The following table sets forth our cash and cash equivalents and
capitalization as of December 31, 1999. This information is presented:
. on an actual basis;
. on a pro forma basis to reflect the automatic conversion of all
outstanding series of preferred stock into our common stock upon
completion of this offering; and
. on a pro forma as adjusted basis to give effect to the sale of
shares of common stock offered in this offering at an assumed
initial public offering price of $ per share (after deducting the
estimated underwriting discounts and offering expenses) and the
application of the net proceeds therefrom.
This table should be read together with the "Selected Financial Data,"
"Management's Discussion and Analysis of Financial Condition" and the financial
statements and notes to those statements included elsewhere in this prospectus.
December 31, 1999
--------------------------------
Pro Forma
Actual Pro Forma as Adjusted
-------- --------- -----------
(dollars in thousands)
Cash and cash equivalents...................... $ 89,234 $ 89,234 $
======== ======== ========
Long-term debt, less current portion........... $ 2,260 $ 2,260 $
-------- -------- --------
Redeemable preferred stock
Series B Preferred Stock, par value $.01 per
share; 10,635 shares authorized; 10,635
shares outstanding.......................... 1,064 --
Series C Preferred Stock, par value $.01 per
share; 10,000,000 shares authorized;
9,953,935 shares outstanding................ 10,284 --
Series D Preferred Stock, par value $.01 per
share; 34,000,000 shares authorized;
33,333,333 shares outstanding............... 99,794 --
Warrants for the purchase of 117,788 shares
of redeemable preferred stock............... 105 --
-------- -------- --------
111,247 --
-------- -------- --------
Stockholders' equity (deficit):
Undesignated preferred stock, 964,365 shares
authorized, none outstanding................ -- --
Preferred stock, Series A, par value $.01 per
share; 5,025,000 shares authorized and
outstanding................................. 503 --
Common stock, par value $.001 per share;
57,000,000 shares authorized; 500,000 shares
outstanding (51,221,169 shares pro forma)... 1 51
Additional paid-in capital, net of unearned
stock option compensation................... 445 112,145
Accumulated deficit.......................... (14,876) (14,876)
-------- -------- --------
Total stockholders' equity (deficit)....... (13,927) 97,320
-------- -------- --------
Total capitalization....................... $ 99,580 $ 99,580 $
======== ======== ========
The number of shares of common stock to be outstanding after this offering
is based on the number of shares outstanding as of December 31, 1999 and does
not include the following:
. that may be issued if the underwriters exercise their option to
purchase additional shares in this offering;
. 2,367,685 shares that could be issued upon the exercise of options
outstanding as of December 31, 1999 at a weighted average exercise price
of $0.65 per share; and
. 117,788 shares that may be issued upon the exercise of warrants
outstanding as of December 31, 1999 at a weighted average exercise price
of $1.29 per share.
21
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with the
financial statements and the notes to such statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus. The statement of operations data for the
period from inception (April 17, 1997) to December 31, 1997 and the years ended
December 31, 1998 and 1999, and the balance sheet data at December 31, 1998 and
1999 are derived from our financial statements which have been audited by KPMG
LLP, independent auditors, and are included elsewhere in this prospectus. The
balance sheet data at December 31, 1997 are derived from our financial
statements, which have been audited by KPMG LLP and are not included in this
prospectus. Historical results are not necessarily indicative of the results to
be expected in the future.
Period from
Inception Years Ended
(April 17, 1997) December 31,
to December 31, ---------------------
1997 1998 1999
---------------- --------- ----------
(in thousands, except share and per
share data)
Statement of Operations Data:
Revenue................................ $ -- $ 675 $ 2,246
Cost of revenue........................ 106 796 3,368
--------- --------- ----------
Gross profit (loss).................... (106) (121) (1,122)
--------- --------- ----------
Operating expenses:
Sales and marketing.................. 69 1,804 7,007
Research and development............. 363 780 1,006
General and administrative, exclusive
of stock option compensation
expense............................. 226 789 1,822
Stock option compensation expense.... -- -- 296
--------- --------- ----------
Total operating expenses........... 658 3,373 10,131
--------- --------- ----------
Loss from operations............... (764) (3,494) (11,253)
Interest income, net................... 15 221 405
Other income (expense), net............ -- 1 (6)
--------- --------- ----------
Net loss........................... $ (749) $ (3,272) $ (10,854)
========= ========= ==========
Basic and diluted net loss per share... $ (2.95) $ (6.86) $ (16.61)
========= ========= ==========
Shares used in computing net loss per
share--basic and diluted.............. 254,264 477,123 653,594
Pro forma basic and diluted net loss
per share............................. $ (0.51)
==========
Shares used in computing pro forma net
loss per share--basic and diluted..... 21,330,732
Pro forma basic and diluted net loss per share is computed using the
weighted average number of common shares outstanding, including the pro forma
effects of the automatic conversion of all outstanding series of preferred
stock into common stock upon completion of this offering, as if the conversion
occurred on January 1, 1999, or at the date the preferred stock was actually
issued, if later.
December 31,
--------------------------------------
1997 1998 1999
---------------- --------- ----------
(in thousands)
Balance Sheet Data:
Cash and cash equivalents.............. $ 434 $ 1,222 $ 89,234
Investment securities.................. -- 4,951 --
Working capital........................ 335 5,631 79,920
Total assets........................... 1,054 8,755 110,338
Long-term debt, less current portion... -- -- 2,260
Redeemable convertible preferred stock
and warrants 1,064 11,347 111,247
Total stockholders' equity (deficit)... (199) (3,469) (13,927)
22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
You should read the following discussion and analysis in conjunction with
"Selected Financial Data" and the financial statements and notes to those
statements included elsewhere in this prospectus. This discussion contains
certain forward-looking statements that involve risks and uncertainties. Please
see "Risk Factors" and "Forward-Looking Statements; Market Data" elsewhere in
this prospectus.
Overview
We are a leading Internet communication services provider. We offer a suite
of services that currently consists of Evoke Webconferencing, Live and On-
Demand Evoke Webcasting and Evoke Talking Email. We market our services to
large and medium-sized corporations and high growth Internet-centric businesses
through our direct sales force, and to small businesses, home offices, and
personal users through our web site and our indirect sales channels, including
co-branding with leading Internet sites.
Since our inception in April 1997, our primary activities have consisted of
the following:
. assembling an experienced management team;
. creating and expanding our telephony and Internet infrastructure;
. acquiring and integrating various communication technologies;
. developing our various services, including Evoke Webconferencing, Evoke
Webcasting and Evoke Talking Email;
. establishing strategic partnerships with leading Internet companies; and
. expanding our direct sales force.
We have incurred losses since commencing operations and as of December 31,
1999, we had an accumulated deficit of $14.9 million. We have not achieved
profitability on a quarterly or annual basis. We intend to invest significantly
in developing our proprietary systems and services, expanding our
infrastructure, building our direct sales force and account development team,
and developing our brand. As a result we expect to continue to incur losses at
least through the end of 2001. We will need to generate significantly higher
revenues to support expected increases in expenses and to achieve and maintain
profitability.
We derive revenue from the sale of our Evoke Webconferencing and Evoke
Webcasting services. We use Evoke Talking Email to promote brand awareness. At
this time, we do not generate revenue from Evoke Talking Email.
. Evoke Webconferencing Revenue. We first recorded revenue from Evoke
Webconferencing in April 1999. Billing for Evoke Webconferencing is
based upon the actual time that each participant is logged onto the
conference. Similarly, a customer is charged a per-minute, per-user fee
for each participant listening and viewing a live or recorded web cast.
In addition, we charge customers a one-time fee to upload visuals for a
web conference or a recorded web cast. We recognize revenue on our Evoke
Webconferencing services as soon as a call or web cast is completed.
. Evoke Webcasting Revenue. We first recorded revenue from our Evoke
Webcasting services in January 1998. Prices and specific service terms
are usually negotiated in advance of service delivery. We recognize
revenue from live event streaming when the content is broadcast over the
Internet. We recognize revenue from encoding recorded content when the
content becomes available for viewing over the Internet. We recognize
revenue from pre-recorded content hosting ratably over the hosting
period.
23
Our cost of revenue consists primarily of telecommunication expenses,
depreciation charges, Internet access fees, compensation and benefits for
operations personnel and allocated overhead. Our telecommunication expenses are
variable and directly correlate to the use of our services. Our depreciation,
Internet access and compensation expenses generally increase as we increase our
capacity and build our infrastructure. We expect to see significant increases
in depreciation and Internet access expense as we continue to build our
infrastructure in anticipation of increased demand for our services. Our
strategic partners and affiliates are paid commissions on revenue generated by
users who access our services through their web sites. We expect to incur
increasing commission expenses in connection with our affiliate program and
strategic partnerships as these programs increase in scope.
We incur sales and marketing expenses that consist primarily of the salaries
and benefits of our sales and marketing personnel, commissions, consulting
fees, tradeshow expenses, advertising, marketing expenses and allocated
overhead. We intend to substantially increase our sales and marketing
expenditures as we expand strategic partnerships, add sales and marketing
personnel and increase marketing programs. In connection with our strategic
partnership with Excite@Home, we will purchase a significant amount of our
advertising and other media services from Excite@Home and its affiliates. We
intend to enter into additional strategic partnerships that may involve
additional sales and marketing expenses.
We incur research and development expenses that consist primarily of
salaries and benefits for research and development personnel, consulting fees
and allocated overhead. We expense research and development costs as they are
incurred, except for certain capitalized costs associated with internally
developed software. We expect to continue to make substantial investments in
research and development and anticipate that these expenses will continue to
increase.
We incur general and administrative expenses that consist primarily of
expenses for finance, human resources, office operations, administrative and
general management activities, including legal, accounting and other
professional fees, travel expenses and other general corporate expenses. We
expect increases in general and administrative expenses as we expand executive
management, finance, human resources and other administrative functions
required to support operations and incur the costs associated with being a
publicly-held company.
Since our inception, we have used stock option programs for employees and
members of our board of directors to attract and retain strong business and
technical personnel. During 1999, we recorded deferred stock option
compensation of $1.7 million. This amount is equal to the excess of the fair
value of our common stock on the date of grant or sale over the option exercise
price and amortized over the vesting period of the options, which range from
one to four years. Of the total deferred compensation, approximately $0.3
million was expensed in 1999.
Results of Operations
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Revenue. Revenue increased $1.5 million from $0.7 million in 1998 to $2.2
million in 1999. The increase was primarily due to the introduction of Evoke
Webconferencing and the increased use of Evoke Webcasting. In 1999, Microsoft
accounted for 21% and Cisco Systems accounted for 9% of our revenues.
Cost of Revenue. Cost of revenue increased $2.6 million from $0.8 million in
1998 to $3.4 million in 1999. Depreciation and amortization expense increased
$1.3 million as we built out our data operation centers in both Boulder and
Louisville, Colorado. Telecommunication and Internet access costs increased
$0.9 million as we incurred telephony expenses consistent with the launch of
Evoke Webconferencing and also increased our Internet access to accommodate
additional growth in our business.
Sales and Marketing. Sales and marketing expense increased $5.2 million from
$1.8 million in 1998 to $7.0 million in 1999. This increase was primarily
attributable to additional sales, marketing and business development personnel
that we hired to expand our sales and distribution network and an increase in
advertising and promotion, as we focused on creating brand awareness and
launching Evoke Webconferencing.
24
Research and Development. Research and development expense increased $0.2
million from $0.8 million in 1998 to $1.0 million in 1999. The increase was
associated with new hires and related benefits. Additionally, we capitalized
$0.2 million of our research and development expenses associated with our
development of internal software.
General and Administrative. General and administrative expense increased
$1.0 million from $0.8 million in 1998 to $1.8 million in 1999. The increase
was primarily due to a $0.4 million increase in compensation expense. General
and administrative expenses are expected to continue to increase as we support
a larger employee base and the requirements of being a public company.
Stock Option Compensation Expense. Stock option compensation expense was
$0.3 million in 1999. In the fourth quarter of 1999, options to purchase
881,500 common shares were granted with exercise prices less than the fair
value resulting in a charge to unearned stock option compensation of $1.7
million, which is being expensed over the vesting period of the options.
Other Income (Expense). Interest income increased $0.5 million, from $0.2
million in 1998 to $0.7 million in 1999. The increase was primarily related to
income earned on the $100 million we raised in venture capital financing in the
fourth quarter of 1999. Interest expense increased $0.3 million in 1999 as a
result of an increase in our debt in 1999.
Year Ended December 31, 1998 Compared to Period from Inception (April 1,
1997) to December 31, 1997
Revenue. Revenue increased to $0.7 million in 1998. We did not record any
revenue in the period from inception to December 31, 1997. The increase in
revenue was due to the introduction of our Evoke Webcasting services. In 1998,
Cisco Systems accounted for 52% and Microsoft accounted for 19% of our
revenues.
Cost of Revenue. Cost of revenue increased $0.7 million from $0.1 million in
the period from inception to December 31, 1997 to $0.8 million in 1998. The
increase was due to increases in compensation expense, depreciation expense and
Internet access fees.
Sales and Marketing. Sales and marketing expense increased $1.7 million from
$0.1 million in the period from inception to December 31, 1997 to $1.8 million
in 1998. The increase was due to expanding the sales and marketing department
as we moved beyond the development stage and increased salaries and other
personnel costs and marketing expenses, such as public relations and trade
shows.
Research and Development. Research and development expense increased $0.4
million from $0.4 million in the period from inception to December 31, 1997 to
$0.8 million in 1998. The increase was primarily due to increased salaries and
other personnel costs as we expanded our operations in 1998.
General and Administrative. General and administrative expense increased
$0.6 million from $0.2 million in the period from inception to December 31,
1997 to $0.8 million in 1998. The increase was due to increased personnel
costs, occupancy and other general office costs in 1998 as we expanded our
business beyond the development stage.
Other Income (Expense). Interest income increased $0.2 million in 1998
primarily related to income earned on the $10.4 million we raised in our Series
C Preferred Stock financing round.
Income Taxes
We use the asset and liability method of accounting for income taxes as
prescribed by Statement of Financial Accounting Standard No. 109, Accounting
for Income Taxes. At December 31, 1999, we had a net operating loss
carryforward for federal income tax purposes of approximately $15.1 million,
which is available to offset future taxable income, if any, through 2019. We
believe the utilization of the carryforwards may be limited by Internal Revenue
Code Section 382 relating to certain changes in ownership that occurred in 1998
and 1999 and that may occur as a result of this offering. We have not recorded
a deferred tax benefit for the net operating loss carryforward.
25
Quarterly Results of Operations
The following table sets forth our historical unaudited quarterly
information for our most recent four quarters. This quarterly information has
been prepared on a basis consistent with our audited financial statements and,
we believe, includes all normal recurring adjustments necessary for a fair
presentation of the information shown.
Three Months Ended
---------------------------------------------
June
March 31, 30, September 30, December 31,
1999 1999 1999 1999
--------- ------- ------------- ------------
(in thousands)
Revenue.......................... $ 220 $ 414 $ 589 $ 1,023
Cost of revenue.................. 487 702 676 1,503
------- ------- ------- -------
Gross profit (loss).............. (267) (288) (87) (480)
------- ------- ------- -------
Operating expenses:
Sales and marketing............ 1,047 906 1,356 3,698
Research and development....... 148 152 216 490
General and administrative,
exclusive of stock option
compensation expense.......... 256 342 430 794
Stock option compensation
expense....................... -- -- -- 296
------- ------- ------- -------
Total operating expenses..... 1,451 1,400 2,002 5,278
------- ------- ------- -------
Loss from operations......... (1,718) (1,688) (2,089) (5,758)
Interest income (expense) and
other, net...................... 48 (23) (49) 423
------- ------- ------- -------
Net loss......................... $(1,670) $(1,711) $(2,138) $(5,335)
======= ======= ======= =======
As a result of our limited operating history and the rapidly changing nature
of the markets in which we compete, our operating results have varied
significantly from period to period in the past and are likely to continue to
vary significantly in future periods. For example, we expect our results will
fluctuate based on seasonal sales patterns. Accordingly, our operating results
are difficult to predict. For these reasons, you should not rely on period-to-
period comparisons of our financial results as indications of future
performance. Our prospects must be considered in light of the risks, costs and
difficulties frequently encountered by growing companies in new and rapidly
evolving markets, such as the markets for web conferencing, collaboration and
streaming services.
Liquidity and Capital Resources
Since inception, we have financed our operations primarily from sales of our
preferred stock and, to a lesser extent, proceeds from loans. Net cash used by
operating activities was $0.6 million in 1997, $3.0 million in 1998 and $6.2
million in 1999.
In 1999, we incurred depreciation and amortization expense of $1.6 million,
consisting primarily of depreciation of equipment, purchased software and
furniture and amortization of leasehold improvements. Fixed assets are recorded
at cost and depreciated over the estimated useful lives of the assets which
range from three to ten years. The depreciation and amortization expense was
primarily due to the purchase of $18.9 million of computer hardware and
software, office equipment, furniture, fixtures and leasehold improvements as
we built out our data operation centers in both Louisville and Boulder,
Colorado.
Net cash used by investing activities was $0.6 million in 1997, $6.5 million
in 1998 and $9.3 million in 1999. In each period, net cash used by investing
activities related primarily to capital expenditures for equipment and software
used in our data operations center from which we operate our Internet
communication platform and net purchases and sales of investments.
Net cash provided by financing activities was $1.6 million in 1997, $10.3
million in 1998 and $103.5 million in 1999. In each period, proceeds from the
sale of preferred stock were the primary source of the net
26
cash provided by financing activities. Specifically, we issued $10.4 million of
our Series C preferred stock in 1998 and $100.0 million of our Series D
preferred stock in 1999.
At December 31, 1999, we had $89.2 million in cash and cash equivalents. We
plan to increase our general level of spending in the future and plan to expend
significant resources on capital expenditures in 2000 for equipment, software,
furniture and leasehold improvements. As of December 31, 1999, our purchase
commitments, including capital expenditures, software licenses and sales and
marketing expenses, totaled $35.8 million.
We expect that existing cash resources and the net proceeds of this offering
will be sufficient to fund our anticipated working capital and capital
expenditure needs at least through the end of 2000. Thereafter, we may require
additional funds to support our working capital requirements or for other
purposes. If we are not successful in raising capital when we need it and on
terms acceptable to us, it could harm our business.
Quantitative and Qualitative Disclosures About Market Risk
At December 31, 1999, we had long term debt, including current portion, in
the aggregate amount of $3.6 million with interest rates ranging from 7.41% to
13.33% with payments due through 2004. We may incur additional debt in the
future. A change in interest rates would not affect our obligations related to
long-term debt existing as of December 31, 1999, as the interest payments
related to that debt are fixed over the term of the debt. Increases in interest
rates could, however, increase the interest expense associated with future
borrowings. Additionally, we may invest a portion of the net proceeds from this
offering in short-term investments. The value of these investments may decline
as a result of changes in equity markets and interest rates.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which is effective, as amended, for all fiscal
quarters of fiscal years beginning after June 15, 2000. This statement
establishes accounting and reporting standards for derivative instruments,
including some derivative instruments embedded in other contracts, and for
hedging securities. To the extent we begin to enter into such transactions in
the future, we will adopt the statement's accounting and disclosure
requirements in our financial statements for the year ending December 31, 2000.
27
BUSINESS
Overview
We are a leading provider of Internet communication services that allow
users to communicate and exchange voice, video and visuals in a simple, cost-
effective manner through web-based applications and technologies. We offer
business-to-business communication services based on our proprietary systems
that integrate traditional telephony technology with powerful streaming media
and web collaboration tools. Our suite of application services currently
consists of our flagship Evoke Webconferencing service, live and on-demand
streaming through our Evoke Webcasting services and voice-to-email messaging
through our Evoke Talking Email service. With Evoke Webconferencing and Evoke
Webcasting, users initiate, control and monitor live and recorded one-to-one,
one-to-many and many-to-many communication events including business meetings,
sales presentations, employee training sessions and team strategy sessions. Our
proprietary automated systems allow Evoke Webconferencing users to instantly
establish a meeting without operator intervention, join participants on the
phone and web to share visuals and present the event as a live or recorded web
cast. We market these services to large and medium-sized corporations and high
growth Internet-centric companies through our direct sales force. We also
partner with leading Internet sites, such as Excite@Home and Blue Mountain
Arts, to offer our proprietary systems as co-branded services to extend our
reach to small businesses, home offices and consumers.
Since our inception in April 1997, we have raised approximately $110 million
from leading strategic and venture capital investors including Centennial
Ventures, EMC, Excite@Home, Panasonic, Pequot Capital and SOFTBANK Technology
Ventures. Through the end of 1999, we provided Evoke Webconferencing and Evoke
Webcasting services to over 550 business customers including Cisco Systems,
Excite@Home, MessageMedia, Microsoft and Wells Fargo Bank.
Market Opportunity
The Internet has emerged as a global medium for communication and commerce,
enabling millions of individuals to communicate and conduct business
electronically. Recent advances in voice over the Internet, streaming media and
content delivery technologies, as well as an improved Internet infrastructure,
are contributing to the rapid evolution of the Internet into a dynamic
communication medium that combines voice, video and data. According to
International Data Corporation, the Internet telephony market is expected to
grow from approximately $500 million in 1999 to approximately $12 billion in
2003. The Internet telephony market includes Internet long distance, voice-
enabled e-commerce applications such as web conferencing, and other enhanced
services. Businesses seek to utilize the capabilities of the Internet to
increase the efficiency of operations and enhance business interactions. The
demand for Internet communication services is driven by the increasing
globalization of operations, geographically-dispersed work teams, shared
decision making, accelerated workforce training and increasing pressure to
reduce operating costs. In addition, companies need simple and cost-effective
services that facilitate the numerous ways businesses and their employees,
customers and partners communicate and share information.
Traditional Conferencing Services. In order to develop and maintain business
relationships and expedite decision-making, companies have historically relied
on in-person meetings and traditional conferencing technologies, such as
telephone and video conferencing. The time and expense associated with business
travel limit the frequency of in-person meetings and the associated
opportunities to strengthen relationships and increase productivity.
Traditional conferencing solutions often require advance scheduling, multiple
operator interventions and, in some cases, the purchase of specialized software
or equipment. Furthermore, current conferencing solutions generally do not
incorporate the dynamic power and capabilities of the Internet to exchange
voice, video and data. As a result, traditional conferencing solutions do not
provide the same level of interaction as in-person meetings, and, therefore,
their applications are limited.
28
Collaboration Services. Collaboration services enhance business
communication through applications that facilitate interaction among
participants, such as text chat, shared visuals, whiteboarding and web touring.
International Data Corporation estimates that web collaboration users will grow
from 13 million in 1999 to 36 million in 2003. However, most current
collaboration applications require a complex, proprietary software interface
that is not available to all users. Industry analysts cite product complexity
and the lack of a universal interface as major obstacles to the broader
adoption of collaboration tools for Internet communication. In addition, these
emerging web collaboration services are not fully integrated with existing
communication technologies, such as teleconferencing, further limiting user
adoption.
Streaming Services. Streaming services enable businesses to communicate
simultaneously with thousands of viewers through the delivery of live and
recorded voice, video and data via the Internet. PEREY Research and Consulting
estimates that the U.S. market for managed video services, including all
segments of a multimedia delivery system necessary to deliver streaming,
broadcast and interactive video sessions, will grow from $6.6 billion in 1999
to $22 billion by 2003. The cost and complexity of current streaming services
has limited the widespread adoption of this technology. Furthermore, providers
of web and satellite broadcasts generally do not offer personalization and
interactivity with broadcast participants.
Need for Integrated Communication Services. Existing providers of standalone
teleconferencing, web collaboration and streaming services each address a
discrete segment of the Internet communication services market. By failing to
combine these technologies with others around a common interface to create a
simple, cost-effective, reliable communication tool, these standalone providers
limit the use and broader adoption of their products and services. We believe
there is a significant opportunity for an integrated Internet communication
solution to capitalize on the anticipated growth in demand for business-to-
business Internet communication services.
Our Solution
We are a leading Internet communication services provider. We have developed
an integrated solution that allows users to communicate and exchange voice,
video and visuals in a simple, cost-effective manner through web-based
applications and technologies. We currently offer three services, Evoke
Webconferencing, Evoke Webcasting and Evoke Talking Email. Each of these
services integrates emerging communication technologies, such as web
collaboration, web conferencing and streaming media, with traditional telephony
and other communication technologies. We also offer our proprietary systems to
our strategic partners as co-branded services that power business and consumer
communication events over the Internet. The key benefits of our solution
include:
Easy-to-Use, Powerful Communication Tools. Our services offer simple yet
powerful functions to appeal to the broadest customer base. They are generally
designed to reflect input received from customer feedback and focus groups.
Users of our services can initiate and control their communication experience
via a standard web browser. Our services do not require the implementation of
specialized hardware or software, other than a standard media player and a
sound card. Accordingly, most Internet users can use our services even if they
are behind a corporate firewall. Through the click of a mouse a user can record
an Evoke Webconference engaging multiple servers on our Internet and telephony
networks.
Superior Functionality. Our communication services leverage the power of the
Internet to increase a user's flexibility, interactivity and control as
compared to more traditional methods of communication. Our proprietary systems
provide the flexibility to execute many communication events, including voice-
to-email messages, collaborative presentations with multiple phone and web
participants and live or recorded web cast presentations to thousands of
viewers online. An Evoke Webconferencing user, for example, has the ability to
record a voice and visual presentation, store the presentation, distribute it
via email to a wide group and play back the presentation using advanced, yet
easy-to-use, streaming technologies. Our systems also enable the user to
control participant access and monitor participant behavior on the Internet for
each communication event. We provide our customers with real-time information,
such as the number and identity of participants and the length of their
participation, which is valuable for corporate training events and business
meetings.
29
Automated Services. Most of our services are fully automated and require no
human intervention, although customer support is available upon request. In the
fourth quarter of 1999, our Evoke Webconferencing service averaged one human
interaction per 200 communication events. In comparison, most competitive
service offerings require at least two human interactions for each
communication event, such as an advance reservation and operator assistance.
Our automated services allow us to handle high user volume, reduce human error
and ultimately make the service easier to use, more reliable and cost-effective
for our customers. Our billing system is e-commerce enabled and can
automatically charge a user after every Evoke Webconference. Additionally,
Evoke Webconferencing customers are automatically emailed an activity summary
after every communication event. We believe that the automation of our services
provides us with a structural cost advantage over our competitors.
Significant Cost Saving Opportunities and Enhanced Productivity. Our
services enable our business customers to achieve significant cost savings by
reducing the need for expensive and time consuming business travel or the
purchase of complex and specialized software or equipment. We believe our
customers can increase the quality and frequency of their business meetings and
sales presentations using Evoke Webconferencing, thereby increasing
productivity and strengthening business relationships. Additionally, business
customers using our Live or On-Demand Evoke Webcasting services can train their
employees more efficiently and cost-effectively than they could with in-person
meetings or other traditional conferencing solutions.
Reliable and Scalable Infrastructure. Since our services integrate
traditional telephony technology with Internet communication technologies, we
have designed our infrastructure to meet stringent telecommunication-grade
reliability requirements. By designing our infrastructure in such a reliable
fashion, our customers are able to depend on our services for their critical
communication needs. We host our proprietary systems and services on our own
servers located in our highly fault-tolerant data facilities. Our systems are
designed with large-scale capacity to meet the varying communication needs of
our customers. We have implemented alternative back-up systems to support the
critical elements of our infrastructure, thereby minimizing service outages.
Our dynamic load balancing systems manage traffic volumes across hundreds of
Internet communication servers and telephony switches, enabling us to increase
capacity and meet growing customer demand.
Strategy
Our objective is to become the global leader in Internet communication
services by developing a broad range of services to meet the diverse
communication needs of businesses and consumers. To achieve this objective, we
have developed the following strategies:
Leverage Proprietary Systems to Quickly Develop Innovative Services. Over
the last three years, we have invested substantial resources to develop
proprietary systems and applications that integrate disparate telephony and
Internet communication technologies. Our approach to building applications
allows us to effectively leverage our existing infrastructure, technologies and
proprietary systems to accommodate changes in the marketplace. We believe this
gives us a significant competitive advantage by allowing us to quickly and
reliably develop new services and improve upon our existing services. As new
technologies emerge, we intend to integrate them into our services by utilizing
our underlying proprietary systems. For example, we are in the process of
developing a wireless platform that will allow users to initiate, control and
monitor an Evoke Webconference from a wireless device.
Aggressively Market Through Multiple Distribution Channels. We intend to
aggressively market our services through multiple distribution channels:
. Direct sales--Our direct sales force targets large and medium-sized
businesses and high-growth, Internet-centric companies. We intend to
increase our direct sales force from 27 as of January 31, 2000 to over
140 by the end of 2000.
. Co-branding--We intend to partner with additional leading Internet
companies to offer our proprietary systems as co-branded services to
extend our reach to small businesses, home offices and millions of
consumers.
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. Affiliate programs--We have over 2500 affiliates who receive a
commission for selling our services through their web sites.
. Indirect sales--We partner with resellers and third party technology
providers to resell our services.
Our sales strategy is reinforced by the viral nature of our services. New
users are exposed to our services through their participation in an Evoke
Webconference or by receiving an Evoke Talking Email.
Migrate Users to More Sophisticated Services. Our current services range
from simple voice-to-email messaging to advanced web conferencing. We intend to
attract users with our basic services and migrate them to more advanced web-
based services as their communication needs and levels of sophistication
change. Additionally, our account development group tracks the usage patterns
of our user base to identify opportunities to convert inactive users into
active users.
Increase Brand Awareness. We intend to establish Evoke as a leading Internet
communication services brand. We expect to invest in the promotion of our brand
through Internet, print and broadcast advertising. We also plan to form
additional strategic partnerships with leading Internet companies to offer co-
branded services. These co-branded services would provide us with access to
millions of potential users at a significantly lower cost than we could achieve
through traditional marketing programs.
Aggressively Expand Our Infrastructure and Capacity. Our current technology
platform integrates telephony and Internet services to support thousands of
simultaneous communication events. We plan to aggressively expand our
telephony, Internet and hardware infrastructure and capacity in advance of
customer demand and in anticipation of new service offerings. This strategy
will enable our sales and business development staff to rapidly grow our
customer and strategic partner base without the constraints of operational
limitations. In addition, by maintaining redundant systems, we minimize the
likelihood of a service outage that could adversely impact our customer base.
Expand through Acquisitions and International Joint Ventures. We intend to
pursue acquisitions of complementary businesses, technologies, services or
products to expand our leadership position in the Internet communication
services market. We also believe there are significant international market
opportunities for our services. We plan to enter these markets through
strategic joint ventures with international partners that can provide us with
experience, resources and a local presence to develop and market our services
in foreign countries. We are in the process of forming a European joint venture
with @viso Limited, a European-based venture capital firm. As part of this
joint venture, we are also developing technology that will allow us to deliver
our services in continental Europe and the United Kingdom.
Strategic Partnerships
We have entered into several strategic partnerships to strengthen our brand
awareness and broaden our customer base. Our strategic partners include:
Excite@Home. In November 1999, we entered into a strategic partnership with
Excite@Home in connection with their investment in our company. According to
Media Metrix, www.excite.com averaged 14 million unique users per month over
the last six months of 1999. Under the terms of the partnership, we are the
exclusive service provider of conferencing, collaboration and streaming
services for Excite@Home's business portal, Work.com. Work.com offers a co-
branded version of Evoke Webconferencing. Excite@Home shares a portion of our
revenue for the sale of our services through this site. Excite@Home will also
offer our voice-to-email messaging service, Evoke Talking Email, across several
major segments of their web properties including their web-based email,
personals, clubs and discussion groups. We believe this partnership will
provide us with access to a much broader customer base, including small
offices, home offices and individual users. This partnership has a term of two
years, over which time we will purchase a significant amount of our advertising
and other media services from Excite@Home and its affiliates.
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@viso Limited. We are in the process of forming a joint venture relationship
with @viso Limited, a European-based venture capital firm owned by a SOFTBANK
Corporation affiliate and Vivendi Corporation, headquartered in Paris, France.
Through our intended joint venture, we would establish a majority-owned
subsidiary that will deploy our services in continental Europe and the United
Kingdom. Additionally, Vivendi's telecommunications subsidiary, Cegetel, will
be the exclusive sales force for our services in France. We are developing
specific technology that will allow our current systems and services to operate
with telephony systems in continental Europe and the United Kingdom. If we
successfully develop this technology on our planned schedule, we anticipate
that Evoke Europe will commence operations in 2000.
Blue Mountain Arts. Since November 1999, we have enabled Blue Mountain Arts
to provide Evoke Talking Email as a co-branded component of their electronic
greeting cards to enhance the user experience. According to Media Metrix,
www.bluemountain.com averaged 12 million unique users per month over the last
six months of 1999. Our agreement has a one-year initial term and grants us the
right to provide at least 75% of Blue Mountain Arts' voice-to-email messaging
services. Blue Mountain Arts was acquired by Excite@Home in December 1999.
In addition, we have developed relationships with various technology
companies to resell our Internet communication services in exchange for revenue
sharing opportunities. Current resale partners include Computer Town,
OfficeClick.com and PeoplePC.
Current Service Offerings
Evoke Webconferencing
Our flagship service, Evoke Webconferencing, is an automated web
conferencing service that combines the power, reach and visual support of the
web with the reliability and universal availability of traditional telephone
conferencing services. We offer Evoke Webconferencing users competitively
priced services with superior functionality and reliability to support their
daily communication requirements. Our Evoke Webconferencing services range from
web conferencing and web casts to traditional teleconferences and allow up to
three types of participants:
. phone only participants who listen and talk via the phone;
. phone and web participants who listen and talk via the phone and view
visuals and interact via a web browser; and
. web only participants who listen via streaming audio, and view visuals
and interact via a web browser.
We charge Evoke Webconferencing customers a per-minute fee based on each
phone participant's actual time on the conference. Similarly, a customer is
charged a per-minute fee for each web participant listening to and viewing a
live or recorded web cast. Additionally, customers are charged a one-time fee
to upload visuals for a web conference or a recorded web cast, and additional
fees for making a recorded web cast available for viewing for more than 30
days. Evoke Webconferencing offers users the following benefits:
. Instant Automated Access. Users can initiate a conference at any time.
Each user receives a unique conference ID and PIN number. To establish a
conference, a user simply gives their participants our web address and
toll-free telephone number and their conference ID number. No
reservation or operator assistance is required for conferences with less
than 95 phone only participants, although operator assistance is
available upon request. In the fourth quarter of 1999, our Evoke
Webconferencing service averaged approximately one operator interaction
per 200 conferences. By removing the reservation and operator-intensive
process of traditional conferencing services, Evoke Webconferencing
gives users complete control of their communication event.
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. Enhanced Functionality through Web-Enabled Interface. Evoke
Webconferencing users perform standard conference functions via Evoke
Webconferencing's web interface. They can call and add participants,
mute individuals or the whole group, disconnect participants, lock the
conference once all participants have joined, and view lists of both
phone and web participants. Immediately after their conference has
ended, users receive an email summary outlining their conference
activity and receive a link to view Evoke Webconferencing's online
reporting, which can be customized for each customer's requirements.
. Shared Online Visuals. Evoke Webconferencing users can conveniently
upload and share visual presentations, such as PowerPoint slides, online
with conference participants. Evoke Webconferencing users can show
charts and graphs without having to email their presentations in advance
and rely on participants to follow along. Our interface allows users to
move through presentations at their own pace, skipping or returning to
specific slides from the current or previously uploaded presentations.
. Live and Recorded Web Casting. Evoke Webconferencing's live and recorded
web casting lets users extend the reach of their conference by streaming
their voice and visuals over the web. Web casts can be executed live for
press conferences or announcements, or can be recorded and made
available to an unlimited number of participants. Thousands of
individuals can listen to the conference and view online presentations
using a standard media player from most standard Internet connections.
Businesses may record training presentations to view over time or may
make presentations of new products, services or policies to a global
workforce that may be reviewed during the local business day of each
geographic area. This one-time recording process saves businesses the
time and expense associated with the mass production and distribution of
videotapes.
. Universal Billing. Evoke Webconferencing customers receive a single bill
that aggregates all account activity, regardless of the features used,
and can request customized invoices based on user, features or location.
Additionally, because our billing system is e-commerce enabled,
customers can automatically charge each Evoke Webconference to their
credit card.
. Affordability. Evoke Webconferencing customers pay only for the time
that they and their participants actually use, at a price per minute
generally lower than competitive services. Evoke Webconferencing users
can also take advantage of our web casting service to enable events with
large numbers of participants with greater functionality than
traditional telephone conferencing services. In addition, we believe
that we enjoy a structural cost advantage over our competitors by
automating our services. Evoke Webconferencing's automation eliminates
traditional conferencing expenses such as operator assistance and
advance reservations.
. Reliability. We have designed our facilities and infrastructure to
incorporate the scalability and reliability required to meet the
critical communication needs of our customers. We incorporate
telecommunication-grade reliability standards into our Internet
communication technologies and design our infrastructure to accommodate
more participants and usage than we expect. Additionally, we offer Evoke
Webconferencing users operator assistance and customer support 24 hours
a day and seven days a week.
Live and On-Demand Evoke Webcasting
Our Live and On-Demand Evoke Webcasting services are designed to provide
businesses of all sizes with a complete solution for controlled delivery of
voice, video and visuals over the Internet or corporate intranets. We capture
content from live and recorded events, encode, track and manage it, providing
our customers with an end-to-end streaming solution. Customers are charged a
fee based on the length of their streamed broadcast and additional fees for
conversion, indexing and archiving of streamed content in a hosted environment.
Live Evoke Webcasting. Our Live Evoke Webcasting service delivers voice,
video and visuals over the Internet. Our customers can either provide content
that is already in an Internet streaming format or have us convert it for them.
For example, we have converted the broadcast signals of auto races for
country.com and concerts for VH1.com into a streaming format for real-time
viewing over the Internet. Evoke Webcasting offers the following benefits:
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. Outsourced Streaming Solution. Our staff of specially trained employees
provide a turnkey streaming solution to our customers by capturing
content from satellite or broadcast transmissions, encoding content into
an Internet streaming format and hosting the content in our secure
servers.
. Hosted Network Infrastructure. Customers can substantially increase
their available bandwidth and eliminate costs and resources associated
with running their own server system to host streamed content. With
access to our high-speed network and specialized servers, customers can
deliver their content at competitive prices.
On-Demand Evoke Webcasting. Our On-Demand Evoke Webcasting service allows
our customers to track usage, control access and manage large libraries of
streamed content. Our customers can either provide content that is already in
an Internet streaming format or have us convert it for them, which can be
indexed and managed to create streamed video libraries that are available
online. For example, we have converted Cisco's in-house sales training and
management videos into an indexed streaming library that is available to
specified employees. Our On-Demand Evoke Webcasting service provides customers
all of the benefits of Live Evoke Webcasting as well as the following benefits:
. Indexing and Dynamic Search Capabilities. On-Demand Evoke Webcasting
allows customers to index content based upon pre-defined criteria and
dynamically search their libraries of content to quickly retrieve
desired content from anywhere in the world.
. Allocation Reporting and Monitoring. On-Demand Evoke Webcasting provides
customers with access to detailed real-time reports that identify the
time and duration of participant access to each specific unit of
content. Detailed billing and tracking features generated from On-Demand
Evoke Webcasting help customers monitor their streaming usage and costs
and gauge viewer response and content success.
. Location-based Bandwidth Control. On-Demand Evoke Webcasting allows
customers to manage the number of simultaneous users and define the
available bandwidth from each location, thereby optimizing the amount of
bandwidth used by the customer.
. Security. On-Demand Evoke Webcasting verifies participants and restricts
access to all or any portion of each customer's library of streamed
content. In addition, On-Demand Evoke Webcasting can prevent
participants from accessing streaming content based on the Internet
address of the user requesting access.
Evoke Talking Email
Our Evoke Talking Email service currently allows users to send a free voice-
to-email message up to 30 seconds long. Although our free service currently
allows delivery of an Evoke Talking Email message to 10 email addresses, we
have the capability to deliver a message to thousands of recipients
simultaneously. Users can also post their voice message as a link embedded on a
web page. Evoke Talking Email is initiated on our home page or by accessing the
web sites of our partners, such as Blue Mountain Arts. When a user inputs her
email address and those of the recipients, the Evoke Talking Email interface
provides the user with a unique message ID number and a toll-free telephone
number to call and record her voice message. The message is recorded in a
streamable format and hosted on our servers. Once the message has been
recorded, the recipient receives an email containing a link to the streamed
message. The recipient then clicks on the link, which opens a web browser and
plays the message using RealPlayer.
Future Service Offerings
We intend to leverage the infrastructure, technologies, and proprietary
systems that we have developed for our existing services to facilitate the
rapid deployment of service enhancements and future Internet communication
services. Although we intend to maintain easy-to-use, functional communication
tools, we also recognize that the needs of our customers vary widely. By
developing and offering a range of services, we will have an opportunity to
migrate users of our basic services to more advanced services as their needs
and levels of sophistication change. We plan to pursue the following service
offerings:
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. Voice Chat Service. We are developing the ability to provide two-way
voice communication services over the Internet, or Voice Chat, as a
standalone service and as an enhancement to our Evoke Webconferencing
service.
. Wireless Platform. We are developing a wireless platform that would
allow users to initiate, control and monitor an Evoke Webconference from
a wireless device.
. Quickcall Service. We are developing a scaled-down version of Evoke
Webconferencing that would enable new users to enter a credit card
number and establish an Evoke Webconference without a prexisting
account.
. Web and Desktop Application Integration. We are working on web and
desktop integration of Evoke Webconferencing that would enable users to
schedule and initiate a conference through standard organizer
applications, such as address books or calendars.
. Advanced Web Collaboration. We intend to integrate advanced
collaboration technologies, such as whiteboarding, application sharing
and web touring, into a high-end version of Evoke Webconferencing
targeted to the advanced user.
We have not yet begun the development or integration of all of these
services, and we do not currently know if or when any of these services will be
offered.
Customers
We have a diverse base of customers across numerous vertical markets. We
have historically targeted large and medium-sized corporations and high-growth
Internet-centric businesses. We expect that in the future a significant portion
of our customers will consist of smaller businesses, home office users and
other consumers that are introduced to our services through our strategic
partners and affiliate resellers. Our top customers based on revenue in 1999
included the following:
Cisco Systems Microsoft
country.com Moreson Info Systems
Excite@Home Radiowave
Launch.com Veracast
MessageMedia Wells Fargo
Technology
Our reliable and scalable telephony and Internet infrastructure forms the
basis of our suite of Internet communication services. Over the last three
years, we have invested substantial resources to develop proprietary systems
and applications that integrate disparate telephony and Internet communication
technologies. Our layered approach to building applications allows us to
effectively leverage our existing infrastructure, technologies and proprietary
systems to accommodate changes in the marketplace. We believe this gives us a
significant competitive advantage by allowing us to quickly and reliably
develop new services and improve upon our existing services. We believe that
our technological resources give us the following competitive advantages:
. the ability to identify new and enhance existing Internet communication
services;
. the ability to build integrated applications by combining traditional
telephony and Internet communication technologies; and
. the ability to build a reliable and scalable communication
infrastructure.
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The following chart illustrates our layered approach to building and
integrating applications:
[Pictured here is a graphic with four rows. The bottom row is titled
"Infrastructure" and contains the words "Telephony," "Fiber," "Internet
Access," "Storage," "Servers," and "Facilities." The next row is titled
"Technologies" and contains the words "Video Streaming," "Audio Streaming,"
"Web Collaboration," "Unified Messaging," "Wireless Web" and "Internet Voice
Chat." The next row is titled "Proprietary Systems" and contains the words
"Automated Billing," "Fraud Detection," "Automated Reporting," "Content
Management," "Automated Transaction Management," "Call Routing," "Telephony
and Internet Integration," and "Dynamic Load Balancing." The top row is
entitled "Proprietary Applications" and containes the words "Evoke
Webconferencing," "Evoke Webcasting" and "Evoke Talking Email."]
Infrastructure. Each of our services resides on a common infrastructure
that is built to a high level of fault tolerance and reliability. We maintain
our own telecommunication-grade data facilities and production servers in
Louisville and Boulder, Colorado. These facilities are interconnected to each
other and to our telephony and Internet service providers through three
independent fiber optic providers on four diverse routes. Our connection to
the public telephony network and to our Internet service providers occur in
geographically diverse cities to provide maximum fault tolerance to network
outages. Our high-speed data centers are based on a fully-switched, high
bandwidth network comprised of Foundry Networks hardware. Our services are
built on a complement of servers running Linux, Solaris and Microsoft
operating systems. Telephony connectivity is provided through hardware
purchased from various vendors. Data related to the execution of our services
is generally stored on fault tolerant EMC enterprise storage systems and is
backed up using enterprise tape systems from Sun Microsystems. Our data
facilities have backup power systems, redundant cooling systems, computer room
fire suppression systems and sophisticated security systems.
Technologies. We continuously evaluate new technologies, determine if they
will be beneficial to our users and build systems and software that assist us
in their management and integration into web-based applications. In cases
where no existing technology meets our needs, we develop our own solution or
modify an existing technology. We believe that by developing proprietary
systems and applications on top of new and existing technologies, we can
leverage the benefits of emerging technologies and rapidly integrate these
technologies into our services. We license streaming audio and video
technologies from Microsoft and RealNetworks. We purchase multipoint control
units that allow us to bridge multiple telephone lines onto a single call. We
purchase other telephony hardware to provide customized telephony
applications. We will incorporate technologies that we license from a third
party to develop voice chat services over the Internet. Our wireless web
applications will be built on technologies readily available from certain
vendors. Our web collaboration technologies are built in-house. Our multi-site
database architecture is based on the Oracle 8i database that provides us with
standby database access in the event of system failure.
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Proprietary Systems. Our systems are the central hub of our services,
linking together disparate communication technologies with applications in an
integrated manner. This enables us to share technologies across multiple
services to quickly develop and enhance applications. Universal functions like
our billing system need only be created once, yet all applications can operate
using the same robust billing structure. The systems layer represents the
majority of our proprietary software development and consists of functions such
as automated billing and reporting, security, transaction management, interface
integration, content management, call routing and fraud detection. Our dynamic
load balancing systems manage traffic volumes across hundreds of Internet
communication servers and telephony switches, enabling us to increase capacity
and meet growing customer demand. We believe our proprietary systems make
otherwise incompatible emerging technologies work together by allowing us to
manage them effectively.
Research and Development
Our research and development efforts are currently focused on improving the
functionality and performance of our existing services as well as developing
new services to meet the changing needs of our diverse customer base. Our
research and development organization is comprised of the following groups:
. The database and transaction group focuses on billing and reporting
systems as well as maintaining a record of every communication event
that happens within our systems.
. The server group focuses on developing, integrating and implementing
server-based technologies used in our solutions.
. The application group focuses on building easy-to-use interfaces for
users to control our services.
. The advanced technology group researches new technologies for potential
integration into our service offerings.
. The operations group is responsible for testing and maintaining all
deployed systems as well as performing routine upgrades and bug fixes.
We devote a substantial portion of our resources to developing new services,
enhancing existing services, expanding and improving the Internet and telephony
technologies we use and strengthening our technological expertise. We believe
our success will depend, in part, on our ability to develop and introduce new
services and enhancements to our existing services. We have made, and expect to
continue to make, significant investments in research and development. Over the
last three years, we have expensed approximately $2.1 million related to
research and development activities. We intend to devote substantial resources
to research and development for the next several years. As of January 31, 2000,
we had 21 full-time engineers and developers engaged in research and
development activities.
Sales and Marketing
Sales. We currently sell our services through a direct sales force and
indirect sales channels. As of January 31, 2000, we had 40 full-time employees
engaged in sales. The following segments outline our direct and indirect sales
initiatives:
. Direct Sales Force. Our direct sales force sells our services primarily
to large and medium-sized corporations and high-growth, Internet-centric
businesses. Our direct sales force is geographically based and as of
January 31, 2000 consisted of 27 employees operating in eleven states. A
significant percentage of our sales compensation is commission based.
Sales is our fastest growing department and we anticipate our direct
sales staff to exceed 140 employees by the end of 2000.
. Co-Branded Partnerships. Our business development team is focused on
establishing strategic partnerships with leading Internet companies that
have a broad user base. Our agreements with popular web sites allow us
to distribute our services through a link on their sites or bundle our
services as part of a co-branded offering. We expect that these
partnerships will help us extend the reach of our services to attract
small businesses, home office users and other consumers. We plan to
expand our business development team from 4 individuals as of January
31, 2000 to over 10 individuals by the end of 2000.
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. Affiliates. In November 1999, we launched an affiliate program with a
third-party service company. An affiliate is a web site owner that
agrees to promote our services by advertising them on their web site.
Affiliates receive a commission on our services sold through their web
site. As of January 31, 2000, we had over 2,500 affiliates signed up to
resell Evoke Webconferencing.
. Indirect Sales. We partner with resellers and third-party technology
providers to resell our services. These indirect sales channels allow us
to extend our reach to businesses of all sizes.
. E-commerce. The majority of our services can be purchased and delivered
directly though our web site. Our web site provides us with a low-cost,
globally accessible sales channel that is available 24 hours a day,
seven days a week.
Marketing. We focus our marketing efforts on communicating the benefits of
our services to increase and enhance usage. We seek to increase brand
awareness, stimulate market demand and educate potential customers about the
advantages of using Internet communication services. Our marketing programs
include:
. Advertising. We use Internet, print and broadcast advertising campaigns
targeted toward business and consumer users to communicate the power of
our services.
. Co-Branding. We offer our services as co-branded engines to strategic
partners, such as web portals and other high-traffic web sites. This
allows us to reach a much larger audience than could be reached through
our web site alone. We believe this increases brand awareness and
ultimately achieves greater market penetration. We also enhance our
brand through our associations with leading Internet companies whose
brand equity and corporate identity we believe reflect favorably upon
our services.
. Public Relations. Our public relations initiatives aim to widen public
recognition of our brand by highlighting important technical
developments, service offerings, awards, strategic partnerships and
company milestones. We seek to enhance our position in our industry
through active participation in industry trade shows, conferences and
speaking engagements.
. Viral Marketing. Our sales and marketing strategy is reinforced by the
viral nature of our services as new users are exposed to our services
through their participation in an Evoke Webconference or receiving an
Evoke Talking Email. This enables our Internet communication services to
reach a broad base of Internet users in a manner more cost-effective
than typical advertising.
. Product Management. Our product management group is responsible for
managing the product life cycle from conception to launch. They conduct
market and competitive analyses to strategically develop our services.
This group oversees product launches and translates our technical
service capabilities into marketable Internet communication tools.
. Customer Relationship Management. Our communication initiatives are
aimed at maintaining positive relationships with our customer base. This
includes maintaining contact with customers through opt-in email
newsletters, training initiatives, promotions and incentives to increase
the use of our services. In addition, we incorporate customer feedback
from emails and focus groups into our services.
Customer Service
We offer customer support and operator assistance 24 hours a day, seven days
a week. Technical and customer support is available through a toll-free
telephone number and email request system. In addition, Evoke Webconferencing
users can request operator help with the click of a mouse. We also offer
substantial self-serve information databases in the form of frequently asked
questions hosted on our web site. As of January 31, 2000, we had 24 full-time
technical and customer support representatives to respond to customer requests
for support.
Most of our requests for customer support involve browser settings or user
error and can be addressed during an operations technician's initial contact
with a customer. If the problem cannot be solved immediately, our development
operations group addresses the technical issues and informs the account
development representative of the customer's difficulties. Once a solution is
discovered, or the problem and timeline for solution are determined, our
account development representative contacts the customer.
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We are currently integrating an automated email response system to
efficiently handle email requests. This automated system will use keywords to
identify the customer's request and send a personalized, specific response to
the customer's query. If the email system cannot handle the particular
request, it will automatically contact an operations technician to initiate
the problem resolution process.
Competition
The market for Internet communication services is relatively new, rapidly
evolving and intensely competitive. As the market for Internet communication
services evolves, more companies will enter this market and invest significant
resources to develop Internet communication services. As a result, we expect
that competition will continue to intensify and may result in price
reductions, reduced sales and margins, loss of market share and reduced
acceptance of our services.
We believe that the primary competitive factors in the Internet
communication services market include:
. ease of use of services and breadth of service offerings;
. quality and reliability of communication services;
. pricing;
. brand identity;
. quality of customer service;
. compatibility with new and existing communication formats;
. access to and penetration of distribution channels necessary to achieve
broad distribution;
. ability to develop and support secure formats for communication
delivery;
. demand for Internet communication services;
. scalability of streaming voice and video and delivery technology; and
. challenges caused by bandwidth constraints and other limitations of the
Internet infrastructure.
Our failure to adequately address any of the above factors could harm our
business.
We are an integrated provider of Internet communication services. As such,
we compete with standalone providers of traditional teleconferencing, web
collaboration and streaming services. We believe that none of our competitors
currently combine these services as an integrated offering other than by using
at least one other vendor. However, our current and potential competitors may
enter or expand their positions in the Internet communication services market
by acquiring one of our existing competitors or by forming strategic alliances
with these competitors.
In the traditional teleconferencing market, our principal competitors
include AT&T, Global Crossing and MCI WorldCom. These companies currently
offer teleconferencing services as part of a bundled telecommunications
offering, which may include video and data conferencing services and other
Internet collaboration services. In the collaboration services market our
principal competitors include Centra Software, Contigo, PlaceWare, and WebEx.
Some of these competitors offer collaboration services with a broader set of
features than we currently offer. Enterprise software vendors, such as Oracle
and SAP, may choose to extend their applications with similar collaboration
features in the future. In the streaming content delivery market our principal
competitors include iBeam Broadcasting, InterVU and Broadcast.com, a division
of Yahoo!.
Many of our current and potential competitors have larger customer bases,
longer operating histories, greater name recognition, more employees and
significantly greater financial, technical, marketing, public relations and
distribution resources than we do. Our failure to compete successfully could
harm our business.
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Intellectual Property
The success of our business is substantially dependent on the proprietary
systems that we have developed. These proprietary systems are not currently
protected by any patents and we may not be successful in our efforts to secure
patents for our proprietary systems. Other companies or individuals could
develop and market similar systems and services and we would have no legal
claim against them unless and until we obtain such protection.
To protect our proprietary rights, we rely on a combination of trademarks,
service marks, trade secrets, copyrights, confidentiality agreements with our
employees and third parties, and protective contractual provisions. Our
protection efforts may prove to be unsuccessful, and unauthorized parties may
copy or infringe upon aspects of our technology, services or trademarks.
Furthermore, the validity, enforceability and scope of protection for
intellectual property such as ours in Internet-related industries is uncertain
and still evolving. Existing trade secret, copyright and trademark laws offer
only limited protection. Further, effective trade secret, copyright and
trademark protection may not be available in every country in which we will
offer our services and policing unauthorized use of our proprietary information
is difficult.
In December 1999, we licensed the source and object code of specific
technologies from AudioTalk Networks which we are using to develop voice chat
services over the Internet. We licensed this technology, subject to certain
installation requirements and will pay royalties and software maintenance
through December 2001, after which we will have no further payment obligations.
AudioTalk may grant identical or similar licenses to others. Generally, we are
not permitted to transfer these license rights to others except in connection
with the sale and distribution of our services. The AudioTalk license is
perpetual and the agreement can be terminated by AudioTalk only if we
materially breach provisions relating to restricted third party access or our
payment or indemnification obligations. If this license is terminated, we would
be forced to remove such technology from any service that incorporates this
technology. As a result, we would be required to expend extensive engineering
efforts to develop comparable technology or pay additional license fees if
similar technologies were available. We may be required to license technologies
from third parties to develop, market and deliver new services in the future.
We may be unable to obtain any such licenses on a timely basis, on commercially
reasonable terms or at all and the rights granted under such licenses may not
be valid or enforceable.
Employees
As of January 31, 2000, we employed 117 people. The employees included 18 in
general and administrative functions, 15 in operations, 63 in sales and
marketing, and 21 in research and development. Our future success depends in
part on our ability to attract, retain and motivate highly qualified technical
and management personnel, for whom competition is intense. Our employees are
not represented by a labor union or covered by any collective bargaining
agreements. We consider our employee relations to be good.
Facilities
Our principal executive office is located in Louisville, Colorado where we
lease 40,000 square feet of space from a company controlled by Paul Berberian,
our chairman of the board, chief executive officer and president, James LeJeal,
our chief operating officer and chief financial officer, and Byron Chrisman,
one of our former directors. See "Certain Transactions--Lease" for more
information on this lease. We also lease 4,000 square feet of space in Boulder,
Colorado under a lease that expires in May 2002. Additionally, the company
leases office space for satellite sales offices that are typically less than
1,000 square feet in Atlanta, Bethesda, Boston, Chicago, Denver, Los Angeles,
New York, Minneapolis and San Francisco. We believe that these existing
facilities are adequate to meet current foreseeable requirements or that
suitable additional or substitute space will be available on commercially
reasonable terms.
40
Legal Proceedings
From time to time, we have been subject to legal proceedings and claims in
the ordinary course of business. Although we are not currently involved in any
material legal proceedings, we may in the future be subject to legal disputes,
including claims of alleged infringement of third party patents, trademarks,
and other intellectual property rights by us and our licenses. Any claims, even
if not meritorious, could result in the expenditure of significant financial
and managerial resources. We are not aware of any legal proceedings or claims
that we believe will have, individually or in the aggregate, a material adverse
effect on our business.
41
MANAGEMENT
Our executive officers, key employees and directors are as follows:
Name Age Position With Us
---- --- ----------------
Paul A. Berberian....... 33 Chairman of the Board, Chief Executive Officer and President
James M. LeJeal......... 35 Chief Operating Officer, Chief Financial Officer and Director
Todd Vernon............. 35 Chief Technology Officer
Mhaer Alahydoian........ 36 Vice President International Business Development
Bryce Ambraziunas....... 29 Vice President Operations
Brad Dupee.............. 30 Vice President Business Development
Arturo Florcruz......... 39 Vice President Sales
Dan Fuller.............. 33 Senior Vice President Sales
Kenneth Mesikapp........ 36 Vice President Finance and Accounting, Assistant Treasurer
Alison Seccombe......... 29 Vice President Marketing
Bradley A. Feld......... 34 Director
Donald Hutchison........ 43 Director
Donald H. Parsons, Jr... 37 Director
Carol deB. Whitaker..... 46 Director
Executive Officers
Paul A. Berberian has served as our chairman of the board, chief executive
officer and president since co-founding our company in April 1997. From
November 1995 to April 1997, Mr. Berberian was director of ConferLink, a
division of ConferTech International, now Global Crossing, focusing on revenue
call management information systems. In June 1993, Mr. Berberian co-founded
LINK-VTC, a videoconferencing service provider, and served as its president and
a member of its board of directors, which was acquired by ConferTech
International in November 1995. He holds a B.S. degree in management and is a
distinguished graduate from the U.S. Air Force Academy.
James M. LeJeal has served as our chief operating officer, chief financial
officer and as a member of our board of directors since co-founding our company
in April 1997. From December 1995 to April 1997, Mr. LeJeal served as the
corporate vice president of finance of ConferTech International, where he was
responsible for managing the accounting and billing functions, human resources
and financial planning and analysis of a $100 million business unit. From
September 1994 to December 1995, Mr. LeJeal served as vice president of finance
and administration of LINK-VTC, which was later acquired by ConferTech
International. He holds a MBA degree from Loyola Marymount University and a
B.S. degree in management and is a distinguished graduate from the U.S. Air
Force Academy.
Todd Vernon has served as our chief technology officer since our inception
in April 1997. From August 1996 to April 1997, Mr. Vernon served as senior
software engineer for ConferLink, a division of ConferTech International. From
January 1996 until August 1996, Mr. Vernon served as product architect and lead
developer for Rogue Wave Software. From August 1994 to January 1996, Mr. Vernon
served as senior software engineer at Evolving Systems, Inc., a software
company. From February 1987 to August 1994, Mr. Vernon served as senior
electronic engineer at NASA Dryden Flight Research Facility. He holds a B.S.
degree in electrical engineering from Central Missouri State University.
42
Key Employees
Mhaer Alahydoian has served as our vice president international business
development since January 2000. From May 1998 to July 1999, Mr. Alahydoian
served as senior partner of The Investment Law Group Ltd., a law firm located
in Yerevan, Armenia. From January 1997 to May 1998, he served as the project
director of judicial and legal training programs for ARDI/Checchi Rule of Law
Consortium. From January 1997 to May 1998, Mr. Alahydoian served as associate
director of the American University of Armenia's LL.M. program. From August
1995 to July 1996, he was a Fulbright scholar lecturing at Yerevan State
University. From November 1994 to April 1995, Mr. Alahydoian served as an
attorney and project manager for the World Bank in Yerevan, Armenia. He holds a
B.A. degree in psycho-biology from Occidental College, a Certificat d'etudes
internationales and a J.D. degree from Loyola Law School in Los Angeles,
California.
Bryce L. Ambraziunas has served as our vice president operations since
November 1998. From October 1997 to November 1998, Mr. Ambraziunas served as
executive manager of U.K. operations for Frontier Videoconferencing, a division
of Frontier ConferTech. From January 1996 to October 1997, Mr. Ambraziunas held
various positions in the operations and sales departments of LINK-VTC,
including technical account executive for its videoconferencing offering. He
received a B.A. degree in economics from the University of California at Santa
Cruz.
Brad Dupee has served as our vice president business development since June
1999. From July 1998 to June 1999, Mr. Dupee served as manager of business
development for Hill/Holiday Interactive, an Internet business consulting firm.
From March 1996 to July 1998, Mr. Dupee served as director of sales and
marketing for General Interactive, Inc., an interactive relationship marketing
firm that he co-founded. From November 1992 to March 1996, Mr. Dupee held a
sales position with Network Plus, Inc., an aggregator of telecommunication
services for small and medium-sized business markets. He holds a B.S. degree in
finance from Bentley College.
Arturo Florcruz has served as our vice president sales since January 2000
and as our director of sales, eastern region from May 1999 to January 2000.
From September 1998 to April 1999, Mr. Florcruz served as vice president, sales
and services for Ovation Communications, a competitive local exchange carrier
that was purchased by McLeod USA in February 1999. From July 1997 to August
1998, Mr. Florcruz served as vice president sales, central region for Frontier
Confertech. From May 1983 to June 1997, Mr. Florcruz held a variety of sales,
marketing and executive positions at Ameritech, including vice president of
sales and vice president of business development. Mr. Florcruz holds a B.S.
degree in marketing and management from Indiana University and a MBA degree in
management from Northwestern University Kellogg School of Business.
Dan Fuller has served as our senior vice president sales since January 2000.
From August 1998 to January 2000, Mr. Fuller served as vice president of sales
for CRN Broadcasting, a radio broadcasting company. From March 1989 to July
1998, Mr. Fuller held various sales manager positions with Noble Broadcasting,
including general sales manager of KBCO, KHIH and KHOW radio in Denver,
Colorado. Noble Broadcasting was acquired by Jacor Broadcasting in May 1996.
Mr. Fuller holds B.A. in marketing from Arizona State University.
Kenneth Mesikapp has served as our vice president finance and accounting and
assistant treasurer since October 1999 and as our corporate controller from
December 1997 to October 1999. From November 1994 to October 1997, Mr. Mesikapp
served as audit manager of Brock and Company, CPAs, P.C., an accounting firm
located in Boulder, Colorado. From June 1986 to November 1994, Mr. Mesikapp
held a variety of positions and most recently was a manager at Nykiel, Carlin
and Company, an accounting firm located in Schaumburg, Illinois. Mr. Mesikapp
holds a B.S. in accounting from the University of Illinois at Chicago and is a
certified public accountant.
Alison Seccombe has served as our vice president marketing since September
1999 and has been employed by us since May 1999. From February 1997 to May
1999, Ms. Seccombe served as account supervisor for
43
Alexander Ogilvy Public Relations Worldwide. From October 1995 to November
1996, Ms. Seccombe was employed in the advertising department of JGF
Communications. From March 1995 to October 1995, Ms. Seccombe held a sales
position with Chroma Copy Imaging. She holds a B.A. degree in political science
from Saint Mary's College.
Directors
Bradley A. Feld has served as a member of our board of directors since May
1998. Since June 1996, Mr. Feld has served as managing director of Softbank
Technology Ventures. Since 1995, Mr. Feld has been the President of Intensity
Ventures Inc., a company that helps to establish, advise and operate software
companies. From 1994 to 1995, Mr. Feld served as chief technology officer of
AmeriData Technologies, a publicly-traded company that was acquired by GE
Capital in 1996. From 1985 to 1993, Mr. Feld was the President of Feld
Technologies, a software consulting firm that he founded and that was acquired
by AmeriData in 1993. Mr. Feld is a director and co-chairman of Interliant,
Inc. and MessageMedia, Inc. and a director of a number of privately held
companies. Mr. Feld holds S.B. and S.M. degrees from the Massachusetts
Institute of Technology.
Donald Hutchison has served as a member of our board of directors since
January 2000. Since February 1997, Mr. Hutchison has served as senior vice
president and general manager of Excite@Home, focusing on building their
business division, @Work. Since February 1997, Mr. Hutchison has served as
director of sales and marketing for TAU Corporation, a digital image computing
company. From May 1994 to January 1997, Mr. Hutchison served as senior vice
president for sales and marketing of NETCOM. From January 1987 to July 1989,
Mr. Hutchison served as director of sales and business planning for Pixar, a
digital animation company. Mr. Hutchison holds a B.A. degree in economics from
the University of California at Santa Barbara, and a MBA degree in finance and
organizational development from Loyola Marymount University.
Donald H. Parsons, Jr. has served as a member of board of directors since
April 1997. Mr. Parsons initially joined Centennial Ventures in 1989. He has
been a special limited partner of Centennial Holdings III and is currently a
general partner of Centennial Holdings IV and Centennial Holdings V and a
managing principal of Centennial Holdings VI. Additionally, he serves as a
senior vice president of Centennial Holdings, Inc. From 1982 to 1987, Mr.
Parsons was a video graphics engineer for IBM Corporation in Boca Raton,
Florida. Mr. Parsons is a member of the board of directors of Ecrix
Corporation, HighGround Systems, Inc., UMONGO, Inc. and iVAST Inc., each a
privately-held company. Mr. Parsons is the former chairman and president of the
Venture Capital Association of Colorado. Mr. Parsons holds a B.S. degree in
electrical engineering from Northwestern University and a MBA degree from the
University of Michigan Business School.
Carol deB. Whitaker has served as a member of our board of directors since
June 1999. Ms. Whitaker has over 20 years of investment banking experience with
both corporations and Wall Street firms. Since 1990, Ms. Whitaker has served as
President of Whitko & Company, a Denver-based corporate finance consulting
firm. From January 1996 to July 1996, Ms. Whitaker served as chief executive
officer of W.W. Comm, Inc., a start-up company pursuing wireless communication
opportunities in Latin America. Ms. Whitaker was a member of the board of
directors of Brooks Fiber Properties, Inc. from October 1996 until the sale of
the company in January 1998 to MCI WorldCom. Ms. Whitaker is also a member of
the board of directors of Yipes Communications, Inc. and Optiglobe, Inc., both
privately held companies. Ms. Whitaker holds a B.A. degree in economics from
Colorado College and a MBA degree from the University of Chicago.
44
Classified Board of Directors
We currently have six directors. In February 2000, our board of directors
approved, subject to stockholder approval, our restated certificate of
incorporation to provide for, among other things, a classified board of
directors. The restated certificate of incorporation states that the terms of
office of the board of directors will be divided into three classes: class I,
whose term will expire at the first annual meeting of stockholders after this
offering, class II, whose term will expire at the second annual meeting of
stockholders after this offering and class III, whose term will expire at the
third annual meeting of stockholders after this offering. After such election,
the directors will serve for a term of three years and until their successors
have been elected.
Board Committees
Our audit committee consists of , and . The audit
committee makes recommendations to the board of directors regarding the
selection of independent auditors, reviews the results and scope of the audit
and other services provided by our independent auditors and evaluates our
internal accounting procedures.
Our compensation committee consists of and . The
compensation committee reviews and approves compensation and benefits for our
executive officers. The compensation committee also administers our
compensation and stock plans and makes recommendations to the board of
directors regarding such matters. No member of the compensation committee has
been an officer or employee of Evoke at any time. None of our executive
officers serves as a member of the board of directors or compensation committee
of any other company that has one or more executive officers serving as a
member of our board of directors or compensation committee.
Director Compensation
Directors do not currently receive any cash compensation for their service
as directors, but are reimbursed for customary and reasonable expenses incurred
in attending board of directors and committee meetings. Non-employee directors
are eligible to receive options and stock issuances under our 2000 equity
incentive plan and have been granted the following options and issuances under
the plan:
. On January 25, 2000, Mr. Hutchison received an option to purchase 40,000
shares of our common stock at an exercise price of $3.00 per share, with
a vesting period of three years commencing on that date at a rate of
1/36th of the shares underlying the options vesting each month;
. On January 25, 2000, Mr. Hutchison purchased 150,000 shares of our
common stock at $3.00 per share;
. On December 1, 1999, Messrs. Chrisman and Tankersley, our former
directors, and Messrs. Feld and Parsons each received an option to
purchase 40,000 shares of our common stock at an exercise price of $1.04
per share, with a vesting period of three years commencing retroactively
on January 1, 1998 at a rate of 1/36th of the shares underlying the
options vesting each month;
. On December 1, 1999, Ms. Whitaker received an option to purchase 50,000
shares of our common stock at an exercise price of $1.04 per share, with
a vesting period of one year commencing retroactively on July 1, 1999 at
a rate of 1/12th of the shares underlying the option vesting each month;
. On July 15, 1999, Whitko & Company for Ms. Whitaker, purchased 50,000
shares of our common stock at $1.04 per share; and
. On June 16, 1999, Ms. Whitaker received an option to purchase 40,000
shares of our common stock at an exercise price of $.85 per share, with
a vesting period of three years at a rate of 1/36th of the shares
underlying the option vesting each month commencing on that date.
45
Executive Compensation
The following table sets forth all compensation awarded to, earned by or
paid to our chief executive officer and our other executive officers whose
annual salary and bonus exceeded $100,000 for services rendered in all
capacities to us during 1999. Throughout this prospectus we refer to these
individuals as our named executive officers.
Summary Compensation Table
Annual Long-Term
Compensation Compensation
---------------- ------------
Securities
Underlying
Name and Principal Position Salary Bonus Options
--------------------------- -------- ------- ------------
Paul A. Berberian,
Chairman of the Board, Chief Executive Officer
and President.................................. $131,515 $ 5,000 200,000
James M. LeJeal
Chief Operating Officer, Chief Financial Officer
and Director................................... 131,515 5,000 200,000
Todd Vernon
Chief Technology Officer........................ 119,697 12,000 50,000
Option Grants in 1999
The following table sets forth information regarding options granted to the
named executive officers during 1999.
Potential Realizable Value
at Assumed Annual Rates of
Percent of Stock Price Appreciation for
Number of Total Options Exercise Option Term
Options Granted in Price Expiration -----------------------------
Name Granted 1999 ($/Share) Date 5% 10%
---- --------- ------------- --------- ------------- -------------- --------------
Paul A. Berberian....... 200,000 9.7% $1.04 Nov. 17, 2009 $130,810 $ 331,498
James M. LeJeal......... 200,000 9.7 1.04 Nov. 17, 2009 130,810 331,498
Todd Vernon............. 50,000 2.4 0.85 May 31, 2009 26,728 67,734
The percent of total options granted in 1999 in the above table is based on
2,059,750 total options granted to employees, directors and consultants. Our
board of directors may reprice options under the terms of our stock option
plans.
Options were granted at an exercise price equal to the fair market value of
our common stock, as determined by our board of directors on the date of grant.
In making this determination, the board of directors considered a number of
factors, including:
. our historical and prospective revenue and profitability;
. our cash balance and rate of cash consumption;
. the development and size of the market for our services;
. the status of our financing activities;
. the stability of our management team; and
. the breadth of our services.
The amounts reflected in the "Potential Realizable Value" column of the
foregoing table are calculated assuming that the fair market value of the
common stock on the date of the grant as determined by the board of directors
appreciates at the indicated annual rate compounded annually for the entire
term of the option, and
46
that the option is exercised and the common stock received therefor is sold on
the last day of the term of the option for the appreciated price. The 5% and
10% rates of appreciation are mandated by the rules of the Securities and
Exchange Commission and do not represent our estimate or projection of future
increases in the price of the common stock.
1999 Option Exercises and Year-End Option Values
The following table sets forth information concerning the value realized
upon exercise of options during 1999 and the number and value of unexercised
options held by each of the named executive officers at January 31, 2000.
Amounts under "Unexercisable" in the table below include unvested options
notwithstanding the fact that they are immediately exercisable upon grant
because unvested shares are subject to repurchase by us at the original
exercise price upon the employees cessation of service. The value of the
unexercised in-the-money options is based on the fair market value of our
common stock as of January 31, 2000 (determined by the board of directors in
the manner discussed above to be $3.00 per share), minus the per share exercise
price, multiplied by the number of shares underlying the option.
Value of Unexercised In-the-
Number of Unexercised Money Options at January 31,
Shares Options at January 31, 2000 2000
Acquired on Value ------------------------------ --------------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ------------- -------------- -------------- ---------------
Paul A. Berberian....... -- -- -- 200,000 $ -- $392,000
James M. LeJeal......... -- -- -- 200,000 -- 392,000
Todd Vernon............. -- -- 187,500 112,500 543,750 288,750
Employment Agreements and Change in Control Arrangements
In November 1999, we entered into personal services agreements with Mr.
Berberian, our chairman of the board, chief executive officer and president,
and Mr. LeJeal, our chief operating officer and chief financial officer. Each
of the agreements is for an initial two year term and continues indefinitely
thereafter until notice of termination by either party. Under the terms of the
agreements, Messrs. Berberian and LeJeal will each receive an annual base
salary of $215,000 beginning in 2000 plus performance-based bonuses as
determined by the compensation committee and in December 1999 each received an
initial stock option grant for options to purchase 200,000 shares of our common
stock.
If either Mr. Berberian or Mr. LeJeal is terminated without cause or
terminates their own employment "for good reason," then the terminated
executive will receive his base salary through the end of the initial term or
for a period of 18 months, whichever is longer, plus any accrued bonuses and
all unexercised stock options shall vest. If either executive is terminated
"for cause," by mutual agreement or voluntarily, then the executive will be
entitled to accrued compensation and unreimbursed expenses. "For good reason"
is generally defined as a material change in the executive's job duties
inconsistent with his position, a reduction in salary inconsistent with a
general reduction of the salaries of similarly situated employees, a required
relocation more than 50 miles from our current location, or our material breach
of the applicable employment period. "For cause" is generally defined as a
material breach of the employment agreement by the executive, dishonesty with
respect to the company, willful misfeasance intended to materially damage the
company, conviction of a crime of moral turpitude or crime, other than a
vehicle offense, that could materially damage our reputation or willful or
prolonged absence, other than due to illness, or failure to perform his duties
for 20 days following written notice.
If either Mr. Berberian or Mr. LeJeal is terminated following a "change of
control," then the terminated executive will receive his base salary through
the end of the initial term or for a period of 18 months, whichever is longer,
plus bonuses that would have been paid to that executive had he remained
employed during such period and the initial grant of stock options shall vest.
A "change of control" is generally defined as a liquidation or dissolution of
the company, the sale of all or substantially all of our assets, and a merger
or consolidation of the company where after the merger or consolidation our
shareholders hold less than 50% of the stock of the surviving corporation.
47
The agreements also contain non-competition and confidentiality provisions.
Under the terms of the agreements, each executive has agreed not to compete
with us in the United States, hire or attempt to hire any of our employees for
a period of 12 months following termination or at any time payments are being
made to the executive.
401(k) Plan
Our employees are eligible to participate in our 401(k) Plan. Pursuant to
the 401(k) Plan, employees may elect to reduce their current compensation by up
to the lesser of 15% of eligible compensation or the statutorily prescribed
annual limit ($10,500 in 2000). Employees may contribute this amount to the
401(k) Plan. The 401(k) Plan is intended to qualify under Section 401 of the
Internal Revenue Code so that contributions by employees to the 401(k) Plan,
and income earned on plan contributions, are not taxable to employees until
withdrawn, and so that the contributions by employees will be deductible when
made. We may make discretionary matching contributions to the 401(k) Plan.
Additionally, we may make discretionary contributions in amounts to be
determined by the board of directors. Since the 401(k) Plan's inception, we
have made $13,072 in matching or profit sharing contributions.
2000 Equity Incentive Plan
Our board of directors adopted our 2000 Equity Incentive Plan on February
15, 2000, subject to stockholder approval. The incentive plan is an amendment
and restatement of our 1997 Stock Option/Stock Issuance Plan.
Administration. The board administers the incentive plan unless it delegates
administration to a committee. The board has the authority to construe,
interpret and amend the incentive plan as well as to determine:
. the grant recipients;
. the grant dates;
. the number of shares subject to the award;
. the exercisability and vesting of the award;
. the exercise price;
. the type of consideration; and
. the other terms of the award.
Share Reserve. We have reserved a total of 5,000,000 shares of our common
stock for issuance under the incentive plan. On January 1 of each year for 10
years, beginning on January 1, 2001, the number of shares in the reserve
automatically will be increased by 3.0% of the lesser of:
. our outstanding stock on the effective date of this offering, or
. our outstanding shares as of such January 1.
However, the automatic increase is subject to reduction by the board. If the
recipient of a stock award does not purchase the shares subject to his or her
stock award before the stock award expires or otherwise terminates, the shares
that are not purchased again become available for issuance under the incentive
plan.
Eligibility. The board may grant incentive stock options that qualify under
Section 422 of the Internal Revenue Code to our employees and to the employees
of our affiliates. The board also may grant nonstatutory
48
stock options, stock bonuses and restricted stock purchase awards to our
employees, directors and consultants as well as to the employees, directors and
consultants of our affiliates.
. A stock option is a contractual right to purchase a specified number of
our shares at a specified price (exercise price) for a specified period
of time.
