<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MARCH 1, 1999
REGISTRATION NO. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
COPPER MOUNTAIN NETWORKS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 3661 33-0702004
(STATE OR OTHER JURISDICTION PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
2470 EMBARCADERO WAY
PALO ALTO, CA 94303
(650) 858-8500
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
RICHARD GILBERT
PRESIDENT AND CHIEF EXECUTIVE OFFICER
COPPER MOUNTAIN NETWORKS, INC.
2470 EMBARCADERO WAY
PALO ALTO, CA 94303
(650) 858-8500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
<TABLE>
<S> <C>
LANCE W. BRIDGES, ESQ. LARRY W. SONSINI, ESQ.
MICHAEL A. NEWMAN, ESQ. JAMES N. STRAWBRIDGE, ESQ.
LAUREN D. BOYD, ESQ. DON S. WILLIAMS, ESQ.
COOLEY GODWARD LLP WILSON SONSINI GOODRICH & ROSATI,
4365 EXECUTIVE DRIVE, SUITE 1100 PROFESSIONAL CORPORATION
SAN DIEGO, CA 92121 650 PAGE MILL ROAD
(619) 550-6000 PALO ALTO, CA 94304
(650) 493-9300
</TABLE>
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
---------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act") check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) of the Securities Act, please check the following box
and list the Securities Act registration serial number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
<CAPTION>
PROPOSED
MAXIMUM
TITLE OF SECURITIES AGGREGATE AMOUNT OF
TO BE REGISTERED OFFERING PRICE(1)(2) REGISTRATION FEE
- --------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock ($.001 par value)................. $60,000,000 $16,680
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
</TABLE>
(1) Includes shares that the Underwriters will have the option to purchase
solely to cover over-allotments, if any.
(2) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(o) promulgated under the Securities Act.
---------------
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO
SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY +
+NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN +
+OFFER TO SELL THESE SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE +
+SECURITIES, IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Issued , 1999
Shares
[COPPER MOUNTAIN NETWORKS, INC. LOGO]
COMMON STOCK
-----------
COPPER MOUNTAIN NETWORKS, INC. IS OFFERING SHARES OF ITS COMMON
STOCK. THIS IS OUR INITIAL PUBLIC OFFERING, AND NO PUBLIC MARKET CURRENTLY
EXISTS FOR OUR SHARES. WE ANTICIPATE THAT THE INITIAL PUBLIC OFFERING PRICE
WILL BE BETWEEN $ AND $ PER SHARE.
-----------
WE HAVE APPLIED TO LIST THE COMMON STOCK ON THE NASDAQ
NATIONAL MARKET UNDER THE SYMBOL "CMTN."
-----------
INVESTING IN THE COMMON STOCK INVOLVES RISKS.
SEE "RISK FACTORS" BEGINNING ON PAGE 6.
-----------
PRICE $ A SHARE
-----------
<TABLE>
<CAPTION>
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND COPPER
PUBLIC COMMISSIONS MOUNTAIN
-------- ------------- -----------
<S> <C> <C> <C>
Per Share............................. $ $ $
Total................................. $ $ $
</TABLE>
The Securities and Exchange Commission and state securities regulators have
not approved or disapproved these securities, or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal
offense.
Copper Mountain has granted the underwriters the right to purchase up to an
additional shares to cover any over-allotments. Morgan Stanley & Co.
Incorporated expects to deliver the shares of common stock to purchasers on
, 1999.
-----------
MORGAN STANLEY DEAN WITTER
BANCBOSTON ROBERTSON STEPHENS
DAIN RAUSCHER WESSELS
a division of Dain Rauscher Incorporated
, 1999
<PAGE>
[INSIDE FRONT COVER PAGE]
PHOTOGRAPHS, DESCRIPTIONS AND CAPTIONS
1. Top Caption: Copper Mountain's DSL solutions are delivered through three
product families:
2. Top left side: Color photo of CopperEdge DSL Access Concentrator, one of
the Company's products. Caption: CopperEdge DSL Access Concentrators.
CopperEdge DSL Access Concentrators enable Competitive Local Exchange
Carriers (CLECs), Incumbent Local Exchange Carriers (ILECs), Internet
service providers and multi-tenant unit service providers to deploy high-
speed Internet and remote LAN access services at competitive rates using
ordinary copper telephone wiring. CopperEdge allows DSL users to access
network services at speeds ranging from 128 Kbps to 1.544 Mbps.
3. Center: Color photo of CopperRocket DSL Access Device, one of the Company's
products. Caption: CopperRocket DSL Access Devices. CopperRocket customer
premise equipment (CPE) is used by teleworkers, small and medium businesses
and other DSL users. The CopperRocket provides high-performance, always-on,
dedicated Internet and LAN access. Users improve productivity, while
obtaining more affordable telecommunications costs. Multiple speeds from
128 Kbps to 1.544 Mbps fit today's budget and bandwidth needs.
4. Lower right side: Color photo of a computer monitor with the Company's
CopperView logo on the screen. Caption: CopperView Network Management
Tools. CopperView network management tools allow carriers to easily
configure, diagnose and monitor their DSL networks end-to-end from one
site, match service offerings to the budget and bandwidth needs of each
customer and--with the touch of a button--migrate a user to a higher-speed
service in real time.
<PAGE>
[INTERIOR FOLD-OUT OF FRONT COVER PAGE]
IMAGES, DIAGRAM, DIAGRAM DESCRIPTIONS AND CAPTIONS
1. Left side: Color logos of the following customers of the Company:
NorthPoint Communications, Inc.; UUNET, a subsidiary of MCI WorldCom, Inc.;
ICG Communications, Inc.; Rhythms NetConnections Inc.; InterAccess; JATO
Communications Corporation; Pacific Crest Networks, Inc.; and OnSite Access
LLC. Caption: Copper Mountain's CLEC Customers Deploy DSL Nationwide.
2. Center: Diagram of a communications network of a metropolitan CLEC DSL
deployment with a CLEC metro office, multiple ILEC central offices with
CopperEdge DSL Access Concentrators, multi-tenant building with a
CopperEdge DSL Access Concentrator, and multiple small office, home office
and residential subscribers with access devices and corporate, Internet
service provider and Internet data services. Caption: CLEC Metropolitan DSL
Network Enabled by Copper Mountain Networks.
3. Right: Captions describing four key benefits of Copper Mountain's solution:
. Support for Business Applications: Our products enable
telecommunications service providers to deliver business services
such as high-speed Internet access, corporate networking,
teleworking and remote PBX extension.
. Full Coverage DSL: Our SDSL and IDSL-based products allow our
telecommunications service provider customers the flexibility and
range to reach their targeted customers.
. Multi-Vendor CPE Interoperability: We have partnered with third-
party DSL CPE manufacturers through the CopperCompatible program to
develop a broad line of modems, routers and other innovative CPE
which are compatible with our CopperEdge DSL Access Concentrators.
. Trouble-Free Operations: Our products are designed to reduce
installation and support requirements for our customers while
allowing large scale central-office based deployment of DSL
solutions with a zero-installation "plug and play" DSL CPE that
eliminates complex configuration issues for the end user.
2
<PAGE>
PROSPECTUS SUMMARY
You should read this summary together with the more detailed information and
financial statements and notes appearing elsewhere in this prospectus. You
should carefully consider, among other things, the matters set forth in "Risk
Factors."
THE COMPANY
Copper Mountain Networks is a leading supplier of high-speed DSL-based
communications products for the broadband access market. Our solutions enable
telecommunications service providers to provide high-speed, cost-effective
connectivity over the existing copper wire telephone infrastructure to the
business, multi-tenant unit and residential markets. We believe there is
significant demand for high-speed data access services, especially among
business users who have found current last-mile solutions to be inadequate or
too costly. Therefore, Copper Mountain has initially focused on producing
equipment that supports practical, large-scale deployment of DSL services to
businesses and their associated teleworkers.
The emergence of electronic commerce, business usage of web-based
communications, remote access for teleworkers, applications hosting and other
services have generated enormous traffic for the existing communications
infrastructure. While there are a number of alternatives to deliver broadband
connectivity for the last mile, such as T-1, ISDN, coaxial cable and wireless,
we believe that none have the cost, performance and coverage advantages of
using the existing copper wire telephone infrastructure. Digital Subscriber
Line ("DSL") is a technology that was developed to enable telecommunications
service providers to exploit this existing infrastructure to provide
guaranteed, dedicated bandwidth at a low cost to virtually all businesses and
homes in the United States. Telecommunications service providers are seeking
vendors that have effectively incorporated DSL into communications equipment
solutions, enabling the deployment of cost-effective, full-coverage, high-
bandwidth data access services. Our flexible, scalable solution consists of the
following products: CopperEdge DSL Access Concentrators, CopperRocket DSL
Customer Premise Equipment ("CPE"), and CopperView Network Management Tools.
Our products offer support for business applications, full-coverage DSL, multi-
vendor CPE interoperability and trouble-free operations. We sell our products
through a direct sales force and selected OEMs and distributors to
telecommunications service providers. Our customers include NorthPoint
Communications, Inc., Rhythms NetConnections Inc., ICG Communications, Inc. and
UUNET, a subsidiary of MCI WorldCom, Inc. We have also formed strategic
relationships with Lucent Technologies Inc. and 3Com Corporation.
THE OFFERING
<TABLE>
<C> <S>
Common stock offered......................... shares
Over-allotment option........................ shares
Common stock to be outstanding after the
offering.................................... shares(1)
Use of proceeds.............................. We intend to use the net
proceeds from the offering for
general corporate purposes,
including working capital and
capital expenditures. See "Use
of Proceeds."
Proposed Nasdaq National Market symbol....... CMTN
</TABLE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 11, 1996
(INCEPTION) YEAR ENDED
THROUGH DECEMBER 31,
DECEMBER 31, ----------------
1996 1997 1998
-------------- ------- -------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue.................................. $ -- $ 211 $21,821
Gross profit................................. -- (1,506) 9,421
Loss from operations......................... (2,036) (9,697) (6,644)
Net loss..................................... (1,992) (9,526) (6,451)
Pro forma net loss per share, basic and
diluted (2)................................. $ (.39)
Shares used in computing pro forma net loss
per share (2)............................... 16,668
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31, 1998
-----------------------
ACTUAL AS ADJUSTED (3)
------- ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments..... $18,529 $
Working capital....................................... 24,326
Total assets.......................................... 36,209
Long-term debt and capital lease obligations, less
current portion...................................... 1,965
Total stockholders' equity............................ 26,843
</TABLE>
- --------
(1) Based upon the number of shares of Copper Mountain common stock outstanding
as of December 31, 1998. Excludes, as of December 31, 1998, (i) 5,370,305
shares of common stock reserved for issuance under the Company's stock
option plans, of which 4,265,471 shares were subject to outstanding options
at a weighted average exercise price of $.52 per share; and (ii) 355,706
shares of common stock issuable upon exercise of outstanding warrants at a
weighted average exercise price of $2.08 per share. See "Capitalization,"
"Description of Capital Stock" and "Management--1996 Equity Incentive
Plan."
(2) Pro forma per share calculations reflect the conversion upon the closing of
the offering of all outstanding shares of preferred stock into 15,334,824
shares of common stock.
(3) As adjusted to reflect our sale of shares of common stock offered hereby
(at an assumed initial public offering price of $ per share) and after
deducting estimated underwriting discounts and commissions and offering
expenses payable by us and the application of our net proceeds from this
offering. See "Capitalization."
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
The Company.............................................................. 5
Risk Factors............................................................. 6
Special Note Regarding Forward-Looking Statements........................ 19
Use of Proceeds.......................................................... 20
Dividend Policy.......................................................... 20
Capitalization........................................................... 21
Dilution................................................................. 22
Selected Financial Data.................................................. 23
Management's Discussion and Analysis of Financial Condition and Operating
Results................................................................. 24
</TABLE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Business................................................................... 32
Management................................................................. 44
Certain Transactions....................................................... 52
Principal Stockholders..................................................... 54
Description of Capital Stock............................................... 57
Shares Eligible for Future Sale............................................ 59
Underwriters............................................................... 61
Legal Matters.............................................................. 63
Experts.................................................................... 63
Additional Information..................................................... 63
Index to Financial Statements.............................................. F-1
</TABLE>
We are a California corporation and will reincorporate in Delaware prior to
the consummation of this offering. Our principal executive offices are located
at 2470 Embarcadero Way, Palo Alto, California 94303, and our telephone number
is (650) 858-8500. Our fiscal year ends on December 31. We maintain a
worldwide web site at www.coppermountain.com. The reference to our worldwide
web address does not constitute incorporation by reference of the information
contained at this site. CopperThrottle and the Copper Mountain logo are
registered trademarks of Copper Mountain. Copper Mountain, CopperEdge,
CopperView, CopperCompatible, CopperCraft and CopperRocket are unregistered
trademarks of Copper Mountain. All other brand names or trademarks appearing
in this prospectus are the property of their respective holders.
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of our common stock only in jurisdictions where offers and sales
are permitted. The information contained in this prospectus is accurate only
as of the date of this prospectus, regardless of the time of delivery of this
prospectus or any sale of our common stock. In this prospectus, "Copper
Mountain," "we," "us" and "our" refer to Copper Mountain Networks, Inc.,
unless the context otherwise requires.
Except as otherwise noted, all information in this prospectus assumes (i)
our reincorporation from California to Delaware, which will be effective prior
to the completion of this offering, has already taken place, (ii) the
conversion of all outstanding shares of our preferred stock into common stock
on a three-for-two basis upon the completion of this offering, and (iii) no
exercise of the underwriters' over-allotment option. In addition, all common
share numbers and common per share data in this prospectus reflect a three-
for-two stock split effected on November 25, 1998.
UNTIL , 1999 (25 DAYS AFTER COMMENCEMENT OF THIS OFFERING), ALL
DEALERS THAT BUY, SELL OR TRADE OUR COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
4
<PAGE>
THE COMPANY
Copper Mountain is a leading supplier of high-speed DSL-based communications
products for the broadband access market. Our solutions enable
telecommunications service providers to provide high-speed, cost-effective
connectivity over the existing copper wire telephone infrastructure to the
business, multi-tenant unit and residential markets. We believe there is
significant demand for high-speed data access services, especially among
business users who have found current last-mile solutions to be inadequate or
too costly. Therefore, Copper Mountain has initially focused on producing
equipment that supports practical, large-scale deployment of DSL services to
businesses and their associated teleworkers.
The emergence of electronic commerce, business usage of web-based
communications, remote access for teleworkers, applications hosting and other
services have generated enormous traffic for the existing communications
infrastructure. While there are a number of alternatives to deliver broadband
connectivity for the last mile, such as T-1, ISDN, coaxial cable and wireless,
we believe that none have the cost, performance and coverage advantages of
using the existing copper wire telephone infrastructure. Digital Subscriber
Line ("DSL") is a technology that was developed to enable telecommunications
service providers to exploit this existing infrastructure to provide
guaranteed, dedicated bandwidth at a low cost to virtually all businesses and
homes in the United States.
Telecommunications service providers are seeking vendors that have
effectively incorporated DSL into communications equipment solutions enabling
the deployment of cost-effective, full-coverage, high-bandwidth data access
services. Our flexible, scalable solution consists of the following products:
CopperEdge DSL Access Concentrators, CopperRocket DSL Customer Premise
Equipment ("CPE") and CopperView Network Management Tools. Our products offer
the following benefits:
. Support for Business Applications. Our products enable
telecommunications service providers to deliver business services such
as high-speed Internet access, corporate networking, teleworking and
remote PBX extension.
. Full Coverage DSL. Our SDSL and IDSL-based products allow our
telecommunications service provider customers the flexibility and range
to reach their targeted customers.
. Multi-Vendor CPE Interoperability. We have partnered with third-party
DSL CPE manufacturers through the CopperCompatible program to develop a
broad line of modems, routers and other innovative CPE which are
compatible with our CopperEdge DSL Access Concentrators.
. Trouble Free Operations. Our products are designed to reduce
installation and support requirements for our customers while allowing
large scale central-office based deployment of DSL solutions with a
zero-installation "plug and play" DSL CPE that eliminates complex
configuration issues for the end user.
Our objective is to be the leading supplier of DSL solutions to
telecommunications service providers. We will focus on expanding our presence
in the business and multi-tenant building markets. In addition, we will
address the emerging opportunities we expect to develop in the residential
market as telecommunications service providers seek to offer DSL services to
residential subscribers seeking high-speed access. Our products are designed
to support future services and technology, and we are currently developing the
capability required to support additional services, such as virtual private
networking and voice-over-packet, as well as additional technologies, such as
HDSL2 and UADSL, to meet evolving telecommunications service provider and
subscriber requirements. Finally, we are working to drive interoperability of
DSL technology to facilitate faster and broader market acceptance.
We sell our products through a direct sales force and selected OEMs and
distributors to telecommunications service providers. Our customers include
NorthPoint Communications, Inc., Rhythms NetConnections Inc., ICG
Communications, Inc. and UUNET, a subsidiary of MCI Worldcom, Inc. As of
December 31, 1998, we have sold over 900 CopperEdge DSL Access Concentrators.
We have also formed strategic relationships with Lucent Technologies Inc. and
3Com Corporation to allow us to expand our distribution and market presence.
In addition, to facilitate faster and broader market acceptance of our
solutions, we have promoted a "CopperCompatible" program through which we
offer licenses of our DSL CPE technology to other manufacturers of CPE
equipment.
Copper Mountain was incorporated in California in 1996 and reincorporated in
Delaware in 1999. Our principal executive offices are located at 2470
Embarcadero Way, Palo Alto, California 94303, and our telephone number is
(650) 858-8500.
5
<PAGE>
RISK FACTORS
This offering and an investment in our common stock involve a high degree of
risk. You should carefully consider the following risk factors and the other
information in this prospectus before investing in our common stock. Our
business and results of operations could be seriously harmed by any of the
following risks. The trading price of our common stock could decline due to
any of these risks, and you may lose part or all of your investment.
COPPER MOUNTAIN HAS A HISTORY OF LOSSES AND MAY EXPERIENCE FUTURE LOSSES
Copper Mountain has incurred net losses of approximately $2.0 million for
the period from inception through December 31, 1996, approximately $9.5
million for fiscal year 1997 and approximately $6.5 million for fiscal year
1998. As of December 31, 1998, we had an accumulated deficit of approximately
$18.0 million. We have not achieved profitability and may incur net losses in
the future. We anticipate continuing to incur significant sales and marketing,
product development and general and administrative expenses and, as a result,
we will need to generate significantly higher revenues to achieve and sustain
profitability on an annual basis. Although our revenues have grown in recent
quarters, we cannot be certain that we will continue to achieve revenue growth
or realize sufficient revenues to achieve profitability.
COPPER MOUNTAIN IS DEPENDENT ON A SMALL NUMBER OF CUSTOMERS
Copper Mountain sells its products predominantly to competitive local
exchange carriers ("CLECs"). Aggregate sales to our four largest customers
accounted for approximately 95% of our total revenues for the twelve months
ended December 31, 1998. Sales to our most significant customers, NorthPoint
Communications, Inc. and Rhythms NetConnections, Inc., accounted for
approximately 61% and 18% of Copper Mountain's total revenues, respectively,
for the twelve months ended December 31, 1998. Accordingly, unless and until
we diversify and expand our customer base, our future success will
significantly depend upon the timing and size of future purchase orders, if
any, from our largest customers, the product requirements of these customers,
the financial and operational success of these customers and, in particular,
the success of these customers' services deployed using our products. Sales to
our largest customers have in the past fluctuated and may in the future
fluctuate significantly from quarter-to-quarter and year-to-year. The loss of
any one of these customers, the delay of significant orders or the occurrence
of any sales fluctuations could materially adversely affect our business,
financial condition and results of operations. ICG Communications, Inc., a
significant current customer, recently signed an agreement to sell its Digital
Subscriber Line ("DSL") assets, including those already deployed or scheduled
for delivery, to NorthPoint Communications and to designate NorthPoint
Communications as its preferred DSL provider. As a result, ICG Communications
may reduce, or even eliminate, the completion of its own DSL network, and
consequently reduce or cease its purchases of our products.
COPPER MOUNTAIN HAS A LIMITED OPERATING HISTORY AND IS SUBJECT TO RISKS
FREQUENTLY ENCOUNTERED BY EARLY STAGE COMPANIES
Copper Mountain has a very limited operating history. We were incorporated
in March 1996 and have generated only limited revenues. In addition, our
business model is evolving and relies entirely upon emerging DSL technologies
and the emerging CLEC industry. Investors must consider our business and
prospects in light of the risks typically encountered by companies in their
early stages of development, particularly those in rapidly evolving markets
such as the telecommunications equipment industry. Some of these risks, in
addition to those risks discussed elsewhere in this "Risk Factors" section,
include:
. a history of losses and potential of future losses;
. significant fluctuations in quarterly operating results;
. the intensely competitive market for telecommunications equipment;
. the challenges encountered in expanding our sales, support and
distribution organization;
6
<PAGE>
. the risks relating to the timely introduction of new products and
product enhancements; and
. the risks associated with the expansion of our operational
infrastructure.
We discuss these and other risks in more detail below. We cannot be certain
that our business strategy will be successful or that we will successfully
address these risks.
COPPER MOUNTAIN'S OPERATING RESULTS FLUCTUATE SIGNIFICANTLY
Copper Mountain's quarterly and annual operating results have fluctuated in
the past and are likely to fluctuate significantly in the future due to a
variety of factors, many of which are outside of its control. Some of these
factors include:
. the timing and amount of, or cancellation or rescheduling of, orders for
our products and services, particularly large orders from our key
customers and OEMs;
. our ability to develop, introduce, ship and support new products and
product enhancements and manage product transitions;
. announcements, new product introductions and reductions in price of
products offered by our competitors;
. the decrease of the average selling prices of our products;
. our ability to achieve cost reductions;
. our ability to obtain sufficient supplies of sole or limited source
components for our products;
. changes in the prices of our components;
. our ability to attain and maintain production volumes and quality levels
for our products;
. the mix of products sold and the mix of distribution channels through
which they are sold;
. fluctuations in demand for our products and services;
. costs relating to possible acquisitions and integration of technologies
or businesses; and
. telecommunications and DSL market conditions and economic conditions
generally.
Historically, our backlog at the beginning of each quarter has not been
equal to expected revenue for that quarter. Accordingly, we are dependent upon
obtaining orders in a quarter for shipment in that quarter to achieve our
revenue objectives. In addition, due in part to factors such as the timing of
product release dates, purchase orders and product availability, significant
volume shipments of products could occur at the end of our fiscal quarter.
Failure to ship products by the end of a quarter may adversely affect our
operating results. Furthermore, our customers may delay delivery schedules or
cancel their orders without notice.
Due to these and other factors, quarterly revenues, expenses and results of
operations could vary significantly in the future, and period-to-period
comparisons should not be relied upon as indications of future performance. We
may not be able to increase our revenues in future periods or be able to
sustain our existing level of revenues or our rate of revenue growth on a
quarterly or annual basis. In addition, our quarterly or annual operating
results may not meet the expectations of securities analysts and investors. If
this happens, the trading price of our common stock could significantly
decline.
COPPER MOUNTAIN IS SUBSTANTIALLY DEPENDENT ON EMERGING TELECOMMUNICATIONS
SERVICE PROVIDERS
The customers of Copper Mountain's products to date have predominantly been
telecommunications service providers. The market for the services provided by
these competitive carriers has only begun to emerge since the passage of the
Telecommunications Act of 1996 (the "Telecom Act"), and many competitive
carriers are still
7
<PAGE>
building their infrastructure and rolling out their services. These
competitive carriers require substantial capital for the development,
construction and expansion of their networks and the introduction of their
services. Financing may not be available to emerging competitive carriers on
favorable terms, if at all. The inability of our current or potential emerging
competitive carrier customers to acquire and keep customers, to successfully
raise needed funds, or to respond to any other trends such as price reductions
for their services or diminished demand for telecommunications services
generally, could adversely affect their operating results or cause them to
reduce their capital spending programs. If our customers are forced to defer
or curtail their capital spending programs, our sales may be adversely
affected, which would have a material adverse effect on our business,
financial condition and results of operations. In addition, many of the
industries in which telecommunications service providers operate have recently
experienced consolidation. The loss of one or more of our telecommunications
service provider customers, through industry consolidation or otherwise, could
have a material adverse effect on our business, financial condition and
results of operations.
COPPER MOUNTAIN IS SUBSTANTIALLY DEPENDENT ON ACCEPTANCE OF DSL TECHNOLOGY BY
A LIMITED NUMBER OF TELECOMMUNICATIONS SERVICE PROVIDERS
Copper Mountain's future success is substantially dependent upon whether DSL
technology gains widespread market acceptance by telecommunications service
providers and end users of their services. Given the capital requirements,
complex regulatory framework and other barriers to entry in the market, there
are a limited number of telecommunications service providers. We have invested
substantial resources in the development of DSL technology, and all of our
products are based on DSL technology. Many telecommunications service
providers continue to evaluate DSL technology, but they may not continue to
pursue the deployment of DSL technology. Even if telecommunications service
providers adopt policies favoring full-scale implementation of DSL technology,
they may not choose to purchase our DSL product offerings. In addition, we
have limited ability to influence or control decisions made by
telecommunications service providers. Telecommunications service providers are
continuously evaluating alternate high-speed data access technologies and may,
at any time, adopt technologies other than the DSL technologies offered by
Copper Mountain.
COPPER MOUNTAIN MUST KEEP PACE WITH THE RAPIDLY CHANGING PRODUCT REQUIREMENTS
OF ITS CUSTOMERS
The telecommunications and data communications markets are characterized by
rapid technological advances, evolving industry standards, changes in end-user
requirements, frequent new product introductions and evolving offerings by
telecommunications service providers. We believe our future success will
depend, in part, on our ability to anticipate or adapt to such changes and to
offer, on a timely basis, services that meet customer demands. Our inability
to develop on a timely basis new products or enhancements to existing
products, or the failure of such new products or enhancements to achieve
market acceptance, could materially adversely affect our business, financial
condition and results of operations. We expect that new technologies or
standards, such as UADSL and HDSL2, will become increasingly important as
competition in our industry increases and the need for higher bandwidth and
more cost efficient transmission equipment expands. The introduction of
products embodying new technologies or the emergence of new industry standards
could render our existing products obsolete or unmarketable. As standards and
technologies evolve, we will be required to modify our products or develop and
support new versions of our products. Our announcements of planned or new
product offerings or product announcements by our competitors may cause our
customers to defer or cancel the purchase of existing products. In such a
rapidly changing environment, product cycles tend to be short. Therefore, from
time-to-time we may need to write-off excess and obsolete inventory. In the
past, we have experienced such write-offs attributed to the obsolescence of
certain printed circuit boards. For the years ended December 31, 1998 and
1997, we reduced the carrying value of inventory by approximately $1,297,000
and $315,000, respectively, to take into consideration excess inventory levels
and obsolete inventory. We also recorded charges for purchase commitments
related to obsolete inventory not yet received by December 31, 1997 of
approximately $582,000.
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COPPER MOUNTAIN'S BUSINESS WILL BE SUBSTANTIALLY DEPENDENT ON CERTAIN
STRATEGIC RELATIONSHIPS
Copper Mountain's success will be substantially dependent upon its strategic
partnerships, including its recently signed OEM agreements with Lucent
Technologies Inc. and 3Com Corporation. Under the Lucent OEM agreement, Lucent
will market and sell our DSL equipment for a period of up to four years. Under
this agreement, we have agreed to manufacture, co-brand and sell our products
to Lucent and to provide Lucent with training, installation and technical
support for these products. In January 1999, shortly after we entered into our
OEM agreement with Lucent, Lucent announced an agreement to acquire Ascend
Communications, Inc., a competitor of ours which offers a competing DSL
solution. As a result, Lucent may seek to reduce the marketing and/or sales of
our products in favor of competitive products manufactured by Ascend.
Under our agreement with 3Com, 3Com has agreed to market our DSL customer
premise equipment ("CPE") for an initial period of up to three years. Under
this agreement we have agreed to manufacture, co-brand and sell our products
to 3Com. Additionally, this agreement calls for both companies to co-market
their DSL products. Moreover, 3Com may request to manufacture its own DSL CPE
products based on our DSL technology. Both parties have agreed to use good
faith efforts to effect such manufacturing license.
The amount and timing of resources which our strategic partners devote to
our business is not within our control. Our strategic partners may not perform
their obligations as expected. Agreements with our strategic partners are
relatively new, and we cannot be certain that any revenue will be derived from
strategic arrangements. If any of our strategic partners breaches or
terminates its agreement or fails to perform its obligations under its
agreement, that could have a material adverse effect on our business,
financial condition and results of operations. In the event that these
relationships are terminated, we may not be able to continue to maintain or
develop strategic relationships or to replace strategic partners. In addition,
any strategic agreements negotiated in the future may not be successful.
COPPER MOUNTAIN'S MARKETS ARE HIGHLY COMPETITIVE
The market for telecommunications equipment is highly competitive. We
compete directly with the following companies: Cisco Systems, Inc., Ascend
(acquisition by Lucent pending), Alcatel S.A., Diamond Lane Communications
Corporation (acquisition by Nokia Corporation pending) and Paradyne
Corporation. We also compete with other DSL equipment providers. Many of our
current and potential competitors have significantly greater selling and
marketing, technical, manufacturing, financial, and other resources, including
vendor-sponsored lease financing programs. Moreover, our competitors may
foresee the course of market developments more accurately than we do. Although
we believe we have certain technological and other advantages over our
competitors, realizing and maintaining such advantages will require a
continued high level of investment in research and development, marketing and
customer service and support. Due to the rapidly evolving markets in which we
compete, additional competitors with significant market presence and financial
resources, including other large telecommunications equipment manufacturers,
may enter those markets, thereby further intensifying competition. We may not
have sufficient resources to continue to make the investments or achieve the
technological advances necessary to compete successfully with existing
competitors or new competitors. Additionally, our markets are characterized by
increasing consolidation both within the data communications sector and by
companies combining or acquiring data communications assets and assets for
delivering voice-related services, as exemplified by the recently announced
acquisitions of Ascend by Lucent and Diamond Lane by Nokia. Increased
competition and consolidation could result in price reductions and loss of
market share, which would materially adversely affect our business, financial
condition and results of operations. Also, to the extent we introduce new
product offerings intended to capitalize on the anticipated trend toward broad
deployment of DSL services, including DSL services targeted at residential
subscribers seeking high-speed access to public communications networks, we
will encounter new competitors such as coaxial cable and wireless equipment
vendors. Even if we are successful in competing in the business DSL market, we
may not be able to compete successfully in the market for residential
subscribers.
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COPPER MOUNTAIN IS SUBJECT TO RISKS ASSOCIATED WITH THE INTRODUCTION OF NEW
PRODUCTS
Copper Mountain intends to continue to invest in product and technology
development. The development of new or enhanced products is a complex and
uncertain process requiring the accurate anticipation of technological and
market trends. We may experience design, manufacturing, marketing and other
difficulties that could delay or prevent our development, introduction or
marketing of new products and enhancements. The introduction of new or
enhanced products also requires that we manage the transition from older
products in order to minimize disruption in customer ordering patterns and
ensure that adequate supplies of new products can be delivered to meet
anticipated customer demand. In the future, we expect to develop certain new
products, such as new DSL Access Concentrators, UADSL and HDSL2 line cards and
new CPE. We may not successfully develop, introduce or manage the transition
of these new products. Furthermore, products such as those we currently offer
may contain undetected or unresolved errors when they are first introduced or
as new versions are released. Despite testing, errors may be found in new
products or upgrades after commencement of commercial shipments. These errors
could result in:
. delays in or loss of market acceptance and sales;
. diversion of development resources;
. injury to our reputation; and
. increased service and warranty costs.
Any of these could materially adversely affect our business, financial
condition and results of operations.
COPPER MOUNTAIN IS DEPENDENT ON WIDESPREAD MARKET ACCEPTANCE OF ITS PRODUCTS
Widespread market acceptance of Copper Mountain's products is critical to
its future success. Factors that may affect the market acceptance of our
products include market acceptance of DSL technology in particular, the
performance, price and total cost of ownership of our products, the
availability and price of competing products and technologies and the success
and development of our resellers, OEMs and field sales channels. Many of these
factors are beyond our control. The introduction of new and enhanced products
may cause certain customers to defer or return orders for existing products.
Although we maintain reserves against such returns, such resources may not be
adequate. We cannot be certain that we will not experience delays in product
development in the future. Failure of our existing or future products to
maintain and achieve meaningful levels of market acceptance would materially
adversely affect our business, financial condition and results of operations.
COPPER MOUNTAIN'S OPERATING RESULTS ARE SUBSTANTIALLY DEPENDENT ON A SMALL
NUMBER OF PRODUCTS
Copper Mountain currently derives substantially all of its revenues from its
product family of DSL solutions and expects that this concentration will
continue in the foreseeable future. As a result, our future performance will
depend on:
. the demand for DSL solutions;
. successful development, introduction and market acceptance of new and
enhanced products that address customer requirements;
. product introductions or announcements by our competitors;
. price competition; and
. technological change.
The market may not continue to demand our current products, and we may not be
successful in marketing any new or enhanced products.
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COPPER MOUNTAIN'S FAILURE TO ADEQUATELY PROTECT ITS PROPRIETARY RIGHTS MAY
ADVERSELY AFFECT ITS BUSINESS
Copper Mountain's success and ability to compete is dependent in part upon
its proprietary technology. We rely on a combination of copyright, trademark
and trade secret laws, as well as confidentiality agreements and licensing
arrangements, to establish and protect our proprietary rights. We presently
have no patents, although we have one patent application pending which we
intend to pursue but which is not central to our current business. Despite our
efforts to protect our proprietary rights, existing copyright, trademark and
trade secret laws afford only limited protection. In addition, the laws of
certain foreign countries do not protect our proprietary rights to the same
extent as do the laws of the United States. Attempts may be made to copy or
reverse engineer aspects of our products or to obtain and use information that
we regard as proprietary. Accordingly, we may not be able to protect our
proprietary rights against unauthorized third-party copying or use. Any
infringement of our proprietary rights could materially adversely affect our
future operating results. Furthermore, policing the unauthorized use of our
products is difficult. Litigation may be necessary in the future to enforce
our intellectual property rights, to protect our trade secrets or to determine
the validity and scope of the proprietary rights of others. Such litigation
could result in substantial costs and diversion of resources and could have a
material adverse effect on our future operating results.
COPPER MOUNTAIN IS SUBSTANTIALLY DEPENDENT ON ITS KEY PERSONNEL
Copper Mountain's success depends to a significant degree upon the continued
contributions of the principal members of its sales, engineering and
management personnel, many of whom would be difficult to replace.
Specifically, we believe that our future success is highly dependent on our
senior management, and in particular on Richard Gilbert, President and Chief
Executive Officer; Joseph Markee, Chief Technology Officer; Steven Hunt, Vice
President of Engineering; and Michael Kelly, Vice President of Sales. Except
for agreements with Mr. Gilbert, Mr. Markee and Mr. Hunt, we do not have
employment contracts with our key personnel. In any event, employment
contracts would not prevent key personnel from terminating their employment
with Copper Mountain. The loss of the services of any key personnel,
particularly senior management and engineers, could materially adversely
affect our business, financial condition and results of operations.
INABILITY TO ATTRACT AND RETAIN PERSONNEL MAY ADVERSELY AFFECT COPPER MOUNTAIN
Copper Mountain has experienced growth in revenues and expansion of its
operations which have placed significant demands on its management,
engineering staff and facilities. We have recently hired additional
engineering, sales, marketing, customer support and accounting personnel.
Continued growth will also require us to hire more engineering, sales and
administrative personnel. We have at times experienced, and continue to
experience, difficulty in recruiting qualified personnel. Recruiting qualified
personnel is an intensely competitive and time-consuming process. We may not
be able to attract and retain the necessary personnel to accomplish our growth
strategies and we may experience constraints that will adversely affect our
ability to satisfy customer demand in a timely fashion or to support
satisfactorily our customers and operations. In addition, companies in the
telecommunications industry whose employees accept positions with competitors
frequently claim that such competitors have engaged in unfair hiring
practices. We received one such notice from another company and, although to
date this notice has not resulted in litigation, we may receive other notices
in the future as we seek to hire qualified personnel and such notices may
result in material litigation. We could incur substantial costs in defending
ourselves against any such litigation, regardless of the merits or outcome of
such litigation.
FAILURE TO MANAGE THE GROWTH OF COPPER MOUNTAIN'S OPERATIONS WILL ADVERSELY
AFFECT ITS BUSINESS
Copper Mountain has rapidly and significantly expanded its operations and
anticipates that further significant expansion will be required to address
potential growth in its client base and market opportunities. During 1998, we
increased the number of employees from 56 to 111. This expansion is placing a
significant strain on our managerial, operational and financial resources.
Most of our existing senior management personnel joined us within the last 18
months, including our President and Chief Executive Officer, who joined us in
April
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1998; our Vice President of Finance and Chief Financial Officer, who joined us
in March 1998; our Vice President of Marketing, who joined us in May 1998; our
Vice President of Business Development, who joined us in June 1998; and our
Vice President of Operations, who joined us in October 1998. Our new employees
include a number of key managerial, technical and operations personnel who we
have not yet fully integrated. We expect to add additional key personnel in
the near future, including direct sales and marketing personnel. To manage the
expected growth of our operations and personnel, we will be required to:
. improve existing and implement new operational, financial and management
controls, reporting systems and procedures;
. install new management information systems; and
. train, motivate and manage our sales and marketing, engineering,
technical and customer support employees.
We may not be able to install management information and control systems in
an efficient and timely manner, and our current or planned personnel, systems,
procedures and controls may not be adequate to support our future operations.
If we are unable to manage growth effectively, our business, financial
condition and results of operations will be materially adversely affected.
We operate our business from facilities in Palo Alto, California and San
Diego, California. We face challenges related to effectively and efficiently
coordinating our operations between these facilities. If we are unsuccessful
in meeting these challenges, our business and operating results may be
adversely affected. Moreover, we currently fully occupy our existing
facilities in San Diego, and we are in the process of securing new facilities
to replace them. The demand for suitable commercial real estate in San Diego
presently is greater than the available supply. To the extent we are unable to
secure, build-out and move into larger facilities in San Diego, our ability to
add new personnel and expand our operations in San Diego will be adversely
affected. We may not be able to complete this move in a timely or cost
effective manner, and there may be disruptions related to such move that could
materially adversely affect our business, financial condition and results of
operations.
COPPER MOUNTAIN'S DEPENDENCE ON SOLE AND SINGLE SOURCE SUPPLIERS EXPOSES IT TO
SUPPLY INTERRUPTION
Although Copper Mountain generally uses standard parts and components for
its products, many key components are purchased from sole or single source
vendors for which alternative sources are not currently available. We
presently purchase three key components from vendors for which there are
currently no substitutes: a semiconductor chip, a power supply and a system
control module. We are evaluating alternate source vendors for each of these
key components, but any alternate vendors may not meet our quality standards
for component vendors. The inability to obtain sufficient quantities of these
components may in the future result in delays or reductions in product
shipments which could materially adversely affect our business, financial
condition and results of operations. In the event of a reduction or
interruption of supply, as much as six months could be required before we
would begin receiving adequate supplies from alternative suppliers, if any. It
is possible that a source may not be available for us or be in a position to
satisfy our production requirements at acceptable prices and on a timely
basis, if at all. In such event, our business, financial condition and results
of operations would be materially adversely affected. In addition, the
manufacture of certain of these single or sole source components is extremely
complex, and our reliance on the suppliers of these components exposes us to
potential production difficulties and quality variations, which could
negatively impact cost and timely delivery of our products. Any significant
interruption in the supply, or degradation in the quality, of any component
could have a material adverse effect on our business, financial condition and
results of operations.
COPPER MOUNTAIN'S DEPENDENCE ON INDEPENDENT MANUFACTURERS COULD RESULT IN
PRODUCT DELIVERY DELAYS
Copper Mountain currently uses a small number of independent manufacturers
to provide certain printed circuit boards, chassis and subassemblies and, in
certain cases, to complete final assembly and testing of our
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products. Our reliance on independent manufacturers involves a number of
risks, including the absence of adequate capacity, the unavailability of or
interruptions in access to certain process technologies and reduced control
over delivery schedules, manufacturing yields and costs. We have historically
subcontracted substantially all of our manufacturing to one company, SMS
Technology, located in San Diego, California. We recently entered into a
letter of intent with Flextronics International Ltd., located in San Jose,
California, and expect to have a formal agreement in place by the end of the
first quarter of 1999. Under the letter of intent, Flextronics will be our
main source of independent manufacturing. The transition from SMS Technology
to Flextronics may result in delays, interruptions or quality problems, and we
may not effectively manage the transition. If our manufacturers are unable or
unwilling to continue manufacturing our components in required volumes, we
will have to identify acceptable alternative manufacturers, which could take
in excess of six months. It is possible that a source may not be available to
us when needed or be in a position to satisfy our production requirements at
acceptable prices and on a timely basis, if at all. Any significant
interruption in supply would result in the allocation of products to
customers, which in turn could have a material adverse effect on our business,
financial condition and results of operations. Moreover, since all of our
final assembly and tests are performed in one location, any fire or other
disaster at our assembly facility would have a material adverse effect on our
business, financial condition and results of operations.
A LONGER THAN EXPECTED SALES CYCLE MAY RESULT IN OPERATING LOSSES FOR COPPER
MOUNTAIN
Copper Mountain's customers tend to be significantly larger than Copper
Mountain and are able to exert a high degree of influence over Copper
Mountain. They have sufficient bargaining power to demand low prices and other
terms and conditions that may materially adversely affect our business,
financial condition and results of operations. Prior to selling our products
to customers, we must undergo lengthy product approval processes, often taking
up to one year. Accordingly, we are continually submitting successive versions
of our products as well as new products to our customers for approval. The
length of the approval process can vary and is affected by a number of
factors, including customer priorities, customer budgets and regulatory issues
affecting telecommunication service providers. Delays in the product approval
process could materially adversely affect our business, financial condition
and results of operations. While we have been successful in the past in
obtaining product approvals from our customers, such approvals and the ensuing
sales of such products may not continue to occur. Delays can also be caused by
late deliveries by other vendors, changes in implementation priorities and
slower than anticipated growth in demand for the services that our products
support. A delay in, or cancellation of, the sale of our products could result
in operating losses and cause our results of operations to vary significantly
from quarter to quarter.
COPPER MOUNTAIN IS SUBJECT TO RISKS ASSOCIATED WITH THE REGULATORY UNCERTAINTY
OF THE TELECOMMUNICATIONS INDUSTRY
CLECs and other telecommunications service providers have been allowed to
compete with incumbent local exchange carriers ("ILECs") in providing local
exchange services, primarily as a result of the adoption of regulations under
the Telecom Act which impose new duties on ILECs to open local telephone
markets to competition. Although the Telecom Act was designed to expand
competition in the telecommunications industry, the realization of the
objectives of the Telecom Act is subject to many uncertainties, including
. judicial and administrative proceedings designed to define rights and
obligations pursuant to the Telecom Act;
. actions or inactions by ILECs or other carriers that affect the pace at
which changes contemplated by the Telecom Act occur;
. resolution of questions concerning which parties will finance such
changes; and
. other regulatory, economic and political factors.
Any changes to legal requirements, the adoption of new regulations by
federal or state regulatory authorities under the Telecom Act or any legal
challenges to the Telecom Act could have a material adverse effect upon the
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market for our products. Moreover, our distributors or telecommunications
service provider customers may require, or we may otherwise deem it necessary
or advisable, that we modify our products to address actual or anticipated
changes in the regulatory environment. Our inability to modify our products or
address any regulatory changes could have a material adverse effect on our
business, financial condition or results of operations.
FAILURE TO MEET FUTURE CAPITAL NEEDS MAY ADVERSELY AFFECT COPPER MOUNTAIN'S
BUSINESS
Copper Mountain requires substantial working capital to fund its business.
We have had significant net losses and negative cash flow from operations
since inception and may continue to experience net losses and negative cash
flow in the future. As of December 31, 1998, we had approximately $18.5
million in cash and short term investments. We expect to use the net proceeds
of this offering primarily to continue investments in product development, to
expand sales and marketing activities and to make capital expenditures. We
believe that such proceeds, together with our existing capital resources, will
be sufficient to meet our capital requirements for at least the next twelve
months. However, our capital requirements depend on several factors, including
the rate of market acceptance of our products, the ability to expand our
client base, the growth of sales and marketing and other factors. If capital
requirements vary materially from those currently planned, we may require
additional financing sooner than anticipated. If additional funds are raised
through the issuance of equity securities, the percentage ownership of our
stockholders will be reduced, stockholders may experience additional dilution,
or such equity securities may have rights, preferences or privileges senior to
those of the holders of our common stock. Additional financing may not be
available when needed on terms favorable to us or at all. If adequate funds
are not available or are not available on acceptable terms, we may be unable
to develop or enhance our services, take advantage of future opportunities or
respond to competitive pressures, which could materially adversely affect our
business, financial condition or results of operations.
INTELLECTUAL PROPERTY CLAIMS AGAINST COPPER MOUNTAIN CAN BE COSTLY AND RESULT
IN THE LOSS OF SIGNIFICANT RIGHTS
The telecommunications industry is characterized by the existence of a large
number of patents and frequent litigation based on allegations of patent
infringement. As the number of entrants in our market increases and the
functionality of our products is enhanced and overlaps with the products of
other companies, we may become subject to claims of infringement or
misappropriation of the intellectual property rights of others. From time to
time, third parties may assert patent, copyright, trademark and other
intellectual property rights to technologies that are important to our
business. Any claims asserting that our products infringe or may infringe
proprietary rights of third parties, if determined adversely to us, could have
a material adverse effect on our business, financial condition or results of
operations. In our agreements, we agree to indemnify our customers for any
expenses or liabilities resulting from claimed infringements of patents,
trademarks or copyrights of third parties. Third parties may assert
infringement or misappropriation claims against us in the future with respect
to current or future products. Any claims, with or without merit, could be
time-consuming, result in costly litigation, divert the efforts of our
technical and management personnel, cause product shipment delays or require
us to enter into royalty or licensing agreements, any of which could have a
material adverse effect upon our operating results. Such royalty or licensing
agreements, if required, may not be available on terms acceptable to us, if at
all. Legal action claiming patent infringement may be commenced against us. We
cannot assure you that we would prevail in such litigation given the complex
technical issues and inherent uncertainties in patent litigation. In the event
a patent claim against us was successful and we could not obtain a license on
acceptable terms or license a substitute technology or redesign to avoid
infringement, our business, financial condition and results of operations
would be materially adversely affected.
FAILURE TO COMPLY WITH REGULATIONS AND EVOLVING INDUSTRY STANDARDS COULD DELAY
COPPER MOUNTAIN FROM INTRODUCING NEW PRODUCTS
The market for Copper Mountain's products is characterized by the need to
meet a significant number of communications regulations and standards, some of
which are evolving as new technologies are deployed. In
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order to meet the requirements of our customers, our products may be required
to comply with various regulations including those promulgated by the FCC and
standards established by Underwriters Laboratories and Bell Communications
Research. Failure of our products to comply, or delays in compliance, with the
various existing and evolving industry regulations and standards could delay
the introduction of our products. Moreover, enactment by federal, state or
foreign governments of new laws or regulations, changes in the interpretation
of existing laws or regulations or a reversal of the trend toward deregulation
in the telecommunications industry could have a material adverse effect on our
customers, and thereby materially adversely affect our business, financial
condition and results of operations.
YEAR 2000 RISKS MAY RESULT IN MATERIAL ADVERSE EFFECT ON COPPER MOUNTAIN'S
BUSINESS
As is true for most companies, the Year 2000 problem creates a risk for us.
If systems do not correctly recognize date information when the year changes
to 2000, there could be an adverse impact on our operations. The risk exists
primarily in four areas:
. potential warranty or other claims from our customers;
. systems we use to run our business;
. systems used by our suppliers; and
. the potential for failures of our products, particularly our central
office-based systems, due to Year 2000 problems associated with products
manufactured by other equipment vendors used in conjunction with our
products.
We are currently evaluating our exposure in all of these areas.
We are in the process of conducting a comprehensive inventory and evaluation
of the information systems used to run our business. Systems which are
identified as non-compliant will be upgraded or replaced. For the Year 2000
non-compliance issues identified to date, the cost of remediation is not
expected to be material to our operating results. However, if implementation
of replacement systems is delayed, or if significant new non-compliance issues
are identified, our business, financial condition or results of operations
could be materially adversely affected.
We intend to contact our critical suppliers and contract manufacturers to
determine whether their operations and the products and services they provide
are Year 2000 compliant. Where practicable, we will attempt to mitigate our
risks with respect to the failure of our suppliers and contract manufacturers
to be prepared for any Year 2000 problems. However, such failures remain a
possibility and could have a material adverse impact on our business,
financial condition or results of operations.
Although we believe our products are Year 2000 compliant, because all
customer situations cannot be anticipated, we may see an increase in warranty
and other claims as a result of the Year 2000 transition. In addition,
litigation regarding Year 2000 compliance issues is expected to escalate. For
these reasons, the impact of customer claims could have a material adverse
impact on our business, financial condition or results of operations.
COPPER MOUNTAIN MAY BE SUBJECT TO SIGNIFICANT LIABILITY CLAIMS FROM ITS
CUSTOMERS AND THE END-USERS OF ITS PRODUCTS
Copper Mountain's products have in the past contained, and may in the future
contain, undetected or unresolved errors when first introduced or as new
versions are released. Despite extensive testing, errors, defects or failures
may be found in our current or future products or enhancements after
commencement of commercial shipments. If this happens, we may experience delay
in or loss of market acceptance and sales, product returns, diversion of
development resources, injury to our reputation or increased service and
warranty costs, any of which could have a material adverse effect on our
business, financial condition and results of operations. Moreover, because our
products are designed to provide critical communications services, we may
receive significant liability claims. Our agreements with customers typically
contain provisions intended to limit our
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exposure to liability claims. These limitations may not, however, preclude all
potential claims resulting from a defect in one of our products. Although we
maintain product liability insurance covering certain damages arising from
implementation and use of our products, our insurance may not cover any claims
sought against us. Liability claims could require us to spend significant time
and money in litigation or to pay significant damages. As a result, any such
claims, whether or not successful could seriously damage our reputation and
our business.
COPPER MOUNTAIN MAY ENGAGE IN FUTURE ACQUISITIONS THAT DILUTE ITS
STOCKHOLDERS, CAUSE IT TO INCUR DEBT AND ASSUME CONTINGENT LIABILITIES
As part of Copper Mountain's business strategy, we expect to review
acquisition prospects that would complement our current product offerings,
augment our market coverage or enhance our technical capabilities, or that may
otherwise offer growth opportunities. While we have no current agreements or
negotiations underway with respect to any such acquisitions, we may acquire
businesses, products or technologies in the future. In the event of such
future acquisitions, we could:
. issue equity securities which would dilute current stockholders'
percentage ownership;
. incur substantial debt; or
. assume contingent liabilities.
Such actions by us could materially adversely affect our results of
operations and/or the price of our common stock. Acquisitions also entail
numerous risks, including:
. difficulties in assimilating acquired operations, technologies or
products;
. unanticipated costs associated with the acquisition could materially
adversely affect our results of operations;
. diversion of management's attention from other business concerns;
. adverse effects on existing business relationships with suppliers and
customers;
. risks of entering markets in which we have no or limited prior
experience; and
. potential loss of key employees of acquired organizations.
We may not be able to successfully integrate any businesses, products,
technologies or personnel that we might acquire in the future, and our failure
to do so could have a material adverse effect on our business, financial
condition and results of operations.
COPPER MOUNTAIN MAY BE EXPOSED TO RISKS ASSOCIATED WITH INTERNATIONAL
OPERATIONS
Copper Mountain does not currently sell its products or have operations in
international markets. However, we may seek to expand sales by expanding into
international markets. Conducting business outside of the United States is
subject to certain risks, including:
. longer accounts receivable collection cycles;
. difficulties in managing operations across disparate geographic areas;
. difficulties associated with enforcing agreements and collecting
receivables through foreign legal systems;
. changes in a specific country's or region's political or economic
conditions;
. trade protection measures;
. import or export licensing requirements;
. potential adverse tax consequences;
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. unexpected changes in regulatory requirements; and
. reduced or limited protection of our intellectual property rights in
some countries.
In addition, we might not successfully market, sell and distribute our
products in local markets and we cannot be certain that one or more of such
factors will not materially adversely affect our future international
operations, and consequently, our business, financial condition and results of
operations.
CONTROL BY EXISTING STOCKHOLDERS MAY LIMIT YOUR ABILITY TO INFLUENCE THE
OUTCOME OF DIRECTOR ELECTIONS AND CERTAIN TRANSACTIONS
Upon completion of this offering, Copper Mountain's executive officers,
directors and principal stockholders and their affiliates will beneficially
own shares or approximately % of the outstanding shares of common
stock ( % if the underwriters' over-allotment option is exercised in full).
These stockholders, if acting together, would be able to significantly
influence all matters requiring approval by our stockholders, including the
election of directors and the approval of mergers or other business
combination transactions.
COPPER MOUNTAIN'S STOCK PRICE MAY BE VOLATILE AND YOU MAY NOT BE ABLE TO
RESELL SHARES AT OR ABOVE THE OFFERING PRICE
There has previously not been a public market for Copper Mountain's common
stock. We cannot predict the extent to which investor interest in Copper
Mountain will lead to the development of a trading market or how liquid that
market might become. The initial public offering price for the shares will be
determined by negotiations between us and the representatives of the
Underwriters and may not be indicative of prices that will prevail in the
trading market. The trading price of our common stock could be subject to wide
fluctuations in response to factors such as:
. actual or anticipated variations in quarterly operating results;
. announcements of technological innovations;
. new products or services offered by us or our competitors;
. changes in financial estimates by securities analysts;
. announcements of significant acquisitions, strategic partnerships, joint
ventures or capital commitments by us or our competitors;
. additions or departures of key personnel;
. sales of common stock; and
. other events or factors, many of which are beyond our control.
In addition, the stock market in general, and the Nasdaq National Market and
technology companies in particular, have experienced extreme price and volume
fluctuations that have often been unrelated or disproportionate to the
operating performance of such companies. The trading prices of many technology
companies' stocks are at or near historical highs and these trading prices and
multiples are substantially above historical levels. These trading prices and
multiples may not be sustained. These broad market and industry factors may
materially adversely affect the market price of our common stock, regardless
of our actual operating performance. In the past, following periods of
volatility in the market price of a company's securities, securities class-
action litigation has often been instituted against such companies. Such
litigation, if instituted, could result in substantial costs and a diversion
of management's attention and resources, which would materially adversely
affect our business, financial condition and results of operations.
17
<PAGE>
SUBSTANTIAL FUTURE SALES OF COPPER MOUNTAIN'S COMMON STOCK IN THE PUBLIC
MARKET COULD CAUSE ITS STOCK PRICE TO FALL
Sales of Copper Mountain's common stock in the public market after this
offering could adversely affect the market price of its common stock. Upon
completion of this offering, we will have approximately shares of
common stock outstanding, of which approximately shares (approximately
shares if the underwriters' over-allotment option is exercised in
full) will be freely transferable without restriction or registration under
the Securities Act of 1933 (the "Securities Act"), unless such shares are held
by our affiliates, as that term is defined in Rule 144 under the Securities
Act. The officers and directors and all of our existing stockholders have
agreed with Morgan Stanley & Co. Incorporated or have otherwise agreed with us
not to sell or otherwise dispose of any of their shares for 180 days after the
date of this prospectus. However, Morgan Stanley & Co. Incorporated may, in
its sole discretion, at any time without notice, release all or any portion of
the shares subject to lock-up agreements. Sales of common stock by existing
stockholders in the public market, or the availability of such shares for
sale, could adversely affect the market price of the common stock.
In addition, as soon as practicable after the date of this prospectus, we
intend to file a registration statement on Form S-8 with the Securities and
Exchange Commission covering the 8,173,383 shares of common stock reserved for
issuance under our 1996 Equity Incentive Plan and 1999 Employee Stock Purchase
Plan. On the date 180 days after the effective date of this offering, at least
1,531,294 shares will be subject to immediately exercisable options (based on
options outstanding on February 26, 1999). Sales of a large number of shares
could have an adverse effect on the market price for our common stock.
After this offering, the holders of 15,690,530 shares of common stock
(including shares issuable upon exercise of warrants) will have certain rights
with respect to registration of such shares for sale to the public. If such
holders, by exercising their registration rights, cause a large number of
securities to be registered and sold in the public market, such sales could
have an adverse effect on the market price for our common stock. If we were to
include in a company-initiated registration shares held by such holders
pursuant to the exercise of their registration rights, such sales may have an
adverse effect on our ability to raise needed capital.
CERTAIN PROVISIONS IN COPPER MOUNTAIN'S CORPORATE CHARTER AND BYLAWS MAY
DISCOURAGE TAKE-OVER ATTEMPTS AND THUS DEPRESS THE MARKET PRICE OF OUR STOCK
Provisions in Copper Mountain's Certificate of Incorporation, as amended and
restated upon the closing of this offering (the "Restated Certificate") may
have the effect of delaying or preventing a change of control or changes in
its management. These provisions include:
. the right of the Board of Directors to elect a director to fill a
vacancy created by the expansion of the board of directors;
. the ability of the Board of Directors to alter our bylaws without
getting stockholder approval; and
. the requirement that at least 10% of the outstanding shares are needed
to call a special meeting of stockholders.
This could discourage potential take-over attempts and could adversely
affect the market price of our common stock. In addition, these provisions may
limit the ability of stockholders to remove our current management.
COPPER MOUNTAIN HAS NO SPECIFIC PLAN FOR ANY SIGNIFICANT PORTION OF PROCEEDS
Copper Mountain currently has no specific plans for any significant portion
of the net proceeds of the offering. As a consequence, our management will
have the discretion to allocate the net proceeds of this offering to uses the
stockholders may not deem desirable. We may not be able to invest these
proceeds to yield a significant return. Substantially all of the proceeds of
the offering will be invested in short-term, interest-bearing, investment
grade securities for an indefinite period of time.
18
<PAGE>
DILUTION
Because Copper Mountain's common stock has in the past been sold at prices
substantially less than the initial public offering price that you will pay,
you will suffer immediate dilution of $ per share in pro forma net
tangible book value. The exercise of outstanding options and warrants may
result in further dilution. See "Dilution."
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These statements relate
to future events or our future financial performance. In some cases, you can
identify forward-looking statements by terminology such as "may," "will,"
"should," "except," "plan," "anticipate," "believe," "estimate," "predict,"
"potential" or "continue," the negative of such terms or other comparable
terminology. These statements are only predictions. Actual events or results
may differ materially. In evaluating these statements, you should specifically
consider various factors, including the risks outlined under "Risks Factors."
These factors may cause our actual results to differ materially from any
forward-looking statement.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other
person assumes responsibility for the accuracy and completeness of the
forward-looking statements. We are under no duty to update any of the forward-
looking statements after the date of this prospectus to conform such
statements to actual results or to changes in our expectations.
19
<PAGE>
USE OF PROCEEDS
The net proceeds to be received by Copper Mountain from the sale of
shares of common stock in this offering are estimated to be $ ($ if
the underwriters exercise their over-allotment option in full), at an assumed
initial public offering price of $ and after deducting underwriting
discounts and commissions and estimated offering expenses of $ payable by
Copper Mountain.
We expect to use the net proceeds for general corporate purposes, including
working capital and other corporate purposes, such as expansion of sales and
marketing activities and our overall operations. The amounts we actually
expend for such working capital and other purposes may vary significantly and
will depend on a number of factors, including the amount of our future
revenues and the other factors described under "Risk Factors." Accordingly,
our management will retain broad discretion in the allocation of the net
proceeds of this offering. A portion of the net proceeds may also be used to
acquire or invest in complimentary businesses, technologies, product lines or
products. We have no current plans, agreements or commitments with respect to
any such acquisition, and we are not currently engaged in any negotiations
with respect to any such transaction. Pending such uses, the net proceeds of
this offering will be invested in short term, interest-bearing, investment
grade securities.
DIVIDEND POLICY
We have never declared nor paid any cash dividends on our capital stock. We
currently intend to retain any future earnings to finance the growth and
development of our business and therefore do not anticipate paying any cash
dividends in the foreseeable future. In addition, our loan and security
agreement with a commercial bank prohibits the payment of dividends. Any
future determination to pay cash dividends will be at the discretion of the
Board of Directors and will be dependent upon our financial condition, results
of operations, capital requirements, general business condition and such other
factors as the Board of Directors may deem relevant.
20
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization as of December 31, 1998:
. on an actual basis;
. on a pro forma basis to reflect the conversion upon the closing of the
offering of all outstanding shares of preferred stock into 15,334,824
shares of common stock; and
. on a pro forma basis as adjusted to reflect the sale of the common stock
offered hereby at an assumed initial public offering price of $ per
share and the receipt of the net proceeds therefrom, after deducting the
estimated expenses, underwriting discounts and commissions payable by
Copper Mountain.
This information should be read in conjunction with our financial statements
and related notes thereto included elsewhere in this prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1998
--------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(IN THOUSANDS, EXCEPT SHARE
DATA)
<S> <C> <C> <C>
Long-term debt, less current portion(1)........ $ 1,965 $ 1,965 $ 1,965
-------- -------- --------
Stockholders' equity:
Convertible preferred stock, no par value,
10,602,464 shares authorized, 10,223,230
shares issued and outstanding actual; $.001
par value, 5,000,000 shares authorized, no
shares issued and outstanding pro forma and
pro forma as adjusted(2).................... 44,502 -- --
Common stock, $.001 par value,
29,397,536 shares authorized, 2,516,873
shares issued and outstanding actual,
17,851,697 shares issued and outstanding pro
forma; 100,000,000 shares authorized,
shares issued and outstanding pro
forma as adjusted(2)........................ 3 18
Notes receivable from stockholders........... (41) (41) (41)
Paid-in capital.............................. 1,416 45,903
Deferred compensation........................ (1,068) (1,068) (1,068)
Accumulated deficit.......................... (17,969) (17,969) (17,969)
-------- -------- --------
Total stockholders' equity................. 26,843 26,843
-------- -------- --------
Total capitalization..................... $ 28,808 $ 28,808 $
======== ======== ========
</TABLE>
- --------
(1) See Notes 3 and 4 of Notes to Financial Statements.
(2) Based upon the number of shares of common stock outstanding as of December
31, 1998. Excludes, as of December 31, 1998, (i) 5,370,305 shares of
common stock reserved for issuance under our 1996 Equity Incentive Plan,
of which 4,265,471 shares were subject to outstanding options at a
weighted average exercise price of $.52 per share; and (ii) 355,706 shares
of common stock issuable upon exercise of outstanding warrants at a
weighted average exercise price of $2.08 per share. See "Description of
Capital Stock" and "Management--1996 Equity Incentive Plan."
21
<PAGE>
DILUTION
Our pro forma net tangible book value as of December 31, 1998 was
approximately $26.8 million or $1.50 per share of common stock. Pro forma net
tangible book value represents the amount of total tangible assets less total
liabilities, divided by the number of shares of common stock outstanding,
assuming conversion of all outstanding shares of preferred stock into common
stock. Without taking into account any other changes in the net tangible book
value after December 31, 1998, other than to give effect to our sale of the
shares of common stock offered hereby at an assumed initial public
offering price of $ per share, and our receipt of the estimated net
proceeds therefrom, our pro forma net tangible book value as of December 31,
1998 would have been approximately $ million or $ per share. This
represents an immediate increase in net tangible book value of $ per share
to existing stockholders and an immediate dilution of $ per share to new
investors. The following table illustrates this per share dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................... $
Pro forma net tangible book value per share before this
offering....................................................... $1.50
Increase per share attributable to new investors................
-----
Pro forma net tangible book value per share after this offering...
-------
Dilution per share to new investors............................... $
=======
</TABLE>
The following table summarizes, on a pro forma basis as of December 31,
1998, the differences between existing stockholders and the new investors with
respect to the number of shares of common stock purchased from Copper
Mountain, the total consideration paid and the average price per share paid,
before deducting the underwriting discounts and commissions and estimated
offering expenses payable by Copper Mountain.
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION AVERAGE
------------------ ------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders.......... 17,851,697 % $45,651,000 % $2.56
New investors..................
---------- ----- ----------- -----
Total........................ 100.0% $ 100.0%
========== ===== =========== =====
</TABLE>
The foregoing discussion and tables assume no exercise of any stock options
or warrants outstanding as of December 31, 1998. As of December 31, 1998,
there were options outstanding to purchase a total of 4,265,471 shares of
common stock with a weighted average exercise price of $.52 per share and
warrants outstanding to purchase a total of 355,706 shares of common stock
with a weighted average exercise price of $2.08 per share. To the extent that
any of these options or warrants are exercised, there will be further dilution
to new investors.
