1
EXHIBIT 10.31
COMMON STOCK SUBSCRIPTION AGREEMENT
This Common Stock Subscription Agreement ("Agreement") is made this 15th
day of May 2000, by and between Accelerated Networks, Inc., a California
corporation (the "Company"), and U S WEST Internet Ventures, Inc., a Colorado
corporation (the "Purchaser").
In consideration of the mutual promises, covenants and conditions
hereinafter set forth, the parties hereto agree as follows:
1. SUBSCRIPTION
The Purchaser hereby irrevocably subscribes for and agrees to purchase,
on and subject to the terms and conditions set forth herein, from the Company,
such shares (the "Shares") of the Company's Common Stock equal to Three Million
Dollars ($3,000,000) divided by the price per share of common stock sold in the
Company's initial public offering (the "IPO"), having the rights, preferences
and privileges set forth in the Company's Amended and Restated Certificate of
Incorporation, the form of which is attached hereto as Exhibit "A" (the
"Restated Certificate") which is the form of the Company's certificate of
incorporation which will govern the Company upon the closing of the Company's
IPO.
The Purchaser hereby acknowledges that the Company is currently
incorporated in California and is undertaking a reincorporation in Delaware. In
connection therewith, each holder of common stock of the California corporation
will receive one share of common stock of the Delaware corporation.
2. CLOSING AND DELIVERY OF SHARE CERTIFICATES
Delivery and payment for the Shares will be completed in one closing
(the "Closing") at the offices of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, 00 Xxxxxxxxxx
Xxxxx, Xxxxxx, Xxxxxxxxxx 00000 at 8:00 a.m. (Pacific Daylight Time) on the date
of, and immediately following, the closing of the Company's IPO. At the Closing,
the Purchaser shall pay the aggregate purchase price for the Shares, $3,000,000
(the "Purchase Price"), by wire transfer to an account specified by the Company.
A certificate representing the Shares will be delivered at Closing against
payment to the Company of the Purchase Price in the manner specified above.
3. COMPANY REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants to the Purchaser that, except
as set forth in the Schedule of Exceptions ("Schedule of Exceptions") attached
to this Agreement as Schedule A, the statements in the following Sections of
this Section 3 are all true and correct:
3.1 Organization and Standing. The Company is a corporation duly
organized and validly existing under, and by virtue of, the laws of the State of
California, and is in good standing under such laws. The Company has all
corporate power and authority to own, lease and operate its properties and to
conduct its business as currently conducted and as proposed to be conducted. The
Company is qualified to do business as a foreign corporation in each
jurisdiction
2
in which the conduct of its business requires such qualification except where
failure to be so qualified would not have a material adverse effect on its
financial condition, business or operations. The Company has made available to
the Purchaser true, correct and complete copies of its Articles of Incorporation
and Bylaws.
3.2 Capitalization. As of the date hereof, the authorized capital stock
of the Company consists of (i) Ninety Million (90,000,000) shares of Common
Stock, of which Ten Million Four Hundred Forty-Two Thousand Four Hundred
Ninety-Seven (10,442,497) shares are issued and outstanding, and (ii)
Thirty-Five Million Five Hundred Forty-Five Thousand Six Hundred Forty-Eight
(35,545,648) shares of Preferred Stock, of which (A) Eleven Million Five Hundred
Thousand (11,500,000) shares have been designated Series A Preferred Stock,
Eleven Million Two Hundred Twenty Thousand (11,220,000) of which shares are
issued and outstanding, (B) Eleven Million Six Hundred Thousand (11,600,000)
shares have been designated Series B Preferred Stock, Eleven Million Five
Hundred Eighty-Four Thousand Eight Hundred Forty-Eight (11,584,848) of which
shares are issued and outstanding, and (C) Eight Million Eight Hundred
Forty-Five Thousand Six Hundred Forty-Eight (8,845,648) shares have been
designated Series C Preferred Stock, Eight Million Eight Hundred Forty-Five
Thousand Six Hundred Forty-Eight of which shares are issued and outstanding and
(D) Three Million Six Hundred Thousand (3,600,000) shares have been designated
Series D Preferred Stock, Three Million Four Hundred Fifty-Five Thousand Two
Hundred Sixty-Seven (3,455,267) of which shares are issued and outstanding.