. An incentive stock option is a stock option that has met the
requirements of Section 422 of the Internal Revenue Code. This type
of option is free from regular tax at both the date of grant and the
date of exercise. However, the difference between the fair market
value on the date of exercise and the exercise price is an item of
alternative minimum tax unless there is a disqualifying disposition
in the year of exercise. If two years pass between grant date and
sale date and one year passes between exercise date and sale date,
all profit on the sale of our shares acquired by exercising the
incentive stock option is long-term capital gain income. However, if
either of the holding periods is not met, there has been a
disqualifying disposition, and a portion of any profit will be taxed
at ordinary income rates.
. A nonstatutory stock option is a stock option that either does not
meet the Internal Revenue Code criteria for qualifying incentive
stock options or is not intended to be an incentive stock option. It
triggers a tax upon exercise. This type of option requires payment
of state and federal income tax and, if applicable, FICA/FUTA on the
difference between the exercise price and the fair market value on
the exercise date.
. A restricted stock purchase award is our offer to sell our shares at a
price either at or near the fair market value of the shares. A stock
bonus, on the other hand, is a grant of our shares at no cost to the
recipient in consideration for past services rendered.
Under certain conditions the board may grant an incentive stock option to a
person who owns or is deemed to own stock possessing more than 10% of our total
combined voting power or the total combined voting power of an affiliate of
ours. The exercise price of an incentive stock option in such cases must be at
least 110% of the fair market value of the stock on the grant date and the
option term must be five years or less.
Limits on Option Grants. There are limits on the number of shares that the
board may grant under an option.
. Section 162(m) of the Internal Revenue Code, among other things, denies
a deduction to publicly held corporations for compensation paid to the
chief executive officer and the four highest compensated officers in a
taxable year to the extent that the compensation for each officer
exceeds $1,000,000. When we become subject to Section 162(m), in order
to prevent options granted under the incentive plan from being included
in compensation, the board may not grant options under the incentive
plan to an employee covering an aggregate of more than 2,000,000 shares
in any calendar year.
. In addition, an employee may not receive incentive stock options that
exceed the $100,000 per year limitation set forth in Section 422(d) of
the Internal Revenue Code. In calculating the $100,000 per year
limitation, we determine the aggregate number of shares under all
incentive stock options granted to that employee that will become
exercisable for the first time during a calendar year. For this purpose,
we include incentive stock options granted under the incentive plan as
well as under any other stock plans that our affiliates or we maintain.
We then determine the aggregate fair market value of the stock as of the
grant date of the option. Taking the options into account in the order
in which they were granted, we treat only the options covering the first
$100,000 worth of stock as incentive stock options. We treat any options
covering stock in excess of $100,000 as nonstatutory stock options.
Option Terms. The board may grant incentive stock options with an exercise
price of 100% or more of the fair market value of a share of our common stock
on the grant date. The exercise price of nonstatutory
49
stock options may be 85% or more of fair market value. If the value of our
shares declines thereafter, the board may offer optionholders the opportunity
to replace their outstanding higher-priced options with new lower-priced
options. To the extent required by Section 162(m) of the Internal Revenue Code,
the old repriced option is deemed to be canceled and a new option granted, but
both options will be counted against the Section 162(m) limit discussed above.
The maximum option term is 10 years. Subject to this limitation, the board
may provide for exercise periods of any length in individual option grants.
However, generally an option terminates three months after the optionholder's
service to our affiliates and to us terminates. If this termination is due to
the optionholder's disability, the exercise period generally is extended to 12
months. If this termination is due to the optionholder's death or if the
optionholder dies within three months after his or her service terminates, the
exercise period generally is extended to 18 months following the optionholder's
death.
The board may provide for the transferability of nonstatutory stock options
but not incentive stock options. However, the optionholder may designate a
beneficiary to exercise either type of option following the optionholder's
death. If the optionholder does not designate a beneficiary, the optionholder's
option rights will pass by his or her will or by the laws of descent and
distribution.
Terms of Other Stock Awards. The board determines the purchase price of
other stock awards. However, the board may award stock bonuses in consideration
of past services without a purchase payment. Shares that we sell or award under
the incentive plan may, but need not be, restricted and subject to a repurchase
option in our favor in accordance with a vesting schedule that the board
determines. The board, however, may accelerate the vesting of the restricted
stock.
Other Provisions. Transactions not involving our receipt of consideration,
including a merger, consolidation, reorganization, stock dividend, and stock
split, may change the class and number of shares subject to the incentive plan
and to outstanding awards. In that event, the board will appropriately adjust
the incentive plan as to the class and the maximum number of shares subject to
the incentive plan, to the cap on the number of shares available for incentive
stock options, and to the Section 162(m) limit. It also will adjust outstanding
awards as to the class, number of shares and price per share subject to the
awards.
If we dissolve or liquidate, then outstanding stock awards will terminate
immediately prior to this event. However, we treat outstanding stock awards
differently in the following situations:
. a sale of substantially all of our assets;
. a merger or consolidation in which we are not the surviving corporation
(other than a merger or consolidation in which stockholders immediately
before the merger or consolidation have, immediately after the merger or
consolidation, greater stock voting power);
. a reverse merger in which we are the surviving corporation but the
shares of our common stock outstanding immediately preceding the merger
are converted by virtue of the merger into other property, whether in
the form of securities, cash or otherwise (other than a reverse merger
in which stockholders immediately before the merger have, immediately
after the merger, greater stock voting power); or
. any transaction or series of related transactions in which in excess of
50% of our voting power is transferred.
In these situations, the surviving entity will either assume or replace all
outstanding awards under the incentive plan. If it declines to do so, then
generally the vesting and exercisability of the awards will accelerate.
In addition, if a participant's service either is involuntarily terminated
without cause or is voluntarily terminated for good reason within 12 months
after one of the listed transactions, then a portion of vesting of an award
(and, if applicable, the exercisability of the award) will accelerate.
50
Stock Awards Granted. As of January 31, 2000, options to purchase 2,681,540
shares at a weighted average exercise price of $1.19 per share were
outstanding. As of January 31, 2000, we have issued 375,000 shares pursuant to
restricted stock purchase awards under the incentive plan.
Plan Termination. The incentive plan will terminate in 2010 unless the board
terminates it sooner.
2000 Employee Stock Purchase Plan
On February 15, 2000, the board adopted, subject to stockholder approval,
the 2000 Employee Stock Purchase Plan, authorizing the issuance of 600,000
shares of common stock pursuant to purchase rights granted to our employees or
to employees of any affiliate of ours. The Purchase Plan is intended to qualify
as an employee stock purchase plan within the meaning of Section 423 of the
Code. As of the date hereof, no shares of common stock had been purchased under
the Purchase Plan. The share reserve for the plan is scheduled to increase each
January 1 during the term of the Purchase Plan by 3% of the lesser of the total
number of shares of our common stock outstanding on:
. such January 1, or
. the effective date of this offering.
The Purchase Plan is administered by the Board, but such administration may
be delegated to the compensation committee. The Purchase Plan provides a means
by which employees may purchase our common stock through payroll deductions.
The Purchase Plan is implemented by offerings of rights to eligible employees.
Generally, all regular employees, including executive officers, who work at
least 20 hours per week and are customarily employed by us or by an affiliate
of ours for at least five months per calendar year may participate in the
Purchase Plan and may authorize payroll deductions of up to 15% of their
earnings for the purchase of stock under the Purchase Plan. Under the plan, we
may specify offerings with a duration of not more than 27 months, and may
specify shorter purchase periods within each offering. The first offering will
begin on the effective date of this offering and be approximately 26 months in
duration with purchases occurring every six months. Unless otherwise determined
by the Board, common stock is purchased for accounts of employees participating
in the Purchase Plan at a price per share equal to the lower of:
. 85% of the fair market value of a share of our common stock on the date
of commencement of participation in this offering; or
. 85% of the fair market value of a share of our common stock on the date
of purchase.
Eligible employees may be granted rights only if the rights, together with
any other rights granted under employee stock purchase plans, do not permit
such employees' rights to purchase stock to accrue at a rate which exceeds
$25,000 of the fair market value of such stock for each calendar year in which
such rights are outstanding. No employee is eligible for the grant of any
rights under the Purchase Plan if immediately after such rights are granted,
such employee has voting power over 5% or more of our outstanding capital stock
(measured by vote or value).
51
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Stock option grants and stock issuances under our executive compensation
plan to our executive officers and directors are described in this prospectus
under the heading "Management--Compensation of Directors and--Executive
Compensation."
Purchases of Capital Stock
From April 1997 through December 1999, the following executive officers,
directors and holders of more than 5% of our voting securities purchased
securities in the amounts, on an as converted to common stock basis, and as of
the dates shown.
Series A Series B Series C Series D
Common Preferred Preferred Preferred Preferred
Purchaser Stock Stock (1) Stock Stock Stock
--------- ---------- ---------- ----------- ---------- ------------
Directors and Executive
Officers
Paul A. Berberian (2)... 30,000 2,970,000 -- 40,000 --
James M. LeJeal......... 20,000 1,980,000 -- -- --
Todd Vernon............. -- 75,000 -- -- --
Byron R. Chrisman (3)... 250,000 -- -- -- 100,000
Carol deB. Whitaker
(4).................... -- -- -- -- 17,000
5% or Greater
Shareholders -- -- -- -- --
Centennial Ventures,
(5).................... -- -- 1,442,307 3,846,154 6,550,000
SOFTBANK Technology
Ventures (6)........... -- -- 480,769 2,884,616 4,658,334
Highland Capital
Partners III Limited
Partners (7)........... -- -- -- 2,884,614 833,000
Intel Corporation....... -- -- -- -- 3,666,667
Pequot Private Equity
Fund II, L.P........... -- -- -- -- 4,666,667
Price per share......... $ 0.10 $ 0.10 $ 0.52 $ 1.04 $ 3.00
Date(s) of purchase..... 4/97, 5/97 4/97, 5/97 9/97, 10/97 5/98, 6/98 11/99, 12/99
(1) The Series A preferred stock was issued at the closing of the Series B
preferred financing upon the terms of convertible promissory notes issued
on the dates shown.
(2) Includes shares of Series B preferred stock purchased by the Berberian
Family Trust, Ani Berberian and Lori Pelantay.
(3) Includes shares of common stock purchased by BMC Properties, LLC of which
Mr. Chrisman is a managing member. Mr. Chrisman is a former member of our
board of directors.
(4) Includes shares of common stock purchased by Whitco & Company, of which Ms.
Whitaker, one of our directors, is the founder and president.
(5) Includes shares purchased by the following entities: Centennial Fund V,
L.P., Centennial Entrepreneurs Fund V, L.P., Centennial Entrepreneurs Fund
VI, L.P., Centennial Fund VI, L.P., and Centennial Holdings I, LLC. Mr.
Parsons, one of our directors, is a general partner of certain Centennial
Ventures entities.
(6) Includes shares purchased by the following entities affiliated with
SOFTBANK Technology Ventures: SOFTBANK Technology Ventures IV, L.P.,
SOFTBANK Technology Ventures V, L.P., SOFTBANK Technology Ventures Advisors
Fund V, L.P., SOFTBANK Technology Ventures Entre Fund V, L.P. and SOFTBANK
Technology Advisors Fund, L.P. Mr. Feld, one of our directors, is a
managing director of SOFTBANK Technology Ventures.
(7) Includes shares purchased by Highland Entrepreneurs' Fund Limited Partners.
52
We have entered into an amended and restated stockholders' agreement with
each of the purchasers of preferred stock shown above. This agreement provides
that these and other stockholders will have registration rights with respect to
their shares of common stock issuable upon conversion of their preferred stock
upon the consummation of this offering. Please see "Description of Capital
Stock--Registration Rights" for a more detailed discussion of these rights.
Bridge Loans
On March 31, 1998, we borrowed $250,000 from certain Centennial Ventures
entities and $250,000 from affiliates of SOFTBANK Technology Ventures under the
terms of convertible promissory notes. The promissory notes accrued interest at
a rate of 10% per annum and converted into an aggregate of 487,355 shares of
our Series C Preferred Stock on May 27, 1998. In connection with our issuance
of the convertible promissory notes, we issued warrants to purchase an
aggregate of 12,018 shares of our Series C preferred to these entities. These
warrants have an exercise price of $1.04 and are currently outstanding. Mr.
Parsons, one of our directors, is a general partner of certain Centennial
Ventures entities and Mr. Feld, another of our directors, is a managing
director of SOFTBANK Technology Ventures.
Leases
In March 1997, we entered into a contract with BMC Properties, LLC for the
lease of 4,295 square feet of office space at 5777 Central Avenue, Boulder,
Colorado 80301. This lease commenced in June 1997 and expires in May 2002. In
1997, 1998 and 1999, we paid an aggregate of $54,908, $103,635 and $118,273 to
BMC Properties, LLC and expect to pay an aggregate of $111,108 in 2000,
$111,108 in 2001 and $46,295 in 2002. Byron Chrisman, a former director of
ours, is a managing member of BMC Properties LLC.
In June 1999, we entered into a contract with BLC Properties, LLC for the
lease of our principal executive offices at 1157 Century Drive, Louisville,
Colorado 80027. This lease commenced in October 1999 and has a term of 10
years. Under this lease, we have agreed to pay rent of $50,110 per month
subject to an annual adjustment for inflation based on the consumer price
index. We also pay the operating expenses related to this building which vary
on a monthly basis. Messrs. Berberian, Chrisman, and LeJeal are members of BLC
Properties, LLC.
We believe that each of the transactions described above was carried out on
terms that were no less favorable to us than those that would have been
obtained from unaffiliated third parties. Any future transactions between us
and any of our directors, officers or principal stockholders will be on terms
no less favorable to us than could be obtained from unaffiliated third parties
and will be approved by a majority of the independent and disinterested members
of the board of directors.
For information concerning indemnification of directors and officers see
"Description of Securities--Limitation of Liability and Indemnification
Matters."
53
PRINCIPAL STOCKHOLDERS
The following table sets forth information with respect to beneficial
ownership of our common stock as of January 31, 2000 for:
. each person, or group of affiliated persons, known to us to own
beneficially more than five percent of the common stock;
. each of our directors and named executive officers; and
. all of our directors and executive officers as a group.
The information has been adjusted to reflect the sale of the common stock in
this offering, the automatic conversion of all outstanding shares of preferred
stock into common stock upon this offering and assuming no exercise of the
underwriters' over-allotment option.
In accordance with the rules of the Securities and Exchange Commission, the
following table gives effect to the shares of common stock that could be issued
upon the exercise of outstanding options within 60 days of January 31, 2000. In
computing the number of shares beneficially owned by a person, shares of common
stock that are subject to our right of repurchase at the original exercise
price paid per share, or such shares that are subject to exercisable but
unvested options, are not included. Unvested options are immediately
exercisable upon grant, provided that upon the optionee's cessation of service,
any unvested shares are subject to repurchase by us at the original exercise
price per share. Unless otherwise noted in the footnotes to the table and
subject to community property laws where applicable, the following individuals
have sole voting and investment control with respect to the shares beneficially
owned by them.
The address of each individual listed in the table is Evoke Incorporated
1157 Century Drive, Louisville, Colorado 80027. As of January 31, 2000, we had
129 stockholders of record and 51,519,764 shares of our common stock and
preferred stock convertible into common stock outstanding. An asterisk
indicates ownership of less than one percent.
Percent of Shares
Beneficially Owned
Number of Shares ------------------------------
Beneficial Owners Beneficially Owned Before Offering After Offering
----------------- ------------------ --------------- --------------
Paul A. Berberian (1)....... 3,040,000 5.9
James M. LeJeal (2)......... 2,000,000 3.9
Todd Vernon (3)............. 266,667 *
Centennial Fund V, L.P.
(4)........................ 6,468,970 12.6
Centennial Fund VI, L.P.
(5)........................ 4,742,423 9.2
SOFTBANK Technology Ventures
IV L.P. (6)................ 8,029,728 15.6
Highland Capital Partners
IIILimited Partners (7).... 3,717,947 7.2
Intel Corporation (8)....... 3,666,667 7.1
Pequot Private Equity Fund
II, L.P. (9)............... 4,666,667 9.1
Donald Hutchison (10)....... 150,000 *
Bradley A. Feld (11)........ 8,058,617 15.6
Donald H. Parsons, Jr.
(12)....................... 11,872,248 23.0
Carol deB. Whitaker (13).... 110,333 *
All executive officer and
directors
as a group (7 persons)
(14)....................... 25,497,865 49.5
(1) Includes 28,000 shares held by the Berberian Family Trust, 8,000 shares
held by Ani Berberian and 8.0000 shares held by Lini Pelantay. Excludes
200,000 shares that are subject to options that are unvested but
exercisable within 60 days of January 31, 2000.
(2) Excludes 200,000 shares that are subject to options that are unvested but
exercisable within 60 days of January 31, 2000.
(3) Includes 191,667 shares subject to options exercisable within 60 days of
January 31, 2000. Excludes 108,333 shares that are subject to options that
are unvested but exercisable within 60 days of January 31, 2000.
54
(4) Includes 5,829 shares subject to a warrant held by Centennial Fund V,
L.P.. Excludes 158,653 shares and 180 shares subject to a warrant held by
Centennial Entrepreneurs Fund V, L.P., 4,742,423 shares held by Centennial
Fund VI, L.P., 124,801 shares held by Centennial Entrepreneurs Fund VI,
L.P., 99,841 shares held by Centennial Holdings I, LLC and 249,602 shares
held by Centennial Strategic Partners VI, L.P. Centennial Fund V has no
voting or investment power over the excluded shares and disclaims
beneficial ownership of them. Centennial Entrepreneurs Fund V, LP
disclaims beneficial ownership of the shares held by Centennial Fund V.
Centennial Holdings V, LLC is the sole general partner of Centennial Fund
V and Centennial Entrepreneurs Fund V, and, accordingly, may be deemed to
be the indirect beneficial owner of the shares of common stock they hold
by virtue of its authority to make decisions regarding the voting and
disposition of such shares. Mr. Parsons, one of our directors, is one of
five general partners of Centennial Holdings V, has no voting or
investment over any of these shares and disclaims beneficial ownership of
these shares except to the extent of his pecuniary interest therein. The
address of Centennial Fund V is 1428 Fifteenth Street, Denver, Colorado
80202.
(5) Excludes 6,463,141 shares and 5,829 shares subject to a warrant held by
Centennial Fund V, L.P. and 158,653 shares and 180 shares subject to a
warrant held by Centennial Entrepreneurs Fund V, L.P., 124,801 shares held
by Centennial Entrepreneurs Fund VI, L.P. and 99,841 shares held by
Centennial Holdings I, LLC. Centennial Fund VI has no voting or investment
power over the excluded shares and disclaims beneficial ownership of them.
Centennial Entrepreneurs Fund VI, LP disclaims beneficial ownership of the
shares held by Centennial Fund VI. Centennial Holdings VI, LLC is the sole
general partner of Centennial Fund VI and Centennial Entrepreneurs Fund
VI, and, accordingly, may be deemed to be the indirect beneficial owner of
the shares of common stock they hold by virtue of its authority to make
decisions regarding the voting and disposition of such shares. Mr.
Parsons, one of our directors, is one of five general partners of
Centennial Holdings VI, has no voting or investment over any of these
shares and disclaims beneficial ownership of these shares except to the
extent of his pecuniary interest therein. The address of Centennial Fund
VI is 1428 Fifteenth Street, Denver, Colorado 80202.
(6) Consists of 5,583,457 shares and 5,889 shares subject to a warrant held by
SOFTBANK Technology Ventures IV, L.P., 2,228,314 shares held by SOFTBANK
Technology Ventures V, L.P., 60,791 shares held by SOFTBANK Technology
Ventures Advisors Fund V, L.P., 40,602 shares held by SOFTBANK Technology
Ventures Entrepreneurs Fund V, L.P. and 111,215 shares and 120 shares
subject to a warrant held by SOFTBANK Technology Advisors Fund L.P. The
address of SOFTBANK Technology Ventures IV L.P. is 200 W. Evelyn Avenue,
Suite 200, Mountain View, California 94043.
(7) Includes 148,717 shares held by Highland Entrepreneurs' Fund Limited
Partners. The address of Highland Capital Partners III Limited Partners is
Two International Place, Boston, Massachusetts 02110.
(8) The address of Intel Corporation is 2200 Mission College Boulevard, Santa
Clara, California 95052.
(9) The address of Pequot Private Equity Fund II, L.P. is 500 Nyala Farm Road,
Westport, Connecticut 06880.
(10) Excludes 40,000 shares that are subject to options that are unvested but
exercisable within 60 days of January 31, 2000.
(11) Includes 5,583,457 shares and 5,889 shares subject to a warrant held by
SOFTBANK Technology Ventures IV, L.P., 2,228,314 shares held by SOFTBANK
Technology Ventures V, L.P., 60,791 shares held by SOFTBANK Technology
Ventures Advisors Fund V, L.P., 40,602 shares held by SOFTBANK Technology
Ventures Entrepreneurs Fund V, L.P. and 111,215 shares and 120 shares
subject to a warrant held by SOFTBANK Technology Advisors Fund L.P. Mr.
Feld, one of our directors, is a managing director of SOFTBANK Technology
Ventures and disclaims beneficial ownership of the shares held by these
entities except to the extent of his pecuniary interest therein. Also
includes 28,889 shares subject to options exercisable within 60 days of
January 31, 2000. Excludes 11,111 shares that are subject to options that
are unvested but exercisable within 60 days of January 31, 2000.
(12) Includes 6,463,141 shares and 5,829 shares subject to a warrant held by
Centennial Fund V, L.P., 158,653 shares and 180 shares subject to a
warrant held by Centennial Entrepreneurs Fund V, L.P., 4,992,025 shares
held by Centennial Fund VI, L.P., 124,801 shares held by Centennial
Entrepreneurs Fund VI, L.P. and 99,841 shares held by Centennial Holdings
I, LLC and 249,602 shares held by Centennial Strategic Partners VI, L.P.
Mr. Parsons, one of our directors, is a general partner or managing
principal of certain Centennial Ventures entities, but disclaims
beneficial ownership of the shares held by these entities except to the
extent of his indirect pecuniary interest therein. Also includes 28,889
shares subject to options exercisable within 60 days of January 31, 2000.
Excludes 11,111 shares that are subject to options that are unvested but
exercisable within 60 days of January 31, 2000. Mr. Parsons holds such
options for the benefit of certain Centennial Ventures entities.
(13) Includes 67,000 shares held by Whitco & Company and 43,333 shares subject
to options exercisable within 60 days of January 31, 2000. Excludes 46,667
shares that are subject to options that are unvested but exercisable
within 60 days of January 31, 2000.
(14) Includes shares described in the notes above, as applicable.
55
DESCRIPTION OF CAPITAL STOCK
The following description of our securities reflects changes that will be
made to our certificate of incorporation and bylaws upon the closing of this
offering. We have filed our restated certificate of incorporation and amended
and restated bylaws as exhibits to the registration statement of which this
prospectus is a part. Upon the effectiveness of this offering, our authorized
capital stock will consist of 200 million shares of common stock, par value
$.001 per share, and 10 million shares of preferred stock, par value $.01 per
share.
Common Stock
As of January 31, 2000, there are 51,519,764 shares of common stock
outstanding assuming the conversion of all outstanding shares of preferred
stock and held of record by 129 stockholders. Upon the closing of this
offering, there will be shares of common stock outstanding assuming
no exercise of the underwriters' over-allotment option.
Holders of common stock are entitled to one vote for each share on all
matters submitted to a vote of stockholders. Holders of common stock are not
entitled to cumulative voting rights in the election of directors, which means
that the holders of a majority of the outstanding common stock voting for the
election of directors can elect all directors then being elected. Accordingly,
minority stockholders will not be able to elect directors on the basis of their
votes alone. Subject to preferences that may be applicable to any then-
outstanding shares of preferred stock, holders of common stock are entitled to
receive ratably dividends as may be declared by our board of directors. In the
event we liquidate, dissolve or wind up our affairs, holders of common stock
are entitled to share ratably in all of our assets remaining after payment of
liabilities and the liquidation preferences of any then-outstanding shares of
preferred stock. Holders of common stock have no preemptive, subscription,
redemption or conversion rights.
Preferred Stock
Our board of directors is authorized, without further stockholder approval,
to issue up to an aggregate of 10,000,000 shares of preferred stock in one or
more series. The board of directors may fix or alter the designations,
preferences, rights and any qualifications, limitations or restrictions of the
shares of each such series, and the dividend rights, dividend rates, conversion
rights, voting rights, terms of redemption, redemption price or prices and
liquidation preferences. The issuance of preferred stock could:
. adversely affect the voting power of holders of common stock;
. adversely affect the likelihood that the holders of common stock will
receive dividend payments and payments upon liquidation; and
. delay, defer or prevent a change in control.
We have no present plans to issue any shares of preferred stock.
Warrants
As of January 31, 2000, we had outstanding warrants to purchase an aggregate
of 157,788 shares of common stock at weighted average exercise price of $1.72
per share to certain principal stockholders and certain other investors.
Warrants to purchase 12,018 shares of our common stock expire upon the closing
of this offering, warrants to purchase 86,538 shares expire on the date five
years from the closing of this offering, warrants to purchase 40,000 shares
expire on January 18, 2001, warrants to purchase 15,026 shares expire on
September 29, 2004 and the remaining warrants to purchase 4,206 shares expire
on May 20, 2008. The warrants contain anti-dilution provisions providing for
adjustments of the exercise price and the number of shares of common stock
underlying the warrants upon the occurrence of any recapitalization,
reclassification, stock dividend, stock split, stock combination or similar
transaction. 117,788 shares of common stock issuable upon exercise of the
warrants carry registration rights, as discussed below.
56
Registration Rights
After this offering, the holders of at least 33% of 45,450,248 shares of
common stock (including shares issuable upon exercise of certain warrants) have
the right to demand that we register their shares, subject to certain
limitations, up to four times under the Securities Act of 1933 on Form S-1 or
any similar form, and an unlimited number of times on Form S-3 or any similar
form. In addition, holders of 50,407,460 shares of our common stock are
entitled to piggyback registration rights with respect to any public offering
registration statement we file under the Securities Act following this offering
for our own account or for the account of holders exercising demand
registration rights, with certain limitations. We are generally required to
bear all of the expenses of these registrations, except underwriting discounts
and commissions. Registration of any of the shares of common stock entitled to
these registration rights would result in such shares becoming freely tradable
without restriction under the Securities Act. Upon completion of this offering,
the registration rights with respect to the shares held by any stockholder will
terminate if the stockholder holds less than 5% of the then-outstanding shares
of common stock and the stockholder's shares are entitled to be resold without
restriction under Rule 144 promulgated under the Securities Act.
Anti-Takeover Effects of Certain Provisions of Delaware Law and Our
Certificate of Incorporation and Bylaws
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law, which generally prohibits a publicly-held Delaware corporation
from engaging in a "business combination" with an "interested stockholder" for
a period of three years after the date of the transaction in which the person
became an interested stockholder, unless the interested stockholder attained
that status with the approval of the corporation's board of directors or unless
the business combination is approved in a prescribed manner. "Business
combinations" include mergers, asset sales and other transactions resulting in
a financial benefit to the interested stockholder. With certain exceptions, an
"interested stockholder" is a person who, together with affiliates and
associates, owns, or within three years did own, fifteen percent (15%) or more
of a corporation's voting stock. This statute could prohibit or delay the
accomplishment of mergers or other takeover or change-in-control attempts and,
accordingly, may discourage attempts to acquire us.
The following provisions of our restated certificate of incorporation and
amended and restated bylaws that will become effective upon the closing of this
offering may have an anti-takeover effect and may delay or prevent a tender
offer or takeover attempt that a stockholder might consider to be in its best
interest, including attempts that might result in a premium over the market
price for the common stock:
Classified Board of Directors. Our board of directors will be divided into
three classes. The directors in class I will hold office until the first annual
meeting of stockholders following this offering, the directors in class II will
hold office until the second annual meeting of stockholders following this
offering, and the directors in class III will hold office until the third
annual meeting of stockholders following this offering. After each such
election, the directors in that class will serve for terms of three years. The
classification system of electing directors may tend to discourage a third
party from making a tender offer or otherwise attempting to obtain control of
us and may maintain the incumbency of the board of directors, since such
classification generally increases the difficulty of replacing a majority of
the directors.
Board of Director Vacancies. The board of directors is authorized to fill
vacant directorships and to increase the size of the board of directors. This
may deter a stockholder from removing incumbent directors and simultaneously
gaining control of the board of directors by filling the resulting vacancies
with its own nominees.
57
Stockholder Action; Special Meetings of Stockholders. Our stockholders will
not be permitted to take action by written consent, but only at duly called
annual or special meetings of stockholders. In addition, special meetings of
stockholders may be called only by the chairman of the board, the chief
executive officer or a majority of the board of directors.
Advance Notice Requirements for Stockholder Proposals and Director
Nominations. Stockholders seeking to bring business before an annual meeting of
stockholders, or to nominate candidates for election as directors at an annual
meeting of stockholders, must deliver a written notice to our principal
executive offices within a prescribed time period. Our amended and restated
bylaws also set forth specific requirements as to the form and content of a
stockholder's notice. These provisions may preclude stockholders from bringing
matters before an annual meeting of stockholders or from making nominations for
the election of directors at an annual meeting of stockholders.
Authorized but Unissued Shares. The authorized but unissued shares of common
stock and preferred stock are available for future issuance without stockholder
approval, subject to limitations imposed by the Nasdaq National Market. We may
use these additional shares for a variety of corporate purposes, including
future public offerings to raise additional capital, acquisitions and employee
benefit plans. The existence of authorized but unissued and unreserved common
stock and preferred stock could render more difficult or discourage an attempt
to obtain control of us by means of a proxy contest, tender offer, merger or
otherwise.
Limitation of Liability and Indemnification
Our bylaws provide that we will indemnify our directors and executive
officers and may indemnify our other officers, employees and agents to the
fullest extent permitted by Delaware law. In addition, our certificate of
incorporation provides that, to the fullest extent permitted by Delaware law,
our directors will not be liable for monetary damages for breach of the
directors' fiduciary duty to us and our stockholders. This provision of the
certificate of incorporation does not eliminate the duty of care. In
appropriate circumstances equitable remedies such as an injunction or other
forms of non-monetary relief are available under Delaware law. This provision
also does not affect a director's responsibilities under any other laws, such
as the federal securities laws.
Each director will continue to be subject to liability for:
. breach of the director's duty of loyalty to Evoke and its
stockholders;
. acts or omissions not in good faith or involving intentional
misconduct;
. knowing violations of law;
. any transaction from which the director derived an improper personal
benefit;
. improper transactions between the director and Evoke; and
. improper distributions to stockholders and improper loans to
directors and officers.
We intend to enter into indemnity agreements with each of our directors and
executive officers under which each director and executive officer will be
indemnified against expenses and losses incurred for claims brought against
them by reason of their being a director or executive officer of Evoke. Our
board of directors has authorized the officers of Evoke to investigate and
obtain directors' and officers' liability insurance.
There is no pending litigation or proceeding involving a director or officer
of Evoke as to which indemnification is being sought. We are not aware of any
pending or threatened litigation that may result in claims for indemnification
by any director or officer.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to directors, officers and control
persons of Evoke pursuant to the foregoing provisions, or otherwise, Evoke has
been advised that in the opinion of the SEC, such indemnification is against
public policy as expressed in the Securities Act of 1933, and is, therefore,
unenforceable.
58
Listing
We have applied for listing of the common stock on the Nasdaq National
Market under the trading symbol "EVOK."
Transfer Agent and Registrar
We have appointed to serve as the transfer agent and
registrar for the common stock.
59
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common
stock. We cannot predict what effect, if any, market sales of shares or the
availability of shares for sale will have on the market price of our common
stock prevailing from time to time. Nevertheless, sales of substantial amounts
of common stock in the public market, or the perception that such sales could
occur, could adversely affect the market price of the common stock and could
impair our future ability to raise capital through the sale of our equity
securities.
Upon the closing of this offering, we will have a total of shares
of common stock outstanding, assuming no exercise of the underwriters' over-
allotment option and no exercise of options or warrants. Of the outstanding
shares, the shares being sold in this offering will be freely
tradable, except that any shares held by our "affiliates" may only be sold in
compliance with the limitations described below. The remaining
shares of common stock will be "restricted securities" that may be sold in the
public market only if they are registered under the Securities Act or if they
qualify for an exemption from registration under Rule 144, 144(k) or 701
promulgated under the Securities Act.
Subject to the lock-up agreements described below and the provisions of
Rules 144, 144(k) and 701, additional shares will become available for sale in
the public market as follows:
Number of Shares Date
---------------- ----
Upon the date of this prospectus (shares eligible for resale under Rule 144(k)
and not subject to lock-up agreements)
90 days following the date of this prospectus (shares eligible for resale under
Rules 144 and 701 and not subject to lock-up agreements)
180 days following the date of this prospectus (lock-up agreements released)
In general, under Rule 144, a person (or persons whose shares are required
to be aggregated), including an affiliate, who has beneficially owned shares
for at least one year is entitled to sell, within any three-month period
commencing 90 days after the date of this prospectus, a number of shares that
does not exceed the greater of (i) 1% of the then-outstanding shares of common
stock (approximately shares immediately after this offering) or (ii)
the average weekly trading volume of the common stock during the four calendar
weeks preceding the date on which notice of that sale is filed. In addition, a
person who is not considered an affiliate of ours at any time during the 90
days preceding a sale and who has beneficially owned the shares proposed to be
sold for at least two years is entitled to sell such shares under Rule 144(k)
without regard to the volume limitations described above.
In addition, following the closing of this offering, we intend to file a
registration statement to register for resale the shares of common
stock available for issuance under our stock plans. Accordingly, shares issued
under those plans will become eligible for resale in the public market from
time to time, subject to the lock-up agreements described below and, in the
case of our affiliates, the volume limitations of Rule 144 described above. As
of the date of this prospectus, options and purchase rights to acquire a total
of shares of common stock are outstanding under our stock plans, of
which are vested and currently exercisable.
Our directors, officers and substantially all of our stockholders have
agreed that they will not sell any shares of common stock without the prior
written consent of Salomon Smith Barney for a period of 180 days from the date
of this prospectus. Please refer to our discussion in "Underwriting" for
further discussion of these agreements.
We have agreed not to sell or otherwise dispose of any shares of common
stock during the 180-day period following the date of this prospectus, other
than the grant of options and purchase rights under our stock plans and the
issuance of common stock pursuant thereto.
Following this offering, certain of our stockholders will have rights to
have their shares of common stock registered for resale under the Securities
Act. Please refer to our discussion in "Description of Securities--Registration
Rights" for further discussion of these registration rights.
60
UNITED STATES TAX CONSEQUENCES TO
NON-UNITED STATES HOLDERS
The following is a general discussion of the material United States federal
income and estate tax consequences of the ownership and disposition of our
common stock applicable to Non-United States Holders of this common stock. For
the purpose of this discussion, a Non-United States Holder is any holder that
for U.S. federal income tax purposes is:
. an individual that is a non-resident alien;
. a corporation or other entity taxable as a corporation created or
organized under non-U.S. law; or
. an estate or trust that is not taxable in the United States on its
worldwide income.
If a partnership holds our common stock, the tax treatment of each partner will
generally depend upon the status of the partner and upon the activities of the
partnership. If you are a partner of a partnership holding our common stock,
you should consult your tax advisor.
This discussion does not address all aspects of U.S. federal income and
estate taxation that may be relevant in light of your particular facts and
circumstances, such as being a U.S. expatriate, and does not address any tax
consequences arising under the laws of any state, local or non-U.S. taxing
jurisdiction. Furthermore, the following discussion is based on current
provisions of the Internal Revenue Code of 1986, as amended, and administrative
and judicial interpretations thereof, all as in effect on the date hereof, and
all of which are subject to change, possibly with retroactive effect. We have
not and will not seek a ruling from the Internal Revenue Service with respect
to the U.S. federal income and estate tax consequences described below, and as
a result, there can be no assurance that the Internal Revenue Service will not
disagree with or challenge any of the conclusions set forth in this discussion.
Dividends
Any dividends we pay to a Non-United States Holder generally will be subject
to U.S. withholding tax either at a rate of 30% of the gross amount of the
dividends or such lower rate as may be specified by an applicable tax treaty.
Dividends received by a Non-United States Holder that are effectively connected
with a U.S. trade or business conducted by the Non-United States Holder (or, if
a tax treaty applies, are attributable to a U.S. permanent establishment of the
Non-United States Holder) are exempt from such withholding tax, provided that
the Non-United States Holder furnishes to us or our paying agent a duly
completed Form 4224 or W-8ECI (or substitute form). However, those effectively
connected dividends, net of certain deductions and credits, are taxed at the
same graduated rates applicable to U.S. persons.
In addition to the graduated tax described above, dividends received by a
corporate Non-United States Holder that are effectively connected with a U.S.
trade or business of such Non-United States Holder may also be subject to a
branch profits tax at a rate of 30% or such lower rate as may be specified by
an applicable tax treaty.
A Non-United States Holder of our common stock that is eligible for a
reduced rate of withholding tax pursuant to a tax treaty must furnish to us or
our paying agent a duly completed Form 1001 or Form W-8BEN (or substitute form)
certifying to its qualification for such rate.
Gain on Disposition of Common Stock
A Non-United States Holder generally will not be subject to U.S. federal
income tax on any gain realized upon the sale or other disposition of our
common stock unless:
. the gain is effectively connected with a U.S. trade or business of the
Non-United States Holder or, if a tax treaty applies, is attributable to
a U.S. permanent establishment maintained by the Non-United States
Holder (which gain, in the case of a corporate Non-United States Holder,
must also be taken into account for branch profits tax purposes);
61
. the Non-United States Holder is an individual who holds his or her
common stock as a capital asset (generally, an asset held for investment
purposes) and is present in the United States for a period or periods
aggregating 183 days or more during the calendar year in which the sale
or disposition occurs and certain other conditions are met; or
. we are or have been a "United States real property holding corporation"
for United States federal income tax purposes at any time within the
shorter of the five-year period preceding the disposition or the
holder's holding period for its common stock. We believe that we are not
currently and will not become a "United States real property holding
corporation" for United States federal income tax purposes.
Backup Withholding and Information Reporting
Generally, we must report annually to the Internal Revenue Service the
amount of dividends paid, the name and address of the recipient, and the
amount, if any, of tax withheld. A similar report is sent to the holder.
Pursuant to tax treaties or other agreements, the Internal Revenue Service may
make its reports available to tax authorities in the recipient's country of
residence.
Dividends paid to a Non-United States Holder at an address within the U.S.
may be subject to backup withholding at a rate of 31% if the Non-United States
Holder fails to establish that it is entitled to an exemption or to provide a
correct taxpayer identification number and other information to the payer.
Backup withholding will generally not apply to dividends paid to Non-United
States Holders at an address outside the U.S. on or prior to December 31, 2000,
unless the payer has knowledge that the payee is a United States person. Under
new Treasury Regulations regarding withholding and information reporting,
payment of dividends to Non-United States Holders at an address outside the
U.S. after December 31, 2000 may be subject to backup withholding at a rate of
31% unless such Non-United States Holder satisfies various certification
requirements.
Under current Treasury Regulations, the payment of proceeds from the
disposition of common stock to or through the U.S. office of a broker is
subject to information reporting and backup withholding at a rate of 31% unless
the holder certifies its non-U.S. status under penalties of perjury or
otherwise establishes an exemption. Generally, the payment of proceeds from the
disposition by a Non-United States Holder of common stock outside the U.S. to
or through a foreign office of a broker will not be subject to backup
withholding but will be subject to information reporting requirements if the
broker is:
. a U.S. person;
. a "controlled foreign corporation" for U.S. federal income tax purposes;
. a foreign person 50% or more of whose gross income for certain periods
is from the conduct of a U.S. trade or business; or
. after December 31, 2000, a foreign partnership with certain connections
to the United States,
unless the broker has documentary evidence in its files of the holder's non-
U.S. status and certain other conditions are met, or the holder otherwise
establishes an exemption. Neither backup withholding nor information reporting
generally will apply to a payment of proceeds from the disposition of common
stock by or through a foreign office of a foreign broker not subject to the
preceding sentence.
In general, the final Treasury Regulations, described above, do not
significantly alter the substantive withholding and information reporting
requirements but would alter the procedures for claiming benefits of an income
tax treaty and change the certifications procedures relating to the receipt by
intermediaries of payments on behalf of the beneficial owner of shares of
common stock. Non-United States Holders should consult their tax advisors
regarding the effect, if any, of those final Treasury Regulations on an
investment in common stock. Those final Treasury Regulations are generally
effective for payments made after December 31, 2000.
62
Backup withholding is not an additional tax. Rather, the regular tax
liability of persons subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained, provided that the required information is furnished to
the Internal Revenue Service.
Estate Tax
An individual Non-United States Holder who owns common stock at the time of
his or her death or has made certain lifetime transfer of an interest in common
stock will be required to include the value of that common stock in such
holder's gross estate for United States federal estate tax purposes, unless an
applicable estate tax treaty provides otherwise.
The foregoing discussion is a summary of the principal federal income and
estate tax consequences of the ownership, sale or other disposition of common
stock by Non-United States Holders. This discussion is not exhaustive, and does
not address the tax consequences of ownership, sale or other disposition for
all types of Non-United States Holders. Accordingly, investors are urged to
consult their own tax advisors with respect to the income tax consequences of
the ownership and disposition of common stock, including the application and
effect of the laws of any state, local, foreign or other taxing jurisdiction.
63
UNDERWRITING
General
Subject to the terms and conditions stated in the underwriting agreement
dated the date of this prospectus, each underwriter named below has severally
agreed to purchase, and we have agreed to sell to each underwriter, the number
of shares set forth opposite the name of that underwriter.
Number
Name of shares
---- ----------
Salomon Smith Barney Inc......................................
FleetBoston Robertson Stephens Inc............................
Thomas Weisel Partners LLC....................................
CIBC World Markets Corp.......................................
-------
Total.......................................................
-------
The underwriting agreement provides that the obligations of the several
underwriters to purchase the shares included in this offering are subject to
approval of particular legal matters by counsel and to other conditions. The
underwriters are obligated to purchase all the shares, other than those covered
by their over-allotment option described below, if they purchase any of the
shares.
The underwriters, for whom Salomon Smith Barney Inc., FleetBoston Robertson
Stephens Inc., Thomas Weisel Partners LLC and CIBC World Markets Corp. are
acting as representatives, propose to offer some of the shares directly to the
public at the public offering price set forth on the cover page of this
prospectus and some of the shares to certain dealers at the public offering
price less a concession not in excess of $ per share. The underwriters may
allow, and such dealers may reallow, a discount not in excess of $ per share
on sales to certain other dealers. If all the shares are not sold at the
initial offering price, the underwriters may change the public offering price
and other selling terms. The representatives have advised us that the
underwriters do not intend to confirm any sales to any accounts over which they
exercise discretionary authority.
We have granted to the underwriters an option, exercisable for 30 days from
the date of this prospectus, to purchase up to additional shares of our
common stock at the public offering price less the underwriting discount. The
underwriters may exercise this option solely for the purpose of covering over-
allotments, if any, in connection with this offering. To the extent this option
is exercised, each underwriter will be obligated, subject to some conditions,
to purchase a number of additional shares approximately proportionate to such
underwriter's initial purchase commitment.
At our request, the underwriters will reserve up to shares of our
common stock to be sold, at the initial public offering price, to our
directors, officers and employees, as well as to some of our customers and
suppliers and individuals associated or affiliated with our directors,
customers and suppliers. This directed share program will be administered by
Salomon Smith Barney Inc. The number of shares of common stock available for
sale to the general public will be reduced to the extent these individuals
purchase any reserved shares. Any reserved shares which are not so purchased
will be offered by the underwriters to the general public on the same basis as
the other shares offered by this prospectus. We have agreed to indemnify the
underwriters against certain liabilities and expenses, including liabilities
under the Securities Act of 1933 in connection with sales of the directed
shares.
We, our officers and directors and holders of most of our stock have agreed
that, for a period of 180 days from the date of this prospectus, we will not,
without the prior written consent of Salomon Smith Barney Inc., dispose of or
hedge, any shares of our common stock or any securities convertible into, or
exercisable or exchangeable for, our common stock. Salomon Smith Barney Inc.,
in its sole discretion, may release any of the securities subject to these
lock-up agreements at any time without notice.
64
Prior to this offering, there has been no public market for our common
stock. Consequently, the initial offering price for the shares was determined
by negotiation among us and the representatives. Among the factors considered
in determining the initial public offering price were:
. our record of operation;
. our current financial condition;
. our future prospects;
. our markets;
. the economic conditions in and future prospects for the industry in which
we compete;
. our management; and
. currently prevailing general conditions in the equity securities markets,
including current market valuations of publicly traded companies
considered comparable to us.
The prices at which the shares will sell in the public market after this
offering may, however, be lower than the price at which they are sold by the
underwriters. Additionally, an active trading market in our common stock may
not develop and continue after this offering.
We have applied to have our common stock included for quotation on the
Nasdaq National Market under the symbol "EVOK".
The following table shows the underwriting discounts and commissions that we
will pay to the underwriters in connection with this offering. These amounts
are shown assuming both no exercise and full exercise of the underwriters'
option to purchase additional shares of common stock to cover overallotments.
Paid by Evoke
-------------------------
No exercise Full exercise
----------- -------------
Per share............................................. $ $
Total................................................. $ $
In connection with this offering Salomon Smith Barney Inc., on behalf of the
underwriters, may purchase and sell shares of common stock in the open market.
These transactions may include over-allotment, syndicate covering transactions
and stabilizing transactions. Over-allotment involves syndicate sales of common
stock in excess of the number of shares to be purchased by the underwriters in
this offering, which creates a syndicate short position. Syndicate covering
transactions involve purchases of the common stock in the open market after the
distribution has been completed in order to cover syndicate short positions.
Stabilizing transactions consist of certain bids for or purchases of common
stock made to prevent or retard a decline in the market price of the shares
while this offering is in progress.
The underwriters may also impose a penalty bid. Penalty bids permit the
underwriters to reclaim a selling concession from a syndicate member when
Salomon Smith Barney Inc., in covering syndicate short positions or making
stabilizing purchases, repurchases shares originally sold by that syndicate
member.
Any of these activities may cause the price of the common stock to be higher
than it would otherwise be in the open market in the absence of such
transactions. Salomon Smith Barney Inc. may effect these transactions on the
Nasdaq National Market or in the over-the-counter market, or otherwise and, if
commenced may discontinue them at any time.
Thomas Weisel Partners LLC, one of the representatives of the underwriters,
was organized and registered as a broker-dealer in December 1998. Since
December 1998, Thomas Weisel Partners has been named as a lead
65
or co-manager on 120 filed public offerings of equity securities, of which 88
have been completed, and has acted as a syndicate member in an additional 57
public offerings of equity securities. Thomas Weisel Partners does not have any
material relationship with us or any of our officers, directors or other
controlling persons, except with respect to its contractual relationship with
us pursuant to the underwriting agreement entered into in connection with this
offering.
We estimate that our total expenses for this offering will be $ .
The representatives or their respective affiliates may in the future perform
various investment banking and advisory services for us from time to time, for
which they will receive customary fees. The representatives may, from time to
time, engage in transactions with and perform services for us in the ordinary
course of business.
We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, or to contribute to
payments the underwriters may be required to make in respect of any of those
liabilities.
LEGAL MATTERS
Cooley Godward LLP, Boulder, Colorado will pass upon the validity of the
shares of common stock offered hereby. Certain legal matters in connection with
the offering will be passed upon for the underwriters by Cravath, Swaine &
Moore, New York, New York.
EXPERTS
Our financial statements as of December 31, 1998 and 1999 and for the period
from inception (April 17, 1997) to December 31, 1997 and for the years ended
December 31, 1998 and 1999, have been included in this prospectus and in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, appearing elsewhere herein, and upon the
authority of that firm as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 (including exhibits, schedules and amendments) under the
Securities Act with respect to the common stock to be sold in this offering.
This prospectus does not contain all of the information in the registration
statement. For further information about us and our common stock, please refer
to the registration statement. Statements contained in this prospectus as to
the contents of any contract, agreement or other document are not necessarily
complete. In each instance, please refer to the copy of that contract,
agreement or document filed as an exhibit to the registration statement.
You may read and copy all or any portion of the registration statement or
any other information we file at the SEC's public reference room at 450 Fifth
Street, N.W., Washington, D.C. 20549. You can request copies of these
documents, upon payment of a duplicating fee, by writing to the SEC. Please
call the SEC at 1-800-SEC-0330 for further information on the operation of the
public reference rooms. Our SEC filings, including the registration statement,
are also available to you on the SEC's web site (http://www.sec.gov).
As a result of this offering, we will become subject to the information and
reporting requirements of the Securities Exchange Act of 1934, as amended. In
accordance with those requirements, we will file periodic reports, proxy
statements and other information with the SEC. You may also inspect these
reports, proxy statements and other information at the offices of Nasdaq
Operations, 1735 K Street, N.W., Washington, D.C. 20006.
We intend to furnish our stockholders with annual reports containing audited
financial statements and with quarterly reports for the first three quarters of
each year containing interim financial information.
66
INDEX TO FINANCIAL STATEMENTS
Page
----
Independent Auditors' Report.............................................. F-2
Balance Sheets as of December 31, 1998 and 1999........................... F-3
Statements of Operations for the period from inception (April 17, 1997) to
December 31, 1997 and the years ended December 31, 1998 and 1999......... F-4
Statements of Stockholders' Deficit for the period from inception (April
17, 1997) to
December 31, 1997 and the years ended December 31, 1998 and 1999......... F-5
Statements of Cash Flows for the period from inception (April 17, 1997) to
December 31, 1997 and the years ended December 31, 1998 and 1999......... F-6
Notes to Financial Statements............................................. F-7
F-1
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Evoke Incorporated:
We have audited the accompanying balance sheets of Evoke Incorporated
(formerly VStream Incorporated) as of December 31, 1998 and 1999, and the
related statements of operations, stockholders' deficit and cash flows for the
period from inception (April 17, 1997) to December 31, 1997 and the years ended
December 31, 1998 and 1999. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Evoke Incorporated as of
December 31, 1998 and 1999, and the results of its operations and its cash
flows for the period from inception (April 17, 1997) to December 31, 1997 and
the years ended December 31, 1998 and 1999 in conformity with generally
accepted accounting principles.
1998 1999
ASSETS ---------- ------------
CURRENT ASSETS:
Cash and cash equivalents........................... $1,221,544 $ 89,234,044
Investment securities............................... 4,950,848 --
Accounts receivable, net of allowance for doubtful
accounts of $20,000 in 1998 and $35,000 in 1999.... 202,787 804,959
Prepaid expenses and other current assets........... 127,140 638,957
---------- ------------
Total current assets............................... 6,502,319 90,677,960
Property and equipment, net.......................... 2,231,377 19,539,258
Other assets......................................... 21,675 121,232
---------- ------------
TOTAL ASSETS....................................... $8,755,371 $110,338,450
========== ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable.................................... $ 598,724 $ 8,519,275
Current portion of long term debt................... -- 1,335,901
Accrued expenses.................................... 259,981 585,694
Deferred revenue.................................... 12,450 317,394
---------- ------------
Total current liabilities.......................... 871,155 10,758,264
Long term debt, less current portion................ -- 2,260,243
Other............................................... 5,557 --
---------- ------------
TOTAL LIABILITIES.................................. 876,712 13,018,507
---------- ------------
MANDATORILY REDEEMABLE PREFERRED STOCK:
Series B, par value $.01, authorized, issued and
outstanding 10,635 shares; aggregate liquidation
preference of $1,063,500........................... 1,063,500 1,063,500
Series C, par value $.01, authorized 10,000,000
shares; issued and outstanding 9,953,935 shares;
aggregate liquidation preference of $10,352,092.... 10,283,999 10,283,999
Series D, par value $.01, authorized 34,000,000
shares; issued and outstanding 33,333,333 shares;
aggregate liquidation preference of $99,999,999.... -- 99,794,138
Warrants for the purchase of mandatorily redeemable
preferred stock.................................... -- 105,000
---------- ------------
11,347,499 111,246,637
---------- ------------
STOCKHOLDERS' DEFICIT:
Undesignated preferred stock, 964,365 shares
authorized in 1999; none issued or outstanding..... -- --
Series A preferred stock, par value $.01,
authorized, issued and outstanding
5,025,000 shares; aggregate liquidation preference
of $502,500........................................ 502,500 502,500
Common stock, par value $.001, 20,000,000 shares
authorized in 1998; 57,000,000 shares authorized in
1999; issued and outstanding 500,000 shares in 1998
and 863,709 shares in 1999......................... 500 864
Additional paid-in capital.......................... 49,500 1,876,362
Unearned stock option compensation.................. -- (1,431,453)
Accumulated deficit................................. (4,021,340) (14,874,967)
---------- ------------
Total stockholders' deficit........................ (3,468,840) (13,926,694)
---------- ------------
Commitments and contingencies
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT........ $8,755,371 $110,338,450
========== ============
(a) Business and Basis of Financial Statement Presentation
Evoke Incorporated, formerly VStream Incorporated, (the Company), was
incorporated under the laws of the State of Delaware on April 17, 1997. The
Company is an Internet communication services provider that allows users to
communicate and exchange voice, video and visuals in a simple, cost-effective
manner through web-based applications and technologies. The Company operates in
a single segment.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Certain prior year balances have been reclassified to conform with the
current year presentation.
(b) Cash Equivalents
All highly liquid investments purchased with maturities of three months or
less are considered to be cash equivalents. Cash equivalents consist of money
market accounts at two financial institutions.
(c) Equipment, Furniture and Fixtures, and Leasehold Improvements
Equipment, furniture and fixtures, and leasehold improvements are recorded
at cost. Depreciation and amortization are calculated using the straight-line
method over the estimated useful lives of the assets which range from three to
ten years.
(d) Income Taxes
The Company uses the asset and liability method of accounting for income
taxes as prescribed by Statement of Financial Accounting Standard No. 109,
Accounting for Income Taxes. Under the asset and liability method, deferred tax
assets and liabilities are recognized for the estimated future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates in effect for the
year in which those temporary differences are expected to be recovered or
settled. The resulting deferred tax assets and liabilities are adjusted to
reflect changes in tax laws or rates in the period of enactment.
The Company's stockholders elected to be taxed as a subchapter S Corporation
at inception. Accordingly, taxable income or loss was reported in the tax
returns of the stockholders until the subchapter S election was terminated on
September 2, 1997.
(e) Fair Value of Financial Instruments
The carrying amounts of certain of the Company's financial instruments,
including accounts receivable and accounts payable and accrued expenses,
approximate fair value because of their short maturities. Because the interest
rates on the Company's note payable obligations reflect market rates and terms,
the fair values of these instruments approximate carrying amounts.
Revenue from web conferencing services is recognized upon completion of a
call or recorded web cast.
Revenue from live event streaming is recognized when the content is
broadcast over the Internet. Revenue from encoding recorded content is
recognized when content becomes available for viewing over the Internet.
Revenue related to the hosting of content is recognized ratably over the
hosting period, generally ranging from one to six months.
(g) Impairment of Long-Lived Assets and Assets to Be Disposed Of
In accordance with SFAS No. 121, Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to Be Disposed Of, the Company reviews
long-lived assets and certain identifiable intangibles for impairment whenever
events or changes in circumstances indicate that the carrying amount of an
asset may not be recoverable. Recoverability of assets to be held and used is
generally measured by a comparison of the carrying amount of an asset to
future net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is equal to the
amount by which the carrying amounts of the assets exceed the fair values of
the assets. Assets to be disposed of are reported at the lower of the carrying
amount or fair value, less costs to sell. No impairment was recognized in
1997, 1998 or 1999.
(h) Stock Based Compensation
The Company accounts for its stock option plan in accordance with the
provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations. As such, compensation
expense is recorded on the date of grant only if the current market price of
the underlying stock exceeds the exercise price. Under SFAS No. 123,
Accounting for Stock-Based Compensation (SFAS 123), entities are permitted to
recognize as expense over the vesting period the fair value of all stock-based
awards on the date of grant. Alternatively, SFAS No. 123 also allows entities
to continue to apply the provisions of APB Opinion No. 25 and provide pro
forma net income disclosures for employee stock option grants as if the fair-
value-based method defined in SFAS No. 123 had been applied. The Company has
elected to continue to apply the provisions of APB Opinion No. 25 and provide
the pro forma disclosures required by SFAS No. 123.
(i) Product Development Costs
The Company capitalizes certain qualifying computer software costs incurred
during the application development stage in accordance with Statement of
Position No. 98-1 "Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use" (SOP 98-1) issued by the American Institute of
Certified Public Accountants, which was adopted by the Company as of January
1, 1999. These costs are amortized over the software's estimated useful life.
Other research and development costs are expensed as incurred.
(j) Loss Per Share
Loss per share is presented in accordance with the provisions of Statement
of Financial Accounting Standards No. 128, Earnings Per Share (SFAS 128).
Under SFAS 128, basic earnings (loss) per share (EPS) excludes dilution for
potential common stock and is computed by dividing income or loss available to
common
stockholders by the weighted average number of common shares outstanding for
the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issued common stock were exercised or
converted into common stock. Basic and diluted EPS are the same in 1997, 1998
and 1999, as all potential common stock instruments are antidilutive.
(2)INVESTMENT SECURITIES
At December 31, 1998, all investment securities consisted of short-term
investments carried at amortized cost (which approximates market value), and
consisted of the following:
U.S. Government securities................................... $ 510,590
U.S. Government agencies..................................... 2,950,191
Commercial paper............................................. 1,490,067
-----------
$ 4,950,848
===========
At December 31, 1999, the Company did not hold any investment securities.
(3)PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 31, 1998 and
1999:
December 31,
-----------------------
1998 1999
---------- -----------
Computers and office equipment......................... $2,239,840 $18,642,894
Computer software...................................... 206,382 1,463,608
Furniture and fixtures................................. 87,650 1,153,430
Leasehold improvements................................. -- 184,884
---------- -----------
2,533,872 21,444,816
Less accumulated depreciation and amortization......... (302,495) (1,905,558)
---------- -----------
$2,231,377 $19,539,258
========== ===========
In 1999, the Company capitalized $242,961 of software application
development costs in accordance with SOP 98-1. These costs are being amortized
over 18 months from the time the software is ready for its intended use.
Amortization of these costs totalled $119,135 in 1999.
(4)DEBT
On January 7, 1999, the Company entered into a loan and security agreement
with a total commitment of $3,000,000. In connection with obtaining this
commitment, the Company issued warrants to purchase 86,538 shares of Series C
Preferred stock to the lender. The exercise price of the warrants is $1.04 per
share and the warrants expire upon the earlier of January 6, 2009 or 5 years
from the closing of an initial public offering. Draws under this agreement are
repaid over 37 months, with interest at the 36 month Treasury note rate, plus
275 basis points. An additional payment of 9% of the amount financed is payable
at the end of the term of the loan. This additional amount will be included in
interest expense over the term of the agreement. The fair value of the warrants
was $75,000 and will be included in interest expense over the term of the
agreement. During 1999, the Company borrowed, in four separate draws, the
entire commitment of $3,000,000. The interest rate ranges from 7.41% to 8.40%.
The loan and security agreement is secured by substantially all business assets
except those specifically secured by the debt facility described below. At
December 31, 1999, the balance due under this agreement is $2,237,488, of which
$976,692 is current.
On September 30, 1999, the Company entered into a promissory note and its
related master loan and security agreement dated September 10, 1999, for
$1,502,623. In connection with obtaining this commitment, the Company issued
warrants to purchase 15,026 shares of Series D Preferred stock to the lender.
The exercise price of the warrants is $3.00 per share and the warrants expire
on September 29, 2004. The draw under this agreement is repaid over 42 months,
with interest at 13.33%. The promissory note is secured by the equipment that
was financed. The fair value of the warrants was $30,000 and will be included
in interest expense over the term of the agreement. At December 31, 1999, the
balance due under this agreement is $1,358,656, of which $359,209 is current.
Long-term debt, all of which was incurred in 1999, consists of the
following:
Balance at December 31, 1999................................. $ 3,596,144
Less current portion......................................... (1,335,901)
-----------
Long-term debt, excluding current portion.................... $ 2,260,243
===========
The aggregate maturities for long-term debt for each of the years
subsequent to December 31, 1999 are as follows: 2000--$1,335,901; 2001--
$1,481,487; 2002--$691,263; 2003--$87,493.
(5)INCOME TAXES
Income tax benefit relating to losses incurred differs from the amounts
that would result from applying the federal statutory rate of 34% as follows:
Period from
Inception to Year ended December 31,
December 31, ------------------------
1997 1998 1999
------------ ----------- -----------
Expected tax benefit................... $(254,609) $(1,112,646) $(3,690,233)
State income taxes, net of federal
benefit............................... (27,830) (179,673) (542,681)
Change in valuation allowance for
deferred tax assets................... 224,883 1,321,913 4,154,871
S corporation loss..................... 64,263 -- --
Other, net............................. (6,707) (29,594) 78,043
--------- ----------- -----------
Actual income tax benefit............ $ -- $ -- $ --
========= =========== ===========
Temporary differences that give rise to the components of deferred tax
assets as of December 31 are as follows:
At December 31, 1999, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $15,100,000, which are available
to offset future federal taxable income, if any, through 2019. Management
believes the utilization of the carryforwards will be limited by Internal
Revenue Code Section 382 relating to changes in ownership, as defined.
Due to the uncertainty regarding the realization of the deferred tax assets
relating to the net operating loss carryforwards and other temporary
differences, a valuation allowance has been recorded for the entire amount of
the Company's deferred tax assets at December 31, 1998 and 1999.
(6)PREFERRED STOCK AND STOCKHOLDERS' DEFICIT
(a)Mandatorily Redeemable Convertible and Convertible Preferred Stock
The Company has four classes of preferred stock (Series A, Series B, Series
C and Series D) outstanding. Series A, Series B, Series C and Series D are
convertible at any time, at the option of the holder, into 5,025,000,
2,045,192, 9,953,935 and 33,333,333 shares of common stock, respectively, and
Series B, C and D shares are mandatorily redeemable. All preferred stock has
voting rights on an as converted basis and have liquidation preferences equal
to the stated amount of preferred shares issued.
Each share of preferred stock is automatically converted to common stock at
the time of an initial public offering, provided certain offering parameters
are met. Each holder of preferred stock is entitled to cash dividends, when and
if declared by the Board of Directors. In the event dividends are paid on any
shares of common stock, an additional dividend shall be paid with respect to
all outstanding shares of preferred stock in an equal amount per share (on an
as-converted basis) to the amount paid for each share of common stock.
Series B, Series C and Series D preferred stock were issued in 1997, 1998
and 1999 for $100, $1.04 and $3.00 per share, respectively. All issuances were
for cash, except for 487,355 shares of Series C Preferred stock issued upon
conversion of $506,861 of convertible debt and related accrued interest. The
Company is required to redeem a number of shares of Series B, Series C and
Series D preferred stock equal to 33 1/3% of the total number of shares issued
under the applicable purchase agreement (or such lesser number than
outstanding) in three annual installments commencing on May 27, 2004. The price
per share is the applicable liquidation value.
(b)Stock Options
In 1997, the Company adopted a stock option/stock issuance plan (the Plan)
pursuant to which the Company's Board of Directors may issue common shares and
grant incentive stock options and non-statutory stock options to employees,
directors and consultants. The Plan authorizes common stock issuances and
grants of options to purchase up to 4,150,000 shares of authorized but unissued
common stock. Stock options are granted with an exercise price equal to the
fair market value of the common shares at the date of grant as determined by
the Compensation Committee of the Company's Board of Directors. Incentive and
non-statutory stock options generally have ten-year terms and vest over one to
four years. The options are exercisable upon grant; however, shares issued upon
exercise are restricted and subject to repurchase at the exercise price if
employees terminate prior to the vesting of their shares.
At December 31, 1999, there were 1,218,606 additional shares available for
grant or issuance under the Plan. The per share weighted-average fair value of
stock options granted during 1997, 1998 and 1999 was $.03, $.07 and $.23,
respectively, using the Black Scholes option-pricing model with the following
weighted-average assumptions: no expected dividends, zero volatility, risk-free
interest rate of 6%, and an expected life of 6 years.
The Company utilizes APB Opinion No. 25 in accounting for its Plan and,
accordingly, because the Company generally grants options at fair value, no
compensation cost has been recognized in the
accompanying financial statements for stock options granted in 1997 and 1998.
In 1999, a total of 881,500 options were granted with exercise prices less than
fair value, resulting in total compensation to be recognized over the vesting
period of $1,727,740, of which $296,287 was recognized in 1999. If the Company
determined compensation cost based on the fair value of the options at the
grant date under SFAS No. 123, the Company's 1998 and 1999 net loss would have
been approximately $3,301,489 and $10,901,877, respectively, and the net loss
per share would have been approximately $6.92 and $16.68, respectively. The
effect on 1997 would not have been significant.
Stock option activity during 1997, 1998 and 1999 is as follows:
Number of Weighted-average
shares exercise price
--------- ----------------
Balance at inception (April 17, 1997)............... -- $ --
Granted........................................... 830,000 0.10
---------
Balance at December 31, 1997........................ 830,000 0.10
Granted........................................... 728,500 0.16
Exercised......................................... (25,000) 0.10
Cancelled......................................... (253,500) 0.10
---------
Balance at December 31, 1998........................ 1,280,000 0.13
Granted........................................... 2,059,750 0.77
Exercised......................................... (313,709) 0.15
Cancelled......................................... (658,356) 0.27
---------
Balance at December 31, 1999........................ 2,367,685 0.65
=========
At December 31, 1999, the weighted-average remaining contractual life of
outstanding options was approximately 9.16 years, with exercise prices ranging
from $0.10 to $1.04 per share. All of the Company's outstanding options are
exercisable at December 31, 1999. Restricted shares issued for options
exercised which are subject to repurchase totalled 70,065 shares at December
31, 1999.
The following table summarizes information about stock options outstanding
at December 31, 1999:
Options outstanding
----------------------------------------------------------------------------
Range of Weighted average
exercise Number remaining Weighted average
prices outstanding contractual life exercise price
-------- ----------- ---------------- ----------------
$0.10 -- 0.25 970,000 8.27 $0.15
0.52 -- 0.85 307,500 9.39 0.84
1.04 1,090,185 9.88 1.04
---------
2,367,685
=========
(c)Stock Purchase Warrants
In March 1998, the Company issued $500,000 in convertible subordinated
promissory notes. These notes were subsequently converted to Series C Preferred
stock. Warrants to purchase 12,018 shares of Series C Preferred stock at $1.04
per share were issued to the lenders in connection with issuance of the
convertible subordinated promissory notes. The warrants are exercisable and
must be exercised by March 31, 2002 or earlier, upon an initial public offering
or change in ownership of the Company.
In April 1998, the Company amended a line of credit agreement. As a result,
on May 31, 1998 the Company issued 4,206 warrants to purchase Series C
Preferred stock. The warrants are exercisable at $1.04 per share and expire on
May 30, 2008. The estimated fair value of all warrants issued in 1998 was not
significant.
In January 1999, in the connection with obtaining a $3.0 million loan, the
Company issued warrants to purchase 86,538 shares of Series C Preferred stock.
The warrants are exercisable at $1.04 per share and will expire upon the
earlier of January 6, 2009 or 5 years from the closing of an initial public
offering. The fair value of the warrants was $75,000, as determined using the
Black-Scholes option pricing model with the following assumptions: no expected
dividends, 75% volatility, risk-free interest rate of 6% and an expected life
of 10 years. The fair value of the warrants will be included in interest
expense over the term of the agreement.
In September 1999, in connection with obtaining a $1.5 million master loan
and security agreement, the Company issued warrants to purchase 15,026 shares
of Series D Preferred stock. The warrants are exercisable at $3.00 per share
and will expire on September 29, 2004. The fair value of the warrants was
$30,000, as determined using the Black-Scholes option pricing model with the
following assumptions: no expected dividends, 75% volatility, risk-free
interest rate of 6% and an expected life of 5 years. The fair value of the
warrants will be included in interest expense over the term of the agreement.
On January 18, 2000, the Company's Board of Directors approved the issuance
of a warrant to purchase 40,000 shares of common stock. The warrant is in
exchange for certain marketing costs. The fair value of the warrant was $37,600
as determined using the Black-Scholes option pricing model with the following
assumptions: no expected dividends, 75% volatility, risk-free interest rate of
6% and an expected life of one year.
(7) COMMITMENTS AND CONTINGENCIES
(a)Leases
The Company leases office facilities under various operating lease
agreements that expire through 2009. Two of the office facilities are leased
from entities who are controlled by either directors or former directors of the
Company. Rent expense related to these leases was $54,908, $103,635 and
$305,049 for the years ended December 31, 1997, 1998 and 1999, respectively.
Future minimum lease payments are as follows:
Portion
attributable
to related
Total parties
---------- ------------
2000............................................... $1,098,918 $ 858,210
2001............................................... 950,961 858,210
2002............................................... 854,119 793,397
2003............................................... 797,654 747,102
2004............................................... 798,918 747,102
Thereafter......................................... 3,654,957 3,548,735
---------- ----------
Total future minimum lease payments................ $8,155,527 $7,552,756
========== ==========
Total rent expense for the years ended December 31, 1997, 1998 and 1999 was
$54,908, $132,183 and $529,872, respectively.
On January 21, 2000, the Company executed a letter of interest for
additional office space. Rent expense under this lease will be approximately
$5,600 per month from April 2000 through December 2006. The space is contiguous
to office space currently under lease.
(b) Purchase Commitments
At December 31, 1999, the Company had commitments outstanding for capital
expenditures under purchase orders and contracts of approximately $11,600,000,
all of which are expected to be incurred in 2000.
At December 31, 1999, the Company had commitments outstanding for software
licenses and associated maintenance and royalties of approximately $4.2
million, all of which will be expended through December 2001. In connection
with the commitments, the Company received a warrant to purchase 1,000,000
shares of Series B Preferred stock. The warrant has an exercise price of $2.00
a share and expires on June 30, 2001. Due to the lack of a readily determinable
fair market value for securities of the issuer, no value has been attributed to
the warrant.
In 1999, the Company entered into arrangements for sales and marketing
services totaling $20 million to be expended over the next two years.
(c)Employment Contract
The Company has employment agreements with two of its executive officers.
The agreements continue until terminated by the executive or the Company, and
provides for a termination payment under certain circumstances. As of December
31, 1999, the Company's liability would be approximately $645,000 if the
officers were terminated without cause (as defined in the agreement).
(d)Litigation
From time to time, the Company has been subject to litigation and claims in
the ordinary course of business. While it is not possible to predict or
determine the financial outcome of these matters, management does not believe
they should result in a materially adverse effect on the Company's financial
position, results of operations or liquidity.
(8)EMPLOYEE BENEFIT PLAN
The Company adopted, effective January 1, 1998, a defined contribution
401(k) plan that allows eligible employees to contribute up to 15% of their
compensation up to the maximum allowable amount under the Internal Revenue
Code. In 1999, the Company made a discretionary employer matching contribution
of $13,072 and did not make a discretionary employer profit sharing
contribution. The Company did not make a discretionary employer matching or
profit sharing contribution to the plan in 1998.
(9)SIGNIFICANT CUSTOMERS AND SUPPLIERS
In 1999, the Company had sales to two customers representing 21% and 9% of
total revenue, respectively. The receivables due from these customers at
December 31, 1999 were $250,000 and $42,837, respectively. In 1998, the
Company's sales to these two customers represented 19% and 52% of total
revenue, respectively. The receivable due from one of these customers at
December 31, 1998 totaled $120,640.
The Company purchases key components of its telephony technology platform
from a single supplier. These components are referred to as multipoint control
units and form the basis of the Company's telephony technology platform, upon
which the majority of offered services rely. The Company has no guaranteed
supply arrangements nor a contract with the supplier of these components. In
1999, the Company purchased $5,990,000 in equipment from this key supplier.
Salomon Smith Barney
Robertson Stephens
Thomas Weisel Partners LLC
CIBC World Markets
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses, other than the
underwriting discount and commissions, payable by the registrant in connection
with the sale of the common stock being registered hereby. All amounts shown
are estimates, except the Securities and Exchange Commission registration fee,
the NASD filing fee and the Nasdaq National Market listing fee.
Securities and Exchange Commission registration fee............ $ 30,360
NASD filing fee................................................ 12,000
Nasdaq National Market listing application fee................. 70,000
Blue Sky fees and expenses..................................... 5,000
Printing and engraving expenses................................ 180,000
Legal fees and expenses........................................ 300,000
Accounting fees and expenses................................... 200,000
Transfer agent and registrar fees.............................. 5,000
Miscellaneous expenses......................................... 197,640
---------
Total........................................................ 1,000,000
=========
Item 14. Indemnification of Directors and Officers.
Our bylaws provide that we will indemnify our directors and executive
officers and may indemify our other officers, employees and agents to the
fullest extent permitted by Delaware law. In addition, our certificate of
incorporation provides that, to the fullest extent permitted by Delaware law,
our directors and executive officers will not be liable for monetary damages
for breach of the directors' fiduciary duty to us and our stockholders. This
provision of the certificate of incorporation does not eliminate the duty of
care. In appropriate circumstances equitable remedies such as an injunction or
other forms of non-monetary relief are available under Delaware law. This
provision also does not affect a director's responsibilities under any other
laws, such as the federal securities laws.
Each director will continue to be subject to liability for:
. breach of the director's duty of loyalty to Evoke and its stockholders;
. acts or omissions not in good faith or involving intentional misconduct;
. knowing violations of law;
. any transaction from which the director derived an improper personal
benefit;
. improper transactions between the director and Evoke; and
. improper distributions to stockholders and improper loans to directors
and officers.
We intend to enter into indemnity agreements with each of its directors and
executive officers under which each director and executive officer will be
indemnified against expenses and losses incurred for claims brought against
them by reason of their being a director or executive officer of Evoke. Our
board of directors has authorized our officers to investigate and obtain
directors' and officers' liability insurance.
There is no pending litigation or proceeding involving any of our directors
or officers as to which indemnification is being sought. We are not aware of
any pending or threatened litigation that may result in claims for
indemnification by any director or officer.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to our directors, officers and control
persons pursuant to the foregoing provisions, or otherwise, we have been
advised that in the opinion of the SEC, such indemnification is against public
policy as expressed in the Securities Act of 1933, and is, therefore,
unenforceable.
II-1
Item 15. Recent Sales of Unregistered Securities.
Described below is information regarding all securities that have been
issued by Evoke since its inception.
(a) From November 17, 1999 to December 15, 1999, we issued an aggregate
of 33,333,333 shares of our Series D Preferred Stock to certain accredited
investors at a purchase price of $3.00 per share for cash proceeds in the
amount of $100.0 million.
(b) From May 28, 1998 to June 30, 1998, we issued an aggregate of
9,953,935 shares of our Series C Preferred Stock to certain accredited
investors at a purchase price of $1.04 per share for cash proceeds in the
amount of $9,845,243 and in exchange for an aggregate of $506,849 in
outstanding convertible promissory notes.
(c) On September 2, 1997, we issued an aggregate of 10,135 shares of our
Series B Preferred Stock to certain accredited investors at a purchase
price of $100.00 per share for cash proceeds in the amount of $1,013,500.
(d) On September 2, 1997, we issued an aggregate of 5,025,000 shares of
our Series A Preferred Stock to Messrs. Berberian, LeJeal and Vernon at
$0.10 per share in exchange for an aggregate of $525,000 in outstanding
convertible promissory notes. Mr. Berberian is our chief executive officer,
Mr. LeJeal is our chief operating officer, and Mr. Vernon is our chief
technology officer.
(e) On August 29, 1997, we issued an aggregate of 250,000 shares of our
common stock to our landlord, BMC Properties, LLC at $0.10 per share in
exchange for an aggregate of $25,000 in rental payments. Mr. Chrisman, one
of our former directors, is a managing member of BMC Properties, LLC.
(f) On April 18, 1997, we issued an aggregate of 50,000 shares of our
common stock to Messrs. Berberian and LeJeal at $0.10 per share for cash
proceeds in the amount of $5,000.
(g) As of January 31, 2000, an aggregate of 958,457 shares of common
stock had been issued upon exercise of options and stock issuance rights
under our 1997 Stock Option/Stock Issuance Plan.
The issuances of the securities described in (a), (b), (c), (d) and (e)
above were deemed to be exempt from registration under the Securities Act of
1933, as amended, in reliance on Section 4(2) of the Securities Act as
transactions by an issuer not involving any public offering. The issuances of
the securities described in (e) above were deemed to be exempt from
registration under the Securities Act in reliance on Rule 701 under the
Securities Act as transactions by an issuer in compensatory circumstances. The
recipients of the above-described securities represented their intention to
acquire the securities for investment only and not with a view for
distribution thereof. Appropriate legends were affixed to the stock
certificates issued in such transactions. All recipients had adequate access,
through employment or other relationships, to information about Evoke.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
Exhibit
No. Description
------- -----------
1.1* Form of Underwriting Agreement.
3.1 Restated Certificate of Incorporation.
3.2 Form of Restated Certificate of Incorporation to become effective upon
the closing of this offering.
3.3 Bylaws.
3.4 Amended and Restated Bylaws to become effective upon the closing of
this offering.
4.1 Reference is made to Exhibits 3.1 through 3.4.
4.2* Specimen stock certificate representing shares of common stock.
5.1* Opinion of Cooley Godward LLP regarding the legality of the securities
being registered.
II-2
Exhibit
No. Description
------- -----------
10.1* 2000 Equity Incentive Plan.
10.2* 2000 Employee Stock Purchase Plan.
10.3 Amended and Restated Stockholders' Agreement, among the Registrant,
certain of its stockholders and certain of its management, dated
November 17, 1999.
10.4 First Amendment to Amended and Restated Stockholders' Agreement,
dated November 17, 1999, among the Registrant, certain of its
stockholders and certain of its management, dated December 15,
1999.
10.5 Amended and Restated Investors' Agreement, among the Registrant and
certain of its stockholders, dated November 17, 1999.
10.6 First Amendment to Amended and Restated Investors' Agreement, dated
as of November 17, 1999, among the Registrant and certain of its
stockholders, dated December 15, 1999.