22
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Operating
Results and Copper Mountain's Financial Statements and Notes thereto, included
elsewhere in this Prospectus. The selected financial data for the period from
March 11, 1996 (inception) through December 31, 1996 and for each of the two
years in the period ended December 31, 1998 and as of December 31, 1996, 1997
and 1998, are derived from the financial statements of Copper Mountain that
have been audited by Ernst & Young LLP, independent auditors, which are
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 11, 1996
(INCEPTION) YEAR ENDED
THROUGH DECEMBER 31,
DECEMBER 31, ----------------
1996 1997 1998
-------------- ------- -------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue.................................. $ -- $ 211 $21,821
Cost of revenue.............................. -- 1,717 12,400
------- ------- -------
Gross profit (loss).......................... -- (1,506) 9,421
Operating expenses:
Research and development................... 1,483 4,753 7,225
Sales and marketing........................ -- 1,510 5,363
General and administrative................. 553 1,928 3,428
Amortization of deferred stock
compensation.............................. -- -- 49
------- ------- -------
Total operating expenses................. 2,036 8,191 16,065
------- ------- -------
Loss from operations......................... (2,036) (9,697) (6,644)
Interest income.............................. 47 268 406
Interest expense............................. (3) (97) (213)
------- ------- -------
Net loss..................................... $(1,992) $(9,526) $(6,451)
======= ======= =======
Basic and diluted net loss per share(1)...... $(10.66) $(13.51) $ (4.84)
======= ======= =======
Shares used to compute basic and diluted net
loss per share(1)........................... 187 705 1,333
======= ======= =======
Pro forma net loss per share, basic and
diluted(2).................................. $ (.39)
=======
Shares used in computing pro forma net loss
per share(2)................................ 16,668
=======
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1996 1997 1998
------ ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash, cash equivalents and short-term investments...... $3,406 $ 9,517 $18,529
Working capital........................................ 366 7,653 24,326
Total assets........................................... 4,056 12,332 36,209
Long-term debt and capital lease obligation, less
current portion....................................... 262 735 1,965
Total stockholders' equity............................. 750 9,069 26,843
</TABLE>
- --------
(1) See Note 1 of Notes to the Financial Statements for a description of the
computation of the basic and diluted net loss per share and the number of
shares used to compute basic and diluted net loss per share.
(2) Pro forma per share calculations reflect the conversion upon the closing
of the offering of all outstanding shares of preferred stock into
15,334,824 shares of common stock.
23
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND OPERATING RESULTS
The following discussion should be read in conjunction with the Financial
Statements and the related Notes contained elsewhere in this prospectus. The
following discussion contains forward-looking statements that involve risks
and uncertainties. These statements relate to future events or our future
financial performance. In many cases, you can identify forward-looking
statements by terminology such as "may," "will," "should," "expects," "plans,"
"anticipates," "believes," "estimates," "predicts," "potential" or "continue,"
or the negative of such terms and other comparable terminology. These
statements are only predictions. Our actual results may differ significantly
from those projected in the forward-looking statements as a result of certain
factors, including, but not limited to, those set forth under "Risk Factors"
and elsewhere in this prospectus.
OVERVIEW
From Copper Mountain's inception in March 1996 through December 1997, our
operating activities related primarily to developing, building and testing
prototype products; building our technical support infrastructure; commencing
the staffing of our marketing, sales and customer service organizations; and
establishing relationships with customers. We commenced shipments of our
CopperEdge product family in September 1997, including our initial line cards
and our CopperRocket DSL customer premise equipment ("CPE"). Since inception,
we have incurred significant losses and as of December 31, 1998, we had an
accumulated deficit of $18.0 million. See "Risk Factors--Copper Mountain Has a
History of Losses and May Experience Future Losses."
Our revenue is generated primarily from sales of our central office based
equipment: our CopperEdge 200 ("CE200") DSL Access Concentrators, the related
wide area network ("WAN") cards and line cards and, to a lesser extent, from
sales of our DSL CPE. Additionally, we plan to sell network management
software which provides monitoring and management capabilities for the CE200,
revenues from which have not been material to date. For the year ended
December 31, 1998, sales to our four largest customers accounted for
approximately 95% of our revenue. Sales to NorthPoint Communications, Inc. and
Rhythms NetConnections Inc., both of which are CLECs, accounted for 61% and
18% of our revenue, respectively, for the same period. While the level of
sales to any specific customer is expected to vary from period to period, we
expect that we will continue to have significant customer concentration for
the foreseeable future. See "Risk Factors--Copper Mountain Is Dependent on a
Small Number of Customers."
We market and sell our products directly to telecommunications service
providers and, to a lesser extent, through strategic OEMs and distributors. We
generally recognize revenue from product sales upon shipment if collection of
the resulting receivable is probable and product returns are reasonably
estimated. No revenue is recognized on products shipped on a trial basis.
Estimated sales returns based on historical experience by product are recorded
at the time the product revenue is recognized. To date, we have not generated
any revenues from international sources.
We expect our gross margin to be affected by many factors including
competitive pricing pressures, fluctuations in manufacturing volumes, costs of
components and sub-assemblies, the mix of products or system configurations
sold and the volume and timing of sales of follow-on line cards for CE200
systems shipped in prior periods. Additionally, our gross margin may fluctuate
due to changes in our mix of distribution channels. Currently we derive the
majority of our revenue from sales made directly to telecommunications service
providers. With the recent strategic OEM agreements with Lucent Technologies
Inc. and 3Com Corporation, we expect to generate increasing OEM revenue in the
future. A significant increase in our OEM revenue could further impact or
reduce our gross margin.
To date, gross margin on sales of our CE200 and related WAN and line cards,
typically sold as a combined system, has been higher than gross margin on
sales of DSL CPE. Furthermore, combined systems are not generally fully
populated (i.e., eight line cards per system which can support up to 192
subscribers) when sold.
24
<PAGE>
When our customers add more subscribers than are supported in the initial
configuration, we expect that these customers will purchase additional line
cards from us to increase subscriber capacity. The sale of additional line
cards generates higher gross margin than the initial sale of combined systems.
Gross margin on our DSL CPE is expected to decline in the future and we expect
to face pricing competition which may result in lower average selling prices
for these products as other suppliers of Copper Mountain compatible CPE enter
the market. As the telecommunications service providers that purchase our
products make their services broadly available to their customers, we expect
our product mix to continue to shift more heavily toward sales of line cards.
We expect gross margin for our CE200 systems and follow-on line cards to
improve due to lower component costs and improved costs from our
subcontractors as our revenue from these products increases. However, we
cannot be sure that we will achieve or maintain the revenue volumes required
for these increases in gross margin. See "Risk Factors--Copper Mountain's
Operating Results Fluctuate Significantly."
We outsource most of our manufacturing and supply chain management
operations, and we conduct manufacturing engineering, quality assurance,
program management, documentation control and product repairs at our
manufacturing facility in San Diego, California. Accordingly, a significant
portion of our cost of revenue consists of payments to our current contract
manufacturer, SMS Technologies, Inc. We expect to transition to a new
independent manufacturer in 1999, Flextronics International Ltd. See "Risk
Factors--Copper Mountain's Dependence on Independent Manufacturers Could
Result in Product Delivery Delays." The Company selected Flextronics as its
new manufacturing partner with the goal of lowering per unit product costs as
a result of manufacturing economies of scale. However, we cannot assure you
when or if such cost reductions will occur. The failure to obtain such cost
reductions could materially adversely affect our gross margins and operating
results.
Research and development expenses consist principally of salaries and
related personnel expenses, consultant fees and prototype expenses related to
the design, development and testing of our products and enhancement of our
network management software. We expense all research and development expenses
as incurred. We believe that continued investment in research and development
is critical to attaining our strategic product and cost-reduction objectives
and, as a result, we expect these expenses to increase in absolute dollars in
the future.
Sales and marketing expenses consist of salaries, commissions and related
expenses for personnel engaged in marketing, sales and field service support
functions, as well as trade shows and promotional expenses. We intend to
invest in marketing, selling and promotional programs, and therefore we expect
expenses related to these programs to continue to increase substantially in
absolute dollars in the future. In addition, we expect to substantially expand
our field sales operations and customer support organizations, which would
also result in an increase in sales and marketing expenses.
General and administrative expenses consist primarily of salaries and
related expenses for executive, finance, human resources, and administrative
personnel, recruiting expenses, professional fees and other general corporate
expenses. We expect general and administrative expenses to increase in
absolute dollars as we add personnel and incur additional costs related to the
growth of our business and operation as a public company.
Despite growing revenues, we have not been profitable on a fiscal-year
basis, and we may continue to incur net losses. In addition to the customer
concentration we have experienced, we also have a lengthy sales cycle for our
products, and there is often a significant delay between the time we incur
expenses and the time we realize the related revenue. To the extent that
future revenues do not increase significantly in the same periods in which
operating expenses increase, our operating results would be adversely
affected. See "Risk Factors--Copper Mountain's Operating Results Fluctuate
Significantly." In 1999, we expect to combine our two offices in San Diego,
California in a new facility which we expect will provide us room for future
expansion. The rent for this new San Diego facility will be significantly
greater than our rent obligations for our current facilities.
The Company first generated revenue from sales of its CE200 in September
1997. Prior to that time, the Company had no revenue. As a result, the Company
believes that period-to-period comparisons of annual
25
<PAGE>
operating results prior to 1997 are less meaningful than an analysis of recent
annual and quarterly operating results. Accordingly, the Company is providing
a discussion and analysis of its results of operations that is primarily
focused upon 1997, 1998 and the six quarters ended December 31, 1998.
QUARTERLY OPERATING RESULTS
The following tables present unaudited quarterly operating results, in
dollars and as a percentage of net revenue, for the six quarters ended
December 31, 1998. We believe this information reflects all adjustments
(consisting only of normal recurring adjustments) that we consider necessary
for a fair presentation of such information in accordance with generally
accepted accounting principles. The results for any quarter are not
necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
QUARTER ENDED
-----------------------------------------------------------
MAR. JUNE SEPT. DEC.
SEPT. DEC. 31, 31, 30, 30, 31,
30, 1997 1997 1998 1998 1998 1998
-------- -------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net revenue............. $ 28 $ 183 $ 317 $ 1,281 $ 5,556 $14,667
Cost of revenue......... 271 1,282 217 795 3,359 8,029
-------- -------- ------- ------- ------- -------
Gross profit (loss)..... (243) (1,099) 100 486 2,197 6,638
Operating expenses:
Research and
development.......... 1,164 1,455 1,773 1,788 1,765 1,899
Sales and marketing... 365 696 724 954 1,377 2,308
General and
administrative....... 451 653 535 721 971 1,201
Amortization of
deferred stock
compensation......... -- -- -- -- 2 47
-------- -------- ------- ------- ------- -------
Total operating
expenses........... 1,980 2,804 3,032 3,463 4,115 5,455
-------- -------- ------- ------- ------- -------
Income (loss) from
operations............. (2,223) (3,903) (2,932) (2,977) (1,918) 1,183
Interest income......... 36 108 113 62 18 213
Interest expense........ (6) (21) (33) (62) (65) (53)
-------- -------- ------- ------- ------- -------
Net income (loss)....... $ (2,193) $ (3,816) $(2,852) $(2,977) $(1,965) $ 1,343
======== ======== ======= ======= ======= =======
<CAPTION>
AS A PERCENTAGE OF NET REVENUE
-----------------------------------------------------------
MAR. JUNE SEPT. DEC.
SEPT. DEC. 31, 31, 30, 30, 31,
30, 1997 1997 1998 1998 1998 1998
-------- -------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net revenue............. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue......... 967.9 700.5 68.5 62.1 60.5 54.7
-------- -------- ------- ------- ------- -------
Gross profit (loss)..... (867.9) (600.5) 31.5 37.9 39.5 45.3
Operating expenses:
Research and
development.......... 4,157.1 795.1 559.3 139.6 31.7 12.9
Sales and marketing... 1,303.6 380.4 228.4 74.4 24.8 15.8
General and
administrative....... 1,610.7 356.8 168.8 56.3 17.5 8.2
Amortization of
deferred stock
compensation......... -- -- -- -- -- 0.3
-------- -------- ------- ------- ------- -------
Total operating
expenses........... 7,071.4 1,532.3 956.5 270.3 74.0 37.2
-------- -------- ------- ------- ------- -------
Income (loss) from
operations............. (7,939.3) (2,132.8) (925.0) (232.4) (34.5) 8.2
Interest income......... 128.6 59.0 35.7 4.8 0.3 1.5
Interest expense........ (21.4) (11.5) (10.4) (4.8) (1.2) (0.4)
-------- -------- ------- ------- ------- -------
Net income (loss) ...... (7,832.1)% (2,085.3)% (899.7)% (232.4)% (35.4)% 9.2%
======== ======== ======= ======= ======= =======
</TABLE>
26
<PAGE>
SIX QUARTERS ENDED DECEMBER 31, 1998
Net Revenue. Our revenue increased in each of the five quarters ended
December 31, 1998. The increase in revenue over these periods reflected the
introduction of our CE200 in September 1997, the successive release of various
DSL line cards for the CE200 systems, release of our DSL CPE, investments made
in our marketing and direct sales organization and the increased commercial
acceptance of DSL technology.
Gross Profit (Loss). Our gross profit increased in each of the five quarters
ended December 31, 1998, with the exception of the quarter ended December 31,
1997, which increases were due to higher unit volumes, decreased unit costs
associated with improved overhead absorption and favorable product mix. For
the quarter ended December 31, 1997, we recorded a loss on purchase
commitments and a writedown of inventory of $582,000 and $315,000,
respectively, to take into consideration excess inventory levels and obsolete
inventory. We include warranty reserves, which are accrued monthly under our
warranty policy, in our cost of revenue figures. These warranty reserves are
taken in connection with the repair and replacement of certain products.
Research and Development. Our research and development expenses increased in
each of the five quarters ended December 31, 1998, except in the quarter ended
September 30, 1998, where research and development expenses declined due to
lower expenses for contract labor. These expenses have generally increased
because of increases in our personnel costs, quality and technical support
expense, depreciation expense and costs of other outside services. Expenses
for third-party contract development and prototype materials fluctuated, on a
quarter to quarter basis, due to the timing of commercial releases of our
products. While we believe future fluctuations in expenses for third-party
contract development are unlikely, they may still occur, and, we may also
continue to experience fluctuations in prototype material expenses in the
future. Research and development expenses as a percentage of revenue declined
in each of the last five quarters due to substantial increases in our net
revenue in each such quarter.
Sales and Marketing. Our sales and marketing expenses increased in each of
the five quarters due to increases in personnel costs, sales commissions,
public relations expenses, and other variable marketing expenses.
Additionally, we have continued to increase our co-marketing efforts and
expenditures with vendors supplying Copper Mountain compatible DSL CPE,
strategic OEMs and customers. We expect these expenses, including costs of
trade show participation, costs of sponsorship of industry forums and expenses
for prototype and production products, to continue to increase in the future.
Sales and marketing expenses as a percentage of revenue declined in each of
the last five quarters due to substantial increases in our net revenue in each
such quarter.
General and Administrative. Our general and administrative costs increased
in each of the five quarters except for the quarter ended March 31, 1998, when
they decreased because of a fluctuation in our personnel costs. In the last
five quarters, we experienced general growth in our recruiting and human
resources expenses, legal expenses and administrative expenses. Also,
beginning in the quarter ended June 30, 1998, we incurred additional expenses
as a result of hiring two executive officers, including expenses for
relocation, travel and compensation. General and administrative expenses as a
percentage of revenue declined in each of the last five quarters due to
substantial increases in our net revenue in each such quarter.
Interest Income (Expense). Our quarterly interest income fluctuated over the
last five quarters due to changes in our cash balances related to the timing
of the sale of our Series C and Series D Preferred Stock in October 1997 and
October 1998, respectively. Our quarterly interest expense has also fluctuated
over the last five quarters, with increases occurring in all quarters except
for the quarter ended December 31, 1998. This decline in the quarter ended
December 31, 1998 was due to the repayment, in early October 1998, of our
outstanding balance under our line of credit.
Our quarterly and annual operating results have fluctuated in the past and
are likely to fluctuate significantly in the future due to a variety of
factors, many of which are outside of our control. For a discussion of some of
these factors, see "Risk Factors--Copper Mountain's Operating Results
Fluctuate Significantly." Because of these and other factors, our quarterly
revenues, expenses and results of operations could vary significantly in the
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future, and period-to-period comparisons should not be relied upon as
indications of future performance. We may not be able to increase our revenues
in future periods or be able to sustain our existing level of revenues or our
rate of revenue growth on a quarterly or annual basis. In addition, our annual
or quarterly operating results may not meet the expectations of securities
analysts and investors. If this happens, the trading price of our common stock
could significantly decline.
RESULTS OF OPERATIONS
The following table sets forth, as a percentage of total revenues, certain
statement of operations data for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
----------------
1997 1998
-------- -----
<S> <C> <C>
Net revenue.................................................. 100.0% 100.0%
Cost of revenue.............................................. 813.7 56.8
-------- -----
Gross profit (loss).......................................... (713.7) 43.2
Operating expenses:
Research and development................................... 2,252.6 33.1
Sales and marketing........................................ 715.6 24.6
General and administrative................................. 913.8 15.7
Amortization of deferred stock compensation................ -- 0.2
-------- -----
Total operating expenses................................. 3,882.0 73.6
-------- -----
Loss from operations......................................... (4,595.7) (30.4)
Interest income.............................................. 127.0 1.9
Interest expense............................................. (46.0) (1.0)
-------- -----
Net loss..................................................... (4,514.7)% (29.5)%
======== =====
</TABLE>
YEARS ENDED DECEMBER 31, 1997 AND 1998
Net Revenue. Our revenue increased from $211,000 in 1997 to $21.8 million in
1998. This increase was primarily due to the successful transition from
development of our products to commencement of commercial operations and the
general release of our products. In 1998, we successfully introduced our 24
port SDSL line card, our 24 port IDSL line card, our frame relay-based WAN
card and our IDSL CPE.
Gross Profit (Loss). Our gross profit increased from a loss of $1.5 million
in 1997 to $9.4 million in 1998. The increase in gross profit was primarily
the result of the absorption of overhead associated with greater unit volumes
and increased economies of scale. As a result, our gross margin in 1998
improved substantially over 1997.
Research and Development. Our research and development expenses increased
from $4.8 million in 1997 to $7.2 million in 1998. This increase in our
research and development expenses was related to increases in personnel and
personnel related costs, prototype material expenses, contract development
expense and as well as expenses related to the completion and commercial
release of our initial products. We intend to increase expenditures in
research and development programs in future periods for the purpose of
enhancing current products, reducing the cost of current products and
developing new products.
Sales and Marketing. Our sales and marketing expenses increased from $1.5
million in 1997 to $5.4 million in 1998. This increase was primarily a result
of an increase in personnel and personnel-related costs, including increases
in staffing for marketing program management, product marketing, account
management, customer support and direct sales as well as a substantial
increase in sales commissions. To a lesser extent, the increase resulted from
higher trade show and marketing communications expenses.
General and Administrative. Our general and administrative expenses
increased from $1.9 million in 1997 to $3.4 million in 1998. This increase is
a result of an increase in personnel costs for executive officers and
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support staff, legal, accounting and consulting fees. The increase in our
general and administrative staffing, was required to support the growth in our
operations, commercial activities and customer base.
Interest Income (Expense). Net interest income increased by $22,000, from
$171,000 in 1997 to $193,000 in 1998. This increase reflects an increase in
interest income generated from higher average cash balances in 1998. The
increases in interest income were partially offset by lesser increases, from
1997 to 1998, in interest expense associated with our equipment loans and our
line of credit.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have financed our operations primarily through the
sale of preferred equity securities and more recently through the use of loans
for the purchase of capital equipment. We have raised an aggregate of $44.5
million, net of offering expenses, through the sale of preferred stock
offerings.
At December 31, 1998, we had cash and cash equivalents of $7.6 million and
short-term investments of $10.9 million. We have a $4.0 million line of credit
agreement with a bank which allows us to borrow an amount equal to 80% of
eligible accounts receivable plus the lesser of 25% of our eligible inventory
or $500,000. There were no amounts outstanding under the line of credit at
December 31, 1998. In addition, we have secured equipment financing with three
lenders which terms allow us to borrow up to $3.7 million. As of December 31,
1998, we had $2.7 million outstanding under these lines and had the ability to
borrow an additional $195,000. See Notes 3 and 4 of Notes to Financial
Statements.
Cash used in operating activities for the periods ended December 31, 1996,
1997 and 1998 was $1.5 million, $8.0 million and $14.3 million, respectively.
The relative increase in cash used for operating activities for the year ended
December 31, 1997 compared to the prior period was primarily due to an
increase in net loss of $7.5 million which was partially offset by an increase
in accounts payable and other accruals. The relative increase in cash used for
operating activities for the year ended December 31, 1998 compared to the
prior year was primarily due to increases in inventory, accounts receivable
and other assets, as a result of the introduction of and growth in demand for
our products. This increase was partially offset by increases in accounts
payable and other accruals, as well as a $3.1 million decrease in the net
loss.
Cash used in investing activities for the periods ended December 31, 1996,
1997 and 1998 was $682,000, $1.5 million and $12.1 million, respectively. The
relative increase in cash used for investing activities for the year ended
December 31, 1997 compared to the prior period was primarily due to an
$833,000 increase in the purchase of computers and other equipment. The
relative increase in cash used for investing activities for the year ended
December 31, 1998 compared to the prior year was primarily due to the purchase
of $10.9 million in short term investments, which was partially offset by a
decrease in the amount of equipment purchased.
Cash provided by financing activities for the periods ended December 31,
1996, 1997 and 1998 was $5.6 million, $15.6 million and $24.5 million,
respectively. The relative increase in cash provided by investing activities
for the year ended December 31, 1997 compared to the prior period was
primarily due to $15.2 million in net proceeds from our issuance of Series B
and Series C Preferred Stock. The relative increase in cash provided from
financing activities for the year ended December 31, 1998 compared to the
prior year was primarily due to $24.1 million in net proceeds from our
issuance of Series D Preferred Stock.
The Company has no material commitments other than obligations under its
credit facilities and operating and capital leases. See Notes 3, 4 and 6 of
Notes to Financial Statements. Our future capital requirements will depend
upon many factors, including the timing of research and product development
efforts and expansion of our marketing efforts. We expect to continue to
expend significant amounts on property and equipment related to the expansion
of facility infrastructure, computer equipment and for research and
development laboratory and test equipment to support on-going research and
development operations.
In future periods, we generally anticipate significant increases in working
capital on a period-to-period basis primarily as a result of planned increased
product revenue. In conjunction with the expected increase in revenue, we
expect higher relative levels of inventory and accounts receivable. While we
also expect an increase in
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accounts payable and other liabilities, we do not expect that they will offset
the increases in inventory and accounts receivable.
We believe that our cash and cash equivalents balances, short-term
investments and funds available under our existing line of credit will be
sufficient to satisfy our cash requirements for at least the next 12 months.
Our management intends to invest our cash in excess of current operating
requirements in short-term, interest-bearing, investment-grade securities.
INTEREST RATE RISK
The Company is exposed to changes in interest rates primarily from its long-
term debt arrangements and, secondarily, its investments in certain held-to-
maturity securities. Under its current policies, the Company does not use
interest rate derivative instruments to manage exposure to interest rate
changes. A hypothetical 100 basis point adverse move in interest rates along
the entire interest rate yield curve would not materially effect the fair
value of interest sensitive financial instruments at December 31, 1998.
IMPACT OF YEAR 2000
Many computers, software, and other equipment include computer code in which
calendar year data is abbreviated to only two digits. As a result of this
design decision, some of these systems could fail to operate or fail to
produce correct results if "00" is interpreted to mean 1900, rather than 2000.
These problems are widely expected to increase in frequency and severity as
the year 2000 approaches, and are commonly referred to as the "Year 2000
Problem."
General Readiness Assessment. The Year 2000 Problem affects the computers,
software and other equipment that we use, operate or maintain for our
operations. As a result, we have formalized our Year 2000 compliance plan (the
"Plan"), to be implemented by a team of employees, led by our internal
information technology staff, responsible for monitoring the assessment and
remediation status of our Year 2000 projects and reporting such status to the
Audit Committee of our Board of Directors. This project team is currently
assessing the potential effect and costs of remediating the Year 2000 Problem
for our internal systems. To date, we have not obtained verification or
validation from any independent third parties of our processes to assess and
correct any of our Year 2000 Problems or the costs associated with these
activities.
Assessment of Copper Mountain's Software and Products. Beginning in 1998, we
began assessing the ability of our software and products to operate properly
in the year 2000. We believe that our current products are Year 2000
compliant. Additionally, as we design and develop new products, we subject
them to testing for Year 2000 compliance and the ability to distinguish
between various date formats. We expect to continue to test our software and
products for Year 2000 compliance and compliance when used with other standard
operating systems or computer platforms, including those developed by
companies such as Microsoft Corporation and Sun MicroSystems, Inc.
Assessment of Internal Infrastructure. We believe that we have identified
most of the major computers, software application, and related equipment used
in connection with our internal operations that will need to be evaluated to
determine if they must be modified, upgraded or replaced to minimize the
possibility of a material disruption to our business. We are currently
assessing the potential impact of the Year 2000 problem on such applications
and equipment. Upon completion of such evaluation, which we expect to occur by
the end of June 1999, we expect to commence the process of modifying,
upgrading, and replacing major systems that have been assessed as adversely
affected. We expect to complete this process before the occurrence of any
material disruption of our business.
Systems Other than Information Technology Systems. In addition to computers
and related systems, the operation of office and facilities equipment, such as
fax machines, telephone switches, security systems and other common devices
may be affected by the Year 2000 Problem. We are currently assessing the
potential effect and costs of remediating the Year 2000 Problem on our office
equipment and our facilities in San Diego, California and Palo Alto,
California.
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Costs of Remediation. We estimate the total cost to us of completing any
required modifications, upgrades or replacements of our internal systems will
not exceed $100,000, most of which we expect to incur during calendar 1999.
This estimate is being monitored, and we will revise it as additional
information becomes available.
Based on the activities described above, we do not believe that the Year
2000 Problem will have a material adverse effect on our business or operating
results. In addition, we have not deferred any material information technology
projects, nor equipment purchases, as a result of our Year 2000 Problem
activities.
Suppliers. As part of the Plan we intend to contact third-party suppliers of
components and our key subcontractors used in the delivery of our products to
identify and, to the extent possible, resolve issues involving the Year 2000
Problem. However, we have limited or no control over the actions of these
third-party suppliers and subcontractors. Thus, while we expect that we will
be able to resolve any significant Year 2000 Problems with these third
parties, there can be no assurance that these suppliers will resolve any or
all Year 2000 Problems before the occurrence of a material disruption to the
operation of our business. Any failure of these third parties to timely
resolve Year 2000 Problems with their systems could have a material adverse
effect on our business, financial condition and results of operations.
Most Likely Consequences of Year 2000 Problems. We expect to identify and
resolve all Year 2000 Problems that could materially adversely affect our
business operations. However, we believe that it is not possible to determine
with complete certainty that all Year 2000 Problems affecting us have been
identified or corrected. The number of devices and systems that could be
affected and the interactions among these devices and systems are too numerous
to address. In addition, no one can accurately predict which Year 2000
Problem-related failures will occur or the severity, timing, duration, or
financial consequences of these potential failures. As a result, we believe
that the following consequences are possible:
. a significant number of operational inconveniences and inefficiencies
for us, our contract manufacturers and our customers that will divert
management's time and attention and financial and human resources from
ordinary business activities;
. possible business disputes and claims, including claims under product
warranty, due to Year 2000 Problems experienced by our customers and
incorrectly attributed to our products or performance, which we believe
will be resolved in the ordinary course of business; and
. a few serious business disputes alleging that we failed to comply with
the terms of contracts or industry standards of performance, some of
which could result in litigation or contract termination.
Contingency Plans. We are currently developing contingency plans to be
implemented if our efforts to identify and correct Year 2000 Problems
affecting our internal systems are not effective. We expect to complete our
contingency plans by the end of June 1999. Depending on the systems affected,
these plans could include:
. accelerated replacement of affected equipment or software;
. short to medium-term use of backup equipment and software or other
redundant systems;
. increased work hours for our personnel or the hiring of additional
information technology staff; and
. the use of contract personnel to correct, on an accelerated basis, any
Year 2000 Problems that arise or to provide interim alternate solutions
for information system deficiencies.
Our implementation of any of these contingency plans could have a material
adverse effect on our business, financial condition and results of operations.
Disclaimer. The discussion of our efforts and expectations relating to Year
2000 compliance are forward-looking statements. Our ability to achieve Year
2000 compliance, and the level of incremental costs associated therewith,
could be adversely affected by, among other things, the availability and cost
of contract personnel and external resources, third-party suppliers' ability
to modify proprietary software, and unanticipated problems not identified in
the ongoing compliance review.
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BUSINESS
OVERVIEW
Copper Mountain Networks is a leading supplier of high-speed DSL-based
communication products for the broadband access market. Our solutions enable
telecommunications service providers to provide high-speed, cost-effective
connectivity over the existing copper wire telephone infrastructure to the
business, multi-tenant unit and residential markets. We believe there is
significant demand for high-speed data access services, especially among
business users who have found current last-mile solutions to be inadequate or
too costly. Therefore, Copper Mountain has initially focused on producing
equipment that supports practical, large-scale deployment of DSL services to
businesses and their associated teleworkers.
INDUSTRY BACKGROUND
Over the past few years, the volume of data traffic across public
communications networks has increased significantly due to the use of the
Internet as a communications and transaction medium. According to
International Data Corporation ("IDC"), the number of Internet users worldwide
reached approximately 69 million in 1997 and is forecasted to grow to
approximately 320 million by 2002. IDC also estimates that the value of goods
and services sold worldwide through the Internet will increase from $12
billion in 1997 to over $400 billion in 2002. In addition to electronic
commerce, business usage of web-based communications, remote access for
teleworkers, applications hosting and other services have generated enormous
traffic for the existing communications infrastructure. To meet this demand,
service providers have installed high-bandwidth fiber optic transmission
equipment, high-speed switches and core routers in backbone and interoffice
networks.
In contrast to these core networks, which support digital transmission
speeds exceeding 9 Gbps, most access networks, or connections between
subscribers and central offices, often called the "last mile," are made
through the copper infrastructure originally built to transmit analog voice
signals. In fact, over 140 million businesses and homes in the United States
are served by this copper infrastructure, and the worldwide installed base of
copper lines exceeds 700 million. We believe most business and residential
users have found narrowband access, using dial-up analog modems with
connection speeds that do not exceed 56.6 Kbps, inadequate to meet their high-
bandwidth requirements.
Until recently, the incumbent local exchange carriers ("ILECs"), consisting
of the Regional Bell Operating Companies and GTE Corporation, were the
exclusive operators of this last-mile, copper wire-based infrastructure and
primarily offered ISDN and T-1 services to address the need for high-speed
connectivity. These service offerings enable symmetrical data transmission at
rates up to 128 Kbps and 1.5 Mbps, respectively. ISDN, which requires the
installation of special equipment at each end of the copper access line, has
achieved limited success due to complexity and high cost of deployment. T-1
services provide 12 times the bandwidth of ISDN, but require expensive
infrastructure modification and investment. While there are various
transmission media alternatives for providing broadband connectivity, such as
coaxial cable and wireless, we believe none have the cost and coverage
advantages of using the existing copper infrastructure.
Digital Subscriber Line ("DSL") is a technology that was developed to
address the last-mile bottleneck. While there are several variants of DSL
implementations, they all share several important advantages over traditional
high-speed services delivered over the copper infrastructure as well as cable
and wireless broadband alternatives.
. Guaranteed, Dedicated Bandwidth. DSL is a point-to-point technology that
allows for guaranteed levels of bandwidth. Because DSL connections are
dedicated to each user, DSL does not suffer from service degradation as
other subscribers are added to the system, and, in addition, allows a
higher level of security. Alternative broadcast solutions, such as cable
and wireless, are shared systems which suffer service degradation and
increase the risk of security breaches as additional users share
bandwidth.
. Low Cost. Because DSL uses the existing copper-based last-mile
connection, it can be significantly less expensive to deploy to
businesses and homes than other broadband solutions. In addition, recent
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advances in semiconductor technology and industry standardization have
made the widespread deployment of DSL increasingly economical to both
service providers and subscribers.
. Universal Coverage. Since virtually all businesses and homes in the
United States already have installed copper wire connections, DSL
technologies can be made immediately available to a large percentage of
potential customers. In addition, the leading variants of DSL can enable
data transmission up to and beyond 20,000 feet without requiring
repeaters.
Despite the advantages of deploying DSL over existing copper infrastructure,
ILECs historically have largely sought to protect their existing T-1 and ISDN
businesses. In the mid-1990's, however, the prospect of greater competition
from cable operators deploying cable modems to deliver high-bandwidth services
prompted the ILECs to accelerate their investments in those DSL technologies
that appeared most appropriate for residential subscribers. The ILECs promoted
an asymmetrical DSL variant, called "ADSL," because consumers typically
download large quantities of data-intensive content from the Internet, while
the amount of data sent upstream by consumers is typically limited. As a
result, most DSL vendors focused on ADSL solutions for the residential market.
However, deployments of ADSL have been limited because of its cost and a
variety of technical issues.
More recently, DSL transmission technology has been embraced by a new set of
telecommunications service providers that emerged as a result of the
Telecommunications Reform Act of 1996 (the "Telecom Act"). The Telecom Act
redefined the competitive landscape in the telecommunications industry by
creating a legal framework for other service providers, such as competitive
local exchange carriers ("CLECs"), to provide competing local communications
services. The Telecom Act also eliminated a substantial barrier to entry for
the CLECs by enabling them to use the existing copper-based network
infrastructure built by the ILECs. Some of the new CLECs have focused on
providing competitively priced, high-bandwidth connectivity for business
customers who typically had used T-1 lines from the ILECs to meet their
bandwidth needs or who used dial-up modems but are currently seeking cost-
effective broadband services. These CLECs are focused on providing DSL
solutions that meet the current needs of business subscribers and provide
flexibility for future services.
While many DSL equipment vendors focus on the needs of the residential
market, few focus on the unique needs of business subscribers. In particular,
CLECs are seeking equipment solutions that enable the deployment of cost-
effective, full-coverage, high-bandwidth data access services. Moreover, as
the demands of high-bandwidth users and technology mature, other
telecommunications service providers are also looking for vendors that can
effectively incorporate DSL into communications equipment solutions. Finally,
telecommunications service providers generally want their equipment providers
to support a variety of end-user devices. As the DSL market naturally evolves
from business to residential users, telecommunications service providers will
require equipment that enables them to provide high-speed services across
their subscriber base.
THE COPPER MOUNTAIN SOLUTION
We provide broadband access solutions based on DSL technology to
telecommunication service providers. Our solutions enable CLECs, ILECs and
other telecommunications service providers to provide high-speed, cost-
effective, last-mile connectivity over the existing copper wire telephone
infrastructure to the business, multiple tenant unit and residential markets.
Our DSL solutions provide the following key benefits:
Support for Business Applications. Our products enable CLECs, ILECs and
other telecommunications service providers to deliver business services such
as high-speed Internet access, corporate networking, teleworking and remote
PBX extension. We focused our initial service offerings on symmetrical data
transmission addressing the bi-directional bandwidth needs of business users
because relevant applications, such as e-mail, file transfer, web hosting and
corporate intranets, require subscribers to send as well as receive data. Our
CopperEdge DSL Access Concentrator provides multiple networking models and
advanced packet processing to meet the evolving needs of business subscribers
by enabling simultaneous support for Internet access, Frame Relay, virtual
private network and voice-over-packet services.
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Full Coverage DSL. Our products allow our service provider customers the
flexibility to reach their targeted subscribers. Our SDSL service offering
delivers symmetrical bandwidth between 128 Kbps and 1.5 Mbps to subscribers up
to and beyond 20,000 feet from the central office. We also offer IDSL, which
is the only variant of DSL that can reach the approximately 17% of U.S.
subscribers connected through existing remote digital loop carriers ("DLCs")
without requiring an upgrade of these remote DLCs. In addition to symmetrical
bandwidth and long reach, our SDSL and IDSL products are based on a
communications protocol that is already widely deployed throughout the access
network ensuring compatibility with other network elements. We intend to
develop products, including new DSL implementations, to enable our customers
to deliver new services to subscribers.
Multi-Vendor CPE Interoperability. We have partnered with third-party DSL
customer premise equipment ("CPE") manufacturers through the CopperCompatible
program to develop a broad line of modems, routers and other innovative CPE
which are compatible with our CopperEdge DSL Access Concentrators. This
program delivers more innovation in CPE products to address subscriber
requirements than any single vendor could on its own, and gives
telecommunications service providers multiple sources of compatible CPE. We
provide CPE manufacturers with interoperability specifications and
intellectual property to assist their development, and we run a test
laboratory to certify the CopperCompatible status of their products. CPE
vendors which currently have or are developing CopperCompatible CPE include
3Com Corporation, ADC Kentrox, a subsidiary of ADC Telecommunications, Inc.,
Netopia, Inc., Cayman Systems, Inc., Escalate Networks, Inc., FlowPoint
Corporation and Ramp Networks, Inc., among others.
Trouble-Free Operations. Our products are designed to reduce installation
time and support requirements for our telecommunications service provider
customers. Our CopperEdge 200 DSL Access Concentrator is designed to meet the
stringent requirements of the telephone company ("telco") central office
environment. Each concentrator supports full redundancy and is designed for
easy support and service. In addition, our products and management software
are designed for and proven in large-scale national deployments. Our initial
service implementations, SDSL and IDSL, are based on a mature protocol that is
spectrally compatible to existing ISDN and T-1 network elements which
minimizes potential interference within the central offices of host ILECs.
Finally, we have reduced CPE deployment complexity with a zero-installation
"plug-and-play" CPE procedure that eliminates end-user configuration, removes
the need to send a technician to the customer premise and provides centralized
management and control.
STRATEGY
Our objective is to be the leading supplier of DSL solutions to
telecommunications service providers. The key elements of our strategy
include:
Extend Position in the Business DSL Market. Since our inception, we have
focused on providing cost-effective solutions for telecommunications service
providers targeting business subscribers. Business users increasingly require
high-speed data services to conduct business, and non-DSL alternatives are
often expensive, complex and lack sufficient bi-directional bandwidth. We are
targeting telecommunications service providers focused on the business market,
including well-financed CLECs and integrated national telecommunications
service providers. To date, our major customers include NorthPoint
Communications, Inc., Rhythms NetConnections Inc., ICG Communications, Inc.
and UUNET, a subsidiary of MCI WorldCom, Inc. ("MCI WorldCom/UUNET"). We will
continue to focus on supporting the requirements of our existing customers as
well as providing solutions to existing and new carriers that are focused on
business users.
Enhance Service Offerings. We intend to continue to add functionality and
services to increase the usefulness and performance of our products. We
believe that our core product offerings can be enhanced to offer better value
to service providers and business subscribers. Our products are designed to
support future services and technology. Currently, we are developing
additional quality of service capabilities to enable virtual private
networking and voice-over-packet services to meet evolving subscriber
requirements. In addition, we are developing new offerings with DSL
technologies such as HDSL-2 and UADSL, and plan to enhance our offerings as
needed by subscribers and service providers.
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Leverage OEM and Development Relationships. We have formed OEM relationships
with Lucent Technologies Inc. and 3Com. We expect these relationships to allow
us to gain greater distribution and market presence. Lucent has agreed to
resell our product line as a co-branded sale. Additionally, it is our hope
that we will work together to integrate our products with Lucent's
complementary networking products. Under the OEM and development agreement
with 3Com, they will offer our CPE products through their distribution
channels. We intend to leverage 3Com's broad distribution network in the
commercial and retail markets. We believe that our OEM and development
relationships will enhance our market position, and we expect to continue to
leverage these relationships and seek additional collaborations.
Target Multi-Tenant Building Deployments Outside the Central Office. In
addition to deploying DSL equipment in ILEC central offices for our CLEC and
other telecommunications service provider customers, we have begun deploying
DSL Concentrators in commercial office buildings and apartment and condominium
buildings. We believe that this market, known as the multi-tenant unit market,
will significantly expand the deployment of DSL technology. While we believe
that our current product offerings are well suited to this market, we are
developing new products that will allow carriers to reduce the cost of high-
speed data access to tenants in these types of properties. In addition, we are
working with service providers who are targeting multi-tenant property
managers to focus on this emerging market.
Drive Interoperability. We actively support the interoperability of DSL
technology to facilitate faster and broader market acceptance. We have formed
the CopperCompatible program through which we offer licenses of our DSL CPE
technology to a number of third-party manufacturers of CPE equipment. This
allows service providers easier deployment, as they can use a number of
different CPE products with our central office or multi-tenant equipment, and
gives subscribers the ability to choose their own premise equipment.
Additionally, interoperability enables our technology to be combined with
other networking products such as routers, access and aggregation devices.
Address Emerging Opportunities in Residential Market. We believe that with
the continued deployment of alternative data-based networks,
telecommunications service providers will seek to offer DSL-based services
beyond the core market for business subscribers. Specifically,
telecommunications service providers will target residential subscribers
seeking high-speed access to public communications networks. As this trend
toward broad deployment of DSL services evolves, we anticipate significant
opportunities for us to introduce new offerings that leverage both our
technology and our relationships with service providers. For example, we are
evaluating voice-over-packet and residential DSL alternatives.
PRODUCTS
We provide end-to-end DSL solutions that enable service providers to deploy
high-bandwidth services over traditional copper wire telephone infrastructure.
Our product family is designed to offer telecommunication service providers
flexibility in network deployment as well as a wide range of subscriber
offerings. Telecommunications service providers using our products can allow
subscribers access to a full range of DSL services at rates up to 25 times
faster than using current 56.6 Kbps analog modems. Our products are scalable
to enable carriers to serve a small number of end users in a particular region
on a cost-effective basis as well as an entire metropolitan area with a high-
performance manageable solution. Our products are designed to support a
variety of service provider network architectures, such as ATM and Frame
Relay. Our solution consists of the following:
. CopperEdge DSL Access Concentrators: Telecommunications service
providers deploy CopperEdge products in telco central offices and multi-
tenant buildings to deliver services to potential end users.
. CopperRocket DSL CPE: Subscriber connectivity is provided at the
subscriber's premises with CopperRocket DSL modems. In addition, we
license our DSL CPE technology to third-party vendors to create
additional CPE that are compatible with our CopperEdge DSL Access
Concentrators.
. CopperView Network Management Tools: Our network management tools enable
telecommunications service providers to manage their Copper Mountain DSL
equipment as well as configure and provision subscriber services.
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[DESCRIPTION OF DIAGRAM
A diagram containing pictures of the Company's CopperEdge, CopperRocket and
CopperView products depicting the locations and usage of these products within
the telecommunications infrastructure.]
COPPEREDGE DSL ACCESS CONCENTRATORS
CopperEdge DSL Access Concentrators enable telecommunications service
providers to offer value-added, high-speed networking services to the rapidly
growing Internet access, small to medium-sized office and teleworking markets.
The CopperEdge platform can be expanded to accommodate additional subscribers,
to provide advanced services and to operate in different networking models.
Our current DSL Access Concentrator, the CopperEdge 200 ("CE200"), is a
carrier-class platform designed specifically for central office environments,
and meets or exceeds industry standards, such as Network Equipment Building
System (or "NEBs," which are Bell Communications Research standards used by
telcos), and other applicable regulatory requirements. The CE200 can be
deployed in telco central offices and multi-tenant buildings. The CE200
consists of a modular chassis that can be configured to accommodate up to 192
subscribers through the addition of up to eight line cards. All line cards,
indicators and switches are accessible from the front of the system,
consistent with current telco industry practices. The CE200 connects to
telecommunications service providers through WAN interface modules. The
following are characteristics of the CE200:
. contains dual redundant power supplies and hot-swappable modules to
ensure high-availability for subscriber services;
. supports a range of interfaces for network backbone and WAN connections,
including 10/100 Base-T, V.35, HSSI, DS3 Frame and DS3 ATM; and
. supports multiple advanced networking models, which can be used
concurrently in the same chassis, including Frame Relay Multiplexing,
Frame Relay to ATM interworking, Layer 3 IP multiplexing and Layer 2
Ethernet frame multiplexing.
We currently provide two types of line cards to deliver subscriber services
through the CE200:
SDSL Line Cards. Our SDSL line cards use proven 2B1Q technology, a symmetric
DSL technology already widely deployed in access networks, enhancing the
ability of telecommunications service providers to deploy spectrally
compatible solutions. Each SDSL line card provides 24 ports, each of which can
provide service to a subscriber network at speeds between 160 Kbps and 1.544
Mbps over distances between 22,000 feet and 9,100 feet, respectively.
IDSL Line Cards. For subscribers who can only be served over ISDN capable
copper lines (such as through a digital loop carrier or through ISDN
repeaters) we provide 24 port IDSL line cards. These line cards use proven
2B1Q technology, to deliver service at speeds between 64 Kbps and 144 Kbps up
to a distance of 18,000 feet from the central office or digital loop carrier
without repeaters. The use of repeaters increases the reach to over 30,000
feet.
COPPERROCKET CUSTOMER PREMISE EQUIPMENT
The CopperRocket family of CPE products consists of SDSL and IDSL modems.
These CPE products can operate at multiple transmission speeds and distances
to satisfy the price and performance needs of each subscriber. The
CopperRocket is a "plug-and-play" device. Unlike ISDN modems, there are no
hardware switches, configuration parameters or end-user software to configure.
Copper Mountain's ZIP! feature enables the CopperRocket to identify itself to
a CopperEdge DSL Access Concentrator and automatically download all
configuration parameters to immediately begin full operation.
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The CopperRocket operates over ordinary copper telephone wire and provides
dedicated, full-duplex throughput at multiple speeds to support network
activities like file transfers, intranet access and Internet Web browsing. The
CopperRocket's multi-speed DSL feature enables service providers to remotely
adjust line speed based upon subscriber requirements at no additional
investment by the service provider. In addition to offering our own CPE
products, we work with third-party providers to offer a broad range of
interoperable customer premise equipment through our CopperCompatible program.
COPPERVIEW NETWORK MANAGEMENT TOOLS
Our CopperView suite of network management tools are used to configure and
manage our DSL solutions. This set of tools provides user interfaces necessary
to manage large, geographically separated DSL Access Concentrator networks,
individual concentrators and simple on-site or remote command line management.
Because the CopperEdge DSL Access Concentrator also manages CopperRocket
modems by proxy, CopperView allows carriers to manage their DSL networks end-
to-end from one site.
. The CopperView DSL Access Management System ("AMS") provides global
management of large networks of CopperEdge DSL Access Concentrators with
an intuitive graphical user interface ("GUI").
. The CopperView Element Management System ("EMS") provides a GUI allowing
precise configuration and management of a single CopperEdge DSL Access
Concentrator and its CPE. The AMS can activate the EMS for a particular
DSL Access Concentrator at the request of the operator.
. The CopperCraft Command Line Interface provides a simple interface for
on-site technicians and for remote access to a DSL Access Concentrator.
PRODUCT DEPLOYMENT
We sell our products for deployment into both central offices and multi-
tenant buildings. A particular telecommunications service provider may deploy
in either or both of these environments in order to reach its target market in
the most effective manner.
Central Office-Based DSL Service Deployment. ILECs or CLECs may install our
CopperEdge DSL Access Concentrator product in a central office in order to
offer service to any telephone service subscriber served by that wiring center
(within the distance limitations of DSL service). The diagram below shows how
a CLEC can install a CopperEdge DSL Access Concentrator in a collocation cage
within the ILEC central office. Typically, the CLEC leases from the ILEC a
high-bandwidth trunk, usually a 45 Mbps DS-3 circuit, in order to connect the
DSL Access Concentrator to the CLEC's regional switching office. The CLEC then
requests from the ILEC an individual copper loop to a subscriber, for which
the CLEC pays a monthly fee. The copper loop is provisioned through the ILEC's
distribution facilities out to the subscriber premise. A CLEC then provisions
the wiring inside the subscriber premise and installs the CPE.
[DESCRIPTION OF DIAGRAM
A diagram depicting the telecommunications infrastructure, including a high
capacity trunk line that links the collocation cage in an ILEC central office
to a CLEC metropolitan office, and how these offices are linked to different
CPE through either copper wire telephone lines alone or through T-1 lines that
lead to copper wire telephone lines.]
CLECs or ILECs deploying DSL from central offices may elect do so in
selected central offices where the number of potential subscribers is highest,
or they may choose to cover a region by installing in all central offices in
that region. A CLEC may choose a regional deployment strategy or a nationwide
deployment strategy.
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Multi-Tenant Building DSL Service Deployment. A telecommunications service
provider can deploy our CopperEdge DSL Access Concentrators into multi-tenant
buildings in order to provide Internet access and other data and voice
services to the tenants of that building. For a CLEC or an independent service
provider, multi-tenant building deployment can provide access to DSL
subscribers in a highly selective manner without the high costs of central
office collocation. Inside the building, the service provider can utilize the
existing telephone wiring to deliver high-bandwidth connections to each tenant
with no building re-wiring expense. A high-bandwidth leased circuit or
wireless transmitter on the roof connects the building to the service
provider's regional switching office or point of presence. Tenants in the
building can use a single, high-bandwidth connection from the building to the
service provider's switching office, providing good application performance at
a lower cost than the same bandwidth dedicated to a single subscriber.
CUSTOMERS
In 1998, sales to our top four customers represented approximately 95% of
our revenues. Of these customers, NorthPoint Communications and Rhythms
NetConnections accounted for approximately 61% and 18%, respectively, of our
1998 revenues. The loss of a significant customer could have a material
adverse effect on our business.
CASE STUDIES
NorthPoint Communications. NorthPoint Communications is a CLEC that delivers
its NorthPoint DSLSM services to small and mid-sized businesses via wholesale
agreements with service providers nationwide. NorthPoint is on a path of rapid
expansion and is aggressively deploying service in major metropolitan areas
nationwide. Customers can order NorthPoint DSL services from network service
providers in the San Francisco Bay Area, the greater Los Angeles area, Boston,
New York, Chicago, San Diego, Washington D.C., Dallas, Detroit, Houston,
Cleveland and Austin. NorthPoint plans to expand to 16 additional metropolitan
markets by the end of 1999 and to continually extend coverage within existing
metropolitan service areas. Copper Mountain products are an integral part of
NorthPoint's deployment strategy.
Rhythms NetConnections. Rhythms NetConnections is a leading service provider
of high-speed local access networking solutions using DSL technology. Rhythms
has designed its network to give its customers a high-speed "always on" local
connection to the Internet and to private local and wide area networks.
Rhythms also recognized Copper Mountain's products would enable it to broaden
its service platform to include both IDSL and SDSL services. Rhythms expects
that its DSL-based solutions will be available in 50 major metropolitan
markets by the end of the year 2000. Services are currently available in San
Diego, San Francisco, San Jose, Oakland/East Bay, Chicago, Los Angeles, Orange
County, Boston, Sacramento and New York.
MCI Worldcom/UUNET. When UUNET, an MCI WorldCom Company and a global leader
in Internet communications solutions, wanted to deploy a new SDSL service, it
selected Copper Mountain's end-to-end DSL solution. Now, Copper Mountain is in
more than 50 of UUNET's central offices nationwide, helping to bring their 768
Kbps dedicated DSL service to small and medium-sized businesses in the United
States. UUNET offers a comprehensive range of services to businesses, online
service providers and telecommunications firms. UUNET's network is comprised
of more than 1,000 points of presence throughout the United States and in
Canada, Europe and the Asia-Pacific region, as well as connections to Internet
service providers around the world.
STRATEGIC RELATIONSHIPS AND INTEROPERABILITY PARTNERSHIPS
We have established several strategic partnerships and licensing agreements
with leading CPE companies to facilitate the deployment of our products and
technology.
. Lucent. Under a recently signed OEM agreement, Lucent will combine our
DSL equipment with its NetCare(R) installation, network management and
customer support professional services to create
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turnkey DSL solutions for CLECs. Lucent will co-brand and market our DSL
equipment for a period of up to four years. We have agreed to
manufacture, co-brand and sell our products to Lucent and to provide
Lucent with training, installation and technical support for these
products. Lucent also plans to offer the new DSL equipment in
combination with some of its existing data networking, switching and
access products to enable service providers to create broader voice and
data network solutions that can evolve and grow with their business.
. 3Com. 3Com will market our DSL CPE for up to three years. Under this
agreement we have agreed to manufacture, co-brand and sell our products
to 3Com and to collaborate on future development projects. Additionally,
this agreement calls for both companies to co-market their DSL products.
Moreover, 3Com may request to manufacture its own DSL CPE products. Both
parties have agreed to use good faith efforts to effect such
manufacturing license.
We have established several CPE licensing relationships with certain vendors
through our CopperCompatible interoperability program in order to promote the
interoperability of our CopperEdge DSL Access Concentrators with such
equipment. Under this interoperability program, licensees are allowed access
to our technology which can be used in the design of their CPE. These CPE
licensing relationships have been established with ADC Kentrox, Netopia,
Cayman Systems, Escalate Networks, FlowPoint Corporation and Ramp Networks,
among others.
. ADC Kentrox. ADC Kentrox, a leading provider of managed Frame Relay
DSU/CSUs (data service unit/channel service unit), is developing and
will be introducing an SDSL version of their newest innovation, the
ServicePoint(TM) Service Delivery Unit (SDU). The SDU will enable
subscribers to use their pre-existing, non-SDSL routers with our
telecommunications service provider customers' SDSL service. The SDU
also can be upgraded to provide ADC Kentrox's Frame Relay performance
and bandwidth usage monitoring, which would enable our service provider
customers to provide the most sophisticated level of Frame Relay
services, including Service Level Agreements and Traffic Management
Reports.
. Netopia. Through a development and co-marketing contract, Netopia, a
market leader in developing Internet/Intranet communication tools,
licensed our DSL networking technology, including integrated DSL
management functionality, to provide business class customer premise
equipment for small-to-medium sized companies. Since June 1998, Netopia
has developed, announced and is shipping three products incorporating
our licensed technology, including an IDSL router and an SDSL router. In
addition, Netopia markets the CopperRocket SDSL modem under Netopia's
own brand name through an OEM reseller agreement with Copper Mountain.
SALES AND MARKETING
We sell and market our products through a direct sales force. Additionally,
we have relationships with selected OEMs and distributors in order to expand
our sales and distribution capabilities.
Direct Sales. Our direct sales responsibilities are divided into three North
American geographic regions: West, Central and East. Our sales effort is
directed by regional directors and sales managers who are responsible for
relationships with targeted customers. A key feature of our selling effort is
the relationships we establish at various levels in our customer's
organization. The sales management team for each customer is responsible for
maintaining contact with key individuals who have planning and policy
responsibility within the customer's organization. At the same time, our sales
engineers work with customers to sell our products at key levels throughout
the customer's organization. Direct sales accounted for approximately 98% of
our revenue in 1998.
OEM Sales. We have established key OEM relationships with leaders in the
telecommunications equipment and customer premise equipment markets. We intend
to maintain a limited number of relationships with key strategic OEMs who may
offer products or have existing customer relationships which may complement
ours. In line with our strategy to offer our telecommunications service
provider customers and their subscribers a
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broad line of CPE, we have entered into several OEM relationships for our
CopperRocket product line and a number of interoperability partnerships with
CPE providers. We receive sales revenues from our OEM partners, but do not
currently receive royalty revenue from interoperability arrangements.
Marketing is structured along product and distribution channel lines for
each of our major product areas. For each major product area, we employ
dedicated product marketing and marketing program management specialists. The
corporate marketing staff coordinates activities among our various business
units and provides marketing support services, including marketing
communications, marketing research, trademark administration and other support
functions. Our marketing organization performs the following functions:
. develops specific marketing strategies for each product line;
. works with our direct sales force and Lucent to develop key account and
segmented market strategies; and
. defines the functions and features of our product and service offerings.
Marketing is responsible for sales support, contract negotiations, in-depth
product presentations, interfacing with operations, setting price levels to
achieve targeted margins, developing new services and business opportunities
and writing proposals in response to customer requests for information or
quotations.
As of December 31, 1998, our sales and marketing organization included 21
individuals. We have offices in Palo Alto and San Diego, California.
CUSTOMER SERVICE AND SUPPORT
A high level of continuing service and support is critical to our objective
of developing long-term customer relationships. The majority of our service
and support activities are related to installation support and network
configuration issues. These services are provided by telephone and directly at
customer installations with resources from our customer support group based in
San Diego, California. To date, our revenues from on-site installation and
technical assistance have been immaterial.
We provide technical support for our products which have warranties of up to
12 months, both directly and through our selected service subcontractors. We
have a variety of comprehensive and flexible hardware and software maintenance
and support programs available for products no longer under warranty, with
services ranging from time and materials remote service support to 24-hour on-
site support, depending on our customer's preferences. We also offer various
training courses for our third-party resellers and telecommunications service
provider customers. To date, revenues attributable to customer service and
support services have been immaterial.
In June 1998, we engaged Lucent NetCare(R), Lucent's data communications
service organization, to provide field installation and maintenance support
for our products. Other than service and support provided by our personnel
located in San Diego, we do not intend to recruit and train our own direct
field service and support organization.
RESEARCH AND DEVELOPMENT
We believe that our future success depends on our ability to adapt to the
rapidly changing telecommunications environment, to maintain our significant
expertise in core technologies, and to continue meeting and anticipating our
customers' needs. We continually review and evaluate technological changes
affecting the telecommunications market and invest substantially in
applications-based research and development. We are committed to an ongoing
program of new product development that combines internal development efforts
with acquisitions, joint ventures and licensing or marketing arrangements
relating to new products and technologies from outside sources.
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We have focused our recent research and development expenditures on
commercializing our DSL systems, including our CopperEdge solutions and
CopperRocket modems along with CopperView Network Management Tools which
support these technologies. We believe that our extensive experience designing
and implementing high-quality network components has enabled us to develop
high-value integrated systems solutions. As a result of these development
efforts, we believe we have created an industry-leading platform for cost-
effective DSL delivery.
We are currently investing significant resources in network management
product enhancements, development of a new chassis for multi-tenant units,
development of line cards delivering UADSL and HDSL2, and enhancements to the
CopperEdge DSL Access Concentrators enabling packet-based voice traffic.
COMPETITION
The telecommunications equipment industry is highly competitive, and we
believe that competition may increase substantially as the introduction of new
technologies, deployment of broadband networks and potential regulatory
changes create new opportunities for established and emerging companies in the
industry. In addition, a number of our competitors have significantly greater
financial and other resources than us to meet new competitive opportunities.
We compete directly with other providers of DSL access concentrators
including, Cisco Systems, Inc., Ascend Communications, Inc. (acquisition by
Lucent pending), Alcatel S.A. and Diamond Lane Communications Corporation
(acquisition by Nokia Corporation pending) and Paradyne Corporation, among
others. In addition, DSL as a technology for deploying broadband connections
is competing with alternative technologies including ISDN, T-1 and wireless
solutions. To the extent we expand into the residential market, we will
compete against certain other companies, including companies relying on
coaxial cable infrastructure and cable modem technology.
The rapid technological developments within the telecommunications industry
have resulted in frequent changes to our group of competitors. The principal
competitive factors in our market include:
. brand recognition;
. key product features;
. system reliability and performance;
. price;
. ease of installation and use;
. technical support and customer service; and
. size and stability of operations.
We believe our success in competing with other manufacturers of
telecommunications products depends primarily on our engineering,
manufacturing and marketing skills, the price, quality and reliability of our
products and our delivery and service capabilities. We may face increasing
pricing pressures from current and future competitors in certain or all of the
markets for our products and services.
We believe that technological change, the increasing addition of voice,
video and other services to networks, continuing regulatory change and
industry consolidation or new entrants will continue to cause rapid evolution
in the competitive environment of the telecommunications equipment market, the
full scope and nature of which is difficult to predict. Increased competition
could result in price reductions, reduced margins and loss of market share by
us. We believe regulatory change in the industry may create new opportunities
for suppliers of telecommunications equipment; however, we expect that such
opportunities may attract increased competition from others as well. We also
believe that the rapid technological changes which characterize the data
communications industry will continue to make the markets in which we compete
attractive to new entrants. There can be no assurance that we will be able to
compete successfully with our existing or new competitors or that competitive
pressures faced by us will not materially and adversely affect our business,
financial condition and results of operations.
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MANUFACTURING
Our manufacturing operations consist primarily of supporting prototype
development, materials planning and procurement, final assembly, testing and
quality control. We use several independent suppliers to provide certain
printed circuit boards, chassis and subassemblies. We have historically
subcontracted substantially all of our manufacturing to one company, SMS
Technology, located in San Diego, California. We recently entered into a
letter of intent with Flextronics International Ltd. located in San Jose,
California, and expect to have a formal agreement in place by the end of the
first quarter of 1999. Under the letter of intent, Flextronics will be the
sole source of contract manufacturing for our products.
Our manufacturing process enables us to configure our products to meet a
wide variety of individual customer requirements. We have initiated the
process of seeking International Standard Organization (ISO) 9002 registration
for quality assurance in production, installation and service. We plan to
strengthen manufacturing capability both in our existing facilities and
through expansion of activities with independent suppliers and manufacturers.
Our future growth will require an extension of existing internal and external
manufacturing resources, hiring of additional technical personnel, improved
coordination of supplier relationships with our inventory ordering and
management practices, and expansion of information systems to accommodate
planned growth across these areas.
We use a combination of standard parts and components, which are generally
available from more than one vendor, and three key components that are
purchased from sole or single source vendors for which alternative sources are
not currently available: a semi-conductor chip, a power supply and a system
control module. If supply of these key components should cease, we would be
required to redesign our products. We are evaluating alternate source vendors
for each of these key components but these vendors may not meet our quality
standards for component vendors. While we work closely with some well-
established vendors, we have no supply commitments from our vendors and we
generally purchase components on a purchase order basis, as opposed to
entering into long term procurement agreements with vendors. To date, we have
generally been able to obtain adequate supplies in a timely manner from
vendors or, when necessary, to meet production needs from alternative vendors.
We believe that, in most cases, alternative supplies of standard parts and
components can be identified if current vendors are unable to fulfill our
needs. However, delays or failure to identify an alternate vendor, if
required, or a reduction or interruption in supply, or a significant increase
in the price of components would materially and adversely affect our business,
financial condition and results of operations and could impact customer
relationships.
INTELLECTUAL PROPERTY
We rely on a combination of copyright, trademark, trade secret and other
intellectual property law, nondisclosure agreements and other protective
measures to protect our proprietary rights. We also utilize unpatented
proprietary know-how and trade secrets and employ various methods to protect
our trade secrets and know-how. We presently have no patents, although we do
have one patent application pending which we intend to pursue but which is not
central to our business. Although we employ a variety of intellectual property
in the development and manufacturing of our products, we believe that none of
such intellectual property is individually critical to our current operations.
Taken as a whole, we believe our intellectual property rights are significant
and that the loss of all or a substantial portion of such rights could have a
material adverse effect on our results of operations. There can be no
assurance that our intellectual property protection measures will be
sufficient to prevent misappropriation of our technology. In addition, the
laws of many foreign countries do not protect our intellectual properties to
the same extent as the laws of the United States. From time to time, we may
desire or be required to renew or to obtain licenses from others in order to
further develop and market commercially viable products effectively. There can
be no assurance that any necessary licenses will be available on reasonable
terms.
PROPERTIES
We lease an approximately 11,000 square foot facility in Palo Alto,
California for executive offices and for administrative, sales and marketing
purposes. The lease for this facility expires in April 2001. We also lease an
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approximately 17,000 square foot facility in San Diego, California, which
serves as our principal engineering and product development facility as well
as for executive offices. The current lease for this facility expires in
October 2001. In addition, we lease an approximately 11,000 square foot
facility in San Diego, California which is used primarily for manufacturing.
The lease for this facility expires in August 2003. In 1999, we intend to
combine our San Diego offices into a single larger facility in order to
accommodate our growth.
