Preferred Shares at the Closing are subject to
satisfaction of the following conditions, any of which may be waived by each
Investor, as to itself only:
6.1. Corporate Proceedings. All corporate and other proceedings to be
---------------------
taken and all waivers and consents, approvals, qualifications and/or
registrations required to be obtained or effected in connection with the
execution, delivery and performance of the transactions contemplated thereby,
including, but not limited to, the issuance, sale and delivery of the Preferred
Shares and the reservation of the Reserved Shares, shall have been taken,
obtained or effected (except for the filing of any notice subsequent to such
Closing which may be required under applicable federal and state securities or
"blue sky" laws which, if required, shall be filed on a timely basis as may be
so required), and all documents incident thereto shall be satisfactory in form
and substance to the Investor and to its counsel. The Investor shall have
received all such originals or certified or other copies of such documents as
have been reasonably requested.
6.2. No Action. No action or proceeding shall have been instituted before
---------
a court or other governmental body or by any governmental agency or public
authority to restrain or prohibit the transactions contemplated by this
Agreement or to obtain an amount of damages or other material relief in
connection with the execution of this Agreement or the consummation of the
transactions contemplated hereby; and no governmental agency shall have given
notice to any party hereto to the effect that consummation of the transactions
contemplated by this Agreement would constitute a violation of any law or that
it intends to commence proceedings to restrain consummation of such
transactions.
6.3. Filing of Certificate of Incorporation. The Certificate of
--------------------------------------
Incorporation shall have been filed with and accepted by the Secretary of State
of the State of Delaware, and a copy of the Certificate of Incorporation,
certified by the Secretary of State of the State of Delaware, shall have been
delivered to the Investor.
6.4. Stockholders Agreement. The Stockholders Agreement shall have been
----------------------
executed and delivered by the Corporation, the Investors and the other
stockholders party thereto. In addition, the Corporation and such parties shall
have complied with all of the terms and conditions of the Stockholders
Agreement, including, among other things, the placement of the legends required
to be placed on securities owned by such partners.
6.5. Certificates, Instruments and Documents. The Corporation and the
---------------------------------------
Investor shall have delivered the certificates and instruments referred to in
Section 3.4 hereof.
13
6.6. Opinion of Counsel. The Corporation shall have delivered to the
------------------
Investor an opinion of counsel dated the Closing Date in form and substance
reasonably satisfactory to the Investor.
SECTION 7. Post-Closing Covenants.
--------- ----------------------
7.1. Access to Records. The Corporation shall afford to the Investors
-----------------
holding at least 10% of the issued shares of Series C Preferred Stock (as of the
date hereof, including the Preferred Shares) and their employees, counsel and
other authorized representatives free and full access during normal business
hours, upon reasonable advance notice, to all of the books, records and
properties of the Corporation and to all officers and employees of the
Corporation, for any reasonable purpose whatsoever. Each Investor shall use
reasonable efforts to maintain the confidentiality of any confidential and
proprietary information so obtained by it; provided, however, that the foregoing
-------- -------
shall in no way limit or otherwise restrict the ability of any Investor or such
authorized representatives to disclose any such information concerning the
Corporation which (i) was previously known to be free of any obligation to keep
confidential, (ii) has become generally known to the public, provided that such
public knowledge was not the result of any act attributable to the Investor or
its authorized representatives, or (iii) is required by law and notice thereof
is given to the Corporation prior to such disclosure so it may seek to obtain a
protective order.