10.7 Form of Indemnity Agreement to be entered into between Registrant
and each of its directors and executive officers.
10.8 Series B Preferred Stock Purchase Agreement, among Registrant and
the parties named therein, as amended, dated September 2, 1997.
10.9 Series C Preferred Stock Purchase Agreement, among Evoke and the
parties named therein, as amended, dated May 27, 1998.
10.10 Series D Preferred Stock Purchase Agreement, among Evoke and the
parties named therein, as amended, dated November 17, 1999.
10.11 First Amendment to Series D Preferred Stock Purchase Agreement,
dated as of November 17, 1999 between Registrant and the parties
named therein, dated December 15, 1999.
10.12 Note and Warrant Purchase Agreement, dated March 31, 1998, among
Registrant and the partners named therein.
10.13 Lease, dated March 3, 1997, between BMC Properties, LLC and
Registrant.
10.14 Lease, dated June 6, 1999, between BLC Properties, LLC and
Registrant.
10.15*+ Source Code and Object Code License Agreement, dated December 29,
1999, between Registrant and AudioTalk Networks, Inc.
10.16 Personal Services Agreement, dated November 17, 1999, between
Registrant and Jim LeJeal.
10.17 Personal Services Agreement, dated November 17, 1999, between
Registrant and Paul Berberian.
23.1* Consent of Cooley Godward LLP (included in Exhibit 5.1).
23.2 Consent of KPMG LLP.
24.1 Powers of attorney (included on Page II-5).
27 Financial Data Schedule.
* To be filed by amendment.
+ Confidential treatment to be requested with respect to portions of these
exhibits.
(b) Financial Statement Schedules.
Not applicable.
Item 17. Undertakings.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
II-3
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to provisions described in Item 14 or otherwise, the
registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes:
(1) That, for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Louisville, County of Boulder, State of Colorado, on February 18, 2000.
/s/ Paul A. Berberian
By:
----------------------------------
Paul A. Berberian
Chairman of the Board,
Chief Executive Officer
and President
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Paul A. Berberian and James M. LeJeal and each
of them, as his true and lawful attorneys-in-fact and agents, with full power
of substitution and resubstitution, for him and in his name, place, and stead,
in any and all capacities, to sign any and all amendments (including post-
effective amendments, exhibits thereto and other documents in connection
therewith) to this Registration Statement and any subsequent registration
statement filed by the registrant pursuant to Rule 462(b) of the Securities Act
of 1933, as amended, which relates to this Registration Statement, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Paul A. Berberian Chairman of the Board, February 18,
___________________________________________ Chief Executive Officer 2000
Paul A. Berberian and President (Principal
Executive Officer)
/s/ James M. LeJeal Chief Operation Officer, February 18,
___________________________________________ Chief Financial Officer, 2000
James M. LeJeal Secretary, Treasurer and
Director (Principal
Financial and Accounting
Officer)
/s/ Don Hutchison Director February 18,
___________________________________________ 2000
Don Hutchison
/s/ Bradley A. Feld Director February 18,
___________________________________________ 2000
Bradley A. Feld
/s/ Donald H. Parsons, Jr. Director February 18,
___________________________________________ 2000
Donald H. Parsons, Jr.
/s/ Carol deB. Whitaker Director February 18,
___________________________________________ 2000
Carol deB. Whitaker
II-5
EXHIBIT INDEX
Exhibit
No. Description
------- -----------
1.1* Form of Underwriting Agreement.
3.1 Restated Certificate of Incorporation.
3.2 Form of Restated Certificate of Incorporation to become effective upon
the closing of this offering.
3.3 Bylaws.
3.4 Amended and Restated Bylaws to become effective upon the closing of
this offering.
4.1 Reference is made to Exhibits 3.1 through 3.4.
4.2* Specimen stock certificate representing shares of common stock.
5.1* Opinion of Cooley Godward LLP regarding the legality of the securities
being registered.
10.1* 2000 Equity Incentive Plan.
10.2* 2000 Employee Stock Purchase Plan.
10.3 Amended and Restated Stockholders' Agreement, among the Registrant,
certain of its stockholders and certain of its management, dated
November 17, 1999.
10.4 First Amendment to Amended and Restated Stockholders' Agreement, dated
November 17, 1999, among the Registrant, certain of its stockholders
and certain of its management, dated December 15, 1999.
10.5 Amended and Restated Investors' Agreement, among the Registrant and
certain of its stockholders, dated November 17, 1999.
10.6 First Amendment to Amended and Restated Investors' Agreement, dated as
of November 17, 1999, among the Registrant and certain of its
stockholders, dated December 15, 1999.
10.7 Form of Indemnity Agreement to be entered into between Registrant and
each of its directors and executive officers.
10.8 Series B Preferred Stock Purchase Agreement, among Registrant and the
parties named therein, as amended, dated September 2, 1997.
10.9 Series C Preferred Stock Purchase Agreement, among Evoke and the
parties named therein, as amended, dated May 27, 1998.
10.10 Series D Preferred Stock Purchase Agreement, among Evoke and the
parties named therein, as amended, dated November 17, 1999.
10.11 First Amendment to Series D Preferred Stock Purchase Agreement, dated
as of November 17, 1999 between Registrant and the parties named
therein, dated December 15, 1999.
10.12 Note and Warrant Purchase Agreement, dated March 31, 1998, among
Registrant and the partners named therein.
10.13 Lease, dated March 3, 1997, between BMC Properties, LLC and
Registrant.
10.14 Lease, dated June 6, 1999, between BLC Properties, LLC and Registrant.
10.15*+ Source Code and Object Code License Agreement, dated December 29,
1999, between Registrant and AudioTalk Networks, Inc.
10.16 Personal Services Agreement, dated November 17, 1999, between
Registrant and Jim LeJeal.
10.17 Personal Services Agreement, dated November 17, 1999, between
Registrant and Paul Berberian.
23.1* Consent of Cooley Godward LLP (included in Exhibit 5.1).
23.2 Consent of KPMG LLP.
I-1
Exhibit
No. Description
------- -----------
24.1 Powers of attorney (included on Page II-5).
27 Financial Data Schedule.
* To be filed by amendment.
+ Confidential treatment to be requested with respect to portions of these
exhibits.
I-2
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
VSTREAM INCORPORATED
VStream Incorporated, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, DOES HEREBY
CERTIFY:
1. The name of the corporation is VStream Incorporated. The corporation was
originally incorporated under the name Intellistat Media Research, Inc. The date
of filing of its original Certificate of Incorporation with the Secretary of
State of the State of Delaware was April 17, 1997.
2. This Restated Certificate of Incorporation of VStream Incorporated has
been duly adopted in accordance with the provisions of Sections 228, 242 and 245
of the General Corporation Law of the State of Delaware.
3. This Restated Certificate of Incorporation restates the Certificate of
Incorporation and all amendments thereto of this corporation by restating the
text of the original Certificate of Incorporation in full to read as follows:
ARTICLE I.
The name of this corporation is Evoke Incorporated (the "Corporation").
Article II.
The address of the registered office of the Corporation in the State of
Delaware is 1013 Centre Road, City of Wilmington, County of New Castle. The name
of the registered agent at that address is Corporation Service Company.
ARTICLE III.
The nature of the business or purposes to be conducted or promoted is to
engage in any lawful act or activity for which corporations may be organized
under the General Corporation Law of Delaware.
ARTICLE IV.
Capital Stock
This Corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total number
of shares which the corporation is authorized to issue is one hundred seven
million (107,000,000) shares, fifty seven million (57,000,000) of which shall be
Common Stock (the "Common Stock") and fifty million (50,000,000) shares of which
shall be Preferred Stock (the "Preferred Stock"). The Preferred Stock shall have
a par value of $.01 per share and the Common Stock shall have a par value of
$.001 per share. The Preferred Stock may be issued from time to time in one or
more series. The Board of Directors is hereby authorized, within the limitations
and restrictions stated in this Certificate of Incorporation, to fix or alter
the dividend rights, dividend rate, conversion rights, voting rights, rights and
terms of redemption (including sinking fund provisions), the redemption price or
prices, the liquidation preferences of any wholly unissued series of Preferred
Stock, and the number of shares constituting any such series and the designation
thereof, or any of them, and to increase or decrease the number of shares of any
series subsequent to the issue of shares of that series, but not below the
number of shares of such series then outstanding. In case the number of shares
of any series shall be so decreased, the shares constituting such decrease shall
resume the status which they had prior to the adoption of the resolution
originally fixing the number of shares of such series.
DESIGNATION OF SERIES A CONVERTIBLE PREFERRED STOCK, SERIES B CONVERTIBLE
PREFERRED STOCK, SERIES C CONVERTIBLE PREFERRED STOCK AND SERIES D CONVERTIBLE
PREFERRED STOCK
Five million twenty-five thousand (5,025,000) of the authorized shares of
Preferred Stock are hereby designated Series A Convertible Preferred Stock (the
"Series A Preferred"). Ten thousand six-hundred thirty-five (10,635) of the
authorized shares of Preferred Stock are hereby designated Series B Convertible
Preferred Stock (the "Series B Preferred"). Ten million (10,000,000) of the
authorized shares of Preferred Stock are hereby designated Series C Convertible
Preferred Stock (the "Series C Preferred"). Thirty four million (34,000,000) of
the authorized shares of Preferred Stock are hereby designated Series D
Convertible Preferred Stock (the "Series D Preferred"). The Series A Preferred,
Series B Preferred, Series C Preferred and Series D Preferred collectively are
referred to as the "Series Preferred." The rights, preferences, privileges,
restrictions and other matters relating to the Series Preferred are as follows:
1. DIVIDEND RIGHTS.
(a) DECLARED DIVIDENDS. Holders of Series Preferred, in preference to
the holders of Common Stock and any other stock of the Corporation that is not
by its terms expressly senior to in right of payment to the Series Preferred
(collectively, "Junior Stock"), shall be entitled to receive dividends, when, as
and if declared by the Board of Directors, but only out of funds that are
legally available therefor. In the event that the Corporation declares or pays
any dividends, upon the Common Stock (whether payable in cash, securities or
other property) other than dividends payable solely in shares of Common Stock,
the Corporation shall also declare and pay to the holders of the Series
Preferred at the same time that it declares and pays such dividends to the
holders of the Common Stock, the dividends which would have been declared and
paid with respect to the Common Stock issuable upon conversion of the Series
Preferred had all of the outstanding Series Preferred been converted immediately
prior to the record date for such dividend, or if no record date is fixed, the
date as of which the record holders of Common Stock entitled to such dividends
are to be determined.
(b) PREFERENCE. The Series A Preferred, Series B Preferred, Series C
Preferred and Series D Preferred shall rank pari passu with respect to
dividends; provided, however, that so long as any Series B Preferred, Series C
Preferred or Series D Preferred remains outstanding, without the prior written
consent of the holders of at least 66 2/3% of the outstanding shares of Series B
Preferred and Series C Preferred (voting together as a single class
2
on an as-converted basis) and at least 66 2/3% of the outstanding Series D
Preferred (voting as a separate class on an as- converted basis) (collectively,
the "Required Holders"), the Corporation shall not, nor shall it permit any
Subsidiary to, redeem, purchase or otherwise acquire directly or indirectly any
Series A Preferred or Junior Stock, nor shall the Corporation directly or
indirectly pay or declare any dividend or make any distribution upon any Series
A Preferred or Junior Stock. The provisions of this Section 1(b) shall not,
however, apply to (i) the acquisition of shares of any Series A Preferred or
Junior Stock in exchange for shares of any other Series A Preferred or Junior
Stock, or (ii) any repurchase of any Reserved Employee Stock from former
employees, directors or consultants in connection with termination of employment
or service as a director or consultant that is approved by the Corporation's
Board of Directors.
2. VOTING RIGHTS.
(a) GENERALLY. Except as otherwise provided herein or as required by
law, the Series Preferred shall vote with the shares of the Common Stock of the
Corporation (and not as a separate class) at any annual or special meeting of
stockholders of the Corporation, and may act by written consent in the same
manner as the Common Stock, in either case upon the following basis: each holder
of shares of Series Preferred shall be entitled to such number of votes as shall
be equal to the whole number of shares of Common Stock into which such holder's
aggregate number of shares of Series Preferred are convertible (pursuant to
Section 5 below) immediately after the close of business on the record date
fixed for such meeting or the effective date of such written consent.
(b) ELECTION OF DIRECTORS. In the election of directors of the
Corporation, the holders of the Series A Preferred, voting separately as a
single class to the exclusion of all other classes of the Corporation's capital
stock and with each share of Series A Preferred entitled to one vote, shall be
entitled to elect one director to serve on the Corporation's Board of Directors
until such person's successor is duly elected by the holders of the Series A
Preferred or such person is removed from office by the holders of the Series A
Preferred. In the election of directors of the Corporation, the holders of the
Series B Preferred, voting separately as a single class to the exclusion of all
other classes of the Corporation's capital stock and with each share of Series B
Preferred entitled to one vote, shall be entitled to elect one director to serve
on the Corporation's Board of Directors until such person's successor is duly
elected by the holders of the Series B Preferred or such person is removed from
office by the holders of the Series B Preferred. In the election of directors of
the Corporation, the holders of the Series C Preferred, voting separately as a
single class to the exclusion of all other classes of the Corporation' s capital
stock and with each share of Series C Preferred entitled to one vote, shall be
entitled to elect one director to serve on the Corporation's Board of Directors
until such person's successor is duly elected by the holders of the Series C
Preferred or such person is removed from office by the holders of the Series C
Preferred. In the election of directors of the Corporation, the holders of the
Series D Preferred, voting separately as a single class to the exclusion of all
other classes of the Corporation's capital stock and with each share of Series D
Preferred entitled to one vote, shall be entitled to elect one director to serve
on the Corporation's Board of Directors until such person's successor is duly
elected by the holders of the Series D Preferred or such person is removed from
office by the holders of the Series D Preferred. If the holders of the Series A
Preferred, Series B Preferred, Series C Preferred and/or Series D Preferred for
any reason fail to elect a director to fill any such directorship, such position
shall remain vacant until such time as
3
the holders of the Series A Preferred, Series B Preferred, Series C Preferred or
Series D Preferred, as the case may be, elect a director to fill such position
and shall not be filled by resolution or vote of the Corporation's Board of
Directors or the Corporation's other stockholders. During the existence of an
Event of Noncompliance and for a period of three months after such Event of
Noncompliance has been cured or waived, the directors elected by the holders of
Series B Preferred, Series C Preferred and Series D Preferred shall be deemed to
constitute a separate class of directors of the Corporation within the meaning
of Section 141(d) of the Delaware General Corporation Law, and such directors
shall together be entitled to cast a number of votes on each matter considered
by the Board of Directors (including for purposes of determining the existence
of a quorum) equal to the sum of the number of votes entitled to be cast by all
other members of the Board of Directors plus one.
(c) CLASS VOTE REQUIREMENT. Except as otherwise provided herein, so long
as at least (i) 10% of the shares of the Series B Preferred issued under the
terms of the Series B Purchase Agreement, (ii) 10% of the shares of the Series C
Preferred issued under the terms of the Series C Purchase Agreement or (iii) 10%
of the shares of Series D Preferred issued under the terms of the Series D
Purchase Agreement remain outstanding, without the affirmative vote of the
Required Holders, the Corporation will not (i) create, issue or authorize the
issuance of any additional Series Preferred or create or authorize any new class
or series of the Company's capital stock, (ii) amend the Corporation's
Certificate of Incorporation or Bylaws, (iii) engage in any merger,
consolidation, recapitalization, liquidation or sale of substantial assets or
substantially all of the assets outside the ordinary course of business, (iv)
engage in any acquisition of substantial assets outside the ordinary course of
business or engage in any business other than the business of the Corporation,
described in the Company's most recent annual business plan approved by the
Board of Directors of the Corporation and activities incidental thereto, (v)
increase the amount of Reserved Employee Stock in excess of 3,975,000 (subject
to adjustment for stock splits, stock dividends and similar transactions), (vi)
engage in any transaction with an affiliate of the Corporation that is not
approved by a majority of the Corporation's disinterested directors, or (vii)
increase the size of the Board of Directors in excess of seven (7) directors.
3. LIQUIDATION RIGHTS.
(a) LIQUIDATION VALUE. Upon any liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, before any distribution or
payment shall be made to the holders of any Junior Stock, (i) the holders of
Series A Preferred shall be entitled to be paid out of the assets of the
Corporation an amount with respect to each share of Series A Preferred equal to
the sum of (A) $0.10 plus (B) all declared but unpaid dividends thereon (the
"Series A Liquidation Value"), (ii) the holders of Series B Preferred shall be
entitled to be paid an amount with respect to each share of Series B Preferred
equal to the sum of (A) $100.00 plus (B) all declared but unpaid dividends
thereon (the "Series B Liquidation Value"), (iii) the holders of Series C
Preferred shall be entitled to be paid an amount with respect to each share of
Series C Preferred equal to the sum of (A) $1.04 plus (B) all declared but
unpaid dividends thereon (the "Series C Liquidation Value"), and (iv) the
holders of Series D Preferred shall be entitled to be paid an amount with
respect to each share of Series D Preferred equal to the sum of (A) $3.00 plus
(B) all declared but unpaid dividends thereon (the "Series D Liquidation Value")
(the Series A Liquidation Value, Series B Liquidation Value, Series C
Liquidation Value and
4
Series D Liquidation Value collectively are referred to as the "Series
Liquidation Value"). The Series Liquidation Value shall be appropriately
adjusted for stock splits, stock dividends and the like.
(b) NON-PARTICIPATION. After the payment of the full liquidation
preference of the Series Preferred as set forth in Section 3(a) above, the
remaining assets of the Corporation legally available for distribution, if any,
shall be distributed to the holders of Junior Stock entitled to a preference
over the Common Stock and, thereafter, to the holders of Common Stock. The
holders of Series Preferred shall be entitled to participate in distributions to
holder of the Common Stock such that, giving effect to all distributions
pursuant to Section 3(a), the holders of Series Preferred receive aggregate
distributions equal to the greater of the Series Liquidation Value or the
amounts that such holders would have received if the Series Preferred Stock had
been converted into Common Stock immediately prior to such liquidation,
dissolution or winding up of the Corporation.
(c) LIQUIDATION EVENTS. The following events shall be considered a
liquidation for purposes of Section 3(a) in the absence of a vote to the
contrary by the Required Holders:
(i) any merger, consolidation, business combination, reorganization
or recapitalization of the Corporation in which the Corporation is not the
surviving entity or in which the stockholders of the Corporation immediately
prior to such transaction own capital stock representing less than fifty percent
(50%) of the Corporation's voting power immediately after such transaction, or
any transaction or series of related transactions in which capital stock
representing in excess of fifty percent (50%) of the Corporation's voting power
is transferred (an "Acquisition"); or
(ii) a sale, lease or other disposition of all or substantially all
of the assets of the Corporation (an "Asset Transfer"), or any extraordinary
dividend of all or substantially all of the assets of the Corporation.
(d) PROPORTIONATE PAYMENTS. If, upon any liquidation, dissolution or
winding up, the assets of the Corporation shall be insufficient to make payment
in full to all holders of Series Preferred, then such assets shall be
distributed among the holders of Series Preferred at the time outstanding,
ratably in proportion to the full amounts to which they would otherwise be
respectively entitled.
4. REDEMPTION RIGHTS.
(a) SCHEDULED REDEMPTIONS. The Corporation shall redeem a number of
shares of Series B Preferred equal to 33 1/3% of the total number of shares of
Series B Preferred issued under the Series B Purchase Agreement (or such lesser
number then outstanding) on each of May 27, 2004, May 27, 2005 and May 27, 2006
(the "Scheduled Redemption Dates") at a price per share equal to the Series B
Liquidation Value. The Corporation shall redeem a number of shares of (i) Series
C Preferred equal to 33 1/3% of the total number of shares of Series C Preferred
issued under the Series C Purchase Agreement (or such lesser number then
outstanding) and (ii) Series D Preferred equal to 33 1/3% of the total number of
shares of
5
Series D Preferred issued under the Series D Purchase Agreement (or such lesser
number then outstanding) on each of the Scheduled Redemption Dates at a price
per share equal to the Series C Liquidation Value and Series D Liquidation
Value, respectively.
(b) REDEMPTION PAYMENTS. For each share of Series Preferred which is to
be redeemed hereunder, the Corporation shall be obligated on the Scheduled
Redemption Date to pay to the holder thereof (upon surrender by such holder at
the Corporation's principal office of the certificate representing such share)
an amount in cash equal to the Series Liquidation Value of such share of Series
Preferred. If the funds of the Corporation legally available for redemption of
Series Preferred required to be redeemed on any Scheduled Redemption Date are
insufficient to redeem the total number of shares to be redeemed on such date,
those funds which are legally available shall be used to redeem the maximum
possible number of shares pro rata among the holders of Series Preferred to be
redeemed based upon the aggregate Series Liquidation Value of such share of
Series Preferred held by each such holder. At any time thereafter when
additional funds of the Corporation are legally available for the redemption of
Series Preferred, such funds shall immediately be used to redeem the balance of
the shares which the Corporation has become obligated to redeem on any Scheduled
Redemption Date but which it has not redeemed.
(c) NOTICE OF REDEMPTION. Except as otherwise provided herein, the
Corporation shall mail written notice of each redemption of Series B Preferred,
Series C Preferred and Series D Preferred to each record holder thereof not more
than 60 nor less than 30 days prior to the Scheduled Redemption Date. The
holders of Series Preferred to be redeemed shall in any event have the right to
convert their shares into Common Stock at any time prior to the close of
business on the Scheduled Redemption Date. In case fewer than the total number
of shares represented by any certificate are redeemed, a new certificate
representing the number of unredeemed shares shall be issued to the holder
thereof without cost to such holder within five business days after surrender of
the certificate representing the redeemed shares.
(d) DETERMINATION OF THE NUMBER OF SHARES TO BE REDEEMED. The number of
shares of Series B Preferred to be redeemed from each holder thereof in
redemptions hereunder shall be the number of shares determined by multiplying
the total number of shares of Series B Preferred to be redeemed by a fraction,
the numerator of which shall be the total number of shares of Series B Preferred
then held by such holder and the denominator of which shall be the total number
of shares of Series B Preferred then outstanding. The number of shares of Series
C Preferred to be redeemed from each holder thereof in redemptions hereunder
shall be the number of shares determined by multiplying the total number of
shares of Series C Preferred to be redeemed by a fraction, the numerator of
which shall be the total number of shares of Series C Preferred then held by
such holder and the denominator of which shall be the total number of shares of
Series C Preferred then outstanding. The number of shares of Series D Preferred
to be redeemed from each holder thereof in redemptions hereunder shall be the
number of shares determined by multiplying the total number of shares of Series
D Preferred to be redeemed by a fraction, the numerator of which shall be the
total number of shares of Series D Preferred then held by such holder and the
denominator of which shall be the total number of shares of Series D Preferred
then outstanding.
6
(e) OTHER REDEMPTIONS OR ACQUISITIONS. The Corporation shall not, nor
shall it permit any Subsidiary to, redeem or otherwise acquire any shares of
Series Preferred, except as expressly authorized herein or pursuant to a
purchase offer made pro rata to all holders of Series Preferred on the basis of
the aggregate Series Liquidation Value of the shares of Series Preferred owned
by each such holder.
5. CONVERSION RIGHTS. The holders of the Series Preferred shall have the
following right with respect to the conversion of the Series Preferred into
shares of Common Stock:
(a) OPTIONAL CONVERSION. Subject to and in compliance with the
provisions of this Section 5, any shares of Series Preferred may, at the option
of the holders, be converted at any time into fully-paid and nonassessable
shares of Common Stock. The number of shares of Common Stock to which a holder
of Series A Preferred shall be entitled upon conversion shall be the product
obtained by multiplying the "Series A Conversion Rate" then in effect
(determined as provided in Section 5(b)) by the number of shares of Series A
Preferred being converted. The number of shares of Common Stock to which a
holder of Series B Preferred shall be entitled upon conversion shall be the
product obtained by multiplying the "Series B Conversion Rate" then in effect
(determined as provided in Section 5(b)) by the number of shares of Series B
Preferred being converted. The number of shares of Common Stock to which a
holder of Series C Preferred shall be entitled upon conversion shall be the
product obtained by multiplying the "Series C Conversion Rate" then in effect
(determined as provided in Section 5(b)) by the number of shares of Series C
Preferred being converted. The number of shares of Common Stock to which a
holder of Series D Preferred shall be entitled upon conversion shall be the
product obtained by multiplying the "Series D Conversion Rate" then in effect
(determined as provided in Section 5(b)) by the number of shares of Series D
Preferred being converted.
(b) CONVERSION RATE. The conversion rate in effect at any time for
conversion of the Series A Preferred (the "Series A Conversion Rate") shall be
the quotient obtained by dividing $.10 by the "Series A Conversion Price"
calculated as provided in Section 5(c). The conversion rate in effect at any
time for conversion of the Series B Preferred (the "Series B Conversion Rate")
shall be the quotient obtained by dividing $100 by the "Series B Conversion
Price" calculated as provided in Section 5(c). The conversion rate in effect at
any time for conversion of the Series C Preferred (the "Series C Conversion
Rate") shall be the quotient obtained by dividing $1.04 by the "Series C
Conversion Price" calculated as provided in Section 5(c). The conversion rate in
effect at any time for conversion of the Series D Preferred (the "Series D
Conversion Rate") shall be the quotient obtained by dividing $3.00 by the
"Series D Conversion Price" calculated as provided in Section 5(c).
(c) CONVERSION PRICE. The conversion price for the Series A Preferred
(the "Series A Conversion Price") shall initially by $.10. The conversion price
for the Series B Preferred (the "Series B Conversion Price") shall initially be
$.52. The conversion price for the Series C Preferred (the "Series C Conversion
Price") shall initially be $1.04. The conversion price for the Series D
Preferred (the "Series D Conversion Price") shall initially be $3.00. Such
initial Series A Conversion Price, Series B Conversion Price, Series C
Conversion Price and Series D Conversion Price shall be adjusted from time to
time in accordance with this Section 5.
7
If and whenever on or after May 27, 1998, the Corporation issues or sells, or in
accordance with this Section 5(c) is deemed to have issued or sold, any shares
of its Common Stock (other than pursuant to a Permitted Issuance) for a
consideration per share less than the Series C Conversion Price in effect
immediately prior to the time of such issue or sale, then immediately upon such
issue or sale or deemed issue or sale the Series C Conversion Price shall be
reduced to the amount determined by dividing (a) the sum of (1) the product
derived by multiplying the Series C Conversion Price in effect immediately prior
to such issue or sale by the number of shares of Common Stock Deemed Outstanding
immediately prior to such issue or sale, plus (2) the consideration, if any,
received or deemed to have been received by the Corporation upon such issue or
sale, by (b) the number of shares of Common Stock Deemed Outstanding immediately
prior to such issue or sale plus the number of shares of Common Stock issued or
sold or deemed issued or sold. All references to the Series C Conversion Price
herein shall mean the Series C Conversion Price as so adjusted. If and whenever
on or after the original date of issuance of the Series D Preferred (the
"Original Series D Issue Date"), the Corporation issues or sells, or in
accordance with this Section 5(c) is deemed to have issued or sold, any shares
of its Common Stock (other than pursuant to a Permitted Issuance) for a
consideration per share less than the Series D Conversion Price in effect
immediately prior to the time of such issue or sale, then immediately upon such
issue or sale or deemed issue or sale, the Series D Conversion Price shall be
reduced to the amount determined by dividing (a) the sum of (1) the product
derived by multiplying the Series D Conversion Price in effect immediately prior
to such issue or sale by the number of shares of Common Stock Deemed Outstanding
immediately prior to such issue or sale, plus (2) the consideration, if any,
received or deemed to have been received by the Corporation upon such issue or
sale, by (b) the number of shares of Common Stock Deemed Outstanding immediately
prior to such issue or sale plus the number of shares of Common Stock issued or
sold or deemed issued or sold. All references to the Series D Conversion Price
herein shall mean the Series D Conversion Price as so adjusted. For purposes of
determining the adjusted Series C Conversion Price and adjusted Series D
Conversion Price, the following shall be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any manner
grants or sells any Options and the price per share for which Common Stock is
issuable upon the exercise of such Options, or upon conversion or exchange of
any Convertible Securities issuable upon exercise of such options, is less than
the Series C Conversion Price or Series D Conversion Price in effect immediately
prior to the time of the granting or sale of such Options, then the maximum
number of shares of Common Stock issuable upon the exercise of such Options or
upon conversion or exchange of the maximum number of shares of Convertible
Securities issuable upon the exercise of such Options shall be deemed to have
been issued and sold by the Corporation at the time of the granting or sale of
such Options for such price per share. For purposes of this paragraph, the
"price per share for which Common Stock is issuable" shall be determined by
dividing (A) the total amount, if any, received or receivable by the Corporation
as consideration for the granting or sale of such Options, plus the minimum
aggregate amount of additional consideration payable to the Corporation upon
exercise of all such Options, plus in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the issuance or sale of
such Convertible Securities and the conversion or exchange thereof, by (B) the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such
8
Options. No further adjustment of the Series C Conversion Price or Series D
Conversion Price shall be made when Convertible Securities are actually issued
upon the exercise of such Options or when Common Stock is actually issued upon
the exercise of such Options or the conversion or exchange of such Convertible
Securities.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Corporation in any
manner issues or sells any Convertible Securities and the price per share for
which Common Stock is issuable upon conversion or exchange thereof is less than
the Series C Conversion Price or Series D Conversion Price in effect immediately
prior to the time of such issue or sale, then the maximum number of shares of
Common Stock issuable upon conversion or exchange of such Convertible Securities
shall be deemed to have been issued and sold by the Corporation at the time of
the issuance or sale of such Convertible Securities for such price per share.
For the purposes of this paragraph, the "price per share for which Common Stock
is issuable" shall be determined by dividing (A) the total amount received or
receivable by the Corporation as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities. No
further adjustment of the Series C Conversion Price or Series D Conversion Price
shall be made when Common Stock is actually issued upon the conversion or
exchange of such Convertible Securities, and if any such issue or sale of such
Convertible Securities is made upon exercise of any Options for which
adjustments of the Series C Conversion Price or Series D Conversion Price had
been or are to be made pursuant to other provisions of this Section 5, no
further adjustment of the Series C Conversion Price or Series D Conversion Price
shall be made by reason of such issue or sale.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the price per
share for any outstanding Options deemed to be issued pursuant to subsection (i)
above, or any outstanding Convertible Securities deemed to be issued pursuant to
subsection (ii) above changes at any time (other than as a result of any anti-
dilution provisions thereof), the Series C Conversion Price and Series D
Conversion Price in effect at the time of such change shall be immediately
adjusted to the Series C Conversion Price or Series D Conversion Price which
would have been in effect had the Options or Convertible Securities outstanding
as of the time of such change in the price per share provided for such changed
"price per share" at the time initially granted, issued or sold.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. Upon the expiration of any Option without the exercise of such
Option or the cancellation of any Convertible Security without payment of
consideration by the Company therefor, the Series C Conversion Price and Series
D Conversion Price then in effect hereunder shall be adjusted immediately to the
Series C Conversion Price and Series D Conversion Price which would have been in
effect at the time of such expiration or termination had such Option or
Convertible Security, to the extent outstanding immediately prior to such
expiration or termination, never been issued.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
Option or Convertible Security is issued or sold or deemed to have been issued
or sold for cash, the consideration received therefor shall be deemed to be the
amount received by the Corporation
9
therefor (net of discounts, commissions and related expenses). If any Common
Stock, Option or Convertible Security is issued or sold for a consideration
other than cash, the amount of the consideration other than cash received by the
Corporation shall be the fair value of such consideration. If any Common Stock,
Option or Convertible Security is issued to the owners of the non-surviving
entity in connection with any merger in which the Corporation is the surviving
corporation, the amount of consideration therefor shall be deemed to be the fair
value of such portion of the net assets and business of the non- surviving
entity as is attributable to such Common Stock, Option or Convertible Security,
as the case may be. The fair value of any consideration other than cash and
securities shall be determined jointly by the Corporation and the Required
Holders. If such parties are unable to reach agreement within a reasonable
period of time, the fair value of such consideration shall be determined by the
Board of Directors, including at least one of the directors elected by the
holders of the Series B Preferred, Series C Preferred or Series D Preferred.
(vi) INTEGRATED TRANSACTIONS. In case any Option is issued in
connection with the issue or sale of other securities of the Corporation,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the Option
shall be deemed to have been issued for a consideration of $.01.
(vii) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Corporation or any Subsidiary, and the disposition of any
shares so owned or held shall be considered an issue or sale of Common Stock.
(d) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the Corporation
shall at any time or from time to time after the Original Series D Issue Date
effect a subdivision of the outstanding Common Stock, the Series A Conversion
Price, the Series B Conversion Price, the Series C Conversion Price and the
Series D Conversion Price in effect immediately before that subdivision shall be
proportionately decreased. Conversely, if the Corporation shall at any time or
from time to time after the Original Series D Issue Date combine the outstanding
shares of Common Stock into a smaller number of shares, the Series A, the Series
B, the Series C and the Series D conversion Price in effect immediately before
the combination shall be proportionately increased. Any adjustment under this
Section 5(d) shall become effective at the close of business on the date the
subdivision or combination becomes effective.
(e) ADJUSTMENT FOR COMMON STOCK DIVIDENDS AND DISTRIBUTIONS. If the
Corporation at any time or from time to time after the Original Series D Issue
Date makes, or fixes a record date for the determination of holders of Common
Stock entitled to receive, a divided or other distribution payable in additional
shares of Common Stock, in each such event the Series A Conversion Price, the
Series B Conversion Price, the Series C Conversion Price and the Series D
Conversion Price that are then in effect shall be decreased as of the time of
such issuance or, in the event such record date is fixed, as of the close of
business on such record date, by multiplying each of the Series A Conversion
Price, the Series B Conversion Price, the Series C Conversion Price and the
Series D Conversion Price then in effect by a fraction (1) the numerator of
which is the total number of shares of Common Stock issued and outstanding
immediately prior to the time of such issuance or the close of business on such
record date, and (2) the denominator of which is the total number of shares of
Common Stock issued and
10
outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution; provided, however, that if such
record date is fixed and such dividend is not fully paid or if such distribution
is not fully made on the date fixed therefor, each of the Series A Conversion
Price, the Series B Conversion Price, the Series C Conversion Price and the
Series D Conversion Price shall be recomputed accordingly as of the close of
business on such record date and thereafter each of the Series A Conversion
Price, the Series B Conversion Price, the Series C Conversion Price and the
Series D Conversion Price shall be adjusted pursuant to this Section 5(e) to
reflect the actual payment of such dividend or distributions.
(f) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. If the
Corporation at any time or from time to time after the Original Series D Issue
Date makes, or fixes a record date for the determination of holders of Common
Stock entitled to receive, a dividend or other distribution payable in
securities of the Corporation other than shares of Common Stock, in each such
event provision shall be made so that the holders of the Series Preferred shall
receive upon conversion thereof, in addition to the number of shares of Common
Stock receivable thereupon, the amount of other securities of the Corporation
which they would have receive had their Series Preferred been converted into
Common Stock on the date of such event and had they thereafter, during the
period from the date of such event to and including the conversion date,
retained such securities receivable by them as aforesaid during such period,
subject to tall other adjustments called for during such period under this
Section 5 with respect to the rights of the holders of the Series Preferred or
with respect to such other securities by their terms.
(g) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION. If at
any time or from time to time after the Original Series D Issue Date, the Common
Stock issuable upon the conversion of the Series Preferred is changed into the
same or a different number of shares of any class or classes of stock, whether
by recapitalization, reclassification or otherwise (other than a subdivision or
combination of shares or stock dividend or a reorganization, merger,
consolidation or sale of assets provided for elsewhere in this Section 5), in
any such event each holder of Series Preferred shall have the right thereafter
to convert such stock into the kind and amount of stock and other securities and
property that such holder would own had such holder converted its shares of
Series Preferred into Common Stock immediately prior to such recapitalization,
reclassification or change and held any stock, securities or other property
received in exchange for Common Stock in connection with such recapitalization,
reclassification or change, from the date of such change until the date of
conversion of such shares of Series Preferred.
(h) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF ASSETS. If at
any time or from time to time after the Original Series D Issue Date, there is a
capital reorganization of the Common Stock (other than a recapitalization,
subdivision, combination, reclassification, exchange or substitution of shares
provided for elsewhere in this Section 5), as part of such capital
reorganization, provision shall be made so that the holders of the Series
Preferred shall thereafter be entitled to receive upon conversion of the Series
Preferred the number of shares of stock or other securities or property of the
Corporation to which a holder of the maximum number of shares of Common Stock
deliverable upon conversion would have been entitled in connection with such
capital reorganization, subject to adjustment in respect of such stock or
securities by the terms thereof. In any such case, appropriate adjustment shall
be made in the
11
application of the provisions of this Section 5 with respect to the rights of
the holders of Series Preferred after the capital reorganization to the end that
the provisions of this Section 5 (including adjustment of the Series A
Conversion Price, the Series B Conversion Price, the Series C Conversion Price
and the Series D Conversion Price then in effect and the number of shares
issuable upon conversion of the Series Preferred) shall be applicable after that
event and be as nearly equivalent as practicable.
(i) CERTIFICATE OF ADJUSTMENT. In each case of an adjustment or
readjustment of the Series A Conversion Price, the Series B Conversion Price,
the Series C Conversion Price and/or Series D Conversion Price for the number of
shares of Common Stock or other securities issuable upon conversion of the
Series Preferred, the Corporation, at its expense, shall compute such adjustment
or readjustment in accordance with the provisions hereof and prepare a
certificate showing such adjustment or readjustment, and shall mail such
certificate, by first class mail, postage prepaid, to each registered holder of
Series Preferred at the holder's address as shown in the Corporation's books.
The certificate shall set forth such adjustment or readjustment, showing in
detail the facts upon which such adjustment or readjustment is based, including
a statement of (1) the consideration received or deemed to be received by the
Corporation for any additional shares of Common Stock issued or sold or deemed
to have been issued or sold, (2) the Series A Conversion Price, the Series B
Conversion Price, the Series C Conversion Price and/or the Series D Conversion
Price at the time in effect, (3) the number of additional shares of Common Stock
issued or sold or deemed to have been issue or sold, and (4) the type and
amount, if any, of other property which at the time would be received upon
conversion of the Series Preferred.
(j) NOTICES OF RECORD DATE. Upon (i) any taking by the Corporation of a
record of the holders of any class of securities for the purpose of determining
the holders thereof who are entitled to receive any dividend or other
distribution, or (ii) any Acquisition (as defined in Section 3(c)) or other
capital reorganization of the Corporation, any reclassification or
recapitalization of the capital stock of the Corporation, any merger or
consolidation of the Corporation with or into any other corporation, any Asset
Transfer (as defined in Section 3(c)), or any voluntary or involuntary
dissolution, liquidation or winding up of the Corporation, the Corporation shall
mail to each holder of Series Preferred at least twenty (20) days prior to the
record date specified therein a notice specifying (1) the date on which any such
record is to be taken for the purpose of such dividend or distribution and a
description of such dividend or distribution, (2) the date on which any such
Acquisition, reorganization, reclassification, transfer, consolidation, merger,
Asset Transfer, dissolution, liquidation or winding up is expected to become
effective, and (3) the date, if any, that is to be fixed for determining the
holders of record of Common Stock (or other securities) that shall be be
entitled to exchange their shares of Common Stock (or other securities) for
securities or other property deliverable upon such Acquisition, reorganization,
reclassification, transfer, consolidation, merger, Asset Transfer, dissolution,
liquidation or winding up.
(k) AUTOMATIC CONVERSION. Each share of Series A Preferred shall
automatically be converted into shares of Common Stock, based on the
then-effective Series A Conversion Price, immediately upon the earlier of (i)
the election of the holders of at least 75% of the outstanding Series A
Preferred (voting as a single class on an as-converted basis) or (ii) the
closing of a firmly underwritten public offering pursuant to an effective
registration
12
statement under the Securities Act of 1933, as amended, covering the offer and
sale of Common Stock for the account of the Corporation in which (x) the per
share price to the public is at least $8.00 per share (as adjusted for stock
splits, recapitalizations and the like), and (y) the gross cash proceeds to the
Corporation (before underwriting discounts, commissions and fees) are at least
$30,000,000 (a "Qualified Public Offering"). Each share of Series B Preferred
shall automatically be converted into shares of Common Stock, based on the
then-effective Series B Conversion Price, immediately upon the earlier of (i)
the election of the holders of at least 75% of the outstanding Series B
Preferred (voting as a single class on an as-converted basis) or (ii) the
closing of a Qualified Public Offering. Each share of Series C Preferred shall
automatically be converted into shares of Common Stock, based on the
then-effective Series C Conversion Price, immediately upon the earlier of (i)
the election of the holders of at least 75% of the outstanding Series C
Preferred (voting as a single class on an as-converted basis) or (ii) the
closing of a Qualified Public Offering. Upon such automatic conversion, all
declared but unpaid dividends, if any, shall be paid in accordance with Section
5(l). Each share of Series D Preferred shall automatically be converted into
shares of Common Stock, based on the then-effective Series D Conversion Price,
immediately upon the earlier of (i) the election of the holders of at least 75%
of the outstanding Series D Preferred (voting as a single class on an
as-converted basis) or (ii) the closing of a Qualified Public Offering. Upon
such automatic conversion, all declared but unpaid dividends, if any, shall be
paid in accordance with Section 5(l).
(l) MECHANICS OF CONVERSION.
(i) OPTIONAL CONVERSION. Each holder of Series Preferred who desires
to convert the same into shares of Common Stock pursuant to this Section 5 shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the Corporation or any transfer agent for the Series Preferred, and shall
give written notice to the Corporation at such office that such holder elects to
convert the same. Such notice shall state the number of shares of Series
Preferred being converted. Thereupon, the Corporation shall promptly issue and
deliver at such office to such holder a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled and shall
promptly pay in cash or, to the extent sufficient funds are not then legally
available therefor, in Common Stock (at the Common Stock's fair market value
determined by the Board of Directors as of the date of such conversion), any
declared but unpaid dividends on the shares of Series Preferred being converted.
Such conversion shall be deemed to have been made at the close of business on
the date of such surrender of the certificate representing the shares of Series
Preferred to be converted, and the person entitled to receive the shares of
Common Stock issuable upon such conversion shall be treated for all purposes as
the record holder of such shares of Common Stock on such date.
(ii) AUTOMATIC CONVERSION. Upon the occurrence of an event specified
in Section 5(1) above, the outstanding shares of Series Preferred shall be
converted into Common Stock automatically without any further action by the
Holders of such shares and whether or not the certificates representing such
shares are surrendered to the Corporation or its transfer agent; provided,
however, that the Corporation shall not be obligated to issue certificates
evidencing the shares of Common Stock issuable upon such conversion unless the
certificates evidencing such shares of Series Preferred are either delivered to
the Corporation or its transfer agent as provided below, or the holder notifies
the Corporation or its transfer agent that such
13
certificates have been lost, stolen or destroyed and executes an agreement
satisfactory to the Corporation to indemnify the Corporation from any loss
incurred by it in connection with such certificates. Upon surrender by any
holder of the certificates formerly representing shares of Series Preferred at
the office of the Corporation or any transfer agent for the Series Preferred,
there shall be issued and delivered to such holder promptly at such office and
in its name as shown on such surrendered certificate or certificates, a
certificate or certificates for the number of shares of Common Stock into which
the shares of Series Preferred surrendered were convertible on the date on which
such automatic conversion occurred, and the Corporation shall promptly pay in
cash or, at the option of the Corporation, Common Stock (at the Common Stock's
fair market value determined by the Board as of the date of such conversion) or,
at the option of the Corporation, a combination of both, all declared but unpaid
dividends on the shares of Series Preferred being converted. Until surrendered
as provided above, each certificate formerly representing shares of Series
Preferred shall be deemed for all corporate purposes to represent the number of
shares of Common Stock resulting from such automatic conversion.
(m) FRACTIONAL SHARES. No fractional shares of Common Stock shall be
issued upon conversion of Series Preferred. All shares of Common Stock
(including fractions thereof) issuable upon conversion of more than one share of
Series Preferred by a holder thereof shall be aggregated for purposes of
determination whether the conversion would result in the issuance of any
fractional share. If, after the aforementioned aggregation, the conversion would
result in the issuance of any fractional share, the Corporation shall, in lieu
of issuing any fractional share, pay cash equal to the product of such fraction
multiplied by the Common Stock's fair market value (as determined by the Board)
on the date of conversion.
6. CERTAIN DEFINITIONS.
"EVENT OF NONCOMPLIANCE" means any of the following:
(i) the Corporation fails to make any dividend, redemption or other
payment with respect to the Series Preferred which it is required to make
hereunder, whether or not such payment is legally permissible or is prohibited
by any agreement to which the Corporation is subject;
(ii) the Corporation breaches or otherwise fails to perform or
observe any other covenant or agreement set forth herein or in the Stockholders
Agreement, which default is not cured within a reasonable period of time (not to
exceed 45 days) after written notice of such default is provided to the
Corporation by the Required Holders or, if such default is not capable of being
cured, such default shall constitute an Event of Noncompliance upon provision of
such notice; provided, however, that no Event of Noncompliance shall have
occurred under this subparagraph (ii) if the Corporation establishes (to the
reasonable satisfaction of the Required Holders) that (a) the particular default
has not been caused by knowing or purposeful conduct by the Corporation or any
Subsidiary, (b) the Corporation has exercised, and continues to exercise, best
efforts to expeditiously cure the default (if cure is possible), and (c) the
default is not material to the financial condition, operating results,
operations, assets or business prospects of the Corporation and its
Subsidiaries, taken as a whole;
14
(iii) any representation or warranty made to any holder of Series
Preferred Stock in the Series B Stock Purchase Agreement, Series C Stock
Purchase Agreement or the Series D Stock Purchase Agreement or in the
Transaction Documents or any information required to be furnished by the
Corporation to holders of Series Preferred Stock, is false or misleading in any
material respect on the date made or furnished and is material to any holder of
the Series Preferred Stock.
(iv) the Corporation or any Significant Subsidiary makes any
assignment for the benefit of creditors or admits in writing its inability to
pay its debts generally as they become due; or an order, judgment or decree is
entered adjudicating the Corporation or any Significant Subsidiary bankrupt or
insolvent; or any order for relief with respect to the Corporation or any
Significant Subsidiary is entered under the Federal Bankruptcy Code; or the
Corporation or any Significant Subsidiary petitions or applies to any tribunal
for the appointment of a custodian, trustee, receiver or liquidator of the
Corporation or any Significant Subsidiary or of any substantial part of the
assets of the Corporation or any Significant Subsidiary, or commences any
proceeding (other than a proceeding for the voluntary liquidation and
dissolution of a Subsidiary) relating to the Corporation or any Significant
Subsidiary under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction; or any
such petition or application is filed, or any such proceeding is commenced,
against the Corporation or any Significant Subsidiary and either (a) the
Corporation or any such Significant Subsidiary by any act indicates its approval
thereof, consent thereto or acquiescence therein or (b) such petition,
application or proceeding is not dismissed within 60 days; or the Corporation or
any Significant Subsidiary defaults in the payment when due of any monetary
obligation in the amount of $250,000 or more or defaults in the performance of
any obligation or agreement if the effect of such default is to cause an amount
exceeding $250,000 to become due prior to its scheduled payment date or to
permit the holder or holders of any such obligation (after giving effect to any
applicable grace period) to cause an amount exceeding $250,000 to become due
prior to its scheduled payment date.
"COMMON STOCK DEEMED OUTSTANDING" means, at any given time, the sum of the
number of shares of Common Stock actually outstanding at such time, plus (a) the
number of shares of Common Stock which would be issued upon exercise of all the
Corporation's outstanding Options and (b) the number of shares of Common Stock
which would be issued upon conversion or exchange of all of the Corporation's
outstanding Convertible Securities (including Convertible Securities issuable
upon exercise of Options).
"CONVERTIBLE SECURITIES" means any stock or securities directly or
indirectly convertible into or exchangeable for Common Stock but shall not
include Options.
"HOLDER STOCK" shall mean (i) shares of Common Stock owned by the holders
of Series C and Series D Preferred; (ii) shares of Common Stock issued or
issuable upon the conversion or exercise of any stock (including, without
limitation, the Series B Preferred, Series C Preferred and Series D Preferred)
warrants, options or other securities of the Company owned by the holders of
Series C and Series D Preferred, and (iii) any shares of Common Stock issued as
a dividend or other distribution with respect to or in exchange for or in
replacement of the shares referenced in (i) and (ii) above.
15
"OPTIONS" means any rights, warrants or options to subscribe for or
purchase Common Stock or Convertible Securities.
"PERMITTED ISSUANCE" means (i) any issuance of Common Stock upon conversion
of shares of Series Preferred, (ii) any issuance of Reserved Employee Stock
(iii) shares of Common Stock issued or issuable in a public offering before or
in connection with which all outstanding shares of Convertible Preferred Stock
will be converted to Common Stock or upon exercise of warrants or rights granted
to underwriters in connection with such a public offering, (iv) shares of Common
Stock issued upon exercise or conversion of any option, warrant or other
convertible security outstanding as of the Original Series D Issue Date, (v)
securities issued pursuant to the acquisition of another business entity or
business segment of any such entity by the Corporation by merger, purchase of
substantially all the assets or other reorganization whereby the Corporation
will own not less than fifty-one percent (51%) of the voting power of such
business entity or business segment of any such entity or (vi) shares of Common
Stock issued in connection with (A) any borrowings, direct or indirect, from
financial institutions or other persons by the Corporation, whether or not
presently authorized, including any type of loan or payment evidenced by any
type of debt instrument, if such borrowing, loan or debt instrument is approved
by the Board of Directors, (B) any transaction with vendors or customers or to
other persons in similar commercial situations with the Corporation if such
issuance is approved by the Board of Directors, or (C) obtaining lease
financing, whether issued to a lessor, guarantor or other person if such
issuance is approved by the Board of Directors.
"PRO RATA PORTION" means the quotient determined by dividing (i) the number
of shares of Holder Stock held by the holder of Series C Preferred by (ii) the
sum of the total number of shares of Holder Stock held by all holders of Series
C Preferred, and the quotient determined by dividing (i) the number of shares of
Holder Stock held by the holder of Series D Preferred by (ii) the sum of the
total number of shares of Holder Stock held by all holders of Series D
Preferred.
"RESERVED EMPLOYEE STOCK" means up to 3,975,000 shares (subject to
adjustment for stock splits, stock dividends and similar transactions) of the
Company's Common Stock issuable to employees, directors, officers or consultants
of the Corporation and its Subsidiaries pursuant to Company's 1997 Stock
Option/Stock Issuance Plan, or any successor plan approved by the Company's
Board of Directors.
"SERIES B PURCHASE AGREEMENT" means the Purchase Agreement, dated as of
September 2, 1997, by and among the Corporation and certain investors, as such
agreement may from time to time be amended in accordance with its terms.
"SERIES C PURCHASE AGREEMENT" means the Purchase Agreement, dated as of May
27, 1998, by and among the Corporation and certain investors, as such agreement
may from time to time be amended in accordance with its terms.
"SERIES D PURCHASE AGREEMENT" means the Purchase Agreement, dated as of
November 17, 1999, by and among the Corporation and certain investors, as such
agreement may from time to time be amended in accordance with its terms.
16
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement dated as of
November 17, 1999, by and among the Corporation, the purchasers of Series
Preferred and certain other stockholders of the Corporation, as such agreement
may from time to time be amended in accordance with its terms.
"SIGNIFICANT SUBSIDIARY" means a "significant subsidiary" as such term is
defined in Regulation S-X of the Securities and Exchange Commission.
"SUBSIDIARY" means any corporation of which the shares of outstanding
capital stock possessing the voting power (under ordinary circumstances) in
electing the board of directors are, at the time as of which any determination
is being made, owned by the Corporation either directly or indirectly through
Subsidiaries.
7. AMENDMENT AND WAIVER.
No amendment, modification or waiver of any of the terms or provisions
of the Series Preferred shall be binding or effective without the prior written
consent of the Required Holders and no change in the terms hereof may be
accomplished by merger or consolidation of the Corporation with another
corporation or entity unless the Corporation has obtained the prior written
consent of the Required Holders; provided that any action which would adversely
alter or change solely the rights, preferences or privileges of the Series A
Preferred shall require the consent of the holders of at least 66 2/3% of the
outstanding Series A Preferred, any action which would adversely alter or change
solely the rights, preferences or privileges of the Series B Preferred shall
require the consent of the holders of at least 66 2/3% of the outstanding Series
B Preferred, any action which would adversely alter or change solely the rights,
preferences or privileges of the Series C Preferred shall require the consent of
the holders of at least 66 2/3% of the outstanding Series C Preferred, and any
action which would adversely alter or change solely the rights, preferences or
privileges of the Series D Preferred shall require the consent of the holders of
at least 66 2/3% of the outstanding Series D Preferred and provided further that
any provision which requires a higher vote of holders of Preferred Stock may not
be amended, waived or modified without the higher vote of such holders and any
amendment, modification or waiver of any of the terms or provisions of the
Series A Preferred, Series B Preferred, Series C Preferred and/or Series D
Preferred made in compliance with this Section 7, whether prospective or
retroactively effective, shall be binding upon all holders of Series A Preferred
Stock, Series B Preferred, Series C Preferred and/or Series D Preferred.
8. GENERAL PROVISIONS.
(a) REGISTRATION OF TRANSFER. The Corporation shall keep at its
principal office a register for the registration of the Series Preferred. Upon
the surrender of any certificate representing Series Preferred at such place,
the Corporation shall, at the request of the record holder of such certificate,
execute and deliver (at the Corporation's expense) a new certificate or
certificates in exchange therefor representing in the aggregate the number of
shares represented by the surrendered certificate. Each such new certificate
shall be registered in such name and shall represent such number of shares as is
requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate.
17
(b) REPLACEMENT. Upon receipt of evidence reasonably satisfactory to the
Corporation (an affidavit of the registered holder shall be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing shares of Series Preferred, and in the case of any such loss, theft
or destruction, upon receipt of indemnity reasonably satisfactory to the
Corporation (provided that if the holder is a financial institution or other
institutional investor its own agreement shall be satisfactory), or in the case
of any such mutilation upon surrender of such certificate, the Corporation shall
(at its expense) execute and deliver in lieu of such certificate a new
certificate of like kind representing the number of shares of such class
represented by lost, stolen, destroyed or mutilated certificate and dated the
date of such lost, stolen, destroyed or mutilated certificate.
(c) RESERVATION OF COMMON STOCK ISSUABLE UPON CONVERSION. The
Corporation shall at all times reserve and keep available out its authorized but
unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series Preferred, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the conversion
of all outstanding shares of Series Preferred. If at any time the number of
authorized but unissued shares of Common Stock shall not be sufficient to effect
the conversion of all then-outstanding shares of the Series Preferred, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purpose.
(d) NOTICES. Any notice required by the provisions of this Article IV of
this Certificate of Incorporation shall be in writing and shall be deemed
effectively given: (i) upon personal delivery to the party to be notified, (ii)
when sent by confirmed telex or facsimile if sent during normal business hours
of the recipient; if not, then on the next business day, (iii) five (5) days
after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (iv) one (1) day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written
verification of receipt. All notices to stockholders shall be addressed to each
holder of record at the address of such holder appearing on the books of the
Corporation.
(e) PAYMENT OF TAXES. The Corporation will pay all taxes (other than
taxes based upon income) and other governmental charges that may be imposed with
respect to the issue or delivery of shares of Common Stock upon conversion of
shares of Series Preferred, excluding any tax or other charge imposed in
connection with any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that in which the shares of Series Preferred
so converted was registered.
(f) NO DILUTION OR IMPAIRMENT. The Corporation shall not amend its
Certificate of Incorporation or participate in any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or any
other voluntary action, for the purpose of avoiding or seeking to avoid the
observance or performance of any of the terms to be observed or performed
hereunder by the Corporation.
(g) NO REISSUANCE OF SERIES PREFERRED. No share or shares of Series
Preferred acquired by the Corporation by reason of redemption, purchase,
conversion or otherwise shall be reissued.
18
ARTICLE V.
Except as otherwise provided in this Restated Certificate of Incorporation,
in furtherance and not limiting the powers conferred by statute, the Board of
Directors is expressly authorized to make, repeal, alter, amend and rescind any
or all of the Bylaws of the Corporation.
ARTICLE VI.
The management of the business and the conduct of the affairs of the
Corporation shall be vested in its Board of Directors. The number of directors
which shall constitute the whole Board of Directors shall be fixed by, or in the
manner provided in, the Bylaws of the Corporation.
ARTICLE VII.
Election of directors at an annual or special meeting of stockholders need
not be by written ballot unless the Bylaws of the Corporation shall so provide.
ARTICLE VIII.
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE IX.
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the Delaware General Corporation
Law, or (iv) for any transaction from which the director derived any improper
personal benefit. If the Delaware General Corporation Law is amended after
approval by the stockholders of this Article to authorize corporate action
further eliminating or limiting the personal liability of directors then the
liability of a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law as so amended.
Any repeal or modification of the foregoing provision of this Article IX by
the stockholders of the Corporation shall not adversely affect any right or
protection of the director of the Corporation existing at the time of such
repeal or modification.
19
ARTICLE X.
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Restated Certificate of Incorporation, in the manner
now or hereafter prescribed by statute, and all rights conferred on stockholders
herein are granted subject to this reservation.
[SIGNATURE PAGE TO FOLLOW]
20
IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been
subscribed this 17th day of February, 2000 by the undersigned who certifies
that the statements made herein are true and correct.
VSTREAM INCORPORATED
By: /s/ Paul Berberion
_______________________________________
Its: President and Chief Executive Officer
_______________________________________
[SIGNATURE PAGE TO RESTATED CERTIFICATE OF INCORPORATION]
21
Exhibit 3.2
RESTATED CERTIFICATE OF INCORPORATION
OF
EVOKE INCORPORATED
Evoke Incorporated, a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, Does Hereby
Certify:
1. The name of the corporation is Evoke Incorporated. The
corporation was originally incorporated under the name Intellistat Media
Research, Inc. The date of filing of its original Certificate of
Incorporation with the Secretary of State of the State of Delaware was
April 17, 1997.
2. This Restated Certificate of Incorporation of Evoke Incorporated
has been duly adopted in accordance with the provisions of Sections 228,
242 and 245 of the General Corporation Law of the State of Delaware.
3. This Restated Certificate of Incorporation restates and further
amends the Restated Certificate of Incorporation of this corporation by
restating the text of the original Restated Certificate of Incorporation in
full to read as follows:
I.
The name of this Corporation is Evoke Incorporated (the "Corporation"
or the "Company").
II.
The address, including street, number, city and county, of the
registered office of the Corporation in the State of Delaware is ________,
City of Wilmington, County of New Castle, and the name of the registered
agent of the Corporation in the State of Delaware at such address is The
Corporation Trust Company.
III.
The purpose of this Corporation is to engage in any lawful act or
activity for which a corporation may be organized under the General
Corporation Law of the State of Delaware.
IV.
A. This corporation is authorized to issue two classes of stock to be
designated, respectively, "Common Stock" and "Preferred Stock." The total
number of shares which the Corporation is authorized to issue is two
hundred ten million (210,000,000) shares. Two hundred million (200,000,000)
shares shall be Common Stock, each having a par
1.
value of $.001. Ten million (10,000,000) shares shall be Preferred Stock,
each having a par value of $.001.
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, by filing a
certificate (a "Preferred Stock Designation") pursuant to the Delaware
General Corporation Law ("DGCL"), to fix or alter from time to time the
designation, powers, preferences and rights of the shares of each such
series and the qualifications, limitations or restrictions of any wholly
unissued series of Preferred Stock, and to establish from time to time the
number of shares constituting any such series or any of them; and to
increase or decrease the number of shares of any series subsequent to the
issuance of shares of that series, but not below the number of shares of
such series then outstanding. In case the number of shares of any series
shall be decreased in accordance with the foregoing sentence, the shares
constituting such decrease shall resume the status that they had prior to
the adoption of the resolution originally fixing the number of shares of
such series.
V.
For the management of the business and for the conduct of the affairs
of the corporation, and in further definition, limitation and regulation of
the powers of the corporation, of its directors and of its stockholders or
any class thereof, as the case may be, it is further provided that:
A. 1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. The number of
directors which shall constitute the whole Board of Directors shall be
fixed exclusively by one or more resolutions adopted by the Board of
Directors.
2. Board of Directors
Subject to the rights of the holders of any series of Preferred Stock
to elect additional directors under specified circumstances, the directors
shall be divided into three classes designated as Class I, Class II and
Class III, respectively. Directors shall be assigned to each class in
accordance with a resolution or resolutions adopted by the Board of
Directors. At the first annual meeting of stockholders following the
adoption and filing of this Certificate of Incorporation, the term of
office of the Class I directors shall expire and Class I directors shall be
elected for a full term of three years. At the second annual meeting of
stockholders following the adoption and filing of this Certificate of
Incorporation, the term of office of the Class II directors shall expire
and Class II directors shall be elected for a full term of three years. At
the third annual meeting of stockholders following the adoption and filing
of this Certificate of Incorporation, the term of office of the Class III
directors shall expire and Class III directors shall be elected for a full
term of three years. At each succeeding annual meeting of stockholders,
directors shall be elected for a full term of three years to succeed the
directors of the class whose terms expire at such annual meeting.
2.
Notwithstanding the foregoing provisions of this section, each
director shall serve until his successor is duly elected and qualified or
until his death, resignation or removal. No decrease in the number of
directors constituting the Board of Directors shall shorten the term of any
incumbent director.
3. Removal of Directors
a. Subject to the rights of any series of Preferred Stock, neither
the Board of Directors nor any individual director may be removed without
cause.
b. Subject to any limitation imposed by law, any individual director
or directors may be removed with cause by the holders of a majority of the
voting power of the corporation entitled to vote at an election of
directors.
4. Vacancies
a. Subject to the rights of the holders of any series of Preferred
Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly
created directorships resulting from any increase in the number of
directors, shall, unless the Board of Directors determines by resolution
that any such vacancies or newly created directorships shall be filled by
the stockholders, except as otherwise provided by law, be filled only by
the affirmative vote of a majority of the directors then in office, even
though less than a quorum of the Board of Directors, and not by the
stockholders. Any director elected in accordance with the preceding
sentence shall hold office for the remainder of the full term of the
director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
b. If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a
majority of the whole board (as constituted immediately prior to any such
increase), the Delaware Court of Chancery may, upon application of any
stockholder or stockholders holding at least ten percent (10%) of the total
number of the shares at the time outstanding having the right to vote for
such directors, summarily order an election to be held to fill any such
vacancies or newly created directorships, or to replace the directors
chosen by the directors then in offices as aforesaid, which election shall
be governed by Section 211 of the DGCL.
B.
1. Bylaw Amendments
Subject to paragraph (h) of Section 43 of the Bylaws, the Bylaws may
be altered or amended or new Bylaws adopted by the affirmative vote of at
least sixty-six and two-thirds percent (66-2/3%) of the voting power of all
of the then-outstanding shares of the voting stock of the corporation
entitled to vote. The Board of Directors shall also have the power to
adopt, amend, or repeal Bylaws.
3.
2. The directors of the corporation need not be elected by written
ballot unless the Bylaws so provide.
3. No action shall be taken by the stockholders of the corporation
except at an annual or special meeting of stockholders called in accordance
with the Bylaws.
4. Advance notice of stockholder nominations for the election of
directors and of business to be brought by stockholders before any meeting
of the stockholders of the corporation shall be given in the manner
provided in the Bylaws of the corporation.
VI.
A. The liability of the directors for monetary damages shall be
eliminated to the fullest extent under applicable law.
B. Any repeal or modification of this Article VI shall be prospective
and shall not affect the rights under this Article VI in effect at the time
of the alleged occurrence of any act or omission to act giving rise to
liability or indemnification.
VII.
A. The corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, except as provided in
paragraph B. of this Article VII, and all rights conferred upon the
stockholders herein are granted subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser
vote or no vote, but in addition to any affirmative vote of the holders of
any particular class or series of the Voting Stock required by law, this
Certificate of Incorporation or any Preferred Stock Designation, the
affirmative vote of the holders of at least sixty-six and two-thirds
percent (66-2/3%) of the voting power of all of the then-outstanding shares
of the voting stock, voting together as a single class, shall be required
to alter, amend or repeal Articles V, VI and VII.
In Witness Whereof, this Certificate has been subscribed this ____ day
of __________, 2000 by the undersigned who affirms that the statements made
herein are true and correct.
Paul A. Berberian
4.
Exhibit 3.3
AMENDED AND RESTATED BYLAWS
OF
VSTREAM INCORPORATED,
a Delaware corporation
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office shall be at the office
of Corporation Service Company, 1013 Centre Road, County of New Castle,
Wilmington, Delaware, 19805.
Section 2. Other Offices. The corporation may also have offices at such
other places both within and without the State of Delaware as the Board of
Directors may on an annual basis determine or the business of the corporation
may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. Annual Meeting. An annual meeting of the stockholders for the
election of directors shall be held at such place either within or without the
State of Delaware as shall be designated on an annual basis by the Board of
Directors and stated in the notice of the meeting. Meetings of stockholders for
any other purpose may be held at such time and place, within or without the
State of Delaware, as shall be stated in the notice of the meeting or in a duly
executed waiver of notice thereof. Annual meetings need not be held each year.
Section 2. Notice of Annual Meeting. Written notice of the annual meeting
stating the place, date and hour of the meeting shall be given to each
stockholder entitled to vote at such meeting not less than ten (10) nor more
than sixty (60) days before the date of the meeting.
Section 3. Voting List. The officer who has charge of the stock ledger of
the corporation shall prepare and make, or cause a third party to prepare and
make, at least ten (10) days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten (10) days prior to
the meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 4. Special Meetings. Special meetings of the stockholders of this
corporation, for any purpose or purposes, unless otherwise prescribed by statute
or by the Certificate of Incorporation, shall be called by the President or
Secretary at the request in writing of the President, a majority of the members
of the Board of Directors or holders of at least 20% of the total voting power
of all outstanding shares of stock of this corporation then entitled to vote,
and may not be called absent such a request. Such request shall state the
purpose or purposes of the proposed meeting.
Section 5. Notice of Special Meetings. As soon as reasonably practicable
after receipt of a request as provided in Section 4 of this Article II, written
notice of a special meeting, stating the place, date (which shall be not less
than ten (10) nor more than sixty (60) days from the date of the notice) and
hour of the special meeting and the purpose or purposes for which the special
meeting is called, shall be given to each stockholder entitled to vote at such
special meeting.
Section 6. Scope of Business at Special Meeting. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in the
notice.
Section 7. Quorum. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business, except as otherwise provided by statute or by the
Certificate of Incorporation. If, however, such quorum shall not be present or
represented at any meeting of the stockholders, the chairman of the meeting or
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting as provided in Section 5
of this Article II.
Section 8. Qualifications to Vote. The stockholders of record on the books
of the corporation at the close of business on the record date as determined by
the Board of Directors and only such stockholders shall be entitled to vote at
any meeting of stockholders or any adjournment thereof.
Section 9. Record Date. The Board of Directors may fix a record date for
the determination of the stockholders entitled to notice of or to vote at any
stockholders' meeting and at any adjournment thereof, and to fix a record date
for any other purpose. The record date shall not be more than sixty (60) nor
less than ten (10) days before the date of such meeting. If no record date is
fixed by the Board of Directors, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given, or
if notice is waived, at the close of business on the day next preceding the day
on which the meeting is held. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply
2
to any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
Section 10. Action at Meetings. When a quorum is present at any meeting,
the vote of the holders of a majority of the stock having voting power present
in person or represented by proxy shall decide any question brought before such
meeting, unless the question is one upon which by express provision of
applicable law or of the Certificate of Incorporation, a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
Section 11. Voting and Proxies. Unless otherwise provided in the
Certificate of Incorporation, each stockholder shall at every meeting of the
stockholders be entitled to one (1) vote in person or by proxy for each share of
the capital stock having voting power held by such stockholder, but no proxy
shall be voted on after three (3) years from its date, unless the proxy provides
for a longer period. Each proxy shall be revocable unless expressly provided
therein to be irrevocable and unless it is coupled with an interest sufficient
in law to support an irrevocable power
Section 12. Nominations for Board of Directors. Nominations for election to
the Board of Directors must be made by the Board of Directors or by any
stockholder of any outstanding class of capital stock of the corporation
entitled to vote for the election of directors. Nominations, other than those
made by the Board of Directors of the corporation, must be preceded by
notification in writing in fact received by the Secretary of the corporation not
less than sixty (60) days prior to any meeting of stockholders called for the
election of directors. Such notification shall contain the written consent of
each proposed nominee to serve as a director if so elected and the following
information as to each proposed nominee and as to each person, acting alone or
in conjunction with one or more other persons as a partnership, limited
partnership, syndicate or other group, who participates or is expected to
participate in making such nomination or in organizing, directing or financing
such nomination or solicitation of proxies to vote for the nominee:
(a) the name, age, residence, address, and business address of each
proposed nominee and of each such person;
(b) the principal occupation or employment, the name, type of business
and address of the corporation or other organization in which such
employment is carried on of each proposed nominee and of each such person;
(c) the amount of stock of the corporation owned beneficially, either
directly or indirectly, by each proposed nominee and each such person; and
(d) a description of any arrangement or understanding of each proposed
nominee and of each such person with each other or any other person
regarding future employment or any future transaction to which the
corporation will or may be a party.
3
The presiding officer of the meeting shall have the authority to determine
and declare to the meeting that a nomination not preceded by notification made
in accordance with the foregoing procedure shall be disregarded.
Section 13. Consent of Stockholders in Lieu of Meeting. Any action required
to be taken, or which may be taken, at any annual or special meeting of
stockholders may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of outstanding stock having not less that the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and voted.
Section 14. Notice to Stockholders Not Consenting. Prompt notice of the
taking of corporate action without a meeting by less than unanimous consent
shall be given in writing to those stockholders who have not consented in
writing. In the event that the action which is consented to is such as would
have required the filing of a certificate under any Section of the General
Corporation Law of the State of Delaware if such action had been voted on by the
stockholders at a meeting thereof, the certificate filed under such other
Section shall state, in lieu of any statement required by such Section
concerning any vote of stockholders, that written consent has been given in
accordance with the provisions of said Section and that written notice to
non-consenting stockholders has been given as provided in this Bylaw.
Section 15. Stockholder Proposals for Meetings. At any meeting of the
stockholders, only such business shall be conducted as shall be properly before
the meeting. To be properly before a meeting, business must be (a) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (b) otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or (c) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
a meeting by a stockholder, the stockholder must have given timely notice
thereof in writing to the Secretary. To be timely, a stockholder's notice must
be delivered to or mailed and received at the principal place of business of the
corporation not less than thirty (30) days nor more than sixty (60) days prior
to the meeting; provided, however, that in the event that less than forty (40)
days notice or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be received
not later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made. A stockholder's written notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the meeting (a) a brief
description of the business desired to be brought before the meeting and the
reasons for conducting such business at the meeting, (b) the name and address as
they appear on the corporation's books of the stockholder proposing such
business, (c) the class and number of shares of the corporation which are
beneficially owned by such stockholder, and (d) any material interest of such
stockholder in such business. Notwithstanding anything in these Bylaws to the
contrary, no business shall be conducted at a meeting unless properly brought
before such meeting in accordance with the procedures set forth in this Section
15 of Article II. The chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the provisions of this Section 15 of
Article II and if it shall be so determined, the chairman of the meeting shall
so
4
declare this to the meeting and such business not properly brought before the
meeting shall not be transacted.
ARTICLE III
DIRECTORS
Section 1. Powers. The business of the corporation shall be managed by or
under the direction of its Board of Directors, which may exercise all such
powers of the corporation and do all such lawful acts and things as are not by
applicable law or by the Certificate of Incorporation or by these Bylaws
directed or required to be exercised or done by the stockholders.
Section 2. Number; Election; Tenure and Qualification. The number of
directors which shall constitute the whole Board of Directors shall be fixed
from time to time by resolution of the Board of Directors or by the Stockholders
at an annual meeting of the Stockholders provided that the number of directors
shall be not less than one (1). With the exception of the first Board of
Directors, which shall be elected by the incorporator, and except as provided in
the corporation's Certificate of Incorporation or in Section 3 of this Article
III, the directors shall be elected at the annual meeting of the stockholders by
a plurality vote of the shares represented in person or by proxy and each
director elected shall hold office until his successor is elected and qualified
unless he shall resign, become disqualified, disabled, or otherwise removed.
Directors need not be stockholders.
Section 3. Vacancies and Newly Created Directorships. Unless otherwise
provided in the Certificate of Incorporation, vacancies and newly-created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors then in office, though less than a
quorum, or by a sole remaining director. The directors so chosen shall serve for
the remainder of the term of the vacated directorships being filled and until
their successors are duly elected and shall qualify, unless sooner displaced. If
there are no directors in office, then an election of directors may be held in
the manner provided by statute.
Section 4. Location of Meetings. The Board of Directors of the corporation
may hold meetings, both regular and special, either within or without the State
of Delaware.
Section 5. Meeting of Newly Elected Board of Directors. The first meeting
of each newly elected Board of Directors shall be held immediately following the
annual meeting of stockholders and no notice of such meeting shall be necessary
to the newly elected directors in order legally to constitute the meeting,
provided a quorum shall be present. In the event such meeting is not held at
such time, the meeting may be held at such time and place as shall be specified
in a notice given as hereinafter provided for special meetings of the Board of
Directors, or as shall be specified in a written waiver signed by all of the
directors.
Section 6. Regular Meetings. Regular meetings of the Board of Directors may
be held upon at least seven (7) days prior written notice at such time and at
such place as shall from time to time be determined by the Board of Directors;
provided that any director who is absent
5
when such a determination is made shall be given notice of such location. Notice
may be waived in accordance with Section 229 of the Delaware General Corporation
Law.
Section 7. Special Meetings. Special meetings of the Board of Directors may
be called by the President on seven (7) days' notice to each director by mail or
two (2) days' notice to each director by overnight courier service or facsimile;
special meetings shall be called by the President or Secretary in a like manner
and on like notice on the written request of two (2) directors unless the Board
of Directors consists of only one (1) director, in which case special meetings
shall be called by the President or Secretary in a like manner and on like
notice on the written request of the sole director. Notice may be waived in
accordance with Section 229 of the Delaware General Corporation Law.
Section 8. Notice. Notice of any special meeting shall be given to each
director at least ten (10) days prior to the meeting by written notice directed
to each director at his or her place of business. Such notice shall be deemed to
have been delivered when sent by registered mail, or by confirmed telex or
telecopy, to each director at his of her business address. Neither the business
to be transacted at, nor the purpose of any regular or special meeting of the
board of Directors need be specified in the notice or waiver of notice of such
meeting. The attendance of a director at any meeting shall constitute a waiver
of notice of such meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting is not lawfully called or convened.
Section 9. Presumption of Assent. A director of the Corporation who is
present at a meeting of the Board of Directors at which action on any corporate
matter is taken shall be conclusively presumed to have assented to the action
taken, unless he or she shall file his or her written dissent to such action
with the person acting as the Secretary of the meeting before the adjournment
thereof, or shall forward such dissent by registered mail to the Secretary of
the Corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
Section 10. Quorum and Action at Meetings. At all meetings of the Board of
Directors, a majority of the directors then in office shall constitute a quorum
for the transaction of business, and the act of a majority of the directors
present at any meeting at which there is a quorum shall be the act of the Board
of Directors, except as may be otherwise specifically provided by statute or by
the Certificate of Incorporation. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum shall be present.
Section 11. Action Without a Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board of Directors or committee.
6
Section 12. Telephonic Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, members of the Board of Directors,
or any committee designated by the Board of Directors, may participate in a
meeting of the Board of Directors, or any committee, upon proper notice duly
given, by means of conference telephone or similar communications equipment by
means of which all persons participating in the meeting can hear each other, and
such participation in a meeting shall constitute presence in person at the
meeting.
Section 13. Committees. The Board of Directors may, by resolution passed by
a majority of the whole board, designate one or more committees, each committee
to consist of one (1) or more of the directors of the corporation. The Board of
Directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence of disqualification of a member of a committee,
the member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
Section 14. Committee Authority. Any such committee, to the extent provided
in the resolution of the Board of Directors, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to amending the Certificate of
Incorporation, adopting an agreement of merger or consolidation, recommending
to the stockholders the sale, lease or exchange of all or substantially all of
the corporation's property and assets, recommending to the stockholders a
dissolution of the corporation or a revocation of a dissolution, amending the
Bylaws of the corporation, or any action requiring unanimous consent of the
Board of Directors pursuant to the terms of the Certificate of Incorporation;
and, unless the resolution or the Certificate of Incorporation expressly so
provide, no such committee shall have the power or authority to declare a
dividend or to authorize the issuance of stock. Such committee or committees
shall have such name or names as may be determined from time to time by
resolution adopted by the Board of Directors.
Section 15. Committee Minutes. Each committee shall keep regular minutes of
its meetings and report the same to the Board of Directors when required.
Section 16. Directors Compensation. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, the Board of Directors shall have
the authority to fix the compensation of directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as director. No such payment shall preclude any
director from serving the corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings.
Section 17. Removal of Directors. One or more of the directors may be
removed, with or without cause, at a meeting of stockholders, by the affirmative
vote of the holders of a
7
majority of the outstanding stock then entitled to vote at an election of
directors. No director shall be removed at a meeting of stockholders unless the
notice of such meeting shall state a purpose of the meeting is to vote upon the
removal of one or more directors named in the notice. Only the named director or
directors may be removed at such meeting.
Section 18. Resignation. Any director or officer of the corporation may
resign at any time. Each such resignation shall be made in writing and shall
take effect at the time specified therein, or, if no time is specified, at the
time of its receipt by either the Board of Directors, the President or the
Secretary. The acceptance of a resignation shall not be necessary to make it
effective unless expressly so provided in the resignation.