EMPLOYEES
As of December 31, 1998 we employed approximately 111 full-time employees,
including 21 in sales and marketing, 15 in manufacturing, 53 in engineering,
15 in finance and administration and 7 in customer service. All of our
employees are located in the United States. None of our employees is
represented by collective bargaining agreements, and management considers
relations with its employees to be good.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of Copper Mountain, the positions held
by them and their ages as of February 28, 1999 are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Richard Gilbert......... 46 President, Chief Executive Officer and Director
John Creelman........... 42 Vice President of Finance, Chief Financial Officer and Secretary
Joseph D. Markee........ 45 Chief Technical Officer and Chairman of the Board of Directors
Mark Handzel............ 43 Vice President of Quality and Customer Support
Steven Hunt............. 41 Vice President of Engineering
Michael Kelly........... 48 Vice President of Sales
Bryan Long.............. 40 Vice President of Marketing
Michael Staiger......... 34 Vice President of Business Development
Joseph Harrington....... 49 Vice President of Operations
Diana Helfrich.......... 38 Vice President of Marketing Communications
Tench Coxe(1)........... 41 Director
Roger Evans(1).......... 53 Director
Richard H. Kimball(2)... 42 Director
Andrew W. Verhalen(2)... 42 Director
</TABLE>
- --------
(1) Member of Compensation Committee
(2) Member of Audit Committee
Richard Gilbert has served as President and Chief Executive Officer of
Copper Mountain since April 1998, and as a Director of Copper Mountain since
August 1998. From July 1992 to April 1998, he worked for ADC
Telecommunications Inc., most recently as Senior Vice President and,
concurrently, as President and General Manager of its subsidiary, ADC Kentrox,
a provider of high-speed access equipment for global networks. Mr. Gilbert
holds an MS in Computer Science from Stanford University and a BA in
Mathematics from the University of California at Berkeley.
John Creelman has served as Vice President of Finance and Chief Financial
Officer of Copper Mountain since March 1998 and as Secretary of Copper
Mountain since February 1999. From July 1997 to March 1998, he worked as a
Financial Consultant to DataWorks Corporation, a developer of Enterprise
Resource Planning software. From July 1995 to May 1997, he served as Vice
President Finance and Chief Financial Officer of ESI Software, Inc., a
provider of Internet authoring software and services. From July 1994 to June
1995 he served as Financial Controller at Western Digital Corporation, a
manufacturer of hard disk drives. From February 1992 to June 1994, he served
as Director of Finance at MTI Technology Corporation, a manufacturer of high-
end storage systems. Mr. Creelman holds an MBA and a BA in Social Sciences
from the University of California at Irvine.
Joseph D. Markee co-founded Copper Mountain in March 1996 and has served as
Chief Technical Officer of Copper Mountain since December 1998 and as Chairman
of the Board of Directors since inception. From Copper Mountain's inception in
March 1996 to April 1998, he served as its President and Chief Executive
Officer and from inception to February 1999, he served as Secretary of Copper
Mountain. In June 1987, he co-founded Primary Access, a remote access server
company acquired by 3Com Corporation. From June 1987 to January 1996, he
served as Vice President of Operations and Vice President of Support of 3Com
Primary Access. Mr. Markee holds a BS in Electrical Engineering from the
University of California at Davis.
Mark Handzel co-founded Copper Mountain in March 1996 and has served as Vice
President of Quality and Customer Support since May 1998. From March 1996 to
May 1998, he served as Vice President of Product Management of Copper
Mountain. From June 1994 to March 1996, he served as Director of Marketing and
Sales at Orckit Communications, a manufacturer of advanced DSL modems. From
May 1993 to June 1994, he served
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as Vice President of Product Development at Coral Systems, a provider of
software products for the wireless telecommunications industry. Mr. Handzel
holds an MBA from the University of California at Irvine, a MS in Computer
Science from the University of California at Los Angeles and a BA in Computer
Science from the State University of New York at Potsdam.
Steven Hunt has served as Vice President of Engineering of Copper Mountain
since August 1996. From June 1980 to August 1996, he held various positions
with AT&T Bell Laboratories, most recently as Department Head of the
Internetworking Technology Department of Paradyne Corporation, which was then
a subsidiary of AT&T. Paradyne is a provider of internetworking product
definition, development and support. While at Paradyne, Mr. Hunt was
responsible for the development of broadband DSL products. Mr. Hunt holds an
MSEE from Stanford University and a BSEE from Drexel University.
Michael Kelly has served as Vice President of Sales of Copper Mountain since
April 1997. From November 1995 to March 1997, he served as Vice President of
Sales at Ramp/Trancell Networks, a developer of small business network
solutions. From September 1994 to October 1995, he served as Vice President of
Sales at CoroNet Systems, a developer of network management software. From
January 1994 to September 1994, Mr. Kelly served as Vice President of Sales at
Brixton Systems, a developer of software. Mr. Kelly holds an MA in Computer
Science from George Washington University, and a BS in General Studies from
the University of Maryland.
Bryan Long has served as Vice President of Marketing of Copper Mountain
since May 1998. From June 1997 to May 1998, he founded and served as marketing
consultant for the Apheta Group, a marketing consultant company. From January
1997 to June 1997, he served as Vice President, Marketing and Customer Support
of Verilink, Inc., a supplier of wide-area network access products. From July
1996 to December 1996, he served as Director, Global Alliance Business
Development of Cisco Systems Inc., a manufacturer of networking products. From
May 1991 until its acquisition by Cisco Systems, Inc. in July 1996, he served
in various positions at StrataCom, Inc., a developer of networking products,
most recently serving as Director, Business Development and previously serving
as Director of Marketing, Channel Development and Product Line Director,
Enterprise Networks. Mr. Long holds an MS in Management from the Massachusetts
Institute of Technology, and a BA in Mathematics from the University of
Colorado.
Michael Staiger has served as Vice President of Business Development of
Copper Mountain since June 1998. From June 1996 to June 1998, he worked at
Shiva Corporation, a provider of direct-dial business access solutions,
serving most recently as Vice President of Business Development and previously
as Senior Director of Business Development. From its inception in August 1993
until its acquisition by Shiva Corporation in June 1996, he served as a co-
founder and Vice President of Business Development of AirSoft, Inc., a
developer of remote access software. Mr. Staiger holds an MBA from the
University of Chicago Graduate School of Business and a BA in English from the
University of Michigan.
Joseph Harrington has served as Vice President of Operations of Copper
Mountain since October 1998. From February 1996 to October 1998, he served as
Director of Operations of the Corollary Division of Intel Corporation, a
manufacturer of symmetric multi-processing computers and network
communications equipment. From June 1995 to February 1996, Mr. Harrington
served as Director of Production of the Symtak Division of Aetrium, Inc., a
manufacturer of handlers and test equipment for the integrated circuit
industry. From September 1992 to August 1994, he served as Manufacturing
Manager of IDT/Alston, a manufacturer of magnetic tape units and digital
emulation systems for the telecommunications industry.
Diana Helfrich has served as Vice President of Marketing Communications of
Copper Mountain since July 1997. From April 1996 to July 1997, she was the
principal of her own direct marketing and management consulting firm. From
November 1991 to March 1996, she served as President and Managing Director of
the Council on Education in Management, an employment law educator. Ms.
Helfrich holds an MBA from St. Mary's College and a BA in English Literature
from the University of California at Berkeley.
45
<PAGE>
Tench Coxe has served as a director of Copper Mountain since March 1996. Mr.
Coxe joined Sutter Hill Ventures, a venture capital firm, in October 1987 and
is currently a Managing Director of the General Partner of Sutter Hill
Ventures. Mr. Coxe currently serves as a director of Clarus Corporation, Edify
Corporation and NVIDIA Corporation and several privately-held companies. Mr.
Coxe holds an MBA from Harvard University and a BA in Economics from Dartmouth
College.
Roger Evans has served as a director of Copper Mountain since March 1996.
Mr. Evans joined Greylock Management Corporation in 1989 and is currently a
General Partner of Greylock Limited Partnership, Greylock Equity Limited
Partnership and Greylock IX Limited Partnership, each a venture capital firm.
Mr. Evans is a director of Ascend Communications and several privately-held
companies. Mr. Evans holds an MA in Economics from King's College, Cambridge.
Richard H. Kimball has served as a Director of Copper Mountain since October
1998. Since 1995, Mr. Kimball has been a founding General Partner of
Technology Crossover Ventures II, L.P. ("Technology Crossover"), a venture
capital firm. Preceding Technology Crossover, Mr. Kimball spent more than ten
years at Montgomery Securities, where he was a Managing Director from 1991
until his departure. He also serves on the board of directors of several
privately-held technology companies. Mr. Kimball holds an MBA from the
University of Chicago and an AB in History from Dartmouth College.
Andrew W. Verhalen has served as a director of Copper Mountain since
February 1999. Mr. Verhalen has been a partner of Matrix Partners, a venture
capital firm, since April 1992. He also serves on the board of directors of
several privately-held technology companies. Prior to Matrix Partners, Mr.
Verhalen held senior management positions at 3Com Corporation and Intel
Corporation. Mr. Verhalen holds BSEE, MEng and MBA degrees from Cornell
University.
Messers. Markee and Handzel are brothers-in-law. There are no other family
relationships between any of the directors or executive officers of the
Company.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors has established an Audit Committee and a Compensation
Committee. The Audit Committee consists of Andrew W. Verhalen and Richard
Kimball. 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 the Company's independent auditors
and reviews and evaluates the Company's audit and control functions.
The Compensation Committee consists of Tench Coxe and Roger Evans. The
Compensation Committee makes recommendations regarding the Company's 1996
Equity Incentive Plan and makes decisions concerning salaries and incentive
compensation for employees and consultants of the Company.
DIRECTOR COMPENSATION
The Company's directors do not currently receive any cash compensation for
services on the Board of Directors or any committee thereof, but directors may
be reimbursed for certain expenses in connection with attendance at Board of
Directors and committee meetings. All directors are eligible to participate in
the Company's 1996 Equity Incentive Plan.
BOARD-COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No executive officer of the Company serves as a member of the Board of
Directors or compensation committee of any entity that has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee.
46
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth summary information concerning compensation
awarded to, earned by, or accrued for services rendered to the Company in all
capacities during the fiscal year ended December 31, 1998 by (i) the Company's
Chief Executive Officer and (ii) the Company's four other most highly
compensated executive officers (together, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION(1) COMPENSATION
----------------------------------- ------------
SECURITIES
NAME AND PRINCIPAL ALL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION SALARY($) BONUS($) COMPENSATION ($) OPTIONS(#) COMPENSATION ($)
- ------------------ --------- -------- ---------------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Richard Gilbert......... $185,358 $ 74,330 844,645 $65,177(2)
President and Chief
Executive Officer
Michael Kelly........... 130,863 160,000 $559,230(3) 150,000
Vice President of Sales
Joseph D. Markee........ 157,256 40,000
Chief Technical Officer
and Chairman of the
Board of Directors
Bryan Long.............. 99,840 90,000 338,292
Vice President of
Marketing
Steven Hunt............. 138,572 30,000 75,000
Vice President of
Engineering
</TABLE>
- --------
(1) In accordance with the rules of the Securities and Exchange Commission
(the "Commission"), the compensation described in this table does not
include medical, group life insurance or other benefits which are
available generally to all salaried employees of the Company and certain
perquisites and other personal benefits received which do not exceed the
lesser of $50,000 or 10% of any officer's salary and bonus disclosed in
this table.
(2) Represents relocation expenses.
(3) Represents sales commissions.
STOCK OPTION GRANTS AND EXERCISES IN LAST FISCAL YEAR
The following table sets forth certain information regarding options granted
during the fiscal year ended December 31, 1998 to the Named Executive
Officers.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
% OF TOTAL ANNUAL RATES OF
OPTIONS STOCK APPRECIATION
SHARES GRANTED TO FOR OPTION
UNDERLYING EMPLOYEES EXERCISE TERM($)(4)
OPTIONS IN FISCAL PRICE PER EXPIRATION ---------------------
NAME GRANTED (#)(1) YEAR(%)(2) SHARE($)(3) DATE 5% 10%
- ---- -------------- ---------- ----------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Richard Gilbert......... 844,645 27.4% .32 06/11/08 $ 169,982 $ 430,767
Michael Kelly........... 150,000 4.9 .53 09/23/08 50,308 127,491
Bryan Long.............. 338,292 11.0 .32 06/11/08 68,080 172,528
Steven Hunt............. 75,000 2.4 .53 09/23/08 25,154 63,746
</TABLE>
- --------
(1) Such options vest 25% on the first anniversary of the date of hire with
the remainder vesting ratably and monthly over the three-year period
following the first anniversary of the date of hire. The number of shares
underlying the options granted has been adjusted to reflect the three-for-
two stock split of the Company's common stock effective November 25, 1998.
47
<PAGE>
(2) Based upon options to purchase a total of 3,086,812 shares of common stock
of the Company granted during 1998.
(3) Options were granted at an exercise price equal to the fair market value
of the Company's common stock, as determined by the Board of Directors on
the date of grant. The exercise price per share has been adjusted to
reflect the three-for-two stock split of the Company's common stock
effective November 25, 1998.
(4) The 5% and 10% assumed annual rates of compounded stock price appreciation
are mandated by rules of the Securities and Exchange Commission. There can
be no assurance provided to any executive officer or any other holder of
the Company's securities that the actual stock price appreciation over the
option term will be at the assumed 5% and 10% levels or at any other
defined level.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth certain information as of December 31, 1998,
regarding options held by the Named Executive Officers. There were no stock
appreciation rights outstanding at December 31, 1998.
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1998(#) DECEMBER 31, 1998($)(2)
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE (#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Richard Gilbert......... -- $ -- -- 844,645
Michael Kelly........... -- -- 155,216 200,284
Bryan Long.............. -- -- -- 338,292
Steven Hunt............. 15,000 18,990 160,000 200,000
</TABLE>
- --------
(1) Equal to the fair market value of the purchased shares on the option
exercise date, less the exercise price paid for such shares.
(2) Based on a value of $ per share, the initial public offering price,
minus the per share exercise price multiplied by the number of shares.
1996 EQUITY INCENTIVE PLAN
In August 1996, the Board of Directors adopted the Company's 1996 Equity
Incentive Plan (the "1996 Plan"). A total of 7,873,383 shares of the Company's
common stock, plus annual increases (beginning in 2000) equal to the least of:
(i) 4% of the outstanding shares on a fully diluted basis taking into account
stock options and warrants and (ii) a lesser amount determined by the Board of
Directors, are currently reserved for issuance pursuant to the 1996 Plan. The
1996 Plan provides for the grant of options to directors, officers and key
employees of, and consultants and certain advisors to, the Company.
The 1996 Plan permits the granting of options intended to qualify as
Incentive Stock Options within the meaning of Section 422 of the Code to
employees (including officers and employee directors) and Nonstatutory Stock
Options (together with Incentive Stock Options, "Options") to employees
(including officers and employee directors), directors and consultants
(including non-employee directors). In addition, the 1996 Plan permits the
granting of stock appreciation rights ("SARs") appurtenant to or independently
of Options, as well as stock bonuses and rights to purchase restricted stock
(Options, SARs, stock bonuses and rights to purchase restricted stock are
hereinafter referred to as "Stock Awards"). No person is eligible to be
granted Options and SARs covering more than 500,000 shares of the Company's
common stock in any calendar year.
The 1996 Plan is administered by the Board of Directors or a committee
appointed by the Board of Directors. Subject to the limitations set forth in
the 1996 Plan, the Board of Directors has the authority to select the persons
to whom grants are to be made, to designate the number of shares to be covered
by each Stock Award, to determine whether an Option is to be an Incentive
Stock Option or a Nonstatutory Stock Option, to establish vesting schedules,
to specify the Option exercise price and the type of consideration to be paid
to the Company upon exercise and, subject to certain restrictions, to specify
other terms of Stock Awards.
48
<PAGE>
The maximum term of Options granted under the 1996 Plan is ten years. The
aggregate fair market value, determined at the time of grant, of the shares of
common stock with respect to which Incentive Stock Options are exercisable for
the first time by an optionee during any calendar year (under all such plans
of the Company and its affiliates) may not exceed $100,000, or the Options or
portion thereof which exceed such limit (according to the order in which they
are granted) shall be treated as Nonstatutory Stock Options. Incentive Stock
Options granted under the 1996 Plan generally are non-transferable.
Nonstatutory Stock Options are generally transferable. Options expire three
months after the termination of an optionee's service to the Company. In
general, if an optionee is permanently disabled or dies during his or her
service to the Company, such person's Options may be exercised up to 12 months
following such disability or 18 months following such death.
The exercise price of Options granted under the 1996 Plan is determined by
the Board of Directors in accordance with the guidelines set forth in the 1996
Plan. The exercise price of an Incentive Stock Option cannot be less than 100%
of the fair market value of the common stock on the date of the grant. The
exercise price of a Nonstatutory Stock Option cannot be less than 85% of the
fair market value of the common stock on the date of grant. Options granted
under the 1996 Plan vest at the rate specified in the option agreement. The
exercise price of Incentive Stock Options granted to any person who at the
time of grant owns stock representing more than 10% of the total combined
voting power of all classes of the Company's capital stock must be at least
110% of the fair market value of such stock on the date of grant and the term
of such Incentive Stock Options cannot exceed five years.
Any stock bonuses or restricted stock purchase awards granted under the 1996
Plan shall be in such form and will contain such terms and conditions as the
Board of Directors deems appropriate. The purchase price under any restricted
stock purchase agreement will not be less than 85% of the fair market value of
the Company's common stock on the date of grant. Stock bonuses and restricted
stock purchase agreements awarded under the 1996 Plan are generally
transferable.
Pursuant to the 1996 Plan, shares subject to Stock Awards that have expired
or otherwise terminated without having been exercised in full again become
available for grant, but exercised shares repurchased by the Company pursuant
to a right of repurchase will not again become available for grant.
Upon certain changes in control of the Company, all outstanding Stock Awards
under the 1996 Plan must either be assumed or substituted by the surviving
entity. In the event the surviving entity does not assume or substitute such
Stock Awards, such Stock Awards will be terminated to the extent not exercised
prior to such change in control.
As of December 31, 1998, the Company had issued and outstanding under the
1996 Plan options to purchase 4,265,471 shares of common stock.
EMPLOYEE STOCK PURCHASE PLAN
In February 1999, the Company adopted the 1999 Employee Stock Purchase Plan
(the "Purchase Plan"). A total of 300,000 shares of Common Stock has been
reserved for issuance under the Purchase Plan. The Purchase Plan is intended
to qualify as an employee stock purchase plan within the meaning of Section
423 of the Code. Under the Purchase Plan, the Board of Directors may authorize
participation by eligible employees, including officers, in periodic offerings
following the commencement of the Purchase Plan. The initial offering under
the Purchase Plan will commence on the effective date of this offering and
terminate on July 31, 2000.
Unless otherwise determined by the Board, employees are eligible to
participate in the Purchase Plan only if they are employed by the Company or a
subsidiary of the Company designated by the Board of Directors for at least
20 hours per week and are customarily employed by the Company or a subsidiary
of the Company designated by the Board of Directors for at least five months
per calendar year. Employees who participate in an offering may have up to 10%
of their earnings withheld pursuant to the Purchase Plan. The amount withheld
is then used to purchase shares of the common stock on specified dates
determined by the Board of Directors. The
49
<PAGE>
price of common stock purchased under the Purchase Plan will be equal to 85%
of the lower of the fair market value of the common stock at the commencement
date of each offering period or the relevant purchase date. Employees may end
their participation in the offering at any time during the offering period,
and participation ends automatically on termination of employment with the
Company.
In the event of a merger, reorganization, consolidation or liquidation
involving the Company, the Board of Directors has discretion to provide that
each right to purchase common stock will be assumed or an equivalent right
substituted by the successor corporation or the Board of Directors may provide
for all sums collected by payroll deductions to be applied to purchase stock
immediately prior to such merger or other transaction. The Board of Directors
has the authority to amend or terminate the Purchase Plan, provided, however,
that no such action may adversely affect any outstanding rights to purchase
common stock.
401(K) PLAN
The Company has established a tax-qualified employee savings and retirement
plan (the "401(k) Plan"). The 401(k) Plan provides that each participant may
contribute up to 10% of his or her pre-tax gross compensation (up to a
statutorily prescribed annual limit of $10,000 in 1999). Employees must be
twenty-one years old to participate and are eligible on the first day of the
first quarter following commencement as an employee of the Company. All
amounts contributed by employee participants and earnings on these
contributions are fully vested at all times. Employee participants may elect
to invest their contributions in various established funds.
EMPLOYMENT AGREEMENTS
On July 26, 1996, the Company entered into an employment offer letter with
Steven Hunt, the Company's Vice President, Engineering, pursuant to which Mr.
Hunt's annual compensation was initially set at $130,000. In addition, the
Company granted Mr. Hunt an option to purchase 300,000 shares of common stock.
Such option vests 25% on the first anniversary of the date of hire with the
remainder vesting monthly over the following three years. Pursuant to the
employment offer letter, in the event Mr. Hunt's employment is terminated
without cause, he will receive severance compensation equal to three months
salary.
On March 18, 1998, the Company entered into an employment agreement with
Richard Gilbert, the Company's President and Chief Executive Officer. Mr.
Gilbert's annual compensation was initially set at a base salary of $200,000
and an on-target bonus of $100,000 for the 1998 calendar year, prorated from
April 6, 1998. In addition, the Company granted Mr. Gilbert an option to
purchase 844,645 shares of common stock. Such option vests 25% on the first
anniversary of the date of hire with the remainder vesting monthly over the
following three years. Pursuant to Mr. Gilbert's employment agreement, in the
event Mr. Gilbert's employment is terminated by the Company without Cause or
by Mr. Gilbert for Good Reason, as defined in his option agreement, following
the occurrence of a Change in Control, as defined in his option agreement, the
vesting of his option accelerates such that one half of the unvested portion
of the option becomes immediately exercisable. Pursuant to Mr. Gilbert's
employment agreement, the Company reimbursed Mr. Gilbert for relocation
expenses of $65,177, and the Company loaned Mr. Gilbert $1 million pursuant to
an interest-free promissory note for the purchase of his principal residence
in California. The principal amount of such note is due on March 30, 2003. The
note is secured by a second trust deed on Mr. Gilbert's residence. Mr.
Gilbert's obligation to repay the note may be accelerated upon the occurrence
of certain events, including the termination of Mr. Gilbert's employment.
LIMITATIONS ON DIRECTORS' AND EXECUTIVE OFFICERS' LIABILITY AND
INDEMNIFICATION
The Company's Bylaws provide that the Company shall indemnify its directors
and executive officers and may indemnify its other officers, employees and
other agents to the fullest extent permitted by Delaware law, except with
respect to certain proceedings initiated by such persons. The Company is also
empowered under its Bylaws to enter into indemnification contracts with its
directors and executive officers and to purchase insurance on behalf of any
person it is required or permitted to indemnify. Pursuant to this provision,
the Company has entered into indemnification agreements with each of its
directors and certain of its executive officers.
50
<PAGE>
In addition, the Company's Restated Certificate provides that a director of
the Company will not be personally liable to the Company or its stockholders
for monetary damages for any breach of fiduciary duty as a director, except
for liability (i) for any breach of the director's duty of loyalty to the
Company 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 derives an improper personal benefit. The
Restated Certificate also provides that if the Delaware General Corporation
Law is amended after the approval by the Company's stockholders of the
Restated Certificate to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of the
Company's directors shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended. The
provision does not affect a director's responsibilities under any other law,
such as the federal securities laws or state or federal environmental laws.
51
<PAGE>
CERTAIN TRANSACTIONS
The following is a description of transactions since inception (March 1996),
to which the Company has been a party, in which the amount involved in the
transaction exceeds $60,000 and in which any director, executive officer or
holder of more than 5% of the capital stock of the Company had or will have a
direct or indirect material interest other than compensation arrangements
which are otherwise required to be described under "Management."
In April 1996, the Company sold in a private placement 2,723,000 shares of
Series A Preferred Stock at a purchase price of $1.00 per share, pursuant to a
Series A Preferred Stock Agreement dated April 10, 1996 (the "Series A
Agreement"). See Note 5 of Notes to Financial Statements for a description of
the Series A Preferred Stock. Upon the closing of this offering, each share of
Series A Preferred Stock will automatically convert into one and one-half
shares of common stock. The following directors and beneficial owners of more
than 5% of the Company's common stock (assuming the conversion of all shares
of preferred stock into common stock) acquired beneficial ownership of Series
A Preferred Stock pursuant to the Series A Agreement.
<TABLE>
<CAPTION>
DIRECTORS / 5% STOCKHOLDERS NO. OF SHARES
- --------------------------- -------------
<S> <C>
Roger Evans/Greylock Equity Limited Partnership................... 1,250,000
Tench Coxe/Entities Affiliated with Sutter Hill Ventures.......... 1,250,000
Joseph D. Markee.................................................. 50,000
Tench Coxe........................................................ 42,350
</TABLE>
In January 1997, the Company sold in a private placement 1,850,063 shares of
Series B Preferred Stock at a purchase price of $3.39 per share (the "Series B
Financing"), pursuant to a Series B Preferred Stock Agreement dated January
14, 1997 (the "Series B Agreement"). See Note 5 of Notes to Financial
Statements for a description of the Series B Preferred Stock. Upon the closing
of this offering, each share of Series B Preferred Stock will automatically
convert into one and one-half shares of common stock. The following directors
and beneficial owners of more than 5% of the Company's common stock (assuming
the conversion of all shares of preferred stock into common stock) acquired
beneficial ownership of Series B Preferred Stock pursuant to the Series B
Agreement.
<TABLE>
<CAPTION>
DIRECTORS / 5% STOCKHOLDERS NO. OF SHARES
- --------------------------- -------------
<S> <C>
Andrew W. Verhalen/Entities Affiliated with Matrix Partners...... 739,725
Roger Evans/Greylock Equity Limited Partnership.................. 368,732
Tench Coxe/Entities Affiliated with Sutter Hill Ventures......... 368,731
Joseph D. Markee................................................. 50,000
Tench Coxe....................................................... 12,492
</TABLE>
In October 1997, the Company sold in a private placement 2,422,361 shares of
Series C Preferred Stock at a purchase price of $4.75 per share, pursuant to a
Series C Preferred Stock Agreement, dated October 29, 1997 (the "Series C
Agreement"). See Note 5 of Notes to Financial Statements for a description of
the Series C Preferred Stock. Upon the closing of this offering, each share of
Series C Preferred Stock will automatically convert into one and one-half
shares of common stock. The following directors and beneficial owners of more
than 5% of the Company's common stock (assuming the conversion of all shares
of Preferred Stock into common stock) acquired beneficial ownership of Series
C Preferred Stock pursuant to the Series C Agreement.
<TABLE>
<CAPTION>
DIRECTORS / 5% STOCKHOLDERS NO. OF SHARES
- --------------------------- -------------
<S> <C>
Canaan Equity, L.P............................................... 736,843
Entities Affiliated with InterWest Partners VI, L.P.............. 736,843
Roger Evans/Greylock Equity Limited Partnership.................. 242,106
Tench Coxe/Entities Affiliated with Sutter Hill Ventures......... 242,106
Andrew W. Verhalen/Entities Affiliated with Matrix Partners...... 210,527
Tench Coxe....................................................... 8,059
</TABLE>
52
<PAGE>
In October 1998, the Company sold in a private placement 3,225,806 shares of
Series D Preferred Stock at a purchase price of $7.75 per share (the "Series D
Financing"), pursuant to a Series D Preferred Stock Agreement dated October 9,
1998 (the "Series D Agreement"). See Note 5 of Notes to Financial Statements
for a description of the Series D Preferred Stock. Upon the closing of this
offering, each share of Series D Preferred Stock will automatically convert
into one and one-half shares of common stock. The following directors and
beneficial owners of more than 5% of the Company's common stock (assuming the
conversion of all shares of preferred stock into common stock) acquired
beneficial ownership of Series D Preferred Stock pursuant to the Series D
Agreement.
<TABLE>
<CAPTION>
DIRECTORS / 5% STOCKHOLDERS NO. OF SHARES
- --------------------------- -------------
<S> <C>
Richard H. Kimball/Entities Affiliated with Technology Crossover
Ventures....................................................... 774,194
Roger Evans/Greylock Equity Limited Partnership................. 147,805
Tench Coxe/Entities Affiliated with Sutter Hill Ventures........ 147,805
Andrew W. Verhalen/Entities Affiliated with Matrix Partners..... 75,478
Entities Affiliated with Canaan Equity, L.P..................... 58,527
Entities Affiliated with InterWest Partners VI, L.P............. 58,527
Tench Coxe/Wells Fargo Bank, Trustee SHV M/P/T FBO Tench Coxe... 4,918
Richard Gilbert................................................. 1,422
</TABLE>
Pursuant to the Amended and Restated Investors' Rights Agreement between the
Company and certain stockholders of the Company, the Underwriters have
reserved for sale to the holders of the Company's Series D Preferred Stock in
this offering, an aggregate of $2 million worth of shares of Copper Mountain
common stock at the price per share set forth on the cover page of this
prospectus.
The Company has entered into employment agreements and related compensatory
arrangements with certain of its executive officers. See "Management--
Employment Agreements."
In the past, the Company has granted options to its executive officers and
directors. The Company intends to grant options to its officers and directors
in the future. See "Management-Executive Compensation."
The Company has also entered into an indemnification agreement with each of
its directors and certain of its executive officers. See "Management--
Limitations on Directors' and Executive Officers' Liability and
Indemnification."
All of the Company's securities referenced above were sold and purchased at
prices equal to the fair market value of the securities, as determined by the
Company's Board of Directors, on the date of issuance.
53
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth information known to us with respect to the
beneficial ownership of our common stock as of January 31, 1999 and as
adjusted to reflect our sale of shares for (i) each person who we know to own
beneficially more than five percent of the common stock, (ii) each of our
directors, (iii) each of the Named Executive Officers, and (iv) all directors
and executive officers as a group. Unless otherwise indicated in the table set
forth below, each person or entity named below has an address in care of
Copper Mountain's principal executive offices.
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED (1)(2)
SHARES -------------------------
BENEFICIALLY PRIOR TO AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED (1)(2) OFFERING OFFERING
- ------------------------------------ ------------ ------------ -------------
<S> <C> <C> <C>
Greylock Equity Limited
Partnership(3)..................... 3,012,964 16.6% %
755 Page Mill Road, Suite A-100
Palo Alto, CA 94304
Roger Evans(4)...................... 3,012,964 16.6% %
Greylock Equity Limited
Partnership
755 Page Mill Road, Suite A-100
Palo Alto, CA 94304
Entities Affiliated with............ 3,012,956 16.6% %
Sutter Hill Ventures(5)
755 Page Mill Road, Suite A-200
Palo Alto, CA 94304
Tench Coxe(6)....................... 2,361,455 13.0% %
Sutter Hill Ventures
755 Page Mill Road, Suite A-200
Palo Alto, CA 94304
Entities Affiliated with............ 1,538,594 8.5% %
Matrix Partners IV, L.P. (7)
2500 Sand Hill Road, Suite 113
Menlo Park, CA 94025
Andrew W. Verhalen(8)............... 1,538,594 8.5% %
Matrix Partners IV, L.P.
2500 Sand Hill Road, Suite 113
Menlo Park, CA 94025
Entities Affiliated with............ 1,193,054 6.6% %
InterWest Partners VI, L.P.(9)
3000 Sand Hill Road
Building 3, Suite 255
Menlo Park, CA 94025
Cannan Equity, L.P.................. 1,193,054 6.6% %
2884 Sand Hill Road, Ste. 115
Menlo Park, CA 94025
Entities Affiliated with............ 1,161,290 6.4% %
Technology Crossover Ventures (10)
575 High Street, Suite 400
Palo Alto, CA 94301
</TABLE>
54
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE OF SHARES
BENEFICIALLY OWNED (1)(2)
SHARES -------------------------
BENEFICIALLY PRIOR TO AFTER
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED (1)(2) OFFERING OFFERING
- ------------------------------------- ------------ ------------ --------------
<S> <C> <C> <C>
Richard H. Kimball(11).................. 1,161,290 6.4% %
Technology Crossover Ventures II, L.P.
575 High Street, Suite 400
Palo Alto, CA 94301
Joseph D. Markee(12).................... 956,739 5.3% %
Mark Handzel(13)........................ 778,302 4.3% %
Steve Hunt(14).......................... 193,750 1.1% %
Mike Kelly(15).......................... 168,878 * %
Richard Gilbert(16)..................... 2,133 * %
All directors and officers as a group (9
persons)(17)........................... 10,174,105 55.6% %
</TABLE>
- --------
* Represents beneficial ownership of less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to securities. Except as indicated by
footnote, and subject to community property laws where applicable, the
persons named in the table above have sole voting and investment power
with respect to all shares of common stock shown as beneficially owned by
them. Percentage of beneficial ownership is based on 18,107,182 shares of
common stock outstanding on an as-converted basis as of January 31, 1999.
(2) Assumes no exercise of the Underwriters' over-allotment option. If the
Underwriters' over-allotment option is exercised in full, the Company
will sell up to an aggregate of shares of common stock of the
Company, and up to shares of common stock will be outstanding
after the completion of this offering.
(3) Mr. Evans, a director of the Company, is a General Partner of Greylock
Equity GP Limited Partnership, the General Partner of Greylock Equity
Limited Partnership ("Greylock"). Mr. Evans disclaims beneficial
ownership of such shares, except to the extent of his pecuniary interest
therein.
(4) Includes 3,012,964 shares held by Greylock. Mr. Evans, a director of the
Company, is a General Partner of Greylock Equity GP Limited Partnership,
the General Partner of Greylock and disclaims beneficial ownership of the
shares held by Greylock, except to the extent of his pecuniary interest
therein.
(5) Includes 101,728 shares held by or for the benefit of Tench Coxe, a
director of Copper Mountain and a Managing Director of the General
Partner of Sutter Hill Ventures, a California Limited Partnership
("Sutter Hill"), 331,580 shares held by or for the benefit of other
Managing Directors of the General Partner of Sutter Hill, and 8,559
shares held by, or for the benefit of, individuals and entities
affiliated with Sutter Hill, all of whom disclaim beneficial ownership of
the shares held by Sutter Hill, except as to their pecuniary interest in
Sutter Hill. Also includes 101,728 shares held by TOW Partners, a
California Limited Partnership ("TOW"), 81,653 shares held by Anvest,
L.P. and 109,950 shares held by Saunders Holdings, L.P., the General
Partners of each of which include individuals who are Managing Directors
of the General Partner of Sutter Hill. Such individuals disclaim
beneficial ownership of the shares held by TOW, Anvest, L.P. and Saunders
Holdings, L.P., except as to their pecuniary interest in these three
partnerships. Also includes 18,031 shares held by a former officer of
Sutter Hill.
(6) Includes 2,259,727 shares held by Sutter Hill and 7,377 shares held by
Wells Fargo Bank, trustee SHV M/P/T FBO Tench Coxe. Mr. Coxe is a
Managing Director of the General Partner of Sutter Hill and disclaims
beneficial ownership of the shares held by Sutter Hill, except as to his
pecuniary interest therein.
55
<PAGE>
(7) Of the total shares indicated as beneficially owned, Matrix Partners IV,
L.P. ("Matrix Partners") owns 1,461,664 shares which represent 8.1% and
% of total shares before and after this offering, respectively.
Matrix IV Entrepreneurs Fund, L.P. owns 76,930 shares which represent
less than 1% of total shares before and after this offering,
respectively. Mr. Verhalen, a director of the Company, is a General
Partner of Matrix Partners. Mr. Verhalen disclaims beneficial ownership
of such shares, except to the extent of his pecuniary interest therein.
(8) Includes 1,538,594 shares held by entities affiliated with Matrix
Partners. See Note 5 above. Mr. Verhalen is a General Partner of Matrix
Partners and disclaims beneficial ownership of the 1,538,594 shares held
by these entities, except to the extent of his pecuniary interest
therein.
(9) Of the total shares indicated as beneficially owned, Interwest Partners
IV, L.P. owns 1,157,261 shares which represent 6.4% and % of total
shares before and after this offering, respectively. Interwest Investors
IV, L.P. owns 35,793 shares which represent less than 1% of total shares
before and after this offering, respectively.
(10) Includes 18,046 shares held by TCV II, V.O.F. which represent less than
1% of total shares before and after this offering, respectively, 555,531
shares held by Technology Crossover Ventures II, L.P. which represent
3.1% and % of total shares before and after this offering,
respectively, 427,099 shares held by TCV II (Q), L.P. which represent
2.4% and % of total shares before and after this offering,
respectively, 75,795 shares held by TCV II Strategic Partners, L.P. which
represent less than 1% of total shares before and after this offering,
respectively, and 84,819 shares held by Technology Crossover Ventures II,
C.V. which represent less than 1% of total shares before and after this
offering, respectively (collectively, "Technology Crossover Ventures").
Mr. Kimball, a Director of the Company, is a managing member of
Technology Crossover Management II, L.L.C., the general partner of
Technology Crossover Ventures. Mr. Kimball disclaims beneficial ownership
of the shares held by Technology Crossover Ventures, except to the extent
of his pecuniary interest therein arising from his interest in Technology
Crossover Management II, L.L.C.
(11) Includes 1,161,290 shares held by Technology Crossover Ventures. See note
10 above. Mr. Kimball is a managing member of Technology Crossover
Management II, L.L.C., the general partner of Technology Crossover
Ventures. Mr. Kimball disclaims beneficial ownership of the shares held
by Technology Crossover Ventures, except to the extent of his pecuniary
interest therein arising from his interest in Technology Crossover
Management II, L.L.C.
(12) Includes 28,437 shares of common stock held by Teresa L. Boley, Mr.
Markee's spouse, and 227,005 shares subject to repurchase by the Company
as of January 31, 1999.
(13) Includes 227,005 shares subject to repurchase by the Company as of
January 31, 1999.
(14) Includes 178,750 shares of common stock issuable upon exercise of options
exercisable within 60 days of January 31, 1999.
(15) Includes 9,108 shares issuable upon exercise of options exercisable
within 60 days of January 31, 1999.
(16) Does not include 884,645 shares of common stock issuable upon the
exercise of options held by Mr. Gilbert, none of which will be vested
within 60 days of January 31, 1999.
(17) Includes 187,858 shares subject to options exercisable within 60 days of
January 31, 1999.
56
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Effective upon the closing of this offering, the authorized capital stock of
the Company consists of 100,000,000 shares of common stock, $.001 par value,
and 5,000,000 shares of preferred stock, $.001 par value.
COMMON STOCK
As of January 31, 1999, there were 18,107,182 shares of common stock
outstanding, after giving effect to the conversion of all outstanding shares
of preferred stock into 15,334,824 shares of common stock.
The holders of common stock are entitled to one vote per share on all
matters to be voted on by the stockholders. Subject to preferences that may be
applicable to any outstanding shares of preferred stock, holders of common
stock are entitled to receive ratably such dividends as may be declared by the
Board of Directors out of funds legally available therefor. In the event of a
liquidation, dissolution or winding up of the Company, holders of common stock
are entitled to share ratably in all assets remaining after payment of
liabilities and the liquidation preferences of any outstanding shares of
preferred stock. Holders of common stock have no preemptive, conversion,
subscription or other rights. There are no redemption or sinking fund
provisions applicable to the common stock. All outstanding shares of common
stock are, and all shares of common stock to be outstanding upon completion of
this offering will be, fully paid and nonassessable.
PREFERRED STOCK
Upon the closing of this offering, all outstanding shares of preferred stock
will be converted at a rate of one and one half shares of common stock for
each share of preferred stock into an aggregate of 15,334,824 shares of common
stock. See Note 5 of Notes to Financial Statements for a description of the
currently outstanding preferred stock. Following the conversion, the Company's
Certificate of Incorporation will be amended and restated to delete all
references to such shares of preferred stock. Under the Restated Certificate,
the Board has the authority, without further action by stockholders, to issue
up to 5,000,000 shares of preferred stock in one or more series and to fix the
rights, preferences, privileges, qualifications and restrictions granted to or
imposed upon such preferred stock, including dividend rights, conversion
rights, voting rights, rights and terms of redemption, liquidation preference
and sinking fund terms, any or all of which may be greater than the rights of
the common stock. The issuance of preferred stock could adversely affect the
voting power of holders of common stock and reduce the likelihood that such
holders will receive dividend payments and payments upon liquidation. Such
issuance could have the effect of decreasing the market price of the common
stock. The issuance of preferred stock could have the effect of delaying,
deterring or preventing a change in control of the Company. The Company has no
present plans to issue any shares of preferred stock.
WARRANTS
In October 1996, in conjunction with the execution of an equipment financing
agreement, the Company issued ten-year warrants to purchase up to 10,000
shares and 40,000 shares of Series A Preferred Stock at an exercise price of
$1.00 per share. In January 1997, in connection with the execution of a
license agreement, the Company issued a seven-year warrant to purchase up to
147,401 shares of Series B Preferred Stock at an exercise price of $3.39 per
share. In October 1997 and in April 1998, in connection with the execution of
an equipment financing agreement, the Company issued ten-year warrants to
purchase 8,421 and 6,316 shares of Series C Preferred Stock at an exercise
price of $4.75 per share. In August 1998, in connection with the execution of
a loan agreement, the Company issued a five-year warrant to purchase up to
25,000 shares of Series C Preferred Stock at an exercise price of $4.75 per
share.
Upon the closing of this offering, all warrants described herein will become
exercisable for common stock at the rate of one and one-half shares of common
stock for each share of preferred stock underlying the warrants.
57
<PAGE>
REGISTRATION RIGHTS
After this offering, the holders of 15,690,530 shares of common stock issued
upon conversion of the Company's preferred stock (including shares issuable
upon exercise of warrants (collectively, the "Registrable Shares")), or their
permitted transferees, are entitled to certain rights with respect to the
registration of such shares under the Securities Act. If the Company proposes
to register any of its securities under the Securities Act for its own account
or the account of any of its stockholders other than the holders of the
Registrable Shares, holders of such Registrable Shares are entitled, subject
to certain limitations and conditions, to notice of such registration and are,
subject to certain conditions and limitations, entitled to include Registrable
Shares therein, provided, among other conditions, that the underwriters of any
such offering have the right to limit the number of shares included in such
registration. In addition, commencing 180 days after the effective date of the
Registration Statement of which this prospectus is a part, the Company may be
required to prepare and file a registration statement under the Securities Act
at its expense if requested to do so by the holders of at least 25% of the
Registrable Shares, provided the reasonably expected aggregate offering price
will equal or exceed $5,000,000 including underwriting discounts and
commissions. The Company is required to use its best efforts to effect such
registration, subject to certain conditions and limitations. The Company is
not obligated to effect more than two of such stockholder-initiated
registrations. Further, holders of Registrable Securities may require the
Company to file additional registration statements on Form S-3, subject to
certain conditions and limitations.
The Company is required to bear substantially all costs incurred in
connection with any such registrations, other than underwriting discounts and
commissions. The foregoing registration rights could result in substantial
future expenses to the Company and adversely affect any future equity or debt
offerings of the Company.
DELAWARE ANTI-TAKEOVER LAW
The Company is governed by the provisions of Section 203 of the Delaware
Law. In general, Section 203 prohibits a public 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 business combination is approved
in a prescribed manner. A "business combination" includes mergers, asset sale
or other transactions resulting in a financial benefit to the stockholder. An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or within three years, did own) 15% or more of the
corporation's voting stock. The statute could have the effect of delaying,
deferring or preventing a change in control of the Company.
The Company's Restated Certificate provides that any action required or
permitted to be taken by stockholders of the Company must be effected at a
duly called annual or special meeting of stockholders and may not be effected
by any consent in writing. In addition, the Company's Bylaws provide that
special meetings of the stockholders of the Company may be called only by the
Chairman of the Board of Directors, the Chief Executive Officer of the
Company, by the Board of Directors pursuant to a resolution adopted by a
majority of the total number of authorized directors, or by the holders of 10%
of the outstanding voting stock of the Company. The Company's Restated
Certificate also specifies that the authorized number of directors may be
changed only by resolution of the Board of Directors and does not include a
provision for cumulative voting for directors. Under cumulative voting, a
minority stockholder holding a sufficient percentage of a class of shares may
be able to ensure the election of one or more directors. These and other
provisions contained in the Restated Certificate and the Company's Bylaws
could delay or discourage certain types of transactions involving an actual or
potential change in control of the Company or its management (including
transactions in which stockholders might otherwise receive a premium for their
shares over then current prices) and may limit the ability of stockholders to
remove current management of the Company or approve transactions that
stockholders may deem to be in their best interests and, therefore, could
adversely affect the price of the Company's common stock.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Company's common stock is
ChaseMellon Shareholder Services, L.L.C.
58
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Immediately prior to this offering, there was no public market for our
common stock. Future sales of substantial amounts of common stock in the
public market could adversely affect the market price of the common stock.
Upon completion of this offering, Copper Mountain will have outstanding
shares of common stock, assuming the issuance of shares of common stock
offered hereby and no exercise of options after January 31, 1998. Of these
shares, the shares sold in this offering will be freely tradable without
restriction or further registration under the Securities Act, unless such
shares are purchased by "affiliates" as that term is defined in Rule 144 under
the Securities Act (whose sales would be subject to certain limitations and
restrictions described below).
We issued and sold the remaining 18,107,182 shares of common stock held by
existing stockholders in reliance on exemptions from the registration
requirements of the Securities Act. All of these shares will be subject to
"lock-up" agreements described below on the effective date of this offering.
Upon expiration of the lock-up agreements 180 days after the effective date of
this offering, all of these shares will become eligible for sale, subject in
most cases to the limitations of Rule 144. In addition, holders of stock
options could exercise such options and sell certain of the shares issued upon
exercise as described below.
<TABLE>
<CAPTION>
SHARES
DAYS AFTER DATE OF ELIGIBLE
THIS PROSPECTUS FOR SALE COMMENT
------------------ ---------- ---------------------------------------------
<C> <C> <S>
Upon Effectiveness Shares sold in this offering
180 days Lock-up released; saleable shares under Rules
18,107,182 144 and 701
</TABLE>
As of December 31, 1998, there were a total of 4,265,471 shares of common
stock subject to outstanding options under our 1996 Equity Incentive Plan,
630,139 of which were vested. However, all of these shares are subject to
lock-up agreements. Immediately after the completion of this offering, we
intend to file registration statements on Form S-8 under the Securities Act to
register all of the shares of common stock issued or reserved for future
issuance under our 1996 Equity Incentive Plan and 1999 Employee Stock Purchase
Plan. On the date 180 days after the effective date of this offering, a total
of 1,531,294 shares of common stock subject to outstanding options will be
vested. After the effective date of the registration statement on Form S-8,
shares purchased upon exercise of options granted pursuant to the 1996 Equity
Incentive Plan and Employee Stock Purchase Plan generally would be available
for resale in the public market.
The officers, directors and stockholders of Copper Mountain have agreed not
to sell or otherwise dispose of any of their shares for a period of 180 days
after the date of this offering. Morgan Stanley & Co. Incorporated, however,
may in its sole discretion, at any time without notice, release all or any
portion of the shares subject to lock-up agreements.
RULE 144
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a person who has beneficially owned shares of
Copper Mountain's common stock for at least one year would be entitled to
sell, within any three-month period, a number of shares that does not exceed
the greater of
(i) 1% of the number of shares of common stock then outstanding, which will
equal approximately shares immediately after this offering; or
(ii) the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale.
Sales under Rule 144 are also subject to certain other requirements
regarding the manner of sale, notice filing and the availability of current
public information about Copper Mountain.
59
<PAGE>
RULE 144(K)
Under Rule 144(k), a person who is not deemed to have been one of Copper
Mountain's "affiliates," as defined in Rule 144, 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, including the holding period of any prior
owner other than an "affiliate," is entitled to sell such shares without
complying with the manner of sale, notice filing, volume limitation or notice
provisions of Rule 144. Therefore, unless otherwise restricted, "144(k)
shares" may be sold immediately upon the completion of this offering.
RULE 701
In general, under Rule 701, any Copper Mountain employee, director, officer,
consultant or advisor who purchases shares from Copper Mountain in connection
with a compensatory stock or option plan or other written agreement before the
effective date of the offering is entitled to resell such shares 90 days after
the effective date of this offering in reliance on Rule 144, without having to
comply with certain restrictions, including the holding period, contained in
Rule 144.
The SEC has indicated that Rule 701 will apply to typical stock options
granted by an issuer before it becomes subject to the reporting requirements
of the Securities Exchange Act of 1934, along with the shares acquired upon
exercise of such options (including exercises after the date of this
prospectus). Securities issued in reliance on Rule 701 are restricted
securities and, subject to the contractual restrictions described above,
beginning 90 days after the date of this prospectus, may be sold by persons
other than "affiliates" (as defined in Rule 144) subject only to the manner of
sale provisions of Rule 144 and by "affiliates" under Rule 144 without
compliance with its one-year minimum holding period requirement.
60
<PAGE>
UNDERWRITERS
Under the terms and subject to the conditions contained in the underwriting
agreement dated the date hereof, the underwriters named below, for whom Morgan
Stanley & Co. Incorporated, BancBoston Robertson Stephens, Inc. and Dain
Rauscher Wessels, a division of Dain Rauscher Incorporated ("Dain Rauscher
Wessels") are acting as representatives, have severally agreed to purchase,
and we have agreed to sell to them an aggregate of shares of
common stock. The number of shares of common stock that each underwriter has
agreed to purchase is set forth opposite its name below:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES
---- ---------
<S> <C>
Morgan Stanley & Co. Incorporated..................................
BancBoston Robertson Stephens, Inc.................................
Dain Rauscher Wessels..............................................
---
Total............................................................
===
</TABLE>
The underwriters are offering the shares subject to their acceptance of the
shares from us and subject to prior sale. The underwriting agreement provides
that the obligations of the several underwriters to pay for and accept
delivery of the shares of common stock offered hereby are subject to the
approval of certain legal matters by their counsel and to certain other
conditions. The underwriters are obligated to take and pay for all of the
shares of common stock offered hereby, other than those covered by the over-
allotment option described below, if any such shares are taken.
The underwriters initially propose to offer part of the shares of common
stock directly to the public at the public offering price set forth on the
cover page hereof and part to certain dealers at a price that represents a
concession not in excess of $ a share under the public offering
price. Any underwriters may allow, and such dealers may reallow, a concession
not in excess of $ a share to other underwriters or to certain other
dealers. After the initial offering of the shares of common stock, the
offering price and other selling terms may from time to time be varied by the
representatives of the underwriters.
Pursuant to the underwriting agreement, we have granted to the underwriters
an option, exercisable for 30 days from the date of this prospectus, to
purchase up to an aggregate of additional shares of common
stock at the public offering price set forth on the cover page hereof, less
underwriting discounts and commissions. The underwriters may exercise such
option solely for the purpose of covering over-allotments, if any, made in
connection with the offering of the shares of common stock offered hereby. To
the extent such option is exercised, each underwriter will become obligated,
subject to certain conditions, to purchase approximately the same percentage
of such additional shares of common stock as the number set forth next to such
underwriter's name in the preceding table bears to the total number of shares
of common stock set forth next to the names of all underwriters in the
preceding table. If the underwriter's over-allotment option is exercised in
full, the total price to public would be $ , the total underwriters'
discounts and commissions would be $ , and the total proceeds to us
would be $ .
We, the directors, officers, stockholders and certain optionholders of
Copper Mountain have each agreed that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the underwriters, during the
period ending 180 days after the date of this prospectus, we will not,
directly or indirectly, (i) offer, pledge, sell, contract to sell, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase, lend or otherwise transfer or
dispose of, directly or indirectly, any shares of common stock or any
securities convertible into or exercisable or exchangeable for common stock,
or (ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of common
stock, whether any such transaction described in clause (i) or (ii) above is
to be settled by delivery of common stock or such other securities, in cash or
otherwise.
61
<PAGE>
The restrictions described in the previous paragraph do not apply to (a) the
sale to the underwriters of the shares of common stock under the underwriting
agreement, (b) the issuance by Copper Mountain of shares of common stock upon
the exercise of an option or a warrant or the conversion of a security
outstanding on the date of this prospectus which is described in this
prospectus, (c) transactions by any person other than Copper Mountain relating
to shares of common stock or other securities acquired in open market
transactions after the completion of the offering of the shares, or (d)
issuances of certain shares of common stock or options to purchase shares of
common stock pursuant to our employee benefit plans as in existence on the
date of this prospectus.
The underwriters have informed us that they do not intend sales to
discretionary accounts to exceed five percent of the total number of shares of
common stock offered by them.
We have submitted an application to have our common stock approved for
quotation on the Nasdaq National Market under the symbol "CMTN."
In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the common stock
for their own account. In addition, to cover over-allotments or to stabilize
the price of the common stock, the underwriters may bid for, and purchase,
shares of common stock in the open market. Finally, the underwriting syndicate
may reclaim selling concessions allowed to an underwriter or a dealer for
distributing the common stock in the offering if the syndicate repurchases
previously distributed shares of common stock in transactions to cover
syndicate short positions, in stabilization transactions or otherwise. Any of
these activities may stabilize or maintain the market price of the common
stock above independent market levels. The underwriters are not required to
engage in these activities and may end any of these activities at any time.
Of the shares of common stock to be offered in this offering, the
underwriters have reserved for sale, at the price set forth on the cover page
of this prospectus, at the request of the Company, up to shares of the
Company's common stock. As a result, the number of shares of common stock
available for sale to the general public will be reduced to the extent such
persons purchase the reserved shares. The underwriters will offer to the
general public (on the same basis as the other shares to be sold in this
offering) any reserved shares that are not so purchased.
We and the underwriters have agreed to indemnify each other against certain
liabilities, including liabilities under the Securities Act.
Morgan Stanley & Co. Incorporated acted as the placement agent of our Series
D Preferred Stock financing, and in connection with that placement, received a
fee for their services. In addition, entities affiliated with Morgan Stanley &
Co. Incorporated purchased an aggregate of 338,709 shares of our Series D
Preferred Stock, and an affiliate of BancBoston Robertson Stephens, Inc.
purchased 58,065 shares of our Series D Preferred Stock.
PRICING OF THE OFFERING
Prior to this offering, there has been no public market for our common
stock. Consequently, the public offering price for the shares of common stock
will be determined by negotiations between us and the representatives of the
underwriters. Among the factors to be considered in determining the public
offering price will be our record of operations, our current financial
position and future prospects, the experience of our management, sales,
earnings and certain of our other financial and operating information in
recent periods, the price-earnings ratios, price-sales ratios, market prices
of securities and certain financial and operating information of companies
engaged in activities similar to ours. The estimated public offering price
range set forth on the cover page of this prospectus is subject to change as a
result of market conditions and other factors.
62
<PAGE>
LEGAL MATTERS
The legality of the shares of common stock offered hereby will be passed
upon for us by Cooley Godward LLP, San Diego, California. Certain legal
matters will be passed upon for the underwriters by Wilson Sonsini Goodrich &
Rosati, Professional Corporation, Palo Alto, California. As of the date of
this prospectus, certain partners and associates of Cooley Godward LLP and
certain partners and associates of Wilson Sonsini Goodrich & Rosati
beneficially own an aggregate of approximately 60,943 and 15,790 shares of the
Company's common stock, respectively, through investment partnerships.
EXPERTS
Ernst & Young LLP, independent auditors, have audited our financial
statements at December 31, 1997 and 1998 and for the period from March 11,
1996 (inception) to December 31, 1996 and for the years ended December 31,
1997 and 1998, as set forth in their report. We've included our financial
statements in the prospectus and elsewhere in the registration statement in
reliance on Ernst & Young LLP's report, given on their authority as experts in
accounting and auditing.
ADDITIONAL INFORMATION
We have filed with the Commission a Registration Statement on Form S-1 under
the Securities Act, with respect to the common stock offered hereby. As
permitted by the rules and regulations of the Commission, this prospectus,
which is a part of the Registration Statement, omits certain information,
exhibits, schedules and undertakings set forth in the Registration Statement.
For further information pertaining to Copper Mountain and the common stock
offered hereby, reference is made to such Registration Statement and the
exhibits and schedules thereto. Statements contained in this prospectus as to
the contents or provisions of any contract or other document referred to
herein are not necessarily complete, and in each instance reference is made to
the copy of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all respects by
such reference. A copy of the Registration Statement may be inspected without
charge at the office of the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the Commission's regional offices located at the
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and Seven World Trade Center, 13th Floor, New York, New York
10048. Copies of all or any part of the Registration Statement may be obtained
from such offices upon the payment of the fees prescribed by the Commission.
In addition, registration statements and certain other filings made with the
Commission through its Electronic Data Gathering, Analysis and Retrieval
("EDGAR") system are publicly available through the Commission's web site on
the Internet's World Wide Web, located at http://www.sec.gov. The Registration
Statement, including all exhibits thereto and amendments thereof, was filed
with the Commission through EDGAR.
63
<PAGE>
COPPER MOUNTAIN NETWORKS, INC.
INDEX TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
<TABLE>
<S> <C>
CONTENTS
Report of Ernst & Young LLP, Independent Auditors......................... F-2
Balance Sheets............................................................ F-3
Statements of Operations.................................................. F-4
Statement of Stockholders' Equity......................................... F-5
Statements of Cash Flows.................................................. F-6
Notes to Financial Statements............................................. F-7
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Copper Mountain Networks, Inc.
We have audited the accompanying balance sheets of Copper Mountain Networks,
Inc. as of December 31, 1997 and 1998, and the related statements of
operations, stockholders' equity and cash flows for the period March 11, 1996
(inception) to December 31, 1996 and for the years ended December 31, 1997 and
1998. 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 audit 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 Copper Mountain Networks,
Inc. at December 31, 1997 and 1998, and the results of its operations and its
cash flows for the period March 11, 1996 (inception) to December 31, 1996 and
for the years ended December 31, 1997 and 1998, in conformity with generally
accepted accounting principles.
San Diego, California
February 25, 1999,
except for Note 10, as to which the date is
, 1999
- -------------------------------------------------------------------------------
The foregoing report is in the form that will be signed upon completion of
certain events as described in Note 10 to the financial statements.
San Diego, California
February 26, 1999
ERNST & YOUNG LLP
F-2
<PAGE>
COPPER MOUNTAIN NETWORKS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, PRO FORMA
-------------------------- STOCKHOLDERS
1997 1998 EQUITY
------------ ------------ ------------
(UNAUDITED)
(NOTE 1)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........... $ 9,517,000 $ 7,631,000
Short-term investments.............. -- 10,898,000
Accounts receivable................. 183,000 8,026,000
Inventory........................... 383,000 4,668,000
Other current assets................ 98,000 476,000
------------ ------------
Total current assets................. 10,181,000 31,699,000
Property and equipment, net.......... 1,905,000 3,214,000
Other assets......................... 246,000 1,296,000
------------ ------------
Total assets......................... $ 12,332,000 $ 36,209,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................... $ 748,000 $ 4,371,000
Accrued liabilities................. 1,435,000 2,219,000
Current portion of obligations under
capital leases and equipment notes
payable............................ 345,000 783,000
------------ ------------
Total current liabilities............ 2,528,000 7,373,000
Obligations under capital leases and
equipment notes payable............. 735,000 1,965,000
Other accrued........................ -- 28,000
Stockholders' equity:
Convertible preferred stock, no par
value, 10,602,464 shares
authorized, 6,997,424 and
10,223,230, shares issued and
outstanding at December 31, 1997
and 1998, respectively; $.001 par
value, 5,000,000 shares authorized,
none issued and outstanding in pro
forma (unaudited) (liquidation
preference of $45,508,000 at
December 31, 1998)................. 20,425,000 44,502,000 $ --
Common stock, $.001, 29,397,536
shares authorized, 2,230,679,
2,516,873, and 17,851,697 shares
issued and outstanding at December
31, 1997, 1998, and pro forma
(unaudited), respectively.......... 2,000 3,000 18,000
Notes receivable from stockholders.. (69,000) (41,000) (41,000)
Paid-in capital..................... 229,000 1,416,000 45,903,000
Deferred compensation............... -- (1,068,000) (1,068,000)
Accumulated deficit................. (11,518,000) (17,969,000) (17,969,000)
------------ ------------ ------------
Total stockholders' equity........... 9,069,000 26,843,000 26,843,000
------------ ------------ ------------
Total liabilities and stockholders'
equity.............................. $ 12,332,000 $ 36,209,000 $ 36,209,000
============ ============ ============
</TABLE>
See accompanying notes.
F-3
<PAGE>
COPPER MOUNTAIN NETWORKS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD FROM MARCH YEAR ENDED
11, 1996 DECEMBER 31,
(INCEPTION) TO ------------------------
DECEMBER 31, 1996 1997 1998
----------------- ----------- -----------
<S> <C> <C> <C>
Net revenue....................... $ -- $ 211,000 $21,821,000
Cost of revenue................... -- 1,717,000 12,400,000
----------- ----------- -----------
Gross profit (loss)............... -- (1,506,000) 9,421,000
Operating expenses:
Research and development........ 1,483,000 4,753,000 7,225,000
Sales and marketing............. -- 1,510,000 5,363,000
General and administrative...... 553,000 1,928,000 3,428,000
Amortization of deferred stock
compensation................... -- -- 49,000
----------- ----------- -----------
Total operating expenses...... 2,036,000 8,191,000 16,065,000
----------- ----------- -----------
Loss from operations.............. (2,036,000) (9,697,000) (6,644,000)
Interest income................... 47,000 268,000 406,000
Interest expense.................. (3,000) (97,000) (213,000)
----------- ----------- -----------
Net loss.......................... $(1,992,000) $(9,526,000) $(6,451,000)
=========== =========== ===========
Basic and diluted net loss per
share............................ $ (10.66) $ (13.51) $ (4.84)
=========== =========== ===========
Shares used to compute basic and
diluted net loss per share....... 186,938 705,236 1,333,036
=========== =========== ===========
Pro forma net loss per share,
basic and diluted (unaudited).... $ (.39)
===========
Shares used in computing pro forma
net loss per share (unaudited)... 16,667,860
===========
</TABLE>
See accompanying notes.
F-4
<PAGE>
COPPER MOUNTAIN NETWORKS, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
NOTES
PREFERRED STOCK COMMON STOCK RECEIVABLE TOTAL
---------------------- ----------------- FROM PAID-IN DEFERRED ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT STOCKHOLDERS CAPITAL COMPENSATION DEFICIT EQUITY
---------- ----------- --------- ------ ------------ ---------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of
common stock at
$0.03 per share
for notes
receivable..... -- $ -- 1,556,604 $2,000 $(42,000) $ 40,000 $ -- $ -- $ --
Issuance of
Series A
convertible
preferred stock
at $1.00 per
share for
cash........... 2,723,000 2,723,000 -- -- -- -- -- -- 2,723,000
Issuance of
Series A
convertible
preferred stock
warrants in
connection with
note payable... -- -- -- -- -- 18,000 -- -- 18,000
Issuance of
common stock at
$0.07 per share
for notes
receivable..... -- -- 408,000 -- (27,000) 27,000 -- -- --
Net loss........ -- -- -- -- -- -- -- (1,992,000) (1,992,000)
---------- ----------- --------- ------ -------- ---------- ----------- ------------ -----------
Balance at
December 31,
1996........... 2,723,000 2,723,000 1,964,604 2,000 (69,000) 85,000 -- (1,992,000) 749,000
Issuance of
Series B
convertible
preferred stock
at $3.39 per
share for cash
and conversion
of convertible
bridge note
payable, net of
offering
expenses of
$76,000........ 1,850,063 6,196,000 -- -- -- -- -- -- 6,196,000
Issuance of
Series C
convertible
preferred stock
at $4.75 per
share for
cash........... 2,422,361 11,506,000 -- -- -- -- -- -- 11,506,000
Exercise of
options to
purchase common
stock.......... -- -- 238,437 -- -- 16,000 -- -- 16,000
Stock grants for
consulting
services....... 2,000 -- 27,638 -- -- 15,000 -- -- 15,000
Issuance of
warrants to
purchase
convertible
preferred stock
in connection
with technology
agreement,
notes payable,
and consulting
services....... -- -- -- -- -- 113,000 -- -- 113,000
Net loss........ -- -- -- -- -- -- -- (9,526,000) (9,526,000)
---------- ----------- --------- ------ -------- ---------- ----------- ------------ -----------
Balance at
December 31,
1997........... 6,997,424 20,425,000 2,230,679 2,000 (69,000) 229,000 -- (11,518,000) 9,069,000
Exercise of
options to
purchase common
stock.......... -- -- 514,635 1,000 -- 60,000 -- -- 61,000
Stock grants for
consulting
services....... -- -- 9,560 -- -- 5,000 -- -- 5,000
Deferred
compensation
related to the
grant of
certain stock
options........ -- -- -- -- -- 1,117,000 (1,117,000) -- --
Amortization
related to
deferred
compensation... -- -- -- -- -- -- 49,000 -- 49,000
Stock forfeited
by employee.... -- -- (238,001) -- 16,000 (16,000) -- -- --
Repayment of
stockholder
note........... -- -- -- -- 12,000 -- -- -- 12,000
Issuance of
Series C
convertible
preferred stock
warrants in
connection with
a financing
agreement...... -- -- -- -- -- 21,000 -- -- 21,000
Issuance of
Series D
convertible
preferred stock
at $7.75 per
share for cash,
net of offering
expenses of
$923,000....... 3,225,806 24,077,000 -- -- -- -- -- -- 24,077,000
Net loss........ -- -- -- -- -- -- -- (6,451,000) (6,451,000)
---------- ----------- --------- ------ -------- ---------- ----------- ------------ -----------
Balance at
December 31,
1998........... 10,223,230 $44,502,000 2,516,873 $3,000 $(41,000) $1,416,000 $(1,068,000) $(17,969,000) $26,843,000
========== =========== ========= ====== ======== ========== =========== ============ ===========
</TABLE>
See accompanying notes.