7.2. Financial Reports. The Corporation agrees to furnish each Investor
-----------------
holding at least 10% of the issued shares of Series C Preferred Stock (as of the
date hereof, including the Preferred Shares), with the following:
(a) Quarterly Reports. As soon as available, but not later than 45
-----------------
days after the end of each quarterly accounting period, (x) an unaudited
consolidated financial report of the Corporation, prepared in accordance with
generally accepted accounting principles consistently applied, and which shall
include the following:
(i) a profit and loss statement for such quarterly accounting
period, together with a cumulative profit and loss statement from the first
day of the current year to the last day of such quarterly accounting
period;
(ii) a balance sheet as at the last day of such quarterly
accounting period;
(iii) a cash flow analysis for such quarterly accounting period
on a cumulative basis for the fiscal year to date;
(iv) a schedule showing all expenditures of a capital nature in
excess of $100,000 individually during such quarterly accounting period;
and
(v) a comparison between the actual figures for such quarterly
accounting period, the comparable figures (with respect to clauses (i) and
(ii) only) for the prior year (if any) and the comparable figures included
in the Budget (as defined in Section 7.2(f) hereof) for such quarterly
accounting period, with an explanation of any material
14
differences between them;
certified by the chief executive officer and chief financial officer of the
Corporation as being prepared in accordance with generally accepted accounting
principles (except that such financial statements shall not include footnotes
and shall be subject to normal year-end audit adjustments, including, with
respect to such quarterly accounting period, the statements and comparisons
referred to in Section 7.2(a)(x)(v)), and (y) a report by management of the
Corporation of the operating and financial highlights of the Corporation for
such quarterly accounting period which shall include (A) a comparison between
operating and financial results and the Budget and (B) an analysis of the
operations of the Corporation for the prior quarterly accounting period.
(b) Annual Audit. As soon as available, but not later than 90 days
------------
after the end of each fiscal year of the Corporation, audited financial
statements of the Corporation, which shall include a statement of cash flows and
statement of operations for such fiscal year and a balance sheet as at the last
day thereof; each prepared in accordance with generally accepted accounting
principles, consistently applied, and accompanied by the report of a firm of
independent certified public accountants of recognized standing selected by the
Board of Directors of the Corporation. The Corporation shall maintain a system
of accounting sufficient to enable its independent certified public accountants
to render the report referred to in this Section 7.2(b).
(c) Subsidiaries. If for any period the Corporation shall have any
------------
subsidiary or subsidiaries whose accounts are consolidated with those of the
Corporation, then in respect of such period the financial statements delivered
pursuant to the foregoing Sections 7.2(a) and (b) shall be the consolidated
(and, in the case of the cash flow statement delivered pursuant to Section
7.2(b), consolidating if normally prepared by the Corporation) financial
statements of the Corporation and all such consolidated subsidiaries.
(d) Miscellaneous. Promptly upon becoming available:
-------------
(i) upon request, copies of all financial statements, reports,
press releases, notices, proxy statements and other documents sent by the
Corporation to its stockholders generally or released to the public and
copies of all regular and periodic reports, if any, filed by the
Corporation with the Securities and Exchange Commission, or any securities
exchange;
(ii) upon request, copies of all reports prepared for or
delivered to the management of the Corporation by its independent public
accountants; and
(iii) any other routinely collected financial or other
information available to management (including, without limitation,
routinely collected statistical data) of the Corporation or as the
Investors shall have reasonably requested on a timely basis.
(e) Notice of Certain Events. Written notice to the Investors
------------------------
promptly following its receipt of notice of the commencement of any action,
suit, claim, legal or administrative or arbitration proceeding or investigation
any of which could reasonably be expected, on the basis of current economic
conditions and other facts and circumstances known to the Corporation at the
time, to have a Material Adverse Effect. In making such determination, the
15
Corporation may rely on the opinion of its counsel regarding the likelihood and
extent of an adverse decision in any litigation, administrative or arbitration
proceeding or investigation against the Corporation.
(f) Budget. With respect to each fiscal year commencing with the
------
fiscal year ending December 31, 1999, not later than 30 days prior to the
commencement of each such fiscal year (or, with respect to the fiscal year
ending December 31, 1999, not later than 30 days after the Closing Date), one
copy of a budget and operating plan (each a "Budget") of the Corporation
(containing monthly and quarterly breakdowns of income and cash flow). The
Budget shall be accepted as the Budget for such fiscal year when it has been
approved by the Board of Directors of the Corporation. The Budget shall be
reviewed by the Corporation periodically and all changes therein and all
material deviations therefrom shall be resubmitted to the Board in advance and
shall be accepted when approved by the Board of Directors.