Section 19. Chairman of the Board. The Board of Directors may, from time to
time, appoint a Chairman, who shall preside at all meetings of the stockholders
and of the Board of Directors. He shall have and may exercise such powers as
are, from time to time, assigned to him by the Board of Directors and as
provided by law.
ARTICLE IV
NOTICES
Section 1. Notice to Directors and Stockholders. Whenever, under the
provisions of the statutes or of the Certificate of Incorporation or of these
Bylaws, notice is required to be given to any director or stockholder, it shall
not be construed to mean personal notice, but such notice may be given in
writing, by mail, addressed to such director or stockholder, at his address as
it appears on the records of the corporation, with postage thereon prepaid, and
such notice shall be deemed to be given at the time when the same shall be
deposited in the United States mail. An affidavit of the Secretary or an
Assistant Secretary or of the transfer agent of the corporation that the notice
has been given shall in the absence of fraud, be prima facie evidence of the
facts stated therein. Notice to directors may also be given by telephone,
facsimile or telegram.
Section 2. Waiver. Whenever any notice is required to be given under the
provisions of the statutes or of the Certificate of Incorporation or of these
Bylaws, a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto. The written waiver need not specify the business to be
transacted at, nor the purpose of, any regular or special meeting of the
stockholders, directors, or members of a committee of directors. Attendance of a
person at a meeting shall constitute a waiver of notice of such meeting, except
when the person attends a meeting for the express purpose of objecting at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened.
ARTICLE V
OFFICERS
Section 1. Enumeration. The officers of the corporation shall be chosen by
the Board of Directors and shall be a President, a Secretary, a Treasurer or
Chief Financial Officer and such other officers with such other titles as the
Board of Directors shall determine. The Board of Directors may elect from among
its members a Chairman or Chairmen of the Board and a
8
Vice Chairman of the Board. The Board of Directors may also choose one (1) or
more VicePresidents and Assistant Secretaries. Any number of offices may be held
by the same person, unless the Certificate of Incorporation or these Bylaws
otherwise provide.
Section 2. Election. The Board of Directors at its first meeting after each
annual meeting of stockholders shall elect a President, a Secretary, a Treasurer
and such other officers with such other titles as the Board of Directors shall
determine.
Section 3. Removal. Any officer elected or appointed by the Board of
Directors may be removed by the Board of Directors whenever in its judgement the
best interests of the Corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
Section 4. Appointment of Other Agents. The Board of Directors may appoint
such other officers and agents as it shall deem necessary, who shall hold their
offices for such terms and shall exercise such powers and perform such duties as
shall be determined from time to time by the Board of Directors.
Section 5. Compensation. The salaries of all officers of the corporation
shall be fixed by the Board of Directors or a committee thereof. The salaries of
agents of the corporation shall, unless fixed by the Board of Directors, be
fixed by the President or any Vice-President of the corporation.
Section 6. Tenure. The officers of the corporation shall hold office until
their successors are chosen and qualify. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the directors of the Board of Directors. Any vacancy occurring in
any office of the corporation shall be filled by the Board of Directors.
Section 7. Chairman of the Board and Vice-Chairman of the Board. The
Chairman or Chairmen of the Board, if any, shall preside at all meetings of the
Board of Directors and of the stockholders at which he or they shall be present.
He or they shall have and may exercise such powers as are, from time to time,
assigned to him or them by the Board and as may be provided by law. In the
absence of the Chairman of the Board, the Vice Chairman of the Board, if any,
shall preside at all meetings of the Board of Directors and of the stockholders
at which he shall be present. He shall have and may exercise such powers as are,
from time to time, assigned to him by the Board of Directors and as may be
provided by law.
Section 8. President. The President shall be the Chief Executive Officer of
the corporation unless such title is assigned to another officer of the
corporation; in the absence of a Chairman and Vice Chairman of the Board, the
President shall preside as the chairman of meetings of the stockholders and the
Board of Directors; and the President shall have general and active management
of the business of the corporation and shall see that all orders and resolutions
of the Board of Directors are carried into effect. The President or any
Vice-President shall execute bonds, mortgages and other contracts requiring a
seal, under the seal of the corporation, except where required or permitted by
law to be otherwise signed and executed
9
and except where the signing and execution thereof shall be expressly delegated
by the Board of Directors to some other officer or agent of the corporation.
Section 9. Vice-President. In the absence of the President or in the event
of his inability or refusal to act, the Vice-President, if any (or in the event
there be more than one Vice-President, the Vice-Presidents in the order
designated by the Board of Directors, or in the absence of any designation, then
in the order of their election) shall perform the duties of the President, and
when so acting shall have all the powers of and be subject to all the
restrictions upon the President. The Vice-President shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
Section 10. Secretary. The Secretary shall attend all meetings of the Board
of Directors and all meetings of the stockholders and record all the proceedings
of the meetings of the corporation and of the Board of Directors in a book to be
kept for that purpose and shall perform like duties for the standing committees
when required. He shall give, or cause to be given, notice of all meetings of
the stockholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose supervision he shall be subject. He shall have custody of
the corporate seal of the corporation and he, or an Assistant Secretary, shall
have authority to affix the same to any instrument requiring it and when so
affixed, it may be attested by his signature or by the signature of such
Assistant Secretary. The Board of Directors may give general authority to any
other officer to affix the seal of the corporation and to attest the affixing by
his signature.
Section 11. Assistant Secretary. The Assistant Secretary, or if there be
more than one (1), the Assistant Secretaries in the order determined by the
Board of Directors (or if there be no such determination, then in the order of
their election) shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties and have such other powers as the
Board of Directors may from time to time prescribe.
Section 12. Treasurer. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the corporation in such depositories as may be designated by the Board of
Directors. The Treasurer shall disburse the funds of the corporation as may be
ordered by the Board of Directors, President or Chief Executive Officer, taking
proper vouchers for such disbursements, and shall render to the President, Chief
Executive Officer and the Board of Directors, at its regular meetings, or when
the Board of Directors so requires, an account of all his transactions as
Treasurer and of the financial condition of the corporation. If required by the
Board of Directors, the Treasurer shall give the corporation a bond (which shall
be renewed every six (6) years) in such sum and with such surety or sureties as
shall be satisfactory to the Board of Directors for the faithful performance of
the duties of his office and for the restoration to the corporation, in case of
his death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
10
ARTICLE VI
CAPITAL STOCK
Section 1. Certificates. Every holder of stock in the corporation shall be
entitled to have a certificate, signed by, or in the name of the corporation by,
the Chairman or Vice-Chairman of the Board of Directors, or the President or a
Vice-President and the Treasurer or the Secretary or an Assistant Secretary of
the corporation, certifying the number of shares owned by him in the
corporation. Certificates may be issued for partly paid shares and in such case
upon the face or back of the certificates issued to represent any such partly
paid shares, the total amount of the consideration to be paid therefor and the
amount paid thereon shall be specified.
Section 2. Class or Series. If the corporation shall be authorized to issue
more than one class of stock or more than one series of any class, the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate which the
corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided in Section 202 of the General Corporation Law
of Delaware, in lieu of the foregoing requirements, there may be set forth on
the face or back of the certificate which the corporation shall issue to
represent such class or series of stock, a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
Section 3. Signature. Any of or all of the signatures on the certificate
may be facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile signature has been placed upon a certificate shall
have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.
Section 4. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the corporation alleged to have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or to give the corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the corporation
with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 5. Transfer of Stock. Upon surrender to the corporation or the
transfer agent of the corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignation or authority to
transfer, it shall be the duty of the corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
11
Section 6. Record Date. In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholder or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall not be more than sixty (60) nor less than ten (10) days before the
date of such meeting, nor more than sixty (60) days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
Section 7. Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and to hold liable
for calls and assessments a person registered on its books as the owner of
shares and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Dividends. Dividends upon the capital stock of the corporation,
subject to the provisions of the Certificate of Incorporation, if any, may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Dividends may be paid in cash, in property or in shares of capital
stock, subject to the provisions of the Certificate of Incorporation. Before
payment of any dividend, there may be set aside out of any funds of the
corporation available for dividends such sum or sums as the Board of Directors
from time to time, in their absolute discretion, think proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the corporation, or for such other purposes as the
Board of Directors shall think conducive to the interest of the corporation, and
the Board of Directors may modify or abolish any such reserve in the manner in
which it was created.
Section 2. Checks. All checks or demands for money and notes of the
corporation shall be signed by such officer or officers or such other person or
persons as the Board of Directors may from time to time designate.
Section 3. Deposits. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks, trust companies or other deposits as the Board of Directors may select.
Section 4. Fiscal Year. The fiscal year of the corporation shall be fixed
by resolution of the Board of Directors.
Section 5. Seal. The Board of Directors may adopt a corporate seal having
inscribed thereon the name of the corporation, the year of its organization and
the words "Corporate Seal,
12
Delaware". The seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
Section 6. Loans. The Board of Directors of this corporation may, without
stockholder approval, authorize loans to, or guaranty obligations of, or
otherwise assist, including, without limitation, the adoption of employee
benefit plans under which loans and guarantees may be made, any officer or other
employee of the corporation or of its subsidiary, including any officer or
employee who is a director of the corporation or its subsidiary, whenever, in
the judgment of the Board of Directors, such loan, guaranty or assistance may
reasonably be expected to benefit the corporation. The loan, guaranty or other
assistance may be with or without interest, and may be unsecured, or secured in
such manner as the Board of Directors shall approve, including, without
limitation, a pledge of shares of stock of the corporation.
Section 7. Contracts. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instrument in the name and on behalf of the Corporation, and such authority may
be general or confirmed to specified instances.
Section 8. Waiver of Notice. Whenever any notice whatever is required to be
given by law, the Certificate of Incorporation or under the provisions of these
Bylaws, a written waiver thereof, signed by the person or persons entitled to
such notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
Section 9. Headings. Articles or section headings are inserted herein only
for convenience of reference and shall not be considered in the construction of
any provision hereof.
ARTICLE VIII
INDEMNIFICATION
Section 1. Scope. The corporation shall, to the fullest extent permitted by
Section 145 of the Delaware General Corporation Law, as that Section may be
amended and supplemented from time to time, indemnify any director, officer,
employee or agent of the corporation, against expenses (including attorneys'
fees), judgments, fines, amounts paid in settlement and/or other matters
referred to in or covered by that Section, by reason of the fact that he is or
was a director, officer, employee or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise.
Section 2. Advancing Expenses. Expenses incurred by a director of the
corporation in defending a civil or criminal action, suit or proceeding by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation (or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise) shall be paid by the corporation in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director to repay such amount if it shall
ultimately be determined that he is not entitled to be indemnified by the
corporation as authorized by relevant provisions of the Delaware General
13
Corporation Law; provided, however, the corporation shall not be required to
advance such expenses to a director (i) who commences any action, suit or
proceeding as a plaintiff unless such advance is specifically approved by a
majority of the Board of Directors, or (ii) who is a party to an action, suit or
proceeding brought by the corporation and approved by a majority of the Board of
Directors which alleges willful misappropriation of corporate assets by such
director, disclosure of confidential information in violation of such director's
fiduciary or contractual obligations to the corporation, or any other willful
and deliberate breach in bad faith of such director's duty to the corporation or
its stockholders.
Section 3. Liability Offset. The corporation's obligation to provide
indemnification under this Article VIII shall be offset to the extent the
indemnified party is indemnified by any other source including, but not limited
to, any applicable insurance coverage under a policy maintained by the
corporation, the indemnified party or any other person.
Section 4. Continuing Obligation. The provisions of this Article VIII shall
be deemed to be a contract between the corporation and each director of the
corporation who serves in such capacity at any time while this bylaw is in
effect, and any repeal or modification thereof shall not affect any rights or
obligations then existing with respect to any state of facts then or theretofore
existing or any action, suit or proceeding theretofore or thereafter brought
based in whole or in part upon any such state of facts.
Section 5. Nonexclusive. The indemnification and advancement of expenses
provided for in this Article VIII shall (i) not be deemed exclusive of any other
rights to which those indemnified may be entitled under any by-law, agreement or
vote of stockholders or disinterested directors or otherwise, both as to action
in their official capacities and as to action in another capacity while holding
such office, (ii) continue as to a person who has ceased to be a director and
(iii) inure to the benefit of the heirs, executors and administrators of such a
person.
Section 6. Other Persons. In addition to the indemnification rights of
directors, officers, employees, or agents of the corporation, the Board of
Directors in its discretion shall have the power on behalf of the corporation to
indemnify any other person made a party to any action, suit or proceeding who
the corporation may indemnify under Section 145 of the Delaware General
Corporation Law.
Section 7. Definitions. The phrases and terms set forth in this Article
VIII shall be given the same meaning as the identical terms and phrases are
given in Section 145 of the Delaware General Corporation Law, as that Section
may be amended and supplemented from time to time.
ARTICLE IX
AMENDMENTS
Except as otherwise provided in the Certificate of Incorporation, these
Bylaws may be altered, amended or repealed, or new Bylaws may be adopted, by the
holders of a majority of the outstanding voting shares or by the Board of
Directors, when such power is conferred upon the Board of Directors by the
Certificate of Incorporation, at any regular meeting of the
14
stockholders or of the Board of Directors or at any special meeting of the
stockholders or of the Board of Directors if notice of such alteration,
amendment, repeal or adoption of new Bylaws be contained in the notice of such
special meeting. If the power to adopt, amend or repeal Bylaws is conferred upon
the Board of Directors by the Certificate of Incorporation, it shall not divest
or limit the power of the stockholders to adopt, amend or repeal Bylaws.
15
CERTIFICATE OF SECRETARY
The undersigned certifies:
(1) That the undersigned is the duly elected and acting Secretary of
VStream Incorporated, a Delaware corporation (the "Corporation"); and
(2) That the foregoing Bylaws constitute the Amended and Restated Bylaws of
the Corporation as duly adopted by the Action by Written Consent dated the 22nd
day of July, 1997.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal
of the Corporation as of this 22nd day of July, 1997.
/s/ James M. LeJeal
------------------------------
James M. LeJeal, Secretary
[SEAL]
16
EXHIBIT 3.4
FORM OF AMENDED AND RESTATED BYLAWS
OF
EVOKE INCORPORATED
(A DELAWARE CORPORATION)
FORM OF AMENDED AND RESTATED BYLAWS
OF
EVOKE INCORPORATED
(A DELAWARE CORPORATION)
ARTICLE I
Offices
Section 1. Registered Office. The registered office of the corporation in
the State of Delaware shall be in the City of Wilmington, County of New Castle.
Section 2. Other Offices. The corporation shall also have and maintain an
office or principal place of business at such place as may be fixed by the Board
of Directors, and may also have offices at such other places, both within and
without the State of Delaware as the Board of Directors may from time to time
determine or the business of the corporation may require.
ARTICLE II
Corporate Seal
Section 3. Corporate Seal. The corporate seal shall consist of a die
bearing the name of the corporation and the inscription, "Corporate Seal-
Delaware." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or reproduced or otherwise.
ARTICLE III
Stockholders' Meetings
Section 4. Place Of Meetings. Meetings of the stockholders of the
corporation shall be held at such place, either within or without the State of
Delaware, as may be designated from time to time by the Board of Directors, or,
if not so designated, then at the office of the corporation required to be
maintained pursuant to Section 2 hereof.
Section 5. Annual Meetings.
(a) The annual meeting of the stockholders of the corporation, for
the purpose of election of directors and for such other business as may lawfully
come before it, shall be held on such date and at such time as may be designated
from time to time by the Board of Directors. Nominations of persons for election
to the Board of Directors of the corporation and the proposal of business to be
considered by the stockholders may be made at an annual meeting of stockholders:
(i) pursuant to the corporation's notice of meeting of stockholders; (ii) by or
at the direction of the Board of Directors; or (iii) by any stockholder of the
corporation who was a stockholder of record at the time of giving of notice
provided for in the following paragraph,
1.
who is entitled to vote at the meeting and who complied with the notice
procedures set forth in Section 5.
(b) At an annual meeting of the stockholders, only such business
shall be conducted as shall have been properly brought before the meeting. For
nominations or other business to be properly brought before an annual meeting by
a stockholder pursuant to clause (c) of Section 5(a) of these Bylaws, (i) the
stockholder must have given timely notice thereof in writing to the Secretary of
the corporation, (ii) such other business must be a proper matter for
stockholder action under the Delaware General Corporation Law ("DGCL"), (iii) if
the stockholder, or the beneficial owner on whose behalf any such proposal or
nomination is made, has provided the corporation with a Solicitation Notice (as
defined in this Section 5(b)), such stockholder or beneficial owner must, in the
case of a proposal, have delivered a proxy statement and form of proxy to
holders of at least the percentage of the corporation's voting shares required
under applicable law to carry any such proposal, or, in the case of a nomination
or nominations, have delivered a proxy statement and form of proxy to holders of
a percentage of the corporation's voting shares reasonably believed by such
stockholder or beneficial owner to be sufficient to elect the nominee or
nominees proposed to be nominated by such stockholder, and must, in either case,
have included in such materials the Solicitation Notice, and (iv) if no
Solicitation Notice relating thereto has been timely provided pursuant to this
section, the stockholder or beneficial owner proposing such business or
nomination must not have solicited a number of proxies sufficient to have
required the delivery of such a Solicitation Notice under this Section 5. To be
timely, a stockholder's notice shall be delivered to the Secretary at the
principal executive offices of the Corporation not later than the close of
business on the ninetieth (90th) day nor earlier than the close of business on
the one hundred twentieth (120th) day prior to the first anniversary of the
preceding year's annual meeting; provided, however, that in the event that the
date of the annual meeting is advanced more than thirty (30) days prior to or
delayed by more than thirty (30) days after the anniversary of the preceding
year's annual meeting, notice by the stockholder to be timely must be so
delivered not earlier than the close of business on the one hundred twentieth
(120th) day prior to such annual meeting and not later than the close of
business on the later of the ninetieth (90th) day prior to such annual meeting
or the tenth (10th) day following the day on which public announcement of the
date of such meeting is first made. In no event shall the public announcement of
an adjournment of an annual meeting commence a new time period for the giving of
a stockholder's notice as described above. Such stockholder's notice shall set
forth: (A) as to each person whom the stockholder proposed to nominate for
election or reelection as a director all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors in an election contest, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "1934 Act") and Rule 14a-11 thereunder (including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
director if elected); (B) as to any other business that the stockholder proposes
to bring before the meeting, a brief description of the business desired to be
brought before the meeting, the reasons for conducting such business at the
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the proposal is made; and (C) as to
the stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
stockholder, as they appear on the corporation's books, and of such beneficial
owner, (ii) the class and number of shares of the corporation which are owned
beneficially and of record by such stockholder and such beneficial owner, and
(iii)
2.
whether either such stockholder or beneficial owner intends to deliver a proxy
statement and form of proxy to holders of, in the case of the proposal, at least
the percentage of the corporation's voting shares required under applicable law
to carry the proposal or, in the case of a nomination or nominations, a
sufficient number of holders of the corporation's voting shares to elect such
nominee or nominees (an affirmative statement of such intent, a "Solicitation
Notice").
(c) Notwithstanding anything in the second sentence of Section 5(b)
of these Bylaws to the contrary, in the event that the number of directors to be
elected to the Board of Directors of the Corporation is increased and there is
no public announcement naming all of the nominees for director or specifying the
size of the increased Board of Directors made by the corporation at least one
hundred (100) days prior to the first anniversary of the preceding year's annual
meeting, a stockholder's notice required by this Section 5 shall also be
considered timely, but only with respect to nominees for any new positions
created by such increase, if it shall be delivered to the Secretary at the
principal executive offices of the corporation not later than the close of
business on the tenth (10th) day following the day on which such public
announcement is first made by the corporation.
(d) Only such persons who are nominated in accordance with the
procedures set forth in this Section 5 shall be eligible to serve as directors
and only such business shall be conducted at a meeting of stockholders as shall
have been brought before the meeting in accordance with the procedures set forth
in this Section 5. Except as otherwise provided by law, the Chairman of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made, or proposed, as the
case may be, in accordance with the procedures set forth in these Bylaws and, if
any proposed nomination or business is not in compliance with these Bylaws, to
declare that such defective proposal or nomination shall not be presented for
stockholder action at the meeting and shall be disregarded.
(e) Notwithstanding the foregoing provisions of this Section 5, in
order to include information with respect to a stockholder proposal in the proxy
statement and form of proxy for a stockholder's meeting, stockholders must
provide notice as required by the regulations promulgated under the 1934 Act.
Nothing in these Bylaws shall be deemed to affect any rights of stockholders to
request inclusion of proposals in the corporation proxy statement pursuant to
Rule 14a-8 under the 1934 Act.
(f) For purposes of this Section 5, "public announcement" shall
mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the corporation with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the 1934 Act.
Section 6. Special Meetings.
(a) Special meetings of the stockholders of the corporation may be
called, for any purpose or purposes, by (i) the Chairman of the Board of
Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors
pursuant to a resolution adopted by a majority of the total number of authorized
directors (whether or not there exist any vacancies in previously authorized
directorships at the time any such resolution is presented to the Board of
Directors for adoption)
3.
(b) If a special meeting is properly called by any person or
persons other than the Board of Directors, the request shall be in writing,
specifying the general nature of the business proposed to be transacted, and
shall be delivered personally or sent by registered mail or by telegraphic or
other facsimile transmission to the Chairman of the Board of Directors, the
Chief Executive Officer, or the Secretary of the corporation. No business may be
transacted at such special meeting otherwise than specified in such notice. The
Board of Directors shall determine the time and place of such special meeting,
which shall be held not less than thirty-five (35) nor more than one hundred
twenty (120) days after the date of the receipt of the request. Upon
determination of the time and place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in
accordance with the provisions of Section 7 of these Bylaws. If the notice is
not given within one hundred (100) days after the receipt of the request, the
person or persons properly requesting the meeting may set the time and place of
the meeting and give the notice. Nothing contained in this paragraph (b) shall
be construed as limiting, fixing, or affecting the time when a meeting of
stockholders called by action of the Board of Directors may be held.
(c) Nominations of persons for election to the Board of Directors
may be made at a special meeting of stockholders at which directors are to be
elected pursuant to the corporation's notice of meeting (i) by or at the
direction of the Board of Directors or (ii) by any stockholder of the
corporation who is a stockholder of record at the time of giving notice provided
for in these Bylaws who shall be entitled to vote at the meeting and who
complies with the notice procedures set forth in this Section 6(c). In the event
the corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be), for election to such
position(s) as specified in the corporation's notice of meeting, if the
stockholder's notice required by Section 5(b) of these Bylaws shall be delivered
to the Secretary at the principal executive offices of the corporation not
earlier than the close of business on the one hundred twentieth (120th) day
prior to such special meeting and not later than the close of business on the
later of the ninetieth (90th) day prior to such meeting or the tenth (10th) day
following the day on which public announcement is first made of the date of the
special meeting and of the nominees proposed by the Board of Directors to be
elected at such meeting. In no event shall the public announcement of an
adjournment of a special meeting commence a new time period for the giving of a
stockholder's notice as described above.
Section 7. Notice Of Meetings. Except as otherwise provided by law or the
Certificate of Incorporation, written notice of each meeting of stockholders
shall be given not less than ten (10) nor more than sixty (60) days before the
date of the meeting to each stockholder entitled to vote at such meeting, such
notice to specify the place, date and hour and purpose or purposes of the
meeting. Notice of the time, place and purpose of any meeting of stockholders
may be waived in writing, signed by the person entitled to notice thereof,
either before or after such meeting, and will be waived by any stockholder by
his attendance thereat in person or by proxy, except when the stockholder
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Any stockholder so waiving notice of such meeting shall be
bound by the proceedings of any such meeting in all respects as if due notice
thereof had been given.
4.
Section 8. Quorum. At all meetings of stockholders, except where
otherwise provided by statute or by the Certificate of Incorporation, or by
these Bylaws, the presence, in person or by proxy duly authorized, of the
holders of a majority of the outstanding shares of stock entitled to vote shall
constitute a quorum for the transaction of business. In the absence of a quorum,
any meeting of stockholders may be adjourned, from time to time, either by the
chairman of the meeting or by vote of the holders of a majority of the shares
represented thereat, but no other business shall be transacted at such meeting.
The stockholders present at a duly called or convened meeting, at which a quorum
is present, may continue to transact business until adjournment, notwithstanding
the withdrawal of enough stockholders to leave less than a quorum. Except as
otherwise provided by statute, the Certificate of Incorporation or these Bylaws,
in all matters other than the election of directors, the affirmative vote of the
majority of shares present in person or represented by proxy at the meeting and
entitled to vote on the subject matter shall be the act of the stockholders.
Except as otherwise provided by statute, the Certificate of Incorporation or
these Bylaws, directors shall be elected by a plurality of the votes of the
shares present in person or represented by proxy at the meeting and entitled to
vote on the election of directors. Where a separate vote by a class or classes
or series is required, except where otherwise provided by the statute or by the
Certificate of Incorporation or these Bylaws, a majority of the outstanding
shares of such class or classes or series, present in person or represented by
proxy, shall constitute a quorum entitled to take action with respect to that
vote on that matter and, except where otherwise provided by the statute or by
the Certificate of Incorporation or these Bylaws, the affirmative vote of the
majority (plurality, in the case of the election of directors) of the votes cast
by the holders of shares of such class or classes or series shall be the act of
such class or classes or series.
Section 9. Adjournment And Notice Of Adjourned Meetings. Any meeting of
stockholders, whether annual or special, may be adjourned from time to time
either by the chairman of the meeting or by the vote of a majority of the shares
casting votes. When a meeting is adjourned to another time or place, notice
need not be given of the adjourned meeting if the time and place thereof are
announced at the meeting at which the adjournment is taken. At the adjourned
meeting, the corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 10. Voting Rights. For the purpose of determining those
stockholders entitled to vote at any meeting of the stockholders, except as
otherwise provided by law, only persons in whose names shares stand on the stock
records of the corporation on the record date, as provided in Section 12 of
these Bylaws, shall be entitled to vote at any meeting of stockholders. Every
person entitled to vote shall have the right to do so either in person or by an
agent or agents authorized by a proxy granted in accordance with Delaware law.
An agent so appointed need not be a stockholder. No proxy shall be voted after
three (3) years from its date of creation unless the proxy provides for a longer
period.
Section 11. Joint Owners Of Stock. If shares or other securities having
voting power stand of record in the names of two (2) or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common, tenants
by the entirety, or otherwise, or if two (2) or more persons have the same
fiduciary relationship respecting the same shares, unless the
5.
Secretary is given written notice to the contrary and is furnished with a copy
of the instrument or order appointing them or creating the relationship wherein
it is so provided, their acts with respect to voting shall have the following
effect: (a) if only one (1) votes, his act binds all; (b) if more than one (1)
votes, the act of the majority so voting binds all; (c) if more than one (1)
votes, but the vote is evenly split on any particular matter, each faction may
vote the securities in question proportionally, or may apply to the Delaware
Court of Chancery for relief as provided in the DGCL, Section 217(b). If the
instrument filed with the Secretary shows that any such tenancy is held in
unequal interests, a majority or even-split for the purpose of subsection (c)
shall be a majority or even-split in interest.
Section 12. List Of Stockholders. The Secretary shall prepare and make,
at least ten (10) days before every meeting of stockholders, a complete list of
the stockholders entitled to vote at said meeting, arranged in alphabetical
order, showing the address of each stockholder and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not
specified, at the place where the meeting is to be held. The list shall be
produced and kept at the time and place of meeting during the whole time thereof
and may be inspected by any stockholder who is present.
Section 13. Action Without Meeting. No action shall be taken by the
stockholders except at an annual or special meeting of stockholders called in
accordance with these Bylaws, and no action shall be taken by the stockholders
by written consent.
Section 14. Organization.
(a) At every meeting of stockholders, the Chairman of the Board of
Directors, or, if a Chairman has not been appointed or is absent, the President,
or, if the President is absent, a chairman of the meeting chosen by a majority
in interest of the stockholders entitled to vote, present in person or by proxy,
shall act as chairman. The Secretary, or, in his absence, an Assistant Secretary
directed to do so by the President, shall act as secretary of the meeting.
(b) The Board of Directors of the corporation shall be entitled to
make such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations of the Board of Directors, if any, the chairman of the meeting shall
have the right and authority to prescribe such rules, regulations and procedures
and to do all such acts as, in the judgment of such chairman, are necessary,
appropriate or convenient for the proper conduct of the meeting, including,
without limitation, establishing an agenda or order of business for the meeting,
rules and procedures for maintaining order at the meeting and the safety of
those present, limitations on participation in such meeting to stockholders of
record of the corporation and their duly authorized and constituted proxies and
such other persons as the chairman shall permit, restrictions on entry to the
meeting after the time fixed for the commencement thereof, limitations on the
time allotted to questions or comments by participants and regulation of the
opening and closing of the polls for balloting on matters which are to be voted
on by ballot. Unless and to the extent determined by
6.
the Board of Directors or the chairman of the meeting, meetings of stockholders
shall not be required to be held in accordance with rules of parliamentary
procedure.
ARTICLE IV
Directors
Section 15. Number And Term Of Office. The authorized number of directors
of the corporation shall be fixed in accordance with the Certificate of
Incorporation. Directors need not be stockholders unless so required by the
Certificate of Incorporation. If for any cause, the directors shall not have
been elected at an annual meeting, they may be elected as soon thereafter as
convenient at a special meeting of the stockholders called for that purpose in
the manner provided in these Bylaws.
Section 16. Powers. The powers of the corporation shall be exercised, its
business conducted and its property controlled by the Board of Directors, except
as may be otherwise provided by statute or by the Certificate of Incorporation.
Section 17. Classes of Directors. Subject to the rights of the holders of
any series of Preferred Stock to elect additional directors under specified
circumstances, the directors shall be divided into three classes designated as
Class I, Class II and Class III, respectively. Directors shall be assigned to
each class in accordance with a resolution or resolutions adopted by the Board
of Directors. At the first annual meeting of stockholders following the
adoption and filing of the Certificate of Incorporation providing for a
classified Board of Directors, the term of office of the Class I directors shall
expire and Class I directors shall be elected for a full term of three years.
At the second annual meeting of stockholders following the adoption and filing
of the Certificate of Incorporation providing for a classified Board of
Directors, the term of office of the Class II directors shall expire and Class
II directors shall be elected for a full term of three years. At the third
annual meeting of stockholders following the adoption and filing of the
Certificate of Incorporation providing for a classified Board of Directors, the
term of office of the Class III directors shall expire and Class III directors
shall be elected for a full term of three years. At each succeeding annual
meeting of stockholders, directors shall be elected for a full term of three
years to succeed the directors of the class whose terms expire at such annual
meeting.
Notwithstanding the foregoing provisions of this section, each director shall
serve until his successor is duly elected and qualified or until his death,
resignation or removal. No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director.
Section 18. Vacancies.
(a) Unless otherwise provided in the Certificate of Incorporation,
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other causes and any newly created directorships
resulting from any increase in the number of directors shall, unless the Board
of Directors determines by resolution that any such vacancies or newly created
directorships shall be filled by stockholders, be filled only by the affirmative
vote
7.
of a majority of the directors then in office, even though less than a quorum of
the Board of Directors. Any director elected in accordance with the preceding
sentence shall hold office for the remainder of the full term of the director
for which the vacancy was created or occurred and until such director's
successor shall have been elected and qualified. A vacancy in the Board of
Directors shall be deemed to exist under this Section 18 in the case of the
death, removal or resignation of any director.
(b) If at the time of filling any vacancy or any newly created
directorship, the directors then in office shall constitute less than a majority
of the whole board (as constituted immediately prior to any such increase), the
Delaware Court of Chancery may, upon application of any stockholder or
stockholders holding at least ten percent (10%) of the total number of the
shares at the time outstanding having the right to vote for such directors,
summarily order an election to be held to fill any such vacancies or newly
created directorships, or to replace the directors chosen by the directors then
in offices as aforesaid, which election shall be governed by Section 211 of the
DGCL.
Section 19. Resignation. Any director may resign at any time by
delivering his written resignation to the Secretary, such resignation to specify
whether it will be effective at a particular time, upon receipt by the Secretary
or at the pleasure of the Board of Directors. If no such specification is made,
it shall be deemed effective at the pleasure of the Board of Directors. When one
or more directors shall resign from the Board of Directors, effective at a
future date, a majority of the directors then in office, including those who
have so resigned, shall have power to fill such vacancy or vacancies, the vote
thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office for the unexpired
portion of the term of the Director whose place shall be vacated and until his
successor shall have been duly elected and qualified.
Section 20. Removal.
(a) Neither the Board of Directors nor any individual director may
be removed without cause.
(b) Subject to any limitation imposed by law, any individual
director or directors may be removed with cause by the affirmative vote of a
majority of the voting power of the corporation entitled to vote at an election
of directors.
Section 21. Meetings.
(a) Annual Meetings. The annual meeting of the Board of Directors
shall be held immediately before or after the annual meeting of stockholders and
at the place where such meeting is held. No notice of an annual meeting of the
Board of Directors shall be necessary and such meeting shall be held for the
purpose of electing officers and transacting such other business as may lawfully
come before it.
(b) Regular Meetings. Unless otherwise restricted by the
Certificate of Incorporation, regular meetings of the Board of Directors may be
held at any time or date and at any place within or without the State of
Delaware which has been designated by the Board of
8.
Directors and publicized among all directors. No formal notice shall be required
for regular meetings of the Board of Directors.
(c) Special Meetings. Unless otherwise restricted by the
Certificate of Incorporation, special meetings of the Board of Directors may be
held at any time and place within or without the State of Delaware whenever
called by the Chairman of the Board, the President or any two of the directors
(d) Telephone Meetings. Any member of the Board of Directors,
or of any committee thereof, may participate in a meeting by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
by such means shall constitute presence in person at such meeting.
(e) Notice of Meetings. Notice of the time and place of all
special meetings of the Board of Directors shall be orally or in writing, by
telephone, including a voice messaging system or other system or technology
designed to record and communicate messages, facsimile, telegraph or telex, or
by electronic mail or other electronic means, during normal business hours, at
least twenty-four (24) hours before the date and time of the meeting, or sent in
writing to each director by first class mail, charges prepaid, at least three
(3) days before the date of the meeting. Notice of any meeting may be waived in
writing at any time before or after the meeting and will be waived by any
director by attendance thereat, except when the director attends the meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened.
(f) Waiver of Notice. The transaction of all business at any
meeting of th Board of Directors, or any committee thereof, however called or
noticed, or wherever held, shall be as valid as though had at a meeting duly
held after regular call and notice, if a quorum be present and if, either before
or after the meeting, each of the directors not present shall sign a written
waiver of notice. All such waivers shall be filed with the corporate records or
made a part of the minutes of the meeting.
Section 22. Quorum And Voting.
(a) Unless the Certificate of Incorporation requires a greater
number and except with respect to indemnification questions arising under
Section 43 hereof, for which a quorum shall be one-third of the exact number of
directors fixed from time to time in accordance with the Certificate of
Incorporation, a quorum of the Board of Directors shall consist of a majority of
the exact number of directors fixed from time to time by the Board of Directors
in accordance with the Certificate of Incorporation; provided, however, at any
meeting whether a quorum be present or otherwise, a majority of the directors
present may adjourn from time to time until the time fixed for the next regular
meeting of the Board of Directors, without notice other than by announcement at
the meeting.
(b) At each meeting of the Board of Directors at which a quorum
is present, all questions and business shall be determined by the affirmative
vote of a majority of the
9.
directors present, unless a different vote be required by law, the Certificate
of Incorporation or these Bylaws.
Section 23. Action Without Meeting. Unless otherwise restricted by the
Certificate of Incorporation or these Bylaws, any action required or permitted
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting, if all members of the Board of Directors or
committee, as the case may be, consent thereto in writing, and such writing or
writings are filed with the minutes of proceedings of the Board of Directors or
committee.
Section 24. Fees And Compensation. Directors shall be entitled to such
compensation for their services as may be approved by the Board of Directors,
including, if so approved, by resolution of the Board of Directors, a fixed sum
and expenses of attendance, if any, for attendance at each regular or special
meeting of the Board of Directors and at any meeting of a committee of the Board
of Directors. Nothing herein contained shall be construed to preclude any
director from serving the corporation in any other capacity as an officer,
agent, employee, or otherwise and receiving compensation therefor.
Section 25. Committees.
(a) Executive Committee. The Board of Directors may appoint an
Executive Committee to consist of one (1) or more members of the Board of
Directors. The Executive Committee, to the extent permitted by law and provided
in the resolution of the Board of Directors shall have and may exercise all the
powers and authority of the Board of Directors in the management of the business
and affairs of the corporation, and may authorize the seal of the corporation to
be affixed to all papers which may require it; but no such committee shall have
the power or authority in reference to (i) approving or adopting, or
recommending to the stockholders, any action or matter expressly required by the
DGCL to be submitted to stockholders for approval, or (ii) adopting, amending or
repealing any bylaw of the corporation.
(b) Other Committees. The Board of Directors may, from time to
time, appoint such other committees as may be permitted by law. Such other
committees appointed by the Board of Directors shall consist of one (1) or more
members of the Board of Directors and shall have such powers and perform such
duties as may be prescribed by the resolution or resolutions creating such
committees, but in no event shall any such committee have the powers denied to
the Executive Committee in these Bylaws.
(c) Term. Each member of a committee of the Board of Directors
shall serve a term on the committee coexistent with such member's term on the
Board of Directors. The Board of Directors, subject to any requirements of any
outstanding series of preferred Stock and the provisions of subsections (a) or
(b) of this Bylaw, may at any time increase or decrease the number of members of
a committee or terminate the existence of a committee. The membership of a
committee member shall terminate on the date of his death or voluntary
resignation from the committee or from the Board of Directors. The Board of
Directors may at any time for any reason remove any individual committee member
and the Board of Directors may fill any committee vacancy created by death,
resignation, removal or increase in the number of members of the committee. The
Board of Directors may designate one or more directors as alternate
10.
members of any committee, who may replace any absent or disqualified member at
any meeting of the committee, and, in addition, in the absence or
disqualification of any member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in the place of any such absent or disqualified
member.
(d) Meetings. Unless the Board of Directors shall otherwise
provide, regular meetings of the Executive Committee or any other committee
appointed pursuant to this Section 25 shall be held at such times and places as
are determined by the Board of Directors, or by any such committee, and when
notice thereof has been given to each member of such committee, no further
notice of such regular meetings need be given thereafter. Special meetings of
any such committee may be held at any place which has been determined from time
to time by such committee, and may be called by any director who is a member of
such committee, upon written notice to the members of such committee of the time
and place of such special meeting given in the manner provided for the giving of
written notice to members of the Board of Directors of the time and place of
special meetings of the Board of Directors. Notice of any special meeting of any
committee may be waived in writing at any time before or after the meeting and
will be waived by any director by attendance thereat, except when the director
attends such special meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. A majority of the authorized number of
members of any such committee shall constitute a quorum for the transaction of
business, and the act of a majority of those present at any meeting at which a
quorum is present shall be the act of such committee.
Section 26. Organization. At every meeting of the directors, the
Chairman of the Board of Directors, or, if a Chairman has not been appointed or
is absent, the President (if a director), or if the President is absent, the
most senior Vice President (if a director), or, in the absence of any such
person, a chairman of the meeting chosen by a majority of the directors present,
shall preside over the meeting. The Secretary, or in his absence, any Assistant
Secretary directed to do so by the President, shall act as secretary of the
meeting.
ARTICLE V
Officers
Section 27. Officers Designated. The officers of the corporation shall
include, if and when designated by the Board of Directors, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, one or more Vice
Presidents, the Secretary, the Chief Financial Officer, the Treasurer and the
Controller, all of whom shall be elected at the annual organizational meeting of
the Board of Directors. The Board of Directors may also appoint one or more
Assistant Secretaries, Assistant Treasurers, Assistant Controllers and such
other officers and agents with such powers and duties as it shall deem
necessary. The Board of Directors may assign such additional titles to one or
more of the officers as it shall deem appropriate. Any one person may hold any
number of offices of the corporation at any one time unless specifically
prohibited therefrom by law. The salaries and other compensation of the
officers of the corporation shall be fixed by or in the manner designated by the
Board of Directors.
11.
Section 28. Tenure And Duties Of Officers .
(a) General. All officers shall hold office at the pleasure of
the Board of Directors and until their successors shall have been duly elected
and qualified, unless sooner removed. Any officer elected or appointed by the
Board of Directors may be removed at any time by the Board of Directors. If the
office of any officer becomes vacant for any reason, the vacancy may be filled
by the Board of Directors.
(b) Duties of Chairman of the Board of Directors. The Chairman
of the Board of Directors, when present, shall preside at all meetings of the
stockholders and the Board of Directors. The Chairman of the Board of Directors
shall perform other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. If there is no President, then the Chairman
of the Board of Directors shall also serve as the Chief Executive Officer of the
corporation and shall have the powers and duties prescribed in paragraph (c) of
this Section 28.
(c) Duties of President. The President shall preside at all
meetings of the stockholders and at all meetings of the Board of Directors,
unless the Chairman of the Board of Directors has been appointed and is present.
Unless some other officer has been elected Chief Executive Officer of the
corporation, the President shall be the chief executive officer of the
corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction and control of the business and officers of the
corporation. The President shall perform other duties commonly incident to his
office and shall also perform such other duties and have such other powers, as
the Board of Directors shall designate from time to time.
(d) Duties of Vice Presidents. The Vice Presidents may assume
and perform the duties of the President in the absence or disability of the
President or whenever the office of President is vacant. The Vice Presidents
shall perform other duties commonly incident to their office and shall also
perform such other duties and have such other powers as the Board of Directors
or the President shall designate from time to time.
(e) Duties of Secretary. The Secretary shall attend all meetings
of the stockholders and of the Board of Directors and shall record all acts and
proceedings thereof in the minute book of the corporation. The Secretary shall
give notice in conformity with these Bylaws of all meetings of the stockholders
and of all meetings of the Board of Directors and any committee thereof
requiring notice. The Secretary shall perform all other duties given him in
these Bylaws and other duties commonly incident to his office and shall also
perform such other duties and have such other powers, as the Board of Directors
shall designate from time to time. The President may direct any Assistant
Secretary to assume and perform the duties of the Secretary in the absence or
disability of the Secretary, and each Assistant Secretary shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time.
(f) Duties of Chief Financial Officer. The Chief Financial
Officer shall keep or cause to be kept the books of account of the corporation
in a thorough and proper manner and shall render statements of the financial
affairs of the corporation in such form and as often as required by the Board of
Directors or the President. The Chief Financial Officer, subject to the
12.
order of the Board of Directors, shall have the custody of all funds and
securities of the corporation. The Chief Financial Officer shall perform other
duties commonly incident to his office and shall also perform such other duties
and have such other powers as the Board of Directors or the President shall
designate from time to time. The President may direct the Treasurer or any
Assistant Treasurer, or the Controller or any Assistant Controller to assume and
perform the duties of the Chief Financial Officer in the absence or disability
of the Chief Financial Officer, and each Treasurer and Assistant Treasurer and
each Controller and Assistant Controller shall perform other duties commonly
incident to his office and shall also perform such other duties and have such
other powers as the Board of Directors or the President shall designate from
time to time.
Section 29. Delegation Of Authority. The Board of Directors may from time
to time delegate the powers or duties of any officer to any other officer or
agent, notwithstanding any provision hereof.
Section 30. Resignations. Any officer may resign at any time by giving
written notice to the Board of Directors or to the President or to the
Secretary. Any such resignation shall be effective when received by the person
or persons to whom such notice is given, unless a later time is specified
therein, in which event the resignation shall become effective at such later
time. Unless otherwise specified in such notice, the acceptance of any such
resignation shall not be necessary to make it effective. Any resignation shall
be without prejudice to the rights, if any, of the corporation under any
contract with the resigning officer.
Section 31. Removal. Any officer may be removed from office at any time,
either with or without cause, by the affirmative vote of a majority of the
directors in office at the time, or by the unanimous written consent of the
directors in office at the time, or by any committee or superior officers upon
whom such power of removal may have been conferred by the Board of Directors.
ARTICLE VI
Execution Of Corporate Instruments And Voting Of Securities Owned By The
Corporation
Section 32. Execution Of Corporate Instruments. The Board of Directors may,
in its discretion, determine the method and designate the signatory officer or
officers, or other person or persons, to execute on behalf of the corporation
any corporate instrument or document, or to sign on behalf of the corporation
the corporate name without limitation, or to enter into contracts on behalf of
the corporation, except where otherwise provided by law or these Bylaws, and
such execution or signature shall be binding upon the corporation.
All checks and drafts drawn on banks or other depositaries on funds to the
credit of the corporation or in special accounts of the corporation shall be
signed by such person or persons as the Board of Directors shall authorize so to
do.
Unless authorized or ratified by the Board of Directors or within the
agency power of an officer, no officer, agent or employee shall have any power
or authority to bind the corporation
13.
by any contract or engagement or to pledge its credit or to render it liable for
any purpose or for any amount.
Section 33. Voting Of Securities Owned By The Corporation. All stock and
other securities of other corporations owned or held by the corporation for
itself, or for other parties in any capacity, shall be voted, and all proxies
with respect thereto shall be executed, by the person authorized so to do by
resolution of the Board of Directors, or, in the absence of such authorization,
by the Chairman of the Board of Directors, the Chief Executive Officer, the
President, or any Vice President.
ARTICLE VII
Shares Of Stock
Section 34. Form And Execution Of Certificates. Certificates for the shares
of stock of the corporation shall be in such form as is consistent with the
Certificate of Incorporation and applicable law. Every holder of stock in the
corporation shall be entitled to have a certificate signed by or in the name of
the corporation by the Chairman of the Board of Directors, or the President or
any Vice President and by the Treasurer or Assistant Treasurer or the Secretary
or Assistant Secretary, certifying the number of shares owned by him in the
corporation. Any or all of the signatures on the certificate may be facsimiles.
In case any officer, transfer agent, or registrar who has signed or whose
facsimile signature has been placed upon a certificate shall have ceased to be
such officer, transfer agent, or registrar before such certificate is issued, it
may be issued with the same effect as if he were such officer, transfer agent,
or registrar at the date of issue. Each certificate shall state upon the face or
back thereof, in full or in summary, all of the powers, designations,
preferences, and rights, and the limitations or restrictions of the shares
authorized to be issued or shall, except as otherwise required by law, set forth
on the face or back a statement that the corporation will furnish without charge
to each stockholder who so requests the powers, designations, preferences and
relative, participating, optional, or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights. Within a reasonable time after the issuance or
transfer of uncertificated stock, the corporation shall send to the registered
owner thereof a written notice containing the information required to be set
forth or stated on certificates pursuant to this section or otherwise required
by law or with respect to this section a statement that the corporation will
furnish without charge to each stockholder who so requests the powers,
designations, preferences and relative participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights. Except as
otherwise expressly provided by law, the rights and obligations of the holders
of certificates representing stock of the same class and series shall be
identical.
Section 35. Lost Certificates. A new certificate or certificates shall be
issued in place of any certificate or certificates theretofore issued by the
corporation alleged to have been lost, stolen, or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen, or destroyed. The corporation may require, as a condition
precedent to the issuance of a new certificate or certificates, the owner of
such lost, stolen, or destroyed certificate or certificates, or his legal
representative, to agree to indemnify the corporation in such manner as it shall
require or to give the corporation a surety bond in such
14.
form and amount as it may direct as indemnity against any claim that may be made
against the corporation with respect to the certificate alleged to have been
lost, stolen, or destroyed.
Section 36. Transfers.
(a) Transfers of record of shares of stock of the corporation
shall be made only upon its books by the holders thereof, in person or by
attorney duly authorized, and upon the surrender of a properly endorsed
certificate or certificates for a like number of shares.
(b) The corporation shall have power to enter into and perform any
agreement with any number of stockholders of any one or more classes of stock of
the corporation to restrict the transfer of shares of stock of the corporation
of any one or more classes owned by such stockholders in any manner not
prohibited by the DGCL.
Section 37. Fixing Record Dates.
(a) In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, the Board of Directors may fix, in advance, a record date,
which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date
shall, subject to applicable law, not be more than sixty (60) nor less than ten
(10) days before the date of such meeting. If no record date is fixed by the
Board of Directors, the record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or if
notice is waived, at the close of business on the day next preceding the day on
which the meeting is held. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the Board of Directors may fix a new
record date for the adjourned meeting.
(b) In order that the corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the Board of Directors may fix, in advance, a record date, which
record date shall not precede the date upon which the resolution fixing the
record date is adopted, and which record date shall be not more than sixty (60)
days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto.
Section 38. Registered Stockholders. The corporation shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim to or interest in such share or
shares on the part of any other person whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Delaware.
15.
ARTICLE VIII
Other Securities Of The Corporation
Section 39. Execution Of Other Securities. All bonds, debentures and
other corporate securities of the corporation, other than stock certificates
(covered in Section 34), may be signed by the Chairman of the Board of
Directors, the President or any Vice President, or such other person as may be
authorized by the Board of Directors, and the corporate seal impressed thereon
or a facsimile of such seal imprinted thereon and attested by the signature of
the Secretary or an Assistant Secretary, or the Chief Financial Officer or
Treasurer or an Assistant Treasurer; provided, however, that where any such
bond, debenture or other corporate security shall be authenticated by the manual
signature, or where permissible facsimile signature, of a trustee under an
indenture pursuant to which such bond, debenture or other corporate security
shall be issued, the signatures of the persons signing and attesting the
corporate seal on such bond, debenture or other corporate security may be the
imprinted facsimile of the signatures of such persons. Interest coupons
appertaining to any such bond, debenture or other corporate security,
authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an
Assistant Treasurer of the corporation or such other person as may be authorized
by the Board of Directors, or bear imprinted thereon the facsimile signature of
such person. In case any officer who shall have signed or attested any bond,
debenture or other corporate security, or whose facsimile signature shall appear
thereon or on any such interest coupon, shall have ceased to be such officer
before the bond, debenture or other corporate security so signed or attested
shall have been delivered, such bond, debenture or other corporate security
nevertheless may be adopted by the corporation and issued and delivered as
though the person who signed the same or whose facsimile signature shall have
been used thereon had not ceased to be such officer of the corporation.
ARTICLE IX
Dividends
Section 40. Declaration Of Dividends. Dividends upon the capital stock of
the corporation, subject to the provisions of the Certificate of Incorporation
and applicable law, if any, may be declared by the Board of Directors pursuant
to law at any regular or special meeting. Dividends may be paid in cash, in
property, or in shares of the capital stock, subject to the provisions of the
Certificate of Incorporation and applicable law.
Section 41. Dividend Reserve. Before payment of any dividend, there may
be set aside out of any funds of the corporation available for dividends such
sum or sums as the Board of Directors from time to time, in their absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
corporation, or for such other purpose as the Board of Directors shall think
conducive to the interests of the corporation, and the Board of Directors may
modify or abolish any such reserve in the manner in which it was created.
16.
ARTICLE X
Fiscal Year
Section 42. Fiscal Year. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
ARTICLE XI
Indemnification
Section 43. Indemnification Of Directors, Executive Officers, Other
Officers, Employees And Other Agents.
(a) Directors And Executive Officers. The corporation shall
indemnify its directors and executive officers (for the purposes of this Article
XI, "executive officers" shall have the meaning defined in Rule 3b-7 promulgated
under the 1934 Act) to the fullest extent not prohibited by the DGCL or any
other applicable law; provided, however, that the corporation may modify the
extent of such indemnification by individual contracts with its directors and
executive officers; and, provided, further, that the corporation shall not be
required to indemnify any director or executive officer in connection with any
proceeding (or part thereof) initiated by such person unless (i) such
indemnification is expressly required to be made by law, (ii) the proceeding was
authorized by the Board of Directors of the corporation, (iii) such
indemnification is provided by the corporation, in its sole discretion, pursuant
to the powers vested in the corporation under the DGCL or any other applicable
law or (iv) such indemnification is required to be made under subsection (d).
(b) Other Officers, Employees and Other Agents. The corporation
shall have power to indemnify its other officers, employees and other agents as
set forth in the DGCL or any other applicable law. The Board of Directors shall
have the power to delegate the determination of whether indemnification shall be
given to any such person except executive officers to such officers or other
persons as the Board of Directors shall determine.
(c) Expenses. The corporation shall advance to any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he is or was a director or
executive officer, of the corporation, or is or was serving at the request of
the corporation as a director or executive officer of another corporation,
partnership, joint venture, trust or other enterprise, prior to the final
disposition of the proceeding, promptly following request therefor, all expenses
incurred by any director or executive officer in connection with such proceeding
upon receipt of an undertaking by or on behalf of such person to repay said
amounts if it should be determined ultimately that such person is not entitled
to be indemnified under this Section 43 or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Section 43, no advance shall be made by the corporation to
an executive officer of the corporation (except by reason of the fact that such
executive officer is or was a director of the
17.
corporation in which event this paragraph shall not apply) in any action, suit
or proceeding, whether civil, criminal, administrative or investigative, if a
determination is reasonably and promptly made (i) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to the
proceeding, or (ii) if such quorum is not obtainable, or, even if obtainable, a
quorum of disinterested directors so directs, by independent legal counsel in a
written opinion, that the facts known to the decision-making party at the time
such determination is made demonstrate clearly and convincingly that such person
acted in bad faith or in a manner that such person did not believe to be in or
not opposed to the best interests of the corporation.
(d) Enforcement. Without the necessity of entering into an express
contract, all rights to indemnification and advances to directors and executive
officers under this Bylaw shall be deemed to be contractual rights and be
effective to the same extent and as if provided for in a contract between the
corporation and the director or executive officer. Any right to indemnification
or advances granted by this Section 43 to a director or executive officer shall
be enforceable by or on behalf of the person holding such right in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. The claimant in such enforcement action,
if successful in whole or in part, shall be entitled to be paid also the expense
of prosecuting his claim. In connection with any claim for indemnification, the
corporation shall be entitled to raise as a defense to any such action that the
claimant has not met the standards of conduct that make it permissible under the
DGCL or any other applicable law for the corporation to indemnify the claimant
for the amount claimed. In connection with any claim by an executive officer of
the corporation (except in any action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
executive officer is or was a director of the corporation) for advances, the
corporation shall be entitled to raise a defense as to any such action clear and
convincing evidence that such person acted in bad faith or in a manner that such
person did not believe to be in or not opposed to the best interests of the
corporation, or with respect to any criminal action or proceeding that such
person acted without reasonable cause to believe that his conduct was lawful.
Neither the failure of the corporation (including its Board of Directors,
independent legal counsel or its stockholders) to have made a determination
prior to the commencement of such action that indemnification of the claimant is
proper in the circumstances because he has met the applicable standard of
conduct set forth in the DGCL or any other applicable law, nor an actual
determination by the corporation (including its Board of Directors, independent
legal counsel or its stockholders) that the claimant has not met such applicable
standard of conduct, shall be a defense to the action or create a presumption
that claimant has not met the applicable standard of conduct. In any suit
brought by a director or executive officer to enforce a right to indemnification
or to an advancement of expenses hereunder, the burden of proving that the
director or executive officer is not entitled to be indemnified, or to such
advancement of expenses, under this Section 43 or otherwise shall be on the
corporation.
(e) Non-Exclusivity of Rights. The rights conferred on any person by this
Bylaw shall not be exclusive of any other right which such person may have or
hereafter acquire under any applicable statute, provision of the Certificate of
Incorporation, Bylaws, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity while holding office. The corporation is specifically
authorized to enter into individual contracts with any or all of its directors,
officers, employees or
18.
agents respecting indemnification and advances, to the fullest extent not
prohibited by the Delaware General Corporation Law, or by any other applicable
law.
(f) Survival of Rights. The rights conferred on any person by this
Bylaw shall continue as to a person who has ceased to be a director, officer,
employee or other agent and shall inure to the benefit of the heirs, executors
and administrators of such a person.
(g) Insurance. To the fullest extent permitted by the DGCL or any other
applicable law, the corporation, upon approval by the Board of Directors, may
purchase insurance on behalf of any person required or permitted to be
indemnified pursuant to this Section 43.
(h) Amendments. Any repeal or modification of this Section 43 shall only
be prospective and shall not affect the rights under this Bylaw in effect at the
time of the alleged occurrence of any action or omission to act that is the
cause of any proceeding against any agent of the corporation.
(i) Saving Clause. If this Bylaw or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
corporation shall nevertheless indemnify each director and executive officer to
the full extent not prohibited by any applicable portion of this Section 43 that
shall not have been invalidated, or by any other applicable law. If this Section
43 shall be invalid due to the application of the indemnification provisions of
another jurisdiction, then the corporation shall indemnify each director and
executive officer to the full extent under any other applicable law.
(j) Certain Definitions. For the purposes of this Bylaw, the following
definitions shall apply:
(1) The term "proceeding" shall be broadly construed and shall
include, without limitation, the investigation, preparation, prosecution,
defense, settlement, arbitration and appeal of, and the giving of testimony in,
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative.
(2) The term "expenses" shall be broadly construed and shall
include, without limitation, court costs, attorneys' fees, witness fees, fines,
amounts paid in settlement or judgment and any other costs and expenses of any
nature or kind incurred in connection with any proceeding.
(3) The term the "corporation" shall include, in addition to the
resulting corporation, any constituent corporation (including any constituent of
a constituent) absorbed in a consolidation or merger which, if its separate
existence had continued, would have had power and authority to indemnify its
directors, officers, and employees or agents, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is or
was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, shall stand in the same position under the provisions
of this Section 43 with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
19.
(4) References to a "director," "executive officer," "officer,"
"employee," or "agent" of the corporation shall include, without limitation,
situations where such person is serving at the request of the corporation as,
respectively, a director, executive officer, officer, employee, trustee or agent
of another corporation, partnership, joint venture, trust or other enterprise.
(5) References to "other enterprises" shall include employee
benefit plans; references to "fines" shall include any excise taxes assessed on
a person with respect to an employee benefit plan; and references to "serving at
the request of the corporation" shall include any service as a director,
officer, employee or agent of the corporation which imposes duties on, or
involves services by, such director, officer, employee, or agent with respect to
an employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner he reasonably believed to be in the interest
of the participants and beneficiaries of an employee benefit plan shall be
deemed to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this Section 43.
ARTICLE XII
Notices
Section 44. Notices.
(a) Notice To Stockholders. Whenever, under any provisions of
these Bylaws, notice is required to be given to any stockholder, it shall be
given in writing, timely and duly deposited in the United States mail, postage
prepaid, and addressed to his last known post office address as shown by the
stock record of the corporation or its transfer agent.
(b) Notice To Directors. Any notice required to be given to any
director may be given by the method stated in subsection (a), or by overnight
delivery service, facsimile, telex or telegram, except that such notice other
than one which is delivered personally shall be sent to such address as such
director shall have filed in writing with the Secretary, or, in the absence of
such filing, to the last known post office address of such director.
(c) Affidavit Of Mailing. An affidavit of mailing, executed by
a duly authorized and competent employee of the corporation or its transfer
agent appointed with respect to the class of stock affected, specifying the name
and address or the names and addresses of the stockholder or stockholders, or
director or directors, to whom any such notice or notices was or were given, and
the time and method of giving the same, shall in the absence of fraud, be prima
facie evidence of the facts therein contained.
(d) Time Notices Deemed Given. All notices given by mail or by
overnight delivery service, as above provided, shall be deemed to have been
given as at the time of mailing, and all notices given by facsimile, telex or
telegram shall be deemed to have been given as of the sending time recorded at
time of transmission.
(e) Methods of Notice. It shall not be necessary that the same
method of giving notice be employed in respect of all directors, but one
permissible method may be
20.
employed in respect of any one or more, and any other permissible method or
methods may be employed in respect of any other or others.
(f) Failure To Receive Notice. The period or limitation of
time within which any stockholder may exercise any option or right, or enjoy any
privilege or benefit, or be required to act, or within which any director may
exercise any power or right, or enjoy any privilege, pursuant to any notice sent
him in the manner above provided, shall not be affected or extended in any
manner by the failure of such stockholder or such director to receive such
notice.
(g) Notice To Person With Whom Communication Is Unlawful.
Whenever notice is required to be given, under any provision of law or of the
Certificate of Incorporation or Bylaws of the corporation, to any person with
whom communication is unlawful, the giving of such notice to such person shall
not be required and there shall be no duty to apply to any governmental
authority or agency for a license or permit to give such notice to such person.
Any action or meeting which shall be taken or held without notice to any such
person with whom communication is unlawful shall have the same force and effect
as if such notice had been duly given. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the DGCL, the certificate shall state, if such is the fact and if
notice is required, that notice was given to all persons entitled to receive
notice except such persons with whom communication is unlawful.
(h) Notice To Person With Undeliverable Address. Whenever
notice is required to be given, under any provision of law or the Certificate of
Incorporation or Bylaws of the corporation, to any stockholder to whom (i)
notice of two consecutive annual meetings, and all notices of meetings or of the
taking of action by written consent without a meeting to such person during the
period between such two consecutive annual meetings, or (ii) all, and at least
two, payments (if sent by first class mail) of dividends or interest on
securities during a twelve-month period, have been mailed addressed to such
person at his address as shown on the records of the corporation and have been
returned undeliverable, the giving of such notice to such person shall not be
required. Any action or meeting which shall be taken or held without notice to
such person shall have the same force and effect as if such notice had been duly
given. If any such person shall deliver to the corporation a written notice
setting forth his then current address, the requirement that notice be given to
such person shall be reinstated. In the event that the action taken by the
corporation is such as to require the filing of a certificate under any
provision of the DGCL, the certificate need not state that notice was not given
to persons to whom notice was not required to be given pursuant to this
paragraph.
ARTICLE XIII
Amendments
Section 45. Amendments. Subject to paragraph (h) of Section 43 of the
Bylaws, the Bylaws may be altered or amended or new Bylaws adopted by the
affirmative vote of at least sixty-six and two-thirds percent (66-2/3%) of the
voting power of all of the then-outstanding shares of the voting stock of the
corporation entitled to vote. The Board of Directors shall also have the power
to adopt, amend, or repeal Bylaws.
21.
ARTICLE XIV
Loans To Officers
Section 46. Loans To Officers. The corporation may lend money to, or
guarantee any obligation of, or otherwise assist any officer or other employee
of the corporation or of its subsidiaries, including any officer or employee who
is a Director of the corporation or its subsidiaries, whenever, in the judgment
of the Board of Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the corporation. The loan, guarantee or other assistance may
be with or without interest and may be unsecured, or secured in such manner as
the Board of Directors shall approve, including, without limitation, a pledge of
shares of stock of the corporation. Nothing in these Bylaws shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
22.
Table Of Contents
Page
ARTICLE I Offices..................................................1
Section 1. Registered Office........................................1
Section 2. Other Offices............................................1
ARTICLE II Corporate Seal...........................................1
Section 3. Corporate Seal...........................................1
ARTICLE III Stockholders' Meetings...................................1
Section 4. Place Of Meetings........................................1
Section 5. Annual Meetings..........................................1
Section 6. Special Meetings.........................................3
Section 7. Notice Of Meetings.......................................4
Section 8. Quorum...................................................5
Section 9. Adjournment And Notice Of Adjourned Meetings.............5
Section 10. Voting Rights............................................5
Section 11. Joint Owners Of Stock....................................5
Section 12. List Of Stockholders.....................................6
Section 13. Action Without Meeting...................................6
Section 14. Organization.............................................6
ARTICLE IV Directors................................................7
Section 15. Number And Term Of Office................................7
Section 16. Powers...................................................7
Section 17. Classes of Directors.....................................7
Section 18. Vacancies................................................7
Section 19. Resignation..............................................8
Section 20. Removal..................................................8
Section 21. Meetings.................................................8
Section 22. Quorum And Voting........................................9
Section 23. Action Without Meeting..................................10
Section 24. Fees And Compensation...................................10
Section 25. Committees..............................................10
Section 26. Organization............................................11
ARTICLE V Officers................................................11
Section 27. Officers Designated.....................................11
Section 28. Tenure And Duties Of Officers...........................12
Section 29. Delegation Of Authority.................................13
Section 30. Resignations............................................13
i.
Table of Contents
(Continued)
Page
Section 31. Removal....................................................13
ARTICLE VI Execution Of Corporate Instruments And Voting Of
Securities Owned By The Corporation........................13
Section 32. Execution Of Corporate Instruments.........................13
Section 33. Voting Of Securities Owned By The Corporation..............14
ARTICLE VII Shares Of Stock............................................14
Section 34. Form And Execution Of Certificates.........................14
Section 35. Lost Certificates..........................................14
Section 36. Transfers..................................................15
Section 37. Fixing Record Dates........................................15
Section 38. Registered Stockholders....................................15
ARTICLE VIII Other Securities Of The Corporation........................16
Section 39. Execution Of Other Securities..............................16
ARTICLE IX Dividends..................................................16
Section 40. Declaration Of Dividends...................................16
Section 41. Dividend Reserve...........................................16
ARTICLE X Fiscal Year................................................17
Section 42. Fiscal Year................................................17
ARTICLE XI Indemnification............................................17
Section 43. Indemnification Of Directors, Executive Officers, Other
Officers, Employees And Other Agents.......................17
ARTICLE XII Notices....................................................20
Section 44. Notices....................................................20
ARTICLE XIII Amendments.................................................21
Section 45. Amendments.................................................21
ARTICLE XIV Loans To Officers..........................................22
Section 46. Loans To Officers..........................................22
ii.
EXHIBIT 10.3
VSTREAM INCORPORATED
AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT
November 17, 1999
TABLE OF CONTENTS
Page
----
Article I Certain Definitions............................................... 1
Article II Registration Rights.............................................. 4
2.1 Demand Registrations.............................................. 4
2.2 Piggyback Registrations........................................... 6
2.3 Expenses of Registration.......................................... 7
2.4 Registration Procedures........................................... 7
2.5 Indemnification................................................... 9
2.6 Other Obligations................................................. 11
2.7 Termination of Registration Rights................................ 12
Article III Restrictions On Transfer Of Management Stock.................... 12
3.1 Rights of First Refusal........................................... 12
3.2 Participation Rights.............................................. 14
3.3 Exempt Transactions............................................... 14
3.4 Assignment of First Refusal Right................................. 14
Article IV Right of First Notification...................................... 15
Article V Covenants Of The Company.......................................... 16
5.1 Basic Financial Information....................................... 16
5.2 Additional Information Rights..................................... 17
5.3 Prompt Payment of Taxes, Etc...................................... 18
5.4 Maintenance of Properties and Leases.............................. 18
5.5 Insurance......................................................... 18
5.6 Accounts and Records.............................................. 19
5.7 Independent Accountants........................................... 19
5.8 Compliance with Laws.............................................. 20
5.9 Maintenance of Corporate Existence, Etc........................... 19
5.10 Limited First Refusal Rights...................................... 20
Article VI Corporate Governance............................................. 21
6.1 Board of Directors................................................ 21
6.2 Meetings of the Board............................................. 23
6.3 Committees........................................................ 24
6.4 Reimbursement of Expenses......................................... 24
6.5 Certain Approvals................................................. 24
Article VII Miscellaneous................................................... 24
7.1 Governing Law..................................................... 24
7.2 "Market Stand-Off" Agreement...................................... 24
7.3 Successors and Assigns............................................ 25
7.4 Entire Agreement: Amendment and Waiver............................ 26
i
Amended and Restated Stockholders Agreement (this "Agreement") dated as of
November 17, 1999 by and among (i) VStream Incorporated, a Delaware corporation
(the "Company"), (ii) the holders of the Company's Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock identified on the
signature pages hereto (the "Investors"), and (iii) the members of the Company's
management identified on the signature pages hereto or that have otherwise
agreed to be bound by the provisions hereof (the "Management Holders"). The
Investors and the Management Holders are referred to collectively as the
"Stockholders."
The purchasers of Series D Preferred Stock (the "Purchasers") and the
Company are parties to a Series D Preferred Stock Purchase Agreement of even
date herewith (the "Purchase Agreement"). The Purchasers' obligations under the
Purchase Agreement are conditioned upon the execution and delivery of this
Agreement by the Stockholders and the Company.
Now, Therefore, in consideration of the mutual promises and covenants set
forth herein, the parties agree as follows:
Article I
Certain Definitions
As used in this Agreement, the following terms shall have the following
respective meanings:
1.1 "Affiliate" shall mean any individual, partnership, corporation,
association, joint stock company, trust, joint venture, unincorporated
organization, governmental entity or any department, agency or political
subdivision thereof, controlling, controlled by or under common control with the
referenced party and any partner of an Investor which is a partnership and any
member of an Investor which is a limited liability company.
1.2 "Certificate of Amendment" shall mean the Company's Certificate of
Amendment to its Certificate of Incorporation setting forth the rights,
preferences, privileges and restrictions of the Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock.
1.3 "Closing" shall mean the date of the initial sale of shares of the
Company's Series D Preferred Stock pursuant to the Purchase Agreement.
1.4 "Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
1.5 "Common Stock" shall mean the Company's Common Stock, $.001 par value
per share.
1.6 "Exchange Act" shall mean the Securities Exchange Act of 1934 (or any
similar successor federal statute), as amended, and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
1.7 "Independent Third Party" means any person who, immediately prior to
the contemplated transaction, does not own in excess of 5 percent (5%) of the
Company's Common Stock, on a fully-diluted basis (a "5% Owner"), who is not
controlling, controlled by or under common control with any such 5% Owner and
who is not the spouse or descendent (by birth or adoption) of any such 5% Owner
or a trust for the benefit of such 5% Owner and/or such other persons.
1.8 "Initiating Holders" shall mean holders of Registrable Securities
representing not less than thirty-three percent (33%) of the then-outstanding
Registrable Securities.
1.9 "Investor Stock" shall mean (i) shares of Common Stock owned by the
Investors or any transferee thereof; (ii) shares of Common Stock issued or
issuable upon the conversion or exercise of any stock (including, without
limitation, the Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock) warrants, options or other securities of the Company owned by
the Investors or any transferee thereof; and (iii) any shares of Common Stock
issued as a dividend or other distribution with respect to or in exchange for or
in replacement of the shares referenced in (i) and (ii) above.
1.10 "Management Stock" shall mean (i) shares of Common Stock owned by the
Management Holders or any Permitted Transferee thereof; (ii) shares of Common
Stock issued or issuable upon the conversion or exercise of any stock (including
without limitation the Series A Preferred Stock), options or other securities of
the Company owned by the Management Holders; and (iii) any shares of Common
Stock issued as a dividend or other distribution with respect to or in exchange
for or in replacement of the shares referenced in (i) and (ii) above.
1.11 "Permitted Transferee" shall mean with respect to a Management
Holder, a member of such Management Holder's immediate family, a trust
established for the benefit of members of such management Holder's immediate
family, or a transferee of such Management Holder by will or the laws of
intestate succession.
1.12 "Preferred Stock" shall mean, collectively, (i) the Series A
Preferred Stock; (ii) the Series B Preferred Stock; (iii) the Series C Preferred
Stock and (iv) the Series D Preferred Stock.
1.13 "Qualified Public Offering" shall mean an underwritten public
offering of Common Stock resulting in proceeds to the Company of not less than
$30 million (prior
2
to expenses and underwriting commissions) and at an offering price per share
equal to at least $8.00 (as appropriately adjusted for future stock splits,
stock dividends, recapitalizations and similar transactions affecting the Common
Stock).
1.14 "Registrable Securities" shall mean (i) the Investor Stock and (ii)
for purposes of Section 2.2 through and including Section 2.7, shall also
include the Management Stock; provided, however, that Registrable Securities
shall not include any shares of Investor Stock that have previously been
registered under the Securities Act or that have otherwise been sold to the
public in an open-market transaction under Rule 144.
1.15 The terms "registers," "registered" and "registration" shall refer to
a registration effected by preparing and filing a registration statement in
compliance with the Securities Act and the declaration or ordering of the
effectiveness of such registration statement by the Commission.
1.16 "Registration Expenses" shall mean all expenses incurred in effecting
any registration pursuant to this Agreement, including without limitation all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Company, blue sky fees and expenses,
expenses of any regular or special audits incident to or required by any such
registration, and the fees and expenses of one counsel for the selling holders
of Registrable Securities, but excluding Selling Expenses.
1.17 "Rule 144" shall mean Rule 144 as promulgated by the Commission under
the Securities Act, as such Rule may be amended from time to time, or any
similar successor Rule that may be promulgated by the Commission.
1.18 "Rule 145" shall mean Rule 145 as promulgated by the Commission under
the Securities Act, as such Rule may be amended from time to time, or any
similar successor Rule that may be promulgated by the Commission.
1.19 "Sale of the Company" means the sale of the Company to an Independent
Third Party or group of Independent Third Parties pursuant to which such party
or parties acquire (i) capital stock of the Company possessing the voting power
under normal circumstances to elect a majority of the Company's board of
directors (whether by merger, consolidation or sale or transfer of the Company's
capital stock) or (ii) all or substantially all of the Company's assets
determined on a consolidated basis.
1.20 "Securities Act" shall mean the Securities Act of 1933 (or any
similar successor federal statute), as amended, and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
3
1.21 "Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities.
1.22 "Series A Preferred Stock" shall mean the Company's Series A
Convertible Preferred Stock, $.01 par value per share.
1.23 "Series B Preferred Stock" shall mean the Company's Series B
Convertible Preferred Stock, $.01 par value per share.
1.24 "Series C Preferred Stock" shall mean the Company's Series C
Convertible Preferred Stock, $.01 par value per share.
1.25 "Series D Preferred Stock" shall mean the Company's Series D
Convertible Preferred Stock, $.01 par value per share.
1.26 "Subsidiary" shall mean any corporation with respect to which a
person or entity owns a majority of the common stock or has the power to vote
or direct the voting of sufficient securities to elect a majority of the
directors.
Article II
Registration Rights
2.1 Demand Registrations .
(a) Request for Registration. At any time or times after the
earlier of the third anniversary of the Closing or the effective date of the
first registration statement filed by the Company under the Securities Act, the
Initiating Holders may require that the Company effect a registration under the
Securities Act up to four times utilizing a registration on Form S-1 or any
similar form (a "Long-Form Registration") and as many times as requested by the
Initiating Holders utilizing a Form S-3 or any similar form, if available (a
"Short-Form Registration") (each a "Demand Registration"). Upon receipt of
written notice of such demand, the Company will promptly give written notice of
the proposed registration to all other holders of Registrable Securities and
will include in such registration all Registrable Securities specified in such
demand, together with all Registrable Securities of any other holder of
Registrable Securities joining in such demand as are specified in a written
request received by the Company within twenty (20) days after delivery of the
Company's notice. Demand Registrations will be Short-Form Registrations whenever
the Company is permitted to use any applicable short form.
(b) Deferral of Demand Registration. The Company shall file a
registration statement with respect to each Demand Registration requested
pursuant to Section 2.1(a) as soon as practicable after receipt of the demand of
the Initiating
4
Holders; provided, however, that if in the good faith judgment of the Board of
Directors of the Company, such registration would be seriously detrimental to
the Company and the Board of Directors concludes, as a result, that it is
advisable to defer the filing of such registration statement at such time (as
evidenced by an appropriate resolution of the Board), then the Company shall
have the right to defer such filing for the period during which such
registration would be seriously detrimental; provided, however, that (i) the
Company may not defer the filing for a period of more than one hundred eighty
(180) days after receipt of the demand of the Initiating Holders, (ii) the
Company shall not exercise its right to defer a Demand Registration more than
once, and (iii) if the Company undertakes a primary registration following an
exercise of its deferral right, the holders of Registrable Securities shall have
"piggyback" rights under Section 2.2 hereof with respect to not less than one-
third (1/3) of the number of shares of Common Stock to be sold in such offering.
In addition, the Company shall not be obligated to effect, or to take any action
to effect, any registration:
(i) in any particular jurisdiction in which the Company would
be required to execute a general consent to service of process in effecting such
registration, qualification or compliance, unless the Company is already subject
to service in such jurisdiction and except as may be required under the
Securities Act; or
(ii) during the period starting with the date 60 days prior to
the Company's good faith estimate of the date of filing of, and ending on a date
180 days after the effective date of, a registration filed pursuant to Section
2.2 hereof; provided that the Company is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective.
(c) Underwriting. If the Initiating Holders intend to distribute
the Registrable Securities covered by a Demand Registration by means of an
underwriting, they shall so advise the Company as a part of their demand made
pursuant to Section 2.1 and the Company shall include such information in its
written notice to holders of Registrable Securities. The Initiating Holders
shall have the right to select the managing underwriter(s) for an underwritten
Demand Registration, subject to the approval of the Company's Board of Directors
(which will not be unreasonably withheld or delayed). The right of any holder of
Registrable Securities to participate in an underwritten Demand Registration
shall be conditioned upon such holder's participation in such underwriting in
accordance with the terms and conditions thereof, and the Company and such
holders will enter into an underwriting agreement in customary form.
(d) Priorities. The holders of Registrable Securities will have
absolute priority over any other securities included in a Demand Registration.
If other securities are included in any Demand Registration that is not an
underwritten offering, all Registrable Securities included in such offering
shall be sold prior to the sale of any of such other securities. If other
securities are included in any Demand Registration that is
5
an underwritten offering, and the managing underwriter for such offering advises
the Company that in its opinion the amount of securities to be included exceeds
the amount of securities which can be sold in such offering without adversely
affecting the marketability thereof, the Company will include in such
registration all Registrable Securities requested to be included therein prior
to the inclusion of any other securities. If the number of Registrable
Securities requested to be included in such registration exceeds the amount of
securities which in the opinion of such underwriter can be sold without
adversely affecting the marketability of such offering, such Registrable
Securities shall be included pro rata among the holders thereof based on the
percentage of the outstanding Common Stock held by each such Stockholder
(assuming the conversion of the Preferred Stock and the exercise of all options,
warrants and similar rights held by such Stockholder).
2.2 Piggyback Registrations .
(a) Request for Inclusion. If (but without any obligation to do so)
the Company shall determine to register any of its securities for its own
account or for the account of other security holders of the Company for cash on
any registration form (other than a registration statement relating either to
the sale of securities to employees of the Company pursuant to a stock option,
stock purchase or similar plan, or a Rule 145 transaction or a registration on
any form that does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities) which permits the inclusion of Registrable Securities (a
"Piggyback Registration"), the Company will promptly give each holder of
Registrable Securities written notice thereof and, subject to Section 2.2(c),
shall include in such registration all the Registrable Securities requested to
be included therein pursuant to the written requests of holders of Registrable
Securities received within twenty (20) days after delivery of the Company's
notice.