F-5
<PAGE>
COPPER MOUNTAIN NETWORKS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
PERIOD FROM
MARCH 11,
1996
(INCEPTION) YEAR ENDED DECEMBER 31,
TO DECEMBER -------------------------
31, 1996 1997 1998
----------- ----------- ------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss.............................. $(1,992,000) $(9,526,000) $ (6,451,000)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization........ 109,000 511,000 1,231,000
Noncash compensation................. 1,000 13,000 54,000
Changes in operating assets and
liabilities:
Accounts receivable................. -- (183,000) (7,843,000)
Inventory........................... -- (383,000) (4,285,000)
Other current assets and other
assets............................. (58,000) (155,000) (1,469,000)
Accounts payable and accrued
liabilities........................ 448,000 1,735,000 4,435,000
----------- ----------- ------------
Net cash used in operating
activities........................... (1,492,000) (7,988,000) (14,328,000)
INVESTING ACTIVITIES
Purchases of short-term investments,
net.................................. -- -- (10,898,000)
Purchases of property and equipment... (682,000) (1,515,000) (1,171,000)
----------- ----------- ------------
Net cash used for investing
activities........................... (682,000) (1,515,000) (12,069,000)
FINANCING ACTIVITIES
Proceeds from issuance of equipment
notes payable........................ 367,000 615,000 921,000
Proceeds from convertible bridge note
payable.............................. 2,500,000 -- --
Payments on capital lease
obligations.......................... -- (18,000) (293,000)
Payments on equipment notes payable... (10,000) (201,000) (267,000)
Proceeds from issuance of preferred
stock................................ 2,723,000 15,202,000 24,077,000
Proceeds from issuance of common
stock................................ -- 16,000 73,000
----------- ----------- ------------
Net cash provided by financing
activities........................... 5,580,000 15,614,000 24,511,000
----------- ----------- ------------
Net increase (decrease) in cash and
cash equivalents..................... 3,406,000 6,111,000 (1,886,000)
Cash and cash equivalents at beginning
of the period........................ -- 3,406,000 9,517,000
----------- ----------- ------------
Cash and cash equivalents at end of
the period........................... $ 3,406,000 $ 9,517,000 $ 7,631,000
=========== =========== ============
SUPPLEMENTAL SCHEDULE OF INVESTING AND
FINANCING ACTIVITIES:
Interest paid......................... $ -- $ 74,000 $ 150,000
=========== =========== ============
Capital lease obligations entered into
for equipment........................ $ -- $ 327,000 $ 1,307,000
=========== =========== ============
Conversion of convertible bridge note
payable to preferred stock........... $ -- $ 2,500,000 $ --
=========== =========== ============
Stock issued (forfeited) for notes
receivable........................... $ 69,000 $ -- $ (16,000)
=========== =========== ============
Issuance of convertible preferred
stock warrants....................... $ 18,000 $ 113,000 $ 21,000
=========== =========== ============
Issuance of stock for consulting
services............................. $ 1,000 $ 13,000 $ 5,000
=========== =========== ============
</TABLE>
See accompanying notes.
F-6
<PAGE>
COPPER MOUNTAIN NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Business Activity
Copper Mountain Networks, Inc. (the "Company" or "Copper Mountain") was
incorporated in California on March 11, 1996, and is a supplier of high-speed
DSL-based communication solutions for the broadband access market. The
Company's solutions enable telecommunication service providers to provide high
speed, cost effective connectivity over the existing copper wire
infrastructure to the business, multiple tenant unit and residential markets.
During the period from March 11, 1996 to December 31, 1997, Copper Mountain
was a developmental stage company as defined in Financial Accounting Standards
Board Statement No. 7 "Development Stage Enterprises." Planned principal
operations commenced as of January 1, 1998 and, accordingly, Copper Mountain
is no longer considered a developmental stage company.
Management Estimates and Assumptions
The preparation of 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 at the
date of the financial statements and reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
Cash and cash equivalents consist of cash, money market funds, and other
highly liquid investments with maturities of three months or less when
purchased. The carrying value of these instruments approximates fair value.
The Company generally invests its excess cash in debt instruments of the U.S.
Treasury, government agencies and corporations with strong credit ratings.
Such investments are made in accordance with the Company's investment policy,
which establishes guidelines relative to diversification and maturities
designed to maintain safety and liquidity. These guidelines are periodically
reviewed and modified to take advantage of trends in yields and interest
rates. The Company has not experienced any losses on its cash and cash
equivalents.
Fair Value of Financial Instruments
The carrying value of cash, cash equivalents, short-term investments,
accounts receivable, accounts payable, accrued liabilities, short-term bank
borrowings and notes payable approximates fair value.
Investments
At December 31, 1998, the Company held investments in investment grade debt
securities with various maturities through August 1999. Management determines
the appropriate classification of its investments in debt securities at the
time of purchase and reevaluates such designation as of each balance sheet
date. The Company's total investments in these securities as of December 31,
1998 totaled $12,896,000. The Company has included $1,998,000 of these
securities in cash and cash equivalents, as of December 31, 1998, as they have
original maturities of less than 90 days. The remaining $10,898,000 as of
December 31, 1998 has been classified as short-term investments. The Company
has designated all of its investments as held to maturity.
Concentration of Credit Risk
The Company operates in one business segment, developing, marketing and
supporting advanced communications products which enable high-speed data
access to business, multi-tenant unit and residential
F-7
<PAGE>
COPPER MOUNTAIN NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
users. The markets for high-speed data access products are characterized by
rapid technological developments, frequent new product introductions, changes
in end user requirements and evolving industry standards. The Company's future
success will depend on its ability to develop, introduce and market
enhancements to its existing products, to introduce new products in a timely
manner which meet customer requirements and to respond to competitive
pressures and technological advances. Further, the emergence of new industry
standards, whether through adoption by official standards committees or
widespread use by telephone companies or other telecommunications service
providers, could require the Company to redesign its products.
A relatively small number of customers account for a significant percentage
of the Company's revenues. The Company expects that the sale of its products
to a limited number of customers may continue to account for a high percentage
of revenues for the foreseeable future. The Company's revenues for the year
ended December 31, 1998 include sales to two significant customers totaling
$13,227,000 and $3,995,000, respectively. The Company's four largest customers
(by revenues) generated approximately 95% of the Company's total revenues for
the year ended December 31, 1998.
The Company performs ongoing credit evaluations of its customers and
generally requires no collateral. The Company had significant accounts
receivable balances due from three customers individually representing 63%,
11% and 10% of total accounts receivable at December 31, 1998.
The Company from time to time maintains a substantial portion of its cash
and cash equivalents in money market accounts with one financial institution.
The Company invests its excess cash in debt instruments of the U.S. Treasury,
governmental agencies and corporations with strong credit ratings. The Company
has established guidelines relative to diversification and maturities that
attempt to maintain safety and liquidity. The Company has not experienced any
significant losses on its cash equivalents or short-term investments.
Inventory
Inventory is stated at the lower of cost, principally standard costs, which
approximate actual costs on a first-in, first-out basis, or market. During the
year ended December 31, 1997, the Company recorded a charge of $582,000 for
commitments to purchase inventory which could not be used in its current
products. The charge is included in cost of revenue for the year ended
December 31, 1997.
Property and Equipment
Property and equipment is stated at cost and depreciated over the estimated
useful lives of the assets, ranging from three to seven years, using the
straight-line method.
Revenue Recognition
The Company generally recognizes revenue from product sales upon shipment if
collection of the resulting receivable is probable and product returns are
reasonably estimated. No revenue is recognized on products shipped on a trial
basis. Estimated sales returns based on historical experience by product, are
recorded at the time the product revenue is recognized.
Revenue from perpetual licenses of the Company's software for which there
are no significant continuing obligations and collection of the related
receivables is probable is recognized on delivery of the software.
Research and Development Costs
Costs incurred in connection with research and development are charged to
operations as incurred.
F-8
<PAGE>
COPPER MOUNTAIN NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Software Costs
Software product development costs incurred from the time technological
feasibility is reached until the product is available for general release to
customers are capitalized and reported at the lower of cost or net realizable
value. Through December 31, 1998, no significant amounts were expended
subsequent to reaching technological feasibility.
Impairment of Long-Lived Assets
The Company assesses potential impairments to its long-lived assets when
there is evidence that events or changes in circumstances have made recovery
of the asset's carrying value unlikely. An impairment loss would be recognized
when the sum of the expected future undiscounted net cash flows is less than
the carrying amount of the asset. The Company has identified no such
impairment losses.
Warranty Reserves
The Company provides limited warranties on certain of its products for
periods of up to one year. The Company recognizes warranty reserves when
products are shipped based upon an estimate of total warranty costs, and such
reserves are included in current liabilities.
Income Taxes
Deferred income taxes result primarily from temporary differences between
financial and tax reporting. Deferred tax assets and liabilities are
determined based on the difference between the financial statement bases and
the tax bases of assets and liabilities using enacted tax rates. A valuation
allowance is established to reduce a deferred tax asset to the amount that is
expected more likely than not to be realized.
Stock Based Compensation
The Company measures compensation expense for its stock-based employee
compensation plans using the intrinsic value method and provides pro forma
disclosures of net loss and net loss per share as if the fair value method had
been applied in measuring compensation expense (See Note 5). Options or stock
awards issued to non-employees are valued using the fair value method and
expensed over the period services are provided.
Net Loss Per Share and Pro Forma Stockholders' Equity
Historical basic and diluted net loss per share has been computed in
accordance with Statement of Financial Accounting Standards (SFAS) No. 128,
"Earnings Per Share," using the weighted-average number of shares of common
stock outstanding during the period. Options, warrants, and preferred stock
were not included in the computation of diluted net loss per share because the
effect would be anti-dilutive.
Pro forma net loss per share has been computed as described above and also
gives effect to common equivalent shares from preferred stock that will
automatically convert upon the closing of the Company's initial public
offering (using the as-if-converted method). If the offering contemplated by
this Prospectus is consummated, all of the convertible preferred stock
outstanding as of the closing date will automatically be converted into an
aggregate of 15,334,824 shares of common stock based on the shares of
convertible preferred stock outstanding at December 31, 1998. Unaudited pro
forma stockholders' equity at December 31, 1998, as adjusted for the
conversion of the convertible preferred stock, is disclosed on the balance
sheet.
Pursuant to Securities and Exchange Commission Staff Accounting Bulletin No.
98, common shares issued in each of the periods presented for nominal
consideration, if any, would be included in the per share calculations as if
they were outstanding for all periods presented. No such shares have been
issued.
F-9
<PAGE>
COPPER MOUNTAIN NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
A reconciliation of shares used in the calculation of historical and pro
forma basic and diluted net loss per share attributable to common shareholders
is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1996 1997 1998
------- ------- ----------
<S> <C> <C> <C>
Net loss per share:
Shares used in computing historical net loss
per common share, basic and diluted.......... 186,938 705,236 1,333,036
Adjustment to reflect the assumed conversion
of outstanding convertible preferred stock... 15,334,824
----------
Shares used in computing pro forma net loss
per common share, basic and diluted.......... 16,667,860
==========
</TABLE>
Potentially dilutive securities including options, warrants, preferred stock
and restricted stock subject to vesting was excluded from historical earnings
per share because of their anti-dilutive effect. Total shares excluded were
6,933,441, 13,812,858 and 20,442,440 for the years end December 31, 1996, 1997
and 1998, respectively.
Recapitalization
In November 1998, the Company filed a Certificate of Amendment to its
Articles of Incorporation to effect a three for two forward stock split of all
outstanding shares of common stock and stock options. The Amended and Restated
Certificate of Incorporation increases the authorized stock of the Company
such that the Company is authorized to issue 10,602,464 shares of no par value
preferred stock, and 29,397,536 shares of no par value common stock. The
conversion ratio of the Company's preferred stock is automatically modified to
reflect this common stock split. All common shares, common stock options and
related per share data in the accompanying financial statements have been
adjusted retroactively to give effect to the stock split.
New Accounting Standards
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," which is effective for fiscal years
beginning after December 15, 1997. SFAS No. 130 requires that all components
of comprehensive income, including net income, be reported in the financial
statements in the period in which they are recognized. Comprehensive income is
defined as the change in equity during a period from transactions and other
events and circumstances from non-owner sources. Net income and other
comprehensive income, including foreign currency translation adjustments, and
unrealized gains and losses on investments, shall be reported, net of their
related tax effect, to arrive at comprehensive income. There was no difference
between the Company's net loss and its total comprehensive loss for the years
ended December 31, 1996, 1997 and 1998.
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1 "Accounting for the Costs of Computer Software
Developed or Obtained for Internal Use" (SOP 98-1). This standard requires
companies to capitalize qualifying computer software costs, which are incurred
during the application development stage and amortize them over the software's
estimated useful life. SOP 98-1 is effective for fiscal years beginning after
December 15, 1998. The Company is currently evaluating the impact of SOP 98-1
on its financial statements and related disclosures.
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-5 "Reporting on the Costs of Start-Up Activities"(SOP
98-5). This standard requires companies to expense the
F-10
<PAGE>
COPPER MOUNTAIN NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
costs of start-up activities and organization costs as incurred. In general,
SOP 98-5 is effective for fiscal years beginning after December 15, 1998. The
Company believes the adoption of SOP 98-5 will not have a material impact on
its results of operations.
2. COMPOSITION OF CERTAIN BALANCE SHEET CAPTIONS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1997 1998
---------- -----------
<S> <C> <C>
Inventory:
Raw materials........................................ $ 332,000 $ 2,582,000
Work in process...................................... -- 790,000
Finished goods....................................... 51,000 1,296,000
---------- -----------
$ 383,000 $ 4,668,000
========== ===========
Property and Equipment:
Laboratory equipment and software.................... $ 868,000 $ 2,265,000
Computer equipment and software...................... 1,296,000 1,885,000
Office furniture and equipment....................... 360,000 840,000
---------- -----------
2,524,000 4,990,000
Less accumulated depreciation and amortization......... (619,000) (1,776,000)
---------- -----------
$1,905,000 $ 3,214,000
========== ===========
Accrued Liabilities:
Accrued compensation................................. $ 294,000 $ 621,000
Accrued vacation..................................... 278,000 493,000
Accrued warranty..................................... 2,000 418,000
Accrued purchase commitments......................... 582,000 --
Other................................................ 279,000 687,000
---------- -----------
$1,435,000 $ 2,219,000
========== ===========
</TABLE>
3. SHORT-TERM BANK BORROWINGS
In August 1998, the Company entered into a $4,000,000 line of credit
agreement with a bank which allows it to borrow an amount equal to 80% of
eligible accounts receivable plus the lesser of 25% of the Company's eligible
inventory or $500,000. Interest accrues at the bank's prime rate plus .25%
(8.0% at December 31, 1998). The credit agreement includes covenants, which,
among other things, require the Company to maintain stated net worth amounts
plus specific liquidity and long-term solvency ratios. The line of credit
expires on August 13, 1999. Amounts borrowed are secured by substantially all
of the Company's assets. There were no borrowings outstanding as of December
31, 1998.
In connection with this financing agreement, the Company granted warrants to
the bank to purchase an aggregate of 25,000 shares of Series C convertible
preferred stock at $4.75 per share. The warrants are exercisable for five
years from the date of issuance. The estimated fair value of the warrants was
approximately $21,000, which has been capitalized as debt issuance costs and
is being amortized over the life of the financing agreement.
F-11
<PAGE>
COPPER MOUNTAIN NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. NOTES PAYABLE
In August 1998, the Company entered into an equipment line of credit with a
bank that allows the Company to borrow up to $1,000,000 for the purchase of
equipment. All borrowings under the equipment line must be made before August
14, 1999, at which time all unpaid principal under such loan will be converted
into a fully amortizing loan for a period of 36 months with a maturity date of
August 14, 2002. As of December 31, 1998 there was $921,000 outstanding under
the equipment line of credit.
In 1996, the Company entered into an equipment financing agreement with a
bank and leasing company that allows the Company to borrow up to $1,000,000
for purchases of equipment. The notes are secured by the related equipment. As
of December 31, 1998 the full amount of funds available under the equipment
financing agreement was utilized.
In connection with the equipment financing agreement, the Company agreed to
make a final payment equal to 12.5% of the equipment financed at the end of
the amortization period. Additionally, the Company granted warrants to the
bank and leasing company to purchase an aggregate of 50,000 shares of Series A
convertible preferred stock at $1.00 per share. The warrants are exercisable
for the longer of ten years from the date of issuance or five years after an
initial public offering. The estimated fair value of the warrants was
approximately $18,000, which has been capitalized as debt issuance costs and
is being amortized over the life of the equipment financing agreement.
In December 1996, the Company received $2,500,000 in connection with a
convertible bridge note payable that accrued interest at 8.0% per annum.
During 1997, the note was converted into Series B convertible preferred stock
at a rate of $3.39 per share.
A summary of the notes payable is as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1997 1998
--------- ----------
<S> <C> <C>
Bank and leasing company installment loans, with
various maturity dates through December 2000, total
monthly payments of $27,000 with interest rates
ranging between 8.99% and 9.76%, collateralized by
equipment........................................... $ 771,000 $ 504,000
Bank installment loan, with a maturity date of August
2002, interest only payments until August 1999 with
a variable interest rate at the bank prime rate plus
0.25%, collateralized by equipment.................. -- 921,000
--------- ----------
771,000 1,425,000
Less current portion................................. (267,000) (395,000)
--------- ----------
$ 504,000 $1,030,000
========= ==========
</TABLE>
Future aggregate annual principal payments on the notes payable are
$395,000, $519,000, $307,000 and $204,000 for 1999, 2000, 2001 and 2002,
respectively.
F-12
<PAGE>
COPPER MOUNTAIN NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
5. STOCKHOLDERS' EQUITY
Convertible Preferred Stock
A summary of convertible preferred stock issued and outstanding at December
31, 1998 is as follows:
<TABLE>
<CAPTION>
SHARES
ISSUED AND LIQUIDATION
OUTSTANDING PREFERENCE
----------- -----------
<S> <C> <C>
Series A............................................. 2,723,000 $ 2,723,000
Series B............................................. 1,852,063 6,279,000
Series C............................................. 2,422,361 11,506,000
Series D............................................. 3,225,806 25,000,000
---------- -----------
10,223,230 $45,508,000
========== ===========
</TABLE>
The Company has authorized for issuance 10,602,464 shares of preferred stock
of which 2,773,000, 1,999,464, 2,530,000 and 3,300,000 shares have been
authorized for Series A, Series B, Series C and Series D convertible preferred
stock, respectively. At the option of the holder, the outstanding shares of
Series A, Series B, Series C and Series D convertible preferred stock are
convertible into common shares, subject to adjustment for antidilution, on a
three-for-two basis. The preferred stockholders have voting rights equal to
the common shares they would own upon conversion.
The Series A and Series B convertible preferred stock will automatically
convert into common shares upon the earlier of the closing of an underwritten
public offering of common stock under the Securities Act of 1933 in which the
Company receives at least $5,000,000 in gross proceeds at a price of at least
$5.00 per share, or on the date specified by written consent or agreement of
the holders of 66 2/3% of the then outstanding shares of each of the Series A
and Series B convertible preferred stock.
The Series C convertible preferred stock will automatically convert into
common shares upon the earlier of the closing of an underwritten public
offering of common stock under the Securities Act of 1933 in which the Company
receives at least $10,000,000 in gross proceeds at a price of at least $9.50
per share, or on the date specified by written consent or agreement of the
holders of 66 2/3% of the then outstanding shares of Series C convertible
preferred stock.
The Series D convertible preferred stock will automatically convert into
common shares upon the earlier of the closing of an underwritten public
offering of common stock under the Securities Act of 1933 in which the Company
receives at least $20,000,000 in gross proceeds at a price of at least $12.00
per share if the closing of such public offering occurs on or before March 30,
2000, and at a per share issuance price of at least $15.50 per share if the
closing of such public offering occurs after March 30, 2000. Additionally, the
Series D convertible preferred stock will automatically convert on the date
specified by written consent or agreement of the holders of more than a
majority of the then outstanding shares of Series D convertible preferred
stock.
In the event of a liquidation of the Company, holders of Series A, Series B,
Series C and Series D convertible preferred stock are entitled to a
liquidation preference of $1.00, $3.39, $4.75 and $7.75 per share,
respectively, plus any declared but unpaid dividends on such shares. If upon
the occurrence of such event, the assets and funds thus distributed among the
holders of the convertible preferred stock shall be insufficient to permit the
payment to such holders of the full aforesaid preferential amounts, the entire
assets and funds of the corporation legally available for distribution shall
be distributed ratably among the holders of the convertible preferred stock in
proportion to the aggregate liquidation preferences of the respective shares,
and ratably among the holders of that series in proportion to the amount of
such stock owned by each such holder. Any remaining assets of the Company are
to be distributed to the common stockholders.
F-13
<PAGE>
COPPER MOUNTAIN NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The holders of Series A, Series B, Series C and Series D convertible
preferred stock are entitled to receive annual noncumulative dividends of
$.08, $.27, $.38 and $.62 per share, respectively, when, as and if declared by
the Board of Directors, prior and in preference to holders of common stock. As
of December 31, 1998, no dividends have been declared.
Common Stock
The Company has issued 1,964,604 shares of common stock to the founders of
the Company at prices ranging from $.03 to $.07 per share in exchange for
promissory notes bearing interest at rates ranging from 5.5% to 10% and
maturing March 12, 2000. The Company has the option to repurchase, at the
original issue price, unvested shares in the event of termination of
employment. In 1998, 238,001 unvested common shares were forfeited upon the
termination of one of the founders. Shares issued under these agreements
generally vest over four years. At December 31, 1998, 486,439 shares of common
stock are subject to repurchase by the Company.
Stock Options
In August 1996, the Company adopted the 1996 Equity Incentive Plan (the
"Plan") and reserved 2,190,720 shares of common stock for grants under the
Plan. The Company has amended the plan to reserve an additional 3,932,663
shares of common stock under the Plan. The Plan provides for the grant of
incentive and nonstatutory stock options, stock bonuses and rights to purchase
stock to employees, directors or consultants of the Company. The Plan provides
that incentive stock options will be granted only to employees at no less than
the fair value of the Company's common stock (no less than 85% of the fair
value for nonstatutory stock options), as determined by the Board of Directors
at the date of the grant. Options generally vest 25% one year from date of
grant and ratably each month thereafter for a period of 36 months, and are
exercisable up to ten years from date of grant.
Certain option grants under the Plan are subject to an early exercise
provision. Common shares obtained on early exercise of unvested options are
subject to repurchase by the Company at the original issue price and will vest
according to the respective option agreement. At December 31, 1998, 105,000
shares are subject to repurchase by the Company.
The purchase price under each stock purchase agreement resulting from stock
bonuses and purchase rights granted will be at no less than 85% of the fair
value of the Company's common stock on the award date. Shares of stock sold or
awarded under the Plan may be subject to repurchase by the Company.
F-14
<PAGE>
COPPER MOUNTAIN NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Transactions under the stock option plan are summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER OF EXERCISE
SHARES PRICE
--------- --------
<S> <C> <C>
Granted................................................. 1,160,700 $ .07
Exercised............................................... -- --
Cancelled............................................... -- --
---------
Balance at December 31, 1996............................. 1,160,700 $ .07
Granted................................................. 1,069,725 $ .23
Exercised............................................... (238,437) $ .07
Cancelled............................................... (115,563) $ .07
---------
Balance at December 31, 1997............................. 1,876,425 $ .16
Granted................................................. 3,086,812 $ .66
Exercised............................................... (514,641) $ .12
Cancelled............................................... (183,125) $ .23
---------
Balance at December 31, 1998............................. 4,265,471 $ .52
=========
</TABLE>
As of December 31, 1996, 1997, and 1998 there were 735,450, 614,734 and
630,139, options, respectively, exercisable at weighted average exercise
prices of $.07, $.08 and $.17, respectively.
The following table summarizes all options outstanding and exercisable by
price range as of December 31, 1998:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------------------------------------
WEIGHTED WEIGHTED
RANGE OF WEIGHTED AVERAGE AVERAGE AVERAGE
EXERCISE NUMBER REMAINING EXERCISE NUMBER EXERCISE
PRICES OUTSTANDING CONTRACTUAL LIFE PRICE EXERCISABLE PRICE
----------------- ----------- ---------------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$.07 455,144 7.84 $ .07 291,241 $.07
$.23-$.32 2,950,827 9.20 $ .30 328,896 $.25
$.53-$1.33 712,500 9.77 $ .82 10,002 $.53
$5.00 147,000 9.96 $5.00 -- --
</TABLE>
Stock Based Compensation
The Company has elected to follow APB Opinion No. 25, "Accounting for Stock
Issued to Employees" to account for their employee stock option plans. Under
APB No. 25, when the exercise price of the Company's employee stock options
equals the fair value price of the underlying stock on the date of grant, no
compensation expense is recognized in the Company's financial statements. With
respect to certain options granted during 1998, the Company has recorded
deferred compensation of $1,117,000, for the difference at the grant date
between the exercise price per share and the fair value per share, based upon
the Board of Directors' estimate of the fair value of the Company's stock on
the various grant dates of the common stock underlying the options. This
amount is being amortized over the vesting period of the individual options,
generally four years.
F-15
<PAGE>
COPPER MOUNTAIN NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Had compensation cost for the Company's stock-based compensation plans been
determined consistent with SFAS No. 123, the Company's net loss would have
increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
1996 1997 1998
----------- ----------- -----------
<S> <C> <C> <C>
Net loss as reported................ $(1,992,000) $(9,526,000) $(6,451,000)
Pro forma net loss under SFAS 123... (2,006,000) (9,540,000) (6,462,000)
Pro forma basic and diluted net loss
under SFAS 123..................... $ (10.73) $ (13.53) $ (4.85)
</TABLE>
The fair value of each option grant is estimated on the date of grant using
the minimum value method with the following weighted-average assumptions: no
dividend yield; risk free interest rate of 5.7% to 6.5%; and expected life for
the option of five years.
The weighted-average estimated fair value of employee stock options granted
during 1996, 1997 and 1998 was $.02, $.06 and $.16 per share, respectively.
For purposes of pro forma disclosures, the estimated fair value of options is
amortized to expense over the vesting period.
Warrants
In January 1997, the Company entered into an agreement with a corporate
partner, whereby the two companies exchanged certain technology and services.
In addition, the Company issued a warrant to such corporate partner to
purchase 147,401 shares of Series B convertible preferred stock at a price of
$3.39 per share. The warrant is exercisable for four years following the date
of issuance. The estimated fair value of the warrant was $88,000, which has
been capitalized as an intangible asset and is being amortized over the two-
year term of the agreement.
Common Shares Reserved for Future Issuance
At December 31, 1998, common shares reserved for future issuance consist of
the following:
<TABLE>
<S> <C>
Conversion of convertible preferred stock......................... 15,334,824
Preferred stock warrants.......................................... 355,706
Stock options..................................................... 5,370,305
----------
21,060,835
==========
</TABLE>
6. COMMITMENTS
The Company leases its facilities under noncancelable operating leases
expiring in 2001. The leases contain renewal options and are subject to cost
increases. Included in the minimum payments under the noncancelable operating
leases for the year ending December 31, 1999 is $147,000 due from the sub-
lease of certain facilities. Rent expense totaled $69,000 $219,000 and
$501,000 for the period from March 11, 1996 (inception) to December 31, 1996
and for the years ended December 31, 1997 and 1998, respectively.
F-16
<PAGE>
COPPER MOUNTAIN NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Future minimum payments under the noncancelable operating leases and
equipment under capital leases consist of the following at December 31, 1998:
<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
---------- ----------
<S> <C> <C>
Year ending December 31,
1999................................................ $ 791,000 $ 471,000
2000................................................ 928,000 471,000
2001................................................ 568,000 443,000
2002................................................ 156,000 98,000
2003................................................ 106,000 --
---------- ----------
Total minimum lease payments.......................... $2,549,000 1,483,000
==========
Less amount representing interest..................... (160,000)
----------
Total present value of minimum payments............... 1,323,000
Less current portion.................................. (388,000)
----------
Non-current portion................................... $ 935,000
==========
</TABLE>
During September 1997, the Company entered into a capital lease agreement,
which allows for the Company to borrow up to $1,750,000 to finance capital
expenditures. As of December 31, 1998, the Company has $116,000 available for
future borrowings under the capital lease agreement. Equipment held under the
capital leases totaled $327,000 and $1,743,000 and the related accumulated
amortization totaled $45,000 and $559,000 at December 31, 1997 and 1998,
respectively. The obligations under the capital leases are secured by the
related equipment.
In conjunction with the capital lease agreement, the Company issued a
warrant to the lessor to purchase 14,737 shares of Series C convertible
preferred stock at a price of $4.75 per share. The warrant is exercisable for
the longer of ten years from the date of issuance or five years after an
initial public offering. The estimated fair value of the warrant was $25,000,
which has been capitalized as debt issuance costs and is being amortized over
the life of the financing agreement.
7. INCOME TAXES
Significant components of the Company's deferred tax assets as of December
31, 1997 and 1998 are shown below. A valuation allowance of $7,781,000 has
been recorded at December 31, 1998 to offset the net deferred tax assets as
realization is uncertain.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1998
----------- -----------
<S> <C> <C>
Deferred tax liability:
Depreciation.................................... $ (21,000) $ (12,000)
Deferred tax assets:
Tax credit carryforwards........................ 571,000 1,185,000
Net operating loss carryforwards................ 4,000,000 5,757,000
Other, net...................................... 456,000 851,000
----------- -----------
Total deferred tax assets......................... 5,027,000 7,793,000
Valuation allowance............................... (5,006,000) (7,781,000)
----------- -----------
Net deferred tax assets........................... $ -- $ --
=========== ===========
</TABLE>
F-17
<PAGE>
COPPER MOUNTAIN NETWORKS, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company had federal and California tax net operating loss carryforwards
at December 31, 1998 of approximately $14,368,000 and $15,168,000,
respectively. The federal and California tax loss carryforwards will begin to
expire in 2011 and 2004, respectively, unless previously utilized. The Company
also has federal and California research tax credit carryforwards of
approximately $876,000 and $475,000, respectively, which will begin to expire
in 2011 unless previously utilized.
Pursuant to Internal Revenue Service Code Sections 382 and 383, use of the
Company's net operating loss carryforwards may be limited because of a
cumulative change in ownership of more than 50% which occurred during 1996,
1997 and 1998. However, the Company does not believe such limitations will
have a material impact on the Company's ability to use these carryforwards.
8. EMPLOYEE SAVINGS PLAN
The Company has a 401(k) plan, which allows participating employees to
contribute up to 15% of their salary, subject to annual limits. The Board of
Directors may, at its sole discretion, approve Company contributions. No such
contributions have been approved or made.
9. RELATED PARTY TRANSACTIONS
At December 31, 1998, the Company had a note receivable from an officer with
a face value of $1,000,000 included in other assets. This note was issued in
connection with the officer's employment and relocation agreement. The note
bears no interest, is secured by the officer's residence and is due at the
earlier of March 30, 2003, or 15 days from the date the officer ceases to be
an employee of the Company.
10. RECENT EVENT (UNAUDITED)
If the initial public offering is closed under the terms presently
anticipated, the Company will reincorporate as a Delaware corporation. The
authorized shares of the Company will be 100,000,000 shares of common stock
($.001 par value) and 5,000,000 shares of preferred stock ($.001 par value).
All common share data in the accompanying financial statements have been
adjusted retroactively to give effect to the reincorporation.
F-18
<PAGE>
[COPPER MOUNTAIN NETWORKS, INC. LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all expenses payable by the Registrant in
connection with the sale of the common stock being registered. All of the
amounts shown are estimates, except for the SEC registration fee, the NASD
filing fee and the Nasdaq National Market application fee.
<TABLE>
<CAPTION>
AMOUNT TO BE
PAID
------------
<S> <C>
Registration fee.............................................. $ 16,680
NASD filing fee............................................... 6,500
Nasdaq Stock Market Listing Application fee................... 95,000
Blue sky qualification fees and expenses...................... 5,000
Printing and engraving expenses............................... 125,000
Legal fees and expenses....................................... 250,000
Accounting fees and expenses.................................. 125,000
Transfer agent and registrar fees............................. 10,000
Miscellaneous................................................. 66,820
--------
Total....................................................... 700,000
========
</TABLE>
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Under Section 145 of the Delaware General Corporation Law, the Registrant
has broad powers to indemnify its Directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act of 1933, as amended (the "Securities Act").
The Registrant's Certificate of Incorporation and Bylaws include provisions
to (i) eliminate the personal liability of its directors for monetary damages
resulting from breaches of their fiduciary duty to the extent permitted by
Section 102(b)(7) of the General Corporation Law of Delaware (the "Delaware
Law") and (ii) require the Registrant to indemnify its Directors and officers
to the fullest extent permitted by Section 145 of the Delaware Law, including
circumstances in which indemnification is otherwise discretionary. Pursuant to
Section 145 of the Delaware Law, a corporation generally has the power to
indemnify its present and former directors, officers, employees and agents
against expenses incurred by them in connection with any suit to which they
are, or are threatened to be made, a party by reason of their serving in such
positions so long as they acted in good faith and in a manner they reasonably
believed to be in or not opposed to, the best interests of the corporation and
with respect to any criminal action, they had no reasonable cause to believe
their conduct was unlawful. The Registrant believes that these provisions are
necessary to attract and retain qualified persons as Directors and officers.
These provisions do not eliminate the Directors' duty of care, and, in
appropriate circumstances, equitable remedies such as injunctive or other
forms of non-monetary relief will remain available under Delaware Law. In
addition, each Director will continue to be subject to liability for breach of
the Director's duty of loyalty to the Registrant, for acts or omissions not in
good faith or involving intentional misconduct, for knowing violations of law,
for acts or omissions that the Director believes to be contrary to the best
interests of the Registrant or its stockholders, for any transaction from
which the Director derived an improper personal benefit, for acts or omissions
involving a reckless disregard for the Director's duty to the Registrant or
its stockholders when the Director was aware or should have been aware of a
risk of serious injury to the Registrant or its stockholders, for acts or
omissions that constitute an unexcused pattern of inattention that amounts to
an abdication of the Director's duty to the Registrant or its stockholders,
for improper transactions between the Director and the Registrant and for
improper distributions to stockholders and loans to Directors and officers.
The provision also does not affect a Director's responsibilities under any
other law, such as the federal securities law or state or federal
environmental laws.
II-1
<PAGE>
The Registrant has entered into indemnity agreements with each of its
Directors and certain executive officers that require the Registrant to
indemnify such persons against expenses, judgments, fines, settlements and
other amounts incurred (including expenses of a derivative action) in
connection with any proceeding, whether actual or threatened, to which any
such person may be made a party by reason of the fact that such person is or
was a Director or an executive officer of the Registrant or any of its
affiliated enterprises, provided that such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the Registrant and, with respect to any criminal proceeding, had
no reasonable cause to believe his conduct was unlawful. The indemnification
agreements also set forth certain procedures that will apply in the event of a
claim for indemnification thereunder.
At present, there is no pending litigation or proceeding involving a
Director or officer of the Registrant as to which indemnification is being
sought nor is the Registrant aware of any threatened litigation that may
result in claims for indemnification by any officer or Director.
The Registrant has an insurance policy covering the officers and Directors
of the Registrant with respect to certain liabilities, including liabilities
arising under the Securities Act or otherwise.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Since March 11, 1996 (inception), the Registrant has sold and issued the
following unregistered securities:
(a) On April 10, 1996 the Registrant issued and sold 2,723,000 shares of
its Series A Preferred Stock to certain accredited investors for an
aggregate purchase price of $2,723,000.00. Upon the closing of this
offering, the shares of Series A Preferred Stock will automatically convert
into 4,084,500 shares of common stock. The Registrant relied on the
exemption provided by Section 4(2) under the Act.
(b) On October 4, 1996, in connection with the execution of an equipment
financing agreement with Silicon Valley Bank ("SVB") and MMC/GATV
Partnership 1 ("MMC"), the Registrant issued to SVB and MMC warrants to
purchase up to 10,000 and 40,000 shares, respectively, of Series A
Preferred Stock. These two warrants have an exercise price of $1.00 per
share and expire on October 4, 2006. Upon the closing of this offering,
these warrants will become exercisable for common stock at the rate of one
and one-half shares of common stock for each share of preferred stock
underlying the warrants. The Registrant relied on the exemption provided by
Section 4(2) under the Act.
(c) On January 14, 1997, the Registrant issued and sold 1,850,063 shares
of Series B Preferred Stock to certain accredited investors for an
aggregate purchase price of $6,278,493.57. Upon the closing of this
offering the shares of Series B Preferred Stock will automatically convert
into 2,778,092 shares of common stock. The Registrant relied on the
exemption provided by Section 4(2) under the Act.
(d) On January 14, 1997, the Company issued a warrant to a corporate
partner to purchase up to 147,401 shares of Series B Preferred Stock at an
exercise price of $3.39 per share. This warrant expires on January 14,
2004. Upon the closing of this offering, this warrant will become
exercisable for common stock at the rate of one and one-half shares of
common stock for each share of preferred stock underlying the warrant. The
Registrant relied on the exemption provided by Section 4(2) under the Act.
(e) On October 29, 1997, the Registrant issued and sold 2,422,361 shares
of its Series C Preferred Stock to certain accredited investors for an
aggregate purchase price of $11,506,214.75. Upon the closing of this
offering, the shares of Series C Preferred Stock will automatically convert
into 3,633,534 shares of common stock. The Registrant relied on the
exemption provided by Section 4(2) under the Act.
(f) On August 14, 1998, in connection with the execution of the Loan and
Security Agreement with SVB, the Company issued to SVB a warrant to
purchase up to 25,000 shares of Series C Preferred Stock at an exercise
price of $4.75 per share. Upon the closing of this offering, this warrant
will become exercisable for common stock at the rate of one and one-half
shares of common stock for each share of preferred stock underlying the
warrant. This warrant expires on August 14, 2003. The Registrant relied on
the exemption provided by Section 4(2) under the Act.
II-2
<PAGE>
(g) On October 29, 1997 and on April 27, 1998, in connection with the
execution of the Master Lease Agreement with Comdisco, Inc. ("Comdisco")
the Company issued to Comdisco warrants to purchase 8,421 and 6,316 shares
of Series C Preferred Stock at an exercise price of $4.75 per share. These
warrants expire on October 29, 2007 and on April 27, 2008. Upon the closing
of this offering, these warrants will become exercisable for common stock
at the rate of one and one-half shares of common stock for each share of
preferred stock underlying the warrants. The Registrant relied on the
exemption provided by Section 4(2) under the Act.
(h) On October 9, 1998, the Registrant issued and sold 3,225,806 shares
of its Series D Preferred Stock to certain to certain accredited investors
for an aggregate purchase price of $24,999,996.50. Upon the closing of this
offering, the shares of Series D Preferred Stock will automatically convert
into 4,838,698 shares of common stock. The Registrant relied on the
exemption provided by Section 4(2) under the Act.
(i) From March 11, 1996 to December 31, 1998, the Registrant granted
common stock options and issued shares of common stock to employees and
consultants in reliance on the exemption provided by either Section 4(2)
under the Act or Rule 701 promulgated under the Act as follows: (i) options
to purchase an aggregate of 5,317,237 shares of common stock with exercise
prices ranging from $.067 to $5.00; and (ii) 1,964,604 shares of common
stock at prices ranging from $.03 to $.07 per share.
The recipients of the above-described securities represented their intention
to acquire the securities for investment only and not with a view to
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 the
Registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Articles of Incorporation effective prior to reincorporation of the
Company in Delaware.
3.2 Bylaws effective prior to reincorporation of the Company in
Delaware.
3.3 Form of Certificate of Incorporation to be filed and become
effective prior to effectiveness of this Registration Statement.
3.4 Form of Bylaws to become effective prior to effectiveness of this
Registration Statement.
3.5 Restated Certificate of Incorporation, to be filed and become
effective upon the closing of this offering.
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4 and 3.5.
4.2 Specimen Stock Certificate.
5.1 Opinion of Cooley Godward LLP.(1)
10.1 Amended and Restated 1996 Equity Incentive Plan (the "1996 Plan").
10.2 Form of Stock Option Agreement pursuant to the 1996 Plan.
10.3 1999 Employee Stock Purchase Plan and related offering documents.
10.4 Employment Offer Letter between the Company and Steve Hunt, dated
July 31, 1996.
10.5 Employment Offer Letter between the Company and Richard Gilbert,
dated March 22, 1998.
10.6 Master Equipment Lease between the Company and Comdisco, Inc., dated
September 30, 1997.
10.7 Loan and Security Agreement between the Company and Silicon Valley
Bank, dated August 14, 1998.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
10.8 Loan and Security Agreement between the Company and Silicon Valley
Bank and MMC/GATX Partnership No. 1, dated October 4, 1996.
10.9 Office Lease between the Company and Public Storage Properties
XVIII, Inc., dated June 14, 1996.
10.10 Office Lease between the Company and R.G. Harris & Company, dated
August 12, 1997.
10.11 Office Sublease between the Company and Stuart Leeb and Associates,
dated May 1, 1998.
10.12 Office Lease between the Company and Palomar Enterprises, Inc.,
dated July 20, 1998.
10.13 Warrant Agreement between the Company and MMC/GATX Partnership No.
1, dated October 4, 1996.
10.14 Warrant Agreement between the Company and Silicon Valley Bank, dated
October 4, 1996.
10.15 Warrant Agreement between the Company and Comdisco, Inc., dated
October 29, 1997.
10.16 Warrant Agreement between the Company and Comdisco, Inc., dated
April 27, 1998.
10.17 Warrant Agreement between the Company and Silicon Valley Bank, dated
August 14, 1998.
10.18 Amended and Restated Investors' Rights Agreement by and among the
Company and certain stockholders of the Company, dated October 9,
1998.
10.19 Right of First Refusal and Co-Sale Agreement by and among the
Company and certain stockholders of the Company, dated October 9,
1998.
10.20 Voting Agreement by and among the Company and certain stockholders
of the Company, dated October 9, 1998.
10.21 Founder Stock Purchase Agreement between the Company and Joseph D.
Markee, dated March 11, 1996.
10.22 First Amendment to Founder Stock Purchase Agreement between the
Company and Joseph D. Markee, dated June 12, 1998.
10.23 Founder Stock Purchase Agreement between the Company and Mark J.
Handzel, dated March 11, 1996.
10.24 First Amendment to Founder Stock Purchase Agreement between the
Company and Mark J. Handzel, dated January 27, 1999.
+10.25 General Agreement for the Procurement of Products and Services and
the Licensing of Software between the Company and Lucent
Technologies Inc., dated November 17, 1998.
+10.26 OEM Purchase and Development Agreement between the Company an 3COM
Corporation, dated November 24, 1998.
+10.27 Development, Manufacturing and Supply Agreement between the Company
and Netopia, Inc., dated May 19, 1998.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.(1)
24.1 Power of Attorney. Reference is made to page II-6.
27 Financial Data Schedule.
</TABLE>
- --------
+ Confidential treatment has been requested with respect to certain portions
of this exhibit. Omitted portions have been filed separately with the
Securities and Exchange Commission.
(1) To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES.
Schedule II--Valuation and Qualifying Accounts.
All other schedules are omitted because they are not required, are not
applicable or the information is included in our financial statements or notes
thereto.
II-4
<PAGE>
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Act 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 Act, each
filing of the registrant's annual report pursuant to Section 13(a) or 15(d)
of the Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange Act)
that is incorporated by reference in the registration statement 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.
(2) That, for purposes of determining any liability under the Act, 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.
(3) 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-5
<PAGE>
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 San
Diego, County of San Diego, State of California, on March 1, 1999.
By: Richard Gilbert
----------------------------------
RICHARD GILBERT
PRESIDENT AND CHIEF EXECUTIVE
OFFICER
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard Gilbert and John Creelman 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.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
Richard Gilbert President, Chief Executive March 1, 1999
____________________________________ Officer and Director
RICHARD GILBERT (Principal Executive
Officer)
John Creelman Vice President of Finance, March 1, 1999
____________________________________ Chief Financial Officer and
JOHN CREELMAN Secretary (Principal
Financial and Accounting
Officer)
Joseph D. Markee Chief Technical Officer and March 1, 1999
____________________________________ Chairman of the Board
JOSEPH D. MARKEE
Andrew W. Verhalen Director March 1, 1999
____________________________________
ANDREW W. VERHALEN
Tench Coxe Director March 1, 1999
____________________________________
TENCH COXE
Roger Evans Director March 1, 1999
____________________________________
ROGER EVANS
Richard H. Kimball Director March 1, 1999
____________________________________
RICHARD H. KIMBALL
</TABLE>
II-6
<PAGE>
SCHEDULE II
COPPER MOUNTAIN NETWORKS, INC.
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
----------
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND END OF
ACCRUED WARRANTY OF YEAR EXPENSES DEDUCTIONS YEAR
- ---------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1997....... $ -- $ 2,000 $ -- $ 2,000
Year ended December 31, 1998....... 2,000 426,000 10,000 418,000
</TABLE>
NOTE: The Company had no activity in accrued warranty prior to 1997.
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Articles of Incorporation effective prior to reincorporation of the
Company in Delaware.
3.2 Bylaws effective prior to reincorporation of the Company in Delaware.
3.3 Form of Certificate of Incorporation to be filed and become effective
prior to effectiveness of this Registration Statement.
3.4 Form of Bylaws to become effective prior to effectiveness of this
Registration Statement.
3.5 Restated Certificate of Incorporation, to be filed and become
effective upon the closing of this offering.
4.1 Reference is made to Exhibits 3.1, 3.2, 3.3, 3.4 and 3.5.
4.2 Specimen Stock Certificate.
5.1 Opinion of Cooley Godward LLP.(1)
10.1 Amended and Restated 1996 Equity Incentive Plan (the "1996 Plan").
10.2 Form of Stock Option Agreement pursuant to the 1996 Plan.
10.3 1999 Employee Stock Purchase Plan and related offering documents.
10.4 Employment Offer Letter between the Company and Steve Hunt, dated July
31, 1996.
10.5 Employment Offer Letter between the Company and Richard Gilbert, dated
March 22, 1998.
10.6 Master Equipment Lease between the Company and Comdisco, Inc., dated
September 30, 1997.
10.7 Loan and Security Agreement between the Company and Silicon Valley
Bank, dated August 14, 1998.
10.8 Loan and Security Agreement between the Company and Silicon Valley
Bank and MMC/GATX Partnership No. 1, dated October 4, 1996.
10.9 Office Lease between the Company and Public Storage Properties XVIII,
Inc., dated June 14, 1996.
10.10 Office Lease between the Company and R.G. Harris & Company, dated
August 12, 1997.
10.11 Office Sublease between the Company and Stuart Leeb and Associates,
dated May 1, 1998.
10.12 Office Lease between the Company and Palomar Enterprises, Inc., dated
July 20, 1998.
10.13 Warrant Agreement between the Company and MMC/GATX Partnership No. 1,
dated October 4, 1996.
10.14 Warrant Agreement between the Company and Silicon Valley Bank, dated
October 4, 1996.
10.15 Warrant Agreement between the Company and Comdisco, Inc., dated
October 29, 1997.
10.16 Warrant Agreement between the Company and Comdisco, Inc., dated April
27, 1998.
10.17 Warrant Agreement between the Company and Silicon Valley Bank, dated
August 14, 1998.
10.18 Amended and Restated Investors' Rights Agreement by and among the
Company and certain stockholders of the Company, dated October 9,
1998.
10.19 Right of First Refusal and Co-Sale Agreement by and among the Company
and certain stockholders of the Company, dated October 9, 1998.
10.20 Voting Agreement by and among the Company and certain stockholders of
the Company, dated October 9, 1998.
10.21 Founder Stock Purchase Agreement between the Company and Joseph D.
Markee, dated March 11, 1996.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------- -----------------------
<C> <S>
10.22 First Amendment to Founder Stock Purchase Agreement between the
Company and Joseph D. Markee, dated June 12, 1998.
10.23 Founder Stock Purchase Agreement between the Company and Mark J.
Handzel, dated March 11, 1996.
10.24 First Amendment to Founder Stock Purchase Agreement between the
Company and Mark J. Handzel, dated January 27, 1999.
+10.25 General Agreement for the Procurement of Products and Services and the
Licensing of Software between the Company and Lucent Technologies
Inc., dated November 17, 1998.
+10.26 OEM Purchase and Development Agreement between the Company an 3COM
Corporation, dated November 24, 1998.
+10.27 Development, Manufacturing and Supply Agreement between the Company
and Netopia, Inc., dated May 19, 1998.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.(1)
24.1 Power of Attorney. Reference is made to page II-6.
27 Financial Data Schedule.
</TABLE>
- --------
+ Confidential treatment has been requested with respect to certain portions
of this exhibit. Omitted portions have been filed separately with the
Securities and Exchange Commission.
(1) To be filed by amendment.
<PAGE>
EXHIBIT 1.1
___________ SHARES
COPPER MOUNTAIN NETWORKS, INC.
COMMON STOCK, PAR VALUE $0.001 PER SHARE
UNDERWRITING AGREEMENT
_______, 1999
<PAGE>
_____________, 1999
Morgan Stanley & Co. Incorporated
BancBoston Robertson Stephens, Inc.
Dain Rauscher Wessels
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
Copper Mountain Networks, Inc., a Delaware corporation (the "COMPANY"),
proposes to issue and sell to the several Underwriters named in Schedule I
hereto (the "UNDERWRITERS") ________ shares of its common stock, $0.001 par
value per share (the "FIRM SHARES"). The Company also proposes to issue and sell
to the several Underwriters not more than an additional ________ shares of its
common stock, $0.001 par value per share (the "ADDITIONAL SHARES"), if and to
the extent that you, as Managers of the offering, shall have determined to
exercise, on behalf of the Underwriters, the right to purchase such shares of
common stock granted to the Underwriters in Section 2 hereof. The Firm Shares
and the Additional Shares are hereinafter collectively referred to as the
"SHARES." The shares of common stock, $0.001 par value per share, of the Company
to be outstanding after giving effect to the sales contemplated hereby are
hereinafter referred to as the "COMMON STOCK."
The Company has filed with the Securities and Exchange Commission (the
"COMMISSION") a registration statement, including a prospectus, relating to the
Shares. The registration statement as amended at the time it becomes effective,
including the information (if any) deemed to be part of the registration
statement at the time of effectiveness pursuant to Rule 430A under the
Securities Act of 1933, as amended (the "SECURITIES ACT"), is hereinafter
referred to as the "REGISTRATION STATEMENT;" the prospectus in the form first
used to confirm sales of Shares is hereinafter referred to as the "PROSPECTUS."
If the Company has filed an abbreviated registration statement to register
additional shares of Common Stock pursuant to Rule 462(b) under the Securities
Act (the "RULE 462 REGISTRATION STATEMENT"), then any reference herein to the
term "REGISTRATION STATEMENT" shall be deemed to include such Rule 462
Registration Statement.
As part of the offering contemplated by this Agreement, Morgan Stanley &
Co. Incorporated ("MORGAN STANLEY") has agreed to reserve out of the Shares set
forth opposite its name on Schedule I to this Agreement, up to _________ shares,
for sale to the Company's employees, officers and directors and other parties
associated with the Company (collectively, "PARTICIPANTS"), as set forth in the
Prospectus under the heading "Underwriting" (the "DIRECTED SHARE PROGRAM"). The
Shares to be sold by Morgan Stanley pursuant to the Directed Share Program (the
"DIRECTED SHARES") will be sold by Morgan Stanley pursuant to this Agreement at
the public offering price. Any Directed Shares not orally confirmed for purchase
by any Participants by the end of the first business day after
<PAGE>
the date on which this Agreement is executed will be offered to the public by
Morgan Stanley as set forth in the Prospectus.
1. Representations and Warranties. The Company represents and warrants to
and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect, and no
proceedings for such purpose are pending before or threatened by the Commission.
(b) (i) The Registration Statement, when it became effective, did not
contain and, as amended or supplemented, if applicable, will not contain any
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,
(ii) the Registration Statement and the Prospectus comply and, as amended or
supplemented, if applicable, will comply in all material respects with the
Securities Act and the applicable rules and regulations of the Commission
thereunder and (iii) the Prospectus does not contain and, as amended or
supplemented, if applicable, will not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
except that the representations and warranties set forth in this paragraph do
not apply to statements or omissions in the Registration Statement or the
Prospectus based upon information relating to any Underwriter furnished to the
Company in writing by such Underwriter through you expressly for use therein.
(c) The Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of the State of Delaware, has the
corporate power and authority to own its property and to conduct its business as
described in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not have
a material adverse effect on the Company and its subsidiaries, taken as a whole.
The execution and delivery of the Agreement and Plan of Merger dated as of
_________, 1999 (the "MERGER AGREEMENT") between Copper Mountain Networks, Inc.,
a California corporation (the "CALIFORNIA CORPORATION"), and the Company,
effecting the reincorporation of the California Corporation under the laws of
the State of Delaware, was duly authorized by all necessary corporate action on
the part of each of the California Corporation and the Company. Each of the
California Corporation and the Company had all corporate power and authority to
execute and deliver the Merger Agreement, to file the Merger Agreement with the
Secretary of State of California and the Secretary of State of Delaware and to
consummate the reincorporation contemplated by the Merger Agreement. The Merger
Agreement at the time of its execution and filing constituted a binding
obligation of each of the California Corporation and the Company, enforceable in
accordance with its terms, and the reincorporation contemplated by the Merger
Agreement has been consummated in accordance with its terms.
(d) Each subsidiary of the Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has
-2-
<PAGE>
the corporate power and authority to own its property and to conduct its
business as described in the Prospectus and is duly qualified to transact
business and is in good standing in each jurisdiction in which the conduct of
its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole; all of the issued shares of capital stock of
each subsidiary of the Company have been duly and validly authorized and issued,
are fully paid and non-assessable and are owned directly by the Company, free
and clear of all liens, encumbrances, equities or claims.
(e) This Agreement has been duly authorized, executed and delivered
by the Company.
(f) The authorized capital stock of the Company conforms as to legal
matters to the description thereof contained in the Prospectus.
(g) The shares of Common Stock outstanding prior to the issuance of
the Shares have been duly authorized and are validly issued, fully paid and non-
assessable.
(h) The Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, and the issuance of such Shares will not
be subject to any preemptive or similar rights.
(i) The execution and delivery by the Company of, and the performance
by the Company of its obligations under, this Agreement will not contravene any
provision of applicable law or the certificate of incorporation or by-laws of
the Company or any agreement or other instrument binding upon the Company or any
of its subsidiaries that is material to the Company and its subsidiaries, taken
as a whole, or any judgment, order or decree of any governmental body, agency or
court having jurisdiction over the Company or any subsidiary, and no consent,
approval, authorization or order of, or qualification with, any governmental
body or agency is required for the performance by the Company of its obligations
under this Agreement, except such as may be required by the securities or Blue
Sky laws of the various states in connection with the offer and sale of the
Shares.
(j) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the condition,
financial or otherwise, or in the earnings, business or operations of the
Company and its subsidiaries, taken as a whole, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement).
(k) There are no legal or governmental proceedings pending or
threatened to which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its subsidiaries is subject
that are required to be described in the Registration Statement or the
Prospectus and are not so described or any statutes, regulations, contracts or
other documents that are required to be described in the Registration Statement
or the Prospectus or to be filed as exhibits to the Registration Statement that
are not described or filed as required.
-3-
<PAGE>
(l) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Securities Act, complied when so filed in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder.
(m) Subsequent to the respective dates as of which information is
given in the Registration Statement and the Prospectus, (i) the Company and its
subsidiaries have not incurred any material liability or obligation, direct or
contingent, nor entered into any material transaction not in the ordinary course
of business; (ii) the Company has not purchased any of its outstanding capital
stock, nor declared, paid or otherwise made any dividend or distribution of any
kind on its capital stock other than ordinary and customary dividends; and (iii)
there has not been any material change in the capital stock, short-term debt or
long-term debt of the Company and its subsidiaries, except in each case as
described in the Prospectus.
(n) The Company and its subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all personal
property owned by them which is material to the business of the Company and its
subsidiaries, in each case free and clear of all liens, encumbrances and defects
except such as are described in the Prospectus or such as do not materially
affect the value of such property and do not interfere with the use made and
proposed to be made of such property by the Company and its subsidiaries; and
any real property and buildings held under lease by the Company and its
subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
subsidiaries, in each case except as described in the Prospectus.
(o) The Company and its subsidiaries own or possess, or can acquire
on reasonable terms, all material patents, patent rights, licenses, inventions,
copyrights, know-how (including trade secrets and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures),
trademarks, service marks and trade names currently employed by them in
connection with the business now operated by them, and, except as described in
the Prospectus, neither the Company nor any of its subsidiaries has received any
notice of infringement of or conflict with asserted rights of others with
respect to any of the foregoing which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would have a material
adverse affect on the Company and its subsidiaries, taken as a whole.
(p) No material labor dispute with the employees of the Company or
any of its subsidiaries exists, except as described in the Prospectus, or, to
the knowledge of the Company, is imminent; and the Company is not aware of any
existing, threatened or imminent labor disturbance by the employees of any of
its principal suppliers, manufacturers or contractors that could have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
(q) The Company and its subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the businesses in which they are
engaged; neither the Company nor any of its subsidiaries has been refused any
insurance coverage sought or applied for; and neither the Company nor any of its
-4-
<PAGE>
subsidiaries has any reason to believe that it will not be able to renew its
existing insurance coverage as and when such coverage expires or to obtain
similar coverage from similar insurers as may be necessary to continue its
business at a cost that would not have a material adverse effect on the Company
and its subsidiaries, taken as a whole, except as described in the Prospectus.
(r) The Company and its subsidiaries have complied and are in
compliance with all federal, state, local and foreign statutes, executive
orders, proclamations, regulations, rules, directives, decrees, ordinances and
similar provisions having the force or effect of law and all judicial and
administrative orders, rulings, determinations and common law concerning the
importation of merchandise, the export or reexport of products, services and
technology, and the terms and conduct of international transactions applicable
to the Company and its subsidiaries in connection with the conduct of the
Company's or any subsidiary's business (including as the same relates to record
keeping requirements) ("INTERNATIONAL TRADE LAWS AND REGULATIONS"); neither the
Company nor any of its subsidiaries has made or provided any material false
statement or material omission to any agency of any federal, state or local
government, purchasers of products, or foreign government or foreign agency, in
connection with the exportation of merchandise (including with respect to export
licenses, exceptions and other export authorizations and any filings required
for or related to exportation of any item), the importation of merchandise or
other approvals required by a foreign government or agency or any other
requirement relating to any International Trade Laws and Regulations; neither
the Company nor any of its subsidiaries has made any payment, offer, gift,
promise to give, or authorized or otherwise participated in, assisted or
facilitated any payment or gift related to the Company's or any subsidiary's
business that is prohibited by the United States Foreign Corrupt Practices Act.
(s) The Company and its subsidiaries possess all certificates,
authorizations and permits issued by the appropriate federal, state or foreign
regulatory authorities necessary to conduct their respective business, and
neither the Company nor any of its subsidiaries has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authorization or permit which, singly or in the aggregate, if the subject of an
unfavorable decision, ruling or finding, would have a material adverse effect on
the Company and its subsidiaries, taken as a whole, except as described the
Prospectus.
(t) The Company and each of its subsidiaries maintain a system of
internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations; (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain asset accountability; (iii) access to
assets is permitted only in accordance with management's general or specific
authorization; and (iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(u) Ernst & Young LLP are independent public accountants with respect
to the Company and its subsidiaries as required by the Securities Act.
-5-
<PAGE>
(v) The consolidated financial statements included in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto), together with related schedules and notes, present fairly the
consolidated financial position, results of operations and changes in financial
position of the Company and its subsidiaries on the basis stated therein at the
respective dates or for the respective periods to which they apply; such
statements and related schedules and notes have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, except as disclosed therein; the supporting schedules, if any,
included in the Registration Statement present fairly in accordance with
generally accepted accounting principles the information required to be stated
therein; and the other financial and statistical information and data set forth
in the Registration Statement and the Prospectus (and any amendment or
supplement thereto) are, in all material respects, accurately presented and
prepared on a basis consistent with such financial statements and the books and
records of the Company.
(w) The Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as described in
the Prospectus, will not be an "investment company" as such term is defined in
the Investment Company Act of 1940, as amended.
(x) The Company and its subsidiaries (i) are in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("ENVIRONMENTAL LAWS"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct their
respective businesses and (iii) are in compliance with all terms and conditions
of any such permit, license or approval, except where such noncompliance with
Environmental Laws, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, have a material
adverse effect on the Company and its subsidiaries, taken as a whole.
(y) There are no costs or liabilities associated with Environmental
Laws (including, without limitation, any capital or operating expenditures
required for clean-up, closure of properties or compliance with Environmental
Laws or any permit, license or approval, any related constraints on operating
activities and any potential liabilities to third parties) which would, singly
or in the aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(z) There are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Securities Act with respect to any
securities of the Company or to require the Company to include such securities
with the Shares registered pursuant to the Registration Statement, except such
as have been validly waived.
(aa) The Company has reviewed its operations and the operations of its
subsidiaries and any third parties with which the Company or any of its
subsidiaries has a material relationship to evaluate the extent to which the
business or operations of the Company or any of its
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subsidiaries will be affected by the Year 2000 Problem. As a result of such
review, the Company has no reason to believe, and does not believe, that the
Year 2000 Problem will have a material adverse effect on the Company and its
subsidiaries taken as a whole. The "Year 2000 Problem" as used herein means any
significant risk that the computer hardware or software used in the receipt,
transmission, storage, retrieval, retransmission or other utilization of data or
in the operation of mechanical or electrical systems of any kind will not, in
the case of dates or time periods occurring after December 31, 1999, function at
least as effectively as in the case of dates or time periods occurring prior to
January 1, 2000.
(bb) The Company has complied with all provisions of Section 517.075,
Florida Statutes relating to doing business with the Government of Cuba or with
any person or affiliate located in Cuba.
(cc) The Nasdaq Stock Market, Inc. has approved the Common Stock for
listing on the Nasdaq National Market, subject only to official notice of
issuance.
(dd) Except for the Shares, all outstanding shares of Common Stock,
and all securities convertible into or exercisable or exchangeable for Common
Stock, are subject to valid and binding agreements (collectively, the "LOCK-UP
AGREEMENTS") that restrict the holders thereof from selling, making any short
sale of, granting any option for the purchase of, or otherwise transferring or
disposing of, any of such shares of Common Stock, or any such securities
convertible into or exercisable or exchangeable for Common Stock, for a period
of 180 days after the date of the Prospectus without the prior written consent
of Morgan Stanley & Co. Incorporated.
(ee) The Company (i) has notified each holder of a currently
outstanding option issued under the 1996 Equity Incentive Plan (the "OPTION
PLAN") and each person who has acquired shares of Common Stock pursuant to the
exercise of any option granted under the Option Plan that pursuant to the terms
of the Option Plan, that none of such options or shares may be sold or otherwise
transferred or disposed of for a period of 180 days after the date of the
Prospectus and (ii) has imposed a stop-transfer instruction with the Company's
transfer agent in order to enforce the foregoing lock-up provision imposed
pursuant to the Option Plan.
(ff) The Company (i) has notified each shareholder who is party to the
Amended and Restated Investor Rights Agreement dated October 9, 1999 (the
"REGISTRATION RIGHTS AGREEMENT"), that pursuant to the terms of the Registration
Rights Agreement, none of the shares of the Company's capital stock held by such
stockholder or capital stock into which such shares are convertible may be sold
or otherwise transferred or disposed of for a period of 180 days after the date
of the Prospectus and (ii) has imposed a stop-transfer instruction with the
Company's transfer agent in order to enforce the foregoing lock-up provision
imposed pursuant to the Registration Rights Agreement.