Except for (i) the conversion privileges of the Company's Series A Preferred
Stock, the Company's Series B Preferred Stock, the Company's Series C Preferred
Stock and the Company's Series D Preferred Stock, (ii) the rights provided in
that certain Second Restated Investors' Rights Agreement dated as of February
18, 2000, among the Company and certain of its shareholders, as amended to date
(as so amended, the "Restated Investors' Rights Agreement"), (iii) the Company's
obligation to issue warrants pursuant to a Warrant Issuance Agreement dated as
of December 16, 1999 with Siemens Information Communication Networks, Inc., of
which warrants to purchase 28,575 shares of Common Stock have previously been
issued and warrants to purchase up to an additional 121,425 shares of Common
Stock may be issued and (iv) the Ten Million Six Hundred Fifty Thousand
(10,650,000) shares of Common Stock authorized for issuance under the Company's
1997 Stock Option/Stock Issuance Plan (the "Plan"), of which Three Million Six
Hundred Forty-Two Thousand Four Hundred Ninety-Seven (3,642,497) shares have
been issued and are outstanding pursuant to the exercise of options or direct
issuances and Five Million Eight Hundred Twenty-Six Thousand Nine Hundred Fifty
(5,826,950) shares are issuable upon exercise of outstanding options as of the
date hereof, there are no options, warrants, conversion privileges or other
rights, or agreements with respect to the issuance thereof, presently
outstanding to purchase any of the capital stock of the Company. All shares are
duly authorized, validly issued, fully paid and nonassessable and have been
issued by the Company in compliance with the registration requirements of
securities laws. Apart from the exceptions noted in this Section 3.2, no shares
of the Company's outstanding capital stock, or stock issuable upon exercise or
exchange of any outstanding options or other stock issuable by the Company, are
subject to any rights of first refusal or other rights to purchase such stock
(whether in favor of the Company or any other person), pursuant to any agreement
or commitment of the Company.
2
3
3.3 Subsidiaries. The Company has no subsidiaries and does not presently
own or control, directly or indirectly, any interest in any other corporation,
partnership, trust, joint venture, association, or other entity.
3.4 Due Authorization. All corporate action on the part of the Company,
its officers, directors and shareholders, necessary for the sale and issuance of
the Shares and the performance of the Company's obligations under this Agreement
and Restated Investors' Rights Agreement has been taken or will be taken prior
to the Closing. This Agreement and the Restated Investors' Rights Agreement are
valid and binding obligations of the Company enforceable against the Company in
accordance with their terms, subject, as to enforcement of remedies, to
applicable bankruptcy, insolvency, moratorium, reorganization and similar laws
affecting creditors' rights generally and to general equitable principles. The
Shares are not subject to any preemptive rights or rights of first refusal
pursuant to any agreement or commitment of the Company. The execution, delivery
and performance by the Company of this Agreement and compliance herewith and the
sale and issuance of the Shares will not result in any violation of and will not
conflict with, or result in a breach of any of the terms of, or constitute a
default under, any provision of state or federal law to which the Company is
subject, the Company's Articles of Incorporation or Bylaws, each as amended, or
any provision of any mortgage, indenture, agreement, instrument, judgment, writ,
decree, order, rule or regulation or other restriction to which the Company is a
party or by which it is bound, the breach of or default under which would have a
material adverse effect upon the business or operations of the Company, or
result in the creation of any mortgage, pledge, lien, encumbrance or charge upon
any of the properties or assets of the Company pursuant to any such term;
provided, however, that the Shares may be subject to restrictions on transfer
under state and/or federal securities laws.
3.5 Valid Issuance of Stock. The outstanding capital stock of the
Company are, and the Shares, when issued, sold and delivered in accordance with
the terms of this Agreement for the consideration provided for herein, will be
duly and validly issued, fully paid and nonassessable and are and will be free
of any liens or encumbrances created by the Company.
3.6 Financial Statements; Absence of Changes. The Company has made
available to the Purchaser its audited financial statements at December 31, 1997
and for the fiscal year then ended, its audited financial statements at December
31, 1998 and for the fiscal year then ended, its audited financial statements at
December 31, 1999 and for the fiscal year then ended, and its unaudited
financial statements at March 31, 2000 and for the three months then ended
(collectively, the "Financial Statements"). Except that the unaudited Financial
Statements do not contain footnotes and are subject to normal year-end
adjustments, the Financial Statements (i) are complete and correct in all
material respects and (ii) accurately set out and describe in all material
respects the financial condition and operating results of the Company as of the
dates, and for the periods, indicated therein. Except as set forth in the
Financial Statements, the Company has no liabilities, contingent or otherwise,
other than (i) liabilities incurred in the ordinary course of business
subsequent to March 31, 2000 and (ii) obligations under contracts and
commitments incurred in the ordinary course of business, which, in both cases,
are not individually or in the aggregate in excess of $1,000,000 or otherwise
material to the financial condition or operating results of the Company. Since
March 31, 2000, there has not been (i) any sale, assignment or transfer of any
patents, trademarks, copyrights, trade secrets or other intangible assets owned
by the Company; (ii) any resignation or termination of employment of
3
4
any key officer of the Company; (iii) any mortgage, pledge, transfer of a
security interest in, or lien, created by the Company, with respect to any of
its material properties or assets, except liens for taxes not yet due or
payable; (iv) any loans or guarantees made by the Company to or for the benefit
of its employees, officers or directors, or any members of their immediate
families, other than travel advances and other advances made in the ordinary
course of its business; (v) any declaration, setting aside or payment or other
distribution in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by the
Company; or (vi) any other event or condition of any character which is
reasonably likely to materially and adversely affect the assets, financial
condition, properties, operating results or business of the Company.