(b) Underwriting. If the Piggyback Registration relates to an
underwritten public offering, the Company shall so advise the holders of
Registrable Securities as a part of the written notice given pursuant to Section
2.2(a). In such event, the right of any holder of Registrable Securities to
participate in such registration shall be conditioned upon such holder's
participation in such underwriting in accordance with the terms and conditions
thereof. All holders of Registrable Securities proposing to distribute their
securities through such underwriting shall (together with the Company) enter
into an underwriting agreement in customary form with the representative of the
underwriter or underwriters selected by the Company.
(c) Priorities. If such proposed Piggyback Registration is an
underwritten offering and the managing underwriter for such offering advises the
Company that the securities requested to be included therein exceeds the amount
of securities that can be sold in such offering, except as provided in Section
2.1(b), any
6
securities to be sold by the Company in such offering shall have priority over
any Registrable Securities, and the number of shares to be included by a holder
of Registrable Securities in such registration shall be reduced, but only after
all shares proposed to be sold by employees, officers or directors of the
Company and any other proposed sellers that do not hold Registrable Securities
have been reduced in their entirety, pro rata on the basis of the percentage of
the outstanding Common Stock held by such Stockholder (assuming the conversion
of the Preferred Stock and the exercise of all options, warrants and similar
rights held by such Stockholder) and all other holders exercising similar
registration rights but in no event shall the amount of securities of the
selling holders included in the offering be reduced below fifteen percent (15%)
of the total amount of securities included in such offering, unless such
offering is the initial public offering of the Company's securities, in which
case all of the Registrable Securities of the selling holders may be excluded if
the underwriters make the determination described above.
2.3 Expenses of Registration . All Registration Expenses incurred in
connection with up to four Long-Form Registrations and all Short-Form and
Piggyback Registrations shall be borne by the Company; provided, however, that
no registration shall count as one of the Company-paid Long Form Registrations
unless the holders of Registrable Securities are able to register and sell at
least 90% of the Registrable Securities requested to be included therein; and
provided, further, that the Company shall not be required to pay for any expense
of any registration proceeding begun pursuant to Section 2.1 if the registration
request is subsequently withdrawn at the request of the holders of a majority of
the Registrable Securities to be registered (in which case all participating
holders of such Registrable Securities to be registered shall bear such
expense), unless the holders of a majority of the Registrable Securities agree
to forfeit their right to one Demand Registration pursuant to Section 2.1. All
Selling Expenses relating to Registrable Securities included in any Demand or
Piggyback Registration shall be borne by the holders of such securities pro rata
on the basis of the number of shares sold by them.
2.4 Registration Procedures . In the case of each registration effected
by the Company pursuant to this Article II, the Company will keep each holder of
Registrable Securities advised in writing as to the initiation of such
registration and as to the completion thereof. At its expense, the Company will
use its best efforts to:
(a) cause such registration to be declared effective by the
Commission and, in the case of a Demand Registration, keep such registration
effective for a period of one hundred eighty (180) days or until the holders of
Registrable Securities included therein have completed the distribution
described in the registration statement relating thereto, whichever first
occurs;
7
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement (including post-effective amendments) as may be
necessary to comply with the provisions of the Securities Act with respect to
the disposition of all securities covered by such registration statement;
(c) obtain appropriate qualifications of the securities covered by
such registration under state securities or "blue sky" laws in such
jurisdictions as may be requested by the holders of Registrable Securities;
provided, however, that the Company shall not be required to file a general
consent to service of process in any jurisdiction in which it is not otherwise
subject to service in order to obtain any such qualification;
(d) furnish such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the prospectus, as
a holder of Registrable Securities from time to time may reasonably request;
(e) notify each holder of Registrable Securities covered by such
registration statement, at any time when a prospectus relating thereto is
required to be delivered under the Securities Act, of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of any such holder, prepare and
furnish to such holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing;
(f) cause all Registrable Securities covered by such registration
to be listed on each securities exchange or inter-dealer quotation system on
which similar securities issued by the Company are then listed;
(g) provide a transfer agent and registrar for all Registrable
Securities covered by such registration and a CUSIP number for all such
Registrable Securities, in each case not later than the effective date of such
registration;
(h) otherwise comply with all applicable rules and regulations of
the Commission, and make available to its security holders, as soon as
reasonably practicable, an earnings statement covering the period of at least
twelve months, but not more than 18 months, beginning with the first month after
the effective date of the
8
registration statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act; and
(i) in connection with any underwritten Demand Registration, the
Company will enter into an underwriting agreement reasonably satisfactory to the
Initiating Holders containing customary underwriting provisions, including
indemnification and contribution provisions.
2.5 Indemnification.
(a) The Company will indemnify each holder of Registrable
Securities, each of such holders' officers, directors, partners, agents,
employees and representatives, and each person controlling such holder within
the meaning of Section 15 of the Securities Act, with respect to each
registration, qualification or compliance effected pursuant to this Article II,
against all expenses, claims, losses, damages and liabilities (or actions,
proceedings or settlements in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any prospectus, offering circular or other document (including any related
registration statement, notification or the like) incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation by the
Company of the Securities Act or any rule or regulation thereunder applicable to
the Company and relating to action or inaction required of the Company in
connection with any such registration, qualification or compliance, and will
reimburse each such indemnified person for any legal and any other expenses
reasonably incurred in connection with investigating and defending or settling
any such claim, loss, damage, liability or action; provided, however, that the
Company will not be liable in any such case to the extent that any such claim,
loss, damage, liability or expense arises out of or is based on any untrue
statement or omission based upon written information furnished to the Company by
such holder of Registrable Securities and stated to be specifically for use
therein. It is agreed that the indemnity agreement contained in this Section
2.5(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Company (which consent has not been unreasonably withheld).
(b) Each holder of Registrable Securities included in any
registration effected pursuant to this Article II shall indemnify the Company,
each of its directors, officers, agents, employees and representatives, and each
person who controls the Company within the meaning of Section 15 of the
Securities Act, each other such holder of Registrable Securities and each of
their officers, directors and partners, and each person controlling such
holders, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
9
untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
such indemnified persons for any legal or any other expenses reasonably incurred
in connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in strict conformity with written
information furnished to the Company by such holder of Registrable Securities;
provided, however, that (x) no holder of Registrable Securities shall be liable
hereunder for any amounts in excess of the net proceeds received by such holder
pursuant to such registration, and (y) the obligations of such holder of
Registrable Securities hereunder shall not apply to amounts paid in settlement
of any such claims, losses, damages or liabilities (or actions in respect
thereof) if such settlement is effected without the consent of such holder
(which consent has not been unreasonably withheld).
(c) Each party entitled to indemnification under this Section 2.5
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnified Party,
who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense, and provided further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Section 2.5 to the extent such
failure is not prejudicial. No Indemnifying Party in the defense of any such
claim or litigation shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include an unconditional release of such Indemnified Party from all liability in
respect to such claim or litigation. Each Indemnified Party shall furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 2.5 is held
by a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any loss, liability, claim, damage or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability,
10
claim, damage or expense in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party on the one hand and of the Indemnified
Party on the other in connection with the statements or omissions which resulted
in such loss, liability, claim, damage or expense as well as any other relevant
equitable considerations. The relative fault of the Indemnifying Party and of
the Indemnified Party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in an underwriting
agreement entered into in connection with an underwritten public offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
2.6 Other Obligations. With a view to making available the benefits of
certain rules and regulations of the Commission which may effectuate the
registration of Registrable Securities or permit the sale of Registrable
Securities to the public without registration, the Company agrees to:
(a) after its initial registration under the Securities Act,
exercise best efforts to cause the Company to be eligible to utilize Form S-3
(or any similar form) for the registration of Registrable Securities;
(b) at such time as any Registrable Securities are eligible for
transfer under Rule 144(k), upon the request of the holder of such Registrable
Securities, remove any restrictive legend from the certificates evidencing such
securities at no cost to such holder;
(c) make and keep available public information as defined in Rule
144 under the Securities Act at all times from and after ninety (90) days
following its initial registration under the Securities Act;
(d) file with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act at any time after it has become subject to such reporting
requirements; and
(e) furnish any holder of Registrable Securities upon request a
written statement by the Company as to its compliance with the reporting
requirements of Rule 144 (at any time from and after the effective date of the
first registration statement filed by the Company for an offering of its
securities to the general public), and of the Securities Act and the Exchange
Act (at any time after it has become subject to such
11
reporting requirements), a copy of the most recent annual or quarterly report of
the Company, and such other reports and documents as a holder of Registrable
Securities may reasonably request in availing itself of any rule or regulation
of the Commission (including Rule 144A) allowing a holder of Registrable
Securities to sell any such securities without registration.
2.7 Termination of Registration Rights. The right of any holder of
Registrable Securities to request inclusion of Registrable Securities in any
registration pursuant to this Article II shall terminate when (i) all
Registrable Securities beneficially owned by such holder of Registrable
Securities may immediately be sold under Rule 144(k), and (ii) the Company's
Common Stock is listed on a national securities exchange or traded in The Nasdaq
Stock Market; provided, however, that the provisions of this Section 2.7 shall
not apply to any holder of Registrable Securities holding more than five percent
(5%) of the Company's then-outstanding Common Stock.
2.8 Transfer of Registration Rights. The rights to cause the Company to
register securities granted to the holders under Sections 2.1 and 2.2 and
associated obligations including the standoff agreement in ARTICLE VII below may
be assigned to any transferee or assignee in connection with any transfer or
assignment of Registrable Securities by the holder provided that the transferor
provides the Company with written notice of the proposed transfer and the
transferee agrees in writing to be bound by the provisions of this Agreement.
Article III
Restrictions On Transfer Of Management Stock
3.1 Rights of First Refusal. No shares of Management Stock or any
interest therein may be transferred other than in compliance with the provisions
of this Article III. If at any time a Management Holder receives a bona fide
offer from any person (a "Third Party") to purchase shares of Preferred Stock
and/or Common Stock or any interest therein held by such Management Holder (a
"Third-Party Offer") which such Management Holder wishes to accept, such
Management Holder shall cause such Third-Party Offer to be reduced to writing
and shall notify the Company and each holder of Investor Stock of such
Management Holder's desire to accept the Third-Party Offer. The Management
Stockholder's notice (the "Sale Notice") shall contain an irrevocable offer to
sell such Preferred Stock and/or Common Stock to the Company and/or the
Investors at a purchase price equal to the price contained in, and on the same
terms and conditions of, the Third-Party Offer and shall be accompanied by a
true copy of the Third-Party Offer (which shall identify the offeror) provided,
however, the Company and the Investors may pay cash to the selling Management
Holder equal in amount to the fair market value of any non-cash consideration
offered by the Third Party in the Third-Party Offer. At any time within 10
business days after the date of receipt by the Company of the Sale Notice, the
Company shall have the right to purchase the Preferred
12
Stock and/or Common Stock covered by the Third-Party Offer at the same price and
on the same terms and conditions as the Third-Party Offer. If at the end of such
10-business day period the Company has not elected to purchase all Preferred
Stock and Common Stock covered by such Third-Party Notice, the Management Holder
shall provide the Sale Notice to the Investors along with a statement as to the
number of shares to be purchased by the Company (if any). Within 10 business
days after receipt by the Investors of such Sale Notice, each Investor (or any
Affiliate thereof), by providing notice to the Management Holder, shall have the
right to purchase that portion of the shares equal to the Investors Pro Rata
Number of Shares (as defined below) at the same price and on the same terms and
conditions as the Third-Party Offer. In the event any Investor (or an Affiliate
thereof) does not exercise its right to purchase its respective Investors Pro
Rata Number of Shares, the other Investors shall have the right to purchase such
shares, and the purchase of such shares shall be allocated among the
participating Investors (or any participating Affiliates thereof) pro rata in
proportion to the Investor Stock held by such Investors, or in such other
proportions as the participating Investors (and such Affiliates) may agree upon.
To the extent the Investors have not notified the selling Management Holder in
writing of a desire to purchase all of the Preferred Stock and Common Stock as
set forth herein, the selling Management Holder may within 60 days thereafter
sell the remaining Management Stock covered by the Third-Party Offer to the
Third Party on the terms set forth in the original Third-Party Offer. Any
Management Stock covered by the Third Party Offer that is not so transferred
during such 60-day period shall again be subject to this Section 3.1. The
Company may assign its rights to purchase Management Stock pursuant to this
Section 3.1 to one or more third parties subject only to compliance with
applicable securities laws, provided that the Company shall offer to assign such
rights to the Investors pro rata prior to offering such rights to other persons.
For purposes of this Section 3.1 such Investors Pro Rata Number of Shares shall
be equal to that number of shares of Preferred Stock and/or Common Stock derived
by multiplying the total number of shares to be purchased by the Third Party as
set forth in the Sale Notice by a fraction, the numerator of which is the total
number of shares of Investor Stock beneficially owned by such participating
holder of Investor Stock and the denominator of which is the total number of
shares beneficially owned by all holders of Investor Stock.
3.2 Co-Sale Rights. If neither the Company nor the Investors has elected
to purchase all of the Management Stock specified in the Sale Notice pursuant to
Section 3.1 above, each Investor may elect to participate in the contemplated
transfer by delivering written notice to the Management Holder and the Company
within 15 business days after receipt by the Investor of the Sale Notice. If any
Investor has elected to participate in such sale, the Management Holder and the
electing Investors will be entitled to sell in the contemplated sale, at the
same price and on the same terms, a number of shares of the Company's Common
Stock equal to the product of (i) the quotient determined by dividing the
percentage of the Company's Common Stock (on a fully-diluted basis) held by such
person, by the aggregate percentage of the Company's Common Stock (on a
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fully-diluted basis) owned by the Management Holder and all electing Investors
and (ii) the number of shares of Common Stock to be sold in the contemplated
sale.
For Example, if the Sale Notice contemplated a sale of 100 shares of Common
Stock, and if the Management Holder was at such time the owner of 30% of
the Company's Common Stock (on a fully-diluted basis) and if one Investor
elected to participate and the Investor owned 20% of the Company's Common
Stock (on a fully-diluted basis), the Management Holder would be entitled
to sell 60 shares (30% / 50% x 100 shares) and the Investor would be
entitled to sell 40 shares (20% / 50% x 100 shares).
If the Management Holder is selling Preferred Stock, the calculation set forth
above shall be done assuming conversion of the Preferred Stock. The Investors
participating in such a sale of Preferred Stock by a Management Holder shall
have the option of selling Preferred Stock or Common Stock. The Management
Holder will use his best efforts to obtain the agreement of the prospective
transferee(s) to the participation of the Investors in the contemplated
transfer and will not transfer any Management Stock to the prospective
transferee(s) if such transferee(s) refuses to allow the participation of
Investors.
3.3 Exempt Transactions. The restrictions set forth in this Article III
shall not apply to transfers of Management Stock to a Permitted Transferee of
the transferring Management Holder; provided, however, that such Permitted
Transferee shall agree in writing to be bound by such restrictions in connection
with subsequent transfers.
3.4 Assignment of First Refusal Right. The Company has (a) adopted its
1997 Stock Option/Stock Issuance Plan (the "Stock Plan") and (b) granted Stock
Options to certain of its employees (the "Optionees") (the documents referred to
in (a) and (b) are collectively defined as the "Stock Plan Agreements"). The
Stock Plan Agreements contain provisions granting the Company certain repurchase
rights and rights of first refusal with respect to Common Stock held by the
Optionees. In the event the Company elects not to exercise such repurchase
rights and rights of first refusal, the Company agrees to assign such
unexercised rights to the Investors (or any Affiliate designated by any
Investor). Any unexercised right shall be assigned at least 10 days prior to its
expiration. The Investors shall be permitted to purchase their Pro Rata Number
of Shares of any Common Stock being offered and the offer shall be conducted in
accordance with the procedures set forth in Section 3.1 of this Agreement. To
the extent any of the provisions of the Stock Plan Agreements and this Section
3.4 are inconsistent
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with the provisions of Section 3.1 or 3.2 above, the provisions of Sections 3.1
and 3.2 shall govern.
Article IV
Right of First Notification
4.1 For so long as Intel Corporation ("Intel") owns at least seventy five
percent (75%) of the Series D Preferred owned by it (including any Common Stock
into which Series D Preferred Stock has been converted) as of the date of this
Agreement, in the event that the Board of Directors of the Company (i) receives
a bona fide offer to be acquired by means of (x) a merger, consolidation or
other business combination pursuant to which the stockholders of the Company
immediately prior to the effective date of such transaction have beneficial
ownership of less than fifty percent (50%) of the total combined voting power
for election of directors of the surviving corporation immediately following
such transaction, or (y) the sale of all or substantially all of the assets of
the Company, or (ii) votes to initiate a sale to any other person or entity of
(xx) fifty (50%) percent or more of the total voting power of the Company, or
(yy) all or substantially all of the Company's assets, prior to accepting such
acquisition proposal or initiating such sale, the Company shall provide to Intel
written notice within 24 hours (the "Notice") of the proposed terms of such
acquisition proposal or sale. The Notice shall set forth the specific terms of
the acquisition proposal or the initiation of a sale of the Company. Further,
the Company shall provide Intel with access to (and copies of, if requested) all
documents containing nonpublic information of the Company that are or have been
supplied to the party making the acquisition proposal. In its discretion, Intel
shall have eight business days (which time period may be extended by mutual
written agreement) following its receipt of the Notice ("the Negotiation
Period") in which to present an offer to acquire the Company (the "Intel
Offer"), which the Company shall be under no obligation to accept. If, however,
the Company elects to pursue the Intel Offer, then the Company will provide
Intel written acknowledgment of such election. The parties agree to negotiate
in good faith for a period of ten (10) business days (which may be extended by
mutual written agreement) after Intel's receipt of the Company's written
acknowledgment to pursue Intel's Offer, to reach agreement on mutually agreeable
terms.
4.2 In the event that (i) Intel does not deliver an Intel Offer to the
Company within eight business days (or other mutually agreed upon time period,
as set forth above), after its receipt of the Notice; (ii) the Company elects
not to accept Intel's Offer; or (iii) within the ten (10) business days (or
other mutually agreed upon time period, as set forth above) following the
Company's acknowledgment of its desire to pursue the Intel Offer, Intel and the
Company do not mutually agree to the terms of an agreement for an acquisition of
the Company, then, and only then, the right of first negotiation of Intel
hereunder shall expire with respect to such acquisition proposal or initiation
of a sale and the Company shall be free thereafter to enter into a definitive
agreement with a third party for an acquisition or sale of the Company.
15
4.3 This right is applicable only to Intel and is not transferable or
assignable by Intel.
Article V
Covenants Of The Company
The Company hereby covenants and agrees, so long as any Registrable
Securities are outstanding, as follows:
5.1 Basic Financial Information. The Company will furnish the following
reports to each of the Investors holding at least 500,000 shares(as adjusted
for stock splits, stock dividends and similar transactions) of the outstanding
Registrable Securities:
(a) As soon as practicable after the end of each fiscal year of the
Company, and in any event within ninety (90) days thereafter, a consolidated
balance sheet of the Company and its subsidiaries, if any, as of the end of such
fiscal year, and consolidated statements of income and cash flow of the Company
and its subsidiaries, if any, for such year, prepared in accordance with
generally accepted accounting principles consistently applied and setting forth
in each case in comparative form the figures for the previous fiscal year, all
in reasonable detail and certified by independent public accountants of
recognized national standing selected by the Company.
(b) As soon as practicable after the end of each quarterly
accounting period in each fiscal year of the Company, and in any event within
forty-five (45) days thereafter, a consolidated balance sheet of the Company and
its subsidiaries, if any, as of the end of each such quarterly period, and
consolidated statements of income and cash flow of the Company and its
subsidiaries, if any, for such period and for the current fiscal year to date,
prepared in accordance with generally accepted accounting principles
consistently applied and setting forth in comparative form the figures for the
corresponding periods of the previous fiscal year, subject to changes resulting
from normal year-end audit adjustments, all in reasonable detail and certified
by the chief financial officer of the Company (or the chief accounting officer
if no chief financial officer is in place), except that such statements need not
contain the notes required by generally accepted accounting principles.
(c) As soon as practicable after the end of each monthly accounting
period and in any event within thirty (30) days thereafter, a consolidated
balance sheet of the Company and its subsidiaries, if any, as of the end of such
month and consolidated statements of income and of cash flow of the Company and
its subsidiaries, if any, for each month and for the current fiscal year of the
Company to date, all subject to normal year-end audit adjustments, prepared in
accordance with generally accepted accounting principles consistently applied
and certified by the chief financial officer of the
16
Company (or the chief accounting officer if no chief financial officer is in
place), except that such statements need not contain the notes required by
generally accepted accounting principles.
(d) Subsequent to the Company's initial public offering, the
Company will deliver to all holders of greater than or equal to 500,000 shares
(as adjusted for stock splits, stock dividends and similar transactions) of the
Registrable Securities, copies of all reports required to be filed by the
Company pursuant to the requirements of the Securities Exchange Act of 1934, as
amended.
5.2 Additional Information Rights.
(a) The Company will permit each of the Investors (for so long as such
Investor beneficially owns greater than or equal to 500,000 shares(as adjusted
for stock splits, stock dividends and similar transactions) of the Registrable
Securities) and/or their respective representatives to visit and inspect any of
the properties of the Company, including its books of account and other records
(and make copies thereof and take extracts therefrom), and to discuss its
affairs, finances and accounts with the Company's officers and its independent
public accountants, all at such reasonable times and as often as any such person
may reasonably request during the Company's normal business hours; provided that
any person or persons exercising rights under this Section 5.2(a) shall (i) use
all reasonable efforts to ensure that any such examination or visit results in a
minimum of disruption to the operations of the Company and (ii) agree in writing
to keep any proprietary information of the Company disclosed to such person in
the course of such inspection confidential in a manner consistent with prudent
business practices and treatment of such person's or persons' own confidential
information and not use such proprietary information for any purpose other than
in connection with such Investor's or such transferee's ownership of an interest
in the Company; provided, further, that the disclosure of confidential
information to Intel shall be governed by the terms of the Corporate Non-
Disclosure Agreement No. 2087874 dated March 23, 1999 and any Confidential
Information Transmittal Records provided in connection therewith.
Notwithstanding the foregoing, the Company reserves the right to omit such
information as the Company's Board of Directors unanimously deems to be
confidential and the disclosure of which could be to the material detriment of
the Company's best interests.
(b) The Company will deliver the reports described below in this Section
5.2(b) to each of the Investors:
(i) Annually (but in any event at least thirty (30) days prior to
the commencement of each fiscal year of the Company) the financial plan of the
Company, in such manner and form as approved by the Board of Directors of the
Company, which
17
financial plan shall include an operating budget for such fiscal year and an
updated five-year strategic plan for the Company.
(ii) Concurrently with delivery thereof, copies of all reports and
other written material submitted to the Board of Directors.
(iii) Concurrently with delivery thereof, copies of any reports or
communications delivered to the financial community, including all press
releases.
(c) Each of the Investors hereby agrees to hold in confidence and trust
and not to misuse or disclose any confidential information provided pursuant to
this Section 5.2; provided, however, that an Investor shall not be prohibited
from using any such information for the purpose of generating and delivering
portfolio valuation information to its investors.
5.3 Prompt Payment of Taxes, Etc. The Company will promptly pay and
discharge, or cause to be paid and discharged, when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company or any subsidiary; provided,
however, that any such tax, assessment, charge or levy need not be paid if the
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company shall have set aside on its books adequate
reserves with respect thereto; and provided, further, that the Company will pay
all such taxes, assessments, charges or levies forthwith upon the commencement
of proceedings to foreclose any lien which may have attached as security
therefore. The Company will promptly pay or cause to be paid when due, in
conformance with customary trade terms, all other uncontested obligations
incident to the operations of the Company and material thereto individually or
in the aggregate.
5.4 Maintenance of Properties and Leases. The Company will keep its
properties and those of its subsidiaries, if any, in good repair, working order
and condition, reasonable wear and tear excepted, and from time to time make all
needful and proper repairs, renewals, replacements, additions and improvements
thereto; and the Company and its subsidiaries will at all times comply with each
material provision of all leases to which any of them is a party or under which
any of them occupies property if the breach of such provision might have a
material and adverse effect on the condition, financial or otherwise, or
operations of the Company.
5.5 Insurance.
(a) The Company will keep its assets, and those of its subsidiaries,
which are of an insurable character insured by financially sound and reputable
insurers against loss or damage by fire, explosion and other risks customarily
insured against by companies in
18
the Company's line of business, and the Company will maintain, with financially
sound and reputable insurers, insurance against other hazards and risks and
liability to persons and property to the extent and in the manner customary for
companies in similar businesses similarly situated.
(b) Within 60 days of the Initial Closing, the Company shall have
obtained from financially sound and reputable insurance companies, life
insurance policies, if available on commercially reasonable terms, on each of
the lives of Paul A. Berberian, James M. LeJeal and Todd H. Vernon, in the
amount of $2,000,000 each, which policies shall name the Company a loss payee,
and the Company shall maintain such life insurance policies.
5.6 Accounts and Records. The Company will keep true records and books of
account in which full, true and correct entries will be made of all dealings or
transactions in relation to its business and affairs.
5.7 Independent Accountants. The Company will retain a "Big Five"
national accounting firm as its independent public accountants who shall certify
the Company's financial statements at the end of each fiscal year. Once such
"Big Five" accounting firm is selected, its services shall not be terminated
unless the holders of at least 51% of the Investor Stock consent to such
termination of services. In the event the Company determines to terminate the
services of the independent public accountants so selected, the Company will
promptly thereafter notify the holders of Investor Stock of such termination and
the reasons therefor. In its notice to the holders of Investor Stock the Company
shall state whether the change of accountants was recommended or approved by the
Board of Directors of the Company or any committee thereof. In the event such
termination takes place, the Company will promptly thereafter engage another
"Big Six" national accounting firm as its independent public accountants.
5.8 Compliance with Laws. The Company and all its subsidiaries shall duly
observe and conform to all applicable laws and valid requirements of
governmental authorities relating to the conduct of their businesses or to their
properties or assets.
5.9 Maintenance of Corporate Existence, Etc. The Company shall maintain
in full force and effect its corporate existence, rights and franchises and all
licenses and other rights in or to use patents, processes, licenses, trademarks,
trade names or copyrights owned or possessed by it or any subsidiary and deemed
by the Company to be necessary to the conduct of their business and material
thereto.
5.10 Transactions with Affiliates. The Company shall not and shall not
permit any Subsidiary of the Company to enter into or be a party to any
transaction with any Affiliate of the Company or such Subsidiary, except (i)
transactions expressly permitted hereby, (ii) transactions in the ordinary
course of and pursuant to the
19
reasonable requirements of the Company's or such Subsidiary's business and upon
fair and reasonable terms that are fully disclosed to the Investors and are no
less favorable to the Company or such Subsidiary than would be obtained in a
comparable arm's-length transaction with a person not an Affiliate of the
Company or such Subsidiary, (iii) transactions between the Company and its
wholly-owned Subsidiaries or between such Subsidiaries and (iv) payment of
compensation to employees and directors' fees.
5.11 Limited First Refusal Rights.
(a) Except for the issuance of Common Stock or any securities containing
options or rights to acquire any shares of Common Stock ("Equity Securities")
(i) to the Company's employees, consultants, officers or directors pursuant to
any stock option plan, stock purchase or stock bonus plan, arrangement or
agreement, as approved by the Company's Board of Directors, (ii) upon the
conversion of the Preferred Stock, (iii) pursuant to a Qualified Public
Offering, (iv) pursuant to a merger, consolidation, acquisition or similar
business combination approved by the Company's Board of Directors, (v) in
connection with any stock split, stock dividend, or recapitalization, (vi) to a
lender or equipment lessor in connection with any loan or lease financing
transaction, or (vii) in connection with strategic transactions involving the
Company and other entities (including (x) joint ventures, manufacturing,
marketing or distribution arrangements or (y) technology transfer or development
arrangements; provided, however, that such strategic transactions and the
issuance of shares therein, have been approved by the Company's Board of
Directors), (viii) securities issued to vendors or customers or other persons in
similar commercial situations with the Company if such issuance is approved by
the Board of Directors or (ix) any right, option or warrant to acquire any
security convertible into securities excluded pursuant to (i) through (viii)
above, if the Company authorizes the issuance or sale of any Equity Securities,
the Company shall first offer to sell to each of the holders of Investor Stock
(or any Affiliates designated by such holder) its "pro rata portion" of such
Equity Securities. A holder's "pro rata portion" shall equal the quotient
determined by dividing (1) the number of shares of Investor Stock held by each
such holder by the (2) sum of the total number of shares of Investor Stock held
by all holders of Investor Stock. Each holder of Investor Stock (or such
Affiliates) shall be entitled to purchase such Equity Securities at the most
favorable price and on the most favorable terms as such Equity Securities are to
be offered to any other Persons. The purchase price for all Equity Securities
offered to the holders of the Investor Stock shall be payable in cash or, to the
extent otherwise required hereunder, notes issued by such holders.
(b) In order to exercise its purchase rights hereunder, a holder of
Investor Stock (or such Affiliate) must within 7 business days after receipt of
written notice from the Company describing in reasonable detail the Equity
Securities being offered, the purchase price thereof, the payment terms and such
holder's percentage allotment
20
deliver a written notice to the Company describing its election hereunder. If
all of the Equity Securities offered to the holders of Investor Stock (or their
Affiliates) are not fully subscribed by such holders, the remaining Equity
Securities shall be reoffered by the Company to the holders of Investor Stock
purchasing their full allotment upon the terms set forth in this paragraph,
except that such holders must exercise their purchase rights within five days
after receipt of such reoffer.
(c) Upon the expiration of the offering periods described above, the
Company shall be entitled to sell such Equity Securities which the holders of
Investor Stock have not elected to purchase during the 90 days following such
expiration on terms and conditions no more favorable to the purchasers thereof
than those offered to such holders. Any Equity Securities offered or sold by the
Company after such 90-day period must be reoffered to the holders of Investor
Stock pursuant to the terms of this section.
Article VI
Corporate Governance
6.1 Board of Directors.
(a) Concurrently with the Closing and at all times thereafter, each
Stockholder agrees to vote all securities of the Company over which such
Stockholder has voting control and to take all other necessary or desirable
actions within its control (whether as a stockholder, director or officer of the
Company or otherwise, and including without limitation attendance at meetings in
person or by proxy for purposes of obtaining a quorum and execution of written
consents in lieu of meetings), and the Company shall take all necessary and
desirable actions within its control (including, without limitation, calling
special board and stockholder meetings), so that:
(i) the Company shall have a Board of Directors comprised of
no more than seven members;
(ii) the following persons shall be elected to the Board of
Directors:
(A) One representative designated by the holders of a
majority of the outstanding Management Stock (the "Management Director");
provided that, until the next annual meeting of the Company's stockholders, Paul
Berberian shall serve as the Management Director;
(B) One representative designated by the holders of a
majority of the outstanding Series A Preferred Stock (the "Series A Preferred
Director"); provided that until the next annual meeting of the Company's
stockholders, Jim LeJeal shall serve as the Series A Director;
21
(C) One representative designated by the holders of a
majority of the outstanding Series B Preferred Stock (the "Series B Preferred
Director") (collectively with the Series C Preferred Director (as defined
below), the "Investor Directors"); provided that, until the next annual meeting
of the Company's stockholders, Donald H. Parsons, Jr. of The Centennial Funds
("Centennial") shall serve as the Series B Preferred Director; and, provided
further, that in the event that the holders of a majority of the Series B
Preferred Stock do not exercise their right to designate an Investor Director
pursuant to this paragraph (C), Centennial shall have the right to designate a
board observer for so long as Centennial owns, through one or more of its
affiliated entities, at least 500,000 shares (subject to adjustment for stock
splits, stock dividends and similar transactions) of the Registrable Securities;
(D) One representative designated by the holders of a
majority of the outstanding Series C Preferred Stock (the "Series C Preferred
Director"); provided that until the next annual meeting of the Company's
stockholders, Bradley Feld, as a representative of SoftBank, shall serve as the
Series C Director;
(E) One representative designated by the holders of a
majority of the outstanding Series D Preferred Stock subject to the approval of
the entire Board (the "Series D Preferred Director"); provided that the Board
seat to be held by such representative shall be filled by an Outside Director
(as defined below) until such date at which the Company has sold an aggregate of
33,333,334 shares of Series D Preferred Stock. Notwithstanding the above,
Centennial shall have the right to designate such Series D Director (who shall
not be affiliated with either the Company, Centennial or any of the Investors)
subject to the approval of the entire Board of Directors, so long as (i)
Centennial has purchased an aggregate of 6,558,334 shares of Series D Preferred
Stock on or as of an Additional Closing (as defined in the Series D Stock
Purchase Agreement) and (ii) Centennial holds at least eighteen percent (18%)of
the Series D Preferred Stock outstanding immediately following such Additional
Closing; and
(F) Three directors designated by a majority of the
Board of Directors until such time as a Series D Director is designated pursuant
to paragraph (E) above, and thereafter two directors (the "Outside Directors");
provided that no such Outside Director is a member of the Company's management
or an employee of the Company or its Subsidiaries; and provided further that,
Byron Chrisman, G. Jackson Tankersley, Jr. and Carol deB. Whittaker shall
initially serve as the Outside Directors.
(iii) in the event that any director for any reason ceases to
serve as a member of the Board during his term of office, the resulting vacancy
on the Board shall be filled by a majority vote of the Stockholders entitled to
elect such director as provided in this Section 6.1;
22
(iv) if the Stockholders fail to designate a representative to
fill a directorship pursuant to the terms of this Section 6.1, the election of
such director shall be accomplished in accordance with the Company's certificate
of incorporation and bylaws and applicable law; and
(v) each of the Stockholders agrees to vote all shares of
stock owned by it for the removal of a director whenever (but only whenever)
there shall be presented to the Board of Directors the written direction that
such director be removed by a majority of the Stockholders entitled to elect the
director.
(vi) Each of Highland Capital Partners III Limited Partnership
("Highland"), Intel Corporation ("Intel"), Excite, Inc. ("Excite") Pequot
Private Equity Fund II, L.P. ("Pequot"), GE Capital Equity Investments, Inc.
("GE") and Matsushita Electric Industrial Co., Ltd. ("Panasonic") for so long as
each of them owns greater than or equal to 500,000 shares (subject to adjustment
for stock dividends, stock splits and similar transactions) of the Registrable
Securities shall be entitled to designate one representative (each an "Observer"
and, collectively, the "Observers") to attend and observe all meetings of the
Company's Board of Directors and all committees thereof (whether in person,
telephonic or otherwise) in a non-voting observer capacity and to receive all
notices and information forwarded by the Company to its directors and copies of
the minutes of all meetings; provided, however, that the Company may require any
such Observer to execute a nondisclosure/confidentiality agreement prior to
disclosing confidential information to such Observer and the right to omit such
information as the Company's Board of Directors unanimously deems to be
confidential and the disclosure of which could be to the material detriment of
the Company and; provided, further, that the disclosure of confidential
information to the Intel Observer shall be governed by the terms of the
Corporate Non-Disclosure Agreement No. 2087874, dated March 23, 1999, and any
Confidential Information Transmittal Records provided in connection therewith.
The Observers may participate in discussions of matters brought to the Board at
the sole discretion of the Board
(b) To the extent that any provision of the Company's certificate
of incorporation or bylaws is inconsistent with the provisions of this
Agreement, the Stockholders agree to take all actions necessary to effect such
amendments to the certificate of incorporation or bylaws as may be necessary and
appropriate to give full effect to the provisions of this Agreement.
6.2 Meetings of the Board. The Board of Directors will meet at least six
times each calendar year in accordance with an agreed-upon schedule. One such
meeting will be held at the same time and place that a national trade conference
is held for the Company's industry. Within six months of the Closing, subject to
reasonable economic feasibility, the Company will implement video
teleconferencing (specifically,
23
one which is compatible with Centennial's video teleconferencing system) to
facilitate board, committee and other meetings with the Investors.
6.3 Committees. Promptly after the Closing, the Board of Directors will
establish audit, nominating and compensation committees and shall delegate to
such committees those duties and powers as are customarily performed by
committees of such type. The audit committee shall not include any of the
Management Directors. At least one of the directors appointed pursuant to
Section 6.1(a)(ii)(C), (D) or (E) shall be a member of each such committee.
6.4 Reimbursement of Expenses. The reasonable travel expenses of each
Investor Director (or observer if an Investor is no longer represented on the
Board) and the Observers incurred in attending or observing Board or committee
meetings shall be reimbursed by the Company. If the Company adopts any plan or
arrangement to compensate all of its "outside" or "independent" directors
generally for service as a director either with cash or with stock options, then
the Company will also extend the same compensation to the Investor Directors
and, in the case of stock options, such options shall be freely transferable by
the Investor Directors to their respective firms.
6.5 Certain Approvals. Without the approval of a majority of the Investor
Directors, the Company shall not (i) engage any underwriter or placement agent
for any public or private offering of securities other than an investment
banking firm of recognized national reputation, (ii) issue any stock or options
to employees of the Company that are not subject to vesting and/or buy-back
restrictions, or (iii) waive or accelerate any vesting or buy-back restrictions
with respect to Management Stock.
Article VII
Miscellaneous
7.1 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of Colorado as such laws are applied to agreements between
Colorado residents entered into and performed entirely in Colorado, except that
the General Corporation Law of the State of Delaware shall govern as to matters
of corporate law. The parties hereto waive all right to trial by jury in any
action or proceeding to enforce or defend any rights under this Agreement.
7.2 "Market Stand-Off" Agreement. Each Stockholder hereby agrees that,
during the period of duration (not to exceed one-hundred eighty (180) days)
specified by the Company and an underwriter of Common Stock or other securities
of the Company following the effective date of the Company's registration
statement in connection with the Company's first Qualified Public Offering, the
Stockholder shall not, to the extent requested by the Company or such
underwriter, directly or indirectly sell, contract to sell (including, without
limitation, any short sale), grant any option to purchase or
24
otherwise transfer or dispose of (other than to donees who agree to be similarly
bound) any securities of the Company held by such Stockholder, except Common
Stock or other securities included in such registration; provided that all
officers, directors and holders of 1% or greater of the Company's Common Stock
agree to similar provisions and such provisions are in full force and effect and
are not waived in any respect or have been waived ratably with respect to each
holder. In order to enforce the foregoing covenant, the Company may impose stop-
transfer instructions with respect to such securities of each such Investor (and
the shares or securities of every other person subject to the foregoing
restriction) until the end of such period. This covenant shall survive
termination of this Agreement.
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 successors, assigns, heirs, executors and administrators of the
parties hereto; provided, however, that such assignee, heir, executor or
administrator of the parties hereto shall then execute a counterpart to this
Agreement.
7.4 Entire Agreement: Amendment and Waiver. This Agreement and the
Purchase Agreement supersede any other agreement, whether written or oral, that
may have been made or entered into by the parties hereto relating to the matters
contemplated hereby and constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof. In particular,
the execution of this Agreement amends and replaces in its entirety that certain
Stockholders' Agreement dated as of May 28th, 1998, as amended, by and between
the Company and certain of the Investors. Neither this Agreement nor any term
hereof may be amended, waived, discharged or terminated except by a written
instrument signed by the Company and the holders of at least 66 2/3% of the
outstanding Investor Stock, including at least 66 2/3% of the outstanding Series
D Preferred Stock, and any such amendment, waiver, discharge or termination
shall be binding on all the Stockholders; provided however, that no amendment or
waiver which adversely affects the interests of one Investor without a similar
and proportionate effect on the interests of all Investors may be made without
the consent of the Investor whose interests are so adversely affected; provided,
further, that any amendment or waiver which solely adversely affects the rights
of the holders of either the Management Stock or the Series A Preferred Stock,
respectively, shall require the written consent of a majority of the Holders of
Management Stock or the Series A Preferred Stock, respectively.
7.5 Notices, Etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given:
(i) upon personal delivery to the party to be notified, (ii) when sent by
confirmed telex or facsimile if sent during normal business hours of the
recipient, if not, then on the next business day, (iii) five (5) days after
having been sent by registered or certified mail, return receipt
25
requested, postage prepaid, or (iv) one (1) day after deposit with a nationally
recognized overnight courier, special next day delivery, with verification of
receipt. All communications shall be sent to the Company at 5777 Central Avenue,
Suite 120, Boulder, Colorado 80301 and to a Stockholder at the address reflected
in the Company's stock ledger or at such other address as such Stockholder shall
have furnished to the Company in writing.
7.6 Delays or Omissions. No delay or omission to exercise any right,
power or remedy accruing to any Stockholder under this Agreement shall impair
any such right, power or remedy of such Stockholder nor shall it be construed to
be a waiver of any such breach or default, or an acquiescence therein, or of or
in any similar breach or default thereafter occurring; nor shall any waiver of
any single breach or default be deemed a waiver of any other breach or default
theretofore or thereafter occurring. Any waiver, permit, consent or approval of
any kind or character on the part of any Stockholder of any breach or default
under this Agreement or any waiver on the part of any Stockholder of any
provisions or conditions of this Agreement must be made 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 any
Stockholder, shall be cumulative and not alternative.
7.7 Severability. Unless otherwise expressly provided herein, a
Stockholder's rights hereunder are several rights, not rights jointly held with
any of the other Stockholders. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
7.8 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.
7.9 Termination. The provisions of this Agreement (other than Article II
hereof) shall terminate upon the earlier to occur of (i) consummation of a
Qualified Public Offering or (ii) a Sale of the Company. The provisions of
Article II shall terminate on the tenth anniversary of the date hereof.
7.10 Specific Enforcement. Any holder of Investor Stock shall be entitled
to specific enforcement of its rights under this Agreement. The parties
acknowledge that money damages would be an inadequate remedy for a breach of
this Agreement and consent to an action for specific performance or other
injunctive relief in the event of any such breach.
7.11 Confidentiality and Non-Disclosure
26
(a) Disclosure of Terms. The terms and conditions of this Agreement
and the Transaction Documents (collectively, the "Financing Terms"), including
their existence, shall be considered confidential information and shall not be
disclosed by any party hereto to any third party except in accordance with the
provisions set forth below.
(b) Press Releases, Etc. Neither the Investors nor the Company
shall issue any press release or make any public disclosure regarding the
transactions contemplated hereby unless such press release or public disclosure
is approved by those parties mentioned in such press release or public
disclosure in advance. Notwithstanding the foregoing and subject to subsection
(d) below, each of the parties hereto may, in documents required to be filed by
it with the SEC or other regulatory bodies, make such statements with respect to
the transactions contemplated hereby as each may be advised by counsel is
legally necessary or advisable, and may make such disclosure as it is advised by
its counsel is required by law. Within sixty (60) days of the first closing of
the transaction contemplated by the Financing Terms in which Intel has
participated, the Company may issue a press release in the form provided by
Intel disclosing that Intel has invested in the Company; provided that (i) the
release does not disclose any of the Financing Terms, (ii) the release does not
disclose the amount invested specifically by Intel and (iii) the final form of
the press release is approved in advance in writing by Intel. Intel's name and
the fact that Intel is an investor in the Company can be included in a reusable
press release boilerplate statement, so long as Intel has given the Company its
initial approval of such boilerplate statement and the boilerplate statement is
reproduced in exactly the form in which it was approved. No other announcement
regarding Intel in a press release, conference, advertisement, announcement,
professional or trade publication, mass marketing materials or otherwise to the
general public may be made without Intel's prior written consent. No
announcement regarding Excite in a press release, conference, advertisement,
announcement, professional or trade publication, mass marketing materials or
otherwise to the general public may be made without Excite's prior written
consent.
(c) Permitted Disclosures. Notwithstanding the foregoing, (i) any
party may disclose any of the Financing Terms to its current or bona fide
prospective investors, employees, investment bankers, lenders, accountants and
attorneys, in each case only where such persons or entities are under
appropriate nondisclosure obligations, (ii) any party may disclose (other than
in a press release or other public announcement described in subsection (b))
solely the fact that the Investors are investors in the Company to any third
parties without the requirement for the consent of any other party or
nondisclosure obligations, (iii) Intel may disclose its investment in the
Company and the related Financing Terms to third parties or the public at its
sole discretion and (iv) Centennial may disclose the Financing Terms to any of
its or their Affiliates
27
(d) Legally Compelled Disclosure. In the event that any party is
requested or becomes legally compelled (including without limitation, pursuant
to securities laws and regulations) to disclose the existence of this Agreement,
the Stock Purchase Agreement, the Rights Agreement or any of the Financing Terms
hereof in contravention of the provisions of this Section 7.11, such party (the
"Disclosing Party") shall provide the other parties (the "Non-Disclosing
Parties") with prompt written notice of that fact so that the appropriate party
may seek (with the cooperation and reasonable efforts of the other parties) a
protective order, confidential treatment or other appropriate remedy. In such
event, the Disclosing Party shall furnish only that portion of the information
which is legally required and shall exercise reasonable efforts to obtain
reliable assurance that confidential treatment will be accorded such information
to the extent reasonably requested by any Non-Disclosing Party.
(e) Other Information. The provisions of this Section 7.11 shall be
in addition to, and not in substitution for, the provisions of any separate
nondisclosure agreement executed by any of the parties hereto with respect to
the transactions contemplated hereby. Additional disclosures and exchange of
confidential information between the Company and Intel (including without
limitation, any exchanges of information with any Intel Observer) shall be
governed by the terms of the Corporate Non-Disclosure Agreement No. 2087874,
dated March 23, 1999, executed by the Company and Intel, and any Confidential
Information Transmittal Records ("CITR") provided in connection therewith.
(f) All notices required under this section shall be made pursuant
to Section 7.5 of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
28
In Witness Whereof, the parties hereto have executed this Stockholders
Agreement effective as of the day and year first above written.
/s/ Paul Berberian
------------------------------------------
Paul Berberian
/s/ Jim Le Jeal
------------------------------------------
Jim Le Jeal
/s/ Todd Vernon
------------------------------------------
Todd Vernon
[Signature Page to Stockholders Agreement]
33
Exhibit 10.4
VSTREAM INCORPORATED
FIRST AMENDMENT
TO
AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
This First Amendment to the Amended and Restated Stockholders' Agreement,
dated as of November 17, 1999 (the "Stockholders' Agreement"), is entered into
as of December 15, 1999, by and among VStream Incorporated, a Delaware
corporation (the "Company"), and the parties identified as additional
stockholders on the signature pages attached hereto (the "Additional
Stockholders") (this "First Amendment").
RECITALS
Whereas, the Company and the holders of the Company's Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock identified on the
signature pages thereto are parties to the Stockholders' Agreement;
Whereas, in connection with and as a condition to the purchase by the
Additional Stockholders of 4,761,334 shares of the Company's Series D Preferred
Stock, the Company has agreed to provide the Additional Stockholders the rights
set forth in the Stockholders' Agreement;
Whereas, under Section 7.4 of the Stockholders' Agreement, the
Stockholders' Agreement may be amended with written consent of the Company and
the holders of at least 66-2/3% of the Shares (as defined in the Stockholders'
Agreement); and
Whereas, at least 66-2/3% of the Shares (as defined in the Stockholders
Agreement) (voting on an as converted basis) have consented in writing to this
First Amendment.
In consideration of the mutual agreements, covenants and considerations
contained herein, the parties hereto agree as follows:
1. Amendment. The first paragraph of the Stockholders' Agreement is
hereby amended in its entirety to read as follows:
Amended and Restated Stockholders' Agreement (this "Agreement") dated
as of November 17, 1999 by and among (i) VStream Incorporated, a
Delaware corporation (the "Company"), (ii) the holders of the
Company's Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock identified on the signature pages hereto (the
"Investors"), (iii) the members of the Company's management identified
on the signature pages hereto or that have otherwise agreed to be
bound by the provisions hereof (the "Management Holders"), and (iv)
the parties identified as additional stockholders on the signature
pages
1
hereto (the "Additional Stockholders"). The Investors, the Management
Holders and the Additional Stockholders are referred to collectively as
the "Stockholders."
2. Definitions. All capitalized terms used herein without definition shall
have the meanings ascribed to them in the Stockholders' Agreement.
3. Additional Purchasers. Upon the effectiveness of this First Amendment to
the Stockholders' Agreement, the Additional Stockholders agree to be bound by
all of the terms and conditions of the Stockholders' Agreement as amended
herein.
4. Notices. All notices sent to the Company pursuant to the Stockholders'
Agreement shall be sent to the Company at 1157 Century Drive, Louisville,
Colorado 80027.
5. Effect of Amendment. Except as amended as set forth above, the
Stockholders' Agreement shall continue in full force and effect.
6. Governing Law. This First Amendment shall be governed and construed in
accordance with the laws of the State of Colorado as though made solely among
residents of the State of Colorado without regard to conflicts of law
principals.
[The Remainder of this Page is Intentionally Left Blank.]
2
IN WITNESS WHEREOF, the undersigned parties have executed this First
Amendment to the Amended and Restated Stockholders' Agreement as of the date set
forth in the first paragraph hereof.
COMPANY:
VSTREAM INCORPORATED
By: /S/ Paul A. Berberian
---------------------------------
Title: Chief Executive Officer
------------------------------
[Signature Page to First Amendment to
Stockholders' Agreement]
3
ADDITIONAL INVESTORS:
CENTENNIAL FUND VI, L.P.
By: Centennial Holdings VI, LLC
Its General Partner
By: /s/ Donald H. Parsons, Jr.
------------------------------------------
Donald H. Parsons, Jr., Managing Principal
CENTENNIAL ENTREPRENEURS FUND VI, L.P.
By: Centennial Holdings VI, LLC
Its General Partner
By: /s/ Donald H. Parsons, Jr.
------------------------------------------
Managing Principal
CENTENNIAL HOLDINGS I, LLC
By: /s/ Donald H. Parsons, Jr.
------------------------------------------
Donald H. Parsons, Jr., Sr. Vice President
[Signature Page to First Amendment to
Stockholders' Agreement]
4
/s/ Kim N.C. Tomsic
------------------------------------------------------
Kim N.C. Tomsic
/s/ John L. Kurtz
------------------------------------------------------
John L. Kurtz, Jr.
/s/ Lori K. Bornheimer
------------------------------------------------------
Lori K. Bornheimer
/s/ Frances L. Berberian
------------------------------------------------------
Frances L. Berberian
/s/ Charles O. Higgins
------------------------------------------------------
Charles O. Higgins
/s/ Byron R. Chrisman
------------------------------------------------------
Byron R. Chrisman
/s/ T. Charles Fial
------------------------------------------------------
T. Charles Fial TTEE FBO T. Charles Fial 1997
Revocable trust DTD 9/30/97
/s/ Eva Garibian
------------------------------------------------------
Eva Garibian
/s/ Vahe Garibian
------------------------------------------------------
Vahe Garibian
/s/ Mathew S. Martin
------------------------------------------------------
Mathew S. Martin
/s/ Karen S. Martin
------------------------------------------------------
Karen S. Martin
/s/ Thomas Patsiga
------------------------------------------------------
Thomas Patsiga
/s/
------------------------------------------------------
Charles Schwab & Co., Inc. FBO Austin R. Gibbons
IRA Acct #36500127
/s/ Jarvis Seccombe
------------------------------------------------------
Jarvis Seccombe
[Signature Page to First Amendment to
Stockholders' Agreement]
5
/s/ Diane Seccombe
-------------------------------------
Diane Seccombe
/s/ Rimvydas Ambraziunas
-------------------------------------
Rimvydas Ambraziunas
/s/ Marsha Ambraziunas
-------------------------------------
Marsha Ambraziunas
/s/ Francis X. Malone
-------------------------------------
Francis X. Malone
/s/ David A. Makarechian
-------------------------------------
David A. Makarechian
/s/ Jeremy W. Makarechian
-------------------------------------
Jeremy W. Makarechian
/s/ Alfred E. Moore
-------------------------------------
Alfred E. Moore
/s/ Joanne L. Moore
-------------------------------------
Joanne L. Moore
/s/ Philippe Muller
-------------------------------------
Philippe Muller
[Signature Page to First Amendment to
Stockholders' Agreement]
6
SOFTBANK TECHNOLOGY VENTURES V, L.P.
By: SBTV V LLC
By: /s/ Bradely A. Feld
-------------------------------
Managing Director
SOFTBANK TECHNOLOGY VENTURES ADVISORS
FUND V, L.P.
By: SBTV V LLC
By: /s/ Bradely A. Feld
-------------------------------
Managing Director
SOFTBANK TECHNOLOGY VENTURES
ENTREPRENEURS FUND V, L.P.
By: SBTV V LLC
By: /s/ Bradely A. Feld
-------------------------------
Managing Director
SOFTBANK TECHNOLOGY VENTURES IV, L.P.
By: STV IV LLC
By: /s/ Bradely A. Feld
-------------------------------
Managing Director
SOFTBANK TECHNOLOGY ADVISORS FUND, L.P.
By: STV IV LLC
By: /s/ Bradely A. Feld
-------------------------------
Managing Director
[Signature Page to First Amendment to
Stockholders' Agreement]
7
EXHIBIT 10.5
AMENDED AND RESTATED
INVESTORS AGREEMENT
This Investors Agreement (this "Agreement") dated as of November 17, 1999,
is by and among (i) VStream Incorporated, a Delaware corporation (the
"Company"), and (ii) the holders of the Company's Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock identified on the
signature pages hereto (the "Investors").
The holders of Series D Preferred and the Company are parties to a Series D
Preferred Stock Purchase Agreement of even date herewith (the "Purchase
Agreement"). The Series D Stockholders' obligations under the Purchase
Agreement are conditioned upon the execution and delivery of this Agreement by
all of the Investors and the Company.
Now, Therefore, in consideration of the mutual promises and covenants set
forth herein, the parties agree as follows:
Article I
Certain Definitions
As used in this Agreement, the following terms shall have the following
respective meanings:
"Affiliate" shall mean any person, entity or investment fund controlling,
controlled by or under common control with an Investor and any partner of an
Investor which is a partnership or a member of an Investor which is a limited
liability company.
"Certificate of Amendment" shall mean the Company's Certificate of
Amendment to its Certificate of Incorporation setting forth the rights,
preferences, privileges and restrictions of the Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock.
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"Common Stock" shall mean the Company's Common Stock, $.001 par value per
share.
"Independent Third Party" means any person who, immediately prior to the
contemplated transaction, does not own in excess of 5% of the Company's Common
Stock, on a fully-diluted basis (a "5% Owner"), who is not controlling,
controlled by or under common control with any such 5% Owner and who is not the
spouse or descendent (by birth or adoption) of any such 5% Owner or a trust for
the benefit of such 5% Owner and/or such other persons.
"Investor Stock" shall mean (i) shares of Preferred Stock and Common Stock
owned by the Investors or any transferee thereof; (ii) shares of Common Stock
issued or issuable upon the conversion or exercise of any stock (including,
without limitation, the Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock) warrants, options or
other securities of the Company owned by the Investors or any transferee
thereof; and (iii) any shares of Common Stock issued as a dividend or other
distribution with respect to or in exchange for or in replacement of the shares
referenced in (i) and (ii) above.
"Permitted Transferee" shall mean with respect to an Investor, an Affiliate
of the Investor, a member of such Investor's immediate family, a trust
established for the benefit of members of such Investor's immediate family, or a
transferee of such Investor by will or the laws of intestate succession.
"Preferred Stock" shall mean, collectively, (i) the Series A Preferred
Stock; (ii) the Series B Preferred Stock; (iii) the Series C Preferred Stock.
and (iv) the Series D Preferred Stock.
"Public Offering" means any offering by the Company of its equity
securities to the public pursuant to an effective registration statement under
the Securities Act, or any comparable statement under any similar federal
statute then in force; provided that a Public Offering shall not include an
offering made in connection with a business acquisition or combination or an
employee benefit plan.
"Public Sale" means any sale of Investor Stock to the public pursuant to an
offering registered under the Securities Act or to the public through a broker,
dealer or market maker pursuant to the provisions of Rule 144 adopted under the
Securities Act.
"Qualified Public Offering" shall mean an underwritten public offering of
Common Stock resulting in proceeds to the Company of not less than $30 million
(prior to expenses and underwriting commissions) and at an offering price per
share equal to at least $8.00 (as appropriately adjusted for future stock
splits, stock dividends, recapitalizations and similar transactions affecting
the Common Stock).
"Rule 144" shall mean Rule 144 as promulgated by the Commission under the
Securities Act, as such Rule may be amended from time to time, or any similar
successor Rule that may be promulgated by the Commission.
"Sale of the Company" means the sale of the Company to an Independent Third
Party or group of Independent Third Parties pursuant to which such party or
parties acquire (i) capital stock of the Company possessing the voting power
under normal circumstances to elect a majority of the Company's board of
directors (whether by merger, consolidation or sale or transfer of the Company's
capital stock) or (ii) all or substantially all of the Company's assets
determined on a consolidated basis.
2
"Securities Act" shall mean the Securities Act of 1933 (or any similar
successor federal statute), as amended, and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
"Series A Preferred Stock" shall mean the Company's Series A Convertible
Preferred Stock, $.01 par value per share.
"Series B Preferred Stock" shall mean the Company's Series B Convertible
Preferred Stock, $.01 par value per share.
"Series C Preferred Stock" shall mean the Company's Series C Convertible
Preferred Stock, $.01 par value per share.
"Series D Preferred Stock" shall mean the Company's Series D Convertible
Preferred Stock, $.01 par value per share.
Article II
Restrictions on Transfers of Investor Stock
2.1 Transfer of Investor Stock. No Investor shall sell, transfer, assign,
pledge or otherwise dispose of (a "Transfer") any interest in any Investor Stock
except pursuant to (i) a Public Sale, a Sale of the Company or any conversion
provisions of the Certificate of Amendment ("Exempt Transfers") or (ii) the
provisions of this Article II. Each Investor agrees not to consummate any
Transfer (other than an Exempt Transfer) until 30 days after the delivery to the
Company and the other Investors of such Investor's Offer Notice, unless the
parties to the Transfer have been finally determined pursuant to this Article II
prior to the expiration of such 30-day period (the "Election Period").
2.2 First Offer Right. At least 30 days prior to making any Transfer of any
Investor Stock (other than an Exempt Transfer) the transferring Investor (the
"Transferring Investor") shall deliver a written notice (the "Offer Notice") to
the Company and the other Investors (the "Other Investors"). The Offer Notice
shall disclose in reasonable detail the proposed terms and conditions of the
Transfer. First, the Company may elect to purchase all (but not less than all)
of the Investor Stock specified in the Offer Notice at the price and on the
terms specified therein by delivering written notice of such election to the
Transferring Investor and the Other Investors as soon as practical but in any
event within ten days after the delivery of the Offer Notice. If the Company has
not elected to purchase all of the Investor Stock within such ten-day period,
each Other Investor (or any Affiliate thereof) may elect to purchase all (but
not less than all) of its Pro Rata Share (as defined below) of the Investor
Stock specified in the Offer Notice at the price and on the terms specified
therein by delivering written notice of such election to the Transferring
Investor as soon as practical but in any event within 20 days after delivery of
the Offer Notice. Any Investor Stock not elected to be purchased by the end of
such 20-day period shall be
3
reoffered for the ten-day period prior to the expiration of the Election Period
by the Transferring Investor on a pro rata basis to the Other Investors (or any
Affiliate thereof) who have elected to purchase their Pro Rata Share. If the
Company or any Other Investors have elected to purchase Investor Stock from the
Transferring Investor, the transfer of such shares shall be consummated as soon
as practical after the delivery of the election notices, but in any event within
15 days after the expiration of the Election Period. To the extent that the
Company and the Other Investors have not elected to purchase all of the Investor
Stock being offered, the Transferring Investor may, within 90 days after the
expiration of the Election Period, transfer such Investor Stock which has not
been purchased by the Company and the Other Investors (or any Affiliate thereof)
to one or more third parties at a price no less than the price per share
specified in the Offer Notice and on other terms no more favorable to the
transferees than offered to the Company and the Other Investors in the Offer
Notice. The purchase price specified in any Offer Notice shall be payable solely
in cash at the closing of the transaction or in installments over time. If the
Transferring Investor does not dispose of its Investor Stock within the 90-day
period after the expiration of the Election Period, it shall not subsequently
dispose of its Investor Stock except in accordance with the provisions of this
Article II. Each Investor's "Pro Rata Share" shall be based upon such Investor's
proportionate ownership of all Investor Stock held by all Investors (exclusive
of the Investor Stock held by the Transferring Investor) on a fully-diluted
basis.
2.3 Permitted Transfers. The restrictions contained in this Article II
shall not apply with respect to any Transfer of Investor Stock by any Investor
to its Permitted Transferees; provided that the restrictions contained in this
Article II shall continue to be applicable to the Investor Stock after any such
Transfer to a Permitted Transferee and provided further that, as a condition to
completing the transfer, the Permitted Transferees of such Investor Stock shall
agree in writing to be bound by the provisions of this Agreement affecting the
Investor Stock so transferred. In addition, the restrictions contained in this
Article II shall not apply with respect to any Transfer of Investor Stock by
Intel Corporation.
2.4 Termination of Restrictions. The restrictions set forth in this
paragraph 2 shall continue with respect to each share of Investor Stock until
the earlier of (i) the date on which such Investor Stock has been transferred in
a Public Sale, (ii) the date on which such Investor Stock has been transferred
pursuant to this Article II (other than Section 2.3), (iii) the consummation of
a Qualified Public Offering or (iv) the consummation of a Sale of the Company.
2.5 Legend. Each certificate evidencing Investor Stock and each certificate
issued in exchange for or upon the transfer of any Investor Stock (if such
shares remain Investor Stock after such transfer) shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"The securities represented by this certificate are subject to an
Investors Agreement dated as of November 17, 1999, among the issuer of
such securities (the "Company") and certain of the
4
Company's stockholders. A copy of such Investors Agreement will be
furnished without charge by the Company to the holder hereof upon
written request."
The Company shall imprint such legend on certificates evidencing Investor Stock
outstanding prior to the date hereof. The legend set forth above shall be
removed from the certificates evidencing any shares which cease to be Investor
Stock in accordance with Article II hereof.
2.6 Transfers in Violation of Agreement. Any Transfer or attempted Transfer
of any Investor Stock in violation of any provision of this Agreement shall be
void, and the Company shall not record such Transfer on its books or treat any
purported transferee of such Investor Stock as the owner of such shares for any
purpose.
Article III
Miscellaneous
3.1 Amendment and Waiver. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement shall be
effective against the Company or the Investors unless such modification,
amendment or waiver is approved in writing by the Company and the holders of at
least 66 2/3% of the shares of Investor Stock, respectively; provided that any
provision which requires a higher vote of holders of Investor Stock may not be
amended, waived or modified without the higher vote of holders of Investor
Stock; provided, further, that no modification, amendment or waiver which
adversely affects the interests of one Investor without a similar and
proportionate effect on the interests of all Investors may be made without the
consent of the Investor whose interests are so adversely affected. The failure
of any party to enforce any of the provisions of this Agreement shall in no way
be construed as a waiver of such provisions and shall not affect the right of
such party thereafter to enforce each and every provision of this Agreement in
accordance with its terms. In calculating the number of shares of Investor
Stock, any Investor Stock represented by the Preferred Stock shall equal the
number of shares of Common Stock issuable upon conversion of the Preferred
Stock.
3.2 Severability. Whenever possible, each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality, or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
3.3 Entire Agreement. Except as otherwise expressly set forth herein, this
document embodies the complete agreement and understanding among the parties
hereto with respect to the subject matter hereof and supersedes and preempts any
prior understandings, agreements or
5
representations by or among the parties, written or oral, which may have related
to the subject matter hereof in any way, including that certain Investor
Agreement dated as of May 28, 1998, as amended by and between the Company and
certain of the Investors.
3.4 Successors and Assigns. Except as otherwise provided herein, this
Agreement shall bind and inure to the benefit of and be enforceable by the
Company and its successors and assigns and the Investors and any subsequent
holders of Investor Stock and the respective successors and assigns of each of
them, so long as they hold Investor Stock.
3.5 Counterparts. This Agreement may be executed in separate counterparts
each of which shall be an original and all of which taken together shall
constitute one and the same agreement.
3.6 Remedies. The Company and the Investors shall be entitled to enforce
their rights under this Agreement specifically to recover damages by reason of
any breach of any provision of this Agreement and to exercise all other rights
existing in their favor. The parties hereto agree and acknowledge that money
damages may not be an adequate remedy for any breach of the provisions of this
Agreement and that the Company and any Investor may in its sole discretion apply
to any court of law or equity of competent jurisdiction for specific performance
and/or injunctive relief (without posting a bond or other security) in order to
enforce or prevent any violation of the provisions of this Agreement.
3.7 Notices, Etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given:
(i) upon personal delivery to the party to be notified, (ii) when sent by
confirmed telex or facsimile if sent during normal business hours of the
recipient, if not, then on the next business day, (iii) five (5) days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid, or (iv) one (1) day after deposit with a nationally recognized
overnight courier, special next day delivery, with verification of receipt. All
communications shall be sent to the Company at 5777 Central Avenue, Suite 120,
Boulder, Colorado 80301 and to an Investor at the address reflected in the
Company's stock ledger or at such other address as such Investor shall have
furnished to the Company in writing.
3.8 Governing Law. The corporate law of Delaware shall govern all issues
concerning the relative rights of the Company and its stockholders. All other
questions concerning the construction, validity and interpretation of this
Agreement shall be governed by the internal law, and not the law of conflicts,
of Colorado. The parties hereto waive all right to trial by jury in any action
or proceeding to enforce or defend any rights under this Agreement.
3.9 Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
6
In Witness Whereof, the parties hereto have executed this Investors
Agreement effective as of the day and year first above written.
/s/ Frances Berberian
_____________________________________
By: Frances Berberian, Trustee
/s/ Lori K. Bornheimer
_____________________________________
Lori K. Bornheimer
/s/ Charles Fial
_____________________________________
Charles Fial
/s/ Richard A. Fink
_____________________________________
Richard A. Fink
/s/ John E. Hayes
_____________________________________
John E. Hayes
/s/ Charles O. Higgins
_____________________________________
Charles O. Higgins
/s/ John L. Kurtz, Jr.
_____________________________________
John L. Kurtz, Jr.
[Signature Page to Investors Agreement]
12
BROBECK, PHLEGER & HARRISON, LLP
By: /s/
_______________________________
Its: _______________________________
/s/ David A. Makarechian
____________________________________
David A. Makarechian
/s/ Jeremy W. Makarechian
____________________________________
Jeremy W. Makarechian
/s/ Kim Tomsic
____________________________________
Kim Tomsic
[Signature Page to Investors Agreement]
13
Exhibit 10.6
VSTREAM INCORPORATED
FIRST AMENDMENT
TO
AMENDED AND RESTATED INVESTORS AGREEMENT
This First Amendment to the Amended and Restated Investors Agreement dated
as of November 17, 1999 (the "Investors Agreement"), is entered into as of
December 15, 1999, by and among VStream Incorporated, a Delaware corporation
(the "Company"), and the parties identified as additional investors on the
signature pages attached hereto (the "Additional Investors") (this "First
Amendment").
RECITALS
Whereas, the Company and the holders of the Company's Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock identified on the
signature pages thereto, are parties to the Investors Agreement;
Whereas, in connection with and as a condition to the purchase by the
Additional Investors of 4,761,334 shares of the Company's Series D Preferred
Stock, the Company has agreed to provide the Additional Investors the rights set
forth in the Investors Agreement;
Whereas, under Section 3.1 of the Investors Agreement, the Investors
Agreement may be amended with written consent of the Company and the holders of
at least 66-2/3% of the outstanding shares of Investor Stock (as defined in the
Investors Agreement );and
Whereas, at least 66-2/3% of the shares of Investor Stock have consented in
writing to this First Amendment.
In consideration of the mutual agreements, covenants and considerations
contained herein, the parties hereto agree as follows:
1. Amendment. The first paragraph of the Investors Agreement is hereby
amended in its entirety to read as follows:
This Investors Agreement (this "Agreement") dated as of November 17,
1999, is entered into by and among (i) VStream Incorporated, a
Delaware corporation (the "Company"), (ii) the holders of the
Company's Series B Preferred Stock, Series C Preferred Stock and
Series D Preferred Stock identified on the signature pages hereto (the
"Initial Investors"), and (iii) the parties identified as additional
investors on the signature pages hereto (the "Additional Investors").
The Initial Investors and the Additional Investors are collectively
referred to herein as the "Investors."
1
2. Definitions. All capitalized terms used herein without definition shall
have the meanings ascribed to them in the Investors Agreement.
3. Additional Investors. Upon the effectiveness of this First Amendment,
the Additional Investors agree to be bound by all of the terms and conditions of
the Investors Agreement as amended herein.
4. Notices. All notices sent to the Company pursuant to the Stockholders'
Agreement shall be sent to the Company at 1157 Century Drive, Louisville.
Colorado 80027.
5. Effect of Amendment. Except as amended as set forth above, the Investors
Agreement shall continue in full force and effect.
6. Governing Law. This First Amendment shall be governed and construed in
accordance with the laws of the State of Colorado as though made solely among
residents of the State of Colorado without regard to conflicts of law
principals.
[The Remainder of this Page is Intentionally Left Blank.]
2
IN WITNESS WHEREOF, the undersigned parties have executed this First
Amendment to the Amended and Restated Investors Agreement as of the date set
forth in the first paragraph hereof.
COMPANY:
VSTREAM INCORPORATED
By: /s/ Paul A. Berberian
---------------------------------
Title: CEO
------------------------------
[Signature Page to First Amendment to Investors
Agreement]
3
ADDITIONAL INVESTORS:
CENTENNIAL FUND VI, L.P.
By: Centennial Holdings VI, LLC
Its General Partner
By: /s/ Donald H. Parsons, Jr.
------------------------------------------
Donald H. Parsons, Jr., Managing Principal
CENTENNIAL ENTREPRENEURS FUND VI, L.P.
By: Centennial Holdings VI, LLC
Its General Partner
By: /s/ Donald H. Parsons, Jr.
------------------------------------------
Managing Principal
CENTENNIAL HOLDINGS I, LLC
By: /s/ Donald H. Parsons, Jr.
------------------------------------------
Donald H. Parsons, Jr., Sr. Vice President
[Signature Page to First Amendment to
Investors Agreement]
4
/s/ Kim N.C. Tomsic
------------------------------------------------------
Kim N.C. Tomsic
/s/ John L. Kurtz, Jr.
------------------------------------------------------
John L. Kurtz, Jr.
/s/ Lori K. Bornheimer
------------------------------------------------------
Lori K. Bornheimer
/s/ Frances L. Berberian
------------------------------------------------------
Frances L. Berberian
/s/ Charles O. Higgins
------------------------------------------------------
Charles O. Higgins
/s/ Byron R. Chrisman
------------------------------------------------------
Byron R. Chrisman
/s/ T. Charles Fial
------------------------------------------------------
T. Charles Fial TTEE FBO T. Charles Fial 1997
Revocable trust DTD 9/30/97
/s/ Eva Garibian
------------------------------------------------------
Eva Garibian
/s/ Vahe Garibian
------------------------------------------------------
Vahe Garibian
/s/ Mathew S. Martin
------------------------------------------------------
Mathew S. Martin
/s/ Karen S. Martin
------------------------------------------------------
Karen S. Martin
/s/ Thomas Patsiga
------------------------------------------------------
Thomas Patsiga
/s/
------------------------------------------------------
Charles Schwab & Co., Inc. FBO Austin R. Gibbons
IRA Acct #36500127
/s/ Jarvis Seccombe
------------------------------------------------------
Jarvis Seccombe
[Signature Page to First Amendment to
Stockholders' Agreement]
5
/s/ Diane Seccombe
-------------------------------------
Diane Seccombe
/s/ Rimvydas Ambraziunas
-------------------------------------
Rimvydas Ambraziunas
/s/ Marsha Ambraziunas
-------------------------------------
Marsha Ambraziunas
/s/ Francis X. Malone
-------------------------------------
Francis X. Malone
/s/ David A. Makarechian
-------------------------------------
David A. Makarechian
/s/ Jeremy W. Makarechian
-------------------------------------
Jeremy W. Makarechian
/s/ Alfred E. Moore
-------------------------------------
Alfred E. Moore
/s/ Joanne L. Moore
-------------------------------------
Joanne L. Moore
/s/ Philippe Muller
-------------------------------------
Philippe Muller
[Signature Page to First Amendment to
Investors Agreement]
6
SOFTBANK TECHNOLOGY VENTURES V, L.P.
By: STV IV LLC
By: /s/ Bradley A. Feld
-------------------------------
Managing Director
SOFTBANK TECHNOLOGY VENTURES ADVISORS
FUND V, L.P.
By: STV IV LLC
By: /s/ Bradley A. Feld
-------------------------------
Managing Director
SOFTBANK TECHNOLOGY VENTURES
ENTREPRENEURS FUND V, L.P.
By: STV IV LLC
By: /s/ Bradley A. Feld
-------------------------------
Managing Director
SOFTBANK TECHNOLOGY VENTURES IV, L.P.
By: STV IV LLC
By: /s/ Bradley A. Feld
-------------------------------
Managing Director
SOFTBANK TECHNOLOGY ADVISORS FUND, L.P.
By: STV IV LLC
By: /s/ Bradley A. Feld
-------------------------------
Managing Director
[Signature Page to First Amendment to Investors
Agreement]
7
EXHIBIT 10.7
FORM OF INDEMNITY AGREEMENT
This Agreement is made and entered into this ____ day of March, 2000 by and
between Evoke Incorporated, a Delaware corporation (the "Corporation"), and
_____ ("Agent").
Recitals
Whereas, Agent performs a valuable service to the Corporation in his/her
capacity as [Officer/Director] of the Corporation;
Whereas, the stockholders of the Corporation have adopted bylaws (the
"Bylaws") providing for the indemnification of the directors, officers,
employees and other agents of the Corporation, including persons serving at the
request of the Corporation in such capacities with other corporations or
enterprises, as authorized by the Delaware General Corporation Law, as amended
(the "Code");
Whereas, the Bylaws and the Code, by their non-exclusive nature, permit
contracts between the Corporation and its agents, officers, employees and other
agents with respect to indemnification of such persons; and
Whereas, in order to induce Agent to continue to serve as
[Officer/Director] of the Corporation, the Corporation has determined and agreed
to enter into this Agreement with Agent;
Now, Therefore, in consideration of Agent's continued service as
[Officer/Director] after the date hereof, the parties hereto agree as follows:
Agreement
1. Services to the Corporation. Agent will serve, at the will of the
Corporation or under separate contract, if any such contract exists, as
[Officer/Director] of the Corporation or as a director, officer or other
fiduciary of an affiliate of the Corporation (including any employee benefit
plan of the Corporation) faithfully and to the best of his ability so long as he
is duly elected and qualified in accordance with the provisions of the Bylaws or
other applicable charter documents of the Corporation or such affiliate;
provided, however, that Agent may at any time and for any reason resign from
such position (subject to any contractual obligation that Agent may have assumed
apart from this Agreement) and that the Corporation or any affiliate shall have
no obligation under this Agreement to continue Agent in any such position.
2. Indemnity of Agent. The Corporation hereby agrees to hold harmless and
indemnify Agent to the fullest extent authorized or permitted by the provisions
of the Bylaws and the Code, as the same may be amended from time to time (but,
only to the extent that such amendment permits the Corporation to provide
broader indemnification rights than the Bylaws or the Code permitted prior to
adoption of such amendment).
3. Additional Indemnity. In addition to and not in limitation of the
indemnification otherwise provided for herein, and subject only to the
exclusions set forth in Section 4 hereof, the Corporation hereby further agrees
to hold harmless and indemnify Agent:
(a) against any and all expenses (including attorneys' fees), witness
fees, damages, judgments, fines and amounts paid in settlement and any other
amounts that Agent becomes legally obligated to pay because of any claim or
claims made against or by him in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative (including an action by or in the right of the
Corporation) to which Agent is, was or at any time becomes a party, or is
threatened to be made a party, by reason of the fact that Agent is, was or at
any time becomes a director, officer, employee or other agent of Corporation, or
is or was serving or at any time serves at the request of the Corporation as a
director, officer, employee or other agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise; and
(b) otherwise to the fullest extent as may be provided to Agent by the
Corporation under the non-exclusivity provisions of the Code and Section 43
of the Bylaws.
4. Limitations on Additional Indemnity. No indemnity pursuant to Section
3 hereof shall be paid by the Corporation:
(a) on account of any claim against Agent for an accounting of profits
made from the purchase or sale by Agent of securities of the Corporation
pursuant to the provisions of Section 16(b) of the Securities Exchange Act of
1934 and amendments thereto or similar provisions of any federal, state or local
statutory law;
(b) on account of Agent's conduct that was knowingly fraudulent or
deliberately dishonest or that constituted willful misconduct;
(c) on account of Agent's conduct that constituted a breach of Agent's
duty of loyalty to the Corporation or resulted in any personal profit or
advantage to which Agent was not legally entitled;
(d) for which payment is actually made to Agent under a valid and
collectible insurance policy or under a valid and enforceable indemnity clause,
bylaw or agreement, except in respect of any excess beyond payment under such
insurance, clause, bylaw or agreement;
(e) if indemnification is not lawful (and, in this respect, both the
Corporation and Agent have been advised that the Securities and Exchange
Commission believes that indemnification for liabilities arising under the
federal securities laws is against public policy and is, therefore,
unenforceable and that claims for indemnification should be submitted to
appropriate courts for adjudication); or
(f) in connection with any proceeding (or part thereof) initiated by
Agent, or any proceeding by Agent against the Corporation or its directors,
officers, employees or other agents, unless (i) such indemnification is
expressly required to be made by law, (ii) the proceeding was authorized by the
Board of Directors of the Corporation, (iii) such indemnification is provided by
the Corporation, in its sole discretion, pursuant to the powers
2.
vested in the Corporation under the Code, or (iv) the proceeding is initiated
pursuant to Section 9 hereof.