Furthermore, the Company represents and warrants to Morgan Stanley that (i)
the Registration Statement, the Prospectus and any preliminary prospectus
comply, and any further amendments or supplements thereto will comply, with any
applicable laws or regulations of foreign jurisdictions in which the Prospectus
or any preliminary prospectus, as amended or supplemented, if
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applicable, are distributed in connection with the Directed Share Program, and
that (ii) no authorization, approval, consent, license, order, registration or
qualification of or with any government, governmental instrumentality or court,
other than such as have been obtained, is necessary under the securities laws
and regulations of foreign jurisdictions in which the Directed Shares are
offered.
Moreover, the Company has not offered, or caused the Underwriters to offer,
Shares to any person pursuant to the Directed Share Program with the specific
intent to unlawfully influence (i) a customer or supplier of the Company to
alter the customer's or supplier's level or type of business with the Company or
(ii) a trade journalist or publication to write or publish favorable information
about the Company or its products.
2. Agreements to Sell and Purchase. The Company hereby agrees to sell to
the several Underwriters, and each Underwriter, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees, severally and not jointly, to purchase from the
Company the respective numbers of Firm Shares set forth in Schedule I hereto
opposite the Underwriter's name at $______ a share (the "PURCHASE PRICE").
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Underwriters the Additional Shares, and the Underwriters shall have a
one-time right to purchase, severally and not jointly, up to _______________
Additional Shares at the Purchase Price. If you, on behalf of the Underwriters,
elect to exercise such option, you shall so notify the Company in writing not
later than 30 days after the date of this Agreement, which notice shall specify
the number of Additional Shares to be purchased by the Underwriters and the date
on which such shares are to be purchased. Such date may be the same as the
Closing Date (as defined below) but not earlier than the Closing Date nor later
than ten business days after the date of such notice. Additional Shares may be
purchased as provided in Section 4 hereof solely for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each Underwriter agrees, severally and
not jointly, to purchase the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as you may determine) that bears the
same proportion to the total number of Additional Shares to be purchased as the
number of Firm Shares set forth in Schedule I hereto opposite the name of such
Underwriter bears to the total number of Firm Shares.
The Company hereby agrees that, without the prior written consent of Morgan
Stanley on behalf of the Underwriters, it will not, during the period ending 180
days after the date of the Prospectus, (i) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock
or (ii) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (i) or (ii) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise. The foregoing sentence shall not apply to (A) the Shares to be sold
hereunder, (B) the issuance by the
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Company of shares of Common Stock upon the exercise of an option or warrant or
the conversion of a security outstanding on the date hereof of which the
Underwriters have been advised in writing.
3. Terms of Public Offering. The Company is advised by you that the
Underwriters propose to make a public offering of their respective portions of
the Shares as soon after the Registration Statement and this Agreement have
become effective as in your judgment is advisable. The Company is further
advised by you that the Shares are to be offered to the public initially at
$_____________ a share (the "PUBLIC OFFERING PRICE") and to certain dealers
selected by you at a price that represents a concession not in excess of $______
a share under the Public Offering Price, and that any Underwriter may allow, and
such dealers may reallow, a concession, not in excess of $_____ a share, to any
Underwriter or to certain other dealers.
4. Payment and Delivery. Payment for the Firm Shares shall be made to the
Company in Federal or other funds immediately available in New York City against
delivery of such Firm Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on _________, 1999, or at such
other time on the same or such other date, not later than _________, 1999, as
shall be designated in writing by you. The time and date of such payment are
hereinafter referred to as the "CLOSING DATE."
Payment for any Additional Shares shall be made to the Company in Federal
or other funds immediately available in New York City against delivery of such
Additional Shares for the respective accounts of the several Underwriters at
10:00 a.m., New York City time, on the date specified in the notice described in
Section 2 or at such other time on the same or on such other date, in any event
not later than _______, 1999, as shall be designated in writing by you. The time
and date of such payment are hereinafter referred to as the "OPTION CLOSING
DATE."
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
5. Conditions to the Underwriters' Obligations. The obligations of the
Company to sell the Shares to the Underwriters and the several obligations of
the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Registration Statement shall have become
effective not later than [_____] (New York City time) on the date hereof.
The several obligations of the Underwriters are subject to the following
further conditions:
(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date:
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(i) there shall not have occurred any downgrading, nor shall any
notice have been given of any intended or potential downgrading or of any review
for a possible change that does not indicate the direction of the possible
change, in the rating accorded any of the Company's securities by any
"nationally recognized statistical rating organization," as such term is defined
for purposes of Rule 436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any development
involving a prospective change, in the condition, financial or otherwise, or in
the earnings, business or operations of the Company and its subsidiaries, taken
as a whole, from that set forth in the Prospectus (exclusive of any amendments
or supplements thereto subsequent to the date of this Agreement) that, in your
judgment, is material and adverse and that makes it, in your judgment,
impracticable to market the Shares on the terms and in the manner contemplated
in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of the
Company, to the effect set forth in Section 5(a)(i) above and to the effect that
the representations and warranties of the Company contained in this Agreement
are true and correct as of the Closing Date and that the Company has complied
with all of the agreements and satisfied all of the conditions on its part to be
performed or satisfied hereunder on or before the Closing Date.
The officer signing and delivering such certificate may rely upon the best
of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date an
opinion of Cooley Godward LLP, outside counsel to the Company, dated the Closing
Date, to the effect that:
(i) the Company has been duly incorporated, is validly existing
as a corporation in good standing under the laws of the State of Delaware, has
the corporate power and authority to own its property and to conduct its
business as described in the Prospectus and is duly qualified to transact
business and is in good standing in each jurisdiction in which the conduct of
its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole;
(ii) the execution and delivery of the Merger Agreement
effecting the reincorporation of the California Corporation into the State of
Delaware pursuant to the laws of the State of California and the State of State
of Delaware, was duly authorized by all necessary corporate action on the part
of each of the California Corporation and the Company;
(iii) each of the California Corporation and the Company had all
corporate power and authority to execute and deliver the Merger Agreement, to
file the Merger Agreement with the Secretary of State of California and the
Secretary of State of Delaware and to consummate the reincorporation
contemplated by the Merger Agreement; the Merger Agreement at the time of
execution and filing constituted a valid and binding obligation of each of the
California Corporation
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<PAGE>
and the Company; and the reincorporation contemplated by the Merger Agreement
has been consummated in accordance with its terms;
(iv) each subsidiary of the Company has been duly incorporated, is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and authority to own
its property and to conduct its business as described in the Prospectus and is
duly qualified to transact business and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company and its subsidiaries, taken as a whole;
(v) the authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the Prospectus;
(vi) the shares of Common Stock outstanding prior to the issuance of
the Shares have been duly authorized and are validly issued, fully paid and non-
assessable;
(vii) all of the issued shares of capital stock of each subsidiary
of the Company have been duly and validly authorized and issued, are fully paid
and non-assessable and are owned directly by the Company, free and clear of all
liens, encumbrances, equities or claims;
(viii) the Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be validly
issued, fully paid and non-assessable, and the issuance of such Shares will not
be subject to any preemptive or similar rights;
(ix) this Agreement has been duly authorized, executed and delivered
by the Company;
(x) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement will not
contravene any provision of applicable law or the certificate of incorporation
or by-laws of the Company or, to the best of such counsel's knowledge, any
agreement or other instrument binding upon the Company or any of its
subsidiaries that is material to the Company and its subsidiaries, taken as a
whole, or, to the best of such counsel's knowledge, any judgment, order or
decree of any governmental body, agency or court having jurisdiction over the
Company or any subsidiary, and no consent, approval, authorization or order of,
or qualification with, any governmental body or agency is required for the
performance by the Company of its obligations under this Agreement, except such
as may be required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Shares;
(xi) the statements (A) in the Prospectus under the captions "Risk
Factors--Control by Existing Stockholders May Make Certain Transactions More
Difficult," "Risk Factors--Substantial Future Sales of Our Common Stock in the
Public Market Could Cause Our Stock Price to Fall," "Risk Factors--Certain
Provisions in Our Corporate Charter or and Bylaws May Discourage Take-Over
Attempts and Thus Depress the Market Price for Our Stock," "Management--1996
Equity Incentive Plan," "Management--Non-Employee Directors' Stock
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Option Plan," "Management--Employee Stock Purchase Plan," "Management--Change of
Control Agreements," "Management--Employment Agreements, "Management--Limitation
of Directors' and Officers' Liability and Indemnification," "Certain
Transactions," "Description of Capital Stock," "Shares Eligible for Future Sale"
and "Underwriters" and (B) in the Registration Statement in Items 14 and 15, in
each case insofar as such statements constitute summaries of the legal matters,
documents or proceedings referred to therein, fairly present the information
called for with respect to such legal matters, documents and proceedings and
fairly summarize the matters referred to therein;
(xii) after due inquiry, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the Company or any of
its subsidiaries is a party or to which any of the properties of the Company or
any of its subsidiaries is subject that are required to be described in the
Registration Statement or the Prospectus and are not so described or of any
statutes, regulations, contracts or other documents that are required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described or filed as
required;
(xiii) the Company is not and, after giving effect to the offering and
sale of the Shares and the application of the proceeds thereof as described in
the Prospectus, will not be an "investment company" as such term is defined in
the Investment Company Act of 1940, as amended;
(xiv) the Company and its subsidiaries (A) are in compliance with any
and all applicable Environmental Laws, (B) have received all permits, licenses
or other approvals required of them under applicable Environmental Laws to
conduct their respective businesses and (C) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals would not, singly or in the aggregate,
have a material adverse effect on the Company and its subsidiaries, taken as a
whole; and
such counsel (A) is of the opinion that the Registration Statement and
Prospectus (except for financial statements and schedules included therein and
financial and statistical data derived therefrom, as to which such counsel need
not express any opinion) comply as to form in all material respects with the
Securities Act and the applicable rules and regulations of the Commission
thereunder, (B) has no reason to believe that (except for financial statements
and schedules included therein and financial and statistical data derived
therefrom, as to which such counsel need not express any belief) the
Registration Statement and the prospectus included therein at the time the
Registration Statement became effective contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading and (C) has no reason
to believe that (except for financial statements and schedules included therein
and financial and statistical data derived therefrom, as to which such counsel
need not express any belief) the Prospectus contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
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6. Covenants of the Company. In further consideration of the agreements
of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, five (5) signed copies of the
Registration Statement (including exhibits thereto) and for delivery to each
other Underwriter a conformed copy of the Registration Statement (without
exhibits thereto) and to furnish to you in New York City, without charge, prior
to 10:00 a.m. New York City time on the business day next succeeding the date of
this Agreement and during the period mentioned in Section 6(c) below, as many
copies of the Prospectus and any supplements and amendments thereto or to the
Registration Statement as you may reasonably request.
(b) Before amending or supplementing the Registration Statement or
the Prospectus, to furnish to you a copy of each such proposed amendment or
supplement and not to file any such proposed amendment or supplement to which
you reasonably object, and to file with the Commission within the applicable
period specified in Rule 424(b) under the Securities Act any prospectus required
to be filed pursuant to such Rule.
(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of counsel for the Underwriters the
Prospectus is required by law to be delivered in connection with sales by an
Underwriter or dealer, any event shall occur or condition exist as a result of
which it is necessary to amend or supplement the Prospectus in order to make the
statements therein, in the light of the circumstances when the Prospectus is
delivered to a purchaser, not misleading, or if, in the opinion of counsel for
the Underwriters, it is necessary to amend or supplement the Prospectus to
comply with applicable law, forthwith to prepare, file with the Commission and
furnish, at its own expense, to the Underwriters and to the dealers (whose names
and addresses you will furnish to the Company) to which Shares may have been
sold by you on behalf of the Underwriters and to any other dealers upon request,
either amendments or supplements to the Prospectus so that the statements in the
Prospectus as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be misleading or
so that the Prospectus, as amended or supplemented, will comply with law.
(d) To endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as you shall reasonably
request.
(e) To make generally available to the Company's security holders and
to you as soon as practicable an earning statement covering the twelve-month
period ending June 30, 2000 that satisfies the provisions of Section 11(a) of
the Securities Act and the rules and regulations of the Commission thereunder.
(f) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, the Company agrees to pay or
cause to be paid all expenses incident to the performance of its obligations
under this Agreement, including: (i) the fees, disbursements and expenses of the
Company's counsel and the Company's accountants in connection with the
registration and delivery of the Shares under the Securities Act and all other
fees or expenses in connection with the preparation and filing of the
Registration Statement, any
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preliminary prospectus, the Prospectus and amendments and supplements to any of
the foregoing, including all printing costs associated therewith, and the
mailing and delivering of copies thereof to the Underwriters and dealers, in the
quantities hereinabove specified, (ii) all costs and expenses related to the
transfer and delivery of the Shares to the Underwriters, including any transfer
or other taxes payable thereon, (iii) the cost of printing or producing any Blue
Sky or Legal Investment memorandum in connection with the offer and sale of the
Shares under state securities laws and all expenses in connection with the
qualification of the Shares for offer and sale under state securities laws as
provided in Section 6(d) hereof, including filing fees and the reasonable fees
and disbursements of counsel for the Underwriters in connection with such
qualification and in connection with the Blue Sky or Legal Investment
memorandum, (iv) all filing fees and the reasonable fees and disbursements of
counsel to the Underwriters incurred in connection with the review and
qualification of the offering of the Shares by the National Association of
Securities Dealers, Inc. (the "NASD"), (v) all fees and expenses in connection
with the preparation and filing of the registration statement on Form 8-A
relating to the Common Stock and all costs and expenses incident to listing the
Shares on the Nasdaq National Market, (vi) the cost of printing certificates
representing the Shares, (vii) the costs and charges of any transfer agent,
registrar or depositary, (viii) the costs and expenses of the Company relating
to investor presentations on any "road show" undertaken in connection with the
marketing of the offering of the Shares, including, without limitation, expenses
associated with the production of road show slides and graphics, fees and
expenses of any consultants engaged in connection with the road show
presentations with the prior approval of the Company, travel and lodging
expenses of the representatives and officers of the Company and any such
consultants, and the cost of any aircraft chartered in connection with the road
show, (ix) all fees and disbursements of counsel incurred by the Underwriters in
connection with the Directed Share Program and stamp duties, similar taxes or
duties or other taxes, if any, incurred by the Underwriters in connection with
the Directed Share Program, and (x) all other costs and expenses incident to the
performance of the obligations of the Company hereunder for which provision is
not otherwise made in this Section. It is understood, however, that except as
provided in this Section, Section 7 entitled "Indemnity and Contribution," and
the last paragraph of Section 9 below, the Underwriters will pay all of their
costs and expenses, including fees and disbursements of their counsel, stock
transfer taxes payable on resale of any of the Shares by them and any
advertising expenses connected with any offers they may make.
(g) That in connection with the Directed Share Program, the Company
will ensure that the Directed Shares will be restricted to the extent required
by the NASD or the NASD rules from sale, transfer, assignment, pledge or
hypothecation for a period of three months following the date of the
effectiveness of the Registration Statement. Morgan Stanley will notify the
Company as to which Participants will need to be so restricted. The Company will
direct the transfer agent to place stop transfer restrictions upon such
securities for such period of time.
Furthermore, the Company covenants with Morgan Stanley that the Company
will comply with all applicable securities and other applicable laws, rules and
regulations in each foreign jurisdiction in which the Directed Shares are
offered in connection with the Directed Share Program.
7. Indemnity and Contribution.
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(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within the
meaning of either Section 15 of the Securities Act or Section 20 of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), from and
against any and all losses, claims, damages and liabilities (including, without
limitation, any legal or other expenses reasonably incurred in connection with
defending or investigating any such action or claim) caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any amendment thereof, any preliminary prospectus or
the Prospectus (as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto), or caused by 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, except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or omission or alleged untrue statement or omission based upon information
relating to any Underwriter furnished to the Company in writing by such
Underwriter through you expressly for use therein .
(b) The Company agrees to indemnify and hold harmless Morgan Stanley
and each person, if any, who controls Morgan Stanley within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act
("MORGAN STANLEY ENTITIES"), from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) (i) caused by any untrue statement or alleged untrue
statement of a material fact contained in the prospectus wrapper material
prepared by or with the consent of the Company for distribution in foreign
jurisdictions in connection with the Directed Share Program attached to the
Prospectus or any preliminary prospectus, or caused by any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement therein, when considered in conjunction with the
Prospectus or any applicable preliminary prospectus, not misleading; (ii) caused
by the failure of any Participant to pay for and accept delivery of the shares
which, immediately following the effectiveness of the Registration Statement,
were subject to a properly confirmed agreement to purchase; or (iii) related to,
arising out of, or in connection with the Directed Share Program, provided that,
the Company shall not be responsible under this subparagraph (iii) for any
losses, claim, damages or liabilities (or expenses relating thereto) that are
finally judicially determined to have resulted from the bad faith or gross
negligence of Morgan Stanley Entities.
(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from the Company to
such Underwriter, but only with reference to information relating to such
Underwriter furnished to the Company in writing by such Underwriter through you
expressly for use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendments or supplements thereto.
(d) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Section 7(a)
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or 7(c), such person (the "INDEMNIFIED PARTY") shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PARTY") in writing
and the indemnifying party, upon request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in such
proceeding and shall pay the fees and disbursements of such counsel related to
such proceeding. In any such proceeding, any indemnified party shall have the
right to retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such indemnified party unless (i) the indemnifying party
and the indemnified party shall have mutually agreed to the retention of such
counsel or (ii) the named parties to any such proceeding (including any
impleaded parties) include both the indemnifying party and the indemnified party
and representation of both parties by the same counsel would be inappropriate
due to actual or potential differing interests between them. It is understood
that the indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all such indemnified
parties and that all such fees and expenses shall be reimbursed as they are
incurred. Such firm shall be designated in writing by Morgan Stanley, in the
case of parties indemnified pursuant to Section 7(a), and by the Company, in the
case of parties indemnified pursuant to Section 7(c). The indemnifying party
shall not be liable for any settlement of any proceeding effected without its
written consent, but if settled with such consent or if there be a final
judgment for the plaintiff, the indemnifying party agrees to indemnify the
indemnified party from and against any loss or liability by reason of such
settlement or judgment. Notwithstanding the foregoing sentence, if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by the second
and third sentences of this paragraph, the indemnifying party agrees that it
shall be liable for any settlement of any proceeding effected without its
written consent if (i) such settlement is entered into more than 30 days after
receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding. Notwithstanding anything
contained herein to the contrary, if indemnity may be sought pursuant to Section
7(b) hereof in respect of such action or proceeding, then in addition to such
separate firm for the indemnified parties, the indemnifying party shall be
liable for the reasonable fees and expenses of not more than one separate firm
(in addition to any local counsel) for Morgan Stanley for the defense of any
losses, claims, damages and liabilities arising out of the Directed Share
Program, and all persons, if any, who control Morgan Stanley within the meaning
of either Section 15 of the Act or Section 20 of the Exchange Act.
(e) To the extent the indemnification provided for in Section 7(a),
7(b) or 7(c) is unavailable to an indemnified party or insufficient in respect
of any losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
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<PAGE>
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other hand from the offering of the Shares or (ii) if the allocation provided by
clause 7(e)(i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
7(e)(i) above but also the relative fault of the Company on the one hand and of
the Underwriters on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Underwriters on the other hand in
connection with the offering of the Shares shall be deemed to be in the same
respective proportions as the net proceeds from the offering of the Shares
(before deducting expenses) received by the Company and the total underwriting
discounts and commissions received by the Underwriters, in each case as set
forth in the table on the cover of the Prospectus, bear to the aggregate Public
Offering Price of the Shares. The relative fault of the Company on the one hand
and the Underwriters on the other hand shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by the Underwriters and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Underwriters' respective obligations to
contribute pursuant to this Section 7 are several in proportion to the
respective number of Shares they have purchased hereunder, and not joint.
(f) The Company and the Underwriters agree that it would not be just
or equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in Section 7(e). The amount paid or payable
by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 7 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
(g) The indemnity and contribution provisions contained in this
Section 7 and the representations, warranties and other statements of the
Company contained in this Agreement shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Underwriter or any person controlling
any
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<PAGE>
Underwriter or by or on behalf of the Company, its officers or directors or any
person controlling the Company and (iii) acceptance of and payment for any of
the Shares.
8. Termination. This Agreement shall be subject to termination by notice
given by you to the Company, if (a) after the execution and delivery of this
Agreement and prior to the Closing Date (i) trading generally shall have been
suspended or materially limited on or by, as the case may be, any of the New
York Stock Exchange, the American Stock Exchange, the National Association of
Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses 8(a)(i) through 8(a)(iv), such event, singly or
together with any other such event, makes it, in your judgment, impracticable to
market the Shares on the terms and in the manner contemplated in the Prospectus.
9. Effectiveness; Defaulting Underwriters. This Agreement shall become
effective upon the execution and delivery hereof by the parties hereto.
If, on the Closing Date or the Option Closing Date, as the case may be, any
one or more of the Underwriters shall fail or refuse to purchase Shares that it
has or they have agreed to purchase hereunder on such date, and the aggregate
number of Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase is not more than one-tenth of the aggregate number
of the Shares to be purchased on such date, the other Underwriters shall be
obligated severally in the proportions that the number of Firm Shares set forth
opposite their respective names in Schedule I bears to the aggregate number of
Firm Shares set forth opposite the names of all such non-defaulting
Underwriters, or in such other proportions as you may specify, to purchase the
Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase on such date; provided that in no event shall the number of
Shares that any Underwriter has agreed to purchase pursuant to this Agreement be
increased pursuant to this Section 9 by an amount in excess of one-ninth of such
number of Shares without the written consent of such Underwriter. If, on the
Closing Date, any Underwriter or Underwriters shall fail or refuse to purchase
Firm Shares and the aggregate number of Firm Shares with respect to which such
default occurs is more than one-tenth of the aggregate number of Firm Shares to
be purchased, and arrangements satisfactory to you and the Company for the
purchase of such Firm Shares are not made within 36 hours after such default,
this Agreement shall terminate without liability on the part of any non-
defaulting Underwriter or the Company. In any such case either you or the
Company shall have the right to postpone the Closing Date, but in no event for
longer than seven days, in order that the required changes, if any, in the
Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. If, on the Option Closing Date, any Underwriter or
Underwriters shall fail or refuse to purchase Additional Shares and the
aggregate number of Additional Shares with respect to which such default occurs
is more than one-tenth of the aggregate number of Additional Shares to be
purchased, the non-defaulting Underwriters shall have the option (i) to
terminate their obligation
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<PAGE>
hereunder to purchase Additional Shares or (ii) to purchase not less than the
number of Additional Shares that such non-defaulting Underwriters would have
been obligated to purchase in the absence of such default. Any action taken
under this paragraph shall not relieve any defaulting Underwriter from liability
in respect of any default of such Underwriter under this Agreement.
If this Agreement shall be terminated by the Underwriters, or any of them,
because of any failure or refusal on the part of the Company to comply with the
terms or to fulfill any of the conditions of this Agreement, or if for any
reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with respect to themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder.
10. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
11. Applicable Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York.
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<PAGE>
12. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
Very truly yours,
COPPER MOUNTAIN NETWORKS, INC.
By: _____________________________________
Richard Gilbert
President and Chief Executive Officer
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
BancBoston Robertson Stephens, Inc.
Dain Rauscher Wessels
Acting severally on behalf
of themselves and the
several Underwriters named
in Schedule I hereto.
By: Morgan Stanley & Co. Incorporated
By: __________________________________
Name:
Title:
<PAGE>
SCHEDULE I
UNDERWRITER NUMBER OF SHARES TO BE
PURCHASED
- ----------------------------------------- -------------------------------
Morgan Stanley & Co. Incorporated
BancBoston Robertson Stephens, Inc.
Dain Rauscher Wessels
________________
Total...... ================
<PAGE>
EXHIBIT A
LOCK-UP AGREEMENT
-----------------
Morgan Stanley & Co. Incorporated
BancBoston Robertson Stephens, Inc.
Dain Rauscher Wessels, a division of Dain Rauscher Incorporated
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Dear Sirs and Mesdames:
The undersigned understands that Morgan Stanley & Co. Incorporated ("MORGAN
STANLEY") proposes to enter into an Underwriting Agreement (the "UNDERWRITING
AGREEMENT") with Copper Mountain Networks, Inc., a Delaware corporation (the
"COMPANY") providing for the public offering (the "PUBLIC OFFERING") by the
several Underwriters, including Morgan Stanley, BancBoston Robertson Stephens
and Dain Rauscher Wessels (the "UNDERWRITERS"), of shares (the "SHARES") of the
Common Stock, par value $0.001 per share, of the Company (the "COMMON STOCK").
To induce the Underwriters that may participate in the Public Offering to
continue their efforts in connection with the Public Offering, the undersigned
hereby agrees that, without the prior written consent of Morgan Stanley on
behalf of the Underwriters, it will not, during the period commencing on the
date hereof and ending 180 days after the date of the final prospectus relating
to the Public Offering (the "PROSPECTUS"), (1) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock
or (2) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of Common Stock,
whether any such transaction described in clause (1) or (2) above is to be
settled by delivery of Common Stock or such other securities, in cash or
otherwise. The foregoing sentence shall not apply to (a) the sale of any Shares
to the Underwriters pursuant to the Underwriting Agreement or (b) transactions
relating to shares of Common Stock or other securities acquired in open market
transactions after the completion of the Public Offering. In addition, the
undersigned agrees that, without the prior written consent of Morgan Stanley on
behalf of the Underwriters, it will not, during the period commencing on the
date hereof and ending 180 days after the date of the Prospectus, make any
demand for or exercise any right with respect to, the registration of any shares
of Common Stock or any security convertible into or exercisable or exchangeable
for Common Stock.
Whether or not the Public Offering actually occurs depends on a number of
factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and the Underwriters.
Very truly yours,
___________________________________
(Name of Shareholder)
___________________________________
(Signature of Authorized Signatory)
___________________________________
(Address)
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
COPPER MOUNTAIN NETWORKS, INC.
The undersigned certify that:
1. They are the President and the Secretary, respectively, of COPPER
MOUNTAIN NETWORKS, INC., a California corporation.
2. Article III, Section A of the Amended and Restated Articles of
Incorporation of this corporation is amended to read in full as follows:
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 40,000,000
shares, 29,397,536 shares shall be Common Stock, no par value, and 10,602,464
shares shall be Preferred Stock, no par value. The Preferred Stock may be
issued from time to time in one or more series. Upon the filing of this
Certificate of Amendment of Amended and Restated Articles of Incorporation, each
share of the Corporation's Common Stock issued and outstanding shall
automatically and without any action on the part of respective holders thereof,
be subdivided into one and one-half (1.5) shares of Common Stock of the
Corporation. No fractional shares will be issued and, in lieu thereof any
holder of less than one share of Common Stock shall be entitled to receive cash
for such holders' fractional share based on the fair market value per share as
determined in good faith by the Board of Directors."
3. The foregoing amendment of the Amended and Restated Articles of
Incorporation has been duly approved by the Board of Directors.
4. The foregoing amendment of Articles of Incorporation has been duly
approved by the required vote of shareholders in accordance with Section 902 of
the California Corporations Code. The total number of outstanding shares of the
corporation is 1,435,679 shares of Common Stock, 2,723,000 shares of Series A
Preferred Stock, 1,852,063 shares of Series B Preferred Stock, 2,422,361 shares
of Series C Preferred Stock and 3,225,806 shares of Series D Preferred Stock.
The number of shares voting in favor of the amendment equaled or exceeded the
vote required. The percentage vote required was more than 50% of the
outstanding shares of Common Stock and more than 50% of the outstanding shares
of Series A, Series B, Series C and Series D Preferred Stock voting together as
a class.
1.
<PAGE>
We further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of our own knowledge.
Date: November 24, 1998
/s/ RICHARD GILBERT
____________________________________________
RICHARD GILBERT
Chief Executive Officer
/s/ JOSEPH MARKEE
____________________________________________
JOSEPH MARKEE
Secretary
2.
<PAGE>
AMENDED AND RESTATED ARTICLES
OF INCORPORATION OF
COPPER MOUNTAIN NETWORKS, INC.
Richard Gilbert and Joseph Markee certify that:
FIRST: They are the President and Chief Executive Officer and the
Secretary, respectively, of Copper Mountain Networks, Inc., a California
corporation (the "Corporation").
SECOND: The Articles of Incorporation of the Corporation are amended and
restated to read as follows:
I.
The name of this corporation is COPPER MOUNTAIN NETWORKS, INC.
II.
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
California, other than the banking business, the trust company business, or the
practice of a profession permitted to be incorporated by the California
Corporations Code.
III.
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 30,000,000
shares, 19,397,536 shares shall be Common Stock, no par value, and 10,602,464
shares shall be Preferred Stock, no par value. The Preferred Stock may be
issued from time to time in one or more series.
B. 2,773,000 of the authorized shares of Preferred Stock are hereby
designated "Series A Preferred Stock."
C. 1,999,464 of the authorized shares of Preferred Stock are hereby
designated "Series B Preferred Stock."
D. 2,530,000 of the authorized shares of Preferred Stock are hereby
designated "Series C Preferred Stock."
E. 3,300,000 of the authorized shares of Preferred Stock are hereby
designated "Series D Preferred Stock." The Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred stock are
collectively referred to herein as the "Preferred Stock."
1.
<PAGE>
F. The rights, preferences, privileges and restrictions granted to or
imposed upon the Common Stock and Preferred Stock are as follows:
1. DIVIDENDS.
a. The holders of the Preferred Stock shall be entitled, when and
if declared by the Board of Directors of the Corporation, to dividends out of
the retained earnings of the Corporation at the rate of the $0.08 per share of
Series A Preferred Stock per annum, $0.27 per share of Series B Preferred Stock
per annum, $0.38 per share of Series C Preferred Stock per annum and $0.62 per
share of Series D Preferred Stock per annum. Dividends on the Preferred Stock
shall be payable on a pari passu basis and in preference and prior to any
payment of any dividend on the Common Stock of the Corporation. No dividends
(other than those payable solely in the Common Stock of the Corporation) shall
be paid on the Common Stock of the Corporation during any fiscal year of the
Corporation until all declared dividends on the Preferred Stock are paid or set
aside. The right to dividends on shares of the Common Stock or Preferred Stock
shall not be cumulative, and no right shall accrue to holders of Common Stock or
Preferred Stock by reason of the fact that dividends on said shares are not
declared in any prior period.
In the event the Corporation shall declare a distribution (other
than any distribution described in Section F.2) payable in securities of other
persons, evidences of indebtedness issued by the Corporation or other persons,
assets (excluding cash dividends) or options or rights to purchase any such
securities or evidences of indebtedness, then, in each such case the holders of
the Preferred Stock shall be entitled to a proportionate share of any such
distribution as though the holders of the Preferred Stock were the holders of
the number of shares of Common Stock of the Corporation into which their
respective shares of Preferred Stock are convertible as of the record date fixed
for the determination of the holders of Common Stock of the Corporation entitled
to receive such distribution.
2. LIQUIDATION PREFERENCE.
a. PREFERENCE. In the event of any liquidation, dissolution or
winding up of the Corporation, either voluntarily or involuntarily, the holders
of Preferred Stock shall be entitled to receive, on a pari passu basis and prior
and in preference to any distribution of any of the assets or surplus funds of
the Corporation to the holders of Common Stock of the Corporation, an amount
equal to $1.00 per share of Series A Preferred Stock, $3.39 per share of Series
B Preferred Stock, $4.75 per share of Series C Preferred Stock and $7.75 per
share of Series D Preferred Stock, plus a further amount equal to any dividends
declared but unpaid on such shares.
If upon such liquidation, dissolution or winding up of the Corporation, the
assets of the Corporation are insufficient to provide for the cash payment
described above to the holders of Preferred Stock, then all of such assets shall
be paid ratably among the holders of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock in
proportion to the preferential amounts each such holder would have been entitled
to receive pursuant to this Section 2(a) if such distribution had been
sufficient to permit the full payment of such preferential amounts.
2.
<PAGE>
After the payment or setting apart of payment to the holders of Preferred
Stock of the preferential amounts so payable to them, the holders of Common
Stock shall be entitled to receive pro rata the remaining assets of the
Corporation.
b. CONSOLIDATION OR MERGER. Any of the following shall be deemed
to be a liquidation, dissolution or winding up within the meaning of this
Section 2:
(i) any transaction or series of related transactions
(including, without limitation, any reorganization, merger or consolidation)
which will result in the Corporation's shareholders immediately prior to such
transaction not holding (by virtue of such shares or securities issued solely
with respect thereto) at least 50% of the voting power of the surviving or
continuing entity;
(ii) a sale of all or substantially all of the assets of the
Corporation, unless the Corporation's shareholders immediately prior to such
sale will, as a result of such sale, hold (by virtue of securities issued as
consideration for the Corporation's sale) at least 50% of the voting power of
the purchasing entity; or
(iii) any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary.
c. NONCASH DISTRIBUTIONS. If any of the assets of the Corporation
are to be distributed other than in cash under this Section 2 or for any
purpose, then the Board of Directors of the Corporation shall promptly engage
independent competent appraisers to determine the value of the assets to be
distributed to the holders of Preferred Stock or Common Stock. The Corporation
shall, upon receipt of such appraiser's valuation, give prompt written notice to
each holder of shares of Preferred Stock or Common Stock of the appraiser's
valuation.
d. CONSENT FOR CERTAIN REPURCHASES. Each holder of an outstanding
share of Preferred Stock shall be deemed to have consented, for purposes of
Sections 502, 503 and 506 of the General Corporation Law of California, to
distributions made by the Corporation in connection with the repurchase of
shares of Common Stock (at a price no greater than the original issuance price
thereof) issued to or held by employees or consultants upon termination of their
employment or services pursuant to agreements approved by the Board of Directors
providing for the right of said repurchase between the Corporation and such
persons.
e. NOTICE TO HOLDERS OF PREFERRED STOCK. Written notice of any
such liquidation, dissolution or winding up, stating a payment date, the place
where such payment shall be made, an estimate of the net value that would be
received by each such holder of Preferred Stock if all such holders converted
all of their Preferred Stock immediately prior to such liquidation, dissolution
or winding up of the Corporation, and containing a statement of or reference to
applicable conversion rights, shall be given by first-class mail, postage
prepaid, not less than thirty (30) days prior to the payment date stated
therein, to each holder of record of Preferred Stock at such holder's address as
shown in the records of the Corporation.
3. CONVERSION. The holders of the Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
3.
<PAGE>
a. RIGHT TO CONVERT.
(i) Each share of Series A Preferred Stock shall be
convertible, without payment of any additional consideration by the holder
thereof and at the option of such holder, at any time after the date of issuance
of such share at the office of the Corporation or any transfer agent for such
share, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing $1.00 by the Series A Conversion Price, determined
as hereinafter provided, in effect at the time of conversion. The conversion
price for the Series A Preferred Stock (the "Series A Conversion Price") shall
initially be $1.00. Such initial Series A Conversion Price shall be subject to
adjustment, as hereinafter provided. The number of shares of Common Stock into
which a share of Series A Preferred Stock is convertible is hereinafter referred
to as the "Series A Conversion Rate."
(ii) Each share of Series B Preferred Stock shall be
convertible, without payment of any additional consideration by the holder
thereof and at the option of such holder, at any time after the date of issuance
of such share at the office of the Corporation or any transfer agent for such
share, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing $3.39 by the Series B Conversion Price, determined
as hereinafter provided, in effect at the time of conversion. The conversion
price for the Series B Preferred Stock (the "Series B Conversion Price") shall
initially be $3.39. Such initial Series B Conversion Price shall be subject to
adjustment, as hereinafter provided. The number of shares of Common Stock into
which a share of Series B Preferred Stock is convertible is hereinafter referred
to as the "Series B Conversion Rate."
(iii) Each share of Series C Preferred Stock shall be
convertible, without payment of any additional consideration by the holder
thereof and at the option of such holder, at any time after the date of issuance
of such share at the office of the Corporation or any transfer agent for such
share, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing $4.75 by the Series C Conversion Price, determined
as hereinafter provided, in effect at the time of conversion. The conversion
price for the Series C Preferred Stock (the "Series C Conversion Price") shall
initially be $4.75. Such initial Series C Conversion Price shall be subject to
adjustment, as hereinafter provided. The number of shares of Common Stock into
which a share of Series C Preferred Stock is convertible is hereinafter referred
to as the "Series C Conversion Rate."
(iv) Each share of Series D Preferred Stock shall be
convertible, without payment of any additional consideration by the holder
thereof and at the option of such holder, at any time after the date of issuance
of such share at the office of the Corporation or any transfer agent for such
share, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing $7.75 by the Series D Conversion Price, determined
as hereinafter provided, in effect at the time of conversion. The conversion
price for the Series D Preferred Stock (the "Series D Conversion Price") shall
initially be $7.75. Such initial Series D Conversion Price shall be subject to
adjustment, as hereinafter provided. The number of shares of Common Stock into
which a share of Series D Preferred Stock is convertible is hereinafter referred
to as the "Series D Conversion Rate."
b. AUTOMATIC CONVERSION.
4.
<PAGE>
(i) Each share of Series A and Series B Preferred Stock
shall automatically be converted into shares of Common Stock at its then
effective Conversion Rate immediately upon the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock, the aggregate gross proceeds of which equal or exceed $5,000,000
at a per share issuance price of at least $5.00 per share (as adjusted for stock
splits, stock dividends, subdivisions, reclassifications, reorganizations, or
other similar transactions).
(ii) Each share of Series C Preferred Stock shall
automatically be converted into shares of Common Stock at its then effective
Conversion Rate immediately upon the closing of a firm commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale of Common Stock,
the aggregate gross proceeds of which equal or exceed $10,000,000 at a per share
issuance price of at least $9.50 per share (as adjusted for stock splits, stock
dividends, subdivisions, reclassifications, reorganizations, or other similar
transactions).
(iii) Each share of Series D Preferred Stock shall
automatically be converted into shares of Common Stock at its then effective
Conversion Rate immediately upon the closing of a firm commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale of Common Stock,
the aggregate gross proceeds of which equal or exceed $20,000,000 at a per share
issuance price of at least $12.00 per share (as adjusted for stock splits, stock
dividends, subdivisions, reclassifications, reorganizations, or other similar
transactions) if the closing of such public offering occurs on or before March
30, 2000 and at a per share issuance price of at least $15.50 per share (as
adjusted for stock splits, stock dividends, subdivisions, reclassifications,
reorganizations, or other similar transactions) if the closing of such public
offering occurs after March 30, 2000.
(iv) Each share of Series A Preferred Stock shall
automatically be converted into shares of Common Stock at its then effective
Conversion Rate immediately upon the Corporation's receipt of the written
consent or vote of holders of more than two-thirds of the then outstanding
shares of Series A Preferred Stock.
(v) Each share of Series B Preferred Stock shall
automatically be converted into shares of Common Stock at its then effective
Conversion Rate immediately upon the Corporation's receipt of the written
consent or vote of holders of more than two-thirds of the then outstanding
shares of Series B Preferred Stock.
(vi) Each share of Series C Preferred Stock shall
automatically be converted into shares of Common Stock at its then effective
Conversion Rate immediately upon the Corporation's receipt of the written
consent or vote of holders of more than two-thirds of the then outstanding
shares of Series C Preferred Stock.
(vii) Each share of Series D Preferred Stock shall
automatically be converted into shares of Common Stock at its then effective
Conversion Rate immediately upon the Corporation's receipt of the written
consent or vote of holders of more than a majority of the then outstanding
shares of Series D Preferred Stock.
5.
<PAGE>
c. MECHANICS OF CONVERSION. Before any holder of Preferred Stock
shall be entitled to convert the same into shares of Common Stock, such holder
shall surrender the certificate or certificates therefor, duly endorsed, at the
office of the Corporation or of any transfer agent for the Preferred Stock and
shall give written notice to the Corporation at such office that he elects to
convert the same (except that no such written notice of election to convert
shall be necessary in the event of an automatic conversion pursuant to Section
3.b. hereof). The Corporation shall, as soon as practicable thereafter, issue
and deliver at such office to such holder of Preferred Stock a certificate or
certificates for the number of shares of Common Stock to which he shall be
entitled as aforesaid and a check payable to such holder in the amount of any
declared but unpaid dividends on the converted Preferred Stock to which the
holder may be entitled. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of Preferred Stock to be converted (except that in the case of an
automatic conversion pursuant to Sections 3.b.(i), 3.b.(ii) or 3.b.(iii) hereof,
such conversion shall be deemed to have been made immediately prior to the
closing of the offering referred to in Sections 3.b.(i), 3.b.(ii) and 3.b.(iii))
and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date.
d. ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES.
(i) SPECIAL DEFINITIONS. For purposes of this Section 3, the
following definitions shall apply:
(a) "OPTION" shall mean rights, options or warrants to
subscribe for, purchase or otherwise acquire either Common Stock or Convertible
Securities.
(b) "SERIES D ORIGINAL ISSUE DATE" shall mean the date on
which a share of Series D Preferred Stock was first issued.
(c) "CONVERTIBLE SECURITIES" shall mean any evidences of
indebtedness, shares or other securities directly or indirectly convertible into
or exchangeable for Common Stock.
(d) "ADDITIONAL SHARES OF COMMON STOCK" shall mean all
shares of Common Stock issued (or, pursuant to Section 3.d.(iii), deemed to be
issued) by the Corporation after the Series D Original Issue Date, other than:
(1) shares of Common Stock issued or issuable upon
conversion of shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock authorized herein;
(2) shares of Common Stock issued or issuable to
officers, directors or employees of, or consultants to, the Corporation pursuant
to a stock grant or option plan or other employee stock incentive program
approved by the Board of Directors;
(3) up to 50,000 shares of Series A Preferred Stock,
up to 147,401 shares of Series B Preferred Stock and up to 39,737 shares of
Series C Preferred Stock issuable upon the exercise of warrants outstanding on
the date of filing hereof;
6.
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(4) shares of Common Stock issued or issuable in
connection with commercial lending arrangements, equipment leases, venture
leasing arrangements or similar transactions on terms approved by the Board of
Directors;
(5) up to 100,000 shares of Common Stock issued or
issuable in connection with corporate partnering arrangements, joint ventures,
technology licensing, and strategic alliances with the Company's suppliers,
vendors, distributors or customers on terms approved by the Board of Directors;
(6) shares of Common Stock issued or issuable as a
dividend or distribution on the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock (provided that such
dividend is paid on all such series of Preferred Stock in proportion to the
number of shares of Common Stock issuable upon conversion thereof), or any event
for which adjustment is made pursuant to Sections 3.e. or 3.f. hereof; or
(7) shares of Common Stock issued or issuable by way
of dividend or other distribution on shares excluded from the definition of
Additional Shares of Common Stock by the foregoing clauses (1) through (6) or
this clause (7) or on shares of Common Stock so excluded.
(ii) NO ADJUSTMENT OF CONVERSION PRICE. No adjustment in the
Conversion Price of a particular share of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock,
respectively, shall be made in respect of the issuance of Additional Shares of
Common Stock unless the consideration per share for an Additional Share of
Common Stock issued or deemed to be issued by the Corporation is less than the
Series A Conversion Price, the Series B Conversion Price, the Series C
Conversion Price or the Series D Conversion Price, respectively, in effect on
the date of, and immediately prior to, the issue of such Additional Share of
Common Stock.
(iii) ISSUE OF SECURITIES DEEMED ISSUE OF ADDITIONAL SHARES OF
COMMON STOCK.
(a) OPTIONS AND CONVERTIBLE SECURITIES. In the event
the Corporation at any time or from time to time after the Series D Original
Issue Date shall issue any Options or Convertible Securities or shall fix a
record date for the determination of holders of any class of securities entitled
to receive any such Options or Convertible Securities, then the maximum number
of shares (as set forth in the instrument relating thereto without regard to any
provisions contained therein for a subsequent adjustment of such number) of
Common Stock issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, in case such a record date shall have
been fixed, as of the close of business on such record date, provided that such
shares would not otherwise be excluded from the definition of "Additional Shares
of Common Stock" by Sections 3.d.(i)(d)(1), (2), (3), (4), (5), (6) and (7)
above, provided further that, in any such case in which Additional Shares of
Common Stock are deemed to be issued:
7.
<PAGE>
(1) no further adjustment in the applicable
Series A Conversion Price, Series B Conversion Price, Series C Conversion Price
or Series D Conversion Price shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon the exercise of such
Options or the conversion or exchange of such Convertible Securities;
(2) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise, for any increase in
the consideration payable to the Corporation, or decreases in the number of
shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof, the applicable Series A Conversion Price, Series B Conversion Price,
Series C Conversion Price or Series D Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon any such
increase or decrease becoming effective, be recomputed to reflect such increase
or decrease insofar as it affects such Options or the rights of conversion or
exchange under such Convertible Securities; provided, however, that no
readjustment pursuant to the foregoing clause shall have the effect of
increasing the applicable Series A Conversion Price, Series B Conversion Price,
Series C Conversion Price or Series D Conversion Price to an amount which
exceeds the lower of (i) such Conversion Price on the original adjustment date
(prior to such adjustment), or (ii) such Conversion Price that would have
resulted from any issuance of Additional Shares of Common Stock between the
original adjustment date and such readjustment date (without giving effect for
such original adjustment); and
(3) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise, for any decrease in
the consideration payable to the Corporation, or increases in the number of
shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof, the applicable Series A Conversion Price, Series B Conversion Price,
Series C Conversion Price or Series D Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon any such
decrease or increase becoming effective, be recomputed to reflect such decrease
or increase insofar as it affects such Options or the rights of conversion or
exchange under such Convertible Securities; provided, however, that no
readjustment pursuant to the foregoing clause shall have the effect of
decreasing the applicable Series A Conversion Price, Series B Conversion Price,
Series C Conversion Price or Series D Conversion Price to an amount which
exceeds the greater of (i) such Conversion Price on the original adjustment date
(prior to such adjustment), or (ii) such Conversion Price that would have
resulted from any issuance of Additional Shares of Common Stock between the
original adjustment date and such readjustment date (without giving effect for
such original adjustment).
(iv) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK. In the event this Corporation shall issue
Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued pursuant to Section 3.d.(iii)) without consideration or for
a consideration per share less than the applicable Series A Conversion Price,
Series B Conversion Price, Series C Conversion Price or Series D Conversion
Price in effect on the date of and immediately prior to such issue, then and in
such event, such Series A Conversion Price, Series B Conversion Price, Series C
Conversion
8.
<PAGE>
Price or Series D Conversion Price, as applicable, shall be reduced,
concurrently with such issue, to a price (calculated to the nearest cent)
determined by multiplying such Series A Conversion Price, Series B Conversion
Price, Series C Conversion Price or Series D Conversion Price by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such issue plus the number of shares of Common Stock which
the aggregate consideration received by the Corporation for the total number of
Additional Shares of Common Stock so issued would purchase at such Series A
Conversion Price, Series B Conversion Price, Series C Conversion Price or Series
D Conversion Price, as applicable; and the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issue
plus the number of such Additional Shares of Common Stock so issued; and
provided further that, for the purposes of this Section 3.d.(iv), all shares of
Common Stock issuable upon exercise or conversion of outstanding Options and
Preferred Stock shall be deemed to be outstanding, and immediately after any
Additional Shares of Common Stock are deemed issued pursuant to Section
3.d.(iii), such Additional Shares of Common Stock shall be deemed to be
outstanding.
(v) DETERMINATION OF CONSIDERATION. For purposes of this
Section 3.d., the consideration received by the Corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(a) CASH AND PROPERTY. Such consideration shall:
(1) insofar as it consists of cash, be computed at
the aggregate amount of cash received by the Corporation excluding amounts paid
or payable for accrued interest or accrued dividends;
(2) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
(3) in the event Additional Shares of Common Stock
are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (1) and (2) above, as
determined in good faith by the Board of Directors.
(b) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Section 3.d.(iii)(a),
relating to Options and Convertible Securities, shall be determined by dividing:
(1) the total amount, if any, received or
receivable by the Corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the instruments relating thereto, without regard
to any provision contained therein for a subsequent adjustment of such
consideration) payable to the Corporation upon the exercise of such Options or
the conversion or exchange of such Convertible Securities, or in the case of
Options for
9.
<PAGE>
Convertible Securities, the exercise of such Options for Convertible Securities
and the conversion or exchange of such Convertible Securities, by
(2) the maximum number of shares of Common Stock
(as set forth in the instruments relating thereto, without regard to any
provision contained therein for a subsequent adjustment of such number) issuable
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities.
e. ADJUSTMENT FOR STOCK SPLITS, DIVIDENDS AND
COMBINATIONS. If the Corporation shall at any time or from time to time effect
a subdivision of the outstanding Common Stock, or shall issue a dividend of
Common Stock on its outstanding Common Stock, the Conversion Price for each
series of Preferred Stock then in effect immediately before that subdivision or
dividend shall be proportionately decreased, and conversely, if the Corporation
shall combine the outstanding shares of Common Stock, the Conversion Price for
each series of Preferred Stock then in effect immediately before the combination
shall be proportionately increased. Any adjustment under this Section 3.e. shall
become effective at the close of business on the date the subdivision or
combination becomes effective or on the date on which the dividend is declared.
f. ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS.
In the event the Corporation at any time or from time to time shall make or
issue, or fix a record date for the determination of holders of Common Stock
entitled to receive a dividend or other distribution payable in securities of
the Company other than shares of Common Stock, then and in each such event the
holders of Preferred Stock shall receive at the time of payment of such dividend
or other distribution, the amount of securities of the Company that they would
have received pursuant to such dividend or distribution had their Preferred
Stock been converted into Common Stock on the date of such event.
g. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. If the Common Stock issuable upon the conversion of the Preferred
Stock shall be changed into the same or different number of shares of any class
or series of stock, whether by capital reorganization, reclassification or
otherwise (other than a subdivision or combination of shares or stock dividend,
provided for in Section 3.e. above, or a merger, consolidation, sale of assets
or other transaction provided for in Section 2 above), then and in each such
event the holder of each share of Preferred Stock shall have the right
thereafter to convert such share into the kind and amount of shares of stock and
other securities and property receivable upon such reorganization,
reclassification or other change by holders of the number of shares of Common
Stock into which such shares of Preferred Stock might have been converted
immediately prior to such reorganization, reclassification or change, all
subject to further adjustment as provided herein.
h. CALCULATIONS. All calculations under this Section
3 shall be made to the nearest cent or to the nearest one hundredth (1/100) of a
share, as the case may be.
i. MINIMAL ADJUSTMENTS. No adjustment in the
Conversion Price for any series of Preferred Stock need be made if such
adjustment would result in a change in the Conversion Price for such series of
Preferred Stock of less than $0.01. Any adjustment of less than $0.01 which is
not made shall be carried forward and shall be made at the time of and
10.
<PAGE>
together with any subsequent adjustment which, on a cumulative basis, amounts to
an adjustment of $0.01 or more in the Conversion Price for such series of
Preferred Stock.
j. NO IMPAIRMENT. The Corporation will not through
any amendment of these Amended and Restated Articles of Incorporation, amendment
of its Bylaws, reorganization, recapitalization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the Corporation, but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 3 and in the taking of all such action as may be necessary or
appropriate in order to protect the Conversion Rights of the holders of
Preferred Stock against impairment.
k. CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence
of each adjustment or readjustment of the Conversion Rate for each series of
Preferred Stock pursuant to this Section 3, the Corporation at its expense shall
promptly compute such adjustment or readjustment in accordance with the terms
hereof and prepare and furnish to each holder of Preferred Stock a certificate
executed by its Chief Executive Officer or Chief Financial Officer, setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based. The Corporation shall, upon written
request at any time of any holder of Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (i) all such
adjustments and readjustments, (ii) the Conversion Rate for each series of
Preferred Stock at the time in effect, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of such holder's shares of Preferred Stock.
l. FRACTIONAL SHARES. No fractional share shall be
issued upon the conversion of any share or shares of Preferred Stock. If the
conversion would result in the issuance of a fraction of a share of Common
Stock, the Corporation shall, in lieu of issuing any fractional share, pay the
holder otherwise entitled to such fraction a sum in cash equal to the fair
market value of such fraction on the date of conversion (as determined in good
faith by the Board of Directors of the Corporation).
m. NOTICES OF RECORD DATE. In the event of 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 (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property or to receive any other right, the Corporation
shall mail to each holder of Preferred Stock at least 20 days prior to such
record date, a notice specifying the date on which any such record is to be
taken for the purpose of such dividend or distribution or right, and the amount
and character of such dividend, distribution or right.
n. ISSUE TAXES. The Corporation shall pay any and all
issue and other taxes that may be payable in respect of any issue or delivery of
shares of Common Stock on conversion of shares of Preferred Stock pursuant
hereto; provided, however, that the Corporation shall not be obligated to pay
any transfer taxes resulting from any transfer requested by any holder in
connection with any such conversion.
11.
<PAGE>
o. COMMON STOCK RESERVED. The Corporation shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock solely for the purpose of effecting the conversion of the shares
of Preferred Stock 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
Preferred Stock; and 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 Preferred Stock, 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.
p. NOTICES. Any notice required by the provisions of
this Section 3 to be given to the holder of shares of Preferred Stock shall be
deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
Corporation.
q. REISSUANCE OF CONVERTED SHARES. No shares of
Preferred Stock which have been converted into Common Stock after the original
issuance thereof shall ever again be reissued and all such shares so converted
shall upon such conversion cease to be a part of the authorized shares of the
Corporation.
4. VOTING RIGHTS. The holder of each share of Preferred
Stock shall be entitled to the number of votes equal to the number of shares of
Common Stock into which each share of Preferred Stock could be converted on the
record date for the vote or written consent of shareholders and, except as
otherwise required by law, shall have voting rights and powers equal to the
voting rights and powers of Common Stock. The holder of each share of Preferred
Stock shall be entitled to notice of any shareholders' meeting in accordance
with the bylaws of the Corporation and shall vote with holders of Common Stock
upon the election of directors and upon any other matter submitted to a vote of
shareholders, except those matters required by law to be submitted to a class
vote. Fractional votes shall not, however, be permitted and any fractional
voting rights resulting from the above formula (after aggregating all shares of
Common Stock into which shares of Preferred Stock held by each holder could be
converted) shall be rounded to the nearest whole number (with one-half rounded
upward to one).
5. PROTECTIVE PROVISIONS.
a. In addition to any other class vote that may be
required by law, so long as any series of Preferred Stock shall be outstanding,
the Corporation shall not without obtaining the approval (by vote or written
consent, as provided by law) of the holders of more than 50% of the outstanding
shares of the Preferred Stock, voting together as a single class (on an as-
converted to Common Stock basis):
(i) increase the authorized number of shares of
any class or series of the Corporation's capital stock;
(ii) create any new class or series of shares
having preferences or priorities (including, without limitation, with regard to
dividends, liquidation and voting) superior to or on parity with any outstanding
series of the Preferred Stock;
12.
<PAGE>
(iii) reclassify any outstanding shares into shares
having preferences or priorities (including, without limitation, with regard to
dividends, liquidation and voting) superior to or on parity with any outstanding
series of the Preferred Stock;
(iv) amend the Corporation's Articles of
Incorporation or Bylaws to adversely affect the rights, preferences or
privileges of any outstanding series of the Preferred Stock;
(v) repurchase or redeem any outstanding shares
of Common Stock or of the Preferred Stock except as contemplated by Section 2.d.
hereof; provided, however, that with respect to any repurchase or redemption of
shares of Preferred Stock, any approval required hereunder shall include the
approval of holders of more than 50% of the outstanding shares of Series D
Preferred Stock voting together as a single series; or
(vi) change the authorized number of Directors on
the Board from the current range of five (5) to nine (9).
b. Except as otherwise required by law, so long as any
of the Preferred Stock shall be outstanding, the Corporation shall not without
obtaining the approval (by vote or written consent, as provided by law) of the
holders of more than 66 2/3% of the outstanding shares of the Preferred Stock
voting together as a single class (on an as-converted to Common Stock basis):
effect any sale, material encumbrance or other conveyance of all or
substantially all of the assets of the Corporation (excluding any security
interest or other encumbrance in favor of a commercial lending institution or
similar entity in connection with commercial lending arrangements, equipment
leases, venture leasing arrangements or similar transactions on terms approved
by the Board of Directors but including any grant of an exclusive license to all
or substantially all of the intellectual property owned by the Corporation) or
any consolidation or merger involving the Corporation or its subsidiaries if the
shareholders of the Corporation immediately prior to such consolidation or
merger shall not represent a majority of the voting power of the outstanding
stock of the continuing or surviving entity of such consolidation or merger
following such consolidation or merger; provided, however, that if any such
transaction pursuant to this Section 5b. results in a per share price to holders
of the Series D Preferred Stock of less than $12.00 per share if the closing of
such transaction occurs on or before March 30, 2000, or a per share price to
holders of the Series D Preferred Stock of less than $15.50 per share if the
closing of such transaction occurs after March 30, 2000, any approval required
hereunder shall include the approval of holders of more than 50% of the
outstanding shares of Series D Preferred Stock voting together as a single
series.
c. In addition to any other class vote that may be
required by law, so long as any of the Series A Preferred Stock shall be
outstanding, the Corporation shall not without obtaining the approval (by vote
or written consent, as provided by law) of the holders of more than 50% of the
outstanding shares of Series A Preferred Stock:
(i) amend the Company's Articles of Incorporation
or Bylaws to adversely affect solely the rights, preferences or privileges of
the Series A Preferred Stock; or
13.
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(ii) increase or decrease the authorized number of
shares of Series A Preferred Stock.
d. In addition to any other class vote that may be
required by law, so long as any of the Series B Preferred Stock shall be
outstanding, the Corporation shall not without obtaining the approval (by vote
or written consent, as provided by law) of the holders of more than 50% of the
outstanding shares of Series B Preferred Stock:
(i) amend the Company's Articles of Incorporation
or Bylaws to adversely affect solely the rights, preferences or privileges of
the Series B Preferred Stock; or
(ii) increase or decrease the authorized number of
shares of Series B Preferred Stock.
e. In addition to any other class vote that may be
required by law, so long as any of the Series C Preferred Stock shall be
outstanding, the Corporation shall not without obtaining the approval (by vote
or written consent, as provided by law) of the holders of more than 50% of the
outstanding shares of Series C Preferred Stock:
(i) amend the Company's Articles of Incorporation
or Bylaws to adversely affect solely the rights, preferences or privileges of
the Series C Preferred Stock; or
(ii) increase or decrease the authorized number of
shares of Series C Preferred Stock.
f. In addition to any other class vote that may be
required by law, so long as any of the Series D Preferred Stock shall be
outstanding, the Corporation shall not without obtaining the approval (by vote
or written consent, as provided by law) of the holders of more than 50% of the
outstanding shares of Series D Preferred Stock:
(i) amend the Company's Articles of Incorporation
or Bylaws to adversely affect solely the rights, preferences or privileges of
the Series D Preferred Stock; or
(ii) increase or decrease the authorized number of
shares of Series D Preferred Stock.
IV.
A. The liability of the directors of this Corporation for monetary damages
shall be eliminated to the fullest extent permissible under California law.
B. This Corporation is authorized to provide indemnification of agents (as
defined in Section 317 of the California Corporations Code) for breach of duty
to the Corporation and its shareholders through bylaw provisions or through
agreements with the agents, or through shareholder resolutions, or otherwise, in
excess of the indemnification otherwise permitted by Section 317 of the
Corporations Code, subject to the limits on such excess indemnification set
forth in Section 204 of the Corporations Code.
14.
<PAGE>
C. Any repeal or modification of this Article shall only be prospective
and shall not affect the rights under this Article in effect at the time of the
alleged occurrence of any act or omission to act giving rise to liability or
indemnification.
THIRD: The foregoing amendment and restatement of Articles of
Incorporation has been duly approved by the Board of Directors.
FOURTH: The foregoing amendment and restatement of Articles of
Incorporation has been duly approved by the required vote of shareholders in
accordance with Section 902 of the California Corporations Code. The total
number of outstanding shares of the corporation is 1,418,785 shares of Common
Stock, 2,723,000 shares of Series A Preferred Stock, 1,852,063 shares of Series
B Preferred Stock and 2,422,361 shares of Series C Preferred Stock. The number
of shares voting in favor of the amendment and restatement equaled or exceeded
the vote required. The percentage vote required was more than 50% of the
outstanding shares of Common Stock and more than 50% of the outstanding shares
of Series A Preferred Stock, more than 50% of the outstanding shares of Series B
Preferred Stock and more than 50% of the outstanding shares of Series C
Preferred Stock.
I further declare under penalty of perjury under the laws of the State of
California that the matters set forth in this certificate are true and correct
of my own knowledge.
Dated: October 5, 1998
/s/ RICHARD GILBERT
___________________________________________
Richard Gilbert
President and Chief Executive Officer
/s/ JOSEPH MARKEE
___________________________________________
Joseph Markee
Secretary
15.
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EXHIBIT 3.2
AMENDMENT TO THE BYLAWS OF
COPPER MOUNTAIN NETWORKS, INC.
APPROVED BY THE BOARD OF DIRECTORS ON OCTOBER 5, 1998
APPROVED BY THE SHAREHOLDERS ON OCTOBER 5, 1998
Article IV
BOARD OF DIRECTORS
SECTION 19. NUMBER OF DIRECTORS The authorized number of directors of the
corporation shall be not less than a minimum of five (5) nor more than a maximum
of nine (9) and the number of directors presently authorized is six (6). The
exact number of directors shall be set within these limits from time to time (a)
by approval of the Board of Directors, or (b) by the affirmative vote of a
majority of the shares represented and voting at a duly held meeting at which a
quorum is present (which shares voting affirmatively also constitute at least a
majority of the required quorum) or by the written consent of shareholders
pursuant to Section 13 hereinabove.
Any amendment of these bylaws changing the maximum or minimum number of
directors may be adopted only by the affirmative vote of a majority of the
outstanding shares entitled to vote; provided, an amendment reducing the minimum
number of directors to less than five (5) cannot be adopted if votes cast
against its adoption at a meeting or the shares not consenting to it in the case
of action by written consent are equal to more than 16-2/3 percent of the
outstanding shares entitled to vote.
No reduction of the authorized number of directors shall remove any
director prior to the expiration of such director's term of office.
ARTICLE XI
RIGHT OF FIRST REFUSAL
SECTION 64. RIGHT OF FIRST REFUSAL. No shareholder shall sell, assign,
pledge, or in any manner transfer any of the shares of Common Stock of the
corporation or any right or interest therein, whether voluntarily or by
operation of law, or by gift or otherwise, except by a transfer which meets the
requirements hereinafter set forth in this bylaw:
(A) If the shareholder desires to sell or otherwise transfer any of
his shares of Common Stock, then the shareholder shall first give written notice
thereof to the corporation. The notice shall name the proposed transferee and
state the number of shares to be transferred, the proposed consideration, and
all other terms and conditions of the proposed transfer.
(B) For thirty (30) days following receipt of such notice, the
corporation shall have the option to purchase all (but not less than all) of the
shares of Common Stock specified in
1.
<PAGE>
the notice at the price and upon the terms set forth in such notice; provided,
however, that, with the consent of the shareholder, the corporation shall have
the option to purchase a lesser portion of the shares of Common Stock specified
in said notice at the price and upon the terms set forth therein. In the event
of a gift, property settlement or other transfer in which the proposed
transferee is not paying the full price for the shares of Common Stock, and that
is not otherwise exempted from the provisions of this Section 64, the price
shall be deemed to be the fair market value of the Common Stock at such time as
determined in good faith by the Board of Directors. In the event the corporation
elects to purchase all of the shares of Common Stock or, with consent of the
shareholder, a lesser portion of the shares of Common Stock, it shall give
written notice to the transferring shareholder of its election and settlement
for said shares of Common Stock shall be made as provided below in paragraph
(d).
(C) The corporation may assign its rights hereunder.
(D) In the event the corporation and/or its assignee(s) elect to
acquire any of the shares of Common Stock of the transferring shareholder as
specified in said transferring shareholder's notice, the Secretary of the
corporation shall so notify the transferring shareholder and settlement thereof
shall be made in cash within thirty (30) days after the Secretary of the
corporation receives said transferring shareholder's notice; provided that if
the terms of payment set forth in said transferring shareholder's notice were
other than cash against delivery, the corporation and/or its assignee(s) shall
pay for said shares of Common Stock on the same terms and conditions set forth
in said transferring shareholder's notice.
(E) In the event the corporation and/or its assignees(s) do not elect
to acquire all of the shares of Common Stock specified in the transferring
shareholder's notice, said transferring shareholder may, within the sixty-day
period following the expiration of the option rights granted to the corporation
and/or its assignees(s) herein, transfer the shares of Common Stock specified in
said transferring shareholder's notice which were not acquired by the
corporation and/or its assignees(s) as specified in said transferring
shareholder's notice. All shares of Common Stock so sold by said transferring
shareholder shall continue to be subject to the provisions of this bylaw in the
same manner as before said transfer.