3.7 Title to Properties and Assets. The Company has good and marketable
title to its properties and assets held in each case subject to no mortgage,
pledge, lien, encumbrance, security interest or charge of any kind, except such
mortgage, pledge, lien, encumbrance, security interest or charge that arises in
the ordinary course of business and does not materially impair the Company's
ownership or use of such property. With respect to the property and assets it
leases, the Company is in compliance with such leases and, to the Company's
knowledge, the Company holds valid leasehold interests in such assets free of
any liens, encumbrances, security interests or claims of any party other than
the lessors of such property and assets.
3.8 Intellectual Property. To the Company's knowledge, the Company has
sufficient title, license and/or ownership of all patents, trademarks, service
marks, trade names, copyrights, trade secrets, information, proprietary rights
and processes necessary for its business as now conducted without any conflict
with or infringement of the rights of others. As used in the foregoing sentence,
the word "knowledge" shall mean the Company's actual knowledge (but without
having conducted any special investigation or patent search other than searches
in connection with the filing of patent applications). Except for the agreements
with its own employees or consultants referenced in Section 3.9 and licensing
agreements entered into by the Company in the ordinary course of its business,
there are no outstanding options, licenses, or agreements of the Company
relating to the foregoing, and the Company is not a party or bound by any
options, licenses or agreements with respect to the patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, information,
proprietary rights and processes of any other person or entity. Neither the
Company, nor to its knowledge any of its employees, has received any
communications alleging that the Company has violated or, by conducting its
business as proposed, would violate any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other proprietary rights of
any other person or entity. The Company warrants that to the actual knowledge of
its executive officers, no employee of the Company is obligated under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would conflict with his obligation to use his best
efforts to promote the interests of the Company or that would conflict with the
Company's business. Reasonable security measures have been taken to protect the
secrecy, confidentiality and value of the proprietary information referred to in
this Section 3.8.
3.9 Material Contracts and Obligations. All employees of the Company
have executed the Company's form "Proprietary Information and Inventions
Agreement" concerning non-disclosure of confidential information and assignment
of inventions to the Company.
4
5
3.10 Litigation. There are no actions, proceedings or investigations
pending or, to the Company's knowledge, threatened, against or affecting the
Company or its property, that, either in any case or in the aggregate, might
result in any material adverse change in the business, prospects, condition,
affairs or operations of the Company or in any of its properties or assets, in
any material impairment of the right or ability of the Company to carry on its
business as now conducted and as proposed to be conducted, or in any change in
the current equity ownership of the Company, and none that questions the
validity of this Agreement or any action taken or to be taken in connection
herewith.
3.11 Governmental Consents. Except for filings of (i) the Restated
Certificate with the Secretary of the State of Delaware and (ii) notices
required or permitted to be filed with certain federal and state securities
commissions (which the Company agrees to timely file), no consents, approvals,
orders, authorizations or registrations, qualifications, designations,
declarations or filings with any federal or state governmental authority on the
part of the Company is required in connection with the valid execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated herein. Based in part on the representations of the Purchaser set
forth in Section 4 below, the offer, sale and issuance of the Shares in
conformity with the terms of this Agreement are exempt from the registration and
prospectus delivery requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and have been qualified or are exempt from qualifications
under all applicable state securities qualification requirements.
3.12 Third Party Consents. Except as set forth above in Section 3.11,
all third party consents, approvals, orders or authorizations required to be
obtained by the Company in connection with the consummation of the transactions
contemplated herein have been obtained.
3.13 Compliance with Other Instruments. The Company is not in violation,
breach or default of any term of its Articles of Incorporation or Bylaws or, in
any material respect, of any term or provision of any mortgage, indenture,
contract, agreement or instrument to which the Company is a party or by which it
may be bound, or of any provision of any foreign or domestic state or federal
judgment, decree, order, statute, rule or regulation applicable and material to
the Company. The execution, delivery and performance of, and compliance with,
this Agreement and the Restated Investors Rights Agreement and the consummation
of the transactions contemplated hereby will not result in any such violation or
default, or be in conflict with or constitute, with or without the passage of
time or the giving of notice or both, (i) a default under the Company's Articles
of Incorporation or Bylaws, or under any agreement or contract of the Company,
(ii) to the Company's knowledge, a violation of any statutes, laws, regulations
or orders, or (iii) an event which results in the creation of any lien, charge
or encumbrance upon any asset of the Company.
3.14 Disclosure. No representation or warranty by the Company in this
Agreement, any publicly-filed document with the Securities and Exchange
Commission, or in any written statement or certificate signed by the President
of the Company furnished pursuant to this Agreement contains or will contain any
untrue statement of a material fact, or omits to state a material fact, in each
case which would cause the statements made herein or therein in the light of the
circumstances under which they were made to be materially misleading. The minute
books of the Company contain complete and accurate records of all meetings and
other corporate
5
6
actions of its shareholders and its Board of Directors and committees thereof.