5. Continuation of Indemnity. All agreements and obligations of the
Corporation contained herein shall continue during the period Agent is a
director, officer, employee or other agent of the Corporation (or is or was
serving at the request of the Corporation as a director, officer, employee or
other agent of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise) and shall continue thereafter so long as Agent
shall be subject to any possible claim or threatened, pending or completed
action, suit or proceeding, whether civil, criminal, arbitrational,
administrative or investigative, by reason of the fact that Agent was serving in
the capacity referred to herein.
6. Partial Indemnification. Agent shall be entitled under this Agreement
to indemnification by the Corporation for a portion of the expenses (including
attorneys' fees), witness fees, damages, judgments, fines and amounts paid in
settlement and any other amounts that Agent becomes legally obligated to pay in
connection with any action, suit or proceeding referred to in Section 3 hereof
even if not entitled hereunder to indemnification for the total amount thereof,
and the Corporation shall indemnify Agent for the portion thereof to which Agent
is entitled.
7. Notification and Defense of Claim. Not later than thirty (30) days
after receipt by Agent of notice of the commencement of any action, suit or
proceeding, Agent will, if a claim in respect thereof is to be made against the
Corporation under this Agreement, notify the Corporation of the commencement
thereof; but the omission so to notify the Corporation will not relieve it from
any liability which it may have to Agent otherwise than under this Agreement.
With respect to any such action, suit or proceeding as to which Agent notifies
the Corporation of the commencement thereof:
(a) the Corporation will be entitled to participate therein at its
own expense;
(b) except as otherwise provided below, the Corporation may, at its
option and jointly with any other indemnifying party similarly notified and
electing to assume such defense, assume the defense thereof, with counsel
reasonably satisfactory to Agent. After notice from the Corporation to Agent of
its election to assume the defense thereof, the Corporation will not be liable
to Agent under this Agreement for any legal or other expenses subsequently
incurred by Agent in connection with the defense thereof except for reasonable
costs of investigation or otherwise as provided below. Agent shall have the
right to employ separate counsel in such action, suit or proceeding but the fees
and expenses of such counsel incurred after notice from the Corporation of its
assumption of the defense thereof shall be at the expense of Agent unless (i)
the employment of counsel by Agent has been authorized by the Corporation, (ii)
Agent shall have reasonably concluded that there may be a conflict of interest
between the Corporation and Agent in the conduct of the defense of such action
or (iii) the Corporation shall not in fact have employed counsel to assume the
defense of such action, in each of which cases the fees and expenses of Agent's
separate counsel shall be at the expense of the Corporation. The Corporation
shall not be entitled to assume the defense of any action, suit or proceeding
brought by or on behalf of the Corporation or as to which Agent shall have made
the conclusion provided for in clause (ii) above; and
3.
(c) the Corporation shall not be liable to indemnify Agent under this
Agreement for any amounts paid in settlement of any action or claim effected
without its written consent, which shall not be unreasonably withheld. The
Corporation shall be permitted to settle any action except that it shall not
settle any action or claim in any manner which would impose any penalty or
limitation on Agent without Agent's written consent, which may be given or
withheld in Agent's sole discretion.
8. Expenses. The Corporation shall advance, prior to the final disposition
of any proceeding, promptly following request therefor, all expenses incurred by
Agent in connection with such proceeding upon receipt of an undertaking by or on
behalf of Agent to repay said amounts if it shall be determined ultimately that
Agent is not entitled to be indemnified under the provisions of this Agreement,
the Bylaws, the Code or otherwise.
9. Enforcement. Any right to indemnification or advances granted by this
Agreement to Agent shall be enforceable by or on behalf of Agent in any court of
competent jurisdiction if (i) the claim for indemnification or advances is
denied, in whole or in part, or (ii) no disposition of such claim is made within
ninety (90) days of request therefor. Agent, in such enforcement action, if
successful in whole or in part, shall be entitled to be paid also the expense of
prosecuting his claim. It shall be a defense to any action for which a claim for
indemnification is made under Section 3 hereof that Agent is not entitled to
indemnification because of the limitations set forth in Section 4 hereof.
Neither the failure of the Corporation (including its Board of Directors or its
stockholders) to have made a determination prior to the commencement of such
enforcement action that indemnification of Agent is proper in the circumstances,
nor an actual determination by the Corporation (including its Board of Directors
or its stockholders) that such indemnification is improper shall be a defense to
the action or create a presumption that Agent is not entitled to indemnification
under this Agreement or otherwise. In any such enforcement action, the burden of
proof shall be on the Corporation to prove that Agent is not entitled to such
indemnification or advance, as the case may be.
10. Subrogation. In the event of payment under this Agreement, the
Corporation shall be subrogated to the extent of such payment to all of the
rights of recovery of Agent, who shall execute all documents required and shall
do all acts that may be necessary to secure such rights and to enable the
Corporation effectively to bring suit to enforce such rights.
11. Non-Exclusivity of Rights. The rights conferred on Agent by this
Agreement shall not be exclusive of any other right which Agent may have or
hereafter acquire under any statute, provision of the Corporation's Certificate
of Incorporation or Bylaws, agreement, vote of stockholders or directors, or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding office.
12. Survival of Rights.
(a) The rights conferred on Agent by this Agreement shall continue
after Agent has ceased to be a director, officer, employee or other agent of the
Corporation or to serve at the request of the Corporation as a director,
officer, employee or other agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise and shall inure to the
benefit of Agent's heirs, executors and administrators.
4.
(b) The Corporation shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Corporation, expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform if no such succession
had taken place.
13. Separability. Each of the provisions of this Agreement is a separate
and distinct agreement and independent of the others, so that if any provision
hereof shall be held to be invalid for any reason, such invalidity or
unenforceability shall not affect the validity or enforceability of the other
provisions hereof. Furthermore, if this Agreement shall be invalidated in its
entirety on any ground, then the Corporation shall nevertheless indemnify Agent
to the fullest extent provided by the Bylaws, the Code or any other applicable
law.
14. Governing Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Delaware.
15. Amendment and Termination. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless in writing signed by
both parties hereto.
16. Identical Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute but one and the same Agreement. Only
one such counterpart need be produced to evidence the existence of this
Agreement.
17. Headings. The headings of the sections of this Agreement are inserted
for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction hereof.
18. Notices. All notices, requests, demands and other communications
hereunder shall be in writing and shall be deemed to have been duly given (i)
upon delivery if delivered by hand to the party to whom such communication was
directed or (ii) upon the third business day after the date on which such
communication was mailed if mailed by certified or registered mail with postage
prepaid:
(a) If to Agent, at the address indicated on the signature page
hereof.
(b) If to the Corporation, to
Evoke Incorporated
5777 Century Drive
Louisville, CO 80027
or to such other address as may have been furnished to Agent by the Corporation.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
5.
In Witness Whereof, the parties hereto have executed this Agreement on and
as of the day and year first above written.
Evoke Incorporated
By: _________________________________________
Paul Berberian
Title: President and Chief Executive Officer
Agent
Address:
6.
Exhibit 10.8
VSTREAM INCORPORATED
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
This Series B Preferred Stock Purchase Agreement (the "Agreement") is
entered into as of September 2, 1997, by and among VSTREAM INCORPORATED, a
Delaware corporation (the "Company") and each of those persons and entities,
severally and not jointly, whose names are set forth on the Schedule of
Purchasers attached hereto as Exhibit A (collectively the "Purchasers" and
individually a "Purchaser").
In consideration of the mutual promises hereinafter set forth, the parties
hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 Authorization of Shares. On or prior to the Closing (as defined in
Section 2 below), the Company shall have authorized the sale and issuance to
Purchasers of the shares of Series B Preferred Stock (the "Shares") having the
rights, preferences, privileges and restrictions set forth in the Certificate of
Amendment to the Certificate of Incorporation of the Company, in the form
attached hereto as Exhibit B (the "Amended Certificate").
1.2 Sale and Purchase. Subject to the terms and conditions hereof, at
the Closing (as hereinafter defined) the Company hereby agrees to issue and sell
to each Purchaser and each Purchaser agrees to purchase from the Company, the
number of Shares set forth opposite such Purchaser's name on Exhibit A, at a
purchase price of One Hundred Dollars ($100) per Share.
2. CLOSING, DELIVERY AND PAYMENT.
2.1 Closing. The closing of the sale and purchase of the Shares under
this Agreement (the "Closing") shall take place at 10:00 AM on September 2,
1997, at the offices of Holland & Hart LLP, 555 Seventeenth Street, Suite 3200,
Denver, Colorado 80202, or at such other time or place as the Company and
Purchasers may mutually agree (such date is hereinafter referred to as the
"Closing Date"). At the Closing, subject to the terms and conditions hereof,
the Company will deliver to the Purchasers certificates representing the number
of Shares to be purchased at the Closing by each Purchaser, against payment of
the purchase price therefor by check or wire transfer made payable to the order
of the Company.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to each Purchaser as follows:
3.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
authority to own
and operate its properties and assets, to execute and deliver this Agreement, to
issue and sell the Shares and the Common Stock $.001 par value per share of the
Company (the "Common Stock") issuable upon conversion thereof (the "Conversion
Shares") and to carry out the provisions of this Agreement and the Amended
Certificate and to carry on its business as presently conducted and as presently
proposed to be conducted.
3.2 Capitalization. The authorized capital stock of the Company,
immediately prior to the Closing, will consist of fifteen million (15,000,000)
shares of Common Stock, four hundred seventy-five thousand (475,000) shares of
which are issued and outstanding and six million (6,000,000) shares of Preferred
Stock, five million twenty-five thousand (5,025,000) of which are designated
Series A Preferred Stock, all of which will be issued and outstanding and ten
thousand one hundred thirty-five (10,135) of which are designated Series B
Preferred Stock, none of which are issued and outstanding. All issued and
outstanding shares of the Company's Common Stock have been duly authorized,
validly issued, and are fully paid and nonassessable. The Conversion Shares have
been duly and validly reserved for issuance. Except as provided in Exhibit C
hereto or as provided in this Agreement, there are no outstanding options,
warrants or other rights to purchase from the Company any of its securities.
When issued in compliance with the provisions of this Agreement and the Amended
Certificate, the Shares and the Conversion Shares will be validly issued, fully
paid and nonassessable.
3.3 Authorization; Binding Obligations. All corporate action on the
part of the Company, its officers, directors and stockholders necessary for the
authorization of this Agreement, the performance of all obligations of the
Company hereunder at the Closing and the authorization, sale, and delivery of
the Shares has been taken or will be taken prior to the Closing.
3.4 Proprietary Rights. The Company has not received any
communications alleging that it has violated or, by conducting its business as
proposed would violate, any proprietary rights of any other person, nor is the
Company aware of any basis for the foregoing.
3.5 Actions Pending. There is no action, suit or proceeding pending
or, to the best knowledge of the Company, threatened against or affecting the
Company or any of its respective properties or rights before any court or by or
before any governmental body or arbitration board or tribunal.
3.6 Investments in United States Real Property Interests. The
Company's capital stock does not constitute a United States real property
interest as that term is defined in Section 897(c)(1)(A)(ii) of the Internal
Revenue Code of 1986, as amended (the "Code"). The preceding representation is
based on a determination by the Company that the Company is not and has not been
a United States real property holding corporation (as that term is defined in
Section 897(c)(2) of the Code) during the five (5) year period preceding the
date of this letter.
2
3.7 Qualified Small Business. To the best of its knowledge the Company
qualifies as a "Qualified Small Business" as defined in Section 1202(d) of the
Code and covenants that so long as its shares are held by the Purchasers (or a
transferee in whose hands the shares are eligible to qualify as Qualified Small
Business Stock as defined in Section 1202(c) of the Code), it will use its
reasonable efforts to cause the shares to qualify as Qualified Small Business
Stock; provided that, notwithstanding the foregoing, the Company shall not be
obligated to take any action, or refrain from any action which in its
discretion, is not in the best interests of the Company or its stockholders.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. Each Purchaser hereby
represents and warrants to the Company as follows:
4.1 Requisite Power and Authority. Purchaser has all necessary power
and authority under all applicable provisions of law to execute and deliver this
Agreement and to carry out its provisions. All actions on Purchaser's part
required for the lawful execution and delivery of this Agreement have been or
will be effectively taken prior to the Closing.
4.2 Investment Representations. Purchaser understands that neither the
Shares nor the Conversion Shares have been registered under the Securities Act
of 1933, as amended (the "Securities Act"). Purchaser also understands that the
Shares are being offered and sold pursuant to an exemption from registration
contained in the Securities Act based in part upon Purchaser's representations
contained in this Agreement. Purchaser hereby represents and warrants as
follows:
(a) Purchaser Bears Economic Risk. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk of
this investment indefinitely unless the Shares (or the Conversion Shares) are
registered pursuant to the Securities Act, or an exemption from registration is
available. Purchaser understands that the Company has no present intention of
registering the Shares, the Conversion Shares or any shares of its Common Stock.
Purchaser also understands that there is no assurance that any exemption from
registration under the Securities Act will be available and that, even if
available, such exemption may not allow Purchaser to transfer all or any portion
of the Shares or the Conversion Shares under the circumstances, in the amounts
or at the times Purchaser might propose.
(b) Acquisition for Own Account. Purchaser is acquiring the
Shares and the Conversion Shares for Purchaser's own account for investment
only, and not with a view towards their distribution.
(c) Purchaser Can Protect Its Interest. Purchaser represents that
by reason of its, or of its management's business or financial experience,
Purchaser
3
has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement. Further, Purchaser is aware of no
publication of any advertisement in connection with the transactions
contemplated in this Agreement.
(d) Accredited Investor. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
(e) Company Information. Purchaser has had an opportunity to
discuss the Company's business, management and financial affairs with directors,
officers and management of the Company. Purchaser has also had the opportunity
to ask questions of and receive answers from, the Company and its management
regarding the terms and conditions of this investment.
(f) Rule 144. Purchaser acknowledges and agrees that the
Conversion Shares must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. Purchaser has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act, which permits limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things: the availability of certain current
public information about the Company, the resale occurring not less than one
year after a party has purchased and paid for the security to be sold, the sale
being through an unsolicited "broker's transaction" or in transactions directly
with a market maker (as said term is defined under the Securities Exchange Act
of 1934, as amended) and the number of shares being sold during any three-month
period not exceeding specified limitations.
4.3 Transfer Restrictions. Each Purchaser acknowledges and agrees that the
Shares and the Conversion Shares are subject to restrictions on transfer as set
forth herein.
5. FUTURE OFFERINGS.
5.1 Series C Financing. The Company has identified to Centennial Fund
V, L.P. and its affiliates ("Centennial V") certain milestones which it is
seeking to accomplish. The Company and Centennial V expect that upon
satisfactory completion or progress toward those milestones (in the sole
discretion of Centennial V), Centennial V currently intends to provide
$10,000,000 in Series C Convertible Preferred Stock financing of the Company on
or before June 30, 1998 at a price equal to $1.04 per share of Common Stock into
which the preferred stock sold in the Series C Financing is convertible (the
"Series C Financing").
5.2 Right of First Offer on Subsequent Offerings. If at any time the
Company offers any "Equity Securities" (as defined below), then Centennial V
shall have a right of first offer to purchase up to $10,000,000 of all Equity
Securities (the "First Offer Amount") that the Company may propose to sell and
issue, other than the Equity Securities excluded by Section 5.2(d) hereof. The
term "Equity Securities" shall mean
4
(i) any capital stock of the Company, (ii) any security convertible, with or
without consideration, into any capital stock, (iii) any security carrying any
warrant or right to subscribe to or purchase any capital stock or (iv) any such
warrant or right.
(a) Exercise of Rights. If the Company proposes to offer any
Equity Securities, it shall give Centennial V written notice of its intention,
describing the Equity Securities, the price, and the terms and conditions upon
which the Company proposes to offer the same. Centennial V shall have thirty
(30) days from the giving of such notice to agree to purchase up to its pro rata
portion of the First Offer Amount for the price and upon the terms and
conditions specified in the notice by giving written notice to the Company and
stating therein the quantity of Equity Securities to be purchased. If Centennial
V exercises its right of first offer, the Company shall be obligated to sell to
Centennial V all of the Equity Securities which Centennial V elects to purchase
(up to the First Offer Amount) in accordance with the terms of this Section
5.2(a).
(b) Issuance of Equity Securities to Other Persons. If Centennial
V fails to exercise in whole or in part the rights to purchase Equity Securities
within such thirty (30) day period, the Company shall have ninety (90) days
thereafter to sell the Equity Securities in respect of which Centennial V's
rights were not exercised, at a price and upon terms and conditions that are not
materially more favorable to the purchasers thereof than specified in the
Company's notice to Centennial V pursuant to this Section. If the Company has
not sold such Equity Securities within such ninety (90) days, the Company shall
not thereafter issue or sell any Equity Securities, without first offering such
securities to Centennial V in the manner provided above.
(c) Termination of Rights to First Offer. The rights of first
offer established by this Section shall terminate upon the closing of the next
equity financing pursuant to which the Company sells Equity Securities with an
aggregate purchase price of not less than $10,000,000 (a "Qualified Financing"),
provided that such sale has been effected in compliance with this Article V.
(d) Excluded Securities. The right of first offer established in
this Article V shall have no application to any of the following:
(i) 975,000 shares of Common Stock (and/or options, warrants
or other Common Stock purchase rights issued pursuant to such options,
warrants or other rights) issued or to be issued to employees, officers or
directors of, or consultants or advisors to the Company or any subsidiary,
pursuant to stock purchase or stock option plans or other arrangements
approved by the Company's Board of Directors (including such shares or
rights issued to such persons prior to or on the date of this Agreement);
(ii) any Equity Securities issued pursuant to a merger,
consolidation, acquisition or similar business combination or pursuant to a
recapitalization or stock split;
5
(iii) any Equity Securities issued pursuant to any venture
leasing arrangement (whether issued to a lessor, guarantor or other
person), if such issuance is approved by the Board of Directors (including
approval by Centennial V's representative to the Board of Directors;
(iv) Equity Securities issued upon conversion of the Shares
or the shares of Series A Preferred Stock;
(v) any borrowings, direct or indirect, from financial
institutions or other persons by the Company, whether or not presently
authorized, including any type of loan or payment evidenced by any type of
debt instrument; provided such borrowings do not have equity features
including warrants, options or other rights to purchase capital stock and
are not convertible into capital stock of the Company;
(vi) Equity Securities issued to vendors or customers or to
other persons in similar commercial situations with the Company if such
issuance is approved by the Board of Directors of the Company (including
approval by Centennial V's representative to the Board of Directors);
(vii) Equity Securities issued in connection with corporate
partnering transactions on terms approved by the Board of Directors
(including approval by Centennial V's representative to the Board of
Directors); and
(viii) any right, option or warrant to acquire any security
convertible into the securities described in subsections (i) through (vii)
above.
(e) No Participation Required. The Company acknowledges that
nothing in this Section 5 (including Section 5. 1) shall obligate Centennial V
to participate in the Series C Financing or to purchase Equity Securities, and
Centennial V has not made any commitments or representations that it will do so.
(f) Not Assignable. The right of first offer set forth in this
Section 5 may not be assigned or transferred except to an affiliate of
Centennial V or to SOFTBANK Technology Ventures.
6. Covenants of the Company.
6.1 Board of Directors. Effective upon the Closing, G. Jackson
Tankersley, Jr. shall become a member of the Company's Board of Directors.
Thereafter, for so long as Centennial V (or its affiliates) owns at least 10% of
the Shares (or an equivalent amount of Common Stock issued upon conversion
thereof) purchased pursuant to this Agreement, at each annual or special meeting
or in connection with the taking of action by written consent for the election
of the Board of Directors, the Company shall cause one representative designated
by Centennial V to be nominated to
6
the Company's Board of Directors and shall use its best efforts to cause the
election of such representatives.
6.2 Management Rights. The Company hereby grants Centennial V the
following contractual rights:
(a) Centennial V shall be entitled to consult with and advise
management of the Company on significant business issues, including management's
proposed annual operating plans. Management will meet with Centennial V
regularly during each year at the Company's facilities at mutually agreeable
times for such consultation and advice and to review progress in achieving said
plans.
(b) Centennial V may examine the books and records of the Company
and inspect its facilities and may request information at reasonable times and
intervals concerning the general status of the Company's financial condition and
operation; subject to subsection 6.2(d) below.
(c) If Centennial V is not represented on the Company's Board of
Directors, the Company shall give a representative of Centennial V copies of all
notices, minutes, consents, and other material that it provides to its
directors. Upon reasonable notice and a scheduled meeting of the Board of
Directors or such other time, if any, as the Board of Directors may determine in
its sole discretion, such representative may address the Board of Directors with
respect to Centennial V's concerns regarding significant business issues facing
the Company.
(d) Centennial V agrees, and any representative of Centennial V
will agree, that as a condition precedent to the rights granted under this
Section 6.2 each person having access to any information provided to the Board
of Directors by the Company will hold in confidence and trust and not use or
disclose any confidential information provided to or learned by it in connection
with its rights under this Agreement. The Company reserves the right not to
provide information and to exclude non-director representatives of Centennial V
from any meeting or portion thereof if delivery of such information or
attendance at such meeting would adversely affect the attorney-client privilege
between the Company and its counsel.
(e) The rights described in this Section 6.2 shall terminate and
be of no further force or effect upon the consummation of the sale of the
Company's securities pursuant to a registration statement filed by the Company
under the Securities Act in connection with the firm commitment underwritten
offering of its securities to the general public or in the event that Centennial
V no longer holds at least 10% of the Shares (or an equivalent amount of Common
Stock upon conversion thereof) purchased pursuant to this Agreement. The
confidentiality provisions hereof will survive any such termination.
6.3 Company Rights. The Purchasers acknowledge that the available pool
for issuance of stock or options to employees, consultants or directors (the
"Option
7
Pool") consists of 975,000 shares of Common Stock subsequent to the Closing. In
addition, 175,000 shares of Common Stock have been issued from the Option Pool
to employees as of the date of this Agreement.
6.4 United States Real Property Holding Company. The Company shall use
its best efforts to ensure that it does not at any time in the future become a
United States real property holding corporation ("USRPHC") and from time to
time, upon request of any Purchaser shall make a determination as to its status
as a USRPHC. If at any time in the future the Company should become a United
States real property holding corporation, the Company shall, as promptly as
possible, notify the Purchasers of such change in status.
6.5 Unrelated Business Taxable Income. Any gross income derived by the
Purchasers from the Company shall be in the form of dividends, interest, capital
gains and losses from the disposition of property, and rents and royalties, but
only such rents and royalties as are excluded pursuant to Code Sections
512(b)(2) and 512(b)(3) respectively, in calculating unrelated business taxable
income and only such dividends, interest, capital gains and losses, and rents
and royalties that are not included under Section 512(b)(4) of the Code in
calculating unrelated business taxable income.
7. REPURCHASE RIGHTS. All or any portion of the Shares purchased hereunder
(and any shares of Conversion Shares or securities issued thereupon as a
dividend or other distribution, or in connection with a reorganization or
recapitalization) by Centennial V shall be subject to repurchase by the Company
at the Company's option at a $100 per share repurchase price (as appropriately
adjusted for any stock splits) upon Centennial V's failure to participate in the
Series C Financing. Such repurchase option shall be exercisable at any time
within eighteen (18) months following Centennial V's failure to participate in
the Series C Financing by written notice signed by an officer of the Company.
Upon exercise of the repurchase option, Centennial V shall duly execute the
share certificates for transfer and deliver the certificates to the Company
against payment of the aggregate purchase price in immediately available funds.
The Company acknowledges that its repurchase right applies only to a failure to
participate in the Series C Financing and does not apply to any other round of
financing by the Company.
8. MISCELLANEOUS.
8.1 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of Colorado as such laws are applied to agreements between
Colorado residents entered into and performed entirely in Colorado.
8.2 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company hereunder in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
8
8.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
8.4 Entire Agreement. This Agreement, the Exhibits and Schedules
hereto and the other documents delivered pursuant hereto, including the letter
dated of even date herewith entitled "Disqualified Parties," constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and no party shall be liable or bound to any other in any manner
by any representations, warranties, covenants and agreements except as
specifically set forth herein and therein.
8.5 Severability. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
8.6 Amendment or Waiver.
(a) This Agreement may be amended or modified only upon the
mutual written consent of the Company and holders of at least a majority of the
Shares (treated as if converted and including any Conversion Shares into which
the Shares have been converted that have not been sold to the public).
(b) The obligations of the Company and the rights of the holders
of the Shares and the Conversion Shares under the Agreement may be waived only
with the written mutual consent of the holders of at least a majority of the
Shares (treated as if converted and including any Conversion Shares into which
the Shares have been converted that have not been sold to the public).
8.7 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified; (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day; (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (iv) one (1) day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
Company at the address as set forth on the signature page hereof and to
Purchaser at the address set forth on Exhibit A attached hereto or at such other
address as the Company or Purchaser may designate by ten (10) days advance
written notice to the other parties hereto.
8.8 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.
9
8.9 Broker's Fees. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 8.9 being untrue.
8.10 Expenses. The Company agrees to pay, and hold each Purchaser
harmless against liability for the payment of, (a) the fees and expenses of
their special counsel arising in connection with the negotiation and execution
of this Agreement and the consummation of the transactions contemplated by this
Agreement which shall be payable at the Closing, (b) other fees and expenses
incurred by the Company, including due diligence expense, (c) the fees and
expenses incurred with respect to any amendments or waivers under or in respect
of this Agreement, the agreements contemplated hereby, and the Amended
Certificate, (d) stamp and other taxes which may be payable in respect of the
execution and delivery of this Agreement or the issuance, delivery or
acquisition of the Shares and the Conversion Shares, and (e) the fees and
expenses incurred with respect to the enforcement of the rights granted under
this Agreement, the agreements contemplated hereby and the Amended Certificate;
provided that the fees and expenses for which the Company is responsible under
(a) and (b) above shall not exceed $10,000 in the aggregate.
8.11 Remedies. Each Purchaser shall have the rights and remedies set
forth in this Agreement, the Amended Certificate and all rights and remedies
which such holders have been granted at any time under any other agreement or
contract and all of the rights which such holders have under any law. Any person
having any rights under any provision of this Agreement shall be entitled to
enforce such rights specifically (without posting a bond or other security), to
recover damages by reason of any breach of any provision of this Agreement and
to exercise all other rights granted by law.
IN WITNESS WHEREOF, the parties hereto have executed the Agreement as of
the date set forth in the first paragraph hereof
COMPANY:
VSTREAM INCORPORATED
By: /s/ James M. LeJeal
------------------------------
Title: Chief Financial Officer
----------------------------
10
PURCHASERS
Centennial Fund V, L.P.
By: Centennial Holdings V, L.P.,
Its General Partner
By: /s/ G. Jackson Tankersley
-------------------------------------
a General Partner
Centennial Entrepreneurs Fund V., L.P.
By: Centennial Holdings V, L.P.
Its General Partner
By: /s/ G. Jackson Tankersley
-------------------------------------
Title: General Partner
-----------------------------------
VStream Investment Partnership
By: /s/ G. Jackson Tankersley
--------------------------------------
Its: Partner
-------------------------------------
11
SERIES B STOCK PURCHASE AGREEMENT
EXHIBIT A
Schedule of Purchasers
----------------------
Name and Address Series B Shares Aggregate
---------------- --------------- ---------
Purchase Price
--------------
Centennial Fund V, L.P. 9,700 $ 970,000
1428 15th Street
Denver, CO 80202
Centennial Entrepreneurs Fund 300 $ 30,000
V, L.P.
1428 15th Street
Denver, CO 80202
VStream Investment Partnership 135 $ 13,500
1125 17th Street, Suite 2525
Denver, CO 80202
------ ----------
TOTAL 10,135 $1,013,500
Exhibit 10.9
VSTREAM INCORPORATED
SERIES C PREFERRED STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
Page
1. Agreement To Sell And Purchase ................................... 1
1.1 Authorization of Shares ...................................... 1
1.2 Sale and Purchase ............................................ 1
2. Closing, Delivery And Payment .................................... 1
2.1 Initial Closing .............................................. 1
2.2 Subsequent Closings .......................................... 2
3. Representations And Warranties Of The Company .................... 2
3.1 Organization, Good Standing and Qualification ................ 2
3.2 Capitalization ............................................... 2
3.3 Subsidiaries ................................................. 3
3.4 Authorization; Binding Obligations ........................... 3
3.5 Consents and Approvals ....................................... 3
3.6 No Violations ................................................ 3
3.7 Financial Statements; Interim Changes ........................ 4
3.8 Compliance with Laws ......................................... 4
3.9 Proprietary Rights ........................................... 4
3.10 Actions Pending ............................................. 5
3.11 Material Contracts .......................................... 5
3.12 Investments in United States Real Property Interests ........ 5
3.13 Unrelated Business Taxable Income ........................... 5
3.14 Qualified Small Business .................................... 6
4. Representations And Warranties Of The Purchasers ................. 6
4.1 Requisite Power and Authority ................................ 6
4.2 Investment Representations ................................... 6
5. Conditions Precedent To Purchasers' Obligations .................. 8
6. Expense Reimbursement ............................................ 9
7. Miscellaneous .................................................... 9
7.1 Definitions .................................................. 9
7.2 Governing Law ................................................10
7.3 Survival .....................................................10
7.4 Successors and Assigns .......................................10
7.5 Entire Agreement .............................................10
7.6 Specific Enforcement .........................................10
7.7 Separability .................................................11
This Series C Preferred Stock Purchase Agreement (the "Agreement") is
entered into as of May 27, 1998, by and among VStream Incorporated, a Delaware
corporation (the "Company"), and each of those persons and entities, severally
and not jointly, whose names are set forth on the Schedule of Purchasers
attached hereto as Exhibit A (collectively the "Purchasers" and individually a
"Purchaser"). Capitalized terms not otherwise defined herein are defined in
Section 7.1.
In consideration of the mutual promises hereinafter set forth, the parties
hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE
1.1 Authorization of Shares. On or prior to the Closing (as defined in
Section 2 below), the Company shall have authorized the sale and issuance to the
Purchasers of shares of its Series C Convertible Preferred Stock (the "Shares")
having the rights, preferences, privileges and restrictions set forth in the
Certificate of Amendment to the Certificate of Incorporation of the Company,
attached hereto as Exhibit B (the "Certificate").
1.2 Sale and Purchase. Subject to the terms and conditions hereof, at
the Closing the Company hereby agrees to issue and sell to each Purchaser and
each Purchaser severally and not jointly agrees to purchase from the Company,
the number of Shares set forth opposite such Purchaser's name on Exhibit A, at a
purchase price of One Dollar and Four Cents ($1.04) per Share.
2. CLOSING, DELIVERY AND PAYMENT
2.1 Initial Closing. Any closing of the separate purchase and sale of
the Shares shall take place at such place and on such date as may be mutually
agreeable to the Company and each Purchaser making a purchase of Shares. The
initial closing (the "Initial Closing") shall take place at the offices of
Holland & Hart LLP at 10:00 a.m. (Mountain Daylight Time) on May 27, 1998 or at
such other place and on such other date as may be mutually agreeable to the
Company and the Purchasers. Additional purchases may be made at a subsequent
closing (the "Subsequent Closing," whether there are one or more such closings).
(The Initial Closing and each Subsequent Closing are referred to as a
"Closing.") At each Closing, subject to the terms and conditions hereof, the
Company will deliver to the Purchasers certificates representing the number of
Shares to be purchased at the Closing by each Purchaser, against payment of the
purchase price therefor by (a) conversion of certain promissory notes, dated
March 31, 1998, payable by the Company to certain of the Purchasers as
identified on Exhibit A (the "Convertible Notes"), and (b) wire transfer of
immediately available funds.
2.2 Subsequent Closings. At any time or times within 30 days after the
Initial Closing (the "Final Closing Date"), the Company may sell up to 3,200,723
additional Shares to additional purchasers (the "Additional Purchasers") on the
same terms and conditions as such Shares are being sold to the Purchasers. If
such additional sales are made, (i) a Supplementary Schedule of Purchasers
listing the Additional Purchasers and the number of Shares being purchased by
each will be prepared and (ii) the Additional Purchasers will sign counterpart
signature pages to this Agreement, the Stockholders Agreement (as defined below)
and the Investors Agreement (as defined below). The parties to this Agreement
also agree to execute such documents and take all other actions necessary to
permit the Additional Purchasers to become parties to this Agreement and the
Stockholders Agreement. At any Subsequent Closing the Company will deliver to
the Additional Purchasers copies of all documents delivered at the Initial
Closing.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each Purchaser that except
as set forth on the Disclosure Schedule attached hereto, which shall be deemed
representations and warranties as if made hereunder:
3.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, the Stockholders Agreement attached hereto as Exhibit C (the
"Stockholders Agreement"), and the Investors Agreement attached hereto as
Exhibit D (the "Investors Agreement") to issue and sell the Shares and the
shares of the Company's common stock. $.00l par value (the "Common Stock")
issuable upon conversion thereof (the "Conversion Shares"), to carry out the
other provisions of this Agreement and the Stockholders Agreement, and to carry
on its business as presently conducted and as presently proposed to be
conducted.
3.2 Capitalization. The authorized capital stock of the Company,
immediately prior to the Closing, will consist of twenty million (20,000,000)
shares of Common Stock, four hundred seventy-five thousand (475,000) shares of
which are issued and outstanding, and sixteen million (l6,000,000) shares of
preferred stock, of which (i) five million twenty-five thousand (5,025,000)
shares are designated Series A Convertible Preferred Stock, all of which are
issued and outstanding, (ii) ten thousand, six hundred thirty-five (10,635)
shares are designated Series B Convertible Preferred Stock, all of which are
issued and outstanding, and (iv) ten million (10,000,000) shares are designated
Series C Convertible Preferred Stock, none of which is issued and outstanding.
(The Series A Convertible Preferred Stock, the Series B Convertible Preferred
Stock and the Series C Convertible Preferred Stock are collectively referred to
as the "Preferred Stock".) All issued and outstanding shares of the Company's
Common
2
Stock, Series A Convertible Preferred Stock and Series B Convertible Preferred
Stock have been duly authorized and validly issued and are fully paid and
nonassessable. Except as set forth on the Disclosure Schedule there are no
outstanding options, warrants or other rights to purchase from the Company any
of its securities.
3.3 Subsidiaries. The Company has no Subsidiaries.
3.4 Authorization; Binding Obligations. All corporate action on the part
of the Company, its officers, directors and stockholders necessary for the
authorization of this Agreement, the performance of all obligations of the
Company hereunder and under the Stockholders Agreement and for the
authorization, sale, issuance and delivery of the Shares has been taken or will
be taken at or prior to the Closing. When issued in compliance with the
provisions of this Agreement and upon conversion of the Convertible Notes, the
Shares will be validly issued, fully paid and nonassessable. The Conversion
Shares have been duly and validly reserved for issuance and, when issued upon
conversion of the Series C Preferred Stock in accordance with the terms of the
Certificate, will be validly issued, fully paid and nonassessable. This
Agreement and the Stockholders Agreement have been duly executed by the Company
and constitute valid and binding obligations of the Company enforceable in
accordance with their terms except (i) as limited by applicable bankruptcy,
reorganization, insolvency, moratorium and similar laws affecting the rights of
creditors generally (ii) as limited by laws relating to the availability of
specific performance, injunctive relief or other equitable remedies and (iii) to
the extent the indemnification provision contained in the Stockholders Agreement
may be limited by applicable federal or state securities laws.
3.5 Consents and Approvals. No filings with, notices to, or approvals of
any governmental or regulatory body are required to be obtained or made by the
Company in connection with the consummation of the transactions contemplated
hereby except for filings pursuant to state securities laws (all of which have
been made by the Company, other than those which are required to be made after
the Closing and which will be duly made on a timely basis).
3.6 No Violations. The execution and delivery of this Agreement and the
Stockholders Agreement and the performance by the Company of its obligations
hereunder and thereunder (i) do not and will not conflict with or violate any
provision of the certificate of incorporation, as amended, (including the
Certificate), or bylaws of the Company and (ii) do not and will not (a) conflict
with or result in a breach of the terms, conditions or provisions of, (b)
constitute a default under, (c) result in the creation of any encumbrance upon
the capital stock or assets of the Company pursuant to, (d) give any third party
the right to modify, terminate or accelerate any obligation under, (e) result in
a violation of, or (f) require any authorization, consent, approval, exemption
or other action by or notice to any court or administrative or governmental body
or other third party pursuant to, any law, statute, rule or regulation or any
agreement or instrument or any order, judgment or decree to which the Company is
subject or by
3
which any of its assets are bound which would have a material adverse effect on
the assets, financial condition or operations of the Company.
3.7 Financial Statements; Interim Changes. The Company's audited balance
sheet as of December 31, 1997 and audited statements of operations and cash
flows of the Company for the 12-month period ended December 31, 1997 and the
Company's unaudited balance sheet as of April 30, 1998 (the "Latest Balance
Sheet") and unaudited statements of operations and cash flows of the Company for
the 4-month period ending April 30, 1998 delivered to the Purchasers in
connection with the investment contemplated hereby have been prepared in
accordance with generally accepted accounting principles consistently applied
(subject to normal year-end adjustments and the absence of footnote disclosures)
and fairly present in all material respects the financial position and the
results of operations of the Company for the period covered thereby, and the
Company has no material liabilities or obligations of any nature (absolute,
accrued, contingent or otherwise) that are not either reflected or fully
reserved against on the Latest Balance Sheet or incurred in the ordinary course
of the business of the Company subsequent to the date thereof. Since the date of
the Latest Balance Sheet, there has not been any material adverse change in the
business, operations, financial condition or business as presently proposed to
be conducted by the Company.
3.8 Compliance with Laws. The Company's business has been conducted in
compliance with all applicable laws and regulations of governmental authorities,
except for such violations that have been cured or that, individually or in the
aggregate, may not reasonably be expected to have a material adverse effect on
the business, operations or financial condition or business as presently
proposed to be conducted by the Company.
3.9 Proprietary Rights. The Disclosure Schedule contains a complete and
accurate list of (i) all patented and registered Proprietary Rights owned by the
Company, (ii) all pending patent applications and applications for registrations
of other Proprietary Rights filed by the Company, (iii) all unregistered trade
names and corporate names owned or used by the Company and (iv) all unregistered
trademarks, service marks and copyrights and computer software, which are
material to the financial condition, operating results, assets, operations or
business prospects of the Company. The Disclosure Schedule also contains a
complete and accurate list of all licenses and other rights granted by the
Company to any third party with respect to any Proprietary Rights and all
licenses and other rights granted by any third party to the Company with respect
to any Proprietary Rights, except for "shrink-wrapped" or similar licenses
granted to the Company by third parties for software used in the business of
the Company that is generally commercially available. The Company owns or has
the right to use pursuant to a valid license all Proprietary Rights necessary
for the operation of the businesses of the Company as presently conducted and as
presently proposed to be conducted. To the Company's knowledge, no loss or
expiration of any Proprietary Right or related group of Proprietary Rights is
threatened, pending or expected. The Company has taken all reasonably necessary
actions to maintain and protect the Proprietary Rights
4
which it owns and uses. The Company has no reason (without having conducted any
special investigation) to believe that the owners of any Proprietary Rights
licensed to the Company have not taken actions necessary to maintain and protect
the Proprietary Rights which are subject to such licenses. Except as indicated
on the Disclosure Schedule, (i) the Company owns all right, title, and interest
in and to or has the right to use under a valid license all of the Proprietary
Rights listed on such schedule and all other Proprietary Rights material to the
operation of the business of the Company, (ii) there have been no claims made
against the Company asserting the invalidity, misuse or unenforceability of any
of such rights and to the Company's knowledge, none is threatened, (iii) the
Company has not received a notice of conflict with the asserted rights of
others, and (iv) to the knowledge of the Company (without having conducted a
special investigation or patent search) the conduct of the Company's business
has not infringed or misappropriated and does not infringe or misappropriate any
Proprietary Rights of other Persons, and, to the Company's knowledge, the
Proprietary Rights owned by the Company have not been infringed or
misappropriated by other Persons.
3.10 Actions Pending. There is no action, suit or proceeding pending or
to the knowledge of the Company, threatened against or affecting the Company or
any of its respective properties or rights before any court or by or before any
governmental body or arbitration board or tribunal.
3.11 Material Contracts. Except as set forth on the Disclosure Schedule
attached hereto, the Company is not a party to (and is not otherwise bound by)
any of the following: (i) any employment or consulting contract, (ii) any
agreement providing for the issuance or repurchase of any securities of the
Company, (iii) any agreement in respect of registration rights, preemptive
rights, rights of first refusal, voting rights or other rights of security
holders, (iv) any agreement evidencing or providing for any indebtedness for
borrowed money, or (v) any other agreement that could reasonably be deemed
material to the Company.
3.12 Investments in United States Real Property Interests. The Company's
capital stock does not constitute a United States real property interest as that
term is defined in Section 897(c)(1)(A)(ii) of the Internal Revenue Code of
1986, as amended (the "Code"). The preceding representation is based on a
determination by the Company that the Company is not and has not been a United
States real property holding corporation (as that term is defined in Section
897(c)(2) of the Code) ("USRPHC") during the five (5) year period preceding the
date of this Agreement. From time to time, upon request of any Purchaser, the
Company shall make a determination as to its status as a USRPHC. If at any time
in the future the Company should become a USRPHC, the Company shall, as promptly
as possible, notify each Purchaser of such change in status.
3.13 Unrelated Business Taxable Income. Any gross income derived by the
Purchasers from the Company shall be in the form of dividends, interest, capital
gains and losses from the disposition of property, and rents and royalties, but
only such rents and royalties as are excluded pursuant to Code Sections
512(b)(2) and 512(b)(3), respectively, in calculating unrelated business taxable
income and only such dividends,
5
interest, capital gains and losses, and rents and royalties that are not
included under Section 512(b)(4) of the Code in calculating unrelated business
taxable income.
3.14 Qualified Small Business. The Company qualifies as a "Qualified
Small Business" as defined in Section 1202(d) of the Code and covenants that so
long as its shares are held by the Purchasers (or a transferee in whose hands
the shares are eligible to qualify as Qualified Small Business Stock as defined
in Section 1202(c) of the Code), it will use its best efforts to cause the
shares to qualify as Qualified Small Business Stock.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser severally and not jointly hereby represents and warrants
to the Company as follows:
4.1 Requisite Power and Authority. Such Purchaser has all necessary
power and authority under all applicable provisions of law to execute and
deliver this Agreement and the Stockholders Agreement and to carry out the
provisions hereunder and thereunder. All actions on such Purchaser's part
required for the lawful execution and delivery of this Agreement and the
Stockholders Agreement have been or will be effectively taken prior to the
Closing and each such agreement constitutes a valid and binding obligation of
such Purchaser, enforceable in accordance with its terms, except (i) as limited
by applicable bankruptcy, reorganization, insolvency, moratorium and similar
laws affecting the rights of creditors generally (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or other
equitable remedies and (iii) to the extent the indemnification provision
contained in the Stockholders Agreement may be limited by applicable federal or
state securities laws.
4.2 Investment Representations. Such Purchaser understands that neither
the Shares nor the Conversion Shares have been registered under the Securities
Act of 1933, as amended (the "Securities Act"). Such Purchaser also understands
and hereby confirms that the Shares are being offered and sold pursuant to an
exemption from registration contained in the Securities Act based in part upon
the Purchaser's representations contained in this Agreement.
(a) Purchaser Bears Economic Risk. Such Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Such Purchaser must bear the economic
risk of this investment indefinitely unless the Shares (or the Conversion
Shares) are registered pursuant to the Securities Act, or an exemption from
registration is available. Such Purchaser understands that the Company has no
present intention of registering the Shares, the Conversion Shares or any
shares of its Common Stock or Preferred Stock. Such Purchaser also understands
that there is no assurance that any exemption from registration under the
Securities Act will be available and that, even if available, such exemption may
not allow such
6
Purchaser to transfer all or any portion of the Shares or the Conversion Shares
under the circumstances, in the amounts or at the times such Purchaser might
propose.
(b) Acquisition for Own Account. Such Purchaser is acquiring the
Shares and the Conversion Shares for its own account for investment only, and
not with a view towards their resale or distribution of any part thereof in
violation of applicable securities laws. By executing this Agreement, each
Purchaser further represents that such Purchaser does not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to any of the
Shares.
(c) Purchaser Can Protect Its Interest. Such Purchaser represents
that, by reason of its or of its management's business or financial experience,
such Purchaser has the capacity to protect its own interests in connection with
the transactions contemplated in this Agreement. Further, such Purchaser is
aware of no publication of any advertisement in connection with the transactions
contemplated by the Agreement.
(d) Accredited Investor. Such Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
(e) Company Information. Such Purchaser has had an opportunity to
discuss the Company's business, management and financial affairs with directors,
officers and management of the Company and believes that such Purchaser has
received all of the information such Purchaser considers necessary or
appropriate for deciding whether to purchase the Shares. Such Purchaser has also
had the opportunity to ask questions of, and receive answers from, the Company
and its management regarding the terms and conditions of this investment.
(f) Rule 144. Such Purchaser acknowledges and agrees that the Shares
and the Conversion Stock must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. Such Purchaser has been advised or is aware of the provisions of Rule
144 promulgated under the Securities Act, which permits limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things: the availability of certain current
public information about the Company, the resale occurring not less than one
year after a party has purchased and paid for the security to be sold, the sale
being through an unsolicited "broker's transaction" or in transactions directly
with a market maker (as said term is defined under the Securities Exchange Act
of 1934, as amended) and the number of shares being sold during any three-month
period not exceeding specified limitations.
(g) Further Limitations on Disposition. Without in any way limiting
the representations set forth above, each Purchaser further agrees not to make
any disposition of all or any portion of the Series C Preferred Stock (or the
Common Stock issuable upon the conversion thereof) unless and until there is
then in effect a
7
Registration Statement under the Securities Act covering such proposed
disposition and such disposition is made in accordance with such Registration
Statement, or such Purchaser shall have established to the reasonable
satisfaction of the Company that an exemption from registration is available.
(h) Legends. It is understood that the certificates evidencing the
Series C Preferred Stock (and the Conversion Stock) may bear one or all of the
following legends:
(i) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH
RESPECT TO THE SECURITIES UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN EXEMPTION FROM REGISTRATION BEING AVAILABLE UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS."
(ii) Any legend required by any applicable state securities laws.
(iii) Any legend required by the Stockholders Agreement.
5. CONDITIONS PRECEDENT To PURCHASERS' OBLIGATIONS
The obligation of each Purchaser to purchase and pay for the Shares to
be delivered to it at each Closing shall be subject to the satisfaction of the
following conditions as of the Closing Date:
(i) the representations and warranties of the Company' contained
in this Agreement shall be true and correct in all material respects on and
as of each Closing Date:
(ii) the Company shall have taken efforts reasonably satisfactory
to the Investors to obtain within 60 days after the date of the Initial
Closing from financially sound and reputable insurers term life insurance
policies reasonably satisfactory to the Purchaser on the lives of Paul A.
Berberian, James Me LeJeal and Todd H. Vernon in the amount of $2,000,000
each, which policies shall name the Company as loss payee:
(iii) concurrent with each Closing, the Company, the Purchasers and
the existing stockholders of the Company shall have entered into the
Stockholders Agreement in the form attached hereto as Exhibit C;
(iv) the Purchasers shall have received the legal opinion of
Brobeck, Phleger & Harrison, LLP, counsel to the Company, in the form of
Exhibit E hereto:
8
(v) the Company shall have provided to Centennial Fund V. L.P.
("Centennial") at each Closing at which Centennial is purchasing Shares a
certification of the direct and indirect holdings of securities of the
Company by certain persons designated by Centennial as required by
Centennial's governing documents;
(vi) all other Purchasers who are purchasing Shares at the Closing
shall have concurrently purchased the Shares to be purchased by them
pursuant to this Agreement; and
(vii) members of the Company's management identified by Centennial
shall have completed interviews with an industrial psychologist chosen by
Centennial.
6. EXPENSE REIMBURSEMENT
The Company hereby agrees to reimburse each Purchaser for its out-of-
pocket expenses incurred in connection with the transactions contemplated
hereby, including all expenses incurred in connection with its due diligence
examination of the Company, the industrial psychologist fees for the
examinations referred to in Section 5(vii) above, the preparation and
negotiation of this Agreement, the Stockholders Agreement and all other
documents evidencing the transactions contemplated herein (including the fees
(not to exceed $25,000) and expenses of one counsel representing the Purchasers,
and in connection with the enforcement of rights and remedies of the Purchasers
hereunder and under the Stockholders Agreement and all other documents
evidencing the transactions contemplated herein; provided, however, that the
Company shall not be responsible for any such fees or expenses if the
transactions contemplated by this Agreement are not consummated.
7. MISCELLANEOUS
7.1 Definitions. For purposes of this Agreement, the following terms
have the meanings set forth below:
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization
and a governmental entity or any department, agency or political subdivision
thereof.
"Proprietary Rights" means all (i) patents, patent applications, patent
disclosures and inventions, (ii) trademarks, service marks, trade dress, trade
names and corporate names and registrations and applications for registration
thereof, (iii) copyrights and registrations and applications for registration
thereof, (iv) mask works and registrations and applications for registration
thereof, (v) computer software, data and documentation, (vi) trade secrets and
other confidential information (including, without limitation, ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, manufacturing and information,
9
drawings, specifications, designs, plans, proposals, and customer and supplier
lists and information), (vii) other intellectual property rights, and (viii)
copies and tangible embodiments thereof (in whatever form or medium).
"Subsidiary" means with respect to any Person, any corporation,
partnership, association or other business entity of which (i) if a corporation,
a majority of the total voting power of shares of stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or controlled, directly or
indirectly, by that Person or one or more of the other Subsidiaries of that
Person or a combination thereof, or (ii) if a partnership, association or other
business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
any Person or one or more Subsidiaries of that Person or a combination thereof.
For purposes hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, association or other business entity if
such Person or Persons shall be allocated a majority of partnership, association
or other business entity gains or losses or shall be or control the managing
director or general partner of such partnership, association or other business
entity.
7.2 Governing Law. This Agreement shall be governed in all respects by
the laws of the State of Colorado as such laws are applied to agreements between
Colorado residents entered into and performed entirely in Colorado, except that
the General Corporation Law of the State of Delaware shall govern as to matters
of corporate law.
7.3 Survival. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by any Purchaser and the
closing of the transactions contemplated hereby. All statements as to factual
matters contained in any certificate or other instrument delivered by or on
behalf of the Company hereunder in connection with the transactions contemplated
hereby shall be deemed to be representations and warranties by the Company
hereunder solely as of the date of such certificate or instrument.
7.4 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares from time to time.
7.5 Entire Agreement. This Agreement, the Exhibits and the other
documents expressly delivered hereunder, including the Stockholders Agreement,
supersede any other agreement, whether written or oral, that may have been made
or entered into by the parties hereto relating to the matters contemplated
hereby and constitute the full and entire understanding and agreement between
the parties with regard to the subjects hereof, and no party shall be liable or
bound to any other in any
10
manner by any representations, warranties, covenants and agreements except as
specifically set forth herein and therein.
7.6 Specific Enforcement. Any Purchaser shall be entitled to specific
enforcement of its rights under this Agreement. The Company acknowledges that
money damages would be an inadequate remedy for its breach of this Agreement and
consents to an action for specific performance or other injunctive relief in the
event of any such breach.
7.7 Separability. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
7.8 Entire Agreement; Amendment and Waiver. This Agreement (including
all exhibits hereto and the documents referred to herein) contains the entire
agreement and understanding of the parties with respect to the subject matter
hereof and supersedes all prior written or oral agreements with respect thereto.
This Agreement may be amended or modified only upon the mutual written consent
of the Company and the holders of at least 66 2/3% of the Shares (voting on an
as-converted basis).
7.9 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified; (ii) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day; (iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid: or (iv) one (1) day after deposit
with a nationally recognized overnight courier, special next day delivery, with
verification of receipt. All communications shall be sent to the Company at 5777
Central Avenue, Suite 120, Boulder, CO 80301 and to a Purchaser at the address
set forth on Exhibit A attached hereto or at such other address as the Company
or Purchaser may designate by ten (10) days advance written notice to the other
parties hereto.
7.10 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.
7.11 Broker's Fees. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 7.11 being
untrue.
11
7.12 Future Financings. Nothing contained in this Agreement or any
Purchaser's prior dealings with the Company shall be deemed to constitute a
commitment on the part of any Purchaser to participate in any future financings
by the Company.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
12
IN WITNESS WHEREOF, the parties hereto have executed the Agreement as of
the date set forth in the first paragraph hereof.
COMPANY:
VSTREAM INCORPORATED
By: /s/ James M. LeJeal
--------------------------------
Title: Secretary
-----------------------------
PURCHASERS:
CENTENNIAL FUND V, L.P.
By: Centennial Holdings V, L.P.,
Its General Partner
By: /s/ Donald H. Parsons, Jr.
---------------------------------
a General Partner
CENTENNIAL ENTREPRENEURS FUND V, L.P.
By: Centennial Holdings V, L.P.
Its General Partner
By: /s/ Donald H. Parsons, Jr.
---------------------------------
Title:
------------------------------
SOFTBANK TECHNOLOGY VENTURES IV L.P.
By: STV IV LLC
By: /s/ Bradley A. Feld
---------------------------------
Managing Director
SOFTBANK TECHNOLOGY ADVISORS FUND L.P.
By: STV IV LLC
By: /s/ Bradley A. Feld
---------------------------------
Managing Director
13
TANKERSLEY FAMILY PARTNERSHIP
By: /s/ G. Jackson Tankersley
-------------------------------------
Title: General Partner
-----------------------------------
MILLENNIAL HOLDINGS, LLC
By: /s/ G. Jackson Tankersley
-------------------------------------
Manager
13
SERIES C STOCK PURCHASE AGREEMENT
Exhibit A
SCHEDULE OF PURCHASERS
May 27, 1998
Number of Aggregate Closing Cash
Name and Address Shares Purchase Price Payment
Centennial Fund V, L.P. 3,730,770 $3,880,000.80 (1) $3,634,245.32
1428 15th Street
Denver, CO 80202
Centennial Entrepreneurs Fund V, L.P. 115,384 119,999.36 (2) 112,398.68
1428 15th Street
Denver, CO 80202
SOFTBANK Technology Ventures IV L.P. 2,826,924 2,940,000.96 (3) 2,691,557.67
c/o Bradley Feld
333 W. San Carlos Road, Suite 1225
San Jose, CA 95510
SOFTBANK Technology Advisors Fund L.P. 57,692 59,999.68 (4) 54,929.82
c/o Bradley Feld
333 W. San Carlos Road, Suite 1225
San Jose, CA 95510
Tankersley Family Partnership 24,038 24,999.52 24,999.52
1428 15th Street
Denver, CO 80202
Millennial Holdings, LLC 24,038 24,999.52 24,999.52
1428 15th Street
Denver, CO 80202
Total 6,778,846 $7,049,999.84 $6,543,150.53
(1) Amount of Principal and Accrued Interest on Convertible Subordinated
Promissory Note: 245,755.48.
(2) Amount of Principal and Accrued Interest on Convertible Subordinated
Promissory Note: 7,600.68.
(3) Amount of Principal and Accrued Interest on Convertible Subordinated
Promissory Note: 248,423.29.
(4) Amount of Principal and Accrued Interest on Convertible Subordinated
Promissory Note: 5,069.86.
Exhibit 10.10
VSTREAM INCORPORATED
Series D Preferred Stock Purchase Agreement
Series D Preferred Stock Purchase Agreement
This Series D Preferred Stock Purchase Agreement (the "Agreement") is
entered into as of November 17, 1999, by and among VStream Incorporated, a
Delaware corporation (the "Company"), and each of those persons and entities,
severally and not jointly, whose names are set forth on Exhibit B attached
hereto (collectively the "Purchasers" and individually a "Purchaser").
Capitalized terms not otherwise defined herein are defined in Section 7.1.
In consideration of the mutual promises hereinafter set forth, the parties
hereto agree as follows:
1. Agreement To Sell And Purchase
1.1 Authorization of Shares. On or prior to the Closing (as defined in
Section 2 below), the Company shall have authorized the sale and issuance to the
Purchasers of shares of its Series D Convertible Preferred Stock (the "Shares")
having the rights, preferences, privileges and restrictions set forth in the
Certificate of Amendment to the Certificate of Incorporation of the Company,
attached hereto as Exhibit A (the "Certificate").
1.2 Sale and Purchase. Subject to the terms and conditions hereof, at the
Closing the Company hereby agrees to issue and sell to each Purchaser and each
Purchaser severally and not jointly agrees to purchase from the Company, the
number of Shares set forth opposite such Purchaser's name on Exhibit B, at a
purchase price of Three Dollars ($3.00) per Share.
2. Closing, Delivery And Payment
2.1 Closing. The closing (the " Closing") shall take place at the offices
of the Company at 10:00 a.m. (Mountain Daylight Time) on November 17, 1999 or
at such other place and on such other date as may be mutually agreeable to the
Company and a majority of the Purchasers upon the satisfaction or waiver of the
conditions set forth in Section 5 herein. At the Closing, subject to the
terms and conditions hereof, the Company will deliver to the Purchasers
certificates representing the number of Shares to be purchased at the Closing by
each Purchaser as set forth on Exhibit B hereto, against payment of the purchase
price therefor by check or wire transfer of immediately available funds.
2.2 Additional Closing(s).
(a) Conditions of Additional Closing(s). At any time and from time to time
during the period immediately following the Closing until the earlier to occur
of (i) December 31, 1999 or (ii) the later of (A) such date that the consent
referred to in Section 5(s) herein is obtained or (B) December 15, 1999 (the
"Additional Closing
Period"), upon satisfaction or waiver of the conditions set forth in Section 5
herein and subject to the terms and conditions hereof, the Company may, at one
or more additional closings (each, an "Additional Closing"), without obtaining
the signature, consent or permission of any of the Purchasers, offer and sell to
other investors listed on Exhibit B and Exhibit B-1(the "Additional
Purchasers"), at a price of Three Dollars ($3.00) per share, up to a maximum of
33,333,334 Shares in the aggregate (including the Shares issued at the Closing).
Additional Purchasers may include persons or entities who are already Purchasers
under this Agreement.
(b) Amendments. The Company and the Additional Purchasers purchasing Shares at
each Additional Closing will execute counterpart signature pages to this
Agreement, the Amended and Restated Stockholders' Agreement attached hereto as
Exhibit C (the "Stockholders' Agreement") and the Amended and Restated
Investors' Agreement attached hereto as Exhibit D (the "Investors' Agreement"),
and such Additional Purchasers will, upon delivery to the Company of such
signature pages, become parties to, and bound by, this Agreement, the
Stockholders' Agreement and the Investors' Agreement (collectively, the
"Transaction Documents"), each to the same extent as if they had been Purchasers
at the Closing. Immediately after each Additional Closing, Exhibit B-1 to this
Agreement will be amended to list the Additional Purchasers hereunder and the
number of Purchased Shares purchased by each Additional Purchaser under this
Agreement at each such Additonal Closing. The Company will promptly furnish to
each Purchaser copies of the amendments to Exhibit B referred to in the
preceding sentence.
(c) Status of Additional Purchasers. Upon the completion of each Additional
Closing as provided in this Section 2, each Additional Purchaser will be deemed
to be a "Purchaser" for all purposes of this Agreement and the other Transaction
Documents.
(d) Authorized Shares Not Fully Sold. If fewer than all of the authorized
Shares are sold by the end of the Additional Closing Period, then the Company
will promptly take all actions as may be necessary to amend the Company's
Certificate to (i) reduce the number of authorized Shares to the number of
Shares then issued and outstanding, plus 333,333 shares and (ii) reduce the
authorized number of shares of Preferred Stock (as defined in Section 3.2 below)
to the sum of the number of authorized shares of each series of Preferred Stock
after giving effect to the adjustment in clause (i) above.
3. Representations And Warranties Of The Company
The Company hereby represents and warrants to each Purchaser that except as
set forth on the Disclosure Schedule attached hereto, which shall be deemed
representations and warranties as if made hereunder:
2
3.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
each of the Transaction Documents, to issue and sell the Shares and the shares
of the Company's common stock, $.001 par value (the "Common Stock") issuable
upon conversion thereof (the "Conversion Shares"), to carry out the other
provisions of this Agreement and the Stockholders Agreement, and to carry on its
business as presently conducted and as presently proposed to be conducted. The
Company is qualified to do business as a foreign corporation and is in good
standing in all jurisdictions in which it is required to be so qualified to do
business as currently conducted and presently proposed to be conducted by the
Company, except for in such jurisdictions in which the failure to so qualify
would not reasonably be expected to have a material adverse effect on the
business or operations of the Company.
3.2 Capitalization. The authorized capital stock of the Company, immediately
prior to the Closing, will consist of fifty seven million (57,000,000) shares of
Common Stock, seven hundred eighty three thousand seven hundred and eight
(783,708) shares of which are issued and outstanding, and fifty million
(50,000,000) shares of preferred stock, of which (i) five million twenty-five
thousand (5,025,000) shares are designated Series A Convertible Preferred Stock,
all of which are issued and outstanding, (ii) ten thousand, six hundred thirty-
five (10,635) shares are designated Series B Convertible Preferred Stock, all of
which are issued and outstanding, (iii) ten million (10,000,000) shares are
designated Series C Convertible Preferred Stock, nine million nine hundred fifty
three thousand nine hundred and thirty five (9,953,935) of which are issued and
outstanding and (iv) thirty four million (34,000,000) shares are designated
Series D Convertible Preferred Stock, none of which is issued and outstanding.
(The Series A Convertible Preferred Stock, the Series B Convertible Preferred
Stock, the Series C Convertible Preferred Stock and the Series D Convertible
Preferred Stock are collectively referred to as the "Preferred Stock".) All
issued and outstanding shares of the Company's Common Stock, Series A
Convertible Preferred Stock, Series B Convertible Preferred Stock and Series C
Convertible Preferred Stock have been duly authorized and validly issued and are
fully paid and nonassessable. Except as set forth in Schedule 3.2, there are
no outstanding options, warrants or other rights to purchase from the Company
any of its securities. Except as set forth in Schedule 3.2 of the Disclosure
Schedule, no shares of the Company's outstanding capital stock, or stock
issuable upon exercise or exchange of any outstanding options, warrants or
rights, or other stock issuable by the Company, are subject to any preemptive
rights, 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.
3.3 Subsidiaries. The Company does not presently own or control, directly or
indirectly, any interest in any other corporation, partnership, trust, joint
venture, association or other entity.
3
3.4 Authorization; Binding Obligations. All corporate action on the part of
the Company, its officers, directors and stockholders necessary for the
authorization of this Agreement, the performance of all obligations of the
Company hereunder and under the Transaction Documents and for the authorization,
sale, issuance and delivery of the Shares has been taken or will be taken at or
prior to the Closing. When issued in compliance with the provisions of this
Agreement , the Shares will be validly issued, fully paid and nonassessable.
The Conversion Shares have been duly and validly reserved for issuance and, when
issued upon conversion of the Series D Preferred Stock in accordance with the
terms of the Certificate, will be validly issued, fully paid and nonassessable.
The Transaction Documents have been duly executed by the Company and constitute
valid and binding obligations of the Company enforceable in accordance with
their terms except (i) as limited by applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting the rights of creditors
generally (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iii) to the
extent the indemnification provision contained in the Stockholders Agreement may
be limited by applicable federal or state securities laws.
3.5 Consents and Approvals. No filings with, notices to, or approvals of any
governmental or regulatory body are required to be obtained or made by the
Company in connection with the consummation of the transactions contemplated
hereby except for filings pursuant to state securities laws (all of which have
been made by the Company, other than those which are required to be made after
the Closing and which will be duly made on a timely basis).
3.6 No Violations. The execution and delivery of this Agreement and the
Transaction Documents and the performance by the Company of its obligations
hereunder and thereunder (i) do not and will not conflict with or violate any
provision of the certificate of incorporation, as amended, (including the
Certificate), or bylaws of the Company and (ii) do not and will not (a) conflict
with or result in a breach of the terms, conditions or provisions of, (b)
constitute a default under, (c) result in the creation of any encumbrance upon
the capital stock or assets of the Company pursuant to, (d) give any third party
the right to modify, terminate or accelerate any obligation under, (e) result in
a violation of, or (f) require any authorization, consent, approval, exemption
or other action by or notice to any court or administrative or governmental body
or other third party pursuant to, any law, statute, rule or regulation or any
agreement or instrument or any order, judgment or decree to which the Company is
subject or by which any of its assets are bound which would have a material
adverse effect on the business, assets, financial condition or operations of the
Company.
3.7 Financial Statements; Interim Changes. The Company's audited balance
sheet as of December 31, 1998 and audited statements of operations and cash
flows of the Company for the 12-month period ended December 31, 1998 and the
Company's unaudited balance sheet as of September 30, 1999 (the "Latest Balance
Sheet") and unaudited statements of operations and cash flows of the Company for
the 9-month
4
period ending September 30, 1999 delivered to the Purchasers in connection with
the investment contemplated hereby have been prepared in accordance with
generally accepted accounting principles consistently applied (subject to normal
year-end adjustments and the absence of footnote disclosures in the unaudited
statements) and fairly present in all material respects the financial position
and the results of operations of the Company for the period covered thereby, and
the Company has no material liabilities or obligations of any nature (absolute,
accrued, contingent or otherwise) that are not either reflected or fully
reserved against on the Latest Balance Sheet or incurred in the ordinary course
of the business of the Company subsequent to the date thereof. Since the date of
the Latest Balance Sheet, there has not been any material adverse change in the
business, operations, or financial condition as presently conducted or presently
proposed to be conducted by the Company (a "Material Adverse Change").
3.8 Compliance with Laws. The Company is not in violation or default of any
provisions of its Certificate of Incorporation or Bylaws, both as amended to-
date. The Company's business has been conducted in compliance with all
applicable laws and regulations of governmental authorities, except for such
violations that have been cured or that, individually or in the aggregate, may
not reasonably be expected to have a Material Adverse Change.
3.9 Proprietary Rights. Section 3.9 of the Disclosure Schedule contains a
complete and accurate list of (i) all patented and registered Proprietary Rights
owned by the Company, (ii) all pending patent applications and applications for
registrations of other Proprietary Rights filed by the Company, (iii) all
unregistered trade names and corporate names owned or used by the Company and
(iv) all unregistered trademarks, service marks and copyrights and computer
software, which are material to the financial condition, operating results,
assets, operations or business of the Company. Section 3.9 of the Disclosure
Schedule also contains a complete and accurate list of all licenses and other
rights granted by the Company to any third party with respect to any Proprietary
Rights and all licenses and other rights granted by any third party to the
Company with respect to any Proprietary Rights, except for "shrink-wrapped" or
similar licenses granted to the Company by third parties for software used in
the business of the Company that is generally commercially available. The
Company owns or has the right to use pursuant to a valid license all Proprietary
Rights necessary for the operation of the businesses of the Company as presently
conducted and as presently proposed to be conducted. To the Company's
knowledge, no loss or expiration of any Proprietary Right or related group of
Proprietary Rights is threatened, pending or expected. The Company has taken
all reasonably necessary actions to maintain and protect the Proprietary Rights
which it owns and uses. The Company has no reason (without having conducted any
special investigation) to believe that the owners of any Proprietary Rights
licensed to the Company have not taken actions necessary to maintain and protect
the Proprietary Rights which are subject to such licenses. Except as indicated
on Section 3.9 of the Disclosure Schedule, (i) the Company owns all right,
title, and interest in and to or has the right to use under a valid license all
of the Proprietary Rights listed on such schedule and all other Proprietary
Rights material to
5
the operation of the business of the Company, (ii) there have been no claims
made against the Company asserting the invalidity, misuse or unenforceability of
any of such rights and to the Company's knowledge, none is threatened, (iii) the
Company has not received a notice of conflict with the asserted rights of
others, and (iv) to the knowledge of the Company (without having conducted a
special investigation or patent search) the conduct of the Company's business
has not infringed or misappropriated and does not infringe or misappropriate any
Proprietary Rights of other Persons, and, to the Company's knowledge, the
Proprietary Rights owned by the Company have not been infringed or
misappropriated by other Persons.
3.10 Actions Pending. There is no action, suit or proceeding pending or, to
the knowledge of the Company, threatened against or affecting the Company or any
of its respective properties or rights before any court or by or before any
governmental body or arbitration board or tribunal.
3.11 Material Contracts. Except as set forth on Section 3.11 of the
Disclosure Schedule, the Company is not a party to (and is not otherwise bound
by) any of the following: (i) any employment or consulting contract, (ii) any
agreement providing for the issuance or repurchase of any securities of the
Company, (iii) any agreement in respect of registration rights, preemptive
rights, rights of first refusal, voting rights or other rights of security
holders, (iv) any agreement evidencing or providing for any indebtedness for
borrowed money, or (v) any other agreement that could reasonably be deemed
material to the Company.
3.12 Investments in United States Real Property Interests. The Company's
capital stock does not constitute a United States real property interest as that
term is defined in Section 897(c)(1)(A)(ii) of the Internal Revenue Code of
1986, as amended (the "Code"). The preceding representation is based on a
determination by the Company that the Company is not and has not been a United
States real property holding corporation (as that term is defined in Section
897(c)(2) of the Code) ("USRPHC") during the five (5) year period preceding the
date of this Agreement. From time to time, upon request of any Purchaser, the
Company shall make a determination as to its status as a USRPHC. If at any time
in the future the Company should become a USRPHC, the Company shall, as promptly
as possible, notify each Purchaser of such change in status.
3.13 Unrelated Business Taxable Income. Any gross income derived by the
Purchasers from the Company shall be in the form of dividends, interest, capital
gains and losses from the disposition of property, and rents and royalties, but
only such rents and royalties as are excluded pursuant to Code Sections
512(b)(2) and 512(b)(3), respectively, in calculating unrelated business taxable
income and only such dividends, interest, capital gains and losses, and rents
and royalties that are not included under Section 512(b)(4) of the Code in
calculating unrelated business taxable income.
3.14 Year 2000 Compliance. To the knowledge of the Company, all of its
products (including products currently under development) will record, store,
process and
6
calculate and present calendar dates falling on and after January 1, 2000, and
will calculate any information dependent on or relating to such dates in the
same manner and with the same functionality, data integrity and performance as
the products record, store, process, calculate and present calendar dates on or
before December 31, 1999, or calculate any information dependent on or relating
to such dates (collectively "Year 2000 Compliant").
3.15 Taxes. The Company has filed all tax returns (including statements of
estimated taxes owed) required to be filed within the applicable periods for
such filings and has paid all taxes required to be paid (other than those
contested in good faith for which adequate reserves have been established), and
has established adequate reserves (net of estimated tax payments already made)
for the payment of all taxes payable in respect of the period subsequent to the
last periods covered by such returns. There is no pending dispute with any
taxing authority relating to any of such returns and the Company has not
received notice of any proposed liability for any tax to be imposed upon the
properties or assets of the Company. No deficiencies for any tax are currently
assessed against the Company, and no tax returns of the Company have ever been
audited, and, to the knowledge of the Company, there is no such audit pending
or threatened. There is no tax lien, whether imposed by any federal, state or
local taxing authority, outstanding against the assets, properties or business
of the Company or its predecessor, except such liens for taxes not yet due and
payable as may accrue in the ordinary course of business and for which the
Company has established reasonable reserve and as would not, in any case,
constitute a Material Adverse Change.
3.16 Real Property.
(a) The Disclosure Schedule sets forth the addresses and uses of all
real property that the Company owns, leases or subleases, and any material lien
or encumbrance on any such owned real property or the Company's leasehold
interest therein, specifying in the case of each such lease or sublease, the
name of the lessor or sublessor, as the case may be, and the lease term. Copies
of all leases have been provided to special counsel to the Purchasers.
(b) The Company has good and marketable title to, and owns free and
clear of all liens and encumbrances, all property listed as owned by the Company
on the Disclosure Schedule, and, to the knowledge of the Company, there is no
material violation of any law, regulation or ordinance (including without
limitation laws, regulations or ordinances relating to zoning, environmental,
city planning or similar matters) relating to any real property owned, leased or
subleased by the Company. With respect to the property it leases, the Company is
in compliance with all such leases and, to its knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances.
(c) There are no defaults by the Company or, to the knowledge of the
Company, by any other party thereto, which might curtail in any material respect
the
7
current use of the Company's property listed on the Disclosure Schedule. Except
for property sold or otherwise disposed of in the ordinary course of business
since September 30, 1999, the Company owns free and clear of any liens or
encumbrances, all of the personal property reflected as owned by the Company in
the balance sheet contained in the Unaudited Financial Statements, and all other
material items of personal property acquired by the Company through the date
hereof. All material items of such personal property are in good operating
condition, normal wear and tear excepted.
3.17 Insurance Coverage. The Disclosure Schedule contains an
accurate summary of the insurance policies currently maintained by the Company.
There are currently no claims in excess of $50,000 in the aggregate pending
against the Company under any insurance policies currently in effect and
covering the property, business or employees of the Company, and all premiums
due and payable with respect to the policies maintained by the Company have been
paid to date.
3.18 Employees and Actions. The Company is not bound by or subject to (and
none of its assets or properties are bound by or subject to) any contract,
commitment or arrangement with any labor union, and no labor union has requested
or, to the knowledge of the Company, has sought to represent any of the
employees, representatives or agents of the Company. There is no strike or
other labor dispute involving the Company pending, or to the knowledge of the
Company threatened, which could constitute a Material Adverse Change, nor is the
Company aware of any labor organization activity involving its employees. The
Company is not aware that any officer or key employee, or that any group of key
employees, intends to terminate his, her or its employment with the Company, nor
does the Company have a current intention to terminate the employment of any of
the foregoing. Subject to general principles related to wrongful termination of
employees, the employment of each officer and employee of the Company is
terminable at the will of the Company. Except as set forth on the Disclosure
Schedule, there are no employment, consulting or management agreements covering
the management of the Company.
3.19 No Brokers or Finders. No person has or will have, as a result of the
transactions contemplated by this Agreement, any right, interest or claim
against or upon the Company for any commission, fee or other compensation as a
finder or broker because of any act or omission by the Company.
3.20 Alliances, etc. Except as set forth on the Disclosure Schedule, the
Company is not engaged in any joint venture or partnership with any other
Person.
3.21 ERISA.
(a) Schedule 3.21 sets forth: (i) all "employee benefit plans", as
defined in Section 3(3) of the Employee Retirement Security Act of 1974, as
amended , and the rules and regulations promulgated thereunder ("ERISA"), and
any other
8
employee benefit arrangements or payroll practices, including, without
limitation, severance pay, sick leave, vacation pay, salary continuation for
disability, consulting or other compensation agreements, retirement, deferred
compensation, bonus, stock purchase, hospitalization, medical insurance, life
insurance and scholarship programs (the "Plans") maintained by Company or to
which Company contributed or is obligated to contribute thereunder, and (ii) all
"employee pension plans", as defined in Section 3(2) of ERISA (the "Pension
Plans"), maintained by Company to which the Company contributed or is obligated
to contribute thereunder.
(b) Purchasers will not have (i) any obligation to make any
contribution to any Multiemployer Plan (as defined under ERISA) or (ii) any
withdrawal liability from any such Multiemployer Plan under Section 4201 of
ERISA which it would not have had if it had not purchased the Shares from the
Company at the Closing in accordance with the terms of this Agreement.
(c) The Pension Plans intended to be qualified under Section 401 of
the Internal Revenue Code of 1986, as amended (the "IRC") are so qualified and
the trusts maintained pursuant thereto are exempt from federal income taxation
under Section 501 of the IRC, and nothing has occurred with respect to the
operation of the Pension Plans which could cause the loss of such qualification
or exemption or the imposition of any liability, penalty, or tax under ERISA or
the IRC.
(d) All contributions required by law or pursuant to the terms of
the Plans (without regard to any waivers granted under Section 412 of the IRC)
to any funds or trusts established thereunder or in connection therewith have
been made by the due date thereof (including any valid extension) and no
accumulated funding deficiencies exist in any of the Pension Plans.
(e) There is no "amount of unfunded benefit liabilities" as defined
in Section 4001(a)(18) of ERISA in any of the respective Pension Plans.
(f) There has been no "reportable event" as that term is defined
in Section 4043 of ERISA and the regulations thereunder with respect to the
Pension Plans which would require the giving of notice, or any event requiring
disclosure under Sections 4041(c)(3)(C), 4063(a) or 4068(f) of ERISA.
(g) There is no material violation of ERISA with respect to the
filing of applicable reports, documents, and notices regarding the Plans with
the Secretary of Labor and the Secretary of the Treasury or the furnishing of
such documents to the participants or beneficiaries of the Plans.
(h) True, correct and complete copies of the following documents,
with respect to each of the Plans, have been made available or delivered to the
Purchasers by the Company: (A) any plans and related trust documents, and
amendments thereto, (B) the most recent Forms 5500 (including any schedules
thereto) and the most recent actuarial valuation report, if any, (C) the last
Internal Revenue Service determination
9
letter, (D) summary plan descriptions, (E) written communications to employees
relating to the Plans and (F) written descriptions of all non-written agreements
relating to the Plans.
(i) There are no pending actions, claims or lawsuits which have been
asserted or instituted against the Plans, the assets of any of the trusts under
such Plans or the Plan sponsor or the Plan administrator, or against any
fiduciary of the Plans with respect to the operation of such Plans (other than
routine benefit claims), nor does the Company have knowledge of facts which
could form the basis for any such claim or lawsuit.
(j) All amendments and actions required to bring the Plans into
conformity in all material respects with all of the applicable provisions of
ERISA and other applicable laws have been made or taken except to the extent
that such amendments or actions are not required by law to be made or taken
until a date after the Closing Date.
(k) The Plans have been maintained, in all material respects, in
accordance with their terms and with all provisions of ERISA (including rules
and regulations thereunder) and other applicable Federal and state law, and
neither the Company nor a "party in interest" or a "disqualified person" with
respect to the Plans has engaged in a "prohibited transaction" within the
meaning of Section 4975 of the IRC or Section 406 of ERISA.
