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EXHIBIT 10.10
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement and Mutual Release ("Settlement Agreement") is
made by and among Xxxxxxx X. Xxxxxxxx & Company, Inc. ("Xxxxxxxx") and Xxxxxxx
X. Xxxxxxxx III ("WKW III"), on the one hand, and Ciena Corporation, f/k/a
HydraLite Inc. ("Ciena"), Xxxxx-Xxxxx Fund II L.P., a Texas Limited Partnership
("Sevin II"), Xxxxx Xxxxx Fund IV, L.P., a Delaware Limited Partnership ("Sevin
IV"), InterWest Partners, a California Limited Partnership ("InterWest"), and
InterWest Partners V, L.P. ("InterWest V") on the other hand (collectively,
"Ciena/Xxxxx"), on the terms set forth below.
WHEREAS, an agreement was entered into by and between Ciena (then known as
HydraLite, Incorporated) and Xxxxxxxx on or about September 29, 1993 (the
"Agreement"); and
WHEREAS, Xxxxxxxx and/or WKW III and/or its affiliates are shareholders of
Ciena;
WHEREAS, a Revised Compensation Agreement was entered into by and between
Ciena (then known as HydraLite, Incorporated) and Xxxxxxxx on or about April 9,
1994 (the "Revised Agreement") (collectively with the Agreement the
"Agreements"); and
WHEREAS, a lawsuit was initiated in the 000xx Xxxxxxxx Xxxxxxxx Xxxxx xx
Xxxxxx Xxxxxx, Xxxxx by Xxxxxxxx against Ciena and Sevin II, numbered
96-07310-K and styled Xxxxxxx X. Xxxxxxxx & Company, Incorporated v. Ciena
Corporation,
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f/k/a Hydralite Inc. and Xxxxx-Xxxxx Funds II, L.P., a Texas Limited
Partnership (the "state court action"); and
WHEREAS, the state court action was removed to the United States District
Court for the Northern District of Texas, numbered CA3-96-CV-2100-H and styled
Xxxxxxx X. Xxxxxxxx & Co., Inc. v. Ciena Corporation, f/k/a Hydralite Inc. and
Xxxxx-Xxxxx Funds II, L.P., a Texas Limited Partnership (the "federal court
action"); and
WHEREAS, Xxxxxxxx filed its First Amended Complaint and Application for
Injunctive Relief in the federal court action, adding Sevin IV and Interwest as
parties; and
WHEREAS, the United States District Court has remanded to the 192nd
Judicial District Court this case and this dispute is once again pending in
Texas state court; and
WHEREAS, Xxxxxxxx, inter alia. seeks to recover in the state court action
certain relief, including monetary, declaratory, and injunctive relief, in
connection with the Agreement and Revised Agreement (collectively, the
"Agreements") and in connection with a contemplated initial public offering of
Ciena's common stock ("IPO"); and
WHEREAS, bona fide disputes and controversies exist between Xxxxxxxx, on
the one hand, and Ciena/Xxxxx, on the other, as to liability, injunctive
relief, and the amount of damages, if any, and by reason of such disputes and
controversies, Xxxxxxxx and Ciena/Xxxxx desire to compromise and settle all
claims and causes of action, including but not limited to all claims and causes
of action arising from the
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state court action, the federal court action, from the Agreements, from the
IPO, from Xxxxxxxx, WKW III or affiliates' status as a shareholder, or any
other claims or causes of action that have been or could have been or could be
asserted against Ciena/Xxxxx, its predecessors or successors, any present or
former employees or agents of Ciena/Xxxxx or its predecessors or successors,
and any underwriters, including but not limited to Xxxxxxx Xxxxx, Xxxx. Xxxxx &
Sons, Xxxxxxx, Xxxxxx & Xxxxxxxxx, or any other underwriters that may become
involved in a Ciena IPO, and intend that the full and exclusive terms and
conditions of the compromise and settlement be set forth in this Settlement
Agreement;
NOW THEREFORE, for good and sufficient consideration, the receipt of which
is hereby acknowledged, it is hereby agreed by mutual consent of the parties
that:
1. In the event of any Ciena IPO, Ciena agrees to retain Xxxxxxxx
as co-manager, with the name of Xxxxxxxx appearing as co-manager on the cover
of the prospectus.
2. In the event of any Ciena IPO, Xxxxxxxx shall have the right
to participate as co-manager, as follows:
x. Xxxxxxxx shall have the right to attend any and all
"all hands" due diligence and prospectus preparation
meetings involving underwriters.
x. Xxxxxxxx shall have the right to attend and be
introduced when other managers are introduced as a
co-manager at such "road show" group presentations at
which all co-managers are invited, unless such
attendance is deemed inappropriate at the discretion
of the lead managing underwriters.
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x. Xxxxxxxx shall not have the right to participate in
any one-on-one meetings between Ciena and potential
investors.
x. Xxxxxxxx shall not have the right to participate in
any meetings in Europe.
3. In the event of any Ciena IPO, Ciena agrees to cause its lead
managing underwriter and any other co-managers to agree as follows:
x. Xxxxxxxx shall receive 10% of any management fee;
x. Xxxxxxxx shall receive that portion of the
underwriting fee, net of expenses, equal to the ratio
of number of shares underwritten by Xxxxxxxx, if any
(it being understood that the lead manager shall have
sole discretion to determine the number of shares; if
any, to be underwritten by Xxxxxxxx), to the total
number of shares underwritten in the offering;
c. As to the selling concession, the lead manager shall
set a fixed portion (which portion shall be
determined by the lead manager in its sole discretion
but shall in no event be less than 30%) for the
institutional pot. WKW shall receive a cash payment
equal to one-sixth (1/6) of the selling concession
attributable to that part of such fixed portion which
is shared among co-managers (exclusive of the lead
manager);
x. Xxxxxxxx shall be allocated no less than 5,000 shares
for sale to Xxxxxxxx customers, each of which shall
be identified in advance of sale to the lead manager;
e. Underwriting compensation shall apply to all of the
stock sold in the IPO, including the underwriters'
over-allotment option and shall be paid at such time
or times as such compensation is paid to the other
co-managers.
4. In the event of any Ciena IPO, shares of Ciena common stock
owned by Xxxxxxxx or WKW III or affiliates shall be "locked up" for such period
as required by the lead manager for directors, officers, and major shareholders
of Ciena.
5. Regardless of whether there is a Ciena IPO, Ciena shall pay
Xxxxxxxx $87,500 in cash upon execution of the Settlement Agreement and receipt
of a copy of
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the dismissal of the lawsuit with prejudice. Xxxxxxxx shall bear its own
attorneys' fees and costs in connection with this litigation, and shall not
submit any such fees and costs as part of underwriting expenses in connection
with any Ciena IPO.
6. Regardless of whether there is any Ciena IPO, any SEC, NASD,
or otherwise legally required disclosure regarding this dispute or its
resolution shall be determined at the sole discretion of Ciena and its counsel.
Ciena agrees to provide a courtesy copy of any such disclosure to Xxxxxxxx,
except where prohibited by law or regulation.