7.3. Qualified IPO. Notwithstanding Sections 7.1 and 7.2 above, the
-------------
rights of the Investors and the obligations of the Corporation under such
Sections, except those contained in Section 7.2(d)(i) (which shall survive),
shall terminate upon the consummation of a firm commitment underwritten public
offering of the Corporation's Common Stock under the Securities Act, which
results in gross proceeds to the Corporation of not less than Twenty Million
Dollars ($20,000,000) at an offering price per share (as constituted on the date
hereof) of not less than $13.75.
SECTION 8. Restriction on Transfer.
--------- -----------------------
(a) Preferred Shares held by an Investor and/or any Reserved Shares
issued upon conversion of Preferred Shares held by an Investor shall not be
sold, transferred, assigned, pledged, encumbered or otherwise disposed of (each,
a "Transfer") except upon the conditions specified in this Section 8, which
conditions are intended to ensure compliance with the provisions of the
Securities Act.
(b) Each certificate for shares of the capital stock of the
Corporation held by an Investor and each certificate for any such securities
issued to subsequent transferees of any such certificate shall (unless otherwise
permitted by the provisions of Sections 8(c) and 8(d)) be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT.
ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE
CONDITIONS SPECIFIED IN SECTION 8 OF THE STOCK PURCHASE AGREEMENT
DATED AS OF FEBRUARY 11, 1999, AMONG TELLIUM, INC. AND THE OTHER
PARTIES THERETO, AND NO TRANSFER OF THESE SECURITIES SHALL BE VALID
EFFECTIVE OR UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED.
16
UPON THE FULFILLMENT OF CERTAIN SUCH CONDITIONS, THE SECRETARY OF
TELLIUM, INC. HAS AGREED TO DELIVER TO THE HOLDER HEREOF A NEW
CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES REPRESENTED
HEREBY REGISTERED IN THE NAME OF THE HOLDER HEREOF. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE
HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF TELLIUM, INC.
(c) Each Investor agrees, prior to any Transfer of such shares, to
give written notice to the Corporation of such Investor's intention to effect
such Transfer and to comply in all other respects with the provisions of this
Section 8. Each such notice shall describe the manner and circumstances of the
proposed Transfer and shall be accompanied by the written opinion, addressed to
the Corporation, of counsel for the holder of such shares, stating that in the
opinion of such counsel (which opinion and counsel shall be reasonably
satisfactory to the Corporation) such proposed Transfer does not involve a
transaction requiring registration or qualification of such shares under the
Securities Act or the securities "blue sky" laws of any relevant state of the
United States; provided, however, that no such opinion of counsel shall be
-------- -------
necessary for a Transfer by an Investor to an Affiliate or by an Investor that
is a partnership to a liquidating trust for the benefit of its partners or to a
partner of such Investor, or a retired partner of such Investor who retires
after the date hereof, or the estate of any such partner or retired partner if
the transferee agrees in writing to be subject to the terms of this Section 8
to the same extent as if such transferee were originally a signatory to this
Agreement. Such Investor shall thereupon be entitled to Transfer such shares in
accordance with the terms of the notice delivered by it to the Corporation.
Each certificate or other instrument evidencing the securities issued upon the
Transfer of any such shares (and each certificate or other instrument evidencing
any untransferred balance of such shares) shall bear the legend set forth in
Section 8(b) unless (x) in such opinion of counsel registration of any future
Transfer is not required by the applicable provisions of the Securities Act or
(y) the Corporation shall have waived the requirement of such legends, provided,
--------
however, that such legend shall not be required on any certificate or other
-------
instrument evidencing the securities issued upon such Transfer in the event such
Transfer shall be made in compliance with the requirements of Rule 144 and the
transferee is not an affiliate of the Corporation. No Investor shall Transfer
any shares until such opinion of counsel has been given (unless waived by the
Corporation or unless such opinion is not required in accordance with the
provisions of this Section 8(c)).