(F) Anything to the contrary contained herein notwithstanding, the
following transactions shall be exempt from the provisions of this bylaw:
(1) A shareholder's transfer of any or all shares of Common
Stock held either during such shareholder's lifetime or on death by will or
intestacy to such shareholder's immediate family or to any custodian or trustee
for the account of such shareholder or such shareholder's immediate family or to
any limited partnership of which the shareholder, members of such shareholder's
immediate family or any trust for the account of such shareholder or such
shareholder's immediate family will be the general of limited partner(s) of such
partnership. "Immediate family" as used herein shall mean spouse, lineal
descendant, father, mother, brother, or sister of the shareholder making such
transfer.
(2) A shareholder's bona fide pledge or mortgage of any shares
of Common Stock with a commercial lending institution, provided that any
subsequent transfer of
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said shares of Common Stock by said institution shall be conducted in the manner
set forth in this bylaw.
(3) A shareholder's transfer of any or all of such shareholder's
shares of Common Stock to the corporation or to any other shareholder of the
corporation.
(4) A shareholder's transfer of any or all of such shareholder's
shares of Common Stock to a person who, at the time of such transfer, is an
officer or director of the corporation.
(5) A corporate shareholder's transfer of any or all of its
shares of Common Stock pursuant to and in accordance with the terms of any
merger, consolidation, reclassification of shares or capital reorganization of
the shareholder, or pursuant to a sale of all or substantially all of the stock
or assets of a corporate shareholder.
(6) A corporate shareholder's transfer of any or all of its
shares of Common Stock to any or all of its shareholders.
(7) A transfer by a shareholder which is a limited or general
partnership to any or all of its partners or former partners.
In any such case, the transferee, assignee, or other recipient
shall receive and hold such stock subject to the provisions of this bylaw, and
there shall be no further transfer of such stock except in accord with this
bylaw.
(G) The provisions of this bylaw may be waived with respect to any
transfer either by the corporation, upon duly authorized action of its Board of
Directors, or by the shareholders, upon the express written consent of the
owners of a majority of the voting power of the corporation (excluding the votes
represented by those shares to be transferred by the transferring shareholder).
This bylaw may be amended or repealed either by a duly authorized action of the
Board of Directors or by the shareholders, upon the express written consent of
the owners of a majority of the voting power of the corporation.
(H) Any sale or transfer, or purported sale or transfer, of Common
Stock of the corporation shall be null and void unless the terms, conditions,
and provisions of this bylaw are strictly observed and followed.
(I) The foregoing right of first refusal shall terminate on either of
the following dates, whichever shall first occur:
(1) On March 9, 2006; or
(2) Upon the date securities of the corporation are first
offered to the public pursuant to a registration statement filed with, and
declared effective by, the United States Securities and Exchange Commission
under the Securities Act of 1933, as amended.
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(J) The certificates representing shares of Common Stock of the
corporation shall bear on their face the following legend so long as the
foregoing right of first refusal remains in effect:
"The shares represented by this Certificate are subject to a right of
first refusal option in favor of the Corporation and/or its
Assignee(s), as provided in the Bylaws of the Corporation."
4.
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BYLAWS
OF
COPPER MOUNTAIN COMMUNICATIONS, INC.
(A CALIFORNIA CORPORATION)
<PAGE>
BYLAWS
OF
COPPER MOUNTAIN COMMUNICATIONS, INC.
(A CALIFORNIA CORPORATION)
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICE. The principal executive office of the
corporation shall be located at such place as the Board of Directors may from
time to time authorize. If the principal executive office is located outside
this state, and the corporation has one or more business offices in this state,
the Board of Directors shall fix and designate a principal business office in
the State of California.
SECTION 2. OTHER OFFICES. Additional offices of the corporation shall
be located at such place or places, within or outside the State of California,
as the Board of Directors may from time to time authorize.
ARTICLE II
CORPORATE SEAL
SECTION 3. CORPORATE SEAL. If the Board of Directors adopts a corporate
seal such seal shall have inscribed thereon the name of the corporation and the
state and date of its incorporation. If and when a seal is adopted by the Board
of Directors, such seal may be engraved, lithographed, printed, stamped,
impressed upon, or affixed to any contract, conveyance, certificate for shares,
or other instrument executed by the corporation.
ARTICLE III
SHAREHOLDERS' MEETINGS AND VOTING RIGHTS
SECTION 4. PLACE OF MEETINGS. Meetings of shareholders shall be held at
the principal executive office of the corporation, or at any other place, within
or outside the State of California, which may be fixed either by the Board of
Directors or by the written consent of all persons entitled to vote at such
meeting, given either before or after the meeting and filed with the Secretary
of the Corporation.
SECTION 5. ANNUAL MEETING. The annual meeting of the shareholders of
the corporation shall be held on any date and time which may from time to time
be designated by the Board of Directors. At such annual meeting, directors
shall be elected and any other business may be transacted which may properly
come before the meeting.
<PAGE>
SECTION 6. POSTPONEMENT OF ANNUAL MEETING. The Board of Directors and
the President shall each have authority to hold at an earlier date and/or time,
or to postpone to a later date and/or time, the annual meeting of shareholders.
SECTION 7. SPECIAL MEETINGS.
(A) Special meetings of the shareholders, for any purpose or
purposes, may be called by the Board of Directors, the Chairman of the Board of
Directors, the President, or the holders of shares entitled to cast not less
than ten percent (10%) of the votes at the meeting.
(B) Upon written request to the Chairman of the Board of Directors,
the President, any vice president or the Secretary of the corporation by any
person or persons (other than the Board of Directors) entitled to call a special
meeting of the shareholders, such officer forthwith shall cause notice to be
given to the shareholders entitled to vote, that a meeting will be held at a
time requested by the person or persons calling the meeting, such time to be not
less than thirty-five (35) nor more than sixty (60) days after receipt of such
request. If such notice is not given within twenty (20) days after receipt of
such request, the person or persons calling the meeting may give notice thereof
in the manner provided by law or in these bylaws. Nothing contained in this
Section 7 shall be construed as limiting, fixing or affecting the time or date
when a meeting of shareholders called by action of the Board of Directors may be
held.
SECTION 8. NOTICE OF MEETINGS. Except as otherwise may be required by
law and subject to subsection 7(b) above, written notice of each meeting of
shareholders shall be given to each shareholder entitled to vote at that meeting
(see Section 15 below), by the Secretary, assistant secretary or other person
charged with that duty, not less than ten (10) (or, if sent by third class mail,
thirty (30)) nor more than sixty (60) days before such meeting.
Notice of any meeting of shareholders shall state the date, place and hour
of the meeting and,
(A) in the case of a special meeting, the general nature of the
business to be transacted, and no other business may be transacted at such
meeting;
(B) in the case of an annual meeting, the general nature of matters
which the Board of Directors, at the time the notice is given, intends to
present for action by the shareholders;
(C) in the case of any meeting at which directors are to be elected,
the names of the nominees intended at the time of the notice to be presented by
management for election; and
(D) in the case of any meeting, if action is to be taken on any of
the following proposals, the general nature of such proposal:
(1) a proposal to approve a transaction within the provisions of
California Corporations Code, Section 310 (relating to certain transactions in
which a director has a direct or indirect financial interest);
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(2) a proposal to approve a transaction within the provisions of
California Corporations Code, Section 902 (relating to amending the Articles of
Incorporation of the corporation);
(3) a proposal to approve a transaction within the provisions of
California Corporations Code, Sections 181 and 1201 (relating to
reorganization);
(4) a proposal to approve a transaction within the provisions of
California Corporations Code, Section 1900 (winding up and dissolution);
(5) a proposal to approve a plan of distribution within the
provisions of California Corporations Code, Section 2007 (relating to certain
plans providing for distribution not in accordance with the liquidation rights
of preferred shares, if any).
At a special meeting, notice of which has been given in accordance
with this Section, action may not be taken with respect to business, the general
nature of which has not been stated in such notice. At an annual meeting, action
may be taken with respect to business stated in the notice of such meeting,
given in accordance with this Section, and, subject to subsection 8(d) above,
with respect to any other business as may properly come before the meeting.
SECTION 9. MANNER OF GIVING NOTICE. Notice of any meeting of
shareholders shall be given either personally or by first-class mail, or, if the
corporation has outstanding shares held of record by 500 or more persons
(determined as provided in California Corporations Code Section 605) on the
record date for such meeting, third-class mail, or telegraphic or other written
communication, addressed to the shareholder at the address of that shareholder
appearing on the books of the corporation or given by the shareholder to the
corporation for the purpose of notice. If no such address appears on the
corporation's books or is given, notice shall be deemed to have been given if
sent to that shareholder by first-class mail or telegraphic or other written
communication to the corporation's principal executive office, or if published
at least once in a newspaper of general circulation in the county where that
office is located. Notice shall be deemed to have been given at the time when
delivered personally or deposited in the mail or sent by telegram or other means
of written communication.
If any notice addressed to a shareholder at the address of that shareholder
appearing on the books of the corporation is returned to the corporation by the
United States Postal Service marked to indicate that the United States Postal
Service is unable to deliver the notice to the shareholder at that address, all
future notices shall be deemed to have been duly given without further mailing
if these shall be available to the shareholder on written demand by the
shareholder at the principal executive office of the corporation for a period of
one year from the date of the giving of the notice.
An affidavit of mailing of any notice or report in accordance with the
provisions of this Section 9, executed by the Secretary, Assistant Secretary or
any transfer agent, shall be prima facie evidence of the giving of the notice.
SECTION 10. QUORUM AND TRANSACTION OF BUSINESS.
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(A) At any meeting of the shareholders, a majority of the shares
entitled to vote, represented in person or by proxy, shall constitute a quorum.
If a quorum is present, the affirmative vote of the majority of shares
represented at the meeting and entitled to vote on any matter shall be the act
of the shareholders, unless the vote of a greater number or voting by classes is
required by law or by the Articles of Incorporation, and except as provided in
subsection (b) below.
(B) The shareholders present at a duly called or held meeting of
the shareholders at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum, provided that any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
(C) In the absence of a quorum, no business other than adjournment
may be transacted, except as described in subsection (b) above.
SECTION 11. ADJOURNMENT AND NOTICE OF ADJOURNED MEETINGS. Any meeting of
shareholders may be adjourned from time to time, whether or not a quorum is
present, by the affirmative vote of a majority of shares represented at such
meeting either in person or by proxy and entitled to vote at such meeting.
In the event any meeting is adjourned, it shall not be necessary to give
notice of the time and place of such adjourned meeting pursuant to Sections 8
and 9 of these bylaws; provided that if any of the following three events occur,
such notice must be given:
(A) announcement of the adjourned meeting's time and place is not
made at the original meeting which it continues or
(B) such meeting is adjourned for more than forty-five (45) days
from the date set for the original meeting or
(C) a new record date is fixed for the adjourned meeting.
At the adjourned meeting, the corporation may transact any business which
might have been transacted at the original meeting.
SECTION 12. WAIVER OF NOTICE, CONSENT TO MEETING OR APPROVAL OF MINUTES.
(A) Subject to subsection (b) of this Section, the transactions of
any meeting of shareholders, however called and noticed, and wherever held,
shall be as valid as though made at a meeting duly held after regular call and
notice, if a quorum is present either in person or by proxy, and if, either
before or after the meeting, each of the persons entitled to vote but not
present in person or by proxy signs a written waiver of notice or a consent to
holding of the meeting or an approval of the minutes thereof.
(B) A waiver of notice, consent to the holding of a meeting or
approval of the minutes thereof need not specify the business to be transacted
or transacted at nor the purpose of the meeting; provided that in the case of
proposals described in subsection (d) of Section 8 of
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these bylaws, the general nature of such proposals must be described in any such
waiver of notice and such proposals can only be approved by waiver of notice,
not by consent to holding of the meeting or approval of the minutes.
(C) All waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
(D) A person's attendance at a meeting shall constitute waiver of
notice of and presence at such meeting, except when such person objects at the
beginning of the meeting to transaction of any business because the meeting is
not lawfully called or convened and except that attendance at a meeting is not a
waiver of any right to object to the consideration of matters which are required
by law or these bylaws to be in such notice (including those matters described
in subsection (d) of Section 8 of these bylaws), but are not so included if such
person expressly objects to consideration of such matter or matters at any time
during the meeting.
SECTION 13. ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action
which may be taken at any meeting of shareholders may be taken without a meeting
and without prior notice if written consents setting forth the action so taken
are signed by the holders of the outstanding shares having not less than 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.
Directors may not be elected by written consent except by unanimous written
consent of all shares entitled to vote for the election of directors; provided
that any vacancy on the Board of Directors (other than a vacancy created by
removal) which has not been filled by the board of directors may be filled by
the written consent of a majority of outstanding shares entitled to vote for the
election of directors.
Any written consent may be revoked pursuant to California Corporations Code
Section 603(c) prior to the time that written consents of the number of shares
required to authorize the proposed action have been filed with the Secretary.
Such revocation must be in writing and will be effective upon its receipt by the
Secretary.
If the consents of all shareholders entitled to vote have not been
solicited in writing, and if the unanimous written consent of all such
shareholders shall not have been received, the Secretary shall give prompt
notice of any corporate action approved by the shareholders without a meeting to
those shareholders entitled to vote on such matters who have not consented
thereto in writing. This notice shall be given in the manner specified in
Section 9 of these bylaws. In the case of approval of (i) a transaction within
the provisions of California Corporations Code, Section 310 (relating to certain
transactions in which a director has an interest), (ii) a transaction within the
provisions of California Corporations Code, Section 317 (relating to
indemnification of agents of the corporation), (iii) a transaction within the
provisions of California Corporations Code, Sections 181 and 1201 (relating to
reorganization), and (iv) a plan of distribution within the provisions of
California Corporations Code, Section 2007 (relating to certain plans providing
for distribution not in accordance with the liquidation rights of preferred
shares, if any), the notice shall be given at least ten (10) days before the
consummation of any action authorized by that approval.
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SECTION 14. VOTING. The shareholders entitled to vote at any meeting of
shareholders shall be determined in accordance with the provisions of Section 15
of these bylaws, subject to the provisions of Sections 702 through 704 of the
California Corporations Code (relating to voting shares held by a fiduciary, in
the name of a corporation, or in joint ownership). Voting at any meeting of
shareholders need not be by ballot; provided, however, that elections for
directors must be by ballot if balloting is demanded by a shareholder at the
meeting and before the voting begins.
Every person entitled to vote at an election for directors may cumulate the
votes to which such person is entitled, i.e., such person may cast a total
number of votes equal to the number of directors to be elected multiplied by the
number of votes to which such person's shares are entitled, and may cast said
total number of votes for one or more candidates in such proportions as such
person thinks fit; provided, however, no shareholder shall be entitled to so
cumulate such shareholder's votes unless the candidates for which such
shareholder is voting have been placed in nomination prior to the voting and a
shareholder has given notice at the meeting, prior to the vote, of an intention
to cumulate votes. In any election of directors, the candidates receiving the
highest number of votes, up to the number of directors to be elected, are
elected.
Except as may be otherwise provided in the Articles of Incorporation or by
law, and subject to the foregoing provisions regarding the cumulation of votes,
each shareholder shall be entitled to one vote for each share held.
Any shareholder may vote part of such shareholder's shares in favor of a
proposal and refrain from voting the remaining shares or vote them against the
proposal, other than elections to office, but, if the shareholder fails to
specify the number of shares such shareholder is voting affirmatively, it will
be conclusively presumed that the shareholder's approving vote is with respect
to all shares such shareholder is entitled to vote.
No shareholder approval, other than unanimous approval of those entitled to
vote, will be valid as to proposals described in subsection 8(d) of these bylaws
unless the general nature of such business was stated in the notice of meeting
or in any written waiver of notice.
SECTION 15. PERSONS ENTITLED TO VOTE OR CONSENT. The Board of Directors
may fix a record date pursuant to Section 60 of these bylaws to determine which
shareholders are entitled to notice of and to vote at a meeting or consent to
corporate actions, as provided in Sections 13 and 14 of these bylaws. Only
persons in whose name shares otherwise entitled to vote stand on the stock
records of the corporation on such date shall be entitled to vote or consent.
If no record date is fixed:
(A) The record date for determining shareholders entitled to
notice of or to vote at a meeting of shareholders shall be at the close of
business on the business day next preceding the day notice is given or, if
notice is waived, at the close of business on the business day next preceding
the day on which the meeting is held;
(B) The record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors has been taken, shall be the day on which the first
written consent is given;
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(C) The record date for determining shareholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating thereto, or the sixtieth (60th) day
prior to the date of such other action, whichever is later.
A determination of shareholders of record entitled to notice of or to vote
at a meeting of shareholders shall apply to any adjournment of the meeting
unless the Board of Directors fixes a new record date for the adjourned meeting;
provided, however, that the Board of Directors shall fix a new record date if
the meeting is adjourned for more than forty-five (45) days from the date set
for the original meeting.
Shares of the corporation held by its subsidiary or subsidiaries (as
defined in California Corporations Code, Section 189(b)) are not entitled to
vote in any matter.
SECTION 16. PROXIES. Every person entitled to vote or execute consents
may do so either in person or by one or more agents authorized to act by a
written proxy executed by the person or such person's duly authorized agent and
filed with the Secretary of the corporation; provided that no such proxy shall
be valid after the expiration of eleven (11) months from the date of its
execution unless otherwise provided in the proxy. The manner of execution,
suspension, revocation, exercise and effect of proxies is governed by law.
SECTION 17. INSPECTORS OF ELECTION. Before any meeting of shareholders,
the Board of Directors may appoint any persons, other than nominees for office,
to act as inspectors of election at the meeting or its adjournment. If no
inspectors of election are so appointed, the chairman of the meeting may, and on
the request of any shareholder or a shareholder's proxy shall, appoint
inspectors of election at the meeting. The number of inspectors shall be either
one (1) or three (3). If inspectors are appointed at a meeting on the request
of one or more shareholders or proxies, the majority of shares represented in
person or proxy shall determine whether one (1) or three (3) inspectors are to
be appointed. If any person appointed as inspector fails to appear or fails or
refuses to act, the chairman of the meeting may, and upon the request of any
shareholder or a shareholder's proxy shall, appoint a person to fill that
vacancy.
These inspectors shall:
(A) Determine the number of shares outstanding and the voting
power of each, the shares represented at the meeting, the existence of a quorum,
and the authenticity, validity, and effect of proxies;
(B) Receive votes, ballots, or consents;
(C) Hear and determine all challenges and questions in any way
arising in connection with the right to vote;
(D) Count and tabulate all votes or consents;
(E) Determine when the polls shall close;
(F) Determine the result; and
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(G) Do any other acts that may be proper to conduct the election
or vote with fairness to all shareholders.
ARTICLE IV
BOARD OF DIRECTORS
SECTION 18. POWERS. Subject to the provisions of law or any limitations
in the Articles of Incorporation or these bylaws, as to action required to be
approved by the shareholders or by the outstanding shares, the business and
affairs of the corporation shall be managed and all corporate powers shall be
exercised, by or under the direction of the Board of Directors. The Board of
Directors may delegate the management of the day-to-day operation of the
business of the corporation to a management company or other person, provided
that the business and affairs of the corporation shall be managed and all
corporate powers shall be exercised under the ultimate direction of the Board of
Directors.
SECTION 19. NUMBER OF DIRECTORS. The authorized number of directors of
the corporation shall be not less than a minimum of three (3) nor more than a
maximum of five (5) (which maximum number in no case shall be greater than two
times said minimum, minus one) and the number of directors presently authorized
is six (6). The exact number of directors shall be set within these limits from
time to time (i) by approval of the Board of Directors, or (ii) by the
affirmative vote of a majority of the shares represented and voting at a duly
held meeting at which a quorum is present (which shares voting affirmatively
also constitute at least a majority of the required quorum) or by the written
consent of shareholders pursuant to Section 13 hereinabove.
Any amendment of these bylaws changing the maximum or minimum number of
directors may be adopted only by the affirmative vote of a majority of the
outstanding shares entitled to vote; provided, an amendment reducing the minimum
number of directors to less than five (5), cannot be adopted if votes cast
against its adoption at a meeting or the shares not consenting to it in the case
of action by written consent are equal to more than 16-2/3 percent of the
outstanding shares entitled to vote.
No reduction of the authorized number of directors shall remove any
director prior to the expiration of such director's term of office.
SECTION 20. ELECTION OF DIRECTORS, TERM, QUALIFICATIONS. The directors
shall be elected at each annual meeting of shareholders to hold office until the
next annual meeting. Each director, including a director elected or appointed
to fill a vacancy, shall hold office either until the expiration of the term for
which elected or appointed and until a successor has been elected and qualified,
or until his death, resignation or removal. Directors need not be shareholders
of the corporation.
SECTION 21. RESIGNATIONS. Any director of the corporation may resign
effective upon giving written notice to the Chairman of the Board, the
President, the Secretary or the Board of Directors of the corporation, unless
the notice specifies a later time for the effectiveness of such
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resignation. If the resignation specifies effectiveness at a future time, a
successor may be elected pursuant to Section 23 of these bylaws to take office
on the date that the resignation becomes effective.
SECTION 22. REMOVAL. The Board of Directors may declare vacant the
office of a director who has been declared of unsound mind by an order of court
or who has been convicted of a felony.
The entire Board of Directors or any individual director may be removed
from office without cause by the affirmative vote of a majority of the
outstanding shares entitled to vote on such removal; provided, however, that
unless the entire Board is removed, no individual director may be removed when
the votes cast against such director's removal, or not consenting in writing to
such removal, would be sufficient to elect that director if voted cumulatively
at an election at which the same total number of votes cast were cast (or, if
such action is taken by written consent, all shares entitled to vote were voted)
and the entire number of directors authorized at the time of such director's
most recent election were then being elected.
SECTION 23. VACANCIES. A vacancy or vacancies on the Board of Directors
shall be deemed to exist in case of the death, resignation or removal of any
director, or upon increase in the authorized number of directors or if
shareholders fail to elect the full authorized number of directors at an annual
meeting of shareholders or if, for whatever reason, there are fewer directors on
the Board of Directors, than the full number authorized. Such vacancy or
vacancies may be filled by a majority of the remaining directors, though less
than a quorum, or by a sole remaining director. The shareholders may elect a
director at any time to fill any vacancy not filled by the directors. Any such
election by written consent, other than to fill a vacancy created by removal,
requires the consent of a majority of the outstanding shares entitled to vote.
Any such election by written consent to fill a vacancy created by removal
requires the consent of all of the outstanding shares entitled to vote.
If, after the filling of any vacancy by the directors, the directors then
in office who have been elected by the shareholders constitute less than a
majority of the directors then in office, any holder or holders of an aggregate
of five percent (5%) or more of the shares outstanding at that time and having
the right to vote for such directors may call a special meeting of shareholders
to be held to elect the entire Board of Directors. The term of office of any
director shall terminate upon such election of a successor.
SECTION 24. REGULAR MEETINGS. Regular meetings of the Board of Directors
shall be held at such times, places and dates as fixed in these bylaws or by the
Board of Directors; provided, however, that if the date for such a meeting falls
on a legal holiday, then the meeting shall be held at the same time on the next
succeeding full business day. Regular meetings of the Board of Directors held
pursuant to this Section 24 may be held without notice.
SECTION 25. PARTICIPATION BY TELEPHONE. Members of the Board of
Directors may participate in a meeting through use of conference telephone or
similar communications equipment, so long as all members participating in such
meeting can hear one another. Such participation constitutes presence in person
at such meeting.
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SECTION 26. SPECIAL MEETINGS. Special meetings of the Board of Directors
for any purpose may be called by the Chairman of the Board or the President or
any vice president or the Secretary of the corporation or any two (2) directors.
SECTION 27. NOTICE OF MEETINGS. Notice of the date, time and place of all
meetings of the Board of Directors, other than regular meetings held pursuant to
Section 24 above shall be delivered personally, orally or in writing, or by
telephone or telegraph to each director, at least forty-eight (48) hours before
the meeting, or sent in writing to each director by first-class mail, charges
prepaid, at least four (4) days before the meeting. Such notice may be given by
the Secretary of the corporation or by the person or persons who called a
meeting. Such notice need not specify the purpose of the meeting. Notice of any
meeting of the Board of Directors need not be given to any director who signs a
waiver of notice of such meeting, or a consent to holding the meeting or an
approval of the minutes thereof, either before or after the meeting, or who
attends the meeting without protesting prior thereto or at its commencement such
director's lack of notice. All such waivers, consents and approvals shall be
filed with the corporate records or made a part of the minutes of the meeting.
SECTION 28. PLACE OF MEETINGS. Meetings of the Board of Directors may be
held at any place within or without the state which has been designated in the
notice of the meeting or, if not stated in the notice or there is no notice,
designated in the bylaws or by resolution of the Board of Directors.
SECTION 29. ACTION BY WRITTEN CONSENT WITHOUT A MEETING. Any action
required or permitted to be taken by the Board of Directors may be taken without
a meeting, if all members of the Board of Directors individually or collectively
consent in writing to such action. Such written consent or consents shall be
filed with the minutes of the proceedings of the Board of Directors. Such
action by written consent shall have the same force and effect as a unanimous
vote of such directors.
SECTION 30. QUORUM AND TRANSACTION OF BUSINESS. A majority of the
authorized number of directors shall constitute a quorum for the transaction of
business. Every act or decision done or made by a majority of the authorized
number of directors present at a meeting duly held at which a quorum is present
shall be the act of the Board of Directors, unless the law, the Articles of
Incorporation or these bylaws specifically require a greater number. A meeting
at which a quorum is initially present may continue to transact business,
notwithstanding withdrawal of directors, if any action taken is approved by at
least a majority of the number of directors constituting a quorum for such
meeting. In the absence of a quorum at any meeting of the Board of Directors, a
majority of the directors present may adjourn the meeting, as provided in
Section 31 of these bylaws.
SECTION 31. ADJOURNMENT. Any meeting of the Board of Directors, whether
or not a quorum is present, may be adjourned to another time and place by the
affirmative vote of a majority of the directors present. If the meeting is
adjourned for more than twenty-four (24) hours, notice of such adjournment to
another time or place shall be given prior to the time of the adjourned meeting
to the directors who were not present at the time of the adjournment.
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SECTION 32. ORGANIZATION. The Chairman of the Board shall preside at
every meeting of the Board of Directors, if present. If there is no Chairman of
the Board or if the Chairman is not present, a Chairman chosen by a majority of
the directors present shall act as chairman. The Secretary of the corporation
or, in the absence of the Secretary, any person appointed by the Chairman shall
act as secretary of the meeting.
SECTION 33. COMPENSATION. Directors and members of committees may receive
such compensation, if any, for their services, and such reimbursement for
expenses, as may be fixed or determined by the Board of Directors.
SECTION 34. COMMITTEES. The Board of Directors may, by resolution adopted
by a majority of the authorized number of directors, designate one or more
committees, each consisting of two (2) or more directors, to serve at the
pleasure of the Board of Directors. The Board of Directors, by a vote of the
majority of authorized directors, may designate one or more directors as
alternate members of any committee, to replace any absent member at any meeting
of such committee. Any such committee shall have authority to act in the manner
and to the extent provided in the resolution of the Board of Directors, and may
have all the authority of the Board of Directors in the management of the
business and affairs of the corporation, except with respect to:
(A) the approval of any action for which shareholders' approval or
approval of the outstanding shares also is required by the California
Corporations Code;
(B) the filling of vacancies on the Board of Directors or any of its
committees;
(C) the fixing of compensation of directors for serving on the Board
of Directors or any of its committees;
(D) the adoption, amendment or repeal of these bylaws;
(E) the amendment or repeal of any resolution of the Board of
Directors which by its express terms is not so amendable or repealable;
(F) a distribution to shareholders, except at a rate or in a periodic
amount or within a price range determined by the Board of Directors; or
(G) the appointment of other committees of the Board of Directors or
the members thereof.
Any committee may from time to time provide by resolution for regular
meetings at specified times and places. If the date of such a meeting falls on
a legal holiday, then the meeting shall be held at the same time on the next
succeeding full business day. No notice of such a meeting need be given. Such
regular meetings need not be held if the committee shall so determine at any
time before or after the time when such meeting would otherwise have taken
place. Special meetings may be called at any time in the same manner and by the
same persons as stated in Sections 26 and 27 of these bylaws for meetings of the
Board of Directors. The provisions of Sections 25, 28, 29, 30, 31 and 32 of
these bylaws shall apply to committees, committee members and committee meetings
as if the words "committee" and "committee
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member" were substituted for the word "Board of Directors", and "director",
respectively, throughout such sections.
ARTICLE V
OFFICERS
SECTION 35. OFFICERS. The corporation shall have a Chairman of the Board
or a President or both, a Secretary, a Chief Financial Officer and such other
officers with such titles and duties as the Board of Directors may determine.
Any two or more offices may be held by the same person.
SECTION 36. APPOINTMENT. All officers shall be chosen and appointed by
the Board of Directors; provided, however, the Board of Directors may empower
the chief executive officer of the corporation to appoint such officers, other
than Chairman of the Board, President, Secretary or Chief Financial Officer, as
the business of the corporation may require. All officers shall serve at the
pleasure of the Board of Directors, subject to the rights, if any, of an officer
under a contract of employment.
SECTION 37. INABILITY TO ACT. In the case of absence or inability to act
of any officer of the corporation or of any person authorized by these bylaws to
act in such officer's place, the Board of Directors may from time to time
delegate the powers or duties of such officer to any other officer, or any
director or other person whom it may select, for such period of time as the
Board of Directors deems necessary.
SECTION 38. RESIGNATIONS. Any officer may resign at any time upon written
notice to the corporation, without prejudice to the rights, if any, of the
corporation under any contract to which such officer is a party. Such
resignation shall be effective upon its receipt by the Chairman of the Board,
the President, the Secretary or the Board of Directors, unless a different time
is specified in the notice for effectiveness of such resignation. The acceptance
of any such resignation shall not be necessary to make it effective unless
otherwise specified in such notice.
SECTION 39. REMOVAL. Any officer may be removed from office at any time,
with or without cause, but subject to the rights, if any, of such officer under
any contract of employment, by the Board of Directors or by any committee to
whom such power of removal has been duly delegated, or, with regard to any
officer who has been appointed by the chief executive officer pursuant to
Section 36 above, by the chief executive officer or any other officer upon whom
such power of removal may be conferred by the Board of Directors.
SECTION 40. VACANCIES. A vacancy occurring in any office for any cause
may be filled by the Board of Directors, in the manner prescribed by this
Article of the bylaws for initial appointment to such office.
SECTION 41. CHAIRMAN OF THE BOARD. The Chairman of the Board, if there be
such an officer, shall, if present, preside at all meetings of the Board of
Directors and shall exercise and perform such other powers and duties as may be
assigned from time to time by the Board of Directors or prescribed by these
bylaws. If no President is appointed, the Chairman of the Board
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is the general manager and chief executive officer of the corporation, and shall
exercise all powers of the President described in Section 42 below.
SECTION 42. PRESIDENT. Subject to such powers, if any, as may be given by
the Board of Directors to the Chairman of the Board, if there be such an
officer, the President shall be the general manager and chief executive officer
of the corporation and shall have general supervision, direction, and control
over the business and affairs of the corporation, subject to the control of the
Board of Directors. The President may sign and execute, in the name of the
corporation, any instrument authorized by the Board of Directors, except when
the signing and execution thereof shall have been expressly delegated by the
Board of Directors or by these bylaws to some other officer or agent of the
corporation. The President shall have all the general powers and duties of
management usually vested in the president of a corporation, and shall have such
other powers and duties as may be prescribed from time to time by the Board of
Directors or these bylaws. The President shall have discretion to prescribe the
duties of other officers and employees of the corporation in a manner not
inconsistent with the provisions of these bylaws and the directions of the Board
of Directors.
SECTION 43. VICE PRESIDENTS. In the absence or disability of the
President, in the event of a vacancy in the office of President, or in the event
such officer refuses to act, the Vice President shall perform all the duties of
the President and, when so acting, shall have all the powers of, and be subject
to all the restrictions on, the President. If at any such time the corporation
has more than one vice president, the duties and powers of the President shall
pass to each vice president in order of such vice president's rank as fixed by
the Board of Directors or, if the vice presidents are not so ranked, to the vice
president designated by the Board of Directors. The vice presidents shall have
such other powers and perform such other duties as may be prescribed for them
from time to time by the Board of Directors or pursuant to Sections 35 and 36 of
these bylaws or otherwise pursuant to these bylaws.
SECTION 44. SECRETARY. The Secretary shall:
(A) Keep, or cause to be kept, minutes of all meetings of the
corporation's shareholders, Board of Directors, and committees of the Board of
Directors, if any. Such minutes shall be kept in written form.
(B) Keep, or cause to be kept, at the principal executive office of
the corporation, or at the office of its transfer agent or registrar, if any, a
record of the corporation's shareholders, showing the names and addresses of all
shareholders, and the number and classes of shares held by each. Such records
shall be kept in written form or any other form capable of being converted into
written form.
(C) Keep, or cause to be kept, at the principal executive office of
the corporation, or if the principal executive office is not in California, at
its principal business office in California, an original or copy of these
bylaws, as amended.
(D) Give, or cause to be given, notice of all meetings of
shareholders, directors and committees of the Board of Directors, as required by
law or by these bylaws.
(E) Keep the seal of the corporation, if any, in safe custody.
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(F) Exercise such powers and perform such duties as are usually
vested in the office of secretary of a corporation, and exercise such other
powers and perform such other duties as may be prescribed from time to time by
the Board of Directors or these bylaws.
If any assistant secretaries are appointed, the assistant secretary, or one
of the assistant secretaries in the order of their rank as fixed by the Board of
Directors or, if they are not so ranked, the assistant secretary designated by
the Board of Directors, in the absence or disability of the Secretary or in the
event of such officer's refusal to act or if a vacancy exists in the office of
Secretary, shall perform the duties and exercise the powers of the Secretary and
discharge such duties as may be assigned from time to time pursuant to these
bylaws or by the Board of Directors.
SECTION 45. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall:
(A) Be responsible for all functions and duties of the treasurer of
the corporation.
(B) Keep and maintain, or cause to be kept and maintained, adequate
and correct books and records of account for the corporation.
(C) Receive or be responsible for receipt of all monies due and
payable to the corporation from any source whatsoever; have charge and custody
of, and be responsible for, all monies and other valuables of the corporation
and be responsible for deposit of all such monies in the name and to the credit
of the corporation with such depositaries as may be designated by the Board of
Directors or a duly appointed and authorized committee of the Board of
Directors.
(D) Disburse or be responsible for the disbursement of the funds of
the corporation as may be ordered by the Board of Directors or a duly appointed
and authorized committee of the Board of Directors.
(E) Render to the chief executive officer and the Board of Directors
a statement of the financial condition of the corporation if called upon to do
so.
(F) Exercise such powers and perform such duties as are usually
vested in the office of chief financial officer of a corporation, and exercise
such other powers and perform such other duties as may be prescribed by the
Board of Directors or these bylaws.
If any assistant financial officer is appointed, the assistant financial
officer, or one of the assistant financial officers, if there are more than one,
in the order of their rank as fixed by the Board of Directors or, if they are
not so ranked, the assistant financial officer designated by the Board of
Directors, shall, in the absence or disability of the Chief Financial Officer or
in the event of such officer's refusal to act, perform the duties and exercise
the powers of the Chief Financial Officer, and shall have such powers and
discharge such duties as may be assigned from time to time pursuant to these
bylaws or by the Board of Directors.
SECTION 46. COMPENSATION. The compensation of the officers shall be fixed
from time to time by the Board of Directors, and no officer shall be prevented
from receiving such compensation by reason of the fact that such officer is also
a director of the corporation.
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ARTICLE VI
CONTRACTS, LOANS, BANK ACCOUNTS, CHECKS AND DRAFTS
SECTION 47. EXECUTION OF CONTRACTS AND OTHER INSTRUMENTS. Except as these
bylaws may otherwise provide, the Board of Directors or its duly appointed and
authorized committee may authorize any officer or officers, agent or agents, to
enter into any contract or execute and deliver any instrument in the name of and
on behalf of the corporation, and such authorization may be general or confined
to specific instances. Except as so authorized or otherwise expressly provided
in these bylaws, no officer, agent, or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge its
credit or to render it liable for any purpose or in any amount.
SECTION 48. LOANS. No loans shall be contracted on behalf of the
corporation and no negotiable paper shall be issued in its name, unless and
except as authorized by the Board of Directors or its duly appointed and
authorized committee. When so authorized by the Board of Directors or such
committee, any officer or agent of the corporation may effect loans and advances
at any time for the corporation from any bank, trust company, or other
institution, or from any firm, corporation or individual, and for such loans and
advances may make, execute and deliver promissory notes, bonds or other
evidences of indebtedness of the corporation and, when authorized as aforesaid,
may mortgage, pledge, hypothecate or transfer any and all stocks, securities and
other property, real or personal, at any time held by the corporation, and to
that end endorse, assign and deliver the same as security for the payment of any
and all loans, advances, indebtedness, and liabilities of the corporation. Such
authorization may be general or confined to specific instances.
SECTION 49. BANK ACCOUNTS. The Board of Directors or its duly appointed
and authorized committee from time to time may authorize the opening and keeping
of general and/or special bank accounts with such banks, trust companies, or
other depositaries as may be selected by the Board of Directors, its duly
appointed and authorized committee or by any officer or officers, agent or
agents, of the corporation to whom such power may be delegated from time to time
by the Board of Directors. The Board of Directors or its duly appointed and
authorized committee may make such rules and regulations with respect to said
bank accounts, not inconsistent with the provisions of these bylaws, as are
deemed advisable.
SECTION 50. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for
the payment of money, notes, acceptances or other evidences of indebtedness
issued in the name of the corporation shall be signed by such officer or
officers, agent or agents, of the corporation, and in such manner, as shall be
determined from time to time by resolution of the Board of Directors or its duly
appointed and authorized committee. Endorsements for deposit to the credit of
the corporation in any of its duly authorized depositaries may be made, without
counter-signature, by the President or any vice president or the Chief Financial
Officer or any assistant financial officer or by any other officer or agent of
the corporation to whom the Board of Directors or its duly appointed and
authorized committee, by resolution, shall have delegated such power or by hand-
stamped impression in the name of the corporation.
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ARTICLE VII
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 51. CERTIFICATE FOR SHARES. Every holder of shares in the
corporation shall be entitled to have a certificate signed in the name of the
corporation by the Chairman or Vice Chairman of the Board or the President or a
Vice President and by the Chief Financial Officer or an assistant financial
officer or by the Secretary or an assistant secretary, certifying the number of
shares and the class or series of shares owned by the shareholder. Any 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 such person were an officer, transfer
agent or registrar at the date of issue.
In the event that the corporation shall issue any shares as only partly
paid, the certificate issued to represent such partly paid shares shall have
stated thereon the total consideration to be paid for such shares and the amount
paid thereon.
SECTION 52. TRANSFER ON THE BOOKS. Upon surrender to the Secretary or
transfer agent (if any) of the corporation of a certificate for shares of the
corporation duly endorsed, with reasonable assurance that the endorsement is
genuine and effective, or accompanied by proper evidence of succession,
assignment or authority to transfer and upon compliance with applicable federal
and state securities laws and if the corporation has no statutory duty to
inquire into adverse claims or has discharged any such duty and if any
applicable law relating to the collection of taxes has been complied with, it
shall be the duty of the corporation, by its Secretary or transfer agent, to
cancel the old certificate, to issue a new certificate to the person entitled
thereto and to record the transaction on the books of the corporation.
SECTION 53. LOST, DESTROYED AND STOLEN CERTIFICATES. The holder of any
certificate for shares of the corporation alleged to have been lost, destroyed
or stolen shall notify the corporation by making a written affidavit or
affirmation of such fact. Upon receipt of said affidavit or affirmation the
Board of Directors, or its duly appointed and authorized committee or any
officer or officers authorized by the Board so to do, may order the issuance of
a new certificate for shares in the place of any certificate previously issued
by the corporation and which is alleged to have been lost, destroyed or stolen.
However, the Board of Directors or such authorized committee, officer or
officers may require the owner of the allegedly lost, destroyed or stolen
certificate, or such owner's legal representative, to give the corporation a
bond or other adequate security sufficient to indemnify the corporation and its
transfer agent and/or registrar, if any, against any claim that may be made
against it or them on account of such allegedly lost, destroyed or stolen
certificate or the replacement thereof. Said bond or other security shall be in
such amount, on such terms and conditions and, in the case of a bond, with such
surety or sureties as may be acceptable to the Board of Directors or to its duly
appointed and authorized committee or any officer or officers authorized by the
Board of Directors to determine the sufficiency thereof. The requirement of a
bond or other security may be waived in particular
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cases at the discretion of the Board of Directors or its duly appointed and
authorized committee or any officer or officers authorized by the Board of
Directors so to do.
SECTION 54. ISSUANCE, TRANSFER AND REGISTRATION OF SHARES. The Board of
Directors may make such rules and regulations, not inconsistent with law or with
these bylaws, as it may deem advisable concerning the issuance, transfer and
registration of certificates for shares of the capital stock of the corporation.
The Board of Directors may appoint a transfer agent or registrar of transfers,
or both, and may require all certificates for shares of the corporation to bear
the signature of either or both.
ARTICLE VIII
INSPECTION OF CORPORATE RECORDS
SECTION 55. INSPECTION BY DIRECTORS. Every director shall have the
absolute right at any reasonable time to inspect and copy all books, records,
and documents of every kind of the corporation and any of its subsidiaries and
to inspect the physical properties of the corporation and any of its
subsidiaries. Such inspection may be made by the director in person or by agent
or attorney, and the right of inspection includes the right to copy and make
extracts.
SECTION 56. INSPECTION BY SHAREHOLDERS.
(A) INSPECTION OF CORPORATE RECORDS.
(1) A shareholder or shareholders holding at least five percent
(5%) in the aggregate of the outstanding voting shares of the corporation or who
hold at least one percent of such voting shares and have filed a Schedule 14B
with the United States Securities and Exchange Commission relating to the
election of directors of the corporation shall have an absolute right to do
either or both of the following:
(A) Inspect and copy the record of shareholders' names and
addresses and shareholdings during usual business hours upon five (5) business
days' prior written demand upon the corporation; or
(B) Obtain from the transfer agent, if any, for the
corporation, upon five business days' prior written demand and upon the tender
of its usual charges for such a list (the amount of which charges shall be
stated to the shareholder by the transfer agent upon request), a list of the
shareholders' names and addresses who are entitled to vote for the election of
directors and their shareholdings, as of the most recent record date for which
it has been compiled or as of a date specified by the shareholder subsequent to
the date of demand.
(2) The record of shareholders shall also be open to inspection
and copying by any shareholder or holder of a voting trust certificate at any
time during usual business hours upon written demand on the corporation, for a
purpose reasonably related to such holder's interest as a shareholder or holder
of a voting trust certificate.
(3) The accounting books and records and minutes of proceedings
of the shareholders and the Board of Directors and of any committees of the
Board of Directors of
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the corporation and of each of its subsidiaries shall be open to inspection,
copying and making extracts upon written demand on the corporation of any
shareholder or holder of a voting trust certificate at any reasonable time
during usual business hours, for a purpose reasonably related to such holder's
interests as a shareholder or as a holder of such voting trust certificate.
(4) Any inspection, copying, and making of extracts under this
subsection (a) may be done in person or by agent or attorney.
(B) INSPECTION OF BYLAWS. The original or a copy of these bylaws
shall be kept as provided in Section 44 of these bylaws and shall be open to
inspection by the shareholders at all reasonable times during office hours. If
the principal executive office of the corporation is not in California, and the
corporation has no principal business office in the state of California, a
current copy of these bylaws shall be furnished to any shareholder upon written
request.
SECTION 57. WRITTEN FORM. If any record subject to inspection pursuant to
Section 56 above is not maintained in written form, a request for inspection is
not complied with unless and until the corporation at its expense makes such
record available in written form.
ARTICLE IX
MISCELLANEOUS
SECTION 58. FISCAL YEAR. Unless otherwise fixed by resolution of the Board
of Directors, the fiscal year of the corporation shall end on the 31st day of
December in each calendar year.
SECTION 59. ANNUAL REPORT.
(A) Subject to the provisions of Section 59(b) below, the Board of
Directors shall cause an annual report to be sent to each shareholder of the
corporation in the manner provided in Section 9 of these bylaws not later than
one hundred twenty (120) days after the close of the corporation's fiscal year.
Such report shall include a balance sheet as of the end of such fiscal year and
an income statement and statement of changes in financial position for such
fiscal year, accompanied by any report thereon of independent accountants or, if
there is no such report, the certificate of an authorized officer of the
corporation that such statements were prepared without audit from the books and
records of the corporation. When there are more than 100 shareholders of record
of the corporation's shares, as determined by Section 605 of the California
Corporations Code, additional information as required by Section 1501(b) of the
California Corporations Code shall also be contained in such report, provided
that if the corporation has a class of securities registered under Section 12 of
the United States Securities Exchange Act of 1934, that Act shall take
precedence. Such report shall be sent to shareholders at least fifteen (15)
(or, if sent by third-class mail, thirty-five (35)) days prior to the next
annual meeting of shareholders after the end of the fiscal year to which it
relates.
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(B) If and so long as there are fewer than 100 holders of record of
the corporation's shares, the requirement of sending of an annual report to the
shareholders of the corporation is hereby expressly waived.
SECTION 60. RECORD DATE. The Board of Directors may fix a time in the
future as a record date for the determination of the shareholders entitled to
notice of or to vote at any 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 shares
or entitled to exercise any rights in respect of any other lawful action. The
record date so fixed shall not be more than sixty (60) days nor less than ten
(10) days prior to the date of the meeting nor more than sixty (60) days prior
to any other action or event for the purpose of which it is fixed. If no record
date is fixed, the provisions of Section 15 of these bylaws shall apply with
respect to notice of meetings, votes, and consents and the record date for
determining shareholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolutions relating
thereto, or the sixtieth (60th) day prior to the date of such other action or
event, whichever is later.
Only shareholders of record at the close of business on the record date
shall be entitled to notice and to vote or to receive the dividend, distribution
or allotment of rights or to exercise the rights, as the case may be,
notwithstanding any transfer of any shares on the books of the corporation after
the record date, except as otherwise provided in the Articles of Incorporation,
by agreement or by law.
SECTION 61. BYLAW AMENDMENTS. Except as otherwise provided by law or
Section 19 of these bylaws, these bylaws may be amended or repealed by the Board
of Directors or by the affirmative vote of a majority of the outstanding shares
entitled to vote, including, if applicable, the affirmative vote of a majority
of the outstanding shares of each class or series entitled by law or the
Articles of Incorporation to vote as a class or series on the amendment or
repeal or adoption of any bylaw or bylaws; provided, however, after issuance of
shares, a bylaw specifying or changing a fixed number of directors or the
maximum or minimum number or changing from a fixed to a variable board or vice
versa may only be adopted by approval of the outstanding shares as provided
herein.
SECTION 62. CONSTRUCTION AND DEFINITION. Unless the context requires
otherwise, the general provisions, rules of construction, and definitions
contained in the California Corporations Code shall govern the construction of
these bylaws.
Without limiting the foregoing, "shall" is mandatory and "may" is
permissive.
ARTICLE X
INDEMNIFICATION
SECTION 63. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND OTHER
AGENTS.
(A) DIRECTORS AND EXECUTIVE OFFICERS. The corporation shall indemnify
its directors and executive officers to the fullest extent not prohibited by the
California General
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Corporation Law; provided, however, that the corporation may limit 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 or any proceeding by such person
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 or
(iii) such indemnification is provided by the corporation, in its sole
discretion, pursuant to the powers vested in the corporation under the
California General Corporation Law.
(B) OTHER OFFICERS, EMPLOYEES AND OTHER AGENTS. The corporation shall
have the power to indemnify its other officers, employees and other agents as
set forth in the California General Corporation Law.
(C) DETERMINATION BY THE CORPORATION. Promptly after receipt of a
request for indemnification hereunder (and in any event within 90 days thereof)
a reasonable, good faith determination as to whether indemnification of the
director or executive officer is proper under the circumstances because such
director or executive officer has met the applicable standard of care shall be
made by:
(1) a majority vote of a quorum consisting of directors who are
not parties to such proceeding;
(2) if such quorum is not obtainable, by independent legal
counsel in a written opinion; or
(3) approval or ratification by the affirmative vote of a
majority of the shares of this corporation represented and voting at a duly held
meeting at which a quorum is present (which shares voting affirmatively also
constitute at least a majority of the required quorum) or by written consent of
a majority of the outstanding shares entitled to vote; where in each case the
shares owned by the person to be indemnified shall not be considered entitled to
vote thereon.
(D) GOOD FAITH.
(1) For purposes of any determination under this bylaw, a
director or executive officer shall be deemed to have acted in good faith and in
a manner he reasonably believed to be in the best interests of the corporation
and its shareholders, and, with respect to any criminal action or proceeding, to
have had no reasonable cause to believe that his conduct was unlawful, if his
action is based on information, opinions, reports and statements, including
financial statements and other financial data, in each case prepared or
presented by:
(A) one or more officers or employees of the corporation
whom the director or executive officer believed to be reliable and competent in
the matters presented;
(B) counsel, independent accountants or other persons as to
matters which the director or executive officer believed to be within such
person's professional competence; and
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(C) with respect to a director, a committee of the Board
upon which such director does not serve, as to matters within such committee's
designated authority, which committee the director believes to merit confidence;
so long as, in each case, the director or executive officer acts without
knowledge that would cause such reliance to be unwarranted.
(2) The termination of any proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent shall
not, of itself, create a presumption that the person did not act in good faith
and in a manner which he reasonably believed to be in the best interests of the
corporation and its shareholders or that he had reasonable cause to believe that
his conduct was unlawful.
(3) The provisions of this paragraph (d) shall not be deemed to
be exclusive or to limit in any way the circumstances in which a person may be
deemed to have met the applicable standard of conduct set forth by the
California General Corporation Law.
(E) EXPENSES. The corporation shall advance, prior to the final
disposition of any 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 shall be determined ultimately that such person is not entitled to
be indemnified under this bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (f) of this bylaw, no advance shall be made by the corporation if a
determination is reasonably and promptly made by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to the
proceeding (or, if no such quorum exists, 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 the
best interests of the corporation and its shareholders.
(F) 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 bylaw to a director or executive officer shall be
enforceable by or on behalf of the person holding such right in the forum in
which the proceeding is or was pending or, if such forum is not available or a
determination is made that such forum is not convenient, 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. 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 California General Corporation Law
for the corporation to indemnify the claimant for the amount claimed. Neither
the failure of the corporation (including its board of directors, independent
legal counsel or its shareholders) 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
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standard of conduct set forth in the California General Corporation Law, nor an
actual determination by the corporation (including its board of directors,
independent legal counsel or its shareholders) 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.
(G) NON-EXCLUSIVITY OF RIGHTS. To the fullest extent permitted by the
corporation's Articles of Incorporation and the California General Corporation
Law, 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
statute, provision of the Articles of Incorporation, bylaws, agreement, vote of
shareholders 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 agents respecting
indemnification and advances, to the fullest extent permitted by the California
General Corporation Law and the corporation's Articles of Incorporation.
(H) 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 or executive
officer and shall inure to the benefit of the heirs, executors and
administrators of such a person.
(I) INSURANCE. 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 bylaw.
(J) AMENDMENTS. Any repeal or modification of this bylaw 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.
(K) EMPLOYEE BENEFIT PLANS. The corporation shall indemnify the
directors and officers of the corporation who serve at the request of the
corporation as trustees, investment managers or other fiduciaries of employee
benefit plans to the fullest extent permitted by the California General
Corporation Law.
(L) 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 fullest extent permitted by any applicable portion of this bylaw that shall
not have been invalidated, or by any other applicable law.
(M) 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 and appeal of any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, arbitrative or
investigative.
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(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, including expenses of
establishing a right to indemnification under this bylaw or any applicable law.
(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 bylaw with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(4) References to a "director," "officer," "employee," or
"agent" of the corporation shall include, without limitation, situations where
such person is or was serving at the request of the corporation as a director,
officer, employee, trustee or agent of another corporation, partnership, joint
venture, trust or other enterprise.
ARTICLE XI
RIGHT OF FIRST REFUSAL
SECTION 64. RIGHT OF FIRST REFUSAL. No shareholder shall sell, assign,
pledge, or in any manner transfer any of the shares of stock of the corporation
or any right or interest therein, whether voluntarily or by operation of law, or
by gift or otherwise, except by a transfer which meets the requirements
hereinafter set forth in this bylaw:
(A) If the shareholder desires to sell or otherwise transfer any of
his shares of stock, then the shareholder shall first give written notice
thereof to the corporation. The notice shall name the proposed transferee and
state the number of shares to be transferred, the proposed consideration, and
all other terms and conditions of the proposed transfer.
(B) For thirty (30) days following receipt of such notice, the
corporation shall have the option to purchase all (but not less than all) of the
shares specified in the notice at the price and upon the terms set forth in such
notice; provided, however, that, with the consent of the shareholder, the
corporation shall have the option to purchase a lesser portion of the shares
specified in said notice at the price and upon the terms set forth therein. In
the event of a gift, property settlement or other transfer in which the proposed
transferee is not paying the full price for the shares, and that is not
otherwise exempted from the provisions of this Section 64, the price shall be
deemed to be the fair market value of the stock at such time as determined in
good faith by the Board of Directors. In the event the corporation elects to
purchase all of the shares or, with consent of the shareholder, a lesser portion
of the shares, it shall give written notice to
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the transferring shareholder of its election and settlement for said shares
shall be made as provided below in paragraph (d).
(C) The corporation may assign its rights hereunder.
(D) In the event the corporation and/or its assignee(s) elect to
acquire any of the shares of the transferring shareholder as specified in said
transferring shareholder's notice, the Secretary of the corporation shall so
notify the transferring shareholder and settlement thereof shall be made in cash
within thirty (30) days after the Secretary of the corporation receives said
transferring shareholder's notice; provided that if the terms of payment set
forth in said transferring shareholder's notice were other than cash against
delivery, the corporation and/or its assignee(s) shall pay for said shares on
the same terms and conditions set forth in said transferring shareholder's
notice.
(E) In the event the corporation and/or its assignees(s) do not elect
to acquire all of the shares specified in the transferring shareholder's notice,
said transferring shareholder may, within the sixty-day period following the
expiration of the option rights granted to the corporation and/or its
assignees(s) herein, transfer the shares specified in said transferring
shareholder's notice which were not acquired by the corporation and/or its
assignees(s) as specified in said transferring shareholder's notice. All shares
so sold by said transferring shareholder shall continue to be subject to the
provisions of this bylaw in the same manner as before said transfer.
(F) Anything to the contrary contained herein notwithstanding, the
following transactions shall be exempt from the provisions of this bylaw:
(1) A shareholder's transfer of any or all shares held either
during such shareholder's lifetime or on death by will or intestacy to such
shareholder's immediate family or to any custodian or trustee for the account of
such shareholder or such shareholder's immediate family. "Immediate family" as
used herein shall mean spouse, lineal descendant, father, mother, brother, or
sister of the shareholder making such transfer.
(2) A shareholder's bona fide pledge or mortgage of any shares
with a commercial lending institution, provided that any subsequent transfer of
said shares by said institution shall be conducted in the manner set forth in
this bylaw.
(3) A shareholder's transfer of any or all of such shareholder's
shares to the corporation or to any other shareholder of the corporation.
(4) A shareholder's transfer of any or all of such shareholder's
shares to a person who, at the time of such transfer, is an officer or director
of the corporation.
(5) A corporate shareholder's transfer of any or all of its
shares pursuant to and in accordance with the terms of any merger,
consolidation, reclassification of shares or capital reorganization of the
corporate shareholder, or pursuant to a sale of all or substantially all of the
stock or assets of a corporate shareholder.
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(6) A corporate shareholder's transfer of any or all of its
shares to any or all of its shareholders.
(7) A transfer by a shareholder which is a limited or general
partnership to any or all of its partners or former partners.
In any such case, the transferee, assignee, or other recipient shall
receive and hold such stock subject to the provisions of this bylaw, and there
shall be no further transfer of such stock except in accord with this bylaw.
(G) The provisions of this bylaw may be waived with respect to any
transfer either by the corporation, upon duly authorized action of its Board of
Directors, or by the shareholders, upon the express written consent of the
owners of a majority of the voting power of the corporation (excluding the votes
represented by those shares to be transferred by the transferring shareholder).
This bylaw may be amended or repealed either by a duly authorized action of the
Board of Directors or by the shareholders, upon the express written consent of
the owners of a majority of the voting power of the corporation.
(H) Any sale or transfer, or purported sale or transfer, of
securities of the corporation shall be null and void unless the terms,
conditions, and provisions of this bylaw are strictly observed and followed.
(I) The foregoing right of first refusal shall terminate on either of
the following dates, whichever shall first occur:
(1) On March 9, 2006; or
(2) Upon the date securities of the corporation are first
offered to the public pursuant to a registration statement filed with, and
declared effective by, the United States Securities and Exchange Commission
under the Securities Act of 1933, as amended.
(J) The certificates representing shares of stock of the corporation
shall bear on their face the following legend so long as the foregoing right of
first refusal remains in effect:
"The shares represented by this Certificate are subject to a right of
first refusal option in favor of the Corporation and/or its Assignee(s), as
provided in the Bylaws of the Corporation."
ARTICLE XII
LOANS OF OFFICERS AND OTHERS
SECTION 65. CERTAIN CORPORATE LOANS AND GUARANTIES. If the corporation has
outstanding shares held of record by 100 or more persons on the date of approval
by the Board of Directors, the corporation may make loans of money or property
to, or guarantee the obligations of, any officer of the corporation or its
parent or any subsidiary, whether or not a director of the corporation or its
parent or any subsidiary, or adopt an employee benefit plan or plans
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authorizing such loans or guaranties, upon the approval of the Board of
Directors alone, by a vote sufficient without counting the vote of any
interested director or directors, if the Board of Directors determines that such
a loan or guaranty or plan may reasonably be expected to benefit the
corporation. Notwithstanding the foregoing, the corporation shall have the power
to make loans permitted by the California Corporations Code.
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EXHIBIT 3.3
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
COPPER MOUNTAIN NETWORKS, INC.
COPPER MOUNTAIN NETWORKS, INC., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, hereby
certifies as follows:
1. The name of the corporation is Copper Mountain Networks, Inc.
2. The corporation's original Certificate of Incorporation was filed with
the Secretary of State on _________________, 1999.
3. The Amended and Restated Certificate of Incorporation of this
corporation, in the form attached hereto as Exhibit A, has been duly adopted by
the Board of Directors and by the stockholders of the corporation in accordance
with Sections 228, 242 and 245 of the General Corporation Law of the State of
Delaware.
4. The Amended and Restated Certificate of Incorporation so adopted
reads in full as set forth in Exhibit A attached hereto and hereby incorporated
by reference.
IN WITNESS WHEREOF, Copper Mountain Networks, Inc. has caused this Amended
and Restated Certificate of Incorporation to be signed by its President and
Chief Executive Officer and attested to by its Secretary this ____ day of
____________, 1999.
_________________________________________
Richard Gilbert
President and Chief Executive Officer
ATTEST:
________________________________
Joseph Markee
Secretary
1.
<PAGE>
EXHIBIT A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
COPPER MOUNTAIN NETWORKS, INC.
I.
The name of this corporation is COPPER MOUNTAIN NETWORKS, INC.
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, and the
name of the registered agent of the corporation in the State of Delaware at such
address is Corporation Service 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 40,000,000
shares, each having a par value of one-tenth of one cent ($0.001). 29,397,536
shares shall be Common Stock, $0.001 par value, and 10,602,464 shares shall be
Preferred Stock, $0.001 par value. The Preferred Stock may be issued from time
to time in one or more series.
B. 2,773,000 of the authorized shares of Preferred Stock are hereby
designated "Series A Preferred Stock."
C. 1,999,464 of the authorized shares of Preferred Stock are hereby
designated "Series B Preferred Stock."
D. 2,530,000 of the authorized shares of Preferred Stock are hereby
designated "Series C Preferred Stock."
E. 3,300,000 of the authorized shares of Preferred Stock are hereby
designated "Series D Preferred Stock." The Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred stock are
collectively referred to herein as the "Preferred Stock."
F. The rights, preferences, privileges and restrictions granted to or
imposed upon the Common Stock and Preferred Stock are as follows:
<PAGE>
1. DIVIDENDS.
A. The holders of the Preferred Stock shall be entitled, when
and if declared by the Board of Directors of the Corporation, to dividends out
of the retained earnings of the Corporation at the rate of the $0.08 per share
of Series A Preferred Stock per annum, $0.27 per share of Series B Preferred
Stock per annum, $0.38 per share of Series C Preferred Stock per annum and $0.62
per share of Series D Preferred Stock per annum. Dividends on the Preferred
Stock shall be payable on a pari passu basis and in preference and prior to any
payment of any dividend on the Common Stock of the Corporation. No dividends
(other than those payable solely in the Common Stock of the Corporation) shall
be paid on the Common Stock of the Corporation during any fiscal year of the
Corporation until all declared dividends on the Preferred Stock are paid or set
aside. The right to dividends on shares of the Common Stock or Preferred Stock
shall not be cumulative, and no right shall accrue to holders of Common Stock or
Preferred Stock by reason of the fact that dividends on said shares are not
declared in any prior period.
In the event the Corporation shall declare a distribution (other
than any distribution described in Section F.2) payable in securities of other
persons, evidences of indebtedness issued by the Corporation or other persons,
assets (excluding cash dividends) or options or rights to purchase any such
securities or evidences of indebtedness, then, in each such case the holders of
the Preferred Stock shall be entitled to a proportionate share of any such
distribution as though the holders of the Preferred Stock were the holders of
the number of shares of Common Stock of the Corporation into which their
respective shares of Preferred Stock are convertible as of the record date fixed
for the determination of the holders of Common Stock of the Corporation entitled
to receive such distribution.
2. LIQUIDATION PREFERENCE.
A. PREFERENCE. In the event of any liquidation, dissolution or
winding up of the Corporation, either voluntarily or involuntarily, the holders
of Preferred Stock shall be entitled to receive, on a pari passu basis and prior
and in preference to any distribution of any of the assets or surplus funds of
the Corporation to the holders of Common Stock of the Corporation, an amount
equal to $1.00 per share of Series A Preferred Stock, $3.39 per share of Series
B Preferred Stock, $4.75 per share of Series C Preferred Stock and $7.75 per
share of Series D Preferred Stock, plus a further amount equal to any dividends
declared but unpaid on such shares.
If upon such liquidation, dissolution or winding up of the Corporation, the
assets of the Corporation are insufficient to provide for the cash payment
described above to the holders of Preferred Stock, then all of such assets shall
be paid ratably among the holders of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock in
proportion to the preferential amounts each such holder would have been entitled
to receive pursuant to this Section 2(a) if such distribution had been
sufficient to permit the full payment of such preferential amounts.
2.
<PAGE>
After the payment or setting apart of payment to the holders of Preferred
Stock of the preferential amounts so payable to them, the holders of Common
Stock shall be entitled to receive pro rata the remaining assets of the
Corporation.
B. CONSOLIDATION OR MERGER. Any of the following shall be
deemed to be a liquidation, dissolution or winding up within the meaning of this
Section 2:
(I) any transaction or series of related transactions
(including, without limitation, any reorganization, merger or consolidation)
which will result in the Corporation's shareholders immediately prior to such
transaction not holding (by virtue of such shares or securities issued solely
with respect thereto) at least 50% of the voting power of the surviving or
continuing entity;
(II) a sale of all or substantially all of the assets of
the Corporation, unless the Corporation's shareholders immediately prior to such
sale will, as a result of such sale, hold (by virtue of securities issued as
consideration for the Corporation's sale) at least 50% of the voting power of
the purchasing entity; or
(III) any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary.
C. NONCASH DISTRIBUTIONS. If any of the assets of the
Corporation are to be distributed other than in cash under this Section 2 or for
any purpose, then the Board of Directors of the Corporation shall promptly
engage independent competent appraisers to determine the value of the assets to
be distributed to the holders of Preferred Stock or Common Stock. The
Corporation shall, upon receipt of such appraiser's valuation, give prompt
written notice to each holder of shares of Preferred Stock or Common Stock of
the appraiser's valuation.
D. CONSENT FOR CERTAIN REPURCHASES. Each holder of an
outstanding share of Preferred Stock shall be deemed to have consented, for
purposes of applicable laws, to distributions made by the Corporation in
connection with the repurchase of shares of Common Stock (at a price no greater
than the original issuance price thereof) issued to or held by employees or
consultants upon termination of their employment or services pursuant to
agreements approved by the Board of Directors providing for the right of said
repurchase between the Corporation and such persons.