(l) Neither the Company nor any Person that, together with the
Company, would be or was at any time treated as a single employer under Section
414 of the Code or Section 4001 of ERISA or any general partnership of which the
Company is or has been a general partner (an "ERISA Affiliate") has terminated
any Pension Plan, or incurred any outstanding liability under Section 4062 of
ERISA to the PBGC, or to a trustee appointed under Section 4042 of ERISA.
(m) Neither the Company nor any ERISA Affiliate maintains retired
life and retired health insurance plans which provide for continuing benefits or
coverage for any participant or any beneficiary of a participant except as may
be required under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended ("COBRA") and at the expense of the participant or the participant's
beneficiary.
(n) Neither the Company nor any ERISA Affiliate has contributed or
been obligated to contribute to a Multiemployer Plan through the Closing.
(o) Neither the Company nor any ERISA Affiliate has withdrawn in a
complete or partial withdrawal from any Multiemployer Plan prior to the Closing
Date, nor has any of them incurred any liability due to the termination or
reorganization of a Multiemployer Plan.
10
(p) Neither the Company nor any ERISA Affiliate or any organization
to which Company is a successor or parent corporation, within the meaning of
Section 4069(b) of ERISA, has engaged in any transaction, within the meaning of
Section 4069 of ERISA.
3.22 Full Disclosure. No information contained in this Agreement, any other
Transaction Document, the Financial Statements or any written statement
furnished by or on behalf of Company pursuant to the terms of this Agreement
contains any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not misleading
in light of the circumstances under which made.
3.23 Securities Laws. In reliance on the investment representations contained
in Section 4, the offer, issuance, sale and delivery of the Shares, as provided
in this Agreement, are exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and all applicable
state securities laws, and are otherwise in compliance with such laws. Neither
the Company nor any person acting on its behalf has taken or will take any
action (including, without limitation, any offering of any securities of Company
under circumstances which would require the integration of such offering with
the offering of the Shares under the Securities Act and the rules and
regulations of the Securities and Exchange Commission ("SEC") thereunder) which
might subject the offering, issuance or sale of the Shares to the registration
requirements of Section 5 of the Securities Act.
3.24 Inventions Assignment and Confidentiality Agreement. Each employee and
contractor of the Company has entered into and executed a Proprietary
Information and Inventions Agreement in the form attached to this Agreement as
Exhibit H or an employment or consulting agreement containing substantially
similar terms.
3.25 Interested Party Transactions. To the knowledge of the Company, no
officer or director of the Company or any "affiliate" or "associate" (as those
terms are defined in Rule 405 promulgated under the Securities Act) of any such
person has had, either directly or indirectly, a material interest in: (i) any
person or entity which purchases from or sells, licenses or furnishes to the
Company any goods, property, technology, intellectual or other property rights
or services; or (ii) any contract or agreement to which the Company is a party
or by which it may be bound or affected.
3.26 Environmental Matters. The Company knows of no violation or violations by
the Company, its employees or agents of any environmental or safety statute, law
or regulation that in the aggregate would have a Material Adverse Effect, no
material expenditures are or will be required in order to comply with any such
existing statute, law or regulation. No action, proceeding, permit revocation,
writ, injunction or claim is pending or, to the Company's knowledge threatened
concerning the Company's facilities and the Company is not aware of any fact or
circumstance which could involve
11
the Company in any environmental litigation or impose any material environmental
liability upon the Company. As of the Closing, no Hazardous Material (as defined
below) is present on any Company facility and, to the Company's knowledge, no
reasonable likelihood exists that any Hazardous Material present on other
property will come to be present on a Company facility. To the Company's
knowledge, there are no underground storage tanks, asbestos or PCBs present on a
Company facility. For the purposes of this Section 3.26, the term "Hazardous
Material" shall mean any material or substance that is prohibited or regulated
by any environmental law or that has been designated by any governmental
authority to be radioactive, toxic, hazardous or otherwise a danger to health,
reproduction or the environment.
3.27 Company Status. The Company is not (i) a "public utility holding
company" or a "holding company" as defined in the Public Utility Holding Company
Act of 1935, as amended, or (ii) an "investment company" as defined in the
Investment Company Act of 1940, as amended.
4. Representations And Warranties Of The Purchasers
Each Purchaser, severally and not jointly, hereby represents and warrants
to the Company as follows:
4.1 Requisite Power and Authority. Such Purchaser has all necessary power and
authority under all applicable provisions of law to execute and deliver this
Agreement and each of the Transaction Documents and to carry out the provisions
hereunder and thereunder. All actions on such Purchaser's part required for the
lawful execution and delivery of this Agreement and each of the Transaction
Documents have been or will be effectively taken prior to the Closing and each
such agreement constitutes a valid and binding obligation of such Purchaser,
enforceable in accordance with its terms, except (i) as limited by applicable
bankruptcy, reorganization, insolvency, moratorium and similar laws affecting
the rights of creditors generally (ii) as limited by laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies and (iii) to the extent the indemnification provision contained in the
Stockholders Agreement may be limited by applicable federal or state securities
laws.
4.2 Investment Representations. Such Purchaser understands that neither the
Shares nor the Conversion Shares have been registered under the Securities Act.
Such Purchaser also understands and hereby confirms that the Shares are being
offered and sold pursuant to an exemption from registration contained in the
Securities Act based in part upon the Purchaser's representations contained in
this Agreement.
(a) Purchaser Bears Economic Risk. Such Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Such
12
Purchaser must bear the economic risk of this investment indefinitely unless the
Shares (or the Conversion Shares) are registered pursuant to the Securities Act,
or an exemption from registration is available. Such Purchaser understands that
the Company has no present intention of registering the Shares, the Conversion
Shares or any shares of its Common Stock or Preferred Stock. Such Purchaser also
understands that there is no assurance that any exemption from registration
under the Securities Act will be available and that, even if available, such
exemption may not allow such Purchaser to transfer all or any portion of the
Shares or the Conversion Shares under the circumstances, in the amounts or at
the times such Purchaser might propose.
(b) Acquisition for Own Account. Such Purchaser is acquiring the
Shares and the Conversion Shares for its own account for investment only, and
not with a view towards their public resale or distribution within the meaning
of the Securities Act; provided that the disposition thereof shall be and remain
in the control of such Purchaser. By executing this Agreement, each Purchaser
further represents that such Purchaser does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participation to such person or to any third person, with respect to any of the
Shares.
(c) Purchaser Can Protect Its Interest. Such Purchaser represents
that, by reason of its or of its management's business or financial experience,
such Purchaser has the capacity to protect its own interests in connection with
the transactions contemplated in this Agreement. Further, such Purchaser is
aware of no publication of any advertisement in connection with the transactions
contemplated by the Agreement.
(d) Accredited Investor. Such Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
(e) Company Information. Such Purchaser has had an opportunity to
discuss the Company's business, management and financial affairs with directors,
officers and management of the Company. Such Purchaser has also had the
opportunity to ask questions of, and receive answers from, the Company and its
management regarding the terms and conditions of this investment.
(f) Rule 144. Such Purchaser acknowledges and agrees that the Shares
and the Conversion Shares must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. Such Purchaser has been advised or is aware of the provisions of Rule
144 promulgated under the Securities Act, which permits limited resales of
shares purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things: the availability of certain current
public information about the Company, the resale occurring not less than one
year after a party has purchased and paid for the security to be sold, the sale
being through an unsolicited "broker's transaction" or in transactions directly
with a market maker (as said term is defined under the Securities
13
Exchange Act of 1934, as amended) and the number of shares being sold during any
three-month period not exceeding specified limitations.
(g) Further Limitations on Disposition. Without in any way limiting the
representations set forth above, each Purchaser further agrees not to make any
disposition of all or any portion of the Shares (or the Conversion Shares
issuable upon the conversion thereof) unless and until 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 such Purchaser shall have established to the reasonable
satisfaction of the Company that an exemption from registration is available.
(h) Legends. It is understood that the certificates evidencing the
Shares (and the Conversion Shares) may bear one or all of the following legends:
(i) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
EXEMPTION FROM REGISTRATION BEING AVAILABLE UNDER SUCH ACT AND APPLICABLE STATE
SECURITIES LAWS."
(ii) Any legend required by any applicable state securities laws.
(iii) Any legend required by the Stockholders Agreement or the
Investors Agreement.
5. Conditions Precedent To Purchasers' Obligations
The obligation of each Purchaser to purchase and pay for the Shares to be
delivered to it at the Closing or any Additional Closing shall be subject to
the satisfaction of the following conditions as of the Closing or Additional
Closing(except as otherwise noted):
(a) Representations and Warranties. The representations and warranties of
the Company contained in this Agreement shall be true and correct in all
respects;
(b) 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.
(c) Certificate Effective. The Certificate shall have been duly adopted by
the Company by all necessary corporate action of its Board of Directors and
14
stockholders, and shall have been duly filed with and accepted by the
Secretary of State of Delaware.
(d) Compliance Certificate. The Company shall have delivered to a
representative of all of the Purchasers at Closing a certificate signed on
its behalf by its President, Chief Executive Officer or Chief Financial
Officer certifying that the conditions specified in Sections 5(a) - (c) have
been fulfilled and stating that there shall have been no Material Adverse
Change not previously disclosed to the Purchasers in writing.
(e) Securities Exemptions. The offer and sale of the Shares to the
Purchasers pursuant to this Agreement shall be exempt from the registration
requirements of the Securities Act and the registration and/or qualification
requirements of all other applicable state securities laws.
(f) Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated at the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to a majority of the Purchasers and to special counsel to the
Purchasers. Such documents shall include (but not be limited to):
(i) Certified Charter Documents. A copy of the Certificate (as
amended through the date of the Closing), certified by the Secretary of the
Company as a true and correct copy thereof as of Closing.
(ii) Corporate Actions. A copy of the resolutions of the Board of
Directors, and, if required, the stockholders of the Company evidencing the
amendment to the Certificate providing for the authorization of the Shares,
the approval of the Transaction Documents and the consummation of the
transactions contemplated hereby and thereby, including the issuance and
sale of the Shares and the other matters contemplated thereby.
(iii) Secretary's Incumbency Certificate. A certificate of the
Secretary or Assistant Secretary or other officer of the Company certifying
the names of the officers of the Company authorized to sign this Agreement,
the certificates for the Shares purchased under this Agreement and the other
documents, instruments or certificates to be delivered pursuant to this
Agreement by the Company or any of its officers, together with the true
signatures of such officers.
(iv) Good Standing Certificates. Certificate of good standing
issued by the Delaware Secretary of State dated within ten (10) days of the
Closing.
(g) Bylaws. The Bylaws of the Company shall be in the form previously
15
provided to special counsel for the Purchasers.
(h) Investors' Agreement. Concurrent with the Closing or any Additional
Closing, the Company, each Purchaser participating in such Closing and the
participating parties to the Investors' Agreement dated May 27, 1998 between
the Company and certain stockholders, shall have entered into the Investors
Agreement;
(i) Stockholders' Agreement. Concurrent with the Closing or any Additional
Closing, the Company, the Purchasers participating in such closing and the
parties to the Stockholders' Agreement dated May 27, 1998 between the
Company and certain stockholders of the Company shall have entered into the
Stockholders Agreement;
(j) Legal Opinion. The Purchasers shall have received the legal opinion of
E*Law Group, counsel to the Company, in the form of Exhibit E hereto as of
the date of the Closing and each Additional Closing;
(k) Centennial Certification. Solely with respect to Centennial's obligation
to purchase Shares at Closing, the Company shall have provided to each of
Centennial Fund V, L.P., Centennial Fund VI, L.P. and certain other
affiliated entities ("Centennial"), a certification of the direct and
indirect holdings of securities of the Company by certain persons designated
by Centennial as required by Centennial's governing documents;
(l) Shares Purchased. A minimum of 13,391,666 Shares shall be concurrently
purchased by the Purchasers for a minimum aggregate purchase price of
$40.175 million at the Closing;
(m) Services Agreement. Solely with respect to the obligations of @Home to
purchase Shares hereunder, the Company and @Home shall have entered into
that certain Services Agreement (the "Services Agreement"), a form of which
is attached hereto as Exhibit F;
(n) Software License Agreement. Solely with respect to the obligations of
Intel Corporation ("Intel") to purchase Shares hereunder, the Company shall
have entered into that certain Software License Agreement (the "License
Agreement") substantially in the form of Exhibit G attached hereto;
(o) Proprietary Information and Inventions Agreements. Each officer and key
employee of the Company shall have entered into a Proprietary Information
and Inventions Agreement, substantially in the form of Exhibit H attached
hereto.
(p) Employment Agreements. Prior to the Closing, Messrs. Berberian and
LeJeal shall have entered into employment agreements satisfactory to each of
16
them, the Company and special counsel to the Purchasers.
(q) Existing First Refusal Rights. Any preemptive rights, rights of first
refusal or other similar rights as they apply to the issuance and sale of
the Shares totaling greater than 50,000 shares, individually or in the
aggregate, shall have been waived and released in writing or shall have
been satisfied in full.
(r) No Material Change. There shall not have been a Material Adverse
Change since the date of the Latest Balance Sheet.
(s) Centennial Consent. Solely with respect to Centennial's obligation to
purchase Shares in an Additional Closing, (i) Centennial shall have
received any consents required pursuant to its governing documents and (ii)
all applicable waiting periods (and any extensions thereof) under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), shall have expired or otherwise been terminated; provided, however,
that the Investors shall use their reasonable best efforts to ensure that
any applicable waiting periods under the HSR Act are subject to early
termination on or before December 15, 1999;
(t) EMC Supply Agreement. Solely with respect to the obligation of EMC
Corporation ("EMC") to purchase Shares hereunder, the Company shall have
entered into that certain Supply Agreement (the "Supply Agreement")
substantially in the form of Exhibit I attached hereto.
6. Expense Reimbursement
The Company hereby agrees to reimburse each Purchaser for its out-of-
pocket expenses incurred in connection with the transactions contemplated
hereby, including all expenses incurred in connection with its due diligence
examination of the Company, the preparation and negotiation of this Agreement,
the Transaction Documents and all other documents evidencing the transactions
contemplated herein (including the fees and expenses of counsel to the
Purchasers not to exceed $100,000 in the aggregate, such aggregate amount to be
allocated to each counsel representing one or more Purchasers in proportion to
the amount invested by such Purchasers) , and in connection with the enforcement
of rights and remedies of the Purchasers hereunder and under the Transaction
Documents and all other documents evidencing the transactions contemplated
herein; provided, however, that the Company shall not be responsible for any
such fees or expenses if the transactions contemplated by this Agreement are not
consummated. In addition, the Company shall reimburse each Purchaser for the
actual cost of any filings required under the HSR Act.
17
7. Miscellaneous
7.1 Definitions. For purposes of this Agreement, the following terms have the
meanings set forth below:
"Person" means an individual, a partnership, a corporation, an association,
a joint stock company, a trust, a joint venture, an unincorporated organization
and a governmental entity or any department, agency or political subdivision
thereof.
"Proprietary Rights" means all (i) patents, patent applications, patent
disclosures and inventions, (ii) trademarks, service marks, trade dress, trade
names and corporate names and registrations and applications for registration
thereof, (iii) copyrights and registrations and applications for registration
thereof, (iv) mask works and registrations and applications for registration
thereof, (v) computer software, data and documentation, (vi) trade secrets and
other confidential information (including, without limitation, ideas, formulas,
compositions, inventions (whether patentable or unpatentable and whether or not
reduced to practice), know-how, manufacturing and information, drawings,
specifications, designs, plans, proposals, and customer and supplier lists and
information), (vii) other intellectual property rights, and (viii) copies and
tangible embodiments thereof (in whatever form or medium).
7.2 Governing Law. This Agreement shall be governed in all respects by the
laws of the State of Colorado as such laws are applied to agreements between
Colorado residents entered into and performed entirely in Colorado, except that
the General Corporation Law of the State of Delaware shall govern as to matters
of corporate law. The parties hereto waive all right to trial by jury in any
action or proceeding to enforce or defend any rights under this Agreement.
7.3 Survival. The representations, warranties, covenants and agreements made
herein shall survive any investigation made by any Purchaser and the closing of
the transactions contemplated hereby. All statements as to factual matters
contained in any certificate or other instrument delivered by or on behalf of
the Company hereunder in connection with the transactions contemplated hereby
shall be deemed to be representations and warranties by the Company hereunder
solely as of the date of such certificate or instrument.
7.4 Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of the Shares from time to time.
7.5 Entire Agreement. This Agreement, the Exhibits and the other documents
expressly delivered hereunder, including the Transaction Documents, supersede
any
18
other agreement, whether written or oral, that may have been made or entered
into by the parties hereto relating to the matters contemplated hereby and
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof, and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
7.6 Specific Enforcement. Any Purchaser shall be entitled to specific
enforcement of its rights under this Agreement. The Company acknowledges that
money damages would be an inadequate remedy for its breach of this Agreement and
consents to an action for specific performance or other injunctive relief in the
event of any such breach.
7.7 Separability. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby and
such provision shall be enforced to the greatest extent permitted by law.
7.8 Amendment and Waiver. This Agreement may be amended or modified only
upon the mutual written consent of the Company and the holders of at least 66
2/3% of the Shares (voting on an as-converted basis).
7.9 Notices. All notices required or permitted hereunder shall be in writing
and shall be deemed effectively given: (i) upon personal delivery to the party
to be notified; (ii) when sent by confirmed telex or facsimile if sent during
normal business hours of the recipient, if not, then on the next business day;
(iii) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (iv) one (1) day after deposit
with a nationally recognized overnight courier, special next day delivery, with
verification of receipt. All communications shall be sent to the Company at
5777 Central Avenue, Suite 120, Boulder, Colorado 80301 and to a Purchaser at
the address set forth on Exhibit B attached hereto or at such other address as
the Company or Purchaser may designate by ten (10) days advance written notice
to the other parties hereto.
7.10 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.
7.11 Broker's Fees. Each party hereto represents and warrants that no agent,
broker, investment banker, person or firm acting on behalf of or under the
authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection with
the transactions contemplated herein. Each party hereto further agrees to
indemnify each other party for any claims, losses or expenses incurred by such
other party as a result of the representation in this Section 7.11 being untrue.
19
7.12 Future Financings. Nothing contained in this Agreement or any Purchaser'
s prior dealings with the Company shall be deemed to constitute a commitment on
the part of any Purchaser to participate in any future financings by the
Company.
7.13 Confidentiality and Non-Disclosure. The parties hereto agree to be bound
by the confidentiality and non-disclosure provisions of Section 7.11 of the
Stockholders' Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
20
In Witness Whereof, the parties hereto have executed the Agreement as of
the date set forth in the first paragraph hereof.
FORM OF CERTIFICATE OF AMENDMENT TO
CERTIFICATE OF INCORPORATION
26
EXHIBIT B
SCHEDULE OF PURCHASERS
Initial Closing Second Closing
Number of Shares Aggregate Number of Aggregate
Purchase Price Shares Purchase Price
Name and Address
Centennial Fund V, L.P. 1,333,333 $ 3,999,999 N/A $ 0.00
1428 15th Street
Denver, CO 80202
Fax: (303) 405-7575
Centennial Fund VI, L.P. 2,333,333 $ 6,999,999 2,666,667 $ 8,000,001
1428 15th Street
Denver, CO 80202
Fax: (303) 405-7575
Centennial Entrepreneurs Fund VI, L.P. 58,333 $ 174,999 66,667 $ 200,001
1428 15th Street
Denver, CO 80202
Fax: (303) 405-7575
Centennial Holdings I, LLC. 46,667 $ 140,001 53,333 $ 159,999
1428 15th Street
Denver, CO 80202
Fax: (303) 405-7575
SOFTBANK Technology Ventures IV, L.P. 2,943,600 $ 8,830,800 N/A N/A
200 W. Evelyn Avenue, Suite 200
Mountain View, CA 94043
Fax: (650) 962-2030
SOFTBANK Technology Advisors Fund, L.P. $ 56,400 $ 169,200 N/A N/A
200 W. Evelyn Avenue, Suite 200
Mountain View, CA 94043
Fax: (650) 962-2030
Other SOFTBANK Entities N/A N/A 1,666,667 $ 5,000,001
Highland Capital Partners III Limited $ 800,000 $ 2,400,000 N/A N/A
Partners
Two International Place
Boston, MA 02110
Fax: (617) 531-1550
27
Highland Entrepreneurs' Fund III Limited 33,333 $ 99,999 N/A N/A
Partners
Two International Place
Boston, MA 02110
Attention: Daniel Nova
Fax: (617) 531-1550
Millennial Holdings, LLC 33,333 $ 99,999 N/A N/A
1428 15th Street
Denver, CO 80202
Fax: (303) 352-2050
Nexus Capital Partners II, L.P. 2,500,000 $ 7,500,000 N/A N/A
C/O Nexus Group LLC
160 Spear Street, Suite 1775
San Francisco, CA 94105
Fax: (415) 247-7659
Porcelain Partners, L.P. 166,666 $ 499,998 N/A N/A
C/O Nexus Group LLC
160 Spear Street, Suite 1775
San Francisco, CA 94105
Fax: (415) 247-7659
GE Capital Equity Investments, Inc. 2,500,000 $ 7,500,000 N/A N/A
120 Long Ridge Road
Stamford, CN 096927
Fax: (203) 357-3047
Asdale, Ltd. 1,666,667 $ 5,000,001 N/A N/A
c/o Aspen Advisory Services
44 Lowndes Street
London, SW1X9HX, ENGLAND
Fax: (011) 44-171-245-6686
Matsushita Electric Industrial Co., Ltd. 1,333,333 $ 3,999,999 N/A N/A
3-1-1 Yagumo-Nakamachi
Moriguchi City, Osaka 570-8501 Japan
Fax: (408) 861-3999
28
Intel Corporation 3,666,667 $11,000,001 N/A N/A
2200 Mission College Blvd.
Santa Clara, CA 95052
Fax: (408) 765-6038
Excite, Inc. 1,666,667 $ 5,000,001 N/A N/A
440 Broadway
Redwood City, CA 94063
Fax: (650) 556-3430
Whitko & Company 17,000 $ 51,000 N/A N/A
3385 S. Clayton Blvd.
Englewood, CO 80110
Attention: Carol deB. Whitaker, President
Fax: (303) 806-8383
Pequot Private Equity Fund II, L.P. 4,666,667 $14,000,001 N/A N/A
500 Nyala Farm Road
Westport, CT 06880
Fax: (212) 259-6333
Vivendi 1,666,667 $ 5,000,001 N/A N/A
42 avenue de Friedland
75008 PARIS, FRANCE
EMC Corporation 1,083,333 $3,249, 999 N/A N/A
35 Parkwood
Hopkinton, MA 01748
Friends and Family N/A N/A 308,000 $ 924,000
TOTAL 28,571,999 $85,715,997 4,761,334 $14,284,002
29
30
EXHIBIT C
FORM OF AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
31
EXHIBIT D
FORM OF AMENDED AND RESTATED INVESTORS' AGREEMENT
32
EXHIBIT E
FORM OF LEGAL OPINION
33
EXHIBIT F
FORM OF SERVICES AGREEMENT
34
EXHIBIT G
FORM OF LICENSE AGREEMENT
35
EXHIBIT H
FORM OF PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
36
EXHIBIT I
SUPPLY AGREEMENT
37
Table of Contents
Page
1. Agreement To Sell And Purchase...........................................1
1.1 Authorization of Shares.............................................1
1.2 Sale and Purchase...................................................1
2. Closing, Delivery And Payment............................................1
2.1 Initial Closing.....................................................1
2.2 Second Closing......................................................1
3. Representations And Warranties Of The Company............................2
3.1 Organization, Good Standing and Qualification.......................3
3.2 Capitalization......................................................3
3.3 Subsidiaries........................................................3
3.4 Authorization; Binding Obligations..................................4
3.5 Consents and Approvals..............................................4
3.6 No Violations.......................................................4
3.7 Financial Statements; Interim Changes...............................4
3.8 Compliance with Laws................................................5
3.9 Proprietary Rights..................................................5
3.10 Actions Pending.....................................................6
3.11 Material Contracts..................................................6
3.12 Investments in United States Real Property Interests................6
3.13 Unrelated Business Taxable Income...................................6
3.14 Year 2000 Compliance................................................6
3.15 Taxes...............................................................7
3.16 Real Property.......................................................7
3.17 Labor Agreements and Actions........................................8
3.18 No Brokers or Finders...............................................8
3.19 Other...............................................................8
3.21 ERISA...............................................................8
3.22 Full Disclosure....................................................11
3.23 Securities Laws....................................................11
4. Representations And Warranties Of The Purchasers........................12
4.1 Requisite Power and Authority......................................12
4.2 Investment Representations.........................................12
5. Conditions Precedent To Purchasers' Obligations.........................14
5.1 Conditions Precedent to Initial Closing............................14
6. Expense Reimbursement...................................................17
i
FIRST AMENDMENT
TO
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
This First Amendment to the Series D Preferred Stock Purchase Agreement
dated as of November 17, 1999 (the "Purchase Agreement"), is entered into as of
December 15, 1999, by and among VStream Incorporated, a Delaware corporation
(the "Company"), and the parties identified as additional purchasers on the
signature pages hereto (the "Additional Purchasers") (this "First Amendment").
RECITALS
Whereas, the Company and the holders of the Company's Series D Preferred
Stock listed on Exhibit B of the Purchase Agreement are parties to the Purchase
Agreement;
Whereas, in connection with and as a condition to the purchase by the
Additional Purchasers of 4,761,334 shares of the Company's Series D Preferred
Stock, the Company has agreed to provide the Additional Purchasers the rights
set forth in the Purchase Agreement;
Whereas, under Section 7.8 of the Purchase Agreement, the Purchase
Agreement may be amended with written consent of the Company and the holders of
at least 66-2/3% of the Shares (as defined in the Purchase Agreement); and
Whereas, at least 66-2/3% of the Shares (voting on an as-converted basis)
have consented in writing to this First Amendment.
In consideration of the mutual agreements, covenants and considerations
contained herein, the parties hereto agree as follows:
1. Amendment. The first sentence of the first paragraph of the Purchase
Agreement is hereby amended in its entirety to read as follows:
This Series D Preferred Stock Purchase Agreement (the "Agreement") is
entered into as of November 17, 1999, by and among VStream
Incorporated, a Delaware corporation (the "Company"), and each of
those persons and entities, severally and not jointly, whose names are
set forth on Exhibit B and Exhibit B-1 attached hereto (collectively,
the "Purchasers" and individually, a "Purchaser").
2. Definitions. All capitalized terms used herein without definition
shall have the meanings ascribed to them in the Purchase Agreement.
1
3. Additional Purchasers. Upon the effectiveness of this First Amendment,
the Additional Purchasers agree to be bound by all of the terms and conditions
of the Purchase Agreement as amended herein.
4. Notices. All notices sent to the Company pursuant to the Purchase
Agreement shall be sent to the Company at 1157 Century Drive, Louisville,
Colorado 80027.
5. Effect of Amendment. Except as amended as set forth above, the
Purchase Agreement shall continue in full force and effect.
6. Governing Law. This First Amendment shall be governed and construed in
accordance with the laws of the State of Colorado as though made solely among
residents of the State of Colorado without regard to conflicts of law
principals.
[The Remainder of this Page is Intentionally Left Blank.]
2
IN WITNESS WHEREOF, the undersigned parties have executed this First
Amendment to the Series D Preferred Stock Purchase Agreement as of the date set
forth in the first paragraph hereof.
COMPANY:
VSTREAM INCORPORATED
By:/s/ Paul A. Berberian
------------------------------------------
Title: CEO
---------------------------------------
ADDITIONAL PURCHASERS:
CENTENNIAL FUND VI, L.P.
By: Centennial Holdings VI, LLC
Its General Partner
By:/s/ Donald H. Parsons, Jr.
------------------------------------------
Donald H. Parsons, Jr., Managing Principal
CENTENNIAL ENTREPRENEURS FUND VI. L.P.
By: Centennial Holdings VI, LLC
Its General Partner
By:/s/
------------------------------------------
Managing Principal
CENTENNIAL HOLDINGS I, LLC
By:/s/ Donald H. Parsons, Jr.
------------------------------------------
Donald H. Parsons, Jr., Sr. Vice President
[Signature Page to First Amendment to
Purchase Agreement]
3
/s/ Kim N.C. Tomsic
-----------------------------------------
Kim N.C. Tomsic
/s/ John L. Kurtz, Jr.
-----------------------------------------
John L. Kurtz, Jr.
/s/ Lori K. Bornheimer
-----------------------------------------
Lori K. Bornheimer
/s/ Frances L. Berberian
-----------------------------------------
Frances L. Berberian
/s/ Charles 0. Higgins
-----------------------------------------
Charles 0. Higgins
/s/ Byron R. Chrisman
-----------------------------------------
Byron R. Chrisman
/s/
-----------------------------------------
T. Charles Fial TTEE FBO T. Charles
Fial 1997 Revocable trust DTD 9/30/97
/s/ Eva Garibian
-----------------------------------------
Eva Garibian
/s/ Vahe Garibian
-----------------------------------------
Vahe Garibian
/s/ Mathew S. Martin
-----------------------------------------
Mathew S. Martin
/s/ Karen S. Martin
-----------------------------------------
Karen S. Martin
/s/ Thomas Patsiga
-----------------------------------------
Thomas Patsiga
/s/
----------------------------------------
Charles Schwab & Co., Inc. FBO Austin R.
Gibbons
IRA Acct. #36500 127
/s/ Jarvis Seccombe
-----------------------------------------
Jarvis Seccombe
[Signature Page to First Amendment to
Purchase Agreement]
4
/s/ Diane Seccombe
------------------------------------
Diane Seccombe
/s/ Rimvydas Ambraziunas
------------------------------------
Rimvydas Ambraziunas
/s/ Marsha Ambraziunas
------------------------------------
Marsha Ambraziunas
/s/ Francis X. Malone
------------------------------------
Francis X. Malone
/s/ David A. Makarechian
------------------------------------
David A. Makarechian
/s/ Jeremy W. Makarechian
------------------------------------
Jeremy W. Makarechian
/s/ Alfred E. Moore
------------------------------------
Alfred E. Moore
/s/ Joanne L. Moore
------------------------------------
Joanne L. Moore
/s/ Philippe Muller
------------------------------------
Philippe Muller
[Signature Page to First Amendment to
Purchase Agreement]
5
SOFTBANK TECHNOLOGY VENTURES V, L.P.
By: STV IV LLC
By: /s/ Bradley A. Feld
-------------------------------
Managing Director
SOFTBANK TECHNOLOGY VENTURES ADVISORS
FUND V, L.P.
By: STV IV LLC
By: /s/ Bradley A. Feld
-------------------------------
Managing Director
SOFTBANK TECHNOLOGY VENTURES
ENTREPRENEURS FUND V, L.P.
By: STV IV LLC
By: /s/ Bradley A. Feld
-------------------------------
Managing Director
SOFTBANK TECHNOLOGY VENTURES IV, L.P.
By: STV IV LLC
By: /s/ Bradley A. Feld
-------------------------------
Managing Director
SOFTBANK TECHNOLOGY ADVISORS FUND, L.P.
By: STV IV LLC
By: /s/ Bradley A. Feld
-------------------------------
Managing Director
[Signature Page to First Amendment to Purchase
Agreement]
6
EXHIBIT B-1
SCHEDULE OF PURCHASERS FOR SECOND CLOSING
Second Closing
Aggregate Purchase
Name and Address Number of Shares Price
Centennial Fund VI, L.P. 2,658,692 $7,976,076
1428 15th Street
Denver, CO 80202
Fax: (303) 405-7575
Centennial Entrepreneurs Fund VI, L.P. 66,468 $199,404
1428 15th Street
Denver, CO 80202
Fax: (303) 405-7575
Centennial Holdings I, LLC. 53,174 $159,522
1428 15th Street
Denver, CO 80202
Fax: (303) 405-7575
SOFTBANK Technology Ventures IV, L.P. 813,579 $2,440,737
200 W. Evelyn Avenue, Suite 200
Mountain View, CA 94043
Fax: (650) 962-2030
SOFTBANK Technology Advisors Fund, L.P. 15,588 $46,764
200 W. Evelyn Avenue, Suite 200
Mountain View, CA 94043
Fax: (650) 962-2030
SOFTBANK Technology Ventures V, L.P. 793,264 $2,379,792
200 W. Evelyn Avenue, Suite 200
Mountain View, CA 94043
Fax: (650) 962-2030
SOFTBANK Technology Ventures Advisors Fund 21,641 $64,923
V, L.P.
200 W. Evelyn Avenue, Suite 200
Mountain View, CA 94043
Fax: (650) 962-2030
SOFTBANK Technology Ventures Entrepreneurs 14,262 $42,786
Fund V, L.P.
200 W. Evelyn Avenue, Suite 200
Mountain View, CA 94043
Fax: (650) 962-2030
7
University of Colorado Foundation, Inc. 16,666 $49,998
P. 0. Box 1140
Boulder, CO 80306-1140
Fax: (303) 735-9001
Kim N.C. Tomsic 24,000 $72,000
John L. Kurtz, Jr. 13,334 $40,002
Lori K. Bornheimer 7,000 $21,000
Frances L. Berberian 32,000 $96,000
Charles 0. Higgins 7,000 $21,000
Byron R. Chrisman 100,000 $300,000
T. Charles Fial TTEE FBO T. Charles Fial 1997 25,000 $75,000
Revocable trst DTD 9/30/97
Eva & Vahe Garibian 20,000 $60,000
Mathew S. & Karen S. Martin 10,000 $30,000
Philippe Muller 5,000 $15,000
Thomas Patsiga 14,000 $42,000
Austin R. Gibbons 7,000 $21,000
Jarvis & Diane Seccombe 7,000 $21,000
Rimvydas & Marsha Ambraziunas 13,333 $39,999
Francis X. Malone 10,000 $30,000
David A. Makarechian 666 $1,998
Jeremy W. Makarechian 2,667 $8,001
Alfred E. & Joanne L. Moore 10,000 $30,000
TOTAL 4,761,334 $14,284,002
8
Exhibit 10.12
NOTE AND WARRANT PURCHASE AGREEMENT
THIS NOTE AND WARRANT PURCHASE AGREEMENT is made as of the 3lst day of March,
1998 by and among VStream Incorporated, a Delaware corporation (the "Company"),
and the persons and entities named on the Schedule of Purchasers attached hereto
(individually, a "Purchaser" and collectively, the "Purchasers").
The Parties hereby agree as follows:
1. Amount and Terms of the Loan; Purchase and Sale of the Warrants
1.1. The Loan. Subject to the terms of this Agreement, the Company shall
borrow from each Purchaser and each Purchaser shall lend to the Company the
amount set forth opposite each such Purchaser's name in the first column of the
attached Schedule of Purchasers (the "Loan Amount") pursuant to a convertible
subordinated promissory note in the form attached hereto as Exhibit A (the
"Note" or collectively, the "Notes"). The Loan Amounts are hereinafter referred
to collectively as the "Loan."
1.2. Purchase and Sale of Warrants. The Company will issue and sell to each
Purchaser and each Purchaser will purchase, severally and not jointly, warrants
in the form attached hereto as Exhibit B (the "Warrants") to purchase that
number of shares of the Company's Series C Preferred Stock as set forth opposite
each Purchaser's name in the second column of the Schedule of Purchasers on the
following terms: (i) the per share exercise price will be One Dollar and Four
Cents ($1.04) per share (subject to adjustment as set forth therein) and (ii)
the purchase price of the Warrants will be One Tenth of One Cent ($.00l) per
warrant share. These warrants shall be issued simultaneously with the closing of
the Loan.
2. The Closing
2.1. Closing Date. The closing shall be held no later than March 31, 1998
at the offices of Holland & Hart LLP, 555 Seventeenth Street, Suite 3200,
Denver, Colorado 80202, or at such other time as the Company and Purchasers
shall agree (the "Closing Date").
2.2. Delivery. At the Closing (i) each Purchaser will deliver to the
Company a check or wire transfer of funds in the amount of such (A) Purchaser's
Loan Amount plus (B) the purchase price of the Warrants being issued to such
Purchaser; and (ii) the Company shall deliver to each Purchaser a Note
representing such Purchaser's Loan Amount and an executed Warrant for the shares
indicated opposite such Purchaser's name on the Schedule of Purchasers.
3. Representations and Warranties of the Company.
The Company hereby represents and warrants to each Purchaser as follows:
3.1. Corporate Power. The Company will have at the Closing Date all
requisite corporate power to execute and deliver this Agreement, the Notes and
the Warrants and to carry out and perform its obligations under the terms of
this Agreement, the Notes and the Warrants.
3.2. Authorization. All corporate action on the part of the Company, its
directors and its stockholders necessary for the authorization, execution,
delivery and performance of this Agreement by the Company and the performance of
the Company's obligations hereunder, including the issuance and delivery of the
Notes and the Warrants has been taken or will be taken prior to the Closing.
This Agreement, the Notes and the Warrants, when executed and delivered by the
Company, and upon the filing with the Secretary of State of the state of
Delaware of an amendment to the Company's Certificate of Incorporation to
authorize the Series C Preferred Stock into which the Notes are convertible and
for which the Warrants are exercisable shall constitute valid and binding
obligations of the Company enforceable in accordance with their terms, subject
to laws of general application relating to bankruptcy, insolvency, the relief of
debtors and, with respect to rights to indemnity, subject to federal and state
securities laws. The Series C Preferred Stock or other equity securities of the
Company, when issued in compliance with the provisions of this Agreement, the
Notes and the Warrants, and the Company's Certificate of Incorporation will be
validly issued, fully paid and nonassessable and free of any liens or
encumbrances.
3.3. Consents. All consents, approvals, orders or authorizations of, or
registrations, qualifications, designations, declarations or filings with, any
governmental authority or other third party, required on the part of the Company
in connection with the valid execution and delivery of this Agreement, the
offer, sale or issuance of the Notes, the Warrants and the equity securities
issuable upon exercise of the Warrants, conversion of the Notes or the
consummation of any other transaction contemplated hereby shall have been
obtained and will be effective at the Closing, except for notices required or
permitted to be filed with certain state and federal securities commissions
following the Closing, which notices will be filed on a timely basis.
3.4. Offering. Assuming the accuracy of the representations and warranties
of the Purchasers contained in Section 4 hereof, the offer, issue and sale of
the Notes and the Warrants are and will be exempt from the registration and
prospectus delivery requirements of the Securities Act of 1933, as amended (the
"1933 Act"), and, upon the filing of certain forms which will be completed
promptly following the Closing, are exempt from registration and qualification
under the registration, permit or qualification requirements of all applicable
state securities laws.
4. Representations and Warranties of the Purchasers
4.1. Purchase for Own Account. Each Purchaser represents that it is
acquiring the Notes, the equity securities issuable upon conversion of the
Notes, the Warrants and the equity securities issuable upon exercise of the
Warrants (collectively, the "Securities") solely for its own account and
beneficial interest and not as nominee for any other party, and for investment
and not for sale or with a view to distribution of the Securities or any part
thereof, and has no present intention of selling (in connection with a
distribution or otherwise), granting any participation in, or otherwise
distributing the same.
2
4.2. Information and Sophistication. Each Purchaser acknowledges that it
has received all the information it has requested from the Company and considers
necessary or appropriate for deciding whether to acquire the Notes and Warrants.
Each Purchaser represents that it has had an opportunity to ask questions and
receive answers from the Company regarding the terms and conditions of the
offering of the Notes and the Warrants and to obtain any additional, information
necessary to verify the accuracy of the information given the Purchaser. Each
Purchaser further represents that it has such knowledge and experience in
financial and business matters that it is capable of evaluating the merits and
risk of this investment.
4.3. Ability to Bear Economic Risk. Each Purchaser acknowledges that
investment in the Notes and the Warrants involves a high degree of risk, and
represents that it is able, without materially impairing its financial
condition, to hold the Securities for an indefinite period of time and to suffer
a complete loss of its investment.
4.4. Further Limitations on Disposition. Without in any way limiting the
representations set forth above, each Purchaser further agrees not to make any
disposition of all or any portion of the Securities unless and until:
(a) There is then in effect a registration statement under the 1933
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, such Purchaser shall have furnished the Company with
an opinion of counsel, reasonably satisfactory to the Company, that such
disposition will not require registration under the 1933 Act.
(c) Notwithstanding the provisions of paragraphs (a) and (b) above, no
such registration statement or opinion of counsel shall be necessary for a
transfer by such Purchaser to a stockholder or partner (or retired partner) of
such Purchaser, or its affiliates, associates or partners, or transfers by gift,
will or intestate succession to any spouse or lineal descendants or ancestors,
if all transferees agree in writing to be subject to the terms hereof to the
same extent as if they were Purchasers hereunder.
Each Purchaser understands that the Securities are "restricted securities" under
the federal securities laws inasmuch as they are being acquired from the Company
in a transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the 1933 Act only in certain limited circumstances. In this connection, the
Purchaser represents that it is familiar with Rule 144 promulgated under the
1933 Act, as presently in effect, and understands the resale limitations imposed
thereby and by the 1933 Act.
4.5. Accredited Investor. Each Purchaser is an "accredited investor" as
such term is defined in Rule 501 under the Securities Act.
3
5. Conditions to Closing
Each Purchaser's obligation to make its portion of the Loan shall be subject to
satisfaction of the following conditions precedent:
5.1. Opinion. Such Purchaser shall have received the written opinion of
Brobeck Phleger & Harrison LLP, counsel to the Company.
5.2. Certificate. Each other Purchaser shall have concurrently performed
its obligations hereunder, and Centennial Fund V, L.P.'s obligation is subject
to its receipt of certification from the Company with respect to interests of
certain disqualified persons.
6. Miscellaneous
6.1. Binding Agreement. The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors and
assigns of the parties. Nothing in this Agreement, express or implied, is
intended to confer upon any third party any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
6.2. Governing Law. This Agreement shall be governed by and construed under
the laws of the State of Colorado as applied to agreements among Colorado
residents, made and to be performed entirely within the State of Colorado.
6.3. Counsel Fees. The Company agrees to reimburse the fees (up to a
maximum of $5,000) and expenses of Holland & Hart LLP, legal counsel to the
Purchasers in connection with the transactions contemplated hereby.
6.4. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.5. Titles and Subtitles. The titles and subtitles used in this Agreement
are used for convenience only and are not to be considered in construing or
interpreting this Agreement.
6.6. Notices. Any notice required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given upon personal delivery
or upon deposit with the United States Post Office, by registered or certified
mail, postage prepaid, addressed to the Company at 5777 Central Avenue, Boulder,
Colorado 80301, or to a Purchaser at its address shown on the Schedule of
Purchasers, or at such other address as such party may designate by ten (10)
days advance written notice to the other party.
6.7. Modification; Waiver. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), with the
written consent of the Company and the holders of Notes representing a majority
of the outstanding aggregate principal amount of the Notes. Any waiver or
amendment effected in accordance with this Section 6.7 shall be binding
4
upon each holder of any securities purchased under this Agreement at the time
outstanding (including securities into which such securities have been
converted) and each future holder of all such securities and the Company.
5
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
COMPANY: PURCHASERS:
VSTREAM INCORPORATED CENTENNIAL FUND V, L.P.
By: Centennial Holdings V, L.P.,
By: /s/ Its General Partner
----------------------------
Title: Chief Financial Officer
-------------------------
By: /s/ Donald H. Parsons, Jr.
---------------------------
a General Partner
CENTENNIAL ENTREPRENEURS FUND V, L.P.
By: Centennial Holdings V, L.P.
Its General Partner
By: /s/ Donald H. Parsons, Jr.
---------------------------
Title: A General Partner
--------------------
SOFTBANK TECHNOLOGY VENTURES IV L.P.
By: STV IV LLC
By: /s/ Brad Feld
----------------------------
Managing Director
SOFTBANK TECHNOLOGY ADVISORS FUND L.P.
By: STV IV LLC
By: /s/ Brad Feld
----------------------------
Managing Director
6
SCHEDULE OF PURCHASERS
CONVERTIBLE SERIES C SERIES C STOCK
SUBORDINATED STOCK WARRANT TOTAL
PURCHASER NOTES WARRANTS PRICE PURCHASE PRICE
Centennial Fund V, L.P $242,500 5829 $ 5.83 $242,505.83
1428 15th Street
Denver, CO 80202
Centennial Entrepreneurs 7,500 180 .18 7,500.18
Fund V, L.P.
1428 15th Street
Denver, CO 80202
SOFTBANK Technology 245,000 5889 5.89 245,005.89
Ventures IV L.P.
c/o Bradley Feld
333 W. San Carlos Road, Suite 1225
San Jose, CA 95510
SOFTBANK Technology Advisors 5,000 120 .12 5,000.12
Fund L.P.
c/o Bradley Feld
333 W. San Carlos Road, Suite 1225
San Jose, CA 95510
----------------------------------------------------------------------
TOTAL $500,000 12,018 12.02 $500,012.02
EXHIBIT 10.13
LEASE
1. PARTIES. This Lease, dated, for reference purposes only, March 3, 1997 is
made by and between BMC PROPERTIES,LLC (herein called "Landlord") and
INTELLISTAT MEDIA RESEARCH, INC. (herein called "Tenant").
2. PREMISES. Landlord does hereby lease to Tenant and Tenant hereby leases
from Landlord that certain office space (herein called "Premises") indicated on
Exhibit A attached hereto and by reference thereto made a part hereof, said
Premises being agreed, for the purposes of this Lease, to have an area of
approximately 4,295 square feet (including a pro rata share of the common areas)
and being situated on the FIRST FLOOR of that certain building known as THE
LAKESHORE BUILDING ("Building"), 5777 Central Avenue, Boulder, Colorado 80301.
Said Lease is subject to the terms, covenants and conditions herein set forth
and the Tenant covenants as a material part of the consideration for this Lease
to keep and perform each and all of said terms, covenants and conditions by it
to be kept and performed and that this Lease is made upon the condition of said
performance.
3. TERM. The term of this Lease shall be for three (3) years. This lease
shall commence on the 1st day of June, 1997("Commencement Date"), and end on the
31st day of May, 2000.
4. POSSESSION.
a. If the Landlord cannot deliver possession of the Premises to Tenant at
the commencement of the term hereof, this Lease shall not be void or voidable,
the expiration date of the above term shall be extended, to three (3) years
after the end of the month during which Landlord delivers possession to Tenant
and all rent shall be abated during the period between the commencement date and
the time when Landlord delivers possession. Notwithstanding anything to the
contrary contained in this section 4(a), in the event that Landlord has not
delivered possession of the Premises to Tenant, for any reason whatsoever, on or
prior to ninety (90) days after the commencement date set forth in Section 3(a)
above, then Tenant may terminate this Lease upon written notice to Landlord and
neither party shall thereafter have any obligations or liability under this
Lease. Nothing in the contrary shall relieve Landlord of its obligation to use
its best efforts to complete the Tenant Improvements and to deliver possession
of the Premises to Tenant on or before the commencement date set forth in
Section 3(a) above. In the event that this Lease is terminated pursuant to this
Section 4(a), Landlord shall promptly return to Tenant the first month's rent
and security deposit prepaid pursuant to Section 5(a) below.
b. In the event that Landlord shall permit Tenant to occupy the Premises
prior to the commencement date of the term, such occupancy shall be subject to
all the provisions of the Lease. Said early possession shall not advance the
termination date herein above provided. Notwithstanding the foregoing, in the
event that Landlord permits Tenant to enter the Premises prior to completion of
the Tenant Improvements solely for the purposes of performing Tenant's pre-
opening activities, Tenant shall not be obligated to pay Rent while Tenant is
performing such pre-opening activities.
5. RENT.
a. Tenant agrees to pay to Landlord as basic rental, without prior notice
or demand, the sum of FOUR THOUSAND TWO HUNDRED NINETY-FIVE AND NO/100 Dollars
($4,295.00), on or before the first day of the first full calendar month of the
term hereof and a like sum on or before the first day of each and every
successive calendar month thereafter during the term hereof, except that the
first month's rent shall be paid upon the execution hereof. Rent for any period
during the term hereof which is for less than one (1) month shall be a prorated
portion of the monthly installment herein, based upon a thirty (30) day month.
Said rental shall be paid to Landlord, without deduction or offset in lawful
money of the United States of America, which shall be legal tender at the time
of payment at 3434 47th Street, Suite 220, Boulder, Colorado 80301, or to such
other person or at such other place as Landlord may from time to time designate
in writing.
b. On the first day of the month following the end of a Lease year
Landlord may increase the basic rental payable for the subsequent twelve (12)
month period. The increase shall be measured by the increase in the Consumer
Price Index, as described below, but shall not exceed five percent (5%) of the
basic rental owing for the immediately preceding year ("the 5% Cap"). The
following definitions and methods shall be used to calculate the increases in
basic rental under this paragraph:
(1) "Consumer Price Index" shall mean the semi-annual indexes of the
Consumer Price Index for all Urban Consumers, Denver-Boulder, Colorado (All
items; 1982-84 equals 100) issued by the United States Department of Labor,
Bureau of Labor Statistics, or any successor agency of the United States that
issues such indexes or any successor index.
(2) "Initial Consumer Price Index" shall mean the Consumer Price
Index published for the nearest calendar period preceding the Commencement Date
of this Lease.
(3) "Latest Consumer Price Index" shall mean the Consumer Price Index
published for the nearest calendar period preceding the first day on which an
increase under this Lease is to be effective.
(4) "Previous Consumer Price Index" shall mean the Consumer Price
Index published for the nearest calendar period preceding the first day on which
the previous increase under this Lease was effective.
(5) The first increase will be calculated by multiplying the basic
rental by a fraction, with the numerator being the Latest Consumer Price Index
and the denominator being the Initial Consumer Price Index.
(6) Each subsequent increase will be calculated by multiplying the
then current basic rental by a fraction, with the numerator being the Latest
Consumer Price Index and the denominator being the Previous Consumer Price
Index.
(7) To the extent that the calculation under subparagraphs (5) and
(6) above exceed the 5% Cap, such excess ("Excess") shall be preserved and
carried forward to subsequent years until utilized. All or part of the Excess
may be added to the amount calculated under subparagraph (6) above for any
subsequent year, subject to the 5% Cap.
(8) If the Consumer Price Index is discontinued, Landlord will
designate an alternative comparable index to be used in calculating the increase
in the basic rental under this Lease.
(9) Tenant will not be entitled to a credit for any decrease in the
Consumer Price Index except to the extent that it shall be off-set against any
Excess carried forward under the provisions of paragraph 5(b)(7).
c. Notwithstanding any provision contained herein, the basic monthly
rental due under the terms hereof shall at no time be less than FOUR THOUSAND
TWO HUNDRED NINETY-FIVE AND NO/100 Dollars ($4,295.00).
6. SECURITY DEPOSIT. Tenant has deposited with Landlord the sum of FIVE
THOUSAND SEVEN HUNDRED TWENTY-SEVEN AND NO/100 Dollars ($5,727.00). Said sum
shall be held by Landlord as security for the faithful performance by Tenant of
all the terms, covenants, and conditions of this Lease to be kept and performed
by Tenant during the term hereof. If Tenant defaults with respect to any
provision of this Lease, including, but not limited to the provisions relating
to the payment of rent, Landlord may (but shall not be required to) use, apply
or retain all or any part of this security deposit for the payment of any rent
or any other sum in default, or for the payment of any amount which Landlord may
spend or become obligated to spend by reason of Tenant's default, or to
compensate Landlord for any other loss or damage which Landlord may suffer by
reason of Tenant's default. If any portion of said deposit is so used or
applied, Tenant
2
shall within five (5) days after written demand therefor, deposit cash with
Landlord in an amount sufficient to restore the security deposit to its original
amount and Tenant's failure to do so shall be a material breach of this Lease.
Landlord shall not be required to keep this security deposit separate from its
general funds, and Tenant shall not be entitled to interest on such deposit. If
Tenant shall fully and faithfully perform every provision of this Lease to be
performed by it, the security deposit or any balance thereof shall be returned
to Tenant (or at Landlord's option, to the last assignee of Tenant's interest
hereunder) at the expiration of the Lease term. In the event of termination of
Landlord's interest in this Lease, Landlord shall transfer said deposit to
Landlord's successor in interest.
7. OPERATING EXPENSES. For the purposes of this Article, operating expenses
means all reasonable and necessary costs and expenses of every kind and nature,
other than those expressly excluded below, paid or incurred by Landlord in
operating, managing, repairing, maintaining and administering the Building
including, without limitation or duplication:
a. The cost of all insurance required to be kept by Landlord pursuant to
this Lease and any other insurance customarily procured for other commercial
buildings in the same geographical area as the Building and which Landlord may
reasonably elect to obtain with respect to the operation or ownership of the
Property and the part of any claim required to be paid under the deductible
portion of any insurance policies carried by Landlord in connection with the
Property.
b. The cost of reasonable and necessary general repairs, maintenance and
replacements, excluding capital expenditures, made from time to time by Landlord
to the Property, including costs under mechanical or other maintenance contracts
and repairs and replacements of equipment used in connection with such
maintenance and repair work.
c. The cost of pest control, security, cleaning and snow and ice removal
services.
d. The cost of maintaining, repairing, redecorating, renovating,
replacement of floor coverings of common areas, and landscaping the Common
Facilities, and of maintaining and operating any fire detection, fire
prevention, lighting and communications systems. Redecorating, renovating and
replacement of floor coverings of common areas shall be charged to operating
expenses as provided in subparagraph i. of this paragraph.
e. The cost of all utilities (including, without limitation, water,
sewer, gas and electricity) used or consumed.
f. The cost of providing heating, ventilating and cooling to the interior
portions of the Building.
g. Remuneration (including wages, usual expense accounts and fringe
benefits, costs to Landlord of workmen's compensation and disability insurance
and payroll taxes) and fees of persons and companies to the extent directly
engaged in operating, managing, repairing, maintaining, or administering the
Property.
h. The cost of professional property management fees, supplying any on-
site manager with necessary office space, office equipment and supplies in the
Building, and costs incurred by Landlord or its agents in engaging accountants
or other consultants to assist in making the computations required hereunder.
i. The cost of capital improvements and structural repairs and
replacements made in, on or to the Property that are [i] made in order to
conform to changes subsequent to the Commencement Date in any applicable laws,
ordinances, rules, regulations or orders of any governmental or quasi-
governmental authority having jurisdiction over the Property, or [ii] designed
primarily to reduce Operating Expenses or the rate of increase in Operating
Expense, [iii] redecoration, renovating and replacement of floor coverings; such
costs shall be charged Landlord to Operating Expense in equal annual
installments over the useful life of such capital improvement or structural
repair or replacement (as reasonably determined by Landlord) together with
interest on
3
the balance of the unreimbursed cost at 4% above the Prime Rate charged by Bank
One, Colorado, N.A. in Boulder on the date the cost was incurred by Landlord.
j. Real property taxes and assessments, gross receipts, taxes (whether
assessed against the Landlord or assessed against the Tenant and collected by
the Landlord, or both). Tenant shall not be responsible to pay any fines, late
charges or penalties assessed against Landlord as a result of Landlord's failure
to timely pay such taxes and assessments.
k. Other costs and expenses, including supplies, not otherwise expressly
excluded hereunder attributable to the operation, management, repair,
maintenance and administration of the Property.
l. A reserve for replacement of heating, ventilating and air-conditioning
equipment, replacement of the roof, and parking lot of THIRTY THOUSAND and
NO/100 Dollars ($30,000.00) per annum.
Operating Expenses shall not, however, include the following:
m. Any charge for depreciation of the Building or equipment and any
principal, interest or other finance charge.
n. The cost of any work, including painting, decorating and work in the
nature of tenant finish, which Landlord performs in any Rentable Premises other
than work which Landlord performs in the Premises.
o. The cost of repairs, replacements or other work occasioned by insured
casualty or defects in construction or equipment to the extent such cost is
reimbursed to Landlord (or not charged to Landlord) by reason of collected
insurance proceeds (using Landlord's good faith efforts to collect such
proceeds) or any contractors', manufacturers' or suppliers' warranties.
p. Expenditures required to be capitalized for federal income tax
purposes (except as provided in Article 7, paragraph d. and i.).
q. Leasing commissions, advertising expenses and other costs incurred in
leasing space in the Building except as otherwise expressly provided in this
Lease.
r. The cost of repairing or rebuilding necessitated by condemnation.
s. The cost of any damage to the Property or any settlement, payment or
judgment incurred by Landlord, resulting in neither case from Landlord's
tortious act, neglect or breach of this Lease that is not covered by insurance
proceeds.
t. Costs (including, without limitation, attorneys fees) incurred by
Landlord in attempting to collect rent or evict tenants (other than Tenant) from
the Building.
u. Costs, including, without limitation, any penalties, fines and legal
expenses incurred by Landlord or any other tenant in the Building as a result of
a violation of any federal, state or local law, code or regulation.
Tenant shall pay 7.7882% of Operating Expenses paid or incurred by the
Landlord for the operation or maintenance of the Building of which the Premises
are a part. This percentage is calculated as Tenant's pro-rata share of such
Operating Expenses based upon the assumption of a 95% occupancy rate and a total
net rentable area of 58,050 square feet. Upon commencement of this Lease,
Landlord shall give Tenant a statement of the amount of Operating Expenses
payable by Tenant with each payment of rent, which shall be based upon a best
estimate of such expenses if no record of actual expenses for the prior year are
available. Landlord shall endeavor to give to Tenant on or before the first day
of March of each year thereafter an itemized statement of the prior year's
Operating Expenses payable by Tenant hereunder and advise Tenant of any increase
in Operating
4
Expenses, but failure by Landlord to give such statement by said date shall not
constitute a waiver by Landlord of its right to require an increase in Operating
Expenses. The total amount of actual Operating Expenses for the prior year shall
be used as an estimate for current year and this amount shall be divided into
twelve (12) equal monthly installments, and Tenant shall pay to Landlord,
concurrently with the regular monthly rent payment next due following the
receipt of such statement, an amount equal to one (1) monthly installment
multiplied by the number of months from January in the calendar year in which
said statement is submitted to the month of such payment. Subsequent
installments shall be payable concurrently with the regular monthly rent
payments for the balance of that calendar year and shall continue until the next
year's statement is rendered. If actual Operating Expenses are more than
estimated, then upon receipt of a statement from Landlord, Tenant shall pay a
lump sum equal to such total increase with the next succeeding regular monthly
rent payment. Tenant or its representative shall have the right to inspect
Landlord's books and records relating to the Operating Expenses during normal
business hours.
Even though the term has expired and Tenant has vacated the Premises, when
the final determination is made of Tenant's share of Operating Expenses for the
year in which this Lease terminates, Tenant shall immediately pay any increase
due over the estimated expenses paid and, conversely, if at any time an
overpayment made in the event said expenses decrease shall be immediately
rebated by Landlord to Tenant or credited to future operating expenses at
Landlord's option.
8. USE. Tenant shall use the Premises for TELECOMMUNICATIONS, HARDWARE AND
SOFTWARE DEVELOPMENT and shall not use or permit the Premises to be used for any
other purpose without the prior written consent of Landlord.
Tenant shall not do or permit anything to be done in or about the Premises
nor bring or keep anything therein which will in any way increase the existing
rate or affect any fire or other insurance upon the Building or any of its
contents, or cause cancellation of any insurance policy covering said Building
or any part thereof or any of its contents. Tenant shall not do or permit
anything to be done in or about the Premises which will, in any way, obstruct or
interfere with the rights of other tenants or occupants of the Building or
injure or annoy them or use or allow the Premises to be used for any improper,
immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain or
permit any nuisance in, on or about the Premises. Tenant shall not commit or
suffer to be committed any waste in or upon the Premises.
9. COMPLIANCE WITH LAW. Tenant shall not use the Premises or permit anything
to be done in or about the Premises which will, in any way, conflict with any
law, statute, ordinance or governmental rule or regulation now in force or which
may hereafter be enacted or promulgated. Tenant shall, at its sole cost and
expense, promptly comply with all laws, statutes, ordinances and governmental
rules, regulations or requirements now in force or which may hereafter be in
force, and with the requirements of any board of fire insurance underwriters or
other similar bodies now or hereafter constituted, relating to, or affecting the
condition, use or occupancy of the Premises, excluding structural changes not
related to or affected by Tenant's improvements or acts. The judgment against
Tenant, whether the Landlord be a party thereto or not, that Tenant has violated
any law, statute, ordinance or governmental rule, regulation or requirement,
shall be conclusive of that fact as between the Landlord and Tenant.
10. ALTERATIONS AND ADDITIONS. Tenant shall not make or suffer to be made
any alterations, additions or improvements to or of the Premises or any part
thereof without the written consent of Landlord first had and obtained, which
will not be unreasonably withheld, conditioned or delayed, and any alterations,
additions or improvements to or of said Premises, including, but not limited to,
wall covering, paneling and built-in cabinet work, but excepting movable
furniture and trade fixtures, shall, on the expiration of the term, become a
part of the realty and belong to the Landlord and shall be surrendered with the
Premises. In the event Landlord consents to the making of any alterations,
additions or improvements to the Premises by Tenant, the same shall be made by
Tenant at Tenant's sole cost and expense, and any contractor or person selected
by Tenant to make the same, must first be approved of in writing by the
Landlord, which will not be unreasonably withheld, conditioned or delayed. Upon
the expiration or earlier
5
termination of the term hereof, Tenant shall, upon the written demand by the
Landlord, given at least thirty (30) days prior to the end of the term, at
Tenant's sole cost and expense, forthwith and with all due diligence, remove any
alterations, additions, or improvements made which have been designated by the
Landlord to be removed, and repair any damage to the Premises caused by such
removal.
11. REPAIRS.
a. Subject to Tenant's right to inspect the Premises prior to occupancy
thereof and submit a "Punch List" to Landlord in accordance with Paragraph 32 of
this Lease, by taking possession of the Premises, Tenant shall be deemed to have
accepted the Premises as being in good, sanitary order, condition and repair.
Tenant shall, at Tenant's sole cost and expense, keep the Premises and every
part thereof in good condition and repair, damage thereto from causes beyond the
reasonable control of Tenant and ordinary wear and tear excepted. Tenant shall,
upon the expiration or sooner termination of this Lease hereof, surrender the
Premises to the Landlord in good condition, ordinary wear and tear and damage
from causes beyond the reasonable control of Tenant excepted. Except as
specifically provided in an addendum, if any, to this Lease, Landlord shall have
no obligation whatsoever to alter, remodel, improve, repair, decorate or paint
the Premises or any part thereof, and the parties hereto affirm that Landlord
has made no representations to Tenant respecting the condition of the Premises
or the Building except as specifically herein set forth.
b. Landlord shall repair and maintain the structural portions of the
Building, including the roof, basic plumbing, air conditioning, heating, and
electrical and sprinkler systems installed or furnished by Landlord, unless such
maintenance and repairs are caused in part or in whole by the act, neglect,
fault or omission of any duty by the Tenant, its agents, servants, employees or
invitees, in which case Tenant shall pay to Landlord the reasonable cost of such
maintenance and repairs. The cost of all such repairs (except repairs of
structural defects) shall be included in Operating Expenses as provided in
Article 7 hereof. Landlord shall not be liable for any failure to make any such
repairs or to perform any maintenance unless such failure shall persist for an
unreasonable time after written notice of the need of such repairs or
maintenance is given to Landlord by Tenant. Except as provided in Article 22
hereof, there shall be no abatement of rent and no liability of Landlord by
reason of any injury to or interference with Tenant's business arising from the
making of any repairs, alterations or improvements in or to any portion of the
Building or the Premises or in or to fixtures, appurtenances and equipment
therein. Except in the event of an emergency, Tenant waives the right to make
repairs at Landlord's expense under any law, statute or ordinance now or
hereafter in effect.
12. LIENS. Tenant shall keep the Premises and the property in which the
Premises are situated free from any liens arising out of any work performed,
materials furnished or obligations incurred by Tenant. Landlord may require, at
Landlord's sole option, that Tenant shall provide to Landlord, at Tenant's sole
cost and expense, a lien and completion bond or other security reasonably
acceptable to Landlord in an amount equal to one and one-half (1-1/2) times any
and all estimated cost of improvements, additions, or alterations in the
Premises, to insure Landlord against any liability for mechanics' and
materialmen's liens and to insure completion of the work.
13. ASSIGNMENT AND SUBLETTING. Except as expressly provided below,Tenant
shall not either voluntarily or by operation of law, assign, transfer, mortgage,
pledge, hypothecate or encumber this Lease or any interest therein, and shall
not sublet the said Premises or any part thereof, or any right or privilege
appurtenant thereto, or suffer any other person (the employees, agents, servants
and invitees of Tenant excepted) to occupy or use the said Premises, or any
portion thereof, without the written consent of Landlord first had and obtained,
which consent shall not be unreasonably withheld, conditioned or delayed, and a
consent to one assignment, subletting, occupation or use by any other person
shall not be deemed to be a consent to any subsequent assignment, subletting,
occupation or use by another person. Any such assignment or subletting without
such consent shall be void, and shall, at the option of the Landlord, constitute
a default under this Lease. Tenant may, upon written notice to Landlord, but
without the consent of Landlord, (i) transfer (by assignment or sublease, in
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whole or in part) this Lease to any parent or affiliate of Tenant or to a wholly
owned subsidiary of Tenant, or (ii) transfer (by assignment or sublease, in
whole or in part) this Lease to any person or entity acquiring, by asset or
stock purchase, merger, consolidation or liquidation, all or substantially all
of Tenant's assets or voting stock, provided that such person or entity assumes
in writing the obligations of Tenant under this Lease.
14. HOLD HARMLESS. Tenant shall indemnify and hold harmless Landlord against
and from any and all claims arising from Tenant's use of the Premises for the
conduct of its business or from any activity, work, or other thing done,
permitted or suffered by the Tenant in or about the Building, and shall further
indemnify and hold harmless Landlord against and from any and all claims arising
from any breach or default in the performance of any obligation on Tenant's part
to be performed under the terms of this Lease, or arising from any act or
negligence of the Tenant, or any officer, agent, employee, guest, or invitee of
Tenant, and from all and against all costs, reasonable attorneys' fees, expenses
and liabilities incurred in or about any such claim or any action or proceeding
brought thereon, and, in any case, action or proceeding be brought against
Landlord by reason of any such claim, Tenant, upon notice from Landlord shall
defend the same at Tenant's expense. Tenant, as a material part of the
consideration to Landlord, hereby assumes all risk of damage to property or
injury to persons, in, upon or about the Premises, from any cause other than
Landlord's negligence or willful acts. Landlord or its agents shall not be
liable for any damage to property entrusted to employees of the Building, nor
for loss or damage to any property by theft or otherwise, nor for any injury to
or damage to persons or property resulting from fire, explosion, falling
plaster, steam, gas, electricity, water or rain which may leak from any part of
the Building or from the pipes, appliances or plumbing works therein or from the
roof, street or subsurface or from any other place resulting from dampness or
any other cause whatsoever, unless caused by or due to the negligence of
Landlord, its agents, servants or employees. Landlord or its agents shall not
be liable for interference with the light or other incorporeal hereditament,
loss of business by Tenant, nor shall Landlord be liable for any latent defects
in the Premises or in the Building. Tenant shall give prompt notice to Landlord
in case of fire or accidents in the Premises or in the Building or of defects
therein or in the fixtures or equipment.
15. SUBROGATION. As long as their respective insurers so permit, Landlord
and Tenant hereby mutually waive their respective rights of recovery against
each other for any loss insured by fire, extended coverage and other property
insurance policies existing for the benefit of the respective parties. Each
party shall obtain any special endorsements, if required by their insurer to
evidence compliance with the aforementioned waiver. If one party is unable to
obtain a waiver of subrogation, the other party is not required to maintain
same.
16. LIABILITY INSURANCE. Tenant shall, at Tenant's expense, obtain and keep
in force during the term of this Lease a policy of comprehensive public
liability insurance with limits not less than $2,000,000, combined single limit,
insuring Landlord and Tenant against any liability arising out of the ownership,
use, occupancy or maintenance of the Premises and all areas appurtenant thereto,
as their interests may appear. The limit of said insurance shall not, however,
limit the liability of the Tenant hereunder. Tenant may carry said insurance
under a blanket policy, providing, however, said insurance by Tenant shall have
a Landlord's protective liability endorsement attached thereto. If Tenant shall
fail to procure and maintain said insurance, Landlord may, but shall not be
required to, procure and maintain same, but at the expense of Tenant after
notifying Tenant and allowing ten (10) business days. Tenant shall deliver to
Landlord prior to occupancy of the Premises certificates evidencing the
existence and amounts of such insurance with named insured as their interests
may appear. No policy shall be cancelable or subject to reduction of coverage
except after thirty (30) days' prior written notice to Landlord.
17. SERVICES AND UTILITIES. Provided that Tenant is not in default
hereunder, Landlord agrees to furnish to the Premises during reasonable hours of
generally recognized business days, to be determined by Landlord at its sole
discretion, and subject to the rules and regulations of the Building of which
the Premises are a part, electricity for normal lighting and fractional
horsepower office machines, heat and air conditioning required in Landlord's
judgment for the comfortable use and occupation of the Premises. Landlord shall
also maintain and keep lighted the common stairs, common entries and toilet
rooms in the Building of which the Premises are a part. Landlord shall not be
liable for, and Tenant shall not be entitled to, any reduction of rental by
reason of Landlord's failure to furnish any of the foregoing when such failure
is caused by accident,
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breakage, repairs, strikes, lockouts or other labor disturbances or labor
disputes of any character, or by any other cause, similar or dissimilar, beyond
the reasonable control of Landlord. Landlord shall not be liable under any
circumstances for a loss or injury to property, however occurring, through or in
connection with or incidental to failure to furnish any of the foregoing, except
as to Landlord's negligence or willful acts. Wherever heat generating machines
or equipment are used in the Premises which affect the temperature otherwise
maintained by the air conditioning system, Landlord reserves the right to
install supplementary air conditioning units in the Premises and the cost
thereof, including the cost of installation, and the cost of operation and
maintenance thereof shall be paid by Tenant to Landlord upon demand by Landlord.
Tenant will not, without written consent of Landlord, use any apparatus or
device in the Premises, including, but without limitation thereto, electronic
data processing machines, punch card machines, and machines using in excess of
120 volts, which will in any way increase the amount of electricity usually
furnished or supplied for the use of the Premises as general office space; nor
connect with electric current except through existing electrical outlets in the
Premises, any apparatus or device, for the purpose of using electric current.
If Tenant shall require water or electric current in excess of that usually
furnished or supplied for the use of the Premises as general office space,
Tenant shall first procure the written consent of Landlord, which Landlord may
not unreasonably refuse, to the use thereof and Landlord may cause a water meter
or electrical current meter to be installed in the Premises, so as to measure
the amount of water and electric current consumed for any such use. The cost of
any such meters and of installation, maintenance and repair thereof shall be
paid for by the Tenant and Tenant agrees to pay to Landlord promptly upon demand
therefor by Landlord for all such water and electric current consumed as shown
by said meters at the rates charged for such services by the local public
utility furnishing the same, plus any additional expense incurred in keeping
account of the water and electric current so consumed. If a separate meter is
not installed, such excess cost for such water and electric current will be
established by an estimate made by a utility company or electrical engineer.
Notwithstanding the foregoing, if any essential service to be provided is
interrupted or curtailed for a period of forty-eight (48) hours and is caused by
Landlord or lies within Landlord's control, in addition to other remedies
available to Tenant, the Rent (inclusive of all payments) for the Premises shall
completely abate from such forty-eight (48) hour period and continue until such
services are fully restored. Landlord shall provide a minimum of seventy-two
(72) hours' prior written notice of any planned interruption of services in
connection with the repair and maintenance of the Premises or the Building.
18. PROPERTY TAXES. Tenant shall pay, or cause to be paid, before
delinquency, any and all taxes levied or assessed and which become payable
during the term hereof upon all Tenant's leasehold improvements, equipment,
furniture, fixtures and personal property located in the Premises; except that
which has been paid for by Landlord, and is the standard of the Building. In
the event any or all of Tenant's leasehold improvements, equipment, furniture,
fixtures and personal property shall be assessed and taxed with the Building,
Tenant shall pay to Landlord its share of such taxes within thirty (30) days
after receipt by Tenant from Landlord of a statement in writing setting forth
the amount of such taxes applicable to Tenant's property which statement shall
include a copy of the tax bill.
19. RULES AND REGULATIONS. Tenant shall faithfully observe and comply with
the non-discriminatory rules and regulations that Landlord shall, from time to
time, promulgate. Landlord reserves the right, from time to time, to make all
reasonable modifications to said rules. The additions and modifications to
those rules shall be binding upon Tenant upon delivery of a copy of them to
Tenant. Landlord shall not be responsible to Tenant for the nonperformance of
any said rules by any other tenants or occupants. A copy of the current rules
and regulations are attached hereto as Exhibit B.
20. HOLDING OVER. If Tenant remains in possession of the Premises or any
part after the expiration of the term hereof, without the express written
consent of Landlord, such occupancy shall be a tenancy from month-to-month at a
rental in the amount of one and one-half times the last
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monthly rental, plus all other charges payable hereunder, and upon all the terms
hereof applicable to a month-to-month tenancy.
21. ENTRY BY LANDLORD. Landlord reserves, and shall during normal business
hours upon reasonable written notice to Tenant and subject to Tenant's security
requirements, as herein defined, have the right to enter the Premises, inspect
the same, supply janitorial service and any other service to be provided by
Landlord to Tenant hereunder, to submit said Premises to prospective purchasers
or during the last six months of the term to prospective tenants, to post
notices of non-responsibility, and to alter, improve or repair the Premises and
any portion of the Building of which the Premises are a part that Landlord may
deem necessary or desirable, without abatement of rent and may for that purpose
in connection with any work to be performed by Landlord under this Lease,
Landlord may erect scaffolding and other necessary structures where reasonably
required by the character of the work to be performed, always providing that the
entrance to the Premises shall not be blocked thereby, and further providing
that the business of the Tenant shall not be interfered with unreasonably.
Tenant hereby waives any claim for damages or for any injury or inconvenience to
or interference with Tenant's business, any loss of occupancy or quiet enjoyment
of the Premises, and any other loss occasioned thereby unless caused by
negligence or willful acts of Landlord. For each of the aforesaid purposes,
Landlord shall, at all times, have and retain a key with which to unlock all of
the doors in, upon and about the Premises, excluding Tenant's vaults, safes and
files and locked documentation room, as defined in Paragraph 31, and Landlord
shall have the right to use any and all means which Landlord may deem proper to
open said doors in an emergency, in order to obtain entry to the Premises
without liability to Tenant except for any failure to exercise due care for
Tenant's property. Any entry to the Premises obtained by Landlord by any of
said means, or otherwise shall not, under any circumstances, be construed or
deemed to be a forcible or unlawful entry into, or a detainer of, the Premises,
or an eviction of Tenant from the Premises or any portion thereof.
22. RECONSTRUCTION. In the event the Premises, or the Building of which the
Premises are a part, are damaged by fire or other perils covered by extended
coverage insurance, Landlord agrees to forthwith repair the same to
substantially the same condition as existed immediately prior to such damage;
and this Lease shall remain in full force and effect, except that the Tenant
shall be entitled to a proportionate reduction of the rent while such repairs
are being made, such proportionate reduction to be based upon the extent to
which the damage and the making of such repairs shall materially interfere with
the business carried on by the Tenant in the Premises. If the damage is due to
the fault or neglect of Tenant or its employees, there shall be no abatement of
rent.
In the event the Premises or the Building of which the Premises are a part
are damaged as a result of any cause other than the perils covered by fire and
extended coverage insurance, then Landlord shall forthwith repair the same
within one hundred and fifty (150) days of casualty, provided the extent of the
destruction be less than ten percent (10%) of the then full replacement cost of
the Premises or the Building of which the Premises are a part. In the event the
destruction of the Premises or the Building is to an extent greater than ten
percent (10%) of the full replacement cost, then Landlord shall have the option:
(1) to repair or restore such damage, this Lease continuing in full force and
effect, but the rent to be proportionately reduced as hereinabove in this
Article provided; or (2) give notice to Tenant at any time within thirty (30)
days after such damage terminating this Lease as of the date specified in such
notice, which date shall thirty (30) days after the giving of such notice. In
the event of giving such notice, this Lease shall expire and all interest of the
Tenant in the Premises shall terminate on the date so specified in such notice
and the Rent, reduced by a proportionate amount, based upon the extent, if any,
to which such damage materially interfered with the business carried on by the
Tenant in the Premises, shall be paid up to date of said such termination.
Notwithstanding anything to the contrary contained in this Article, Landlord
shall not have any obligation whatsoever to repair, reconstruct or restore the
Premises when the damage resulting from any casualty covered under this Article
occurs during the last twelve (12) months of the term of this Lease or any
extension thereof and in the event of such casualty during the last twelve (12)
months of the term of this Lease either Landlord or Tenant shall have the right
to terminate this Lease by giving written notice to the other party within
thirty (30) days of such casualty.
9
Landlord shall not be required to repair any injury or damage by fire or
other cause, or to make any repairs or replacements of any panels, decoration,
office fixtures, railings, floor coverings, partitions, or any other property
installed in the Premises by Tenant unless covered by Landlord's insurance as
part of the building.
The Tenant shall not be entitled to any compensation or damages from
Landlord for loss of the use of the whole or any part of the Premises, Tenant's
personal property or any inconvenience or annoyance occasioned by such damage,
repair, reconstruction or restoration unless caused by Landlord.