17
(d) Notwithstanding the foregoing provisions of this Section 8, the
restrictions imposed by this Section 8 upon the transferability of any shares of
the capital stock of the Corporation held by an Investor shall cease and
terminate when (i) any such shares are sold or otherwise disposed of pursuant to
an effective registration statement under the Securities Act or as otherwise
contemplated by Section 8(c) and, pursuant to Section 8(c), the securities so
transferred are not required to bear the legend set forth in Section 8(b) or
(ii) the holder of such shares has met the requirements for Transfer of such
shares pursuant to subparagraph (k) of Rule 144. Whenever the restrictions
imposed by this Section 8 shall terminate, as herein provided, each Investor
holding shares as to which such restrictions have terminated shall be entitled
to receive from the Corporation, without expense, a new certificate not bearing
the restrictive legend set forth in Section 8(b) and not containing any other
reference to the restrictions imposed by this Section 8.
SECTION 9. Transfer Taxes.
--------- --------------
The Corporation agrees that it will pay, and will hold the Investors
harmless from, any and all liability with respect to any stamp, transfer or
similar taxes which may be determined to be payable in connection with the
execution, delivery and performance of this Agreement, or any modification,
amendment or alteration of the terms or provisions of this Agreement, and that
it will similarly pay and hold the Investors harmless from all issue taxes in
respect of the issuance of the Reserved Shares to the Investors.
SECTION 10. Exchanges; Lost, Stolen or Mutilated Certificates. Upon
---------- -------------------------------------------------
surrender by any Investor to the Corporation of any certificate representing
Preferred Shares or Reserved Shares, the Corporation at its expense will issue
in exchange therefor, and deliver to such Investor, a new certificate or
certificates representing such shares, in such denominations as may be requested
by such Investor. Upon receipt of evidence satisfactory to the Corporation of
the loss, theft, destruction or mutilation of any certificate representing any
Preferred Shares or Reserved Shares purchased or acquired by an Investor upon
conversion of the Preferred Shares, and in case of any such loss, theft or
destruction, upon delivery of any indemnity agreement satisfactory to the
Corporation, or in case of any such mutilation, upon surrender and cancellation
of such certificate, the Corporation at its expense will issue and deliver to
such Investor a new certificate for such shares of like tenor, in lieu of such
lost, stolen or mutilated certificate.
SECTION 11. Survival of Representations, Warranties and Agreements, Etc.
---------- -----------------------------------------------------------
All representations and warranties hereunder shall survive the Closing and
expire on the date that is two years after the Closing Date, and all agreements
contained herein shall survive indefinitely until, by their respective terms,
they are no longer operative.
SECTION 12. Indemnification.
---------- ---------------
(a) The Corporation shall defend, indemnify and hold each Investor and
its Affiliates harmless from all damages, costs (including reasonable attorney's
fees), liabilities and penalties (collectively, "Losses") incurred by or awarded
against such Investor or its Affiliates arising out of or incident to any breach
of the representations and warranties made by the Corporation in or pursuant to
Section 4 of this Agreement, but only to the extent that the Losses incurred by
each such Investor in connection with all such breaches exceed $250,000 in the
aggregate (in which case the Corporation's liability shall extend to all such
Losses); provided,
18
however, that the Corporation's liability to any Investor for Losses which are
limited to the diminution in the value of the Preferred Shares purchased by the
Investor hereunder shall in no event exceed the product of $9.15 multiplied by
number of Preferred Shares purchased by such Investor hereunder.
(b) Each Investor shall severally defend, indemnify and hold the
Corporation and its Affiliates harmless from all damages, costs (including
reasonable attorney's fees), liabilities and penalties incurred by or awarded
against the Corporation or its Affiliates arising out of or incident to any
breach of the representations and warranties made by such Investor in or
pursuant to Section 5 of this Agreement.
SECTION 13. Remedies. In case any one or more of the covenants and/or
---------- --------
agreements set forth in this Agreement shall have been breached by a party
hereto, the other parties may proceed to protect and enforce its or their rights
either by suit in equity and/or by action at law, including, but not limited to,
an action for damages as a result of any such breach and/or an action for
specific performance of any such covenant or agreement contained in this
Agreement.