The stock ledger of the Company is complete and accurate and reflects all
issuances, transfers, repurchases and cancellations of shares of capital stock
of the Company.
3.15 Registration Rights. Except as provided in the Restated Investors'
Rights Agreement, the Company has not granted or agreed to grant any person or
entity any rights (including piggy-back registration rights) to have any
securities of the Company registered with the United States Securities and
Exchange Commission ("SEC") or any other governmental authority.
3.16 Tax Matters. The Company has no unpaid federal, state, county or
local taxes, except such taxes which would not result in a material adverse
effect on the Company. The Company has not been advised (i) that any of its
federal, state or local tax returns have been or are being audited as of the
date hereof, or (ii) of any deficiency in assessment or proposed judgment with
respect to its federal, state or other taxes. The Company has duly filed all
federal, state, county and local tax returns required to have been filed by it
and paid all taxes shown to be due on such returns. There are in effect no
waivers of applicable statutes of limitations with respect to taxes for any
year.
3.17 Tax Elections. The Company has not elected pursuant to the Internal
Revenue Code of 1986, as amended (the "Code"), to be treated as a Subchapter S
corporation or collapsible corporation pursuant to Section 1362(a) or Section
341(f) of the Code, nor has it made any other elections pursuant to the Code
(other than elections which relate solely to matters of accounting, depreciation
or amortization) which would have a material adverse affect on the Company, its
financial condition, its business as presently conducted or presently proposed
to be conducted or any of its properties or material assets.
3.18 Shareholders, Directors and Officers. To the actual knowledge of
the Company's executive officers and without any inquiry of any of the following
individuals, none of the officers or directors or significant employees or
consultants of the Company, has, individually or collectively, a material
interest in any entity which is a competitor, customer or supplier of (or has
any existing contractual relationship with) the Company, other than holdings of
less than 1% of publicly-held entities. To the actual knowledge of the Company's
executive officers and without any inquiry of the following individuals, no
employee, officer, or director of the Company or member of his or her immediate
family is indebted to the Company, nor is the Company indebted (or committed to
make loans or extend or guarantee credit) to any of them other than (i) for
payment of salary rendered, (ii) reimbursement for reasonable expenses incurred
on behalf of the Company, and (iii) for other standard employee benefits made
generally available to all employees (including stock option agreements
outstanding under any stock option plan approved by the Board of Directors of
the Company).
3.19 Employees. To the Company's knowledge, no employee of the Company
is in violation of any term of any employment contract, patent disclosure
agreement, non-competition agreement, or any restrictive covenant to a former
employer relating to the right of any such employee to be employed by the
Company because of the nature of the business conducted or presently proposed to
be conducted by the Company or to the use of trade secrets or proprietary
information of others. There is neither pending nor, to the Company's knowledge,
threatened
6
7
any actions, suits, proceedings or claims, or to its knowledge any basis
therefor or threat thereof, with respect to any contract, agreement, covenant or
obligation referred to in the preceding sentence. The Company does not have any
collective bargaining agreement covering any of its employees. No employee of
the Company has an employment agreement or a severance arrangement with the
Company and such employees are employed on an "at will" basis. There is no
strike, labor dispute or union organization activities pending or, to the
Company's knowledge, threatened between the Company and its employees. None of
the Company's employees belongs to any union or collective bargaining unit. The
Company is not aware that any officer or key employee, or that any group of key
employees, intends to terminate their employment with the Company, nor does the
Company have a present intention to terminate the employment of any of the
foregoing.
3.20 Permits. To the Company's knowledge, the Company has such material
permits, licenses, franchises, authorizations and clearances of governmental or
regulatory authorities ("Permits") as are necessary to own its properties and to
conduct its business as presently conducted. The Company has fulfilled and
performed all its material obligations with respect to its Permits, and no event
has occurred that allows or would allow revocation or termination thereof or
results or would result in any other material impairment of the rights of the
Company.
3.21 Employee Benefit Plans. To the Company's knowledge, the Company is
and has been in compliance with all applicable laws, rules and regulations
relating to employment and employment practices, terms and conditions of
employment, wages and hours and the provisions of all laws or rules or
regulations applicable to any employee benefit compensation, stock option or
other similar plan, maintained or contributed to by it for the benefit of its
employees, the failure of which would have a material adverse effect on the
Company and its financial position. There are no claims (other than routine
claims for benefits) pending or threatened with respect to any of such plans or
arrangements.
3.22 Environmental and Safety Laws. To the Company's knowledge, the
Company is not in violation of any applicable statute, law or regulation
relating to the environment or occupational health and safety, and is not aware
of any material expenditures that are or will be required in order to comply
with any such existing statute, law or regulation.
3.23 Manufacturing and Marketing Rights. The Company has not granted any
material rights to manufacture, produce, assemble, license, market, or sell its
products to any other person and is not bound by any agreement that materially
affects the Company's exclusive right to develop, manufacture, assemble,
distribute, market, or sell its products.