23. DEFAULT. The occurrence of any one or more of the following events shall
constitute a default and breach of this Lease by Tenant:
a. The vacating or abandonment of the Premises by Tenant, without
payment of rent.
b. The failure by Tenant to make any payment of rent or any other payment
required to be made by Tenant hereunder, as and when due, where such failure
shall continue for a period of ten (10) days after written notice thereof by
Landlord to Tenant.
c. The failure by Tenant to observe or perform any of the covenants,
conditions or provisions of this Lease to be observed or performed by the
Tenant, other than described in Article 23.b above, where such failure shall
continue for a period of thirty (30) days after written notice thereof by
Landlord to Tenant; provided, however, that if the nature of Tenant's default is
such that more than thirty (30) days are reasonably required for its cure, then
Tenant shall not be deemed to be in default if Tenant commences such cure within
said thirty (30) day period and thereafter diligently prosecutes such cure to
completion.
d. The making by Tenant of any general assignment or general arrangement
for the benefit of creditors; or the filing by or against Tenant of a petition
to have Tenant adjudged a bankrupt, or a petition of reorganization or
arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against Tenant, the same is dismissed within sixty [60] days); or
the appointment of a trustee or a receiver to take possession of substantially
all of Tenant's assets located at the Premises or of Tenant's interest in this
Lease, where possession is not restored to Tenant within thirty (30) days; or
the attachment, execution or other judicial seizure of substantially all of
Tenant's assets located at the Premises or of Tenant's interest in this Lease,
where such seizure is not discharged in thirty (30) days.
e. If Landlord is in default in the performance of any obligation under
this Lease on the part of Landlord to be performed and such default continues
for a period of thirty (30) days after Tenant's written notice to Landlord
specifying the nature of the default, then Tenant may exercise any right or
remedy it may possess at law or equity, which is not otherwise waived in this
Lease. If the default set forth in Tenant's notice cannot reasonably be cured
within thirty (30) days, then Landlord shall not be deemed to be in default if
(i) Landlord notifies Tenant in writing that it will cure the default, (ii)
commences to cure the default within such thirty (30)-day period, and (iii)
proceeds diligently and in good faith thereafter to cure such default and does
cure such default within a reasonable time.
24. REMEDIES IN DEFAULT. In the event of any such default or breach by
Tenant, Landlord may at any time thereafter, with or without notice or demand,
and without limiting Landlord in the exercise of a right or remedy which
Landlord may have by reason of such default or breach:
a. Terminate Tenant's right to possession of the Premises by any lawful
and peaceful means, in which case this Lease shall terminate and Tenant shall
immediately surrender possession of the Premises to Landlord. In such event
Landlord shall be entitled to recover from Tenant all damages incurred by
Landlord by reason of Tenant's default including, but not limited to, the cost
of recovering possession of the Premises; expenses of reletting, including
necessary and
10
reasonable expenses incurred in connection with renovation and alteration of the
Premises, reasonable attorneys' fees, any real estate commission actually paid;
the worth at the time of award by the court having jurisdiction thereof of the
amount by which the unpaid rent for the balance of the term after the time of
such award exceeds the amount of such rental loss for the same period that
Tenant proves could be reasonably avoided; that portion of the leasing
commission paid by Landlord and applicable to the unexpired term of the Lease.
Unpaid installments of rent or other sums shall bear interest from the date due
at the rate of twenty percent (20%) per annum. In the event Tenant shall have
abandoned the Premises without payment of rent, Landlord shall have the option
of (a) taking possession of the Premises and recovering from Tenant the amount
specified in this paragraph, or (b) proceeding under the provisions of the
following Article 24.b.
b. Maintain Tenant's right to possession, in which case this Lease shall
continue in effect whether or not Tenant shall have abandoned the Premises. In
such event, Landlord shall be entitled to enforce all of Landlord's rights and
remedies under this Lease, including the right to recover the rent as it becomes
due hereunder.
c. Pursue any other remedy now or hereafter available to Landlord under
the laws or judicial decision of the State in which the Premises are located.
25. EMINENT DOMAIN. If more than twenty-five percent (25%) of the Premises
shall be taken or appropriated by any public or quasi-public authority under the
power of eminent domain, either party hereto shall have the right, at its
option, to terminate this Lease by giving written notice to the other party, and
Landlord shall be entitled to any and all income, rent, award, or any interest
therein whatsoever which may be paid or made in connection with such public or
quasi-public use or purpose, and Tenant shall have no claim against Landlord for
the value of any unexpired term of this Lease. If either less than or more than
twenty-five percent (25%) of the premises is taken, or neither party elects to
terminate as herein provided, the rental thereafter to be paid shall be
proportionately reduced. If more than ten percent (10%) of the Building other
than the Premises may be so taken or appropriated, Landlord shall have the right
at its option to terminate this Lease by giving thirty (30) days written notice
to Tenant and shall be entitled to the entire award as above provided. Tenant
shall, however, have the right to pursue a separate claim for any damage
suffered as a result of such taking.
26. ESTOPPEL STATEMENT. Landlord and Tenant shall at any time and from time
to time upon not less than ten (10) business days' prior written notice from the
other party execute, acknowledge, and deliver to the other party a statement in
writing, (a) certifying that this Lease is unmodified and in full force and
effect (or, if modified, stating the nature of such modification and certifying
that this Lease as so modified, is in full force and effect), and the date to
which the rental and other charges are paid in advance, if any, and (b)
acknowledging that there are not, to Tenant's or Landlord's knowledge, as
appropriate, any uncured defaults on the part of the other party hereunder, or
specifying such defaults if any are claimed. Any such statement may be relied
upon by any prospective purchaser or encumbrancer of all or any portion of the
real property of which the Premises are a part.
27. PARKING. Tenant shall have the right to use in common with other tenants
or occupants of the Building the parking facilities of the Building, subject to
the non-discriminatory rules and regulations which may be established or altered
by Landlord at any time or from time to time during the term hereof. Tenant
shall have the right to the use of fourteen (14) parking spaces.
28. AUTHORITY OF PARTIES.
a. Corporate Authority. If Tenant is a corporation, each individual
executing this Lease on behalf of said corporation represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of the
corporation, in accordance with a duly adopted resolution of the board of
directors of said corporation or in accordance with the bylaws of said
corporation, and that this Lease is binding upon said corporation in accordance
with its terms.
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b. Limited Partnerships. If the Landlord herein is a limited partnership,
it is understood and agreed that any claims by Tenant on Landlord shall be
limited to the assets of the limited partnership, and furthermore, Tenant
expressly waives any and all rights to proceed against the individual partners
or the officers, directors or shareholders of any corporate partner, except to
the extent of their interest in said limited partnership.
29. GENERAL PROVISIONS.
a. Plats and Riders. Clauses, plats, exhibits and riders, if any, signed
by the Landlord and the Tenant and endorsed on or affixed to this Lease are a
part hereof.
b. Waiver. The waiver by Landlord of any term, covenant, or condition
herein contained shall not be deemed to be a waiver of such term, covenant or
condition or any subsequent breach of the same or any other term, covenant or
condition herein contained. The subsequent acceptance of rent hereunder by
Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of
any term, covenant or condition of this Lease, other than the failure of the
Tenant to pay the particular rental so accepted, regardless of Landlord's
knowledge of such preceding breach at the time of the acceptance of such rent.
c. Notices. All notices and demands which may or are to be required or
permitted to be given by either party to the other hereunder shall be in
writing. All notices and demands by the Landlord to the Tenant shall be sent by
a) United States Mail, postage prepaid, or b) nationally recognized overnight
bonded courier, addressed to the Tenant at 5777 Central Avenue, Boulder, CO
80301, or to such other place as Tenant may, from time to time, designate in a
notice to the Landlord. All notices and demands by the Tenant to the Landlord
shall be sent by a) United States Mail, postage prepaid, addressed to the
Landlord at the Office of the Building, or to such other person or place as the
Landlord may, from time to time, designate in a notice to the Tenant.
d. Joint Obligation. If there be more than one Tenant the obligations
hereunder imposed upon Tenants shall be joint and several.
e. Marginal Headings. The marginal headings and Article titles to the
Articles of this Lease are not a part of this Lease and shall have no effect
upon the construction or interpretation of any part hereof.
f. Time. Time is of the essence of this Lease and each and all of its
provisions in which performance is a factor.
g. Successors and Assigns. The covenants and conditions herein contained,
subject to the provisions as to assignment, apply to and bind the heirs,
successors, executors, administrators and assigns of the parties hereto.
h. Recordation. Neither the Landlord nor Tenant shall record this Lease
or a short form memorandum hereof without the prior written consent of the other
party.
i. Quiet Possession. Upon Tenant paying the rent reserved hereunder and
observing and performing all of the covenants, conditions and provisions of
Tenant's part to be observed and performed hereunder, Tenant shall have quiet
possession of the Premises for the entire term hereof, subject to all the
provisions of this Lease.
j. Late Charges. Tenant hereby acknowledges that late payment by Tenant
to Landlord of rent or other sums due hereunder will cause Landlord to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Landlord by terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or of a sum due from Tenant shall not be
received by Landlord or Landlord's designee within five (5) business days after
said amount is due, then Tenant shall pay to Landlord a late charge equal to
five percent (5%) of such overdue amount. The parties hereby agree that such
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late charges represent a fair and reasonable estimate of the cost that Landlord
will incur by reason of the late payment by Tenant. Acceptance of such late
charges by the Landlord shall in no event constitute a waiver of Tenant's
default with respect to such overdue amount, nor prevent Landlord from
exercising any of the other rights and remedies granted hereunder.
k. Prior Agreements. This Lease contains all of the agreements of the
parties hereto with respect to any matter covered or mentioned in this Lease,
and no prior agreements or understanding pertaining to any such matters shall be
effective for any purpose. No provision of this Lease may be amended or added
to except by an agreement in writing signed by the parties hereto or their
respective successors in interest. This Lease shall not be effective or binding
on any party until fully executed by both parties hereto.
l. Attorneys' Fees. In the event of any action or proceeding brought by
either party against the other under this Lease, the prevailing party shall be
entitled to recover all costs and expenses, including the fees of its attorneys
in such action or proceeding in such amount as the court may adjudge reasonable
as attorneys' fees.
m. Sale of Premises by Landlord. In the event of any sale of the
Building, Landlord shall be and is hereby entirely freed and relieved of all
liability under any and all of its covenants and obligations contained in or
derived from this Lease arising out of any act, occurrence or omission occurring
after the consummation of such sale; and the purchaser, at such sale or any
subsequent sale of the Premises, shall be deemed, without any further agreement
between the parties or their successors in interest or between the parties and
any such purchaser, to have assumed and agreed to carry out any and all of the
covenants and obligations of the Landlord under this Lease.
n. Subordination, Non-Disturbance and Attornment. Upon request of the
Landlord, Tenant will, in writing, subordinate its rights hereunder to the lien
of any first mortgage or first deed of trust to any bank, insurance company or
other lending institution, now or hereafter in force against the land and
Building of which the Premises are a part, and upon any buildings hereafter
placed upon the land of which the Premises are a part, and to all advances made
or hereafter to be made upon the security thereof.
In the event any proceedings are brought for foreclosure, or in the event
of the exercise of the power of sale under any mortgage or deed of trust made by
the Landlord covering the Premises, the Tenant shall attorn to the purchaser
upon any such foreclosure or sale and recognize such purchaser as the Landlord
under this Lease.
Notwithstanding anything to the contrary contained herein, Tenant shall
only be obligated under this Section 29(n) if such bank, insurance company or
other lending institution or purchaser upon any such foreclosure or sale (a)
recognizes Tenant's interest under this Lease, (b) agrees that, so long as
Tenant is not in default under this Lease beyond any applicable cure periods,
not to disturb Tenant's possession of the Premises, and (c) executes and
delivers a subordination, non-disturbance and attornment agreement substantially
in the form attached hereto as Exhibit D.
o. Name. Tenant shall not use the name of the Building or of the
development in which the Building is situated for any purpose other than as an
address of the business to be conducted by the Tenant in the Premises.
p. Separability. Any provision of this Lease which shall prove to be
invalid, void or illegal shall in no way affect, impair or invalidate any other
provision hereof and such other provision shall remain in full force and effect.
q. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
r. Choice of Law. This Lease shall be governed by the laws of the State
in which the Premises are located.
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s. Signs and Auctions. Tenant shall not place any sign upon the Premises
or Building or conduct any auction thereon without Landlord's prior written
consent which shall not be unreasonably withheld, conditioned or delayed.
t. Landlord's Liability. The liabilities of the partners of the Landlord
pursuant to this Lease shall be limited to the assets of the partnership, and
Tenant, its successors and assigns hereby waive all right to proceed against any
of the partners, or the officers, shareholders, or directors of any corporate
partner of Landlord. The term "Landlord," as used in this article, shall mean
only the owner or owners at the time in question of the fee title or an interest
in a ground lease of the building. Notwithstanding anything to the contrary
contained herein, the extent of the Landlord's liability under this Lease shall
be limited to the property of which the Premises herein are a part, and Tenant
shall not seek any personal liability against Landlord or any of Landlord's
partners.
u. Waiver of Jury Trial. Landlord and Tenant waive trial by jury in any
action, proceeding or counterclaim brought by either of the parties to this
Lease against the other on any matters whatsoever arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant, Tenant's
use of occupancy of the Premises, or any other claims (except claims for
personal injury or property damage), and any emergency statutory or any other
statutory remedy.
v. Arbitration. With the exception of an action to gain possession of
the Premises, in the event of any other dispute arising out of this Agreement,
the parties agree to submit that dispute to binding arbitration in Boulder,
Colorado, according to the then existing rules for commercial arbitration of the
American Arbitration Association. Either of the parties shall agree to submit
the dispute to the Judicial Arbiter Group, or if they do not so agree, then each
party shall appoint one (1) arbitrator. Those two (2) arbitrators shall select a
third (3rd) arbitrator. The dispute shall be heard within forty-five (45) days
of selection of the third arbitrator. The prevailing party shall be entitled to
recover costs and reasonable attorneys' fees in addition to any other relief to
which they may be entitled. A decision shall be rendered no later than ten (10)
days after the close of the arbitration hearing.
w. Financial Statements. Tenant shall provide their most recent annual
report, including statements of income and expense and statements of net worth
("financial statements") within 15 business days following the written request
of Landlord. Landlord my request said annual report once during any twelve (12)
month period. Said annual report shall be verified as being true and correct
and Landlord agrees to keep said annual report confidential, but may use the
annual report for purposes of obtaining financing upon the property. At the
time Landlord requests annual financial statements from Tenant for financing
purposes, Landlord shall advise Tenant to whom the annual report will be
submitted and Landlord shall, if requested to do so by Tenant, obtain from such
individual or entity a written agreement which shall provide that said annual
report will be and shall remain confidential. Within fifteen (15) days after
the execution of this Lease, Tenant shall submit to Landlord its most recent
financial statements.
30. BROKERS. Tenant warrants that it has had no dealings with any real
estate brokers or agents in connection with the negotiation of this Lease
excepting only The Prudential Wise-McIntire Realtors and The Colorado Group,
Inc. and it knows of no other real estate broker or agent who is entitled to a
commission in connection with this Lease.
31. HAZARDOUS MATERIALS AND ENVIRONMENTAL CONSIDERATIONS
a. Tenant covenants and agrees that Tenant and its agents, employees,
contractors and invitees shall comply with all Hazardous Materials Laws (as
hereinafter defined). Without limiting the foregoing, Tenant covenants and
agrees that it will not use, generate, store or dispose of, nor permit the use,
generation, storage or disposal of Hazardous Materials (as hereinafter defined)
on, under or about the Leased Premises, nor will it transport or permit the
transportation of Hazardous Materials to or from the Leased Premises, except in
full compliance with any applicable Hazardous Materials Laws. Any Hazardous
Materials located on the Leased Premises shall be handled in an appropriately
controlled environment which shall include the use of such equipment
14
(at Tenant's expense) as is necessary to meet or exceed standards imposed by any
Hazardous Materials Laws and in such a way as not to interfere with any other
tenant's use of its premises. Upon breach of any covenant contained herein,
Tenant shall, at Tenant's sole expense, cure such breach by taking all action
prescribed by any applicable Hazardous Materials Laws or by any governmental
authority with jurisdiction over such matters.
b. Tenant shall inform Landlord at any time of (i) any Hazardous
Materials it intend to use, generate, handle, store or dispose of, on or about
or transport from, the Leased Premises and (ii) of Tenant's discovery of any
event or condition which constitutes a violation of any applicable Hazardous
Materials Laws. Tenant shall provide to Landlord copies of all communications to
or from any governmental authority or any other party relating to Hazardous
Materials affecting the Leased Premises.
c. Tenant shall indemnify and hold Landlord harmless from any and all
claims, judgements, damages, penalties, fines, costs, liabilities, expenses or
losses (including without limitation, diminution on value of the Leased
Premises, damages for loss or restriction on use of all or part of the Leased
Premises, sums paid in settlement of claims, investigation of site conditions,
or any cleanup, removal or restoration work required by any federal, state or
local governmental agency, attorney's fees, consultant fees and expert fees)
which arise as a result of or in connection with any breach of the foregoing
covenants or any other violation contained herein shall also accrue to the
benefit of the employees, agents, officers, directors and/or partners of
Landlord.
d. Upon termination of the Lease and/or vacation of the Leased Premises,
Tenant shall properly remove all Hazardous Materials and shall provide to
Landlord an environmental audit report, prepared by a professional consultant
satisfactory to Landlord and at Tenant's sole expense, certifying that the
Leased Premises have not been subjected to environmental harm caused by Tenant's
use and occupancy of the Leased Premises; provided, however, Landlord reasonably
believes that such a report is necessary. Landlord shall grant to Tenant and
its agents or contractors such access to the Leased Premises as is necessary to
accomplish such removal and prepare such report.
e. "Hazardous Materials" shall mean (a) any chemical, material, substance
or pollutant which poses a hazard to the Leased Premises or to persons on or
about the Leased Premises or would cause a violation of or is regulated by any
Hazardous Materials Laws, and (b) any chemical, material or substance defined as
or included in the definitions of "hazardous substances", "hazardous wastes",
"hazardous materials", "extremely hazardous waste", "restricted hazardous
waste", "toxic substances", "regulated substances", or words of similar import
under any applicable federal, state or local law or under the regulations
adopted or publications promulgated pursuant thereto, including, but not limited
to, the Comprehensive Environmental Response. Compensation and Liability Act of
1980, as amended, 42 U.S.C. Sec. 9601, et seq.; the Hazardous Materials
Transportation Act, as amended, 49 U.S.C. Sec. 1801, et seq.; the Resource
Conservation and Recover Act, as amended, 42 U.S.C. Sec. 6901, et seq.; the
Solid Waste Disposal Act, 42 U.S.C. Sec. 6991 et seq.; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Sec. 1251, et seq., of the Colorado
Revised Statutes. "Hazardous Materials Laws" shall mean any federal, state or
local laws, ordinances, rules, regulations, or policies (including, but not
limited to, those laws specified above) relating to the environment, health and
safety or the use, handling, transportation, production, disposal, discharge or
storage of Hazardous Materials, or to industrial hygiene or the environmental
conditions on, under or about the Leased Premises. Said term shall be deemed to
include all such laws as are now in effect or as hereafter amended and all other
such laws as may hereafter be enacted or adopted during the term of this Lease.
f. All obligations of Tenant hereunder shall survive and continue after
the expiration of this Lease or its earlier termination for any reason.
g. Tenant further covenants and agrees that it shall not install any
storage tank (whether above or below the ground) on the Leased Premises without
obtaining the prior written consent of the Landlord, which consent may be
conditioned upon further requirements imposed by
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Landlord with respect to, among other things, compliance by Tenant with any
applicable laws, rules, regulations or ordinances and safety measures or
financial responsibility requirements.
32. MISCELLANEOUS
a. Heating and air conditioning will be available to the Premises during
normal business hours. If Tenant wishes to have air conditioning and heat to
the Premises between the hours of 6 p.m. and 6:30 a.m., Monday through Friday,
and the 48 hours of Saturday and Sunday, Tenant agrees to pay for the cost of
operating the system as estimated by Control Service Center. The cost currently
is estimated to be not more than $10.00 per hour. There is a dial for after
hour usage located within the Tenant's suite.
b. At Tenant's option, Landlord shall provide janitorial services to the
Premises at Tenant's cost and shall bill Tenant therefor monthly.
c. Landlord shall, at Landlord's expense construct certain build-out
improvements to the Premises, including construction of suspended ceilings and
outside and partitioning walls; installation of carpeting; painting;
installation of fire sprinkling system; HVAC, and lighting systems; and other
improvements as agreed upon in accordance with plans and specifications
("Plans") to be approved by Landlord and Tenant, and attached hereto as Exhibit
C (hereinafter collectively referred to as the "Tenant Improvement"). Landlord
and Tenant will use their best effort to prepare and approve construction
drawings and specifications, in writing, within twenty-one (21) days after the
date of this Lease.
Basic rental as set forth in Paragraph 5(a) is based upon Landlord
completing the Tenant Improvements in accordance with the Plans. Landlord's
allowance for Tenant Improvements is $85,900.00. To the extent that the cost of
said improvements is less than or exceeds $85,900.00, basic monthly rental shall
increase or decrease by amortizing the increase or decrease over three (3) years
at 11% per annum. In other words, if Tenant Improvement costs increase or
decrease by $1,000, the basic monthly rental will increase or decrease by
$32.74.
d. Tenant has the right, within 10 days prior to possession, to inspect
the Premises after Landlord completes the Tenant Improvements. Tenant has the
right to create a "punch list" of unfinished items based on Tenant's pre-
possession inspection and to add to the "punch list" for a period of 30 days
after taking possession. Landlord is obligated to complete items on the "punch
list" within 30 days.
e. Upon full and complete performance of all the terms, covenants and
conditions herein contained by Tenant and payment of all rental due under the
terms hereof, Tenant shall be given the option to renew this Lease for one
additional term of two (2) years. In the event Tenant desires to exercise said
option, Tenant shall give written notice of such fact to Landlord not less than
one hundred eighty (180) days prior to the expiration of the then current term
of this Lease. In the event of such exercise, this Lease shall be deemed to be
extended for the additional period on the same terms and conditions; provided,
however, Landlord shall have the option of increasing basic monthly rental under
the provisions of Paragraph 5(a) hereof to the then existing market rate for
similar space in the Boulder vicinity.
f. Notwithstanding the provisions of Paragraph 5(a) hereof, Tenant will
receive free basic rental of $40,000.00 from the Commencement Date until the
$40,000.00 has been fully used, and Landlord agrees to accept two hundred fifty
thousand (250,000) shares of the common stock of Tenant, in lieu of an
additional $25,000.00 of basic rent. Tenant will pay Operating
16
Expenses from and after the Commencement Date of this Lease. Said stock shall be
issued to Byron R. Chrisman on behalf of BMC Properties, LLC.
LANDLORD: TENANT:
BMC PROPERTIES, LLC INTELLISTAT MEDIA RESEARCH, INC.
By: /s/Byron R. Chrisman By: /s/James M. Le Jeal
--------------------- ----------------------
Byron R. Chrisman James M. Le Jeal
Manager Chief Financial Officer
1900 Fifteenth Street 5777 Central Avenue
Boulder, CO 80302 Boulder, CO 80301
Tax I.D. 84-1322498
17
ADDENDUM
THIS ADDENDUM, made and entered into this _____ day of September, 1997, to
that Lease dated March 3, 1997, by and between BMC Properties, LLC (herein
called "Landlord") and VSTREAM, INCORPORATED, f/k/a Intellistat Media Research,
Inc., (herein called "Tenant").
The parties hereto agree to modify said Lease as follows:
1. It is understood and agreed by Landlord and Tenant that the cost of
Tenant Improvements to be paid by Tenant was $76,780.00. Under the provisions
of Paragraph 32.c of this Lease, Basic Monthly Rental under the provisions of
paragraph 5.a is to be increased by $32.74 for each $1,000.00 of Tenant
Improvements to be paid by Tenant. Basic Monthly Rental under the provisions of
paragraph 5.a is hereby increased from $4,295.00 to $6,808.77 ($4,295.00 plus
76.780 x $32.74).
2. Tenant hereby acknowledges delivery of possession of the Premises on
May 16, 1997.
3. Other than as modified herein, all terms and conditions of the Lease
shall remain unchanged.
IN WITNESS WHEREOF, the undersigned have executed this document as of the
date above written.
LANDLORD: TENANT:
BMC PROPERTIES, LLC VSTREAM, INCORPORATED
By:___________________________ By:_________________________
Byron R. Chrisman, Manager James M. LeJeal, Chief Financial Officer
1900 Fifteenth Street President
Boulder, CO 80302 5777 Central Avenue, Suite 120
Boulder, CO 80301
18
EXHIBIT 10.14
LEASE
1. PARTIES. This Lease, dated, for reference purposes only, June 16,
1999 is made by and between BLC PROPERTIES, LLC (herein called "Landlord") and
VSTREAM, INCORPORATED, A DELAWARE CORPORATION. (herein called "Tenant").
2. PREMISES. Landlord does hereby lease to Tenant and Tenant hereby
leases from Landlord that certain office building, said Premises being agreed,
for the purposes of this Lease, to have an area of approximately 36,444 square
feet and being situated on the 1st and 2nd FLOORS of that certain building known
as THE VALLEYVIEW BUILDING ("Building"), 1157 Century Drive, Louisville,
Colorado 80027. Said Lease is subject to the terms, covenants and conditions
herein set forth and the Tenant covenants as a material part of the
consideration for this Lease to keep and perform each and all of said terms,
covenants and conditions by it to be kept and performed and that this Lease is
made upon the condition of said performance.
3. TERM. The term of this Lease shall be for ten (10) years. This Lease
shall commence on the 1st day of October, 1999 ("Commencement Date"), and end on
the 30th day of September, 2009.
4. POSSESSION.
a. If the Landlord cannot deliver possession of the Premises to
Tenant at the commencement of the term hereof, this Lease shall not be void or
voidable, the expiration date of the above term shall be extended, to ten (10)
years after the end of the month during which Landlord delivers possession to
Tenant and all rent shall be abated during the period between the commencement
date and the time when Landlord delivers possession. Notwithstanding anything to
the contrary contained in this section 4(a), in the event that Landlord has not
delivered possession of the Premises to Tenant, for any reason whatsoever, on or
prior to sixty (60) days after the commencement date set forth in Section 3(a)
above, then Tenant may terminate this Lease upon written notice to Landlord and
neither party shall thereafter have any obligations or liability under this
Lease. Nothing in the contrary shall relieve Landlord of its obligation to use
its best efforts to complete the Tenant Improvements and to deliver possession
of the Premises to Tenant on or before the commencement date set forth in
Section 3(a) above. In the event that this Lease is terminated pursuant to this
Section 4(a), Landlord shall promptly return to Tenant the first month's rent
and security deposit prepaid pursuant to Section 5(a) below.
b. In the event that Landlord shall permit Tenant to occupy the
Premises prior to the commencement date of the term, such occupancy shall be
subject to all the provisions of the Lease. Said early possession shall not
advance the termination date herein above provided. Notwithstanding the
foregoing, in the event that Landlord permits Tenant to enter the Premises prior
to completion of the Tenant Improvements solely for the purposes of performing
Tenant's pre-opening activities, Tenant shall not be obligated to pay Rent while
Tenant is performing such pre-opening activities.
5. RENT.
a. Tenant agrees to pay to Landlord as basic rental, without prior
notice or demand, the sum of FIFTY THOUSAND ONE HUNDRED TEN AND 50/100 Dollars
($50,110.50), on or before the first day of the first full calendar month of the
term hereof and a like sum on or before the first day of each and every
successive calendar month thereafter during the term hereof, except that the
first month's rent shall be paid at the time the Premises is available for
occupancy. Rent for any period during the term hereof which is for less than one
(1) month shall be a prorated portion of the monthly installment herein, based
upon a thirty (30) day month. Said rental shall be paid to Landlord, without
deduction or offset in lawful money of the United States of America, which shall
be legal tender at the time of payment at 3434 47th Street, Suite 220, Boulder,
Colorado 80301, or to such other person or at such other place as Landlord may
from time to time designate in writing.
b. On the first day of the month following the end of a Lease year
Landlord may increase the basic rental payable for the subsequent twelve (12)
month period. The increase shall be measured by the increase in the Consumer
Price Index, as described below, but shall not
exceed three percent (3%) of the basic rental owing for the immediately
preceding year ("the 3% Cap"). The following definitions and methods shall be
used to calculate the increases in basic rental under this paragraph:
(1) "Consumer Price Index" shall mean the semi-annual indexes
of the Consumer Price Index for all Urban Consumers, Denver-Boulder, Colorado
(All items; 1982-84 equals 100) issued by the United States Department of Labor,
Bureau of Labor Statistics, or any successor agency of the United States that
issues such indexes or any successor index.
(2) "Initial Consumer Price Index" shall mean the Consumer
Price Index published for the nearest calendar period preceding the Commencement
Date of this Lease.
(3) "Latest Consumer Price Index" shall mean the Consumer
Price Index published for the nearest calendar period preceding the first day on
which an increase under this Lease is to be effective.
(4) "Previous Consumer Price Index" shall mean the Consumer
Price Index published for the nearest calendar period preceding the first day on
which the previous increase under this Lease was effective.
(5) The first increase will be calculated by multiplying the
basic rental by a fraction, with the numerator being the Latest Consumer Price
Index and the denominator being the Initial Consumer Price Index.
(6) Each subsequent increase will be calculated by
multiplying the then current basic rental by a fraction, with the numerator
being the Latest Consumer Price Index and the denominator being the Previous
Consumer Price Index.
(7) To the extent that the calculation under subparagraphs
(5) and (6) above exceed the 3% Cap, such excess ("Excess") shall be preserved
and carried forward to subsequent years until utilized. All or part of the
Excess may be added to the amount calculated under subparagraph (6) above for
any subsequent year, subject to the 3% Cap.
(8) If the Consumer Price Index is discontinued, Landlord
will designate an alternative comparable index to be used in calculating the
increase in the basic rental under this Lease.
(9) Tenant will not be entitled to a credit for any decrease
in the Consumer Price Index except to the extent that it shall be off-set
against any Excess carried forward under the provisions of paragraph 5(b)(7).
c. Notwithstanding any provision contained herein, the basic
monthly rental due under the terms hereof shall at no time be less than FIFTY
THOUSAND ONE HUNDRED TEN AND 50/100 Dollars ($50,110.50).
6. SECURITY DEPOSIT. Tenant has deposited with Landlord, upon the
execution of this Lease, the sum of SIXTY TWO THOUSAND TWO HUNDRED FIFTY EIGHT
AND 50/100 Dollars ($62,258.50). Said sum shall be held by Landlord as security
for the faithful performance by Tenant of all the terms, covenants, and
conditions of this Lease to be kept and performed by Tenant during the term
hereof. If Tenant defaults with respect to any provision of this Lease,
including, but not limited to the provisions relating to the payment of rent,
Landlord may (but shall not be required to) use, apply or retain all or any part
of this security deposit for the payment of any rent or any other sum in
default, or for the payment of any amount which Landlord may spend or become
obligated to spend by reason of Tenant's default, or to compensate Landlord for
any other loss or damage which Landlord may suffer by reason of Tenant's
default. If any portion of said deposit is so used or applied, Tenant shall
within five (5) days after written demand therefor, deposit cash with Landlord
in an amount sufficient to restore the security deposit to its original amount
and Tenant's failure to do so shall be a material breach of this Lease. Landlord
shall not be required to keep this security deposit separate from its
2
general funds, and Tenant shall not be entitled to interest on such deposit. If
Tenant shall fully and faithfully perform every provision of this Lease to be
performed by it, the security deposit or any balance thereof shall be returned
to Tenant (or at Landlord's option, to the last assignee of Tenant's interest
hereunder) at the expiration of the Lease term. In the event of termination of
Landlord's interest in this Lease, Landlord shall transfer said deposit to
Landlord's successor in interest.
7. OPERATING EXPENSES. For the purposes of this Article, operating
expenses means all reasonable and necessary costs and expenses of every kind and
nature, other than those expressly excluded below, paid or incurred by Landlord
in operating, managing, repairing, maintaining and administering the Building
including, without limitation or duplication:
a. The cost of all insurance required to be kept by Landlord
pursuant to this Lease and any other insurance customarily procured for other
commercial buildings in the same geographical area as the Building and which
Landlord may reasonably elect to obtain with respect to the operation or
ownership of the Property and the part of any claim required to be paid under
the deductible portion of any insurance policies carried by Landlord in
connection with the Property.
b. The cost of reasonable and necessary general repairs,
maintenance and replacements, excluding capital expenditures, made from time to
time by Landlord to the Property, including costs under mechanical or other
maintenance contracts and repairs and replacements of equipment used in
connection with such maintenance and repair work.
c. The cost of pest control, security, cleaning and snow and ice
removal services.
d. The cost of maintaining, repairing, redecorating, renovating,
replacement of floor coverings of common areas, and landscaping the Common
Facilities, and of maintaining and operating any fire detection, fire
prevention, lighting and communications systems. Redecorating, renovating and
replacement of floor coverings of common areas shall be charged to operating
expenses as provided in subparagraph i. of this paragraph.
e. The cost of all utilities (including, without limitation,
water, sewer, gas and electricity) used or consumed.
f. The cost of providing heating, ventilating and cooling to the
interior portions of the Building.
g. Remuneration (including wages, usual expense accounts and
fringe benefits, costs to Landlord of workmen's compensation and disability
insurance and payroll taxes) and fees of persons and companies to the extent
directly engaged in operating, repairing, maintaining, or administering the
Property.
h. The cost of professional property management fees (6% of basic
rental), and costs incurred by Landlord or its agents in engaging accountants or
other consultants to assist in making the computations required hereunder.
i. The cost of capital improvements and structural repairs and
replacements made in, on or to the Property that are [i] made in order to
conform to changes subsequent to the Commencement Date in any applicable laws,
ordinances, rules, regulations or orders of any governmental or quasi-
governmental authority having jurisdiction over the Property, or [ii] designed
primarily to reduce Operating Expenses or the rate of increase in Operating
Expense, [iii] redecoration, renovating and replacement of floor coverings; such
costs shall be charged by Landlord to Operating Expense in equal annual
installments over the useful life of such capital improvement or structural
repair or replacement (as reasonably determined by Landlord) together with
interest on the balance of the unreimbursed cost at 4% above the Prime Rate
charged by Bank One, Colorado, N.A. in Boulder on the date the cost was incurred
by Landlord.
3
j. Real property taxes and assessments, gross receipts, taxes
(whether assessed against the Landlord or assessed against the Tenant and
collected by the Landlord, or both). Tenant shall not be responsible to pay any
fines, late charges or penalties assessed against Landlord as a result of
Landlord's failure to timely pay such taxes and assessments.
k. Other costs and expenses, including supplies, not otherwise
expressly excluded hereunder attributable to the operation, management, repair,
maintenance and administration of the Property.
l. A reserve for replacement of heating, ventilating and air-
conditioning equipment, replacement of the roof, and parking lot of EIGHTEEN
THOUSAND AND NO/100 Dollars ($18,000.00) per annum.
Operating Expenses shall not, however, include the following:
m. Any charge for depreciation of the Building or equipment and
any principal, interest or other finance charge.
n. The cost of any work, including painting, decorating and work
in the nature of tenant finish, which Landlord performs in any Rentable Premises
other than work which Landlord performs in the Premises.
o. The cost of repairs, replacements or other work occasioned by
insured casualty or defects in construction or equipment to the extent such cost
is reimbursed to Landlord (or not charged to Landlord) by reason of collected
insurance proceeds (using Landlord's good faith efforts to collect such
proceeds) or any contractors', manufacturers' or suppliers' warranties.
p. Expenditures required to be capitalized for federal income tax
purposes (except as provided in Article 7, paragraph d. and i.).
q. Leasing commissions, advertising expenses and other costs
incurred in leasing space in the Building except as otherwise expressly provided
in this Lease.
r. The cost of repairing or rebuilding necessitated by
condemnation.
s. The cost of any damage to the Property or any settlement,
payment or judgment incurred by Landlord, resulting from Landlord's tortious
act, neglect or breach of this Lease that is not covered by insurance proceeds.
t. Costs (including, without limitation, attorneys fees) incurred
by Landlord in attempting to collect rent or evict tenants (other than Tenant)
from the Building.
u. Costs, including, without limitation, any penalties, fines and
legal expenses incurred by Landlord or any other tenant in the Building as a
result of a violation of any federal, state or local law, code or regulation.
Tenant shall pay 100% of Operating Expenses paid or incurred by the
Landlord for the operation or maintenance of the Building of which the Premises
are a part. Upon commencement of this Lease, Landlord shall give Tenant a
statement of the amount of Operating Expenses payable by Tenant with each
payment of rent, which shall be based upon a best estimate of such expenses if
no record of actual expenses for the prior year are available. Landlord shall
endeavor to give to Tenant on or before the first day of March of each year
thereafter an itemized statement of the prior year's Operating Expenses payable
by Tenant hereunder and advise Tenant of any increase in Operating Expenses, but
failure by Landlord to give such statement by said date shall not constitute a
waiver by Landlord of its right to require an increase in Operating Expenses.
The total amount of actual Operating Expenses for the prior year shall be used
as an estimate for current year and this amount shall be divided into twelve
(12) equal monthly installments, and Tenant shall pay to Landlord, concurrently
with the regular
4
monthly rent payment next due following the receipt of such statement, an amount
equal to one (1) monthly installment multiplied by the number of months from
January in the calendar year in which said statement is submitted to the month
of such payment. Subsequent installments shall be payable concurrently with the
regular monthly rent payments for the balance of that calendar year and shall
continue until the next year's statement is rendered. If actual Operating
Expenses are more or less than estimated, then upon receipt of a statement from
Landlord, Tenant shall pay a lump sum equal to such total increase with the next
regular monthly rent payment or receive a credit against said rent payment.
Tenant or its representative shall have the right to inspect Landlord's books
and records relating to the Operating Expenses during normal business hours.
Even though the term has expired and Tenant has vacated the Premises,
when the final determination is made of Tenant's share of Operating Expenses for
the year in which this Lease terminates, Tenant shall immediately pay any
increase due over the estimated expenses paid and, conversely, any overpayment
made in the event said expenses decrease shall be immediately rebated by
Landlord to Tenant.
8. USE. Tenant shall use the Premises for Internet Services and General
Offices and shall not use or permit the Premises to be used for any other
purpose without the prior written consent of Landlord.
Tenant shall not do or permit anything to be done in or about the
Premises nor bring or keep anything therein which will in any way increase the
existing rate or affect any fire or other insurance upon the Building or any of
its contents, or cause cancellation of any insurance policy covering said
Building or any part thereof or any of its contents. Tenant shall not do or
permit anything to be done in or about the Premises which will, in any way,
obstruct or interfere with the rights of other tenants or occupants of the
Building or injure or annoy them or use or allow the Premises to be used for any
improper, immoral, unlawful or objectionable purpose, nor shall Tenant cause,
maintain or permit any nuisance in, on or about the Premises. Tenant shall not
commit or suffer to be committed any waste in or upon the Premises.
9. COMPLIANCE WITH LAW. Tenant shall not use the Premises or permit
anything to be done in or about the Premises which will, in any way, conflict
with any law, statute, ordinance or governmental rule or regulation now in force
or which may hereafter be enacted or promulgated. Tenant shall, at its sole cost
and expense, promptly comply with all laws, statutes, ordinances and
governmental rules, regulations or requirements now in force or which may
hereafter be in force, and with the requirements of any board of fire insurance
underwriters or other similar bodies now or hereafter constituted, relating to,
or affecting the condition, use or occupancy of the Premises, excluding
structural changes not related to or affected by Tenant's improvements or acts.
The judgment against Tenant, whether the Landlord be a party thereto or not,
that Tenant has violated any law, statute, ordinance or governmental rule,
regulation or requirement, shall be conclusive of that fact as between the
Landlord and Tenant.
10. ALTERATIONS AND ADDITIONS. Tenant shall not make or suffer to be made
any alterations, additions or improvements to or of the Premises or any part
thereof without the written consent of Landlord first had and obtained, which
will not be unreasonably withheld, conditioned or delayed, and any alterations,
additions or improvements to or of said Premises, including, but not limited to,
wall covering, paneling and built-in cabinet work, but excepting movable
furniture and trade fixtures, shall, on the expiration of the term, become a
part of the realty and belong to the Landlord and shall be surrendered with the
Premises. In the event Landlord consents to the making of any alterations,
additions or improvements to the Premises by Tenant, the same shall be made by
Tenant at Tenant's sole cost and expense, and any contractor or person selected
by Tenant to make the same, must first be approved of in writing by the
Landlord, which will not be unreasonably withheld, conditioned or delayed. Upon
the expiration or earlier termination of the term hereof, Tenant shall, upon the
written demand by the Landlord, given at least thirty (30) days prior to the end
of the term, at Tenant's sole cost and expense, forthwith and with all due
diligence, remove any alterations, additions, or improvements made which have
been designated by the Landlord to be removed, and repair any damage to the
Premises caused by such removal.
5
11. REPAIRS.
a. Subject to Tenant's right to inspect the Premises prior to
occupancy thereof and submit a "Punch List" to Landlord in accordance with
Paragraph 32 of this Lease, by taking possession of the Premises, Tenant shall
be deemed to have accepted the Premises as being in good, sanitary order,
condition and repair. Tenant shall, at Tenant's sole cost and expense, keep the
Premises and every part thereof in good condition and repair, damage thereto
from causes beyond the reasonable control of Tenant and ordinary wear and tear
excepted. Tenant shall, upon the expiration or sooner termination of this Lease
hereof, surrender the Premises to the Landlord in good condition, ordinary wear
and tear and damage from causes beyond the reasonable control of Tenant
excepted. Except as specifically provided in an addendum, if any, to this Lease,
Landlord shall have no obligation whatsoever to alter, remodel, improve, repair,
decorate or paint the Premises or any part thereof, and the parties hereto
affirm that Landlord has made no representations to Tenant respecting the
condition of the Premises or the Building except as specifically herein set
forth.
b. Landlord shall repair and maintain the structural portions of
the Building, including the roof, basic plumbing, air conditioning, heating, and
electrical and sprinkler systems installed or furnished by Landlord, unless such
maintenance and repairs are caused in part or in whole by the act, neglect,
fault or omission of any duty by the Tenant, its agents, servants, employees or
invitees, in which case Tenant shall pay to Landlord the reasonable cost of such
maintenance and repairs. The cost of all such repairs (except repairs of
structural defects) shall be included in Operating Expenses as provided in
Article 7 hereof. Landlord shall not be liable for any failure to make any such
repairs or to perform any maintenance unless such failure shall persist for an
unreasonable time after written notice of the need of such repairs or
maintenance is given to Landlord by Tenant. Except as provided in Article 22
hereof, and subject to the provisions of Article 21, there shall be no abatement
of rent and no liability of Landlord by reason of any injury to or interference
with Tenant's business arising from the making of any repairs, alterations or
improvements in or to any portion of the Building or the Premises or in or to
fixtures, appurtenances and equipment therein. Except in the event of an
emergency, Tenant waives the right to make repairs at Landlord's expense under
any law, statute or ordinance now or hereafter in effect.
12. LIENS. Tenant shall keep the Premises and the property in which the
Premises are situated free from any liens arising out of any work performed,
materials furnished or obligations incurred by Tenant. Landlord may require, at
Landlord's sole option, that Tenant shall provide to Landlord, at Tenant's sole
cost and expense, a lien and completion bond or other security reasonably
acceptable to Landlord in an amount equal to one and one-half (1-1/2) times any
and all estimated cost of improvements, additions, or alterations in the
Premises, to insure Landlord against any liability for mechanics' and
materialmen's liens and to insure completion of the work.
13. ASSIGNMENT AND SUBLETTING. Except as expressly provided below, Tenant
shall not either voluntarily or by operation of law, assign, transfer, mortgage,
pledge, hypothecate or encumber this Lease or any interest therein, and shall
not sublet the said Premises or any part thereof, or any right or privilege
appurtenant thereto, or suffer any other person (the employees, agents, servants
and invitees of Tenant excepted) to occupy or use the said Premises, or any
portion thereof, without the written consent of Landlord first had and obtained,
which consent shall not be unreasonably withheld, conditioned or delayed, and a
consent to one assignment, subletting, occupation or use by any other person
shall not be deemed to be a consent to any subsequent assignment, subletting,
occupation or use by another person. Any such assignment or subletting without
such consent shall be void, and shall, at the option of the Landlord, constitute
a default under this Lease. Tenant may, upon written notice to Landlord, but
without the consent of Landlord, (i) transfer (by assignment or sublease, in
whole or in part) this Lease to any parent or affiliate of Tenant or to a wholly
owned subsidiary of Tenant, or (ii) transfer (by assignment or sublease, in
whole or in part) this Lease to any person or entity acquiring, by asset or
stock purchase, merger, consolidation or liquidation, all or substantially all
of Tenant's assets or voting stock, provided that such person or entity assumes
in writing the
6
obligations of Tenant under this Lease. Landlord may charge a reasonable fee not
to exceed $1,000 as part of its consent to any assignment, sublease, or
encumbrance.
14. HOLD HARMLESS. Tenant shall indemnify and hold harmless Landlord
against and from any and all claims arising from Tenant's use of the Premises
for the conduct of its business or from any activity, work, or other thing done,
permitted or suffered by the Tenant in or about the Building, and shall further
indemnify and hold harmless Landlord against and from any and all claims arising
from any breach or default in the performance of any obligation on Tenant's part
to be performed under the terms of this Lease, or arising from any act or
negligence of the Tenant, or any officer, agent, employee, guest, or invitee of
Tenant, and from all and against all costs, reasonable attorneys' fees, expenses
and liabilities incurred in or about any such claim or any action or proceeding
brought thereon, and, in any case, action or proceeding be brought against
Landlord by reason of any such claim, Tenant, upon notice from Landlord shall
defend the same at Tenant's expense. Tenant, as a material part of the
consideration to Landlord, hereby assumes all risk of damage to property or
injury to persons, in, upon or about the Premises, from any cause other than
Landlord's negligence or willful acts. Landlord or its agents shall not be
liable for any damage to property entrusted to employees of the Building, nor
for loss or damage to any property by theft or otherwise, nor for any injury to
or damage to persons or property resulting from fire, explosion, falling
plaster, steam, gas, electricity, water or rain which may leak from any part of
the Building or from the pipes, appliances or plumbing works therein or from the
roof, street or subsurface or from any other place resulting from dampness or
any other cause whatsoever, unless caused by or due to the negligence of
Landlord, its agents, servants or employees. Landlord or its agents shall not be
liable for interference with the light or other incorporeal hereditament, loss
of business by Tenant, nor shall Landlord be liable for any latent defects in
the Premises or in the Building. Tenant shall give prompt notice to Landlord in
case of fire or accidents in the Premises or in the Building or of defects
therein or in the fixtures or equipment.
15. SUBROGATION. As long as their respective insurers so permit, Landlord
and Tenant hereby mutually waive their respective rights of recovery against
each other for any loss insured by fire, extended coverage and other property
insurance policies existing for the benefit of the respective parties. Each
party shall obtain any special endorsements, if required by their insurer to
evidence compliance with the aforementioned waiver. If one party is unable to
obtain a waiver of subrogation, the other party is not required to maintain
same.
16. LIABILITY INSURANCE. Tenant shall, at Tenant's expense, obtain and
keep in force during the term of this Lease a policy of comprehensive public
liability insurance with limits not less than $2,000,000, combined single limit,
insuring Landlord and Tenant against any liability arising out of the ownership,
use, occupancy or maintenance of the Premises and all areas appurtenant thereto,
as their interests may appear. The limit of said insurance shall not, however,
limit the liability of the Tenant hereunder. Tenant may carry said insurance
under a blanket policy, providing, however, said insurance by Tenant shall have
a Landlord's protective liability endorsement attached thereto. If Tenant shall
fail to procure and maintain said insurance, Landlord may, but shall not be
required to, procure and maintain same, but at the expense of Tenant after
notifying Tenant and allowing ten (10) business days. Tenant shall deliver to
Landlord prior to occupancy of the Premises certificates evidencing the
existence and amounts of such insurance with named insured as their interests
may appear. No policy shall be cancelable or subject to reduction of coverage
except after thirty (30) days' prior written notice to Landlord.
17. SERVICES AND UTILITIES. Tenant shall contract directly with Public
Service Company of Colorado to provide gas and electric service to the Premises
18. PROPERTY TAXES. Tenant shall pay, or cause to be paid, before
delinquency, any and all taxes levied or assessed and which become payable
during the term hereof upon all Tenant's leasehold improvements, equipment,
furniture, fixtures and personal property located in the Premises; except that
which has been paid for by Landlord, and is the standard of the Building. In the
event any or all of Tenant's leasehold improvements, equipment, furniture,
fixtures and personal property shall be assessed and taxed with the Building,
Tenant shall pay to
7
Landlord its share of such taxes within thirty (30) days after receipt by Tenant
from Landlord of a statement in writing setting forth the amount of such taxes
applicable to Tenant's property which statement shall include a copy of the tax
bill.
19. RULES AND REGULATIONS. Tenant shall faithfully observe and comply
with the non-discriminatory rules and regulations that Landlord shall, from time
to time, promulgate. Landlord reserves the right, from time to time, to make all
reasonable modifications to said rules. The additions and modifications to those
rules shall be binding upon Tenant upon delivery of a copy of them to Tenant.
Landlord shall not be responsible to Tenant for the nonperformance of any said
rules by any other tenants or occupants. A copy of the current rules and
regulations are attached hereto as Exhibit A.
20. HOLDING OVER. If Tenant remains in possession of the Premises or any
part after the expiration of the term hereof, without the express written
consent of Landlord, such occupancy shall be a tenancy from month-to-month at a
rental in the amount of one and one-half times the last monthly rental, plus all
other charges payable hereunder, and upon all the terms hereof applicable to a
month-to-month tenancy.
21. ENTRY BY LANDLORD. Landlord reserves, and shall during normal
business hours upon reasonable written notice to Tenant and subject to Tenant's
security requirements, as herein defined, have the right to enter the Premises,
inspect the same, supply janitorial service and any other service to be provided
by Landlord to Tenant hereunder, to submit said Premises to prospective
purchasers or during the last six months of the term to prospective tenants, to
post notices of non-responsibility, and to alter, improve or repair the Premises
and any portion of the Building of which the Premises are a part that Landlord
may deem necessary or desirable, without abatement of rent and may for that
purpose in connection with any work to be performed by Landlord under this
Lease, Landlord may erect scaffolding and other necessary structures where
reasonably required by the character of the work to be performed, always
providing that the entrance to the Premises shall not be blocked thereby, and
further providing that the business of the Tenant shall not be interfered with
unreasonably. Tenant hereby waives any claim for damages or for any injury or
inconvenience to or interference with Tenant's business, any loss of occupancy
or quiet enjoyment of the Premises, and any other loss occasioned thereby unless
caused by negligence or willful acts of Landlord. For each of the aforesaid
purposes, Landlord shall, at all times, have and retain a key with which to
unlock all of the doors in, upon and about the Premises, excluding Tenant's
vaults, safes and files and locked documentation room, as defined in Paragraph
31, and Landlord shall have the right to use any and all means which Landlord
may deem proper to open said doors in an emergency, in order to obtain entry to
the Premises without liability to Tenant except for any failure to exercise due
care for Tenant's property. Any entry to the Premises obtained by Landlord by
any of said means, or otherwise shall not, under any circumstances, be construed
or deemed to be a forcible or unlawful entry into, or a detainer of, the
Premises, or an eviction of Tenant from the Premises or any portion thereof.
22. RECONSTRUCTION. In the event the Premises, or the Building of which
the Premises are a part, are damaged by fire or other perils covered by extended
coverage insurance, Landlord agrees to forthwith repair the same to
substantially the same condition as existed immediately prior to such damage;
and this Lease shall remain in full force and effect, except that the Tenant
shall be entitled to a proportionate reduction of the rent while such repairs
are being made, such proportionate reduction to be based upon the extent to
which the damage and the making of such repairs shall materially interfere with
the business carried on by the Tenant in the Premises. If the damage is due to
the fault or neglect of Tenant or its employees, there shall be no abatement of
rent.
In the event the Premises or the Building of which the Premises are a
part are damaged as a result of any cause other than the perils covered by fire
and extended coverage insurance, then Landlord shall forthwith repair the same
within one hundred and fifty (150) days of casualty, provided the extent of the
destruction be less than ten percent (10%) of the then full replacement cost of
the Premises or the Building of which the Premises are a part. In the event the
destruction of the Premises or the Building is to an extent greater than ten
percent (10%) of
8
the full replacement cost, then Landlord shall have the option: (1) to repair or
restore such damage, this Lease continuing in full force and effect, but the
rent to be proportionately reduced as hereinabove in this Article provided; or
(2) give notice to Tenant at any time within thirty (30) days after such damage
terminating this Lease as of the date specified in such notice, which date shall
be no less than thirty (30) and no more than sixty (60) days after the giving of
such notice. In the event of giving such notice, this Lease shall expire and all
interest of the Tenant in the Premises shall terminate on the date so specified
in such notice and the Rent, reduced by a proportionate amount, based upon the
extent, if any, to which such damage materially interfered with the business
carried on by the Tenant in the Premises, shall be paid up to date of said such
termination. Notwithstanding anything to the contrary contained in this Article,
Landlord shall not have any obligation whatsoever to repair, reconstruct or
restore the Premises when the damage resulting from any casualty covered under
this Article occurs during the last twelve (12) months of the term of this Lease
or any extension thereof and in the event of such casualty during the last
twelve (12) months of the term of this Lease either Landlord or Tenant shall
have the right to terminate this Lease by giving written notice to the other
party within thirty (30) days of such casualty.
Landlord shall not be required to repair any injury or damage by fire
or other cause, or to make any repairs or replacements of any panels,
decoration, office fixtures, railings, floor coverings, partitions, or any other
property installed in the Premises by Tenant unless covered by Landlord's
insurance as part of the building.
The Tenant shall not be entitled to any compensation or damages from
Landlord for loss of the use of the whole or any part of the Premises, or
Tenant's personal property, unless caused by Landlord, or, subject to Article
21, any compensation or damages for inconvenience or annoyance occasioned by
such damage, repair, reconstruction or restoration.
23. DEFAULT. The occurrence of any one or more of the following events
shall constitute a default and breach of this Lease:
a. The vacating or abandonment of the Premises by Tenant, without
payment of rent.
b. The failure by Tenant to make any payment of rent or any other
payment required to be made by Tenant hereunder, as and when due, where such
failure shall continue for a period of ten (10) days after written notice
thereof by Landlord to Tenant.
c. The failure by Tenant to observe or perform any of the
covenants, conditions or provisions of this Lease to be observed or performed by
the Tenant, other than described in Article 23.b above, where such failure shall
continue for a period of thirty (30) days after written notice thereof by
Landlord to Tenant; provided, however, that if the nature of Tenant's default is
such that more than thirty (30) days are reasonably required for its cure, then
Tenant shall not be deemed to be in default if Tenant commences such cure within
said thirty (30) day period and thereafter diligently prosecutes such cure to
completion.
d. The making by Tenant of any general assignment or general
arrangement for the benefit of creditors; or the filing by or against Tenant of
a petition to have Tenant adjudged a bankrupt, or a petition of reorganization
or arrangement under any law relating to bankruptcy (unless, in the case of a
petition filed against Tenant, the same is dismissed within sixty [60] days); or
the appointment of a trustee or a receiver to take possession of substantially
all of Tenant's assets located at the Premises or of Tenant's interest in this
Lease, where possession is not restored to Tenant within thirty (30) days; or
the attachment, execution or other judicial seizure of substantially all of
Tenant's assets located at the Premises or of Tenant's interest in this Lease,
where such seizure is not discharged in thirty (30) days.
e. If Landlord is in default in the performance of any obligation
under this Lease on the part of Landlord to be performed and such default
continues for a period of thirty (30) days after Tenant's written notice to
Landlord specifying the nature of the default, then Tenant may exercise any
right or remedy it may possess at law or equity, which is not otherwise
9
waived in this Lease. If the default set forth in Tenant's notice cannot
reasonably be cured within thirty (30) days, then Landlord shall not be deemed
to be in default if (i) Landlord notifies Tenant in writing that it will cure
the default, (ii) commences to cure the default within such thirty (30)-day
period, and (iii) proceeds diligently and in good faith thereafter to cure such
default and does cure such default within a reasonable time.
24. REMEDIES IN DEFAULT. In the event of any such default or breach by
Tenant, Landlord may at any time thereafter, with or without notice or demand,
and without limiting Landlord in the exercise of a right or remedy which
Landlord may have by reason of such default or breach:
a. Terminate Tenant's right to possession of the Premises by any
lawful and peaceful means, in which case this Lease shall terminate and Tenant
shall immediately surrender possession of the Premises to Landlord. In such
event Landlord shall be entitled to recover from Tenant all damages incurred by
Landlord by reason of Tenant's default including, but not limited to, the cost
of recovering possession of the Premises; expenses of reletting, including
necessary and reasonable expenses incurred in connection with renovation and
alteration of the Premises, reasonable attorneys' fees, any real estate
commission actually paid; the worth at the time of award by the court having
jurisdiction thereof of the amount by which the unpaid rent for the balance of
the term after the time of such award exceeds the amount of such rental loss for
the same period that Tenant proves could be reasonably avoided; that portion of
the leasing commission paid by Landlord and applicable to the unexpired term of
the Lease. Unpaid installments of rent or other sums shall bear interest from
the date due at the rate of twenty percent (20%) per annum. In the event Tenant
shall have abandoned the Premises without payment of rent, Landlord shall have
the option of (a) taking possession of the Premises and recovering from Tenant
the amount specified in this paragraph, or (b) proceeding under the provisions
of the following Article 24.b.
b. Maintain Tenant's right to possession, in which case this Lease
shall continue in effect whether or not Tenant shall have abandoned the
Premises. In such event, Landlord shall be entitled to enforce all of Landlord's
rights and remedies under this Lease, including the right to recover the rent as
it becomes due hereunder.
c. Pursue any other remedy now or hereafter available to Landlord
under the laws or judicial decision of the State in which the Premises are
located.
25. EMINENT DOMAIN. If more than twenty-five percent (25%) of the
Premises shall be taken or appropriated by any public or quasi-public authority
under the power of eminent domain, either party hereto shall have the right, at
its option, to terminate this Lease by giving written notice to the other party,
and Landlord shall be entitled to any and all income, rent, award, or any
interest therein whatsoever which may be paid or made in connection with such
public or quasi-public use or purpose, and Tenant shall have no claim against
Landlord for the value of any unexpired term of this Lease. If either less than
or more than twenty-five percent (25%) of the premises is taken, or neither
party elects to terminate as herein provided, the rental thereafter to be paid
shall be proportionately reduced. If more than ten percent (10%) of the Building
other than the Premises may be so taken or appropriated, Landlord shall have the
right at its option to terminate this Lease by giving thirty (30) days written
notice to Tenant and shall be entitled to the entire award as above provided.
Tenant shall, however, have the right to pursue a separate claim for any damage
suffered as a result of such taking.
26. ESTOPPEL STATEMENT. Landlord and Tenant shall at any time and from
time to time upon not less than ten (10) business days' prior written notice
from the other party execute, acknowledge, and deliver to the other party a
statement in writing, (a) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such modification and
certifying that this Lease as so modified, is in full force and effect), and the
date to which the rental and other charges are paid in advance, if any, and (b)
acknowledging that there are not, to Tenant's or Landlord's knowledge, as
appropriate, any uncured defaults on the part of the other party hereunder, or
specifying such defaults if any are claimed. Any such
10
statement may be relied upon by any prospective purchaser or encumbrancer of all
or any portion of the real property of which the Premises are a part.
Said Tenant Estoppel Statement shall be substantially in the form
attached hereto as Exhibit B.
27. PARKING. Tenant shall have the right to use all of the parking
facilities of the Building.
28. AUTHORITY OF PARTIES.
a. Corporate Authority. If Tenant is a corporation, each individual
executing this Lease on behalf of said corporation represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of the
corporation, in accordance with a duly adopted resolution of the board of
directors of said corporation or in accordance with the bylaws of said
corporation, and that this Lease is binding upon said corporation in accordance
with its terms.
b. Limited Partnerships. If the Landlord herein is a limited
partnership, it is understood and agreed that any claims by Tenant on Landlord
shall be limited to the assets of the limited partnership, and furthermore,
Tenant expressly waives any and all rights to proceed against the individual
partners or the officers, directors or shareholders of any corporate partner,
except to the extent of their interest in said limited partnership.
c. Limited Liability Company. If the Landlord herein is a limited
liability company, it is understood and agreed that any claims by Tenant on
Landlord shall be limited to the assets of the limited liability company, and
furthermore, Tenant expressly waives any and all rights to proceed against
individual members or managing members, except to the extent of their interest
in said limited liability company.
29. GENERAL PROVISIONS.
a. Plats and Riders. Clauses, plats, exhibits and riders, if any,
signed by the Landlord and the Tenant and endorsed on or affixed to this Lease
are a part hereof.
b. Waiver. The waiver by Landlord of any term, covenant, or
condition herein contained shall not be deemed to be a waiver of such term,
covenant or condition or any subsequent breach of the same or any other term,
covenant or condition herein contained. The subsequent acceptance of rent
hereunder by Landlord shall not be deemed to be a waiver of any preceding breach
by Tenant of any term, covenant or condition of this Lease, other than the
failure of the Tenant to pay the particular rental so accepted, regardless of
Landlord's knowledge of such preceding breach at the time of the acceptance of
such rent.
c. Notices. All notices and demands which may or are to be required
or permitted to be given by either party to the other hereunder shall be in
writing. All notices and demands by the Landlord to the Tenant shall be sent by
a) United States Mail, postage prepaid, or b) nationally recognized overnight
bonded courier, addressed to the Tenant at 1157 Century Drive, Louisville, CO
80027, or to such other place as Tenant may, from time to time, designate in a
notice to the Landlord. All notices and demands by the Tenant to the Landlord
shall be sent by a) United States Mail, postage prepaid, addressed to the
Landlord at the Office of the Building, or to such other person or place as the
Landlord may, from time to time, designate in a notice to the Tenant.
d. Joint Obligation. If there be more than one Tenant the
obligations hereunder imposed upon Tenants shall be joint and several.
e. Marginal Headings. The marginal headings and Article titles to
the Articles of this Lease are not a part of this Lease and shall have no effect
upon the construction or interpretation of any part hereof.
11
f. Time. Time is of the essence of this Lease and each and all of
its provisions in which performance is a factor.
g. Successors and Assigns. The covenants and conditions herein
contained, subject to the provisions as to assignment, apply to and bind the
heirs, successors, executors, administrators and assigns of the parties hereto.
h. Recordation. Neither the Landlord nor Tenant shall record this
Lease or a short form memorandum hereof without the prior written consent of the
other party.
i. Quiet Possession. Upon Tenant paying the rent reserved hereunder
and observing and performing all of the covenants, conditions and provisions of
Tenant's part to be observed and performed hereunder, Tenant shall have quiet
possession of the Premises for the entire term hereof, subject to all the
provisions of this Lease.
j. Late Charges. Tenant hereby acknowledges that late payment by
Tenant to Landlord of rent or other sums due hereunder will cause Landlord to
incur costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Landlord by terms of any mortgage or trust deed covering the Premises.
Accordingly, if any installment of rent or of a sum due from Tenant shall not be
received by Landlord or Landlord's designee within five (5) business days after
said amount is due, then Tenant shall pay to Landlord a late charge equal to
five percent (5%) of such overdue amount. The parties hereby agree that such
late charges represent a fair and reasonable estimate of the cost that Landlord
will incur by reason of the late payment by Tenant. Acceptance of such late
charges by the Landlord shall in no event constitute a waiver of Tenant's
default with respect to such overdue amount, nor prevent Landlord from
exercising any of the other rights and remedies granted hereunder.
k. Prior Agreements. This Lease contains all of the agreements of
the parties hereto with respect to any matter covered or mentioned in this
Lease, and no prior agreements or understanding pertaining to any such matters
shall be effective for any purpose. No provision of this Lease may be amended or
added to except by an agreement in writing signed by the parties hereto or their
respective successors in interest. This Lease shall not be effective or binding
on any party until fully executed by both parties hereto.
l. Attorneys' Fees. In the event of any action or proceeding brought
by either party against the other under this Lease, the prevailing party shall
be entitled to recover all costs and expenses, including the fees of its
attorneys in such action or proceeding in such amount as the court may adjudge
reasonable as attorneys' fees.
m. Sale of Premises by Landlord. In the event of any sale of the
Building, and assignment of Tenant's Security Deposit to Purchaser, Landlord
shall be and is hereby entirely freed and relieved of all liability under any
and all of its covenants and obligations contained in or derived from this Lease
arising out of any act, occurrence or omission occurring after the consummation
of such sale; and the purchaser, at such sale or any subsequent sale of the
Premises, shall be deemed, without any further agreement between the parties or
their successors in interest or between the parties and any such purchaser, to
have assumed and agreed to carry out any and all of the covenants and
obligations of the Landlord under this Lease.
n. Subordination, Non-Disturbance and Attornment. Upon request of
the Landlord, Tenant will, in writing, subordinate its rights hereunder to the
lien of any first mortgage or first deed of trust to any bank, insurance company
or other lending institution, now or hereafter in force against the land and
Building of which the Premises are a part, and upon any buildings hereafter
placed upon the land of which the Premises are a part, and to all advances made
or hereafter to be made upon the security thereof.
In the event any proceedings are brought for foreclosure, or in the
event of the exercise of the power of sale under any mortgage or deed of trust
made by the Landlord covering
12
the Premises, the Tenant shall attorn to the purchaser upon any such foreclosure
or sale and recognize such purchaser as the Landlord under this Lease.
Notwithstanding anything to the contrary contained herein, Tenant
shall only be obligated under this Section 29(n) if such bank, insurance company
or other lending institution or purchaser upon any such foreclosure or sale (a)
recognizes Tenant's interest under this Lease, (b) agrees that, so long as
Tenant is not in default under this Lease beyond any applicable cure periods,
not to disturb Tenant's possession of the Premises, and (c) executes and
delivers a subordination, non-disturbance and attornment agreement substantially
in the form attached hereto as Exhibit C.
o. Name. Tenant shall not use the name of the Building or of the
development in which the Building is situated for any purpose other than as an
address of the business to be conducted by the Tenant in the Premises.
p. Separability. Any provision of this Lease which shall prove to be
invalid, void or illegal shall in no way affect, impair or invalidate any other
provision hereof and such other provision shall remain in full force and effect.
q. Cumulative Remedies. No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
r. Choice of Law. This Lease shall be governed by the laws of the
State of Colorado.
s. Signs and Auctions. Tenant shall not place any sign upon the
Premises or Building or conduct any auction thereon without Landlord's prior
written consent which shall not be unreasonably withheld, conditioned or
delayed.
t. Landlord's Liability. The liabilities of the partners or members
of the Landlord pursuant to this Lease shall be limited to the assets of the
partnership or limited liability company, and Tenant, its successors and assigns
hereby waive all right to proceed against any of the partners, members, or the
officers, shareholders, or directors of any corporate partner of Landlord. The
term "Landlord," as used in this article, shall mean only the owner or owners at
the time in question of the fee title or an interest in a ground lease of the
building. Notwithstanding anything to the contrary contained herein, the extent
of the Landlord's liability under this Lease shall be limited to the property of
which the Premises herein are a part, and Tenant shall not seek any personal
liability against Landlord or any of Landlord's partners or members.
u. Waiver of Jury Trial. Landlord and Tenant waive trial by jury in
any action, proceeding or counterclaim brought by either of the parties to this
Lease against the other on any matters whatsoever arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant, Tenant's use
of occupancy of the Premises, or any other claims (except claims for personal
injury or property damage), and any emergency statutory or any other statutory
remedy.
v. Arbitration. Except for an action to gain possession of the
Premises and except as provided below, any and all disputes arising under or
related to this Agreement which cannot be resolved through negotiations between
the parties shall be submitted to binding arbitration. If the parties fail to
reach a settlement of their dispute within fifteen (15) days after the earliest
date upon which one of the parties notified the other(s) of its desire to
attempt to resolve the dispute, then the dispute shall promptly be submitted to
arbitration by a single arbiter through the Judicial Arbiter Group ("JAG"), any
successor of the Judicial Arbiter Group, or any similar arbitration provider who
can provide a former judge to conduct such arbitration if JAG is no longer in
existence, or an arbiter appointed by the court. The arbiter shall be selected
by JAG or the court on the basis, if possible, of his or her expertise in the
subject matter(s) of the dispute. The decision of the arbiter shall be final,
nonappealable and binding upon the parties, and it may be entered in any court
of competent jurisdiction. The arbitration shall take place in Boulder,
13
Colorado. The arbitrator shall be bound by the laws of the State of Colorado
applicable to the issues involved in the arbitration and all Colorado rules
relating to the admissibility of evidence, including, without limitation, all
relevant privileges and the attorney work product doctrine. All such discovery
shall be completed in accordance with the time limitations prescribed in the
Colorado Rules of Civil Procedure, unless otherwise agreed by the parties or
ordered by the arbitrator on the basis of strict necessity adequately
demonstrated by the party requesting an extension or reduction of time. The
arbitrator shall have the power to grant equitable relief where applicable under
Colorado law. The arbitrator shall issue a written opinion setting forth her or
his decision and the reasons therefor within thirty (30) days after the
arbitration proceeding is concluded. The obligation of the parties to submit any
dispute arising under or related to this Agreement to arbitration as provided in
this Section shall survive the expiration or earlier termination of this
Agreement. Notwithstanding the foregoing, either party may seek and obtain an
injunction or other appropriate relief from a court to preserve or protect the
status quo with respect to any matter pending conclusion of the arbitration
proceeding, but no such application to a court shall in any way be permitted to
stay or otherwise impede the progress of the arbitration proceeding.
w. Financial Statements. Tenant shall provide their most recent
annual report, including statements of income and expense and statements of net
worth ("financial statements") within 15 business days following the written
request of Landlord. Landlord my request said annual report once during any
twelve (12) month period. Said annual report shall be verified as being true and
correct and Landlord agrees to keep said annual report confidential, but may use
the annual report for purposes of obtaining financing upon the property. At the
time Landlord requests annual financial statements from Tenant for financing
purposes, Landlord shall advise Tenant to whom the annual report will be
submitted and Landlord shall, if requested to do so by Tenant, obtain from such
individual or entity a written agreement which shall provide that said annual
report will be and shall remain confidential. Within fifteen (15) days after the
execution of this Lease, Tenant shall submit to Landlord its most recent
financial statements.
30. BROKERS. Tenant warrants that it has had no dealings with any real
estate brokers or agents in connection with the negotiation of this Lease
excepting Chrisman Commercial, LLC and The Colorado Group, Inc. and it knows of
no other real estate broker or agent who is entitled to a commission in
connection with this Lease.
31. HAZARDOUS MATERIALS AND ENVIRONMENTAL CONSIDERATIONS
a. Tenant covenants and agrees that Tenant and its agents, employees,
contractors and invitees shall comply with all Hazardous Materials Laws (as
hereinafter defined). Without limiting the foregoing, Tenant covenants and
agrees that it will not use, generate, store or dispose of, nor permit the use,
generation, storage or disposal of Hazardous Materials (as hereinafter defined)
on, under or about the Leased Premises, nor will it transport or permit the
transportation of Hazardous Materials to or from the Leased Premises, except in
full compliance with any applicable Hazardous Materials Laws. Any Hazardous
Materials located on the Leased Premises shall be handled in an appropriately
controlled environment which shall include the use of such equipment (at
Tenant's expense) as is necessary to meet or exceed standards imposed by any
Hazardous Materials Laws and in such a way as not to interfere with any other
tenant's use of its premises. Upon breach of any covenant contained herein,
Tenant shall, at Tenant's sole expense, cure such breach by taking all action
prescribed by any applicable Hazardous Materials Laws or by any governmental
authority with jurisdiction over such matters.
b. Tenant shall inform Landlord at any time of (i) any Hazardous
Materials it intend to use, generate, handle, store or dispose of, on or about
or transport from, the Leased Premises and (ii) of Tenant's discovery of any
event or condition which constitutes a violation of any applicable Hazardous
Materials Laws. Tenant shall provide to Landlord copies of all communications to
or from any governmental authority or any other party relating to Hazardous
Materials affecting the Leased Premises.
c. Tenant shall indemnify and hold Landlord harmless from any and all
claims, judgements, damages, penalties, fines, costs, liabilities, expenses or
losses (including
14
without limitation, diminution on value of the Leased Premises, damages for loss
or restriction on use of all or part of the Leased Premises, sums paid in
settlement of claims, investigation of site conditions, or any cleanup, removal
or restoration work required by any federal, state or local governmental agency,
attorney's fees, consultant fees and expert fees) which arise as a result of or
in connection with any breach of the foregoing covenants or any other violation
contained herein shall also accrue to the benefit of the employees, agents,
officers, directors and/or partners of Landlord.
d. Upon termination of the Lease and/or vacation of the Leased
Premises, Tenant shall properly remove all Hazardous Materials and shall provide
to Landlord an environmental audit report, prepared by a professional consultant
satisfactory to Landlord and at Tenant's sole expense, certifying that the
Leased Premises have not been subjected to environmental harm caused by Tenant's
use and occupancy of the Leased Premises; provided, however, Landlord reasonably
believes that such a report is necessary. Landlord shall grant to Tenant and its
agents or contractors such access to the Leased Premises as is necessary to
accomplish such removal and prepare such report.
e. "Hazardous Materials" shall mean (a) any chemical, material,
substance or pollutant which poses a hazard to the Leased Premises or to persons
on or about the Leased Premises or would cause a violation of or is regulated by
any Hazardous Materials Laws, and (b) any chemical, material or substance
defined as or included in the definitions of "hazardous substances", "hazardous
wastes", "hazardous materials", "extremely hazardous waste", "restricted
hazardous waste", "toxic substances", "regulated substances", or words of
similar import under any applicable federal, state or local law or under the
regulations adopted or publications promulgated pursuant thereto, including, but
not limited to, the Comprehensive Environmental Response. Compensation and
Liability Act of 1980, as amended, 42 U.S.C. Sec. 9601, et seq.; the Hazardous
Materials Transportation Act, as amended, 49 U.S.C. Sec. 1801, et seq.; the
Resource Conservation and Recover Act, as amended, 42 U.S.C. Sec. 6901, et seq.;
the Solid Waste Disposal Act, 42 U.S.C. Sec. 6991 et seq.; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Sec. 1251, et seq., of the Colorado
Revised Statutes. "Hazardous Materials Laws" shall mean any federal, state or
local laws, ordinances, rules, regulations, or policies (including, but not
limited to, those laws specified above) relating to the environment, health and
safety or the use, handling, transportation, production, disposal, discharge or
storage of Hazardous Materials, or to industrial hygiene or the environmental
conditions on, under or about the Leased Premises. Said term shall be deemed to
include all such laws as are now in effect or as hereafter amended and all other
such laws as may hereafter be enacted or adopted during the term of this Lease.
f. All obligations of Tenant hereunder shall survive and continue
after the expiration of this Lease or its earlier termination for any reason.
g. Tenant further covenants and agrees that it shall not install any
storage tank (whether above or below the ground) on the Leased Premises without
obtaining the prior written consent of the Landlord, which consent may be
conditioned upon further requirements imposed by Landlord with respect to, among
other things, compliance by Tenant with any applicable laws, rules, regulations
or ordinances and safety measures or financial responsibility requirements.
32. MISCELLANEOUS
a. At Tenant's option, Landlord shall provide janitorial services to
the Premises at Tenant's cost and shall bill Tenant therefor monthly.
b. Landlord shall, at Landlord's expense construct certain build-out
improvements to the Premises, including construction of suspended ceilings and
outside and partitioning walls; installation of carpeting; painting;
installation of fire sprinkling system; HVAC, and lighting systems; and other
improvements as agreed upon in accordance with plans and specifications
("Plans") to be approved by Landlord and Tenant, and attached hereto as Exhibit
D (hereinafter collectively referred to as the "Tenant Improvement"). Landlord
and
15
Tenant will use their best efforts to prepare and approve construction drawings
and specifications and approve them in writing within twenty-one (21) days after
the date of this Lease.
Basic rental as set forth in Paragraph 5(a) is based upon Landlord
completing the Tenant Improvements in accordance with the Plans. Landlord's
allowance for Tenant Improvements is $911,100.00. To the extent that the cost of
said improvements is less than or exceeds $911,110.00, basic monthly rental
shall increase or decrease by amortizing the increase or decrease over ten (10)
years at the interest rate Landlord is able to obtain on the permanent financing
plus 300 basis points, but not more than 11% per annum, or Tenant has the option
of paying up front any amount in excess of the $911,100.00 allowance.
c. Tenant has the right, within 10 days prior to possession, to
inspect the Premises after Landlord completes the Tenant Improvements. Tenant
has the right to create a "punch list" of unfinished items based on Tenant's
pre-possession inspection and to add to the "punch list" for a period of 30 days
after taking possession. Landlord is obligated to complete items on the "punch
list" within 30 days.
d. Upon full and complete performance of the terms, covenants and
conditions herein contained by Tenant and payment of all rental due under the
terms hereof, Tenant shall be given the option to renew this Lease for two
additional terms of five (5) years. In the event Tenant desires to exercise said
option, Tenant shall give written notice of such fact to Landlord not less than
one hundred eighty (180) days prior to the expiration of the then current term
of this Lease. In the event of such exercise, this Lease shall be deemed to be
extended for the additional period; provided, however, the Landlord shall have
the option of increasing basic monthly rental under the provisions of Paragraph
5(a) hereof to the then existing market rate for similar space in the
Louisville, Colorado vicinity.
e. Tenant has the right to install up to five-7 foot satellite dishes
upon the roof without Landlord's written consent as long as they meet zoning and
subdivision covenant requirements. Any additional satellite dishes shall require
Landlord's written consent. Tenant shall have the obligation to remove said
satellite dishes upon termination of the Lease and pay for the repairs caused by
the installation and removal.
f. Tenant has the right to install a battery and an electrical
generator backup to service its data center without the Landlord's written
consent as long as they meet zoning and subdivision covenant requirements.
Tenant shall have the obligation to remove said generator upon termination of
the Lease and pay for the repairs caused by the installation and removal.
g. This Lease supercedes that Lease between the parties for the
Property dated January 13, 1999.
LANDLORD: TENANT:
BLC PROPERTIES, LLC VSTREAM, INCORPORATED
By:/s/ Byron R. Chrisman By:/s/ James M. LeJeal
-------------------------------- --------------------------------
Byron R. Chrisman James M. LeJeal
Manager CFO/COO
5777 Central Avenue 5777 Central Avenue
Boulder, CO 80301 Boulder, CO 80301
Tax I.D. 84-1452002
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