7. Regardless of whether there is any Ciena IPO, this Settlement
Agreement shall supersede the Agreement and the Revised Agreement, copies of
which are attached hereto as Exhibits A and B. The Agreement and the Revised
Agreement and all rights and obligations of the parties thereunder are null and
void and the Agreements are terminated in all respects with the execution of
this Settlement Agreement. In connection therewith, Ciena shall sell to
Xxxxxxxx for $.01/share warrants to purchase 15,000 shares at $20.00/share upon
receipt of dismissal of the lawsuit with prejudice following execution of a
final settlement agreement in the form attached here to Exhibit C. The warrants
shall have a term of five (5) years and shall not be exercisable until the
first anniversary of the signing of a settlement agreement. The warrants shall
have a "net exercise" provision. The terms of the warrant, including without
limitation the exercise price, may be subject to adjustment if required by the
NASD under its corporate financing rules. The warrants shall become null and
void if, subsequent to the execution of this Settlement Agreement and sale of
the warrants to Xxxxxxxx, Xxxxxxxx or WKW
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III asserts any claims of any kind, whether in arbitration, litigation or any
other forum (including to the NASD or SEC), including, specifically, claims for
breach of this Settlement Agreement, against Ciena/Xxxxx or any of the entities
identified in paragraph 10 herein. Additionally, to the extent the warrants
have been exercised at the time Xxxxxxxx or WKW III asserts any such claim,
Ciena shall have an immediate right to recover from Xxxxxxxx and WKW III in
cash the greater of (a) the difference between the exercise price per share
under the warrants which have been exercised and the fair market value of Ciena
common stock at the time the warrants were exercised, or (b) the difference
between the exercise price per share under the warrants which have been
exercised and the fair market value of Ciena common stock at the time the claim
is made. Xxxxxxxx and WKW III acknowledge that the foregoing is intended to
assure that if Xxxxxxxx and WKW III assert claims against Ciena/Xxxxx or any of
the entities identified in paragraph 10, that they will do so with the
knowledge of the impact of such action on the unexercised warrants and on
Ciena's rights of recovery with respect to the exercised warrants.
8. Regardless of whether there is any Ciena IPO, Xxxxxxxx shall
dismiss with prejudice all claims asserted in the state court action and
federal court action against Ciena/Xxxxx on or before 4:00 p.m., Thursday,
August 22, 1996. On or before 4:00 p.m., Thursday, August 22, 1996, Xxxxxxxx
shall notify the Court in the federal court action that this lawsuit has been
dismissed and is withdrawing its request for attorneys' fees.
9. Regardless of whether there is any Ciena IPO, Xxxxxxxx and WKW
III covenant not ever to xxx or otherwise assert claims against, from this day
forward,
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Ciena, its present and former directors, officers, agents, attorneys,
accountants, underwriters, affiliates, employees, shareholders, partners,
general and/or limited, and general or limited partners thereof, for any claims
relating to the subject matter of the litigation, or relating to Xxxxxxxx/WKW
III/or affiliates' status as a shareholder, or relating to any Ciena IPO that
might occur in the future, including, without limitation, any claims for breach
of contract, defamation, fraud, intentional infliction of emotional distress,
negligence, gross negligence, claims under the Texas Deceptive Trade Practices
Act, breach of fiduciary duty, tortious interference with contractual or
business relationship, and declaratory judgment. Notwithstanding the foregoing,
Xxxxxxxx shall have the right to assert claims for breach of the Settlement
Agreement or of the indemnification provisions of the Underwriting Agreement.
Xxxxxxxx and WKW III agree that any suit or claims relating to the Settlement
Agreement or the indemnification provisions of the Indemnity Agreement,
including any request for injunctive relief, shall not be brought in court, but
shall be brought in arbitration and shall be subject to binding arbitration
before the NASD pursuant to the NASD's code of arbitration procedures.
10. WKW III and Xxxxxxxx and its agents, representatives,
successors, affiliates, and assigns do fully and finally release and forever
discharge Ciena/Xxxxx, and their present and former officers, directors,
shareholders, partners, general and/or limited, and general or limited partners
thereof, agents, attorneys, employees, representatives, predecessors,
successors, parents, subsidiaries, affiliates, assigns, and underwriters,
including, but not limited to, Xxxxxxx Xxxxx, Xxxx. Xxxxx & Sons, Xxxxxxx,
Xxxxxx & Xxxxxxxxx, or any other
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underwriters that may become involved in a Ciena IPO, from any and all claims
or causes of action of any kind whatsoever, known or unknown, direct or
derivative, now existing or which may arise hereafter, relating to any
relationship between or among WKW III or Xxxxxxxx on the one hand and Ciena on
the other, including, without limitation, all claims or causes of action
directly or indirectly relating to the state court action, the federal court
action, Xxxxxxxx/WKW III/or affiliates' status as a shareholder, any Ciena IPO,
or the Agreements, including, without limitation, claims for breach of
contract, negligence, claims under the Texas Deceptive Trade Practices Act,
breach of fiduciary duty, tortious interference with contractual or business
relationship, gross negligence, fraud, defamation, intentional infliction of
emotional distress, and declaratory judgment; provided that nothing herein
shall prohibit WKW or Xxxxxxxx from asserting claims for breach of the
Settlement Agreement. Notwithstanding the foregoing, Xxxxxxxx shall have the
same rights to indemnification as other underwriters under the Underwriting
Agreement executed by Ciena in connection with a Ciena IPO.
11. Ciena/Xxxxx and their officers, directors, agents, employees,
representatives, successors, affiliates, and assigns do fully and finally
release and forever discharge WKW III and Xxxxxxxx and its present and former
agents, representatives, successors, affiliates, assigns, officers, directors,
shareholders, attorneys, employees, predecessors, parents, and subsidiaries
from any and all claims or causes of action of any kind whatsoever, known or
unknown, direct or derivative, now existing or which have arisen to date,
including, without limitation, all claims or causes of action directly or
indirectly relating to the state court action,
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the federal court action, or the Agreements; provided that nothing herein shall
prohibit Ciena from asserting claims for breach of the Settlement Agreement or
of any Underwriting Agreement entered into in connection with a Ciena IPO; and
provided, further, that this release shall immediately and automatically become
null and void ab initio at the time, if any, when Xxxxxxxx or WKW III asserts
any claim of any kind whether in arbitration, litigation or any other forum,
including specifically, claims for breach of this Settlement Agreement brought
after conclusion of a Ciena IPO, against Ciena/Xxxxx or any of the entities
identified in paragraph 10 herein.
12. It is expressly understood and agreed that the terms hereof
are contractual and not merely recitals and that the agreements contained
herein and the mutual consideration transferred is to compromise disputed
claims fully, and that no releases or other consideration given shall be
construed as an admission of liability or wrongdoing, all liability or
wrongdoing being expressly denied by Ciena/Xxxxx.
13. Xxxxxxxx and WKW III warrant that the party signing below on
its behalf is duly authorized to execute this Settlement Agreement, and that it
has read this Settlement Agreement and fully understands it to be a compromise
and settlement and release of all claims, known or unknown, present or future,
that WKW III and Xxxxxxxx have or may have against Ciena/Xxxxx and their
present and former officers, directors, shareholders, agents, attorneys,
employees, representatives, predecessors, successors, parents, subsidiaries,
affiliates, assigns, and underwriters, including, but not limited to, Xxxxxxx
Xxxxx, Xxxx. Xxxxx &
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Sons, Xxxxxxx, Xxxxxx & Xxxxxxxxx, or any other underwriters that may become
involved in a Ciena IPO, including claims for breach of contract, negligence,
claims under the Texas Deceptive Trade Practices Act, breach of fiduciary duty,
tortious interference with contractual or business relationship, gross
negligence, fraud, defamation, intentional infliction of emotional distress,
and declaratory judgment. Xxxxxxxx also warrants that it is executing this
Settlement Agreement of its own free will and accord, with full knowledge, and
without influence or duress, that it has had the benefit and advice of counsel
of its own selection, that it is not relying upon any other representations,
either written or oral, express or implied, made to Xxxxxxxx by any person, and
that the consideration received or to be received by Xxxxxxxx is actual and
adequate. Xxxxxxxx further warrants that it has not assigned, pledged, or set
over to any third party any of the rights, claims, expectancies, recoveries, or
actions, of whatever variety, that have been or could have been or could be
asserted against Ciena/Xxxxx, or which are the subject of the release as set
forth in this Settlement Agreement.