SECTION 14. Successors and Assigns. This Agreement shall bind and inure
---------- ----------------------
to the benefit of the Corporation, the Investors and the respective successors
and assigns of the Corporation and the Investors. The rights and duties of an
Investor as set forth herein may not be assigned, in whole or in part, by the
Investor without the prior written consent of the Corporation; provided,
however, that an Investor may assign its rights and duties hereunder to its
Affiliate without the consent of the Corporation, provided that any such
assignment shall not release such Investor from any of its obligations
hereunder, including, without limitation, pursuant to Section 12(b). Any
transferee (other than an Investor) to whom rights under Section 7.1 or 7.2 are
transferred shall, as a condition to such transfer, deliver to the Corporation a
written instrument by which such transferee identifies itself, gives the
Corporation notice of the transfer of such rights, identifies any securities of
the Corporation owned or acquired by it and agrees to be bound by the
obligations imposed hereunder and under the Stockholders Agreement upon
Stockholders (as defined therein) to the same extent as if such transferee were
an Investor hereunder and a Stockholder thereunder. A transferee to whom rights
are transferred pursuant to this Section 14 may not again transfer such rights
to any other person or entity, other than as provided in this Section 14.
SECTION 15. Entire Agreement. This Agreement and the other writings
---------- ----------------
referred to herein or delivered pursuant hereto which form a part hereof contain
the entire agreement among the parties with respect to the subject matter hereof
and supersede all prior and contemporaneous arrangements with respect thereto.
SECTION 16. Notices. All notices, requests, consents and other
---------- -------
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or sent by telecopy,
nationally-recognized overnight courier or first class registered or certified
mail, return receipt requested, postage prepaid, addressed to such party at the
address set forth below or such other address as may hereafter be designated in
writing by such party to the other parties:
(a) if to the Corporation, to:
19
Tellium, Inc.
0 Xxxxxxxx Xxxxx
Xxxxxxxxx, XX 00000
(b) if to the Investors, to their respective addresses set forth on
Schedule I hereto.
All such notices, requests, consents and other communications shall be
deemed to have been delivered (a) in the case of personal delivery or delivery
by telecopy, on the date of such delivery, (b) in the case of dispatch by
nationally-recognized overnight courier, on the next business day following such
dispatch and (c) in the case of mailing, on the third business day after the
posting thereof.
SECTION 17. Changes. The terms and provisions of this Agreement may not
---------- -------
be modified or amended, nor may any of the provisions hereof be waived,
temporarily or permanently, except pursuant to a written instrument executed by
the Corporation and Investors, if such parties are holding at least 66-2/3% of
the Preferred Shares.
SECTION 18. Counterparts. This Agreement may be executed in any number of
---------- ------------
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
SECTION 19. Headings. The headings of the sections of this Agreement have
---------- --------
been inserted for convenience of reference only and shall not be deemed to be a
part of this Agreement.
SECTION 20. Nouns and Pronouns. Whenever the context may require, any
---------- ------------------
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of names and pronouns shall include the
plural and vice-versa.
SECTION 21. Governing Law. This Agreement shall be governed by and
---------- -------------
construed in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed wholly therein.
SECTION 22. Corporation Disclosure Schedule. Any matter disclosed in one
---------- -------------------------------
section of the Corporation Disclosure Schedule may be cross-referenced in other
sections of the Corporation Disclosure Schedule, and shall be deemed disclosed
for all purposes of the Corporation Disclosure Schedule to the extent this
Agreement requires such disclosure and to the extent the relevance and
significance of such disclosure is evident from such disclosure or cross-
reference.
(BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK)
20
IN WITNESS WHEREOF, the parties have executed this Stock Purchase Agreement
as of the day and year first written above.
CISCO SYSTEMS, INC., a California corporation
By: /s/
--------------------------------------
Name:
Title:
IN WITNESS WHEREOF, the parties have executed this Stock Purchase Agreement
as of the day and year first written above.
TELLIUM, INC., a Delaware corporation (the
"Company")
By: /s/ Xxxxxxx Xxxxxx
-------------------------------------------
Name: Xxxxxxx Xxxxxx
Title: President and CEO
TELLIUM, INC.