E. NOTICE TO HOLDERS OF PREFERRED STOCK. Written notice of any
such liquidation, dissolution or winding up, stating a payment date, the place
where such payment shall be made, an estimate of the net value that would be
received by each such holder of Preferred Stock if all such holders converted
all of their Preferred Stock immediately prior to such liquidation, dissolution
or winding up of the Corporation, and containing a statement of or reference to
applicable conversion rights, shall be given by first-class mail, postage
prepaid, not less than thirty (30) days prior to the payment date stated
therein, to each holder of record of Preferred Stock at such holder's address as
shown in the records of the Corporation.
3. CONVERSION. The holders of the Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
3.
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A. RIGHT TO CONVERT.
(I) Each share of Series A Preferred Stock shall be
convertible, without payment of any additional consideration by the holder
thereof and at the option of such holder, at any time after the date of issuance
of such share at the office of the Corporation or any transfer agent for such
share, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing $1.00 by the Series A Conversion Price, determined
as hereinafter provided, in effect at the time of conversion. The conversion
price for the Series A Preferred Stock (the "Series A Conversion Price") shall
initially be $1.00. Such initial Series A Conversion Price shall be subject to
adjustment, as hereinafter provided. The number of shares of Common Stock into
which a share of Series A Preferred Stock is convertible is hereinafter referred
to as the "Series A Conversion Rate."
(II) Each share of Series B Preferred Stock shall be
convertible, without payment of any additional consideration by the holder
thereof and at the option of such holder, at any time after the date of issuance
of such share at the office of the Corporation or any transfer agent for such
share, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing $3.39 by the Series B Conversion Price, determined
as hereinafter provided, in effect at the time of conversion. The conversion
price for the Series B Preferred Stock (the "Series B Conversion Price") shall
initially be $3.39. Such initial Series B Conversion Price shall be subject to
adjustment, as hereinafter provided. The number of shares of Common Stock into
which a share of Series B Preferred Stock is convertible is hereinafter referred
to as the "Series B Conversion Rate."
(III) Each share of Series C Preferred Stock shall be
convertible, without payment of any additional consideration by the holder
thereof and at the option of such holder, at any time after the date of issuance
of such share at the office of the Corporation or any transfer agent for such
share, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing $4.75 by the Series C Conversion Price, determined
as hereinafter provided, in effect at the time of conversion. The conversion
price for the Series C Preferred Stock (the "Series C Conversion Price") shall
initially be $4.75. Such initial Series C Conversion Price shall be subject to
adjustment, as hereinafter provided. The number of shares of Common Stock into
which a share of Series C Preferred Stock is convertible is hereinafter referred
to as the "Series C Conversion Rate."
(IV) Each share of Series D Preferred Stock shall be
convertible, without payment of any additional consideration by the holder
thereof and at the option of such holder, at any time after the date of issuance
of such share at the office of the Corporation or any transfer agent for such
share, into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing $7.75 by the Series D Conversion Price, determined
as hereinafter provided, in effect at the time of conversion. The conversion
price for the Series D Preferred Stock (the "Series D Conversion Price") shall
initially be $7.75. Such initial Series D Conversion Price shall be subject to
adjustment, as hereinafter provided. The number of shares of Common Stock into
which a share of Series D Preferred Stock is convertible is hereinafter referred
to as the "Series D Conversion Rate."
4.
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B. AUTOMATIC CONVERSION.
(I) Each share of Series A and Series B Preferred Stock
shall automatically be converted into shares of Common Stock at its then
effective Conversion Rate immediately upon the closing of a firm commitment
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of
Common Stock, the aggregate gross proceeds of which equal or exceed $5,000,000
at a per share issuance price of at least $5.00 per share (as adjusted for stock
splits, stock dividends, subdivisions, reclassifications, reorganizations, or
other similar transactions).
(II) Each share of Series C Preferred Stock shall
automatically be converted into shares of Common Stock at its then effective
Conversion Rate immediately upon the closing of a firm commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale of Common Stock,
the aggregate gross proceeds of which equal or exceed $10,000,000 at a per share
issuance price of at least $9.50 per share (as adjusted for stock splits, stock
dividends, subdivisions, reclassifications, reorganizations, or other similar
transactions).
(III) Each share of Series D Preferred Stock shall
automatically be converted into shares of Common Stock at its then effective
Conversion Rate immediately upon the closing of a firm commitment underwritten
public offering pursuant to an effective registration statement under the
Securities Act of 1933, as amended, covering the offer and sale of Common Stock,
the aggregate gross proceeds of which equal or exceed $20,000,000 at a per share
issuance price of at least $12.00 per share (as adjusted for stock splits, stock
dividends, subdivisions, reclassifications, reorganizations, or other similar
transactions) if the closing of such public offering occurs on or before March
30, 2000 and at a per share issuance price of at least $15.50 per share (as
adjusted for stock splits, stock dividends, subdivisions, reclassifications,
reorganizations, or other similar transactions) if the closing of such public
offering occurs after March 30, 2000.
(IV) Each share of Series A Preferred Stock shall
automatically be converted into shares of Common Stock at its then effective
Conversion Rate immediately upon the Corporation's receipt of the written
consent or vote of holders of more than two-thirds of the then outstanding
shares of Series A Preferred Stock.
(V) Each share of Series B Preferred Stock shall
automatically be converted into shares of Common Stock at its then effective
Conversion Rate immediately upon the Corporation's receipt of the written
consent or vote of holders of more than two-thirds of the then outstanding
shares of Series B Preferred Stock.
(VI) Each share of Series C Preferred Stock shall
automatically be converted into shares of Common Stock at its then effective
Conversion Rate immediately upon the Corporation's receipt of the written
consent or vote of holders of more than two-thirds of the then outstanding
shares of Series C Preferred Stock.
(VII) Each share of Series D Preferred Stock shall
automatically be converted into shares of Common Stock at its then effective
Conversion Rate immediately
5.
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upon the Corporation's receipt of the written consent or vote of holders of more
than a majority of the then outstanding shares of Series D Preferred Stock.
C. MECHANICS OF CONVERSION. Before any holder of Preferred
Stock shall be entitled to convert the same into shares of Common Stock, such
holder shall surrender the certificate or certificates therefor, duly endorsed,
at the office of the Corporation or of any transfer agent for the Preferred
Stock and shall give written notice to the Corporation at such office that he
elects to convert the same (except that no such written notice of election to
convert shall be necessary in the event of an automatic conversion pursuant to
Section 3.b. hereof). The Corporation shall, as soon as practicable thereafter,
issue and deliver at such office to such holder of Preferred Stock a certificate
or certificates for the number of shares of Common Stock to which he shall be
entitled as aforesaid and a check payable to such holder in the amount of any
declared but unpaid dividends on the converted Preferred Stock to which the
holder may be entitled. Such conversion shall be deemed to have been made
immediately prior to the close of business on the date of such surrender of the
shares of Preferred Stock to be converted (except that in the case of an
automatic conversion pursuant to Sections 3.b.(i), 3.b.(ii) or 3.b.(iii) hereof,
such conversion shall be deemed to have been made immediately prior to the
closing of the offering referred to in Sections 3.b.(i), 3.b.(ii) and 3.b.(iii))
and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such shares of Common Stock on such date.
D. ADJUSTMENTS TO CONVERSION PRICE FOR DILUTING ISSUES.
(I) SPECIAL DEFINITIONS. For purposes of this Section 3,
the following definitions shall apply:
(A) "OPTION" shall mean rights, options or warrants
to subscribe for, purchase or otherwise acquire either Common Stock or
Convertible Securities.
(B) "SERIES D ORIGINAL ISSUE DATE" shall mean the
date on which a share of Series D Preferred Stock was first issued.
(C) "CONVERTIBLE SECURITIES" shall mean any
evidences of indebtedness, shares or other securities directly or indirectly
convertible into or exchangeable for Common Stock.
(D) "ADDITIONAL SHARES OF COMMON STOCK" shall mean
all shares of Common Stock issued (or, pursuant to Section 3.d.(iii), deemed to
be issued) by the Corporation after the Series D Original Issue Date, other
than:
(1) shares of Common Stock issued or issuable
upon conversion of shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock authorized herein;
(2) shares of Common Stock issued or issuable
to officers, directors or employees of, or consultants to, the Corporation
pursuant to a stock grant or option plan or other employee stock incentive
program approved by the Board of Directors;
6.
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(3) up to 50,000 shares of Series A Preferred
Stock, up to 147,401 shares of Series B Preferred Stock and up to 39,737 shares
of Series C Preferred Stock issuable upon the exercise of warrants outstanding
on the date of filing hereof;
(4) shares of Common Stock issued or issuable
in connection with commercial lending arrangements, equipment leases, venture
leasing arrangements or similar transactions on terms approved by the Board of
Directors;
(5) up to 100,000 shares of Common Stock
issued or issuable in connection with corporate partnering arrangements, joint
ventures, technology licensing, and strategic alliances with the Company's
suppliers, vendors, distributors or customers on terms approved by the Board of
Directors;
(6) shares of Common Stock issued or issuable
as a dividend or distribution on the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock (provided
that such dividend is paid on all such series of Preferred Stock in proportion
to the number of shares of Common Stock issuable upon conversion thereof), or
any event for which adjustment is made pursuant to Sections 3.e. or 3.f. hereof;
or
(7) shares of Common Stock issued or issuable
by way of dividend or other distribution on shares excluded from the definition
of Additional Shares of Common Stock by the foregoing clauses (1) through (6) or
this clause (7) or on shares of Common Stock so excluded.
(II) NO ADJUSTMENT OF CONVERSION PRICE. No adjustment in
the Conversion Price of a particular share of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock or Series D Preferred Stock,
respectively, shall be made in respect of the issuance of Additional Shares of
Common Stock unless the consideration per share for an Additional Share of
Common Stock issued or deemed to be issued by the Corporation is less than the
Series A Conversion Price, the Series B Conversion Price, the Series C
Conversion Price or the Series D Conversion Price, respectively, in effect on
the date of, and immediately prior to, the issue of such Additional Share of
Common Stock.
(III) ISSUE OF SECURITIES DEEMED ISSUE OF ADDITIONAL SHARES
OF COMMON STOCK.
(A) OPTIONS AND CONVERTIBLE SECURITIES. In the
event the Corporation at any time or from time to time after the Series D
Original Issue Date shall issue any Options or Convertible Securities or shall
fix a record date for the determination of holders of any class of securities
entitled to receive any such Options or Convertible Securities, then the maximum
number of shares (as set forth in the instrument relating thereto without regard
to any provisions contained therein for a subsequent adjustment of such number)
of Common Stock issuable upon the exercise of such Options or, in the case of
Convertible Securities and Options therefor, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue or, in case such a record date shall have
been fixed, as of the close of business on such record date, provided that such
7.
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shares would not otherwise be excluded from the definition of "Additional Shares
of Common Stock" by Sections 3.d.(i)(d)(1), (2), (3), (4), (5), (6) and (7)
above, provided further that, in any such case in which Additional Shares of
Common Stock are deemed to be issued:
(1) no further adjustment in the applicable
Series A Conversion Price, Series B Conversion Price, Series C Conversion Price
or Series D Conversion Price shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon the exercise of such
Options or the conversion or exchange of such Convertible Securities;
(2) if such Options or Convertible Securities
by their terms provide, with the passage of time or otherwise, for any increase
in the consideration payable to the Corporation, or decreases in the number of
shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof, the applicable Series A Conversion Price, Series B Conversion Price,
Series C Conversion Price or Series D Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon any such
increase or decrease becoming effective, be recomputed to reflect such increase
or decrease insofar as it affects such Options or the rights of conversion or
exchange under such Convertible Securities; provided, however, that no
readjustment pursuant to the foregoing clause shall have the effect of
increasing the applicable Series A Conversion Price, Series B Conversion Price,
Series C Conversion Price or Series D Conversion Price to an amount which
exceeds the lower of (i) such Conversion Price on the original adjustment date
(prior to such adjustment), or (ii) such Conversion Price that would have
resulted from any issuance of Additional Shares of Common Stock between the
original adjustment date and such readjustment date (without giving effect for
such original adjustment); and
(3) if such Options or Convertible Securities
by their terms provide, with the passage of time or otherwise, for any decrease
in the consideration payable to the Corporation, or increases in the number of
shares of Common Stock issuable, upon the exercise, conversion or exchange
thereof, the applicable Series A Conversion Price, Series B Conversion Price,
Series C Conversion Price or Series D Conversion Price computed upon the
original issue thereof (or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon, shall, upon any such
decrease or increase becoming effective, be recomputed to reflect such decrease
or increase insofar as it affects such Options or the rights of conversion or
exchange under such Convertible Securities; provided, however, that no
readjustment pursuant to the foregoing clause shall have the effect of
decreasing the applicable Series A Conversion Price, Series B Conversion Price,
Series C Conversion Price or Series D Conversion Price to an amount which
exceeds the greater of (i) such Conversion Price on the original adjustment date
(prior to such adjustment), or (ii) such Conversion Price that would have
resulted from any issuance of Additional Shares of Common Stock between the
original adjustment date and such readjustment date (without giving effect for
such original adjustment).
(IV) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF
ADDITIONAL SHARES OF COMMON STOCK. In the event this Corporation shall issue
Additional Shares of Common Stock (including Additional Shares of Common Stock
deemed to be issued
8.
<PAGE>
pursuant to Section 3.d.(iii)) without consideration or for a consideration per
share less than the applicable Series A Conversion Price, Series B Conversion
Price, Series C Conversion Price or Series D Conversion Price in effect on the
date of and immediately prior to such issue, then and in such event, such Series
A Conversion Price, Series B Conversion Price, Series C Conversion Price or
Series D Conversion Price, as applicable, shall be reduced, concurrently with
such issue, to a price (calculated to the nearest cent) determined by
multiplying such Series A Conversion Price, Series B Conversion Price, Series C
Conversion Price or Series D Conversion Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such issue plus the number of shares of Common Stock which the
aggregate consideration received by the Corporation for the total number of
Additional Shares of Common Stock so issued would purchase at such Series A
Conversion Price, Series B Conversion Price, Series C Conversion Price or Series
D Conversion Price, as applicable; and the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such issue
plus the number of such Additional Shares of Common Stock so issued; and
provided further that, for the purposes of this Section 3.d.(iv), all shares of
Common Stock issuable upon exercise or conversion of outstanding Options and
Preferred Stock shall be deemed to be outstanding, and immediately after any
Additional Shares of Common Stock are deemed issued pursuant to Section
3.d.(iii), such Additional Shares of Common Stock shall be deemed to be
outstanding.
(V) DETERMINATION OF CONSIDERATION. For purposes of this
Section 3.d., the consideration received by the Corporation for the issue of any
Additional Shares of Common Stock shall be computed as follows:
(A) CASH AND PROPERTY. Such consideration shall:
(1) insofar as it consists of cash, be computed
at the aggregate amount of cash received by the Corporation excluding amounts
paid or payable for accrued interest or accrued dividends;
(2) insofar as it consists of property other than
cash, be computed at the fair value thereof at the time of such issue, as
determined in good faith by the Board of Directors; and
(3) in the event Additional Shares of Common
Stock are issued together with other shares or securities or other assets of the
Corporation for consideration which covers both, be the proportion of such
consideration so received, computed as provided in clauses (1) and (2) above, as
determined in good faith by the Board of Directors.
(B) OPTIONS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Corporation for Additional Shares of
Common Stock deemed to have been issued pursuant to Section 3.d.(iii)(a),
relating to Options and Convertible Securities, shall be determined by dividing:
(1) the total amount, if any, received or
receivable by the Corporation as consideration for the issue of such Options or
Convertible Securities, plus the minimum aggregate amount of additional
consideration (as set forth in the
9.
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instruments relating thereto, without regard to any provision contained therein
for a subsequent adjustment of such consideration) payable to the Corporation
upon the exercise of such Options or the conversion or exchange of such
Convertible Securities, or in the case of Options for Convertible Securities,
the exercise of such Options for Convertible Securities and the conversion or
exchange of such Convertible Securities, by
(2) the maximum number of shares of Common Stock (as
set forth in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number) issuable upon the
exercise of such Options or the conversion or exchange of such Convertible
Securities.
E. ADJUSTMENT FOR STOCK SPLITS, DIVIDENDS AND COMBINATIONS. If
the Corporation shall at any time or from time to time effect a subdivision of
the outstanding Common Stock, or shall issue a dividend of Common Stock on its
outstanding Common Stock, the Conversion Price for each series of Preferred
Stock then in effect immediately before that subdivision or dividend shall be
proportionately decreased, and conversely, if the Corporation shall combine the
outstanding shares of Common Stock, the Conversion Price for each series of
Preferred Stock then in effect immediately before the combination shall be
proportionately increased. Any adjustment under this Section 3.e. shall become
effective at the close of business on the date the subdivision or combination
becomes effective or on the date on which the dividend is declared.
F. ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the
event the Corporation at any time or from time to time shall make or issue, or
fix a record date for the determination of holders of Common Stock entitled to
receive a dividend or other distribution payable in securities of the Company
other than shares of Common Stock, then and in each such event the holders of
Preferred Stock shall receive at the time of payment of such dividend or other
distribution, the amount of securities of the Company that they would have
received pursuant to such dividend or distribution had their Preferred Stock
been converted into Common Stock on the date of such event.
G. ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND SUBSTITUTION.
If the Common Stock issuable upon the conversion of the Preferred Stock shall be
changed into the same or different number of shares of any class or series of
stock, whether by capital reorganization, reclassification or otherwise (other
than a subdivision or combination of shares or stock dividend, provided for in
Section 3.e. above, or a merger, consolidation, sale of assets or other
transaction provided for in Section 2 above), then and in each such event the
holder of each share of Preferred Stock shall have the right thereafter to
convert such share into the kind and amount of shares of stock and other
securities and property receivable upon such reorganization, reclassification or
other change by holders of the number of shares of Common Stock into which such
shares of Preferred Stock might have been converted immediately prior to such
reorganization, reclassification or change, all subject to further adjustment as
provided herein.
H. CALCULATIONS. All calculations under this Section 3 shall
be made to the nearest cent or to the nearest one hundredth (1/100) of a share,
as the case may be.
10.
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I. MINIMAL ADJUSTMENTS. No adjustment in the Conversion Price
for any series of Preferred Stock need be made if such adjustment would result
in a change in the Conversion Price for such series of Preferred Stock of less
than $0.01. Any adjustment of less than $0.01 which is not made shall be
carried forward and shall be made at the time of and together with any
subsequent adjustment which, on a cumulative basis, amounts to an adjustment of
$0.01 or more in the Conversion Price for such series of Preferred Stock.
J. NO IMPAIRMENT. The Corporation will not through any
amendment of these Amended and Restated Articles of Incorporation, amendment of
its Bylaws, reorganization, recapitalization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Corporation, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 3
and in the taking of all such action as may be necessary or appropriate in order
to protect the Conversion Rights of the holders of Preferred Stock against
impairment.
K. CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Conversion Rate for each series of Preferred
Stock pursuant to this Section 3, the Corporation at its expense shall promptly
compute such adjustment or readjustment in accordance with the terms hereof and
prepare and furnish to each holder of Preferred Stock a certificate executed by
its Chief Executive Officer or Chief Financial Officer, setting forth such
adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon written
request at any time of any holder of Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (i) all such
adjustments and readjustments, (ii) the Conversion Rate for each series of
Preferred Stock at the time in effect, and (iii) the number of shares of Common
Stock and the amount, if any, of other property which at the time would be
received upon the conversion of such holder's shares of Preferred Stock.
L. FRACTIONAL SHARES. No fractional share shall be issued upon
the conversion of any share or shares of Preferred Stock. If the conversion
would result in the issuance of a fraction of a share of Common Stock, the
Corporation shall, in lieu of issuing any fractional share, pay the holder
otherwise entitled to such fraction a sum in cash equal to the fair market value
of such fraction on the date of conversion (as determined in good faith by the
Board of Directors of the Corporation).
M. NOTICES OF RECORD DATE. In the event of 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 (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property or to receive any other right, the Corporation
shall mail to each holder of Preferred Stock at least 20 days prior to such
record date, a notice specifying the date on which any such record is to be
taken for the purpose of such dividend or distribution or right, and the amount
and character of such dividend, distribution or right.
N. ISSUE TAXES. The Corporation shall pay any and all issue
and other taxes that may be payable in respect of any issue or delivery of
shares of Common Stock
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on conversion of shares of Preferred Stock pursuant hereto; provided, however,
that the Corporation shall not be obligated to pay any transfer taxes resulting
from any transfer requested by any holder in connection with any such
conversion.
O. COMMON STOCK RESERVED. The Corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock solely for the purpose of effecting the conversion of the shares of
Preferred Stock 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
Preferred Stock; and 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 Preferred Stock, 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.
P. NOTICES. Any notice required by the provisions of this
Section 3 to be given to the holder of shares of Preferred Stock shall be deemed
given if deposited in the United States mail, postage prepaid, and addressed to
each holder of record at his address appearing on the books of the Corporation.
Q. REISSUANCE OF CONVERTED SHARES. No shares of Preferred
Stock which have been converted into Common Stock after the original issuance
thereof shall ever again be reissued and all such shares so converted shall upon
such conversion cease to be a part of the authorized shares of the Corporation.
4. VOTING RIGHTS. The holder of each share of Preferred Stock shall
be entitled to the number of votes equal to the number of shares of Common Stock
into which each share of Preferred Stock could be converted on the record date
for the vote or written consent of shareholders and, except as otherwise
required by law, shall have voting rights and powers equal to the voting rights
and powers of Common Stock. The holder of each share of Preferred Stock shall
be entitled to notice of any shareholders' meeting in accordance with the bylaws
of the Corporation and shall vote with holders of Common Stock upon the election
of directors and upon any other matter submitted to a vote of shareholders,
except those matters required by law to be submitted to a class vote.
Fractional votes shall not, however, be permitted and any fractional voting
rights resulting from the above formula (after aggregating all shares of Common
Stock into which shares of Preferred Stock held by each holder could be
converted) shall be rounded to the nearest whole number (with one-half rounded
upward to one).
5. PROTECTIVE PROVISIONS.
A. In addition to any other class vote that may be required by
law, so long as any series of Preferred Stock shall be outstanding, the
Corporation shall not without obtaining the approval (by vote or written
consent, as provided by law) of the holders of more than 50% of the outstanding
shares of the Preferred Stock, voting together as a single class (on an as-
converted to Common Stock basis):
(I) increase the authorized number of shares of any class
or series of the Corporation's capital stock;
12.
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(II) create any new class or series of shares having
preferences or priorities (including, without limitation, with regard to
dividends, liquidation and voting) superior to or on parity with any outstanding
series of the Preferred Stock;
(III) reclassify any outstanding shares into shares having
preferences or priorities (including, without limitation, with regard to
dividends, liquidation and voting) superior to or on parity with any outstanding
series of the Preferred Stock;
(IV) amend the Corporation's Articles of Incorporation or
Bylaws to adversely affect the rights, preferences or privileges of any
outstanding series of the Preferred Stock;
(V) repurchase or redeem any outstanding shares of Common
Stock or of the Preferred Stock except as contemplated by Section 2.d. hereof;
provided, however, that with respect to any repurchase or redemption of shares
of Preferred Stock, any approval required hereunder shall include the approval
of holders of more than 50% of the outstanding shares of Series D Preferred
Stock voting together as a single series; or
(VI) change the authorized number of Directors on the
Board from the current range of five (5) to nine (9).
B. Except as otherwise required by law, so long as any of the
Preferred Stock shall be outstanding, the Corporation shall not without
obtaining the approval (by vote or written consent, as provided by law) of the
holders of more than 66 2/3% of the outstanding shares of the Preferred Stock
voting together as a single class (on an as-converted to Common Stock basis):
effect any sale, material encumbrance or other conveyance of all or
substantially all of the assets of the Corporation (excluding any security
interest or other encumbrance in favor of a commercial lending institution or
similar entity in connection with commercial lending arrangements, equipment
leases, venture leasing arrangements or similar transactions on terms approved
by the Board of Directors but including any grant of an exclusive license to all
or substantially all of the intellectual property owned by the Corporation) or
any consolidation or merger involving the Corporation or its subsidiaries if the
shareholders of the Corporation immediately prior to such consolidation or
merger shall not represent a majority of the voting power of the outstanding
stock of the continuing or surviving entity of such consolidation or merger
following such consolidation or merger; provided, however, that if any such
transaction pursuant to this Section 5b. results in a per share price to holders
of the Series D Preferred Stock of less than $12.00 per share if the closing of
such transaction occurs on or before March 30, 2000, or a per share price to
holders of the Series D Preferred Stock of less than $15.50 per share if the
closing of such transaction occurs after March 30, 2000, any approval required
hereunder shall include the approval of holders of more than 50% of the
outstanding shares of Series D Preferred Stock voting together as a single
series.
C. In addition to any other class vote that may be required by
law, so long as any of the Series A Preferred Stock shall be outstanding, the
Corporation shall not without obtaining the approval (by vote or written
consent, as provided by law) of the holders of more than 50% of the outstanding
shares of Series A Preferred Stock:
<PAGE>
(I) amend the Company's Articles of Incorporation or
Bylaws to adversely affect solely the rights, preferences or privileges of the
Series A Preferred Stock; or
(II) increase or decrease the authorized number of shares
of Series A Preferred Stock.
D. In addition to any other class vote that may be required by
law, so long as any of the Series B Preferred Stock shall be outstanding, the
Corporation shall not without obtaining the approval (by vote or written
consent, as provided by law) of the holders of more than 50% of the outstanding
shares of Series B Preferred Stock:
(I) amend the Company's Articles of Incorporation or Bylaws
to adversely affect solely the rights, preferences or privileges of the Series B
Preferred Stock; or
(II) increase or decrease the authorized number of shares of
Series B Preferred Stock.
E. In addition to any other class vote that may be required by
law, so long as any of the Series C Preferred Stock shall be outstanding, the
Corporation shall not without obtaining the approval (by vote or written
consent, as provided by law) of the holders of more than 50% of the outstanding
shares of Series C Preferred Stock:
(I) amend the Company's Articles of Incorporation or Bylaws
to adversely affect solely the rights, preferences or privileges of the Series C
Preferred Stock; or
(II) increase or decrease the authorized number of shares of
Series C Preferred Stock.
F. In addition to any other class vote that may be required by
law, so long as any of the Series D Preferred Stock shall be outstanding, the
Corporation shall not without obtaining the approval (by vote or written
consent, as provided by law) of the holders of more than 50% of the outstanding
shares of Series D Preferred Stock:
(I) amend the Company's Articles of Incorporation or Bylaws
to adversely affect solely the rights, preferences or privileges of the Series D
Preferred Stock; or
(II) increase or decrease the authorized number of shares of
Series D Preferred Stock.
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:
14.
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A.
1. The management of the business and the conduct of the affairs of
the corporation shall be vested in its Board of Directors. Subject to the rights
of the holders of any series of Preferred Stock, 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. A. Directors shall be elected at each annual meeting of
stockholders to hold office until the next annual meeting. Each director shall
hold office either until the expiration of the term for which elected or
appointed and until a successor has been elected and qualified, or until such
director's death, resignation or removal. No decrease in the number of
directors constituting the Board of Directors shall shorten the term of any
incumbent director.
B. No person entitled to vote at an election for directors may
cumulate votes to which such person is entitled, unless, at the time of such
election, the corporation is subject to Section 2115(b) of the California
General Corporation Law (" CGCL") AND is not a "listed" corporation or ceases to
be a "listed" corporation under Section 301.5 of the CGCL. During this time,
every stockholder entitled to vote at an election for directors may cumulate
such stockholder's votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which
such stockholder's shares are otherwise entitled, or distribute the
stockholder's votes on the same principle among as many candidates as such
stockholder thinks fit. No stockholder, however, shall be entitled to so
cumulate such stockholder's votes unless (i) the names of such candidate or
candidates have been placed in nomination prior to the voting and (ii) the
stockholder has given notice at the meeting, prior to the voting, of such
stockholder's intention to cumulate such stockholder's votes. If any
stockholder has given proper notice to cumulate votes, all stockholders may
cumulate their votes for any candidates who have been properly placed in
nomination. Under cumulative voting, the candidates receiving the highest number
of votes, up to the number of directors to be elected, are elected.
3. Subject to the rights of the holders of any series of Preferred
Stock, the Board of Directors or any individual director may be removed from
office at any time (i) with cause by the affirmative vote of the holders of a
majority of the voting power of all the then outstanding shares of voting stock
of the corporation, entitled to vote at an election of directors (the "Voting
Stock") or (ii) without cause by the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66 2/3%) of the voting power of all the then-
outstanding shares of the Voting Stock.
4. 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
15.
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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.
1. Subject to paragraph (h) of Section 42 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. The Board of Directors shall
also have the power to adopt, amend, or repeal Bylaws.
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 by written consent to the extent provided for in the Bylaws or at an
annual or special meeting of stockholders called in accordance with the Bylaws;
and following the closing of the Initial Public Offering no action shall be
taken by the stockholders by written consent.
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. A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for any 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 an 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 shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
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 Section VII.B., 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
16.
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affirmative vote of the holders of any particular class or series of the Voting
Stock required by law, this Certificate of Incorporation or any document
relating thereto filed with the Delaware Secretary of State, 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.
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EXHIBIT 3.4
BYLAWS
OF
COPPER MOUNTAIN NETWORKS, INC.
(A DELAWARE CORPORATION)
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
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................................... 6
Section 12. List Of Stockholders.................................... 6
Section 13. Action Without Meeting.................................. 6
Section 14. Organization............................................ 7
ARTICLE IV DIRECTORS.................................................. 7
Section 15. Number And Term Of Office............................... 7
Section 16. Powers.................................................. 8
Section 17. Board of Directors...................................... 8
Section 18. Vacancies............................................... 8
Section 19. Resignation............................................. 9
Section 20. Meetings................................................ 9
(a) Annual Meetings......................................... 9
(b) Regular Meetings........................................ 9
(c) Special Meetings........................................ 10
(d) Telephone Meetings...................................... 10
(e) Notice Of Meetings...................................... 10
(f) Waiver Of Notice........................................ 10
</TABLE>
<PAGE>
Table of Contents
(CONTINUED)
<TABLE>
<CAPTION>
Page
<S> <C>
Section 21. Quorum And Voting..................................... 10
Section 22. Action Without Meeting................................ 10
Section 23. Fees And Compensation................................. 11
Section 24. Committees............................................ 11
(a) Executive Committee................................... 11
(b) Other Committees...................................... 11
(c) Term.................................................. 11
(d) Meetings.............................................. 12
Section 25. Organization.......................................... 12
ARTICLE V OFFICERS................................................. 12
Section 26. Officers Designated................................... 12
Section 27. Tenure And Duties Of Officers......................... 13
(a) General............................................... 13
(b) Duties Of Chairman Of The Board Of Directors.......... 13
(c) Duties Of President................................... 13
(d) Duties Of Vice Presidents............................. 13
(e) Duties Of Secretary................................... 13
(f) Duties Of Chief Financial Officer..................... 14
Section 28. Delegation Of Authority............................... 14
Section 29. Resignations.......................................... 14
Section 30. Removal............................................... 14
ARTICLE VI EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF
SECURITIES OWNED BY THE CORPORATION...................... 14
Section 31. Execution Of Corporate Instruments.................... 14
Section 32. Voting Of Securities Owned By The Corporation......... 15
ARTICLE VII SHARES OF STOCK.......................................... 15
Section 33. Form And Execution Of Certificates.................... 15
Section 34. Lost Certificates..................................... 16
Section 35. Transfers............................................. 16
Section 36. Fixing Record Dates................................... 16
</TABLE>
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(CONTINUED)
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Section 37. Registered Stockholders.................................................................. 17
ARTICLE VIII OTHER SECURITIES OF THE CORPORATION......................................................... 17
Section 38. Execution Of Other Securities............................................................ 17
ARTICLE IX DIVIDENDS................................................................................... 18
Section 39. Declaration Of Dividends................................................................. 18
Section 40. Dividend Reserve......................................................................... 18
ARTICLE X FISCAL YEAR................................................................................. 18
Section 41. Fiscal Year.............................................................................. 18
ARTICLE XI INDEMNIFICATION............................................................................. 19
Section 42. Indemnification Of Directors, Executive Officers, Other Officers,
Employees And Other Agents............................................................... 19
(a) Directors And Executive Officers.................................................. 19
(b) Other Officers, Employees and Other Agents........................................ 19
(c) Expenses.......................................................................... 19
(d) Enforcement....................................................................... 20
(e) Non-Exclusivity Of Rights......................................................... 20
(f) Survival Of Rights................................................................ 20
(g) Insurance......................................................................... 20
(h) Amendments........................................................................ 21
(i) Saving Clause..................................................................... 21
(j) Certain Definitions............................................................... 21
ARTICLE XII NOTICES..................................................................................... 22
Section 43. Notices.................................................................................. 22
(a) Notice To Stockholders............................................................ 22
(b) Notice To Directors............................................................... 22
(c) Address Unknown................................................................... 22
(d) Affidavit Of Mailing.............................................................. 22
(e) Time Notices Deemed Given......................................................... 22
(f) Methods Of Notice................................................................. 22
(g) Failure To Receive Notice......................................................... 22
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(CONTINUED)
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(h) Notice To Person With Whom Communication Is Unlawful.............................. 23
(i) Notice To Person With Undeliverable Address....................................... 23
ARTICLE XIII AMENDMENTS.................................................................................. 23
Section 44. Amendments............................................................................... 23
ARTICLE XIV LOANS TO OFFICERS........................................................................... 23
Section 45. Loans To Officers........................................................................ 23
</TABLE>
iv.
<PAGE>
BYLAWS
OF
COPPER MOUNTAIN NETWORKS, INC.
(A DELAWARE CORPORATION)
ARTICLE I
OFFICES
SECTION 1. REGISTERED OFFICE. The registered office of the corporation in
State of Delaware shall be in the City of Dover, County of Kent.
SECTION 2. OTHER OFFICES. The corporation shall also have and maintain an
office or principal place of business at 3931 Sorrento Valley Boulevard, San
Diego, California 92121, or at such other 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.
<PAGE>
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 General Corporation Law of Delaware, (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 (90/th/) day nor earlier than the close of business on
the one hundred twentieth (120/th/) 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
(120/th/) day prior to such annual meeting and not later than the close of
business on the later of the ninetieth (90/th/) day prior to such annual meeting
or the tenth (10/th/) 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.
<PAGE>
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 (10/th/) 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, (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.
<PAGE>
or (iv) by the holders of shares entitled to cast not less than ten percent
(10%) of the votes at the meeting, and shall be held at such place, on such
date, and at such time as the Board of Directors, shall fix. At any time or
times that the corporation is subject to Section 2115(b) of the California
General Corporation Law ("CGCL"), stockholders holding five percent (5%) or more
of the outstanding shares shall have the right to call a special meeting of
stockholders as set forth in Section 18(c) herein.
(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 (120/th/) day
prior to such special meeting and not later than the close of business on the
later of the ninetieth (90/th/) day prior to such meeting or the tenth (10/th/)
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
4.
<PAGE>
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.
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 law, the Certificate of Incorporation or these Bylaws, all
action taken by the holders of a majority of the vote cast, excluding
abstentions, at any meeting at which a quorum is present shall be valid and
binding upon the corporation; provided, however, that, except as set forth in
Section 17 herein, 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, including abstentions, 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, excluding abstentions. 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
5.
<PAGE>
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 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 Delaware General Corporation Law, 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.
(A) Unless otherwise provided in the Certificate of Incorporation,
any action required by statute to be taken at any annual or special meeting of
the stockholders, or any action which may be taken at any annual or special
meeting of the 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 than
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.
(B) Every written consent shall bear the date of signature of each
stockholder who signs the consent, and no written consent shall be effective to
take the corporate action referred to therein unless, within sixty (60) days of
the earliest dated consent delivered to the corporation in the manner herein
required, written consents signed by a sufficient number of stockholders to take
action are delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to a corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
6.
<PAGE>
(C) Prompt notice of the taking of the corporate action without a
meeting by less than unanimous written consent shall be given to those
stockholders who have not consented in writing. If the action which is consented
to is such as would have required the filing of a certificate under any section
of the Delaware General Corporation Law if such action had been voted on by
stockholders at a meeting thereof, then the certificate filed under such section
shall state, in lieu of any statement required by such section concerning any
vote of stockholders, that written consent has been given as provided in Section
228 of the Delaware General Corporation Law.
(D) Notwithstanding the foregoing, no such action by written consent
may be taken following the closing of the initial public offering pursuant to an
effective registration statement under the Securities Act of 1933, as amended
(the "1933 Act"), covering the offer and sale of Common Stock of the corporation
(the "Initial Public Offering").
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 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
7.
<PAGE>
provided in these Bylaws. No reduction of the authorized number of directors
shall have the effect of removing any director before the director's term of
office expires.
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. BOARD OF DIRECTORS.
(A) Directors shall be elected at each annual meeting of stockholders
to hold office until the next annual meeting. Each director shall hold office
either until the expiration of the term for which elected or appointed and until
a successor has been elected and qualified, or until such director's death,
resignation or removal. No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director.
(B) No person entitled to vote at an election for directors may
cumulate votes to which such person is entitled, unless, at the time of such
election, the corporation is subject to (S)2115(b) of the CGCL. During such time
or times that the corporation is subject to (S)2115(b) of the CGCL, every
stockholder entitled to vote at an election for directors may cumulate such
stockholder's votes and give one candidate a number of votes equal to the number
of directors to be elected multiplied by the number of votes to which such
stockholder's shares are otherwise entitled, or distribute the stockholder's
votes on the same principle among as many candidates as such stockholder thinks
fit. No stockholder, however, shall be entitled to so cumulate such
stockholder's votes unless (i) the names of such candidate or candidates have
been placed in nomination prior to the voting and (ii) the stockholder has given
notice at the meeting, prior to the voting, of such stockholder's intention to
cumulate such stockholder's votes. If any stockholder has given proper notice to
cumulate votes, all stockholders may cumulate their votes for any candidates who
have been properly placed in nomination. Under cumulative voting, the candidates
receiving the highest number of votes, up to the number of directors to be
elected, are elected.
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 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 Bylaw 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
8.
<PAGE>
immediately prior to any such increase), the Delaware Court of Chancery may,
upon application of any stockholder 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 Delaware General Corporation Law.
(C) At any time or times that the corporation is subject to Section
2115(b) of the CGCL, if, after the filling of any vacancy by the directors, the
directors then in office who have been elected by stockholders shall constitute
less than a majority of the directors then in office, then
(1) Any holder or holders of an aggregate of five percent (5%)
or more of the total number of shares at the time outstanding having the right
to vote for those directors may call a special meeting of stockholders; or
(2) The Superior Court of the proper county shall, upon
application of such stockholder or stockholders, summarily order a special
meeting of stockholders, to be held to elect the entire board, all in accordance
with Section 305(c) of the CGCL. The term of office of any director shall
terminate upon that election of a successor.
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. 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. Except as hereinafter otherwise provided,
regular meetings of the Board of Directors shall be held in the office of the
corporation required to be maintained pursuant to Section 2 hereof. Unless
otherwise restricted by the Certificate of Incorporation, regular meetings of
the Board of Directors may also be held at any place within or without the State
of Delaware which has been designated by resolution of the Board of Directors or
the written consent of all directors.
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(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,
facsimile, telegraph or telex, 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 the 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 21. QUORUM AND VOTING.
(A) Unless the Certificate of Incorporation requires a greater number
and except with respect to indemnification questions arising under Section 42
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 directors present, unless a different vote be required by
law, the Certificate of Incorporation or these Bylaws.
SECTION 22. 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
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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 23. 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 24. COMMITTEES.
(A) EXECUTIVE COMMITTEE. The Board of Directors may by resolution
passed by a majority of the whole Board of Directors 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, including without limitation the power or authority
to declare a dividend, to authorize the issuance of stock and to adopt a
certificate of ownership and merger, 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 (except that a committee may, to the extent
authorized in the resolution or resolutions providing for the issuance of shares
of stock adopted by the Board of Directors fix the designations and any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation or the conversion
into, or the exchange of such shares for, shares of any other class or classes
or any other series of the same or any other class or classes of stock of the
corporation or fix the number of shares of any series of stock or authorize the
increase or decrease of the shares of any series), 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, or amending the bylaws of the corporation.
(B) OTHER COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, 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 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 the provisions of subsections (a)
or (b) of this Bylaw may at any
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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 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 24 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 25. 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, or if the President is absent, the most senior Vice
President, or, in the absence of any such officer, a chairman of the meeting
chosen by a majority of the directors present, shall preside over the meeting.
The Secretary, or in his absence, an Assistant Secretary directed to do so by
the President, shall act as secretary of the meeting.
ARTICLE V
OFFICERS
SECTION 26. 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, 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
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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.
SECTION 27. 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 27.
(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
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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 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 the extent such officers have
been designated by the Board of Directors, 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 28. 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 29. 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 30. 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 31. 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
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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.
Unless otherwise specifically determined by the Board of Directors or otherwise
required by law, promissory notes, deeds of trust, mortgages and other evidences
of indebtedness of the corporation, and other corporate instruments or documents
requiring the corporate seal, and certificates of shares of stock owned by the
corporation, shall be executed, signed or endorsed by the Chairman of the Board
of Directors, or the President or any Vice President, and by the Secretary or
Treasurer or any Assistant Secretary or Assistant Treasurer. All other
instruments and documents requiring the corporate signature, but not requiring
the corporate seal, may be executed as aforesaid or in such other manner as may
be directed by the Board of Directors.
All checks and drafts drawn on banks or other depositories 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 by any contract or engagement or to pledge its
credit or to render it liable for any purpose or for any amount.
SECTION 32. 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 33. 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
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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 34. 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 advertise the same in such manner as it shall require or to
give the corporation a surety bond in such 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 35. 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 General Corporation Law of Delaware.
SECTION 36. 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 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.
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(B) Prior to the Initial Public Offering, in order that the
corporation may determine the stockholders entitled to consent to corporate
action in writing without a meeting, the Board of Directors may fix 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 date
shall not be more than ten (10) days after the date upon which the resolution
fixing the record date is adopted by the Board of Directors. Any stockholder of
record seeking to have the stockholders authorize or take corporate action by
written consent shall, by written notice to the Secretary, request the Board of
Directors to fix a record date. The Board of Directors shall promptly, but in
all events within ten (10) days after the date on which such a request is
received, adopt a resolution fixing the record date. If no record date has been
fixed by the Board of Directors within ten (10) days of the date on which such a
request is received, the record date for determining stockholders entitled to
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is required by applicable law, shall be the first date
on which a signed written consent setting forth the action taken or proposed to
be taken is delivered to the corporation by delivery to its registered office in
the State of Delaware, its principal place of business or an officer or agent of
the corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the Board of Directors and prior action by
the Board of Directors is required by law, the record date for determining
stockholders entitled to consent to corporate action in writing without a
meeting shall be at the close of business on the day on which the Board of
Directors adopts the resolution taking such prior action.
(C) 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 37. 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.
ARTICLE VIII
OTHER SECURITIES OF THE CORPORATION
SECTION 38. EXECUTION OF OTHER SECURITIES. All bonds, debentures and other
corporate securities of the corporation, other than stock certificates (covered
in Section 33), 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
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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 39. DECLARATION OF 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 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.
SECTION 40. 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.
ARTICLE X
FISCAL YEAR
SECTION 41. FISCAL YEAR. The fiscal year of the corporation shall be
fixed by resolution of the Board of Directors.
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ARTICLE XI
INDEMNIFICATION
SECTION 42. 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 Delaware General
Corporation 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 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 Delaware General Corporation 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 Delaware General Corporation Law.
(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 Bylaw or otherwise.
Notwithstanding the foregoing, unless otherwise determined pursuant to
paragraph (e) of this Bylaw, 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 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.
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(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 Bylaw 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
Delaware General Corporation 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 Delaware General Corporation 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 Article XI 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 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 agents respecting indemnification and advances, to the
fullest extent not prohibited by the Delaware General Corporation 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 Delaware
General Corporation Law, the corporation, upon approval by the Board of
Directors, may purchase
20.
<PAGE>
insurance on behalf of any person required or permitted to be indemnified
pursuant to this Bylaw.
(H) AMENDMENTS. Any repeal or modification of this Bylaw 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 Bylaw that
shall not have been invalidated, or by 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 Bylaw with respect to the resulting or surviving corporation as he would
have with respect to such constituent corporation if its separate existence had
continued.
(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
21.
<PAGE>
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 Bylaw.
ARTICLE XII
NOTICES
SECTION 43. 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 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) ADDRESS UNKNOWN. If no address of a stockholder or Director be
known, notice may be sent to the office of the corporation required to be
maintained pursuant to Section 2 hereof.
(D) 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.
(E) TIME NOTICES DEEMED GIVEN. All notices given by mail, 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.
(F) 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 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.
(G) 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.
22.
<PAGE>
(H) 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
Delaware General Corporation Law, 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.
(I) 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 Delaware General Corporation Law, 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 44. AMENDMENTS. Subject to paragraph (h) of Section 42 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 at an election of the directors. The Board of
Directors shall also have the power to adopt, amend, or repeal Bylaws.
ARTICLE XIV
LOANS TO OFFICERS
SECTION 45. 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
23.
<PAGE>
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.
24.
<PAGE>
EXHIBIT 3.5
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
COPPER MOUNTAIN NETWORKS, INC.
COPPER MOUNTAIN NETWORKS, INC., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware, hereby
certifies as follows:
1. The name of the corporation is Copper Mountain Networks, Inc.
2. The corporation's original Certificate of Incorporation was filed with
the Secretary of State on _________________, 1999.
3. The Second Amended and Restated Certificate of Incorporation of this
corporation, in the form attached hereto as Exhibit A, has been duly adopted by
the Board of Directors and by the stockholders of the corporation in accordance
with Sections 228, 242 and 245 of the General Corporation Law of the State of
Delaware.
4. The Second Amended and Restated Certificate of Incorporation so adopted
reads in full as set forth in Exhibit A attached hereto and hereby incorporated
by reference.
IN WITNESS WHEREOF, Copper Mountain Networks, Inc. has caused this Second
Amended and Restated Certificate of Incorporation to be signed by its President
and Chief Executive Officer and attested to by its Secretary this ____ day of
____________, 1999.
______________________________________
Richard Gilbert
President and Chief Executive Officer
ATTEST:
______________________________________
Joseph Markee
Secretary
<PAGE>
Exhibit A
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
COPPER MOUNTAIN NETWORKS, INC.
I.
The name of this corporation is COPPER MOUNTAIN NETWORKS, INC.
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, and the
name of the registered agent of the corporation in the State of Delaware at such
address is Corporation Service 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 one hundred
five million (105,000,000) shares. One hundred million (100,000,000) shares
shall be Common Stock, each having a par value of one-tenth of one cent ($.001).
Five million (5,000,000) shares shall be Preferred Stock, each having a par
value of one-tenth of one cent ($.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,
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
<PAGE>
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. A. Directors shall be elected at each annual meeting of
stockholders to hold office until the next annual meeting. Each director shall
hold office either until the expiration of the term for which elected or
appointed and until a successor has been elected and qualified, or until such
director's death, resignation or removal. No decrease in the number of
directors constituting the Board of Directors shall shorten the term of any
incumbent director.
B. No person entitled to vote at an election for directors may
cumulate votes to which such person is entitled, unless, at the time of such
election, the corporation is subject to Section 2115(b) of the California
General Corporation Law ("CGCL") AND is not a "listed" corporation or ceases to
be a "listed" corporation under Section 301.5 of the CGCL. During this time,
every stockholder entitled to vote at an election for directors may cumulate
such stockholder's votes and give one candidate a number of votes equal to the
number of directors to be elected multiplied by the number of votes to which
such stockholder's shares are otherwise entitled, or distribute the
stockholder's votes on the same principle among as many candidates as such
stockholder thinks fit. No stockholder, however, shall be entitled to so
cumulate such stockholder's votes unless (i) the names of such candidate or
candidates have been placed in nomination prior to the voting and (ii) the
stockholder has given notice at the meeting, prior to the voting, of such
stockholder's intention to cumulate such stockholder's votes. If any
stockholder has given proper notice to cumulate votes, all stockholders may
cumulate
2.
<PAGE>
their votes for any candidates who have been properly placed in nomination.
Under cumulative voting, the candidates receiving the highest number of votes,
up to the number of directors to be elected, are elected.
3. Subject to the rights of the holders of any series of Preferred
Stock, the Board of Directors or any individual director may be removed from
office at any time (ii) with cause by the affirmative vote of the holders of a
majority of the voting power of all the then outstanding shares of voting stock
of the corporation, entitled to vote at an election of directors (the "Voting
Stock") or (ii) without cause by the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66 2/3%) of the voting power of all the then-
outstanding shares of the Voting Stock.
4. 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.
1. Subject to paragraph (h) of Section 42 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. The Board of Directors shall also
have the power to adopt, amend, or repeal Bylaws.
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
by written consent to the extent provided for in the Bylaws or at an annual or
special meeting of stockholders called in accordance with the Bylaws; and
following the closing of the Initial Public Offering no action shall be taken by
the stockholders by written consent.
4. Advance notice of stockholder nominations for the election of directors
and of business to be brought by stockholders before any meeting of the
3.
<PAGE>
stockholders of the corporation shall be given in the manner provided in the
Bylaws of the corporation.
VI.
A. A director of the corporation shall not be personally liable to the
corporation or its stockholders for monetary damages for any 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 an 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 shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
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 Section VII.B., 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.
4.
<PAGE>
EXHIBIT 4.2
===============================================================================
[LOGO OF COPPER MOUNTAIN NETWORKS, INC.]
COMMON STOCK COMMON STOCK
CM_______
NUMBER SHARES
INCORPORATED UNDER THE SEE REVERSE FOR CERTAIN
LAWS OF THE STATE DEFINITIONS
DELAWARE CUSIP
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
FULLY PAID AND NONASSESSABLE SHARES OF THE COMMON STOCK,
$0.001 PAR VALUE OF
COPPER MOUNTAIN NETWORKS, INC.
transferable on the books of the Corporation in person or by duly authorized
attorney on surrender of this certificate properly endorsed. This certificate
shall not be valid until countersigned and registered by the Transfer Agent and
Registrar.
WITNESS the facsimile seal of the Corporation and the signatures of its duly
authorized officers.
Dated:___________________
[CORPORATE SEAL OF COPPER MOUNTAIN NETWORKS, INC.]
/s/______________________ /s/______________________
SECRETARY CHAIRMAN
COUNTERSIGNED AND REGISTERED:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
TRANSFER AGENT AND REGISTRAR
BY_______________________________________________
AUTHORIZED SIGNATURE
================================================================================
<PAGE>
================================================================================
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.
Such requests shall be made to the Corporation's Secretary at the principal
office of the Corporation.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, OR DESTROYED THE
CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO THE ISSUANCE OF A
REPLACEMENT CERTIFICATE.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common UNIF GIFT MIN ACT-.........Custodian.........
TEN ENT - as tenants by the (Cust) (Minor)
entireties under Uniform Gifts to
JP TEN - as joint tenants with Minors Act..................
right of survivorship (State)
and not as tenants in UNIF TRF MIN ACT- .....Custodian (until age..)
common (Cust)
......under Uniform Transfer
(Minor)
to Minors Act...............
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, _____________________________ hereby sell, assign and
transfer unto
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
_____________________________
_____________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
_________________________________________________________________________ Shares
of the common stock represented by the within Certificate,
and do hereby irrevocably constitute and appoint
________________________________________________________________________Attorney
to transfer the said stock on the books of the within named
Corporation with full power of substitution in the premises.
Dated ____________________________
X __________________________________
X __________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S) AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By_________________________________
THE SIGNATURE(S) MUST BE GUARANTEED
BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND
LOAN ASSOCIATIONS AND CREDIT UNIONS
WITH MEMBERSHIP IN AN APPROVED
SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17Ad-15.
<PAGE>
EXHIBIT 10.1
COPPER MOUNTAIN NETWORKS, INC.
AMENDED AND RESTATED
1996 EQUITY INCENTIVE PLAN
ADOPTED AUGUST 12, 1996
APPROVED BY STOCKHOLDERS AUGUST 12, 1996
AMENDED OCTOBER 5, 1998
AMENDED AND RESTATED FEBRUARY 24, 1999
APPROVED BY STOCKHOLDERS ____________, 1999
1. PURPOSES.
(a) ELIGIBLE STOCK AWARD RECIPIENTS. The persons eligible to receive Stock
Awards are the Employees, Directors and Consultants of the Company and its
Affiliates.
(b) AVAILABLE STOCK AWARDS. The purpose of the Plan is to provide a means
by which eligible recipients of Stock Awards may be given an opportunity to
benefit from increases in value of the Common Stock through the granting of the
following Stock Awards: (i) Incentive Stock Options, (ii) Nonstatutory Stock
Options, (iii) stock appreciation rights, (iv) stock bonuses and (v) rights to
acquire restricted stock.
(c) GENERAL PURPOSE. The Company, by means of the Plan, seeks to retain
the services of the group of persons eligible to receive Stock Awards, to secure
and retain the services of new members of this group and to provide incentives
for such persons to exert maximum efforts for the success of the Company and its
Affiliates.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation of
the Company, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance with
subsection 3(c).
(e) "COMMON STOCK" means the common stock of the Company.
(f) "COMPANY" means Copper Mountain Networks, Inc., a Delaware corporation.
(g) "CONCURRENT STOCK APPRECIATION RIGHT" or "CONCURRENT RIGHT" means a
right granted pursuant to subsection 7(c)(2) of the Plan.
1
<PAGE>
(h) "CONSULTANT" means any person, including an advisor, (1) engaged by the
Company or an Affiliate to render consulting or advisory services and who is
compensated for such services or (2) who is a member of the Board of Directors
of an Affiliate. However, the term "Consultant" shall not include either
Directors of the Company who are not compensated by the Company for their
services as Directors or Directors of the Company who are paid a director's fee
or otherwise compensated by the Company solely for their services as Directors.
(i) "CONTINUOUS SERVICE" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or Consultant, is not
interrupted or terminated. The Participant's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate as an Employee,
Consultant or Director or a change in the entity for which the Participant
renders such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a Director of the
Company will not constitute an interruption of Continuous Service. The Board or
the chief executive officer of the Company, in that party's sole discretion, may
determine whether Continuous Service shall be considered interrupted in the case
of any leave of absence approved by that party, including sick leave, military
leave or any other personal leave.
(j) "COVERED EMPLOYEE" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to stockholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(k) "DIRECTOR" means a member of the Board of Directors of the Company.
(l) "DISABILITY" means the permanent and total disability of a person
within the meaning of Section 22(e)(3) of the Code.
(m) "EMPLOYEE" means any person employed by the Company or an Affiliate.
Mere service as a Director or payment of a director's fee by the Company or an
Affiliate shall not be sufficient to constitute "employment" by the Company or
an Affiliate.
(n) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(o) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or traded on the Nasdaq National Market or the Nasdaq SmallCap Market, the Fair
Market Value of a share of Common Stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in the Common Stock) on the last market trading day prior to the day of
determination, as reported in THE WALL STREET JOURNAL or such other source as
the Board deems reliable.
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(ii) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
(p) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(q) "INDEPENDENT STOCK APPRECIATION RIGHT" or "INDEPENDENT RIGHT" means a
right granted pursuant to subsection 7(c)(3) of the Plan.
(r) "LISTING DATE" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
security exchange, or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of the Section 25100(o) of the California
Corporate Securities Law of 1968.
(s) "NON-EMPLOYEE DIRECTOR" means a Director of the Company who either (i)
is not a current Employee or Officer of the Company or its parent or a
subsidiary, does not receive compensation (directly or indirectly) from the
Company or its parent or a subsidiary for services rendered as a consultant or
in any capacity other than as a Director (except for an amount as to which
disclosure would not be required under Item 404(a) of Regulation S-K promulgated
pursuant to the Securities Act ("Regulation S-K")), does not possess an interest
in any other transaction as to which disclosure would be required under Item
404(a) of Regulation S-K, and is not engaged in a business relationship as to
which disclosure would be required under Item 404(b) of Regulation S-K; or (ii)
is otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(t) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
(u) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(v) "OPTION" means an Incentive Stock Option or a Nonstatutory Stock Option
granted pursuant to the Plan.
(w) "OPTION AGREEMENT" means a written agreement between the Company and an
Optionholder evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(x) "OPTIONHOLDER" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.
(y) "OUTSIDE DIRECTOR" means a Director of the Company who either (i) is
not a current employee of the Company or an "affiliated corporation" (within the
meaning of Treasury
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Regulations promulgated under Section 162(m) of the Code), is not a former
employee of the Company or an "affiliated corporation" receiving compensation
for prior services (other than benefits under a tax qualified pension plan), was
not an officer of the Company or an "affiliated corporation" at any time, and is
not currently receiving direct or indirect remuneration from the Company or an
"affiliated corporation" for services in any capacity other than as a Director
or (ii) is otherwise considered an "outside director" for purposes of Section
162(m) of the Code.
(z) "PARTICIPANT" means a person to whom a Stock Award is granted pursuant
to the Plan or, if applicable, such other person who holds an outstanding Stock
Award.
(aa) "PLAN" means this Copper Mountain Networks, Inc. Amended and Restated
1996 Equity Incentive Plan.
(bb) "RULE 16b-3" means Rule 16b-3 promulgated under the Exchange Act or any
successor to Rule 16b-3, as in effect from time to time.
(cc) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(dd) "STOCK APPRECIATION RIGHT" means any of the various types of rights
which may be granted under subsection 7(c) of the Plan.
(ee) "STOCK AWARD" means any right granted under the Plan, including an
Option, a stock appreciation right, a stock bonus and a right to acquire
restricted stock.
(ff) "STOCK AWARD AGREEMENT" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
(gg) "TANDEM STOCK APPRECIATION RIGHT" or "TANDEM RIGHT" means a right
granted pursuant to subsection 7(c)(1) of the Plan.
(hh) "TEN PERCENT STOCKHOLDER" means a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of any of its Affiliates.
3. ADMINISTRATION.
(a) ADMINISTRATION BY BOARD. The Board will administer the Plan unless and
until the Board delegates administration to a Committee, as provided in
subsection 3(c).
(b) POWERS OF BOARD. The Board shall have the power, subject to, and within
the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; what type or combination of types of Stock Award shall be
granted; the provisions of each Stock Award granted (which need not be
identical), including the time or times when a person shall be
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permitted to receive stock pursuant to a Stock Award; and the number of shares
with respect to which a Stock Award shall be granted to each such person.
(ii) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(iii) To amend the Plan or a Stock Award as provided in Section 12.
(iv) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(v) Any interpretation of the Plan by the Board of any decision made
by it under the Plan shall be final and binding on all persons.
(c) DELEGATION TO COMMITTEE.
(i) GENERAL. The Board may delegate administration of the Plan to a
Committee or Committees of one or more members of the Board, and the term
"Committee" shall apply to any person or persons to whom such authority has been
delegated. If administration is delegated to a Committee, the Committee shall
have, in connection with the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate to a subcommittee any of
the administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the Committee or
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
(ii) COMMITTEE COMPOSITION WHEN COMMON STOCK IS PUBLICLY TRADED. At
such time as the Common Stock is publicly traded, in the discretion of the
Board, a Committee may consist solely of two (2) or more Outside Directors, in
accordance with Section 162(m) of the Code, and/or solely of two (2) or more
Non-Employee Directors, in accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (i) delegate to a committee of one (1)
or more members of the Board who are not Outside Directors, the authority to
grant Stock Awards to eligible persons who are either (a) not then Covered
Employees and are not expected to be Covered Employees at the time of
recognition of income resulting from such Stock Award or (b) not persons with
respect to whom the Company wishes to comply with Section 162(m) of the Code
and/or (ii) delegate to a committee of one (1) or more members of the Board who
are not Non-Employee Directors the authority to grant Stock Awards to eligible
persons who are not then subject to Section 16 of the Exchange Act.
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4. SHARES SUBJECT TO THE PLAN.
(a) SHARE RESERVE. Subject to the provisions of Section 11 relating to
adjustments upon changes in stock, the stock that may be issued pursuant to
Stock Awards shall not exceed in the aggregate seven million eight hundred
seventy-three thousand three hundred eighty-three (7,873,383) shares of Common
Stock, plus an annual increase to be added on the day of each Annual
Stockholders Meeting beginning with the Annual Stockholders Meeting in 2000
equal to the least of the following amounts (i) 4% of the Company's outstanding
shares on such date (rounded to the nearest whole share and calculated on a
fully diluted basis), that is assuming the exercise of all outstanding stock
options and warrants to purchase common stock or (ii) an amount determined by
the Board.
(b) REVERSION OF SHARES TO THE SHARE RESERVE. If any Stock Award shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full (or vested in the case of Restricted Stock), the stock
not acquired under such Stock Award shall revert to and again become available
for issuance under the Plan. Shares subject to stock appreciation rights
exercised in accordance with the Plan shall not be available for subsequent
issuance under the Plan. If any Common Stock acquired pursuant to the exercise
of an Option shall for any reason be repurchased by the Company under an
unvested share repurchase option provided under the Plan, the stock repurchased
by the Company under such repurchase option shall not revert to and again become
available for issuance under the Plan.
(c) SOURCE OF SHARES. The stock subject to the Plan may be unissued shares
or reacquired shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) ELIGIBILITY FOR SPECIFIC STOCK AWARDS. Incentive Stock Options and
Stock Appreciation Rights appurtenant thereto may be granted only to Employees.
Stock Awards other than Incentive Stock Options and Stock Appreciation Rights
appurtenant thereto may be granted to Employees, Directors and Consultants.
(b) TEN PERCENT STOCKHOLDERS. No Ten Percent Stockholder shall be eligible
for the grant of an Incentive Stock Option unless the exercise price of such
Option is at least one hundred ten percent (110%) of the Fair Market Value of
the Common Stock at the date of grant and the Option is not exercisable after
the expiration of five (5) years from the date of grant.
(c) SECTION 162(M) LIMITATION. Subject to the provisions of Section 11
relating to adjustments upon changes in stock, no employee shall be eligible to
be granted Options and/or stock appreciation rights covering more than five
hundred thousand (500,000) shares of the Common Stock during any calendar year.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be separately
designated Incentive Stock
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Options or Nonstatutory Stock Options at the time of grant, and a separate
certificate or certificates will be issued for shares purchased on exercise of
each type of Option. The provisions of separate Options need not be identical,
but each Option shall include (through incorporation of provisions hereof by
reference in the Option or otherwise) the substance of each of the following
provisions:
(a) TERM. Subject to the provisions of subsection 5(b) regarding Ten
Percent Stockholders, no Incentive Stock Option shall be exercisable after the
expiration of ten (10) years from the date it was granted.
(b) EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the provisions
of subsection 5(b) regarding Ten Percent Stockholders, the exercise price of
each Incentive Stock Option shall be not less than one hundred percent (100%) of
the Fair Market Value of the stock subject to the Option on the date the Option
is granted. Notwithstanding the foregoing, an Incentive Stock Option may be
granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.
(c) EXERCISE PRICE OF A NONSTATUTORY STOCK OPTION. The exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, a Nonstatutory Stock Option
may be granted with an exercise price lower than that set forth in the preceding
sentence if such Option is granted pursuant to an assumption or substitution for
another option in a manner satisfying the provisions of Section 424(a) of the
Code.
(d) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised or (ii) at
the discretion of the Board at the time of the grant of the Option (or
subsequently in the case of a Nonstatutory Stock Option) by delivery to the
Company of other Common Stock, according to a deferred payment or other
arrangement (which may include, without limiting the generality of the
foregoing, the use of other Common Stock) with the Participant or in any other
form of legal consideration that may be acceptable to the Board; provided,
however, that at any time that the Company is incorporated in Delaware, payment
of the Common Stock's "par value," as defined in the Delaware General
Corporation Law, shall not be made by deferred payment, whether issuing a
promissory note or otherwise.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at no less than the minimum
rate of interest necessary to avoid the treatment as interest, under any
applicable provisions of the Code, of any amounts other than amounts stated to
be interest under the deferred payment arrangement.
(e) TRANSFERABILITY OF AN INCENTIVE STOCK OPTION. An Incentive Stock Option
shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the Optionholder
only by the Optionholder. Notwithstanding the foregoing provisions of this
subsection 6(e), the Optionholder may, by delivering written
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notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionholder, shall thereafter be
entitled to exercise the Option.