3.24 Insurance. The Company has in full force and effect fire and
casualty insurance policies sufficient in amount (subject to reasonable
deductibles) to allow it to replace any of its properties that might be damaged
or destroyed. The Company also has in full force and effect broad form
comprehensive general liability insurance in the minimum amount of $5,000,000
per year. The Company also has in full force and effect term life insurance,
payable to the Company, on the life of key personnel, in an amount in excess of
$2,000,000.
7
8
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser represents and warrants to the Company as follows:
4.1 Due Authorization. All corporate action on the part of the
Purchaser, and its officers, directors, partners and shareholders (as
applicable), necessary for the purchase of the Shares and the performance of the
Purchaser's obligations under this Agreement and the Restated Investors' Rights
Agreement has been taken or will be taken prior to the Closing. This Agreement
and the Restated Investors' Rights Agreement are valid and binding obligations
of the Purchaser, enforceable in accordance with their terms, subject, as to
enforcement of remedies, to applicable bankruptcy, insolvency, moratorium,
reorganization and similar laws affecting creditors' rights generally and to
general equitable principles.
4.2 Investigation. The Purchaser acknowledges that it has had an
opportunity to discuss the business, affairs and current prospects of the
Company with the Company's officers and that it has had access to information
about the Company that it has requested or considers necessary for purposes of
purchasing the Shares. The Purchaser further acknowledges and agrees that: (i)
it has not been provided with a registration statement, prospectus or any
similar document in connection with its purchase of the Shares and (ii) its
decision to execute this Agreement and the Investors' Rights Amendment in
substantially the form attached hereto as Exhibit B (the "Investors' Rights
Amendment") and to purchase the Shares has not been based upon any verbal or
written representations as to fact or otherwise made by or on behalf of the
Company and that its decision is based upon the information, representations and
covenants of the Company contained in this Agreement, its own review of certain
of the Company's documents and records, and publicly available information
concerning the Company.
4.3 Purchase for Own Account. The Shares that the Purchaser will
purchase hereunder will be acquired by the Purchaser, not as a nominee or agent,
and not with a view to or in connection with the distribution of any part
thereof within the meaning of the Securities Act. The Purchaser is an
"accredited investor" within the meaning of Regulation D of the Securities Act
and a "qualified institutional buyer" as defined in Rule 144A promulgated under
the Securities Act.
4.4 Exempt from Registration. The Purchaser understands that the Shares
will not be registered under the Securities Act, on the ground that the sale
provided for in this Agreement is exempt from registration under the Securities
Act, and that the reliance of the Company on such exemption is predicated in
part on the Purchaser's representations set forth in this Agreement.
4.5 Economic Risk. The Purchaser acknowledges that it is experienced in
evaluating and investing in securities of companies in the development stage and
acknowledges that it is able to fend for itself in the transactions contemplated
by this Agreement and has the ability to bear the economic risks of its
investment pursuant to this Agreement.
4.6 Restricted Securities. The Purchaser understands that the Shares may
not be sold, transferred, or otherwise disposed of without registration under
the Securities Act or an exemption therefrom, and that, in the absence of an
effective registration statement covering the Shares or an available exemption
from registration under the Securities Act, the Shares must be
8
9
held indefinitely. In particular, the Purchaser is aware that the Shares may not
be sold pursuant to Rule 144 promulgated under the Securities Act unless (i)
adequate information concerning the Company is then available to the public,
(ii) the Purchaser has held the Shares for the applicable holding period
specified in Rule 144 and (iii) all other terms and conditions of Rule 144 are
satisfied.
4.7 Restrictive Legends. It is understood that each certificate
representing the Shares and any other securities issued in respect of the Shares
upon any stock split, stock dividend, recapitalization, merger or similar event
(unless no longer required in the opinion of counsel for the Company) shall be
stamped or otherwise imprinted with legends substantially in the following forms
(in addition to any legend that may now or hereafter be required by applicable
federal or state law):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS. THEY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO SUCH SECURITIES, THE AVAILABILITY OF CERTAIN EXEMPTIONS FROM
SUCH REGISTRATION REQUIREMENTS, OR DELIVERY OF AN OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER OF SUCH SECURITIES THAT SUCH OFFER, SALE,
TRANSFER, PLEDGE OR HYPOTHECATION IS IN FULL COMPLIANCE WITH THE
SECURITIES ACT OF 1933, AS AMENDED."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS SET FORTH IN THAT CERTAIN SECOND RESTATED INVESTORS' RIGHTS
AGREEMENT, AS MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH MAY BE
OBTAINED BY THE HOLDER, UPON REQUEST AND WITHOUT CHARGE, AT THE
PRINCIPAL OFFICE OF THE CORPORATION."