AMENDMENT NO. 1 TO THE STOCK PURCHASE AGREEMENT
This AMENDMENT NO. 1 TO THE STOCK PURCHASE AGREEMENT (this "Amendment"),
dated as of May 5, 1999, among TELLIUM, INC., a Delaware corporation (the
"Company"), and each of the investors signatories hereto under the
heading "Investors" (each an "Investor").
WHEREAS, the Company and the Investors are parties to a Stock Purchase
Agreement dated as of February 11, 1999 (the "Agreement"); and
WHEREAS, the parties to the Agreement desire to amend such agreement on
the terms and conditions stated herein;
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the parties hereto agree as follows:
1. Defined Terms. Capitalized terms used and not otherwise
-------------
defined in this Agreement shall have the meanings given to such terms in the
Agreement.
2. Amendment to Section 3.5. Section 3.5 of the Agreement
------------------------
is hereby amended and restated in its entirety to read as follows:
"3.5 Subsequent Sales of Series C Preferred Stock. It
--------------------------------------------
is anticipated that certain purchasers may not purchase Series C
Preferred Stock at the Closing, but may acquire Series C Preferred Stock
in an aggregate amount not to exceed $20,000,000 of shares of Series C
Preferred Stock at a later date within 180 days following the Closing;
provided, however, that the Company hereby covenants to amend its
-------- -------
Certificate of Incorporation to the extent necessary to ensure that
sufficient shares of Series C Preferred Stock are available for issuance
to the holders of Series C Preferred Stock pursuant to Article IV,
Paragraph (E)(5) of the Certificate of Incorporation prior to or as a
result of any proposed sale of Series C Preferred Stock hereunder. Any
such sales of Series C Preferred Stock shall be made on the terms and
conditions set forth in this Agreement. Any Series C Preferred Stock
sold pursuant to this Section 3.5 shall be deemed to be "Preferred
Shares" for all purposes under this Agreement and shall be deemed to be
"Preferred Stock" and "Registrable Securities" for all purposes of the
Stockholders Agreement. Upon execution and delivery of a counterpart to
this Agreement, the purchasers thereof shall be deemed to be "Investors"
for all purposes of this Agreement and shall be deemed to be "Qualified
Offerees" and "Stockholders" as of the date of this Agreement for all
purposes of the Stockholders Agreement and Schedule I hereto shall be
amended to add such parties; provided, however, that no party that
-------- -------
markets a product generating revenues wich competes with a product of
comparable application (A) marketed by a company in which
representatives of Cisco or its Affiliates represent a majority of the
board of directors of such company or in which Cisco and its Affiliates
own more than fifty percent (50%) of the total combined voting power for
election of directors of such company and (B) which product is a
principal product of such
company, shall be permitted to purchase shares of Series C Preferred Stock
hereunder without the prior written consent of Cisco (which consent shall
not be unreasonably withheld)."
3. Continuing Effect; No Other Amendments. Except as expressly provided
--------------------------------------
herein, all of the terms and provisions of the Agreement are and shall remain in
full force and effect. The amendment provided for herein is limited to the
specific sections of the Agreement specified herein and shall not constitute a
consent, waiver or amendment of, or an indication of the Investors' or the
Company's willingness to consent to any action requiring consent under or to
waive or amend, any other provisions of the Agreement.
4. Governing Law. This Amendment shall be governed by, and construed
-------------
according to the laws of the State of New York.
5. Effective Date. This Amendment will become effective upon execution
--------------
by the Company and such Investors holding at least 66 2/3% of the Preferred
Shares.
6. Counterparts. This Amendment may be executed in any number of
------------
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
* * * * *
-2-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
TELLIUM, INC.
By: /s/
---------------------------------
Name:
Title:
Address: 0 Xxxxxxxx Xxxxx
X.X. Xxx 000
Xxxxxxxxx, XX 00000-0000
-3-
CISCO SYSTEMS, INC.
By: /s/
-------------------------------
Name:
Title:
-4-