14. Ciena/Xxxxx warrant that their undersigned representatives are
duly authorized to execute this Settlement Agreement on behalf of Ciena/Xxxxx,
and that their representatives have read this Settlement Agreement and fully
understand it to be a compromise and settlement and release of all claims,
known or unknown, present or future, that Ciena/Xxxxx has or may have against
Xxxxxxxx, and its present and former agents, representatives, predecessors,
successors, affiliates, and assigns. Ciena/Xxxxx also warrants that they are
executing this Settlement Agreement of their own free will and accord, with
full knowledge, and without
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influence or duress, that they have had the benefit and advice of counsel of
their own selection, that they are not relying upon any other representations,
either written or oral, express or implied, made to Ciena/Xxxxx by any person,
and that the consideration received or to be received by Ciena/Xxxxx is actual
and adequate. Ciena/Xxxxx further warrant that they have not assigned, pledged,
or set over to any third party any of the rights, claims, expectancies,
recoveries, or actions, of whatever variety, that have been or could have been
or could be asserted against Xxxxxxxx, or which are the subject of the release
as set forth in this Settlement Agreement.
15. This Settlement Agreement shall be governed by, and construed
in accordance with, the laws of the State of Texas.
16. Xxxxxxxx'x rights under Nos. 1-4 herein shall be subject to
Xxxxxxxx being in good standing with the NASD.
17. This Settlement Agreement shall be binding upon and inure to
the benefit of the parties, their predecessors, successors, subsidiaries,
affiliates, licensees, and assigns.
18. In any litigation for breach of or enforcement of any of the
provisions of this Settlement Agreement, the prevailing party shall be entitled
to recover its attorney fees and costs.
19. This Settlement Agreement constitutes the entire agreement
among the parties with respect to the subject matter hereof, and it supersedes
any prior or written oral agreements or discussions among the parties with
respect to any of the subject matter contained herein. Xxxxxxxx agrees that
Ciena/Xxxxx has made no
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other representations or warranties contemporaneously with or in connection
with this Settlement Agreement. Ciena/Xxxxx agrees that Xxxxxxxx has made no
other representations or warranties contemporaneously with or in connection
with this Settlement Agreement. This Settlement Agreement cannot be changed,
modified, or otherwise altered orally or by course of conduct.
20. This Settlement Agreement may be executed in multiple
counterparts each of which may be deemed to be an original, so long as all
parties execute the Agreement.
21. This Settlement Agreement shall become effective, and be
deemed to have been executed, on the date on which the last of the undersigned
parties signs this Settlement Agreement before a Notary Public.
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XXXXXXX X. XXXXXXXX & COMPANY, INC.
8/22/96 By: /s/ XXXXXXX X. XXXXXXXX
----------------- ----------------------------------------
Date Signed Xxxxxxx X. Xxxxxxxx
Its:
--------------------------------
THE STATE OF TEXAS Section
Section
COUNTY OF DALLAS Section
BEFORE ME, the undersigned, a Notary Public for said County
and State, on this day personally appeared Xxxxxxx X. Xxxxxxxx, and
acknowledged to me that the same was the act of the said corporation, XXXXXXX
X. XXXXXXXX & COMPANY, INCORPORATED, and that he executed the same for the
purposes and consideration therein expressed, and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 22nd day of
August, 1996.
/s/ XXXXX XXXXXXX
----------------------------
Notary Public, in and for
the State of Texas
My Commission Expires:
11/12/96
-----------------
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8/22/96 By: /s/ XXXXXXX X. XXXXXXXX
----------------- ----------------------------------------
Date Signed Xxxxxxx X. Xxxxxxxx
THE STATE OF TEXAS Section
Section
COUNTY OF DALLAS Section
BEFORE ME, the undersigned, a Notary Public for said County
and State, on this day personally appeared Xxxxxxx X. Xxxxxxxx III,
individually, and acknowledged to me that he is the individual above-named.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 22nd day of
August, 1996.
/s/ XXXXX XXXXXXX
----------------------------
Notary Public, in and for
the State of Texas
My Commission Expires:
11/12/96
-----------------
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CIENA CORPORATION
8/23/96 By: /s/ XXXXXXX X. XXXXXXX
----------------- ----------------------------------------
Date Signed Xxxxxxx X. Xxxxxxx
THE STATE OF MARYLAND Section
Section
COUNTY OF XXXXXX Section
BEFORE ME, the undersigned, a Notary Public for said County
and State, on this day personally appeared Xxxxxxx X. Xxxxxxx, and
acknowledged to me that the same was the act of the said corporation, CIENA
CORPORATION, and that he executed the same for the purposes and consideration
therein expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 22nd day of
August, 1996.
/s/ XXXXX X. XXXX
----------------------------
Notary Public
My Commission Expires:
4/22/97
-----------------
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XXXXX-XXXXX FUND II L.P.
a Texas Limited Partnership
8/23/96 By: /s/ XXXXXX X. XXXXXX
----------------- ----------------------------------------
Date Signed Xxxxxx X. Xxxxxx, General Partner
Its:
--------------------------------
THE STATE OF TEXAS Section
Section
COUNTY OF DALLAS Section
BEFORE ME, the undersigned, a Notary Public for said County
and State, on this day personally appeared Xxxxxx X. Xxxxxx, and acknowledged
to me that the same was the act of the said entity, XXXXX-XXXXX FUNDS II, L.P.,
and that he executed the same for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 23rd day of
August, 1996.
JO XXX XXXXXX
----------------------------
Notary Public, in and for
the State of Texas
My Commission Expires:
5/27/98
-----------------
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XXXXX-XXXXX FUND IV L.P.
a Delaware Limited Partnership
8/23/96 By: /s/ XXXXXX X. XXXXXX
----------------- ----------------------------------------
Date Signed Xxxxxx X. Xxxxxx, General Partner
THE STATE OF TEXAS Section
Section
COUNTY OF DALLAS Section
BEFORE ME, the undersigned, a Notary Public for said County
and State, on this day personally appeared Xxxxxx X. Xxxxxx, and acknowledged
to me that the same was the act of the said entity, XXXXX-XXXXX FUNDS II, L.P.,
and that he executed the same for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 23rd day of
August, 1996.
/s/ JO XXX XXXXXX
----------------------------
Notary Public
My Commission Expires:
5/27/98
-----------------
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INTERWEST INVESTORS V
a California Limited Partnership
8/26/96 By: /s/ XXXXXX MOMSEN
----------------- ----------------------------------------
Date Signed Xxxxxx Momsen, General Partner
THE STATE OF CALIFORNIA Section
Section
COUNTY OF SAN MARTEN Section
BEFORE ME, the undersigned, a Notary Public for said County
and State, on this day personally appeared Xxxxxx Momsen, and acknowledged to
me that the same was the act of the said entity, INTERWEST INVESTORS V, and
that he executed the same for the purposes and consideration therein expressed,
and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 26th day of
August, 1996.
/s/ XXXX X. XXXXXX
----------------------------
Notary Public
My Commission Expires:
2/7/98
-----------------
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INTERWEST INVESTORS V, L.P.
a California Limited Partnership
8/22/96 By: /s/ XXXXXX MOMSEN
----------------- ----------------------------------------
Date Signed Xxxxxx Momsen, General Partner
THE STATE OF CALIFORNIA Section
Section
COUNTY OF SAN MARTEN Section
BEFORE ME, the undersigned, a Notary Public for said County
and State, on this day personally appeared Xxxxxx Momsen, and acknowledged to
me that the same was the act of the said entity, INTERWEST INVESTORS V, L.P.,
and that he executed the same for the purposes and consideration therein
expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this the 22nd day of
August, 1996.
/s/ XXXX X. XXXXXX
----------------------------
Notary Public
My Commission Expires:
2/7/98
-----------------
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EXHIBIT A
EXHIBIT 10.10
XXXXXXX X. XXXXXXXX & COMPANY
INCORPORATED
September 29, 1993
Xx. Xxxxx X. Xxxxx
President
HydraLite Incorporated
X.X. Xxx 00
Xxxxxxx, XX 00000
Dear Xx. Xxxxx:
We are pleased to present HydraLite Incorporated ("HydraLite" or the
"Company") with the terms under which Xxxxxxx X. Xxxxxxxx & Company,
Incorporated ("WKW") will serve as exclusive financial advisor to the Company
respecting a private financing of approximately $5 million for the Company.