4.8 Further Limitations on Disposition. Without in any way limiting the
representations set forth above, the Purchaser further agrees not to make any
disposition of all or any portion of the Shares for a period of one (1) year
after the Closing. Furthermore, the Purchaser agrees that any disposition after
such one (1) year period will not be valid or permitted unless and until the
transferee has agreed in writing for the benefit of the Company to be bound by
this Section 4 and the Restated Investors' Rights Agreement; provided, and to
the extent, this Section and such agreement is then applicable, and:
(a)There is then in effect a registration statement under the Securities
Act covering such proposed disposition and such disposition is made in
accordance with such registration statement; or
(b) (i) The Purchaser shall have notified the Company of the proposed
disposition and shall have furnished the Company with a detailed statement of
the circumstances surrounding the proposed disposition, and (ii) if reasonably
requested by the Company, the Purchaser shall have
9
10
furnished the Company with an opinion of counsel, reasonably satisfactory to the
Company that such disposition will not require registration of such shares under
the Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 under the Securities Act
except in unusual circumstances and will not require opinions of counsel in
transactions involving the transfer or distribution of the Shares by the
Purchaser to any direct or indirect subsidiary, parent or affiliate of the
Purchaser.
4.9 Governmental Consents. All consents, approvals, orders,
authorizations or registrations, qualifications, designations, declarations or
filings with any U.S. federal or state governmental authority on the part of the
Purchaser required in connection with the consummation of the transactions
contemplated herein shall have been obtained prior to and be effective as of the
Closing.
4.10 Third Party Consents. All third party consents, approvals, orders
or authorizations required to be obtained by the Purchaser in connection with
the consummation of the transactions contemplated herein have been obtained.
5. CONDITIONS TO THE PURCHASER'S OBLIGATIONS AT THE CLOSING
The obligation of the Purchaser to purchase the Shares at the Closing is
subject to the fulfillment to the satisfaction of the Purchaser on or prior to
the Closing of the following conditions:
5.1 Representations and Warranties Correct; Performance of Obligations.
The representations and warranties made by the Company in Section 3 hereof shall
be true and correct when made, and, except for representations and warranties
which are as of a specified date, shall be true and correct as of the Closing
with the same force and effect as if they had been made on and as of said date,
subject to changes contemplated by this Agreement.
5.2 Performance. The Company shall have performed and complied with all
agreements, obligations and conditions contained in this Agreement that are
required to be performed or complied with by it on or before the Closing and
shall have obtained all approvals, consents and qualifications necessary to
complete the purchase and sale described herein.
5.3 Restated Certificate. The Restated Certificate shall have been duly
adopted by the Company by all necessary corporate action of its Board of
Directors and shareholders, and shall have been duly filed with and accepted by
the Delaware Secretary of State.
5.4 Opinion of Company's Counsel. The Purchaser shall have received from
counsel to the Company, an opinion, in substantially the form attached hereto as
Exhibit C addressed to the Purchaser, dated the date of Closing.
5.5 Compliance Certificate. At the Closing there shall have been
delivered to the Purchaser a certificate, dated as of such date of Closing,
signed by the Company's President certifying that the conditions specified in
Sections 5.1 and 5.2 of this Agreement have been fulfilled.
10
11
5.6 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing hereby and all
documents and instruments incident to such transactions shall be satisfactory in
substance and form to the Purchaser, and the Purchaser shall have received all
such counterpart originals or certified or other copies of such documents as the
Purchaser may reasonably request.
5.7 Investors' Rights Amendment. The required parties shall have
executed the Investors' Rights Amendment, and such agreement shall be in full
force and effect.
5.8 Authorizations. All authorizations, approvals or permits, if any, of
any governmental authority or regulatory body (including, without limitation,
federal and state securities commissions) that are required in connection with
the lawful issuance and sales of the Shares pursuant to this Agreement shall
have been duly obtained and shall be effective on and as of the Closing.
5.9 Effectiveness of Registration Statement.
The Company's registration statement on Form S-1 (No. 333-31732) filed
with the Securities and Exchange Commission in connection with the Company's IPO
shall have been declared effective and the Company shall have consummated the
IPO.
6. CONDITIONS TO COMPANY'S OBLIGATIONS AT THE CLOSING
The obligations of the Company under this Agreement are subject to the
fulfillment at or before the Closing of the following conditions:
6.1 Representations and Warranties. The representations and warranties
of the Purchaser contained in Section 4 hereof shall be true and correct when
made, and shall be true and correct as of the Closing with the same force and
effect as if they had been made on and as of said date, subject to changes
contemplated by this Agreement.
6.2 Restated Certificate. The Restated Certificate shall have been duly
adopted by the Company by all necessary corporate action of its Board of
Directors and shareholders, and shall have been duly filed with and accepted by
the Delaware Secretary of State.
6.3 Payment of Purchase Price. The Purchaser shall have delivered to the
Company the Purchase Price for the Shares set forth in Section 2. 6.4 Investors'
Rights Amendment. The required parties shall have executed the Investors' Rights
Amendment, and such agreement shall be in full force and effect.
6.5 Board of Directors Approval. The Company's Board of Directors shall
have approved the sale of the Shares pursuant to this Agreement.