Our advisory services will include, but are not limited to, the presentation of
HydraLite to certain qualified prospective institutional investors and
strategic investors and the evaluation of financing proposals submitted by such
investors solicited by WKW or brought to the Company's attention independently
of WKW, including parties contacted by HydraLite prior to the date hereof. WKW
agrees to such engagement and for the term of this engagement we will use our
best efforts on the Company's behalf.
Set forth below are the services WKW will perform in the course of
this assignment, the fees and expenses payable to WKW in exchange for these
services, and general terms and conditions of the engagement.
I. SERVICES TO BE PROVIDED BY WKW
1. WKW will perform due diligence on the business, operations,
and financial condition and prospects of HydraLite and will assist the Company
in preparing a confidential offering memorandum ("Confidential Memorandum")
that will provide prospective investors with the necessary information that
will enable them to fairly evaluate HydraLite for financing.
2. Subject to the Company's prior approval, WKW will distribute
the Confidential Memorandum to a group of prospective investors jointly
selected by WKW and the Company.
21
Xx. Xxxxx X. Xxxxx
Septemer 29, 1993
Page 2
3. WKW will develop, update and review with the Company on an
ongoing basis a list of parties that may be interested in investigating in
HydraLite, and contact only parties on this list that are approved by the
Company.
4. WKW will screen prospective investors based on their level of
interests, financial capability, compatibility, etc. and enter into
preliminary negotiations with qualified prospective investors.
5. WKW will assist and advise the Company in negotiations with
prospective investors regarding price, type of securities and other material
factors.
6. WKW will assist the Company as requested by the Company, with
document preparation, procedural execution and closing of the transaction.
II. FEE AND EXPENSE ARRANGEMENTS
The professional fees and expense reimbursement payable to WKW with respect to
this assignment are set forth below:
Should the Company consummate a transaction resulting in the financing, joint
venture, operating agreement, sale, merger or comparable transaction of
HydraLite with another person or entity (the "Transaction") during the period
of time this agreement is in effect, WKW shall be paid a contingent advisory fee
("Advisory Fee") in the amount of five percent (5%) of the amounts funded by
the prospective investors or, for consideration to HydraLite or its
shareholders not in cash, 5% of the amount determined by good faith negotiation
between HydraLite and WKW to have been received by HydraLite. No amounts will
be owed to WKW for amounts funded on or before December 10, 1993 by Optelecom,
Inc. and/or its affiliates. The Advisory Fee will be payable in cash at the
time of funding or receipt by HydraLite.
Upon closing of the Transaction contemplated hereby, the Company will sell to
WKW, for nominal consideration, warrants entitling WKW to purchase that number
of shares of common stock of the Company equal to five percent of the
fully-diluted common stock outstanding upon completion of the Transaction.
Such warrants shall have an exercise price per common share equal to the actual
or implied common share price in the Transaction, shall be exercisable for a
period of five years from the date of closing, and shall have standard
antidilution provisions and registration rights.
22
Xx. Xxxxx X. Xxxxx
Septemer 29, 1993
Page 3
Also upon closing of the Transaction, the Company will grant to WKW a five-year
right of first refusal to serve as HydraLite's investment banker in any
transaction in which HydraLite retains an investment banker. WKW's
compensation will be usual and customary in any such engagement. In any case
in which the Company selects two or more investment bankers, WKW's share of
overall investment banking fees will be no less favorable to WKW than the total
of such fees divided by the number of underwriters or agents, as the case may
be, retained by HydraLite.
For its direct accountable expenses incurred in connection with this
assignment, such as telephone, travel, postage and express expenses, and
computer database access fees, WKW will earn common stock of HydraLite at the
rate of 0.0715% of the fully-diluted shares of HydraLite per $1,000 of such
expenses. Such shares will be issued to WKW on the basis of such fully-diluted
shares as of the date of execution of this letter, and will be issued to WKW at
the earlier of the closing of the Transaction or the date of termination of
this engagement. The maximum obtainable by WKW pursuant to the provision of
this paragraph will be 1.5% of the fully-diluted shares at such time.
III. TERMS OF ENGAGEMENT RELATING TO FINANCING OF THE COMPANY
WKW will have the exclusive right for a period of 270 days from the date of
execution of this letter to serve as the Company's representative with respect
to the financing of HydraLite. Any entity contacted by WKW or introduced to
the Company independently of WKW during the course of this assignment will be
deemed to be an interested party ("Interested Party").
Should this assignment be terminated prior to the financing of HydraLite by an
Interested Party and should the Company agree in principle to or subsequently
secure financing from or be sold to an Interested Party within an 18 month
period following the signing of this letter, then WKW shall be due the Advisory
Fee as contemplated in Section II above with respect to the financing.
IV. INDEMNIFICATION
Recognizing that transactions of the type contemplated by this engagement
sometimes result in litigation and that the role of WKW is limited to acting as
of the Company's financial advisor, the Company will indemnify WKW, and its
directors, officers, agents and employees and controlling persons (hereinafter
referred to as "Indemnified Party") to the full extent lawful against any and
all
23
Xx. Xxxxx X. Xxxxx
Septemer 29, 1993
Page 4
claims, losses and expenses as incurred (including reimbursement of all
reasonable fees and disbursements of Indemnified Party and cost of counsel and
of all Indemnified Party's reasonable travel and other out-of-pocket and per
diem expenses incurred in connection with the investigation or other
proceedings arising therefrom) arising out of WKW's engagement hereunder,
provided, however, that the Company shall not be liable in any such case to the
extent that any such claim, loss or expense is found in the final judgment by a
court and/or jury and/or arbitral body to have resulted from a breach of the
obligations of the Indemnified Party to the Company in circumstances involving
willfull bad faith or gross negligence in the performance of the services which
are the subject of this agreement. The Company shall not be liable for any
settlment of any such action or claim without its express written consent.
V. LACK OF INDEPENDENT VERIFICATION
During the course of this assignment, WKW may rely upon the opinions of experts
(including, but not limited to, independent public accounting firms) with
respect to the accuracy of certain data. WKW will make no effort to
independently verify the accuracy of any expert opinons so relied upon.
VI. CONFIDENTIALITY
All information supplied to WKW by the Company will be held in strict
confidence, whether or not marked confidential, as we understand that this
information is treated as highly confidential by you and is not normally
divulged to outside sources. Moreover, WKW will make every reasonable effort to
ensure that the confidentiality of the Company data is protected by any
prospective investor to whom it is entrusted. Each copy of the Confidential
Memorandum will be numbered and accounted for, and the immediate return of the
Confidential Memorandum and other accompanying data will be requested from any
prospective investor of the Company or any investor who indicates no further
interest in the financing contemplated herein.
VII. AMENDMENTS
Both parties agree that this document can be modified or amended only through
written agreement of WKW and HydraLite.
24
Xx. Xxxxx X. Xxxxx
Septemer 29, 1993
Page 5
If the foregoing accurately sets forth your understanding of our agreement,
please so indicate by signing, dating and returning one of the enclosed copies
of this letter, retaining the other for your records.
We look forward to working with you.
Sincerely,
XXXXXXX X. XXXXXXXX & COMPANY, INCORPORATED
By: /s/ XXXX XXXXXXX
--------------------------------------
Xxxx Xxxxxxx
ACCEPTED AND AGREED TO:
HydraLite Incorporated
By: /s/ XXXXX XXXXX
--------------------------------------
Xxxxx Xxxxx
President
25
EXHIBIT B
EXHIBIT 10.10
REVISED COMPENSATION AGREEMENT
This Revised Compensation Agreement is entered into this 9th
day of April, 1994 by and between Xxxxxxx X. Xxxxxxxx & Company, Incorporated
("Xxxxxxxx") and HydraLite Incorporated, a Delaware corporation ("HydraLite").
RECITALS
X. Xxxxxxxx and HydraLite are parties to an Agreement
dated September 29, 1993 (the "Original Agreement") in which Xxxxxxxx agreed to
assist HydraLite in raising approximately $5 million in a private financing in
return for specified compensation.
B. To accommodate a private placement to be undertaken
by Xxxxxxx Xxxxx Holdings Incorporated ("Xxxxxxx Xxxxx") as private placement
agent to HydraLite, Xxxxxxxx and HydraLite entered into a letter agreement
dated November 22, 1993 and signed by Xxxxxxxx on November 29, 1993 (the
"Modification Agreement") that excepted from certain terms of the Original
Agreement the private placement to be undertaken by Xxxxxxx Xxxxx and provided
for specific compensation to Xxxxxxxx with respect to such private placement.
C. HydraLite is now negotiating an arrangement under
which it will receive first round financing from Xxxxx Xxxxx and/or other
venture capital firms or capital sources in an amount of at least $2 million
for shares of Preferred Stock ("First Round Financing") with a second round to
be raised through (1) a private placement to be undertaken by Xxxxxxx Xxxxx as
private placement agent, or (ii) additional venture capital money.
D. As an inducement to Xxxxx Xxxxx, other venture
capitalists or capital sources and Xxxxxxx Xxxxx to invest in and undertake
activities on HydraLite's behalf, Xxxxxxxx and HydraLite desire to revise the
Original Agreement and the Modification Agreement upon the occurrence of the
First Round Financing, as further described below.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties do hereby
agree as follows:
Conditioned upon the occurrence of HydraLite's obtaining First
Round Financing of at least $2 million through the sale of a series of
preferred stock having substantially the rights and privileges contained in
Attachment A (the "Series A Preferred Stock"), and with the capitalization
resulting therefrom also substantially as shown in Attachment A, the following
shall occur:
26
Revised Compensation Agreement
Page 2
April 9, 1994
a. Except as provided below, the Original
Agreement and the Modification Agreement shall terminate upon the closing of
the First Round Financing and the simultaneous execution of the Warrant
Agreement by HydraLite and Xxxxxxxx and receipt by Xxxxxxxx of the Warrants
specified in paragraph b (below) and shall be of no further force or effect and
the parties shall have no further rights, duties or obligations arising out of
such agreements and no compensation or reimbursement of expenses, in whatever
form, shall be owed by HydraLite to Xxxxxxxx for the First Round Financing or
any future investments made in HydraLite (unless other separate agreements
between Xxxxxxxx & HydraLite are entered into). The agreement contained in
Article VI. (Confidentiality) of the Original Agreement shall remain in full
force and effect for two years after the First Round Financing, and the
provisions of Article IV (Indemnification) shall remain in full force and
effect without time limit.
b. HydraLite shall issue to Xxxxxxxx warrants to
purchase 215,000 shares of HydraLite's Common Stock and execute the attached
Warrant Agreement dated April 9, 1994. Such warrants shall be issued to
Xxxxxxxx simultaneously with the issuance of shares of Series A preferred Stock
to investors in the First Round Financing. Issuance of these warrants to
Xxxxxxxx shall be the sole compensation of any type, except as provided in
paragraph c (below), including reimbursement of expenses, payable to Xxxxxxxx
in connection with the First Round Financing and any subsequent financing of
HydraLite (unless other separate agreements between Xxxxxxxx and HydraLite are
entered into).
c. For a period concluding at the earlier of
seven (7) years from the date of closing of the First Round Financing or upon
the closing of HydraLite's initial public offering resulting in proceeds to
HydraLite of at least $10 million, in any transaction for which HydraLite
intends to retain one or more investment bankers, HydraLite shall give right of
first refusal to Xxxxxxxx for retention as an investment banker. Giving
Xxxxxxxx right of first refusal shall mean, by way of example but not
limitation, that HydraLite shall first evaluate the proposals, advice and
qualifications of Xxxxxxxx for the transaction before approaching other
investments bankers, and if HydraLite agrees to undertake a transaction with
another credible such firm, Xxxxxxxx will have the right to participate in such
transaction provided that it agrees with and accepts the terms (e.g.,
valuation, investment banking compensation, etc.) accepted by HydraLite.
Xxxxxxxx'x compensation will be usual and customary in any such engagement. In
any case in which HydraLite selects two or more investment bankers, Xxxxxxxx'x
share of overall investment banking fees and commissions will be no less
favorable to Xxxxxxxx than the total of such fees and commissions divided by
the number of underwriters or agents, as the case may be, retained by
HydraLite.
27
Revised Compensation Agreement
Page 3
April 9, 1994
In all transactions for which Xxxxxxxx is retained by
HydraLite, whether or not pursuant to its right of first refusal, Xxxxxxxx will
exercise its best efforts in cooperation with HydraLite and its co-managers or
co-agents to effect the transaction to the greatest practicable benefit to
HydraLite.
d. HydraLite agrees, subject to the exercise of
prudence and good corporate governance practice, to interview Bart Stuck and
consider him in good faith as a candidate for an outside board member seat.
This revised Compensation Agreement is executed as of the date specified below.
HYDRALITE INCORPORATED
/s/ Xxxxxxx Xxxxxxx, CEO
-------------------------
XXXXXXX X. XXXXXXXX & CO.
/s/ XXXX XXXXXXX
-------------------------------------------
By Xxxx Xxxxxxx
4/9/94
-------------------------------------------
Date
28
Attachment A
Security Holders of the Company Upon Closing of Series A Financing
Common Stock Common Stock Series A Series A
Issued & Warrants and Preferred Preferred
Outstanding Options Stock Warrants
----------- --------- ---------- --------
Xxxxx Xxxxx 1,200,000
Xxx Xxxxxx 13,333 6,667
Xxxxxxx Xxxxxxx 700,000
INNO 221,520
Optelecom 200,000
Xxxxx Xxxxx Fund IV 1,125,000 25,000
SRB Management 5,000
InterWest V 1,125,000 25,000
InterWest Investors V 6,000
Vanguard Venture Partners 750,000
Xxx Xxxxxxxxxxxx 100,000
General Instrument 105,667
Xxxxxxxx & Co. 215,000
(Note 1)
Note 1. The value of the General Instrument option is reflected based on the
Common Stock Outstanding as of the closing of the Series A financing.
29
PROPOSED CAPITALIZATION TABLE FOR HYDRALITE FINANCING
------------------------------------------------------------------------------------------------
Common (after Preferred A Preferred B Issued Fully diluted
split) $1.00 $1.75 Total % %
------------------------------------------------------------------------------------------------
INNO 221,520 221,520 2.58% 2.39%
Optelecom 200,000 200,000 2.33% 2.16%
Xxxxx Xxxxx Fund IV 1,125,000 206,840 1,331,840 15.58% 14.38%
SRB Management 5,000 918 5,918 0.07% 0.08%
InterWest V 1,125,000 206,840 1,331,840 15.50% 14.38%
InterWest Investors V 6,000 1,102 7,102 0.08% 0.08%
Vanguard 750,000 137,760 887,780 10.33% 0.59%
Xxx Xxxxxxxxxxxxx 100,000 18,368 118,368 1.38% 1.28%
Xxxxxxx Xxxxx Investors 1,714,288 1,714,288 19.95% 18.51%
Xxx Xxxxxx 13,333 13,333 0.16% 0.14%
Management 2,760,000 2,760,000 32.12% 29.81%
------------------------------------------------------------------------------------------------
Issued and outstanding by class 2,773,333 3,532,520 2,285,714 8,591,587 100.00% 92.79%
------------------------------------------------------------------------------------------------
Cumulative Issued and outstanding 2,773,333 6,305,853 8,591,567
------------------------------------------------------
Xxxxx Warrant 6,667 8,667 0.07%
Xxxxx Xxxxx 25,000 25,000 0.27%
InterWest 25,000 25,000 0.27%
General Instrument @ 5% of com
138,667 138,667 1.50%
Xxxxxxxx (provisional) 215,000 215,000 2.32%
Xxxxxxx Xxxxx Warrant 257,143 257,143 2.78%
------------------------------------------------------------------------------------------------
Total (fully diluted) 3,133,687 9,582,520 2,542,057 9,258,044 100.00%
------------------------------------------------------------------------------------------------
30
EXHIBIT C
EXHIBIT 10.11
THIS WARRANT AND THE SECURITIES PURCHASABLE HEREUNDER HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION, AND MAY NOT BE OFFERED, SOLD, OR TRANSFERRED IN THE ABSENCE OF
REGISTRATION OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE AND THE
COMPANY RECEIVES AN OPINION OF COUNSEL SATISFACTORY TO IT TO SUCH EFFECT.