6.6 Authorizations. All authorizations, approvals or permits, if any, of
any governmental authority or regulatory body (including, without limitation,
federal and state securities commissions) that are required in connection with
the lawful issuance and sales of the Shares pursuant to this Agreement shall
have been duly obtained and shall be effective on and as of the Closing.
11
12
6.7 Effectiveness of Registration Statement.
The Company's registration statement on Form S-1 (No. 333-31732) filed
with the Securities and Exchange Commission in connection with the Company's IPO
shall have been declared effective and the Company shall have consummated the
IPO.
7. MISCELLANEOUS
7.1 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of California as applied to agreements among California
residents entered into and to be performed entirely within California, without
regard to the conflict of law provisions thereof. All unresolved disputes
arising under this Agreement shall be submitted to, and resolved exclusively by,
arbitration to be held in Los Angeles County, California. The arbitration shall
be conducted under the then-prevailing rules of the American Arbitration
Association. The award of the arbitrator shall be binding and may be entered as
a judgment in any court of competent jurisdiction. Each party shall bear the
cost of preparing and presenting its case. The costs of the arbitration,
including the fees and expenses of the arbitrator, will be paid by the
non-prevailing party, as determined by the arbitrator. This provision shall not
be construed to prohibit either party from seeking preliminary or permanent
injunctive relief in any court of competent jurisdiction.
7.2 Survival. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by any party hereto and the
closing of the transactions contemplated hereby for a period of one (1) year
from the Closing.
7.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the respective successors and assigns of the parties hereto. Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
7.4 Entire Agreement. This Agreement and the other documents and
agreements referred to herein, constitute the entire understanding and agreement
between the parties with regard to the subject matter hereof.
7.5 Notices. Except as otherwise provided, all notices and other
communications required or permitted hereunder shall be in writing, shall be
effective when given, and shall in any event be deemed to be given upon receipt
or, if earlier, (i) five (5) days after deposit with the U.S. postal service or
other applicable postal service, if delivered by first class mail, postage
prepaid, (ii) upon delivery, if delivered by hand, (iii) one (1) business day
after the day of deposit with Federal Express or similar overnight courier,
freight prepaid, if delivered by overnight courier or (iv) one (1) business day
after the day of facsimile transmission, if delivered by facsimile transmission
with copy by first class mail, postage prepaid, and shall be addressed, (a) if
to the Purchaser, at the Purchaser's address set forth below its signature, or
at such other address as the Purchaser shall have furnished the Company in
writing, or (b) if to the Company,
12
13
at its address as set forth below, or at such other address as the Company shall
have furnished to the Purchaser in writing.
7.6 Amendments and Waivers. This Agreement and any term hereof may be
amended, waived, discharged or terminated by a written instrument signed by the
Company and the Purchaser.
7.7 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to the Company or to the Purchaser upon a breach or
default of any party hereto under this Agreement shall impair any such right,
power or remedy of the Company or the Purchaser, nor shall it be construed to be
a waiver of any such breach or default, or an acquiescence therein, or of any
similar breach or default thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of the Company or the Purchaser of
a breach or default under this Agreement, or any waiver on the part of the
Company or the Purchaser of any provisions or conditions of this Agreement, must
be in writing and shall be effective only to the extent specifically set forth
in such writing. All remedies, either under this Agreement or by law or
otherwise afforded to the Company or the Purchaser, shall be cumulative and not
alternative.
7.8 Each Party to Bear Own Costs. Except as otherwise provided in
Section 7.10, each of the parties shall pay all costs and expenses incurred or
to be incurred by it in negotiating and preparing this Agreement and in closing
and carrying out the transactions contemplated by this Agreement.
7.9 Third Parties. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any persons other than the parties to it and their respective
successors and assigns, nor is anything in this Agreement intended to relieve or
discharge the obligation or liability of any third person to any party to this
Agreement, nor shall any provision give any third persons any right of
subrogation or action against any party to this Agreement.
7.10 Finder's Fees.
(a) The Company hereby agrees to indemnify and to hold the Purchaser
harmless of and from any liability for commission or compensation in the nature
of a finder's fee of any broker or other person or firm (and the costs and
expenses of defending against such liability or asserted liability) for which
the Company, or any of its employees or representatives, is responsible.
(b) The Purchaser hereby agrees to indemnify and to hold the Company
harmless of and from any liability for any commission or compensation in the
nature of a finder's fee to any broker or other person or firm (and the costs
and expenses of defending against such liability or asserted liability) for
which the Purchaser, or any of its employees or representatives, is responsible.
7.11 Titles and Subtitles. The titles of the Sections and Sub-sections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
7.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
13
14
7.13 Severability. Should any provision of this Agreement be determined
to be illegal or unenforceable, such determination shall not affect the
remaining provisions of this Agreement.