CIENA CORPORATION
WARRANT TO PURCHASE COMMON STOCK
This certifies that, for the sum of $150.00, the receipt of which
is hereby acknowledged, Xxxxxxx X. Xxxxxxxx & Co., Incorporated or its
registered assigns pursuant to Paragraph 10(b) hereof ("Holder") is entitled to
subscribe for and purchase up to 15,000 shares (subject to adjustment as
described herein) of fully paid and nonassessable Common Stock of CIENA
Corporation, a Delaware corporation (the "Company"), upon exercise of this
Warrant and subject to the provisions and upon the terms and conditions
hereinafter set forth.
As used herein, the term "Common Stock" shall mean the Company's
presently authorized Common Stock and any securities into which such Common
Stock may hereafter be exchanged.
1. TERM.
This Warrant is exercisable, in whole or in part, at any time
beginning August 22, 1997 until 5:00 P.M. New York City time on August 21, 2001,
provided, however, that if at any time Holder or any of Holder's affiliates
(including without limitation, Xxxxxxx X. Xxxxxxxx, III) brings a claim or
claims of any kind, whether in arbitration, litigation or any other forum,
including specifically claims brought after conclusion of an IPO by the Company
for breach of the Settlement Agreement and Mutual Release dated as of August 21,
1996 between Holder and the Company (the "Settlement"), against the Company,
Xxxxx Xxxxx or any of the entities identified in paragraph 10 of the Settlement,
this Warrant, to the extent unexercised, shall be null and void. Notwithstanding
anything herein to the contrary, the Company shall use reasonable efforts to
mail to the original Holder, by certified mail, return receipt requested, notice
of the expiration date of this Warrant, no later than 15 days prior to the
expiration date, but the failure of the Company to send or the Holder to receive
such notice shall not affect the expiration hereof.
31
2. WARRANT PRICE.
The purchase price payable for each share of Common Stock
deliverable upon exercise of this Warrant (the "Warrant Price") is $20.00 per
share, subject to adjustment as described in Section 5 hereof.
3. METHOD OF EXERCISE; PAYMENT; ISSUANCE OF NEW WARRANT.
(a) Subject to Paragraph 1 hereof, the purchase right
represented by this Warrant may be exercised by the Holder hereof, in
whole or in part, by the surrender of this Warrant (with the Notice of Exercise
form attached hereto as Exhibit 1 duly executed) at the principal office of the
Company and by the payment to the Company of an amount equal to the then
applicable Warrant Price per share multiplied by the number of shares then
being purchased. The Warrant Price shall be paid in cash, by wire transfer or
by check.
(b) In lieu of delivering the Warrant Price as set forth
in subparagraph (a), the Holder may exercise this Warrant by conversion, in
whole or in part, into shares of Common Stock, by instructing the Company in
writing ("Notice of Conversion") to deliver to the Holder (without payment by
the Holder of any Warrant Price or of any other cash or consideration) that
number of shares of Common Stock equal to the quotient obtained by dividing:
(i) the value of this Warrant at the time the
conversion right is exercised (determined by subtracting
the aggregate Warrant Price in effect immediately prior to
the exercise of the conversion right from the aggregate
current market price (as determined in accordance with
Paragraph 5(f) hereof) of the shares of Common Stock
issuable upon exercise of this Warrant immediately prior
to the exercise of the conversion right) by
(ii) the current market price (as determined in
accordance with Paragraph 5(e) hereof) of one share of
Common Stock immediately prior to the exercise of the
conversion right,
and multiplying the quotient so obtained by a fraction equal to the portion of
this Warrant which the Holder desires to exercise.
The Notice of Conversion may be given by circling the appropriate
option in the Notice of Exercise attached to this Warrant.
(c) Each exercise of this Warrant shall be deemed to have been
effected immediately prior to the close of business on the business day on which
this Warrant shall have been surrendered to the Company, and at such time, the
person or persons in whose name or names any certificate or certificates for
shares of Common Stock (or other securities) shall be issuable upon such
exercise, shall be deemed to have become the holder or holders of record
thereof.
2
32
(d) In the event of any exercise of the rights represented by
this Warrant, certificates for the shares of stock so purchased shall be
delivered to the Holder hereof (or the transferee designated in the Notice of
Exercise) within a reasonable time (but not later than three (3) business days
after the date of such exercise) and, unless this Warrant has been fully
exercised or expired, a new Warrant representing the portion of the shares, if
any, with respect to which this Warrant shall not then have been exercised shall
also be issued to the Holder hereof within such reasonable time.
4. STOCK FULLY PAID; RESERVATION OF SHARES.
All Common Stock which may be issued upon the exercise
of the rights represented by this Warrant will, upon issuance, be fully paid
and nonassessable, and free from all taxes, liens and charges with respect to
the issue thereof. During the period within which the rights represented by
this Warrant may be exercised, the Company will at all times have authorized,
and reserved for the purpose of the issue upon exercise of this Warrant, a
sufficient number of shares of its Common Stock to provide for the exercise of
this Warrant in full.
5. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF SHARES.
The kind of securities purchasable upon the exercise of
this Warrant and the Warrant Price shall be subject to adjustment from time to
time upon the occurrence of certain events as follows:
(a) Reclassification, Consolidation or Merger. In case of any
reclassification or change of outstanding securities of the class issuable upon
exercise of this Warrant (other than a change in par value, or from par value
to no par value, or as a result of a subdivision or combination), or in case of
any consolidation or merger of the Company with or into another corporation,
(other than a merger (i) with another corporation in which the Company is the
surviving corporation and which does not result in any reclassification or
change of outstanding securities issuable upon exercise of this Warrant or (ii)
a merger in which the Company is not the surviving corporation and holders of
equity securities of the Company as a result of such merger receive more than
50% of the equity securities of the surviving corporation), or in case of any
sale of all or substantially all of the assets of the Company, or in case of a
share exchange in which 80% or more of the outstanding capital stock of the
Company is exchanged for capital stock of another corporation, any of which
transactions shall be referred to hereinafter as a "Corporate Transaction," the
Company or such successor or purchasing company or entity, as the case may be,
shall execute with the Holder of this Warrant an agreement pursuant to which
the Holder of the Warrant shall have the right thereafter to purchase upon
exercise of the Warrant the kind and amount of shares, and/or other securities
and property that the Holder of the Warrant would have owned or have been
entitled to receive after the happening of such Corporate Transaction had the
Warrant been exercised immediately prior to such action. The agreement referred
to in this subparagraph (a) shall provide for adjustments which shall be as
nearly equivalent as
3
33
may be practicable to the adjustments provided for in this Paragraph 5. The
provisions of this subparagraph (a) shall similarly apply to successive
Corporate Transactions.
(b) Subdivision or Combination of Shares. If the Company at any
time while this Warrant remains outstanding and unexpired shall subdivide or
combine its Common Stock, the Warrant Price shall be proportionately decreased
in the case of a subdivision or increased in the case of a combination.
(c) Stock Dividends. If the Company at any time while this
Warrant is outstanding and unexpired shall pay a dividend with respect to Common
Stock payable in, or make any other distribution with respect to Common Stock
(except any distribution provided for in the foregoing subparagraph (a) or (b)),
of Common Stock, then the Warrant Price shall be adjusted, from and after the
date of determination of shareholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Warrant Price in
effect immediately prior to such date of determination by a fraction (a) the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend or distribution and (b) the
denominator of which shall be the total number of shares of Common Stock
outstanding immediately after such dividend or distribution.
(d) Adjustment of Number of Shares. Upon each adjustment in the
Warrant Price, the number of shares of Common Stock purchasable hereunder shall
be adjusted, to the nearest whole share, to the product obtained by multiplying
the number of shares purchasable immediately prior to such adjustment in the
Warrant Price by a fraction, the numerator of which shall be the Warrant Price
immediately prior to such adjustment and the denominator of which shall be the
Warrant Price immediately thereafter.
(e) Current Market Price. For the purpose of any computation
under this Warrant, the "current market price" per share of Common Stock on any
date shall be deemed to be the average of the daily Closing Prices of the shares
of Common Stock for the thirty (30) consecutive Trading Days preceding the
applicable date. The "Closing Price" for each day shall be (i) the last reported
sale price regular way or, in case no such sale takes place on such date, the
average of the closing bid and asked quotations regular way, in either case on
the New York Stock Exchange, or, if the Common Stock is not listed or admitted
to trading on such exchange, on the principal national securities exchange on
which the Common Stock is listed or admitted to trading; or (ii) if the Common
Stock is not listed or admitted to trading on any national securities exchange,
the last reported sale price regular way or, in case no such sale takes place on
such day, the average of the closing bid and asked quotations regular way, in
either case on the National Market System of the National Association of
Securities Dealers, Inc. ("NASD"); or (iii) if not authorized for trading or
quotation on such system, the average of the highest reported bid and lowest
reported asked quotations as furnished by the NASD or similar organization if
the NASD is no longer reporting such information; or (iv) if no such prices or
quotations are available, the fair market value of the Common Stock as
determined by good faith action of the Board of
4
34
Directors of the Company (whose determination shall be conclusive). A "Trading
Day" shall be any day that the principal national securities exchange on which
the Common Stock listed or admitted to trading is open for the transaction of
business or, if not so listed or admitted, that the New York Stock Exchange is
open for the transaction of business.
(f) Adjustment for De Minimis Change. No adjustment in the
Warrant Price shall be required unless such adjustment would require an increase
or decrease of at least $0.05 in such price; provided, however, that any
adjustments which by reason of this subparagraph (f) are not required to be made
shall be carried forward and taken into account in any subsequent adjustment
required to be made hereunder.
6. NOTICE OF ADJUSTMENTS.
Whenever any Warrant Price shall be adjusted pursuant to
Paragraph 5 hereof, the Company shall make a certificate signed by its chief
financial officer setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated, and the Warrant Price or Prices after giving effect to such
adjustment, and shall cause copies of such certificate to be mailed (by
registered mail, return receipt requested, postage prepaid) to the Holder of
this Warrant at the address specified in Paragraph 10(d) hereof or at any
address provided to the Company in writing by the Holder of this Warrant.
7. FRACTIONAL SHARES.
No fractional shares of Common Stock will be issued in
connection with any exercise hereunder, but in lieu of such fractional shares
the Company shall make a cash payment upon the basis of the Warrant Price then
in effect and the fair market value of a full share as determined for this
purpose by the Company's Board of Directors.
8. COMPLIANCE WITH SECURITIES ACT; DISPOSITION OF SHARES OF
COMMON STOCK.
The Holder of this Warrant, by acceptance hereof, agrees that
this Warrant and the shares of Common Stock to be issued upon exercise hereof
are being acquired for investment and that it will not offer, sell or otherwise
dispose of this Warrant or any shares of Common Stock to be issued upon exercise
hereof except under circumstances which will not result in a violation of the
Securities Act of 1933, as amended (the "Act") and will provide to the Company
upon its request an opinion of counsel satisfactory to the Company as to the
exemption from the Act and applicable state securities laws applicable to such
offer, sale or disposition. Upon exercise of this Warrant, the Holder hereof
shall, if requested by the Company, confirm in writing, in a form satisfactory
to the Company, that the shares of Common Stock so purchased are being acquired
for investment and not with a view toward distribution or resale. This
5
35
Warrant and all shares of Common Stock issued upon exercise of this Warrant
(unless registered under the Act) shall be stamped or imprinted with a legend
substantially in the following form as well as any additional legends required
by applicable securities laws or stockholders' agreements and similar agreements
encumbering such shares:
"THIS WARRANT AND THE SECURITIES PURCHASABLE HEREUNDER HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS
OF ANY STATE OR OTHER JURISDICTION, AND MAY NOT BE OFFERED, SOLD,
OR TRANSFERRED IN THE ABSENCE OF REGISTRATION OR UNLESS AN
EXEMPTION FROM REGISTRATION IS AVAILABLE AND THE COMPANY RECEIVES
AN OPINION OF COUNSEL SATISFACTORY TO IT TO SUCH EFFECT."
The Holder represents and warrants to the Company that it is an
"accredited investor" as defined in Securities and Exchange Commission Rule 501
promulgated under the Act.
9. PIGGY-BACK REGISTRATION RIGHTS.
(a) Piggy Back Registrations. If at any time after an initial
public offering by the Company of its securities, the Company proposes to make a
registered public offering of any of its securities under the Securities Act of
1933 (whether to be sold by the Company or by one or more third parties), the
Company agrees on the first such occasion, to give written notice of the
proposed registration to Holder, not less than 15 days prior to the proposed
filing date of the registration statement, and at the written request of Holder
delivered in writing to the Company within 15 days after the receipt of said
notice; the Company agrees, subject to the provisions of this Section 9, to
include in the registration statement and offering, and in any underwriting of
the offering; all shares of Common Stock as may have been designated in the
Holder's request.
(b) Underwriter Discretion. If a registration in which the Holder
has the right to participate pursuant to this Section 9 is an underwritten
registration on behalf of the Company, and the managing underwriters advise the
Company, that in their opinion, the number of securities requested to be
included in the registration exceeds the number which can be sold in the
offering, the Company shall allocate the number of shares to be included in the
registration statement as follows: (i) first, all of the securities of the
Company proposed to be sold by the Company, (ii) second, stockholders with
piggy-back registration rights in existence as of the date hereof; and (iii)
third, the Common Stock requested to be sold by Holder and all other requesting
stockholders reduced, pro rata, in accordance with the percentage interests in
the Company held by each of them.
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36
(c) Information Required. The Company shall have no obligation to
include shares of Common Stock owned by Holder in a registration statement
pursuant to this Section 9, unless and until the Holder shall have furnished the
Company with all information and statements about or pertaining to Holder in the
reasonable detail and on a timely basis as is reasonably deemed by the Company
to be necessary or appropriate with respect to the preparation of the
registration statement.
(d) Hold-back. In the event that the Company effects an
underwritten public offering of any security, the Holder agrees, if requested by
the managing underwriters, not to effect any public sale or distribution,
including any sale pursuant to Rule 144 under the Securities Act of 1933, of any
Common Stock (except as part of the underwritten offering) during the 180-day
period commencing with the effective date of the registration statement for the
offering.