7.14 Confidentiality. Each of the parties hereto agree that, except with
the prior written permission of the other party, it shall at all times keep
confidential and not divulge, furnish, or make accessible to anyone any
confidential information, knowledge, or data concerning or relating to the
business or financial affairs of the other party to which said party has been or
shall become privy by reason of this Agreement, discussions or negotiations
relating to this Agreement, or the performance of its obligations hereunder;
provided, the foregoing restrictions shall not apply to any information,
knowledge or data which (a) is already in the public domain at the time of
disclosure or becomes publicly available through no breach of this provision by
said party; (b) was lawfully in said party's possession prior to receipt from
the other party without obligation of confidentiality; (c) is received
independently from a third party free to lawfully disclose such information to
said party; (d) is subsequently independently developed by said party; or (e) is
required to be disclosed by court order or applicable law.
7.15 Termination. This Agreement shall terminate and be of no further
force and effect, and the rights of the Purchaser and the Company hereunder,
shall terminate if the registration statement filed in connection with the
Corporation's IPO shall not have been declared effective by the Securities and
Exchange Commission on or before August 31, 2000.
14
15
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year hereinabove first written.
THE COMPANY:
ACCELERATED NETWORKS, INC.
By: /s/ Xxxxxx Xxxxxxxx
---------------------------------
Xxxxxx Xxxxxxxx, President
Address: 000 Xxxxxxx Xxxxx
Xxxxxxxx, XX 00000
THE PURCHASER:
U S WEST INTERNET VENTURES, INC.
By: /s/ Xxxxxx Xxxx
---------------------------------
Name: Xxxxxx Xxxx
------------------------
Title: President
-----------------------
Address: 0000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
16
1. SUBSCRIPTION.......................................................................1
2. CLOSING AND DELIVERY OF SHARE CERTIFICATES.........................................1
3. COMPANY REPRESENTATIONS AND WARRANTIES.............................................1
3.1 Organization and Standing...................................................1
3.2 Capitalization..............................................................2
3.3 Subsidiaries................................................................3
3.4 Due Authorization...........................................................3
3.5 Valid Issuance of Stock.....................................................3
3.6 Financial Statements; Absence of Changes....................................3
3.7 Title to Properties and Assets..............................................4
3.8 Intellectual Property.......................................................4
3.9 Material Contracts and Obligations..........................................4
3.10 Litigation..................................................................5
3.11 Governmental Consents.......................................................5
3.12 Third Party Consents........................................................5
3.13 Compliance with Other Instruments...........................................5
3.14 Disclosure..................................................................5
3.15 Registration Rights.........................................................6
3.16 Tax Matters.................................................................6
3.17 Tax Elections...............................................................6
3.18 Shareholders, Directors and Officers........................................6
3.19 Employees...................................................................6
3.20 Permits.....................................................................7
3.21 Employee Benefit Plans......................................................7
3.22 Environmental and Safety Laws...............................................7
3.23 Manufacturing and Marketing Rights..........................................7
3.24 Insurance...................................................................7
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER........................................8
4.1 Due Authorization...........................................................8
4.2 Investigation...............................................................8
4.3 Purchase for Own Account....................................................8
4.4 Exempt from Registration....................................................8
4.5 Economic Risk...............................................................8
4.6 Restricted Securities.......................................................8
4.7 Restrictive Legends.........................................................9
4.8 Further Limitations on Disposition..........................................9
4.9 Governmental Consents......................................................10
4.10 Third Party Consents.......................................................10
5. CONDITIONS TO THE PURCHASER'S OBLIGATIONS AT THE CLOSING..........................10
5.1 Representations and Warranties Correct; Performance of Obligations.........10
17
5.2 Performance................................................................10
5.3 Restated Certificate.......................................................10
5.4 Opinion of Company's Counsel...............................................10
5.5 Compliance Certificate.....................................................10
5.6 Proceedings and Documents..................................................11
5.7 Investors' Rights Amendment................................................11
5.8 Authorizations.............................................................11
5.9 Effectiveness of Registration Statement....................................11
6. CONDITIONS TO COMPANY'S OBLIGATIONS AT THE CLOSING................................11
6.1 Representations and Warranties.............................................11
6.2 Restated Certificate.......................................................11
6.3 Payment of Purchase Price..................................................11
6.4 Investors' Rights Amendment................................................11
6.5 Board of Directors Approval................................................11
6.6 Authorizations.............................................................11
6.7 Effectiveness of Registration Statement....................................12
7. MISCELLANEOUS.....................................................................12
7.1 Governing Law..............................................................12
7.2 Survival...................................................................12
7.3 Successors and Assigns.....................................................12
7.4 Entire Agreement...........................................................12
7.5 Notices....................................................................12
7.6 Amendments and Waivers.....................................................13
7.7 Delays or Omissions........................................................13
7.8 Each Party to Bear Own Costs...............................................13
7.9 Third Parties..............................................................13
7.10 Finder's Fees..............................................................13
7.11 Titles and Subtitles.......................................................13
7.12 Counterparts...............................................................13
7.13 Severability...............................................................14
7.14 Confidentiality............................................................14
7.15 Termination................................................................14
SCHEDULE A Schedule of Exceptions
Exhibits
A Amended and Restated Certificate of Incorporation
B - Investors' Rights Amendment
C - Form of Opinion