(e) Expenses. If, pursuant to Section 9 hereof, shares of Common
Stock owned by any Holder are included in a registration statement, the Holder
shall pay all transfer taxes, if any, relating to the sale of its shares, the
fees and expenses of its own counsel, and its pro rata portion of any
underwriting discounts or commissions or the equivalent thereof. The Company
agrees to pay all expenses incident to the registration including all
registration and filing fees, fees and expenses of compliance with securities or
blue sky laws, underwriting discounts, fees and expenses (other than the
Holder's pro rata portion of any underwriting discounts or commissions or the
equivalent thereof), printing expenses, messenger and delivery expenses, and
fees and expenses of counsel for the Company and all independent certified
public accountants and other persons retained by the Company.
(f) Indemnification. In the event that any share of Common Stock
owned by a Holder are sold by means of a registration statement pursuant to this
Section 9, the Company agrees to indemnify and hold harmless the Holder, each of
its officers and directors, and each person, if any, who controls or may control
the Holder within the meaning of the Act (the Holder, its officers and
directors., and any other persons being hereinafter referred to individually as
an "Indemnified Person" and collectively as "Indemnified Persons") from and
against all demands, claims, actions or causes of action, assessments, losses,
damages, liabilities, costs, and expenses, including, without limitation,
interest, penalties, and reasonable attorneys' fees and disbursements, asserted
against, resulting to, imposed upon or incurred by the Indemnified Person,
directly or indirectly (hereinafter referred to in this Section 9 or, the
singular as a "claim" and in the plural as "claims"), based upon, arising out of
or resulting from any untrue statement of a material fact obtained in the
registration statement or any omission to state therein a material fact
necessary to make the statement made therein, in the light of the circumstances
under which they were made, not misleading, except insofar as the claim is based
upon, rises out of or results from information furnished to the Company in
writing by the Holder for use in connection with the registration statement. The
Holder agrees to indemnify and. hold harmless the Company, its officers and
directors, and each person, if any, who controls or may control the Company
within the meaning of the Act (the Company, it's officers and
7
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directors, and any other persons also being hereinafter referred to individually
as an "Indemnified Person" and collectively as "Indemnified Persons") from and
against all claims based upon, arising out of or resulting from any untrue
statement of a material fact contained in the registration statement or any
omission to state therein a material fact necessary in order to make the
statement made therein, in the light of the circumstances under which they were
made, not misleading, to the extent that the claim is based upon, arises out of
or results from information furnished to the Company in writing by the Holder
for use in connection with the registration statement. Promptly after actually
receiving definitive notice of any claim in respect of which an Indemnified
Person may seek indemnification under this Section 9, the Indemnified Person
shall submit written notice thereof to either the Company or the Holder, as the
case may be (sometimes being hereinafter referred to as an "Indemnifying
Person"). The omission of the Indemnified Person to so notify the Indemnifying
Person of any claim shall not relieve the Indemnifying Person from any liability
it may have hereunder except to the extent that (a) the liability was caused or
increased by the omission, or (b) the ability of the Indemnifying Person to
reduce the liability was materially adversely affected by the omission. In
addition, the omission of the Indemnified Person so to notify the Indemnifying
Person of any claim shall not relieve the Indemnifying Person from any liability
it may have otherwise than hereunder. The Indemnifying Person shall have the
right to undertake, by counsel or representatives of its own choosing, the
defense, compromise or settlement (without admitting liability of the
Indemnified Person) of and the claim asserted, the defense, compromise or
settlement to be undertaken at the expense and risk of the Indemnifying Person,
and the Indemnified Person shall have the right to engage separate counsel, at
its own expense, whom counsel for the Indemnifying Person shall keep informed
and consult with in a reasonable manner. In the event the Indemnifying Person
shall elect not to undertake the defense by its own representatives, the
Indemnifying Person shall give prompt written notice of the election to the
Indemnified Person, and the Indemnified Person shall undertake the defense,
compromise or settlement (without admitting liability of the Indemnified Person)
thereof on behalf of and for the account and risk of the Indemnifying Person by
counsel or other representatives designated by the Indemnified Person. In the
event that any claim shall arise out of a transaction or cover any period or
periods wherein the Company and the Holder shall each be liable hereunder for
part of the liability or obligation arising therefrom, then the parties shall,
each choosing its own counsel and bearing its own expenses, defend the claim,
and no settlement or compromise of the claim may be made without the joint
consent or approval of the Company and the Holder. Notwithstanding the
foregoing, no Indemnifying Person shall be obligated hereunder with respect to
amounts paid in settlement of any claim if the settlement is effected without
the consent of the Indemnifying Person (which consent shall not be unreasonably
withheld).
10. MISCELLANEOUS.
(a) No Rights as Stockholder. No Holder of the Warrant or
Warrants shall be entitled to vote or receive dividends or be deemed the Holder
of Common Stock or any other securities of the Company which may at any time be
issuable on the
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exercise hereof for any purpose, nor shall anything contained herein be
construed to confer upon the Holder of this Warrant, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change of par
value or change of stock to no par value, consolidation, merger, conveyance, or
otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until the Warrant or Warrants shall have been
exercised and the shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein.
(b) Exchange, Transfer and Replacement of Warrant. Subject to
Paragraph 8 hereof, the Holder may transfer or assign this Warrant, in whole but
not in part and from time to time. Upon the surrender of the Warrant, properly
endorsed, for registration of transfer or for exchange at the principal office
of the Company, the Company at its expense will execute and deliver to or upon
the order of the Holder thereof a new Warrant of like tenor, in the name of such
Holder or as such Holder (upon payment by such Holder of any applicable transfer
taxes) may direct, calling on the face thereof for the number of shares of
Common Stock called for on the face of the Warrant. On receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant and, in the case of loss, theft or destruction, on
delivery of any indemnity agreement or bond reasonably satisfactory in form and
amount to the Company or, in the case of mutilation, on surrender and
cancellation of this Warrant, the Company, at its expense, will execute and
deliver, in lieu of this Warrant, a new Warrant of like tenor.
(c) Amendments. Neither the Warrant nor any term hereof may be
changed, waived, discharged or terminated without the prior written consent of
the Holder.
(d) Notice. Any notice given to either party under this Agreement
shall be deemed to be given three (3) days after mailing, postage prepaid,
addressed to such party at the address as such party may provide to the other.
(e) No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Company but will at all
times in good faith assist in the carrying out of all the provisions of this
Warrant.
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(f) Governing Law. This Warrant shall be governed by and
construed under the laws of the State of Maryland.
Date: August 21, 1996
CIENA CORPORATION
By: /s/ XXXXXXX X. XXXXXXX
-----------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chief Executive Officer
RECEIVED BY
XXXXXXX X. XXXXXXXX & CO. INCORPORATED
By: /s/ XXXXXXX X. XXXXXXXX
---------------------------
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EXHIBIT 1
NOTICE OF EXERCISE
TO: CIENA CORPORATION
1. The undersigned hereby elects to acquire ________ shares of Common
Stock of CIENA Corporation pursuant to the terms of the attached Warrant, and
[CIRCLE EITHER (A) OR (B)]
(a) tenders herewith payment of the purchase price of such
shares in full or
(b) elects to exercise its right of conversion set forth in
Paragraph 3(b) of the attached Warrant.
2. Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
---------------------------
(Name)
---------------------------
---------------------------
(Address)
3. The undersigned represents that the aforesaid shares of Common
Stock are being acquired for the account of the undersigned for investment and
not with a view to, or for resale in connection with, the distribution thereof
and that the undersigned has no present intention of distributing or reselling
such shares.
4. The Purchaser is an "accredited investor" as defined in Securities
and Exchange Commission Rule 501(a) issued pursuant to the Securities Act of
1933, as amended.
5. The undersigned represents and warrants that the undersigned has no
present intention to bring any claim of any kind, whether in arbitration,
litigation or any other forum, including specifically any claims for breach of
the Settlement Agreement and Mutual Release dated as of August 21, 1996 between
the Holder and the Company (the "Settlement"), against the Company, Xxxxx Xxxxx
or any of the entities identified in paragraph 10 of the Settlement.
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