(f) TRANSFERABILITY OF A NONSTATUTORY STOCK OPTION. A Nonstatutory Stock
Option shall be transferable to the extent provided in the Option Agreement. If
the Nonstatutory Stock Option does not provide for transferability, then the
Nonstatutory Stock Option shall not be transferable except by will or by the
laws of descent and distribution and shall be exercisable during the lifetime of
the Optionholder only by the Optionholder. Notwithstanding the foregoing
provisions of this subsection 6(f), the Optionholder may, by delivering written
notice to the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionholder, shall thereafter be
entitled to exercise the Option.
(g) VESTING GENERALLY. The total number of shares of Common Stock subject
to an Option may, but need not, vest and therefore become exercisable in
periodic installments which may, but need not, be equal. The Option may be
subject to such other terms and conditions on the time or times when it may be
exercised (which may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options may vary. The
provisions of this subsection 6(g) are subject to any Option provisions
governing the minimum number of shares as to which an Option may be exercised.
(h) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death or
Disability), the Optionholder may exercise his or her Option (to the extent that
the Optionholder was entitled to exercise it as of the date of termination) but
only within such period of time ending on the earlier of (i) the date three (3)
months following the termination of the Optionholder's Continuous Service (or
such longer or shorter period specified in the Option Agreement), or (ii) the
expiration of the term of the Option as set forth in the Option Agreement. If,
after termination, the Optionholder does not exercise his or her Option within
the time specified in the Option Agreement, the Option shall terminate.
(i) DISABILITY OF OPTIONHOLDER. In the event an Optionholder's Continuous
Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the Optionholder
was entitled to exercise it as of the date of termination), but only within such
period of time ending on the earlier of (i) the date twelve (12) months
following such termination (or such longer or shorter period specified in the
Option Agreement) or (ii) the expiration of the term of the Option as set forth
in the Option Agreement. If, after termination, the Optionholder does not
exercise his or her Option within the time specified herein, the Option shall
terminate.
(j) DEATH OF OPTIONHOLDER. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the period (if any) specified in the Option Agreement
after the termination of the Optionholder's Continuous Service for a reason
other than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise the Option as of the date of death) by the
Optionholder's estate, by a person who acquired the right to exercise the Option
by bequest or inheritance or by a person designated to exercise the option upon
the Optionholder's death
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pursuant to subsection 6(e) or 6(f), but only within the period ending on the
earlier of (1) the date eighteen (18) months following the date of death (or
such longer or shorter period specified in the Option Agreement) or (2) the
expiration of the term of such Option as set forth in the Option Agreement. If,
after death, the Option is not exercised within the time specified herein, the
Option shall terminate.
(k) EXTENSION OF TERMINATION DATE. An Optionholder's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionholder's Continuous Service would be prohibited at any time solely because
the issuance of shares would violate the registration requirements under the
Securities Act, then the Option shall terminate no earlier than (i) the
expiration of the term of the Option set forth in subsection 6(a) or (ii) the
expiration of a period of three (3) months after the termination of the
Optionholder's Continuous Service during which the exercise of the Option would
not be in violation of such registration requirements.
(l) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the Optionholder's
Continuous Service terminates to exercise the Option as to any part or all of
the shares subject to the Option prior to the full vesting of the Option. Any
unvested shares so purchased may be subject to an unvested share repurchase
option in favor of the Company or to any other restriction the Board determines
to be appropriate.
(m) RE-LOAD OPTIONS. Without in any way limiting the authority of the Board
to make or not to make grants of Options hereunder, the Board shall have the
authority (but not an obligation) to include as part of any Option Agreement a
provision entitling the Optionholder to a further Option (a "Re-Load Option") in
the event the Optionholder exercises the Option evidenced by the Option
Agreement, in whole or in part, by surrendering other shares of Common Stock in
accordance with this Plan and the terms and conditions of the Option Agreement.
Any such Re-Load Option shall (i) provide for a number of shares equal to the
number of shares surrendered as part or all of the exercise price of such
Option; (ii) have an expiration date which is the same as the expiration date of
the Option the exercise of which gave rise to such Re-Load Option; and (iii)
have an exercise price which is equal to one hundred percent (100%) of the Fair
Market Value of the Common Stock subject to the Re-Load Option on the date of
exercise of the original Option. Notwithstanding the foregoing, a Re-Load Option
shall be subject to the same exercise price and term provisions heretofore
described for Options under the Plan.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the grant
of the original Option; provided, however, that the designation of any Re-Load
Option as an Incentive Stock Option shall be subject to the one hundred thousand
dollars ($100,000) annual limitation on exercisability of Incentive Stock
Options described in subsection 10(d) and in Section 422(d) of the Code. There
shall be no Re-Load Options on a Re-Load Option. Any such Re-Load Option shall
be subject to the availability of sufficient shares under subsection 4(a) and
the "Section 162(m) Limitation" on the grants of Options under subsection 5(c)
and shall be subject to such
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other terms and conditions as the Board may determine which are not inconsistent
with the express provisions of the Plan regarding the terms of Options.
7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.
(a) STOCK BONUS AWARDS. Each stock bonus agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem appropriate.
The terms and conditions of stock bonus agreements may change from time to time,
and the terms and conditions of separate stock bonus agreements need not be
identical, but each stock bonus agreement shall include (through incorporation
of provisions hereof by reference in the agreement or otherwise) the substance
of each of the following provisions:
(i) CONSIDERATION. A stock bonus shall be awarded in consideration
for past services actually rendered to the Company for its benefit.
(ii) VESTING. Shares of Common Stock awarded under the stock bonus
agreement may, but need not, be subject to a share reacquisition option in favor
of the Company in accordance with a vesting schedule to be determined by the
Board.
(iii) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. In the event a
Participant's Continuous Service terminates, the Company may reacquire any or
all of the shares of Common Stock held by the Participant which have not vested
as of the date of termination under the terms of the stock bonus agreement.
(iv) TRANSFERABILITY. Rights to acquire shares under the stock bonus
agreement shall be transferable by the Participant only upon such terms and
conditions as are set forth in the stock bonus agreement, as the Board shall
determine in its discretion, so long as stock awarded under the stock bonus
agreement remains subject to the terms of the stock bonus agreement.
(b) RESTRICTED STOCK AWARDS. Each restricted stock purchase agreement shall
be in such form and shall contain such terms and conditions as the Board shall
deem appropriate. The terms and conditions of the restricted stock purchase
agreements may change from time to time, and the terms and conditions of
separate restricted stock purchase agreements need not be identical, but each
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions:
(i) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board shall determine and
designate in such restricted stock purchase agreement. The purchase price shall
not be less than eighty-five percent (85%) of the stock's Fair Market Value on
the date such award is made or at the time the purchase is consummated.
(ii) CONSIDERATION. The purchase price of stock acquired pursuant to
the restricted stock purchase agreement shall be paid in one or a combination of
the following forms:
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(i) in cash or by check at the time of purchase; (ii) at the discretion of the
Board, according to a deferred payment arrangement using a promissory note or
other similar arrangement with the Participant; or (iii) in any other form of
legal consideration that may be acceptable to the Board in its discretion;
provided, however, that at any time that the Company is incorporated in
Delaware, payment of the Common Stock's "par value," as defined in the Delaware
General Corporation Law, shall not be made by deferred payment.
(iii) VESTING. Shares of Common Stock acquired under the restricted
stock purchase agreement may, but need not, be subject to a share repurchase
option in favor of the Company in accordance with a vesting schedule to be
determined by the Board.
(iv) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. In the event a
Participant's Continuous Service terminates, the Company may repurchase or
otherwise reacquire any or all of the shares of Common Stock held by the
Participant which have not vested as of the date of termination under the terms
of the restricted stock purchase agreement.
(v) TRANSFERABILITY. Rights to acquire shares under the restricted
stock purchase agreement shall be transferable by the Participant only upon such
terms and conditions as are set forth in the restricted stock purchase
agreement, as the Board shall determine in its discretion, so long as stock
awarded under the restricted stock purchase agreement remains subject to the
terms of the restricted stock purchase agreement.
(c) STOCK APPRECIATION RIGHTS.
(i) AUTHORIZED RIGHTS. The following three types of stock
appreciation rights shall be authorized for issuance under the Plan:
(1) TANDEM RIGHTS. A "Tandem Right" means a stock appreciation
right granted appurtenant to an Option which is subject to the same terms and
conditions applicable to the particular Option grant to which it pertains with
the following exceptions: The Tandem Right shall require the holder to elect
between the exercise of the underlying Option for shares of Common Stock and the
surrender, in whole or in part, of such Option for an appreciation distribution.
The appreciation distribution payable on the exercised the Tandem Right shall be
in cash (or, if so provided, in an equivalent number of shares of Common Stock
based on Fair Market Value on the date of the Option surrender) in an amount up
to the excess of (A) the Fair Market Value (on the date of the Option surrender)
of the number of shares of Common Stock covered by that portion of the
surrendered Option in which the Optionholder is vested over (B) the aggregate
exercise price payable for such vested shares.
(2) CONCURRENT RIGHTS. A "Concurrent Right" means a stock
appreciation right granted appurtenant to an Option which applies to all or a
portion of the shares of Common Stock subject to the underlying Option and which
is subject to the same terms and conditions applicable to the particular Option
grant to which it pertains with the following exceptions: A Concurrent Right
shall be exercised automatically at the same time the underlying Option is
exercised with respect to the particular shares of Common Stock to which the
Concurrent Right pertains. The appreciation distribution payable on an exercised
Concurrent
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Right shall be in cash (or, if so provided, in an equivalent number of shares of
Common Stock based on Fair Market Value on the date of the exercise of the
Concurrent Right) in an amount equal to such portion as determined by the Board
at the time of the grant of the excess of (A) the aggregate Fair Market Value
(on the date of the exercise of the Concurrent Right) of the vested shares of
Common Stock purchased -under the underlying Option which have Concurrent Rights
appurtenant to them over (B) the aggregate exercise price paid for such shares.
(3) INDEPENDENT RIGHTS. An "Independent Right" means a stock
appreciation right granted independently of any Option but which is subject to
the same terms and conditions applicable to a Nonstatutory Stock Option with the
following exceptions: An Independent Right shall be denominated in share
equivalents. The appreciation distribution payable on the exercised Independent
Right shall be not greater than an amount equal to the excess of (a) the
aggregate Fair Market Value (on the date of the exercise of the Independent
Right) of a number of shares of Company stock equal to the number of share
equivalents in which the holder is vested under such Independent Right, and with
respect to which the holder is exercising the Independent Right on such date,
over (b) the aggregate Fair Market Value (on the date of the grant of the
Independent Right) of such number of shares of Company stock. The appreciation
distribution payable on the exercised Independent Right shall be in cash or, if
so provided, in an equivalent number of shares of Common Stock based on Fair
Market Value on the date of the exercise of the Independent Right.
(ii) RELATIONSHIP TO OPTIONS. Stock appreciation rights appurtenant
to Incentive Stock Options may be granted only to Employees. The "Section 162(m)
Limitation" provided in subsection 5(c) shall apply as well to the grant of
stock appreciation rights.
(iii) EXERCISE. To exercise any outstanding stock appreciation right,
the holder shall provide written notice of exercise to the Company in compliance
with the provisions of the Stock Award Agreement evidencing such right. Except
as provided in subsection 5(c) regarding the "Section 162(m) Limitation," no
limitation shall exist on the aggregate amount of cash payments that the Company
may make under the Plan in connection with the exercise of a stock appreciation
right.
8. COVENANTS OF THE COMPANY.
(a) AVAILABILITY OF SHARES. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of Common Stock
required to satisfy such Stock Awards.
(b) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such authority
as may be required to grant Stock Awards and to issue and sell shares of Common
Stock upon exercise of the Stock Awards; provided, however, that this
undertaking shall not require the Company to register under the Securities Act
the Plan, any Stock Award or any stock issued or issuable pursuant to any such
Stock Award or to take similar actions under applicable law. If, after
reasonable efforts, the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company deems necessary
for the lawful issuance
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and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such Stock Awards
unless and until such authority is obtained.
9. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
10. MISCELLANEOUS.
(a) ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have the
power to accelerate the time at which a Stock Award may first be exercised or
the time during which a Stock Award or any part thereof will vest in accordance
with the Plan, notwithstanding the provisions in the Stock Award stating the
time at which it may first be exercised or the time during which it will vest.
(b) STOCKHOLDER RIGHTS. No Participant shall be deemed to be the holder of,
or to have any of the rights of a holder with respect to, any shares subject to
such Stock Award unless and until such Participant has satisfied all
requirements for exercise of the Stock Award pursuant to its terms.
(c) NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall confer upon
any Participant or other holder of Stock Awards any right to continue to serve
the Company or an Affiliate in the capacity in effect at the time the Stock
Award was granted or shall affect the right of the Company or an Affiliate to
terminate (i) the employment of an Employee with or without notice and with or
without cause, (ii) the service of a Consultant pursuant to the terms of such
Consultant's agreement with the Company or an Affiliate, (iii) the service of a
Consultant as a director of an Affiliate pursuant to the Bylaws of the Affiliate
or (iv) the service of a Director pursuant to the Bylaws of the Company, and any
applicable provisions of the corporate law of the state in which the Company is
incorporated.
(d) INCENTIVE STOCK OPTION $100,000 LIMITATION. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of stock with
respect to which Incentive Stock Options are exercisable for the first time by
any Optionholder during any calendar year (under all plans of the Company and
its Affiliates) exceeds one hundred thousand dollars ($100,000), the Options or
portions thereof which exceed such limit (according to the order in which they
were granted) shall be treated as Nonstatutory Stock Options.
(e) INVESTMENT ASSURANCES. The Company may require a Participant, as a
condition of exercising or acquiring stock under any Stock Award, (i) to give
written assurances satisfactory to the Company as to the Participant's knowledge
and experience in financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is knowledgeable and
experienced in financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the merits and
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risks of exercising the Stock Award; and (ii) to give written assurances
satisfactory to the Company stating that the Participant is acquiring the stock
subject to the Stock Award for the Participant's own account and not with any
present intention of selling or otherwise distributing the stock. The foregoing
requirements, and any assurances given pursuant to such requirements, shall be
inoperative if (1) the issuance of the shares upon the exercise or acquisition
of stock under the Stock Award has been registered under a then currently
effective registration statement under the Securities Act or (2) as to any
particular requirement, a determination is made by counsel for the Company that
such requirement need not be met in the circumstances under the then applicable
securities laws. The Company may, upon advice of counsel to the Company, place
legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the stock.
(f) WITHHOLDING OBLIGATIONS. To the extent provided by the terms of a Stock
Award Agreement, the Participant may satisfy any federal, state or local tax
withholding obligation relating to the exercise or acquisition of stock under a
Stock Award by any of the following means (in addition to the Company's right to
withhold from any compensation paid to the Participant by the Company) or by a
combination of such means: (i) tendering a cash payment; (ii) authorizing the
Company to withhold shares from the shares of the Common Stock otherwise
issuable to the participant as a result of the exercise or acquisition of stock
under the Stock Award; or (iii) delivering to the Company owned and unencumbered
shares of the Common Stock.
11. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) CAPITALIZATION ADJUSTMENTS. If any change is made in the stock subject
to the Plan, or subject to any Stock Award, without the receipt of consideration
by the Company (through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares, change
in corporate structure or other transaction not involving the receipt of
consideration by the Company), the Plan will be appropriately adjusted in the
class(es) and maximum number of securities subject to the Plan pursuant to
subsection 4(a) and the maximum number of securities subject to award to any
person pursuant to subsection 5(c), and the outstanding Stock Awards will be
appropriately adjusted in the class(es) and number of securities and price per
share of stock subject to such outstanding Stock Awards. Such adjustments shall
be made by the Board, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a transaction "without receipt of consideration" by the
Company.)
(b) CHANGE IN CONTROL--DISSOLUTION OR LIQUIDATION. In the event of a
dissolution or liquidation of the Company, then such Stock Awards shall be
terminated if not exercised (if applicable) prior to such event.
(c) CHANGE IN CONTROL--ASSET SALE. In the event of a sale of all or
substantially all of the assets of the Company, then all Stock Awards
outstanding under the Plan shall continue in full force and effect.
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(d) CHANGE IN CONTROL--MERGER OR CONSOLIDATION IN WHICH THE COMPANY IS NOT
THE SURVIVING CORPORATION. In the event of a merger or consolidation in which
the Company is not the surviving corporation, then any surviving corporation or
acquiring corporation shall assume any Stock Awards outstanding under the Plan
or shall substitute similar stock awards (including an award to acquire the same
consideration paid to the stockholders in the transaction described in this
subsection 11(d)) for those outstanding under the Plan. In the event any
surviving corporation or acquiring corporation refuses to assume such Stock
Awards or to substitute similar stock awards for those outstanding under the
Plan, then with respect to Stock Awards held by Participants whose Continuous
Service has not terminated, the vesting of such Stock Awards (and, if
applicable, the time during which such Stock Awards may be exercised) shall be
accelerated in full, and the Stock Awards shall terminate if not exercised (if
applicable) at or prior to such event. With respect to any other Stock Awards
outstanding under the Plan, such Stock Awards shall terminate if not exercised
(if applicable) prior to such event.
(e) CHANGE IN CONTROL--REVERSE MERGER. In the event of a reverse merger in
which the Company is the surviving corporation but the shares of 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, then any acquiring corporation (or a corporation which directly or
indirectly controls such an acquiring corporation) shall assume any Stock Awards
outstanding under the Plan or shall substitute similar stock awards (including
an award to acquire the same consideration paid to the stockholders in the
transaction described in this subsection 11(e)) for those outstanding under the
Plan. In the event any acquiring corporation or corporation controlling such an
acquiring corporation refuses to assume such Stock Awards or to substitute
similar stock awards for those outstanding under the Plan, then with respect to
Stock Awards held by Participants whose Continuous Service has not terminated,
the vesting of such Stock Awards (and, if applicable, the time during which such
Stock Awards may be exercised) shall be accelerated in full, and the Stock
Awards shall terminate if not exercised (if applicable) at or prior to such
event. With respect to any other Stock Awards outstanding under the Plan, such
Stock Awards shall terminate if not exercised (if applicable) prior to such
event.
12. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) AMENDMENT OF PLAN. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 11 relating to
adjustments upon changes in stock, no amendment shall be effective unless
approved by the stockholders of the Company to the extent stockholder approval
is necessary to satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.
(b) STOCKHOLDER APPROVAL. The Board may, in its sole discretion, submit any
other amendment to the Plan for stockholder approval, including, but not limited
to, amendments to the Plan intended to satisfy the requirements of Section
162(m) of the Code and the regulations thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
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(c) CONTEMPLATED AMENDMENTS. It is expressly contemplated that the Board
may amend the Plan in any respect the Board deems necessary or advisable to
provide eligible Employees with the maximum benefits provided or to be provided
under the provisions of the Code and the regulations promulgated thereunder
relating to Incentive Stock Options and/or to bring the Plan and/or Incentive
Stock Options granted under it into compliance therewith.
(d) NO IMPAIRMENT OF RIGHTS. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the Participant and (ii) the Participant
consents in writing.
(e) AMENDMENT OF STOCK AWARDS. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided, however,
that the rights under any Stock Award shall not be impaired by any such
amendment unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.
13. TERMINATION OR SUSPENSION OF THE PLAN.
(a) PLAN TERM. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on August 11, 2006 which
shall be within ten (10) years from the date the Plan is adopted by the Board or
approved by the stockholders of the Company, whichever is earlier. No Stock
Awards may be granted under the Plan while the Plan is suspended or after it is
terminated.
(b) NO IMPAIRMENT OF RIGHTS. Rights and obligations under any Stock Award
granted while the Plan is in effect shall not be impaired by suspension or
termination of the Plan, except with the written consent of the Participant.
14. EFFECTIVE DATE OF PLAN.
This amended and restated Plan shall become effective on the Listing Date,
but no Stock Award shall be exercised (or, in the case of a stock bonus, shall
be granted) unless and until this amended and restated Plan has been approved by
the stockholders of the Company, which approval shall be within twelve (12)
months before or after the date the Plan is adopted by the Board.
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EXHIBIT 10.2
COPPER MOUNTAIN NETWORKS, INC.
STOCK OPTION GRANT NOTICE
(AMENDED AND RESTATED 1996 EQUITY INCENTIVE PLAN)
Copper Mountain Networks, Inc. (the "Company"), pursuant to its Amended and
Restated 1996 Equity Incentive Plan (the "Plan"), hereby grants to Optionholder
an option to purchase the number of shares of the Company's Common Stock set
forth below. This option is subject to all of the terms and conditions as set
forth herein and in the Stock Option Agreement, the Plan and the Notice of
Exercise, all of which are attached hereto and incorporated herein in their
entirety.
Optionholder: ______________________
Date of Grant: ______________________
Vesting Commencement Date: ______________________
Number of Shares Subject to Option: ______________________
Exercise Price (Per Share): ______________________
Total Exercise Price: ______________________
Expiration Date: ______________________
TYPE OF GRANT: [_] Incentive Stock Option/1/ [_] Nonstatutory Stock Option
EXERCISE SCHEDULE: [_] Same as Vesting Schedule [_] Early Exercise Permitted
VESTING SCHEDULE: [1/4/th/ of the shares vest one year after the Vesting
Commencement Date.
1/48/th/ of the shares vest monthly thereafter over the next
three years.]
PAYMENT: By one or a combination of the following items (described
in the Stock Option Agreement):
By cash or check
Pursuant to a Regulation T Program if the Shares are
publicly traded
By delivery of already-owned shares if the Shares are
publicly traded
[By deferred payment]
ADDITIONAL TERMS/ACKNOWLEDGEMENTS: The undersigned Optionholder acknowledges
receipt of, and understands and agrees to, this Grant Notice, the Stock Option
Agreement and the Plan. Optionholder further acknowledges that as of the Date of
Grant, this Grant Notice, the Stock Option Agreement and the Plan set forth the
entire understanding between Optionholder and the Company regarding the
acquisition of stock in the Company and supersede all prior oral and written
agreements on that subject with the exception of (i) options previously granted
and delivered to Optionholder under the Plan, and (ii) the following agreements
only:
OTHER AGREEMENTS: __________________________________
__________________________________
COPPER MOUNTAIN NETWORKS, INC. OPTIONHOLDER:
By:________________________________ _______________________________
Signature Signature
Title:_____________________________ Date: _________________________
Date:______________________________
Attachments: Stock Option Agreement, Amended and Restated 1996 Equity Incentive
Plan and Notice of Exercise
- ------------------------------
/1/ If this is an incentive stock option, it (plus your other outstanding
incentive stock options) cannot be first exercisable for more than
-----------
$100,000 in any calendar year. Any excess over $100,000 is a nonstatutory
stock option.
<PAGE>
ATTACHMENT I
STOCK OPTION AGREEMENT
<PAGE>
COPPER MOUNTAIN NETWORKS, INC.
AMENDED AND RESTATED
1996 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
(INCENTIVE AND NONSTATUTORY STOCK OPTIONS)
Pursuant to your Stock Option Grant Notice ("Grant Notice") and this Stock
Option Agreement, Copper Mountain Networks, Inc. (the "Company") has granted you
an option under its Amended and Restated 1996 Equity Incentive Plan (the "Plan")
to purchase the number of shares of the Company's Common Stock indicated in your
Grant Notice at the exercise price indicated in your Grant Notice. Defined
terms not explicitly defined in this Stock Option Agreement but defined in the
Plan shall have the same definitions as in the Plan.
The details of your option are as follows:
1. VESTING. Subject to the limitations contained herein, your option will
vest as provided in your Grant Notice, provided that vesting will cease upon the
termination of your Continuous Service.
2. NUMBER OF SHARES AND EXERCISE PRICE. The number of shares of Common
Stock subject to your option and your exercise price per share referenced in
your Grant Notice may be adjusted from time to time for Capitalization
Adjustments, as provided in the Plan.
3. EXERCISE PRIOR TO VESTING ("EARLY EXERCISE"). If permitted in your
Grant Notice (i.e., the "Exercise Schedule" indicates that "Early Exercise" of
your option is permitted) and subject to the provisions of your option, you may
elect at any time that is both (i) during the period of your Continuous Service
and (ii) during the term of your option, to exercise all or part of your option,
including the nonvested portion of your option; provided, however, that:
(a) a partial exercise of your option shall be deemed to cover first
vested shares of Common Stock and then the earliest vesting installment of
unvested shares of Common Stock;
(b) any shares of Common Stock so purchased from installments that
have not vested as of the date of exercise shall be subject to the purchase
option in favor of the Company as described in the Company's form of Early
Exercise Stock Purchase Agreement;
(c) you shall enter into the Company's form of Early Exercise Stock
Purchase Agreement with a vesting schedule that will result in the same vesting
as if no early exercise had occurred; and
(d) if your option is an incentive stock option, then, as provided in
the Plan, to the extent that the aggregate Fair Market Value (determined at the
time of grant) of the shares of Common Stock with respect to which your option
plus all other incentive stock options you hold
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are exercisable for the first time by you during any calendar year (under all
plans of the Company and its Affiliates) exceeds one hundred thousand dollars
($100,000), your option(s) or portions thereof that exceed such limit (according
to the order in which they were granted) shall be treated as nonstatutory stock
options.
4. METHOD OF PAYMENT. Payment of the exercise price is due in full upon
exercise of all or any part of your option. You may elect to make payment of
the exercise price in cash or by check or in any other manner PERMITTED BY YOUR
-----------------
GRANT NOTICE, which may include one or more of the following:
- ------------
(a) In the Company's sole discretion at the time your option is
exercised and provided that at the time of exercise the Common Stock is publicly
traded and quoted regularly in The Wall Street Journal, pursuant to a program
developed under Regulation T as promulgated by the Federal Reserve Board that,
prior to the issuance of Common Stock, results in either the receipt of cash (or
check) by the Company or the receipt of irrevocable instructions to pay the
aggregate exercise price to the Company from the sales proceeds.
(b) Provided that at the time of exercise the Common Stock is publicly
traded and quoted regularly in The Wall Street Journal, by delivery of already-
owned shares of Common Stock either that you have held for the period required
to avoid a charge to the Company's reported earnings (generally six months) or
that you did not acquire, directly or indirectly from the Company, that are
owned free and clear of any liens, claims, encumbrances or security interests,
and that are valued at Fair Market Value on the date of exercise. "Delivery" for
these purposes, in the sole discretion of the Company at the time you exercise
your option, shall include delivery to the Company of your attestation of
ownership of such shares of Common Stock in a form approved by the Company.
Notwithstanding the foregoing, you may not exercise your option by tender to the
Company of Common Stock to the extent such tender would violate the provisions
of any law, regulation or agreement restricting the redemption of the Company's
stock.
(c) Pursuant to the following deferred payment alternative:
(i) Not less than one hundred percent (100%) of the aggregate
exercise price, plus accrued interest, shall be due four (4) years from date of
exercise or, at the Company's election, upon termination of your Continuous
Service.
(ii) Interest shall be compounded at least annually and shall be
charged at the minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Code, of any portion of any
amounts other than amounts stated to be interest under the deferred payment
arrangement.
(III) At any time that the Company is incorporated in Delaware,
payment of the Common Stock's "par value," as defined in the Delaware General
Corporation Law, shall be made in cash and not by deferred payment.
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<PAGE>
(iv) In order to elect the deferred payment alternative, you
must, as a part of your written notice of exercise, give notice of the election
of this payment alternative and, in order to secure the payment of the deferred
exercise price to the Company hereunder, if the Company so requests, you must
tender to the Company a promissory note and a security agreement covering the
purchased shares of Common Stock, both in form and substance satisfactory to the
Company, or such other or additional documentation as the Company may request.
5. WHOLE SHARES. You may exercise your option only for whole shares of
Common Stock.
6. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, you may not exercise your option unless the shares of Common
Stock issuable upon such exercise are then registered under the Securities Act
or, if such shares of Common Stock are not then so registered, the Company has
determined that such exercise and issuance would be exempt from the registration
requirements of the Securities Act. The exercise of your option must also
comply with other applicable laws and regulations governing your option, and you
may not exercise your option if the Company determines that such exercise would
not be in material compliance with such laws and regulations.
7. TERM. The term of your option commences on the Date of Grant and
expires upon the EARLIEST of the following:
(a) three (3) months after the termination of your Continuous Service
for any reason other than your Disability or death, provided that if during any
part of such three- (3-) month period your option is not exercisable solely
because of the condition set forth in the preceding paragraph relating to
"Securities Law Compliance," your option shall not expire until the earlier of
the Expiration Date or until it shall have been exercisable for an aggregate
period of three (3) months after the termination of your Continuous Service;
(b) twelve (12) months after the termination of your Continuous
Service due to your Disability;
(c) eighteen (18) months after your death if you die either during
your Continuous Service or within three (3) months after your Continuous Service
terminates;
(d) the Expiration Date indicated in your Grant Notice; or
(e) the tenth (10th) anniversary of the Date of Grant.
If your option is an incentive stock option, note that, to obtain the
federal income tax advantages associated with an "incentive stock option," the
Code requires that at all times beginning on the date of grant of your option
and ending on the day three (3) months before the date of your option's
exercise, you must be an employee of the Company or an Affiliate, except in the
event of your death or Disability. The Company has provided for extended
exercisability of your option under certain circumstances for your benefit but
cannot guarantee that your option
3
<PAGE>
will necessarily be treated as an "incentive stock option" if you continue to
provide services to the Company or an Affiliate as a Consultant or Director
after your employment terminates or if you otherwise exercise your option more
than three (3) months after the date your employment terminates.
8. EXERCISE.
(a) You may exercise the vested portion of your option (and the
unvested portion of your option if your Grant Notice so permits) during its term
by delivering a Notice of Exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require.
(b) By exercising your option you agree that, as a condition to any
exercise of your option, the Company may require you to enter into an
arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of (1) the exercise of
your option, (2) the lapse of any substantial risk of forfeiture to which the
shares of Common Stock are subject at the time of exercise, or (3) the
disposition of shares of Common Stock acquired upon such exercise.
(c) If your option is an incentive stock option, by exercising your
option you agree that you will notify the Company in writing within fifteen (15)
days after the date of any disposition of any of the shares of the Common Stock
issued upon exercise of your option that occurs within two (2) years after the
date of your option grant or within one (1) year after such shares of Common
Stock are transferred upon exercise of your option.
9. TRANSFERABILITY. Your option is not transferable, except by will or by
the laws of descent and distribution, and is exercisable during your life only
by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise your
option.
10. OPTION NOT A SERVICE CONTRACT. Your option is not an employment or
service contract, and nothing in your option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company or an Affiliate, or of the Company or an Affiliate to continue your
employment. In addition, nothing in your option shall obligate the Company or an
Affiliate, their respective shareholders, Boards of Directors, Officers or
Employees to continue any relationship that you might have as a Director or
Consultant for the Company or an Affiliate.
11. WITHHOLDING OBLIGATIONS.
(a) At the time you exercise your option, in whole or in part, or at
any time thereafter as requested by the Company, you hereby authorize
withholding from payroll and any other amounts payable to you, and otherwise
agree to make adequate provision for (including by means of a "cashless
exercise" pursuant to a program developed under Regulation T as
4
<PAGE>
promulgated by the Federal Reserve Board to the extent permitted by the
Company), any sums required to satisfy the federal, state, local and foreign tax
withholding obligations of the Company or an Affiliate, if any, which arise in
connection with your option.
(b) Upon your request and subject to approval by the Company, in its
sole discretion, and compliance with any applicable conditions or restrictions
of law, the Company may withhold from fully vested shares of Common Stock
otherwise issuable to you upon the exercise of your option a number of whole
shares of Common Stock having a Fair Market Value, determined by the Company as
of the date of exercise, not in excess of the minimum amount of tax required to
be withheld by law. If the date of determination of any tax withholding
obligation is deferred to a date later than the date of exercise of your option,
share withholding pursuant to the preceding sentence shall not be permitted
unless you make a proper and timely election under Section 83(b) of the Code,
covering the aggregate number of shares of Common Stock acquired upon such
exercise with respect to which such determination is otherwise deferred, to
accelerate the determination of such tax withholding obligation to the date of
exercise of your option. Notwithstanding the filing of such election, shares of
Common Stock shall be withheld solely from fully vested shares of Common Stock
determined as of the date of exercise of your option that are otherwise issuable
to you upon such exercise. Any adverse consequences to you arising in connection
with such share withholding procedure shall be your sole responsibility.
(c) You may not exercise your option unless the tax withholding
obligations of the Company and/or any Affiliate are satisfied. Accordingly, you
may not be able to exercise your option when desired even though your option is
vested, and the Company shall have no obligation to issue a certificate for such
shares of Common Stock or release such shares of Common Stock from any escrow
provided for herein.
12. NOTICES. Any notices provided for in your option or the Plan shall be
given in writing and shall be deemed effectively given upon receipt or, in the
case of notices delivered by mail by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the last
address you provided to the Company.
13. GOVERNING PLAN DOCUMENT. Your option is subject to all the provisions
of the Plan, the provisions of which are hereby made a part of your option, and
is further subject to all interpretations, amendments, rules and regulations
which may from time to time be promulgated and adopted pursuant to the Plan. In
the event of any conflict between the provisions of your option and those of the
Plan, the provisions of the Plan shall control.
5
<PAGE>
ATTACHMENT II
AMENDED AND RESTATED 1996 EQUITY INCENTIVE PLAN
<PAGE>
ATTACHMENT III
NOTICE OF EXERCISE
<PAGE>
EXHIBIT 10.3
COPPER MOUNTAIN NETWORKS, INC.
EMPLOYEE STOCK PURCHASE PLAN
ADOPTED BY THE BOARD OF DIRECTORS ON FEBRUARY 24, 1999
APPROVED BY THE STOCKHOLDERS ON __________, 1999
EFFECTIVE DATE ___________, 1999
1. PURPOSE.
(a) The purpose of this Employee Stock Purchase Plan (the "Plan") is to
provide a means by which employees of Copper Mountain Networks, Inc., a Delaware
corporation (the "Company"), and its Affiliates, as defined in subparagraph
1(b), which are designated as provided in subparagraph 2(b), may be given an
opportunity to purchase stock of the Company.
(b) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").
(c) The Company, by means of the Plan, seeks to retain the services of its
employees, to secure and retain the services of new employees, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.
(d) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION.
(a) The Plan shall be administered by the Board of Directors (the "Board")
of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(i) To determine when and how rights to purchase stock of the Company
shall be granted and the provisions of each offering of such rights (which need
not be identical).
(ii) To designate from time to time which Affiliates of the Company
shall be eligible to participate in the Plan.
(iii) To construe and interpret the Plan and rights granted under it, and
to establish, amend and revoke rules and regulations for its administration. The
Board, in the
<PAGE>
exercise of this power, may correct any defect, omission or inconsistency in the
Plan, in a manner and to the extent it shall deem necessary or expedient to make
the Plan fully effective.
(iv) To amend the Plan as provided in paragraph 13.
(v) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the Company
and its Affiliates and to carry out the intent that the Plan be treated as an
"employee stock purchase plan" within the meaning of Section 423 of the Code.
(c) The Board may delegate administration of the Plan to a Committee
composed of one (1) or more members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
(d) Any interpretation of the Plan by the Board of any decision made by
it under the Plan shall be final and binding on all persons.
3. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to rights granted under
the Plan shall not exceed in the aggregate three hundred thousand (300,000)
shares of the Company's common stock (the "Common Stock"). If any right granted
under the Plan shall for any reason terminate without having been exercised, the
Common Stock not purchased under such right shall again become available for the
Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
(a) The Board or the Committee may from time to time grant or provide for
the grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate, which shall comply with the requirements of Section 423(b)(5) of
the Code that all employees granted rights to purchase stock under the Plan
shall have the same rights and privileges. The terms and conditions of an
Offering shall be incorporated by reference into the Plan and treated as part of
the Plan. The provisions of separate Offerings need not be identical, but each
Offering shall include (through incorporation of the provisions of this Plan by
reference in the document comprising the Offering or otherwise) the period
during which the Offering shall be effective, which period shall not exceed
twenty-seven (27) months beginning with the Offering Date, and the substance of
the provisions contained in paragraphs 5 through 8, inclusive.
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(b) If an employee has more than one (1) right outstanding under the Plan,
unless he or she otherwise indicates in agreements or notices delivered
hereunder, a right with a lower exercise price (or an earlier-granted right if
two (2) rights have identical exercise prices), will be exercised to the fullest
possible extent before a right with a higher exercise price (or a later-granted
right if two (2) rights have identical exercise prices) will be exercised.
5. ELIGIBILITY.
(a) Rights may be granted only to employees of the Company or, as the Board
or the Committee may designate as provided in subparagraph 2(b), to employees of
any Affiliate of the Company. Except as provided in subparagraph 5(b), an
employee of the Company or any Affiliate shall not be eligible to be granted
rights under the Plan unless, on the Offering Date, such employee has been in
the employ of the Company or any Affiliate for such continuous period preceding
such grant as the Board or the Committee may require, but in no event shall the
required period of continuous employment be greater than two (2) years. In
addition, unless otherwise determined by the Board or the Committee and set
forth in the terms of the applicable Offering, no employee of the Company or any
Affiliate shall be eligible to be granted rights under the Plan unless, on the
Offering Date, such employee's customary employment with the Company or such
Affiliate is for at least twenty (20) hours per week and at least five (5)
months per calendar year.
(b) The Board or the Committee may provide that each person who, during the
course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
(i) the date on which such right is granted shall be the "Offering
Date" of such right for all purposes, including determination of the exercise
price of such right;
(ii) the period of the Offering with respect to such right shall begin
on its Offering Date and end coincident with the end of such Offering; and
(iii) the Board or the Committee may provide that if such person first
becomes an eligible employee within a specified period of time before the end of
the Offering, he or she will not receive any right under that Offering.
(c) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of
this subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.
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(d) An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock purchase
plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such employee's rights to purchase stock of the Company
or any Affiliate to accrue at a rate which exceeds twenty five thousand dollars
($25,000) of fair market value of such stock (determined at the time such rights
are granted) for each calendar year in which such rights are outstanding at any
time.
(e) Officers of the Company and any designated Affiliate shall be eligible
to participate in Offerings under the Plan; provided, however, that the Board
may provide in an Offering that certain employees who are highly compensated
employees within the meaning of Section 423(b)(4)(D) of the Code shall not be
eligible to participate.
6. RIGHTS; PURCHASE PRICE.
(a) On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase up to the number of
shares of Common Stock of the Company purchasable with a percentage designated
by the Board or the Committee not exceeding fifteen percent (15%) of such
employee's Earnings (as defined in subparagraph 7(a)) during the period which
begins on the Offering Date (or such later date as the Board or the Committee
determines for a particular Offering) and ends on the date stated in the
Offering, which date shall be no later than the end of the Offering. The Board
or the Committee shall establish one (1) or more dates during an Offering (the
"Purchase Date(s)") on which rights granted under the Plan shall be exercised
and purchases of Common Stock carried out in accordance with such Offering.
(b) In connection with each Offering made under the Plan, the Board or the
Committee may specify a maximum number of shares that may be purchased by any
employee as well as a maximum aggregate number of shares that may be purchased
by all eligible employees pursuant to such Offering. In addition, in connection
with each Offering that contains more than one (1) Purchase Date, the Board or
the Committee may specify a maximum aggregate number of shares which may be
purchased by all eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.
(c) The purchase price of stock acquired pursuant to rights granted under
the Plan shall be not less than the lesser of:
(i) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Offering Date; or
(ii) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Purchase Date.
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7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(a) An eligible employee may become a participant in the Plan pursuant to
an Offering by delivering an enrollment agreement to the Company within the time
specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such employee's Earnings during the
Offering. "Earnings" is defined as an employee's regular salary or wages
(including amounts thereof elected to be deferred by the employee, that would
otherwise have been paid, under any arrangement established by the Company that
is intended to comply with Section 125, Section 401(k), Section 402(e)(3),
Section 402(h) or section 403(b) of the Code, and also including any deferrals
under a non-qualified deferred compensation plan or arrangement established by
the Company), and also, if determined by the Board or the Committee and set
forth in the terms of the Offering, may include any or all of the following: (i)
overtime pay, (ii) commissions, (iii) bonuses, incentive pay, profit sharing and
other remuneration paid directly to the employee, and/or (iv) other items of
remuneration not specifically excluded pursuant to the Plan. Earnings shall not
include the cost of employee benefits paid for by the Company or an Affiliate,
education or tuition reimbursements, imputed income arising under any group
insurance or benefit program, traveling expenses, business and moving expense
reimbursements, income received in connection with stock options, contributions
made by the Company or an Affiliate under any employee benefit plan, and similar
items of compensation, as determined by the Board or the Committee.
Notwithstanding the foregoing, the Board or Committee may modify the definition
of "Earnings" with respect to one or more Offerings as the Board or Committee
determines appropriate. The payroll deductions made for each participant shall
be credited to an account for such participant under the Plan and shall be
deposited with the general funds of the Company. A participant may reduce
(including to zero) or increase such payroll deductions, and an eligible
employee may begin such payroll deductions, after the beginning of any Offering
only as provided for in the Offering. A participant may make additional
payments into his or her account only if specifically provided for in the
Offering and only if the participant has not had the maximum amount withheld
during the Offering.
(b) At any time during an Offering, a participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides.
Such withdrawal may be elected at any time prior to the end of the Offering
except as provided by the Board or the Committee in the Offering. Upon such
withdrawal from the Offering by a participant, the Company shall distribute to
such participant all of his or her accumulated payroll deductions (reduced to
the extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility to participate in any other Offerings under the Plan but such
participant will be required to deliver a new enrollment agreement in order to
participate in subsequent Offerings under the Plan.
(c) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of any participating employee's employment with the
Company and any designated Affiliate, for any reason, and the Company shall
distribute to such terminated
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employee all of his or her accumulated payroll deductions (reduced to the
extent, if any, such deductions have been used to acquire stock for the
terminated employee), under the Offering, without interest.
(d) Rights granted under the Plan shall not be transferable by a
participant other than by will or the laws of descent and distribution, or by a
beneficiary designation as provided in paragraph 14, and during a participant's
lifetime, shall be exercisable only by such participant.
8. EXERCISE.
(a) On each Purchase Date specified therefor in the relevant Offering, each
participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of whole shares of stock of the Company, up to
the maximum number of shares permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering. No
fractional shares shall be issued upon the exercise of rights granted under the
Plan. The amount, if any, of accumulated payroll deductions remaining in each
participant's account after the purchase of shares which is less than the amount
required to purchase one share of Common Stock on the final Purchase Date of an
Offering shall be held in each such participant's account for the purchase of
shares under the next Offering under the Plan, unless such participant withdraws
from such next Offering, as provided in subparagraph 7(b), or is no longer
eligible to be granted rights under the Plan, as provided in paragraph 5, in
which case such amount shall be distributed to the participant after such final
Purchase Date, without interest. The amount, if any, of accumulated payroll
deductions remaining in any participant's account after the purchase of shares
which is equal to the amount required to purchase one or more whole shares of
Common Stock on the final Purchase Date of an Offering shall be distributed in
full to the participant after such Purchase Date, without interest.
(b) No rights granted under the Plan may be exercised to any extent unless
the shares to be issued upon such exercise under the Plan (including rights
granted thereunder) are covered by an effective registration statement pursuant
to the Securities Act of 1933, as amended (the "Securities Act") and the Plan is
in material compliance with all applicable state, foreign and other securities
and other laws applicable to the Plan. If on a Purchase Date in any Offering
hereunder the Plan is not so registered or in such compliance, no rights granted
under the Plan or any Offering shall be exercised on such Purchase Date, and the
Purchase Date shall be delayed until the Plan is subject to such an effective
registration statement and such compliance, except that the Purchase Date shall
not be delayed more than twelve (12) months and the Purchase Date shall in no
event be more than twenty-seven (27) months from the Offering Date. If on the
Purchase Date of any Offering hereunder, as delayed to the maximum extent
permissible, the Plan is not registered and in such compliance, no rights
granted under the Plan or any Offering shall be exercised and all payroll
deductions accumulated during the Offering (reduced to the extent, if any, such
deductions have been used to acquire stock) shall be distributed to the
participants, without interest.
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9. COVENANTS OF THE COMPANY.
(a) During the terms of the rights granted under the Plan, the Company
shall keep available at all times the number of shares of Common Stock required
to satisfy such rights.
(b) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights unless and until
such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the Plan
shall constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shareholdings acquired upon
exercise of rights under the Plan are recorded in the books of the Company (or
its transfer agent).
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding rights will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding rights. Such adjustments shall be made by the Board or
the Committee, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a "transaction not involving the receipt of consideration by
the Company.")
(b) In the event of: (1) a dissolution or liquidation of the Company; (2)
a sale of all or substantially all of the assets of the Company; (3) a merger or
consolidation in which the Company is not the surviving corporation; (4) a
reverse merger in which the Company is the surviving corporation but the shares
of the Company's 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; (5) the acquisition by any person, entity or
group within the meaning of Section 13(d) or 14(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or any comparable successor
provisions (excluding any employee benefit plan, or related trust, sponsored or
maintained by the Company or any Affiliate of the Company) of the beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Exchange
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Act, or comparable successor rule) of securities of the Company representing at
least fifty percent (50%) of the combined voting power entitled to vote in the
election of directors; or (6) the individuals who, as of the date of the
adoption of this Plan, are members of the Board (the "Incumbent Board"; (if the
election, or nomination for election by the Company's stockholders, of a new
director was approved by a vote of at least fifty percent (50%) of the members
of the Board then comprising the Incumbent Board, such new director shall upon
his or her election be considered a member of the Incumbent Board) cease for any
reason to constitute at least fifty percent (50%) of the Board; then the Board
in its sole discretion may take any action or arrange for the taking of any
action among the following: (i) any surviving or acquiring corporation may
assume outstanding rights or substitute similar rights for those under the Plan,
(ii) such rights may continue in full force and effect, or (iii) all
participants' accumulated payroll deductions may be used to purchase Common
Stock immediately prior to or within a reasonable period of time following the
transaction described above and the participants' rights under the ongoing
Offering terminated.
13. AMENDMENT OF THE PLAN OR OFFERINGS.
(a) The Board at any time, and from time to time, may amend the Plan or the
terms of one or more Offerings. However, except as provided in paragraph 12
relating to adjustments upon changes in stock, no amendment shall be effective
unless approved by the stockholders of the Company within twelve (12) months
before or after the adoption of the amendment, where the amendment will:
(i) Increase the number of shares reserved for rights under the Plan;
(ii) Modify the provisions as to eligibility for participation in the
Plan or an Offering (to the extent such modification requires stockholder
approval in order for the Plan to obtain employee stock purchase plan treatment
under Section 423 of the Code or to comply with the requirements of Rule 16b-3
promulgated under the Exchange Act, or any comparable successor rule ("Rule 16b-
3"); or
(iii) Modify the Plan or an Offering in any other way if such
modification requires stockholder approval in order for the Plan to obtain
employee stock purchase plan treatment under Section 423 of the Code or to
comply with the requirements of Rule 16b-3.
It is expressly contemplated that the Board may amend the Plan or an Offering in
any respect the Board deems necessary or advisable to provide eligible employees
with the maximum benefits provided or to be provided under the provisions of the
Code and the regulations promulgated thereunder relating to employee stock
purchase plans and/or to bring the Plan and/or rights granted under an Offering
into compliance therewith.
(b) The Board may, in its sole discretion, submit any amendment to the Plan
or an Offering for stockholder approval.
(c) Rights and obligations under any rights granted before amendment of the
Plan or Offering shall not be impaired by any amendment of the Plan, except with
the consent of the person to whom such rights were granted, or except as
necessary to comply with any laws or
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governmental regulations, or except as necessary to ensure that the Plan and/or
rights granted under an Offering comply with the requirements of Section 423 of
the Code.
14. DESIGNATION OF BENEFICIARY.
(a) A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if applicable, from the participant's account under
the Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.
(b) Such designation of beneficiary may be changed by the participant at
any time by written notice in the form prescribed by the Company. In the event
of the death of a participant and in the absence of a beneficiary validly
designated under the Plan who is living (or if an entity, is otherwise in
existence) at the time of such participant's death, the Company shall deliver
such shares and/or cash to the executor or administrator of the estate of the
participant, or if no such executor or administrator has been appointed (to the
knowledge of the Company), the Company, in its sole discretion, may deliver such
shares and/or cash to the spouse or to any one (1) or more dependents or
relatives of the participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may determine.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board in its discretion, may suspend or terminate the Plan at any
time. The Plan shall automatically terminate if all the shares subject to the
Plan pursuant to subparagraph 3(a) are issued. No rights may be granted under
the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any rights granted while the Plan is in
effect shall not be impaired by suspension or termination of the Plan, except as
expressly provided in the Plan or with the consent of the person to whom such
rights were granted, or except as necessary to comply with any laws or
governmental regulation, or except as necessary to ensure that the Plan and/or
rights granted under an Offering comply with the requirements of Section 423 of
the Code.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the same day on which the Company's
registration statement under the Securities Act with respect to the initial
public offering of shares of the Company's Common Stock becomes effective (the
"Effective Date"), but no rights granted under the Plan shall be exercised
unless and until the Plan had been approved by the stockholders of the Company
within twelve (12) months before or after the date the Plan is adopted by the
Board or the Committee, which date may be prior to the Effective Date.
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17. CHOICE OF LAW.
All questions concerning the construction, validity and interpretation of
this Plan shall be governed by the law of the State of California, without
regard to such state's conflict of laws rules.
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COPPER MOUNTAIN NETWORKS, INC.
EMPLOYEE STOCK PURCHASE PLAN OFFERING
ADOPTED BY THE BOARD OF DIRECTORS ON FEBRUARY 24, 1999
1. GRANT; OFFERING DATE.
(a) The Board of Directors (the "Board") of Copper Mountain Networks, Inc.
(the "Company"), pursuant to the Company's Employee Stock Purchase Plan (the
"Plan"), hereby authorizes the grant of rights to purchase shares of the common
stock of the Company ("Common Stock") to all Eligible Employees (an "Offering").
The first Offering shall begin on the effective date of the initial public
offering of the Company's Common Stock and end on July 31, 2000 (the "Initial
Offering"). Thereafter, an Offering shall begin on August 1, 2000 and on each
August 1 every year thereafter, and each such offering shall end on the day
prior to the first anniversary of its Offering Date. The first day of an
Offering is that Offering's "Offering Date."
(b) Notwithstanding the foregoing: (i) if any Offering Date falls on a day
that is not a Trading Day (as defined herein), then such Offering Date shall
instead fall on the next subsequent Trading Day and (ii) if any Purchase Date
falls on a day that is not a Trading Day, then such Purchase Date shall instead
fall on the immediately preceding Trading Day. "Trading Day" shall mean any day
the exchange(s) or market(s) on which the Common Stock is listed, whether it be
any established stock exchange, The Nasdaq National Market, The Nasdaq SmallCap
Market or otherwise, is open for trading.
(c) Notwithstanding anything to the contrary, in the event that the fair
market value of a share of Common Stock on any Purchase Date during an Offering
is less than the fair market value of a share of Common Stock on the Offering
Date of such Offering, then following the purchase of Common Stock on such
Purchase Date: (i) the Offering shall terminate and (ii) all participants in the
just-terminated Offering shall automatically be enrolled in the Offering that
shall commence on the day following the Purchase Date.
(d) Prior to the commencement of any Offering, the Board (or the Committee
described in subparagraph 2(c) of the Plan, if any) may change any or all terms
of such Offering and any subsequent Offerings. The granting of rights pursuant
to each Offering hereunder shall occur on each respective Offering Date unless,
prior to such date (a) the Board (or the Committee) determines that such
Offering shall not occur, or (b) no shares remain available for issuance under
the Plan in connection with the Offering.
2. ELIGIBLE EMPLOYEES.
(a) All employees of the Company and each of its Affiliates (as defined in
the Plan) incorporated in the United States, shall be granted rights to purchase
Common Stock under each Offering on the Offering Date of such Offering, provided
that each such employee otherwise meets the employment requirements of
subparagraph 5(a) of the Plan and has been continuously employed by the Company
or an Affiliate for at least one (1) month (an "Eligible Employee") and that
each Eligible Employee may only contribute to one Offering at any given point in
time.
<PAGE>
Notwithstanding the foregoing, the following employees shall not be Eligible
---
Employees or be granted rights under an Offering: (i) part-time or seasonal
employees whose customary employment is less than twenty (20) hours per week or
five (5) months per calendar year and (ii) 5% stockholders (including ownership
through unexercised and/or unvested stock options) described in subparagraph
5(c) of the Plan.
(b) Notwithstanding the foregoing, each person who first become an Eligible
Employee during any Offering and at least six (6) months prior to the final
Purchase Date (as defined in paragraph 6 hereof) of the Offering will, on the
next February 1 during that Offering, receive a right under such Offering, which
right shall thereafter be deemed to be a part of the Offering. Such right shall
have the same characteristics as any rights originally granted under the
Offering except that:
(1) the date on which such right is granted shall be the "Offering
Date" of such right for all purposes, including determination of the exercise
price of such right; and
(2) the Offering for such right shall begin on its Offering Date and
end coincident with the end of the ongoing Offering.
3. RIGHTS.
(a) Subject to the limitations contained herein and in the Plan, on each
Offering Date each Eligible Employee shall be granted the right to purchase the
number of shares of Common Stock purchasable with up to ten percent (10%) of
such employee's Earnings paid during the period of such Offering beginning after
such Eligible Employee first commences participation; provided, however, that no
employee may purchase Common Stock on a particular Purchase Date that would
result in more than ten percent (10%) of such employee's Earnings in the period
from the Offering Date to such Purchase Date having been applied to purchase
shares under all ongoing Offerings under the Plan and all other plans of the
Company intended to qualify as "employee stock purchase plans" under Section 423
of the Internal Revenue Code of 1986, as amended (the "Code"). For this
Offering, "Earnings" means the base salary paid to an employee (including all
amounts elected to be deferred by the employee, that would otherwise have been
paid, under any cash or deferred arrangement established by the Company) and
overtime pay, but excluding commissions, bonuses, and other remuneration paid
directly to the employee, profit sharing, the cost of employee benefits paid for
by the Company, education or tuition reimbursements, imputed income arising
under any Company group insurance or benefit program, traveling expenses,
business and moving expense reimbursements, income received in connection with
stock options, contributions made by the Company under any employee benefit
plan, and similar items of compensation.
(b) Notwithstanding the foregoing, the maximum number of shares of Common
Stock an Eligible Employee may purchase on any Purchase Date in an Offering
shall be such number of shares as has a fair market value (determined as of the
Offering Date for such Offering) equal to (x) $25,000 multiplied by the number
of calendar years in which the right under such Offering has been outstanding at
any time, minus (y) the fair market value of any other shares of Common Stock
(determined as of the relevant Offering Date with respect to such shares) which,
for purposes of the limitation of Section 423(b)(8) of the Code, are attributed
to
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any of such calendar years in which the right is outstanding. The amount in
clause (y) of the previous sentence shall be determined in accordance with
regulations applicable under Section 423(b)(8) of the Code based on (i) the
number of shares previously purchased with respect to such calendar years
pursuant to such Offering or any other Offering under the Plan, or pursuant to
any other Company plans intended to qualify as "employee stock purchase plans"
under Section 423 of the Code, and (ii) the number of shares subject to other
rights outstanding on the Offering Date for such Offering pursuant to the Plan
or any other such Company plan.
(c) The maximum aggregate number of shares available to be purchased by all
Eligible Employees under an Offering shall be the number of shares remaining
available under the Plan on the Offering Date. If the aggregate purchase of
shares of Common Stock upon exercise of rights granted under the Offering would
exceed the maximum aggregate number of shares available, the Board shall make a
pro rata allocation of the shares available in a uniform and equitable manner.
4. PURCHASE PRICE.
The purchase price of the Common Stock under the Offering shall be the
lesser of: (i) eighty-five percent (85%) of the fair market value of the Common
Stock on the Offering Date or (ii) or eighty-five percent (85%) of the fair
market value of the Common Stock on the Purchase Date, in each case rounded up
to the nearest whole cent per share. For the Initial Offering, the fair market
value of the Common Stock at the time when the Offering commences shall be the
price per share at which shares of Common Stock are first sold to the public in
the Company's initial public offering as specified in the final prospectus with
respect to that public offering.
5. PARTICIPATION.
(a) An Eligible Employee may elect to participate in an Offering at the
beginning of the Offering or as of any February 1. An Eligible Employee shall
become a participant in an Offering by delivering an enrollment form authorizing
payroll deductions. Such deductions must be either a fixed dollar amount per pay
period, up to a maximum dollar amount which is less than or equal to ten percent
(10%) of Earnings, or in whole percentages of Earnings, with a minimum
percentage of one percent (1%) and a maximum percentage of ten percent (10%). A
participant may not make additional payments into his or her account. The
agreement shall be made on such enrollment form as the Company provides, and
must be delivered to the Company prior to the date participation is to be
effective, unless a later time for filing the enrollment form is set by the
Company for all Eligible Employees with respect to a given Offering. For the
Initial Offering, the time for filing an enrollment form and commencing
participation for individuals who are Eligible Employees on the Offering Date
for the Initial Offering shall be determined by the Company and communicated to
such Eligible Employees.
(b) A participant may decrease his or her participation level during the
course of a six (6) month purchase interval one (1) time, and only by delivering
notice to the Company at least ten (10) days in advance of the Purchase Date in
such form as the Company prescribes; provided that a participant may (i) reduce
his or her deductions to zero percent (0%) upon ten (10) days' prior notice by
delivering a notice in such form as the Company provides, (ii) may increase or
decrease his or her participation level at any time to become effective on the
day following the
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next subsequent Purchase Date, or (iii) may withdraw from an Offering and
receive his or her accumulated payroll deductions from the Offering (reduced to
the extent, if any, such deductions have been used to acquire Common Stock for
the participant on any prior Purchase Dates) without interest, at any time prior
to the end of the Offering, excluding only each ten (10) day period immediately
preceding a Purchase Date, by delivering a withdrawal notice to the Company in
such form as the Company provides. A participant who has withdrawn from an
Offering shall not again participate in such Offering, but may participate in
subsequent Offerings under the Plan in accordance with the terms thereof.
6. PURCHASES.
Subject to the limitations contained herein, on each Purchase Date, each
participant's accumulated payroll deductions (without any increase for interest)
shall be applied to the purchase of whole shares of Common Stock, up to the
maximum number of shares permitted under the Plan and the Offering. "Purchase
Date" shall be defined as each January 31 and July 31. The first Purchase Date
under the Initial Offering shall be January 31, 2000. Notwithstanding the
foregoing, if any Purchase Date falls on a day that is not a Trading Day, then
such Purchase Date shall instead fall on the immediately preceding Trading Day.
7. NOTICES AND AGREEMENTS.
Any notices or agreements provided for in an Offering or the Plan shall be
given in writing, in a form provided by the Company, and unless specifically
provided for in the Plan or this Offering, shall be deemed effectively given
upon receipt or, in the case of notices and agreements delivered by the Company,
five (5) days after deposit in the United States mail, postage prepaid.
8. EXERCISE CONTINGENT ON STOCKHOLDER APPROVAL.
The rights granted under an Offering are subject to the approval of the
Plan by the stockholders as required for the Plan to obtain treatment as a tax-
qualified employee stock purchase plan under Section 423 of the Code and to
comply with the requirements of an available exemption from potential liability
under Section 16(b) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") set forth in Rule 16b-3 promulgated under the Exchange Act.
9. OFFERING SUBJECT TO PLAN.
Each Offering is subject to all the provisions of the Plan, and its
provisions are hereby made a part of the Offering, and is further subject to all
interpretations, amendments, rules and regulations which may from time to time
be promulgated and adopted pursuant to the Plan. In the event of any conflict
between the provisions of an Offering and those of the Plan (including
interpretations, amendments, rules and regulations which may from time to time
be promulgated and adopted pursuant to the Plan), the provisions of the Plan
shall control.
4
<PAGE>
EXHIBIT 10.4
COPPER MOUNTAIN COMMUNICATIONS, INC.
6650 Lusk Blvd. Ste. B-103
San Diego, CA 92121
July 26, 1996
Steven D. Hunt
200 Hunt Road
Freehold, NJ 07728
Dear Steve:
I am pleased to confirm our verbal offer of employment to join Copper Mountain
Communications, Inc. ("the Company") as our Vice President, Engineering
reporting to Joe Markee, President.
The terms of this employment offer are as follows:
1. Compensation. The Company will pay you at a rate of $5,000 biweekly,
------------
which equates to about $130,000 per year. You will be paid one week in
arrears and on regularly scheduled paydays. In addition, the Company
will grant you 200,000 shares of common stock of the Company when
approved by the Board of Directors and with the restrictions defined
in the Company's stock grant plan.
2. Employment Classification and Work Hours. This position is classified
----------------------------------------
under the Fair Labor Standards Act (FLSA) as an (Exempt/Non-exempt)
position, which means that overtime pay is not paid for any work over
40 hours in a work week or over 8 hours on a single work day. The
normal work week begins at 12:01 a.m. on Monday and ends at 12:00
midnight the following Sunday. You will be expected to devote your
full business time, attention, and energies to the performance of your
duties with the Company during your scheduled work hours.
3. At-will Employment. Your employment with the Company will be for no
------------------
specific period and will be considered "at-will." This means that
employment is at the mutual consent of you and the Company, and may be
ended by either you or the Company at any time, for any reason or for
no reason, with or without cause. Should the Company elect to
terminate your employment without cause, you will be provided
severance compensation in the amount of three (3) months base pay.
Please note that no person, other than a member of the Executive
Staff, has the authority to make any agreement with you which is
different than at-will, and that any such agreement must be in writing
and signed by both you and the Executive Staff originator. Any and all
prior verbal statements which may have been made to you regarding
employment are superseded by this letter.
4. Introductory Period. There will be a 90-day introductory period
-------------------
beginning on your date of hire, before you are eligible to become
classified as a regular employee, and thus become eligible for Company
benefits. You will be evaluated at that time for consideration to be
classified as a regular full-time employee.
<PAGE>
Steven D. Hunt Offer Letter (cont.) p. 2
5. Benefits. Once you become classified as a regular employee, you will
--------
be eligible to participate in the Company's health benefits programs
subject to the terms, conditions, and limitations stated in plan
documents and insurance policies.
6. Offer Contingent Upon Required Documents and Verifications. As a
----------------------------------------------------------
condition of accepting this offer, you will be required to complete
the following:
a. Proprietary Information Agreement - this agreement sets forth the
---------------------------------
legal obligations you will have to protect the Company's
proprietary interests.
b. Immigration and Naturalization Service Form 1-9 - Federal law
-----------------------------------------------
requires employers to verify your identity and your eligibility
for employment in the united states within three days after hire.
This requires you to bring certain documents with you to your new
employee orientation.
7. Relocation. As we discussed, relocation expenses for you and your
----------
family we be covered by the Company up to a maximum of $50,000.
Coverage for additional relocation expenses will require further
justification.
8. Reporting Date. As we discussed, your first day of work will be August
--------------
19, 1996. Please report to the Human Resources Office at 8:00 a.m.
that day for your new employee orientation.
If you agree to this offer, please sign and date the original and copy of
this document. Keep the copy for your personal records, and return the
original to me no later than August 1, 1996. This offer expires as of close
of business on August 5, 1996.
We certainly look forward to you joining us! Please call me if I may be of
service to you at (619) 453-8799.
Sincerely,
/s/ Joe Markee
Joe Markee
President
================================================================================
I accept this offer of employment.
By: /s/ Steven D. Hunt Date: 7/31/96
--------------------------------------- ----------------
Steven D. Hunt
<PAGE>
EXHIBIT 10.5
March 18, 1998
Mr. Richard S. Gilbert
15451 Village Drive
Lake Oswego, OR 97034
Dear Rick,
Copper Mountain Networks, Inc. (the "Company") is pleased to offer you the
position of President and Chief Executive Officer on the following terms:
Your title will be President and Chief Executive Officer and you will be
responsible to perform duties as specified in the Company's Bylaws and by the
Board of Directors. You will report to the Company's Board of Directors. You
will work at the Company's California Bay Area office and commute to the
Company's headquarters in San Diego as necessary.
Your base compensation will be $200,000 per year, paid bi-weekly less
payroll deductions and all required withholdings. In addition, you will be paid
an on-target bonus of $100,000 for calendar year 1998, prorated for the period
from your first day as a regular full-time employee of the Company (your
"Starting Date") through December 31, 1998. You agree that your Starting Date
will be April 6, 1998. The 1998 bonus will be guaranteed (i.e. paid in full) and
paid in bi-weekly installments. You will be paid one week in arrears on
regularly scheduled paydays. You will also be eligible for the Company's
standard benefits package offered to its regular full-time employees, including
medical insurance, vacation, holidays and other benefits adopted by the Company
from time to time. Details about these benefits are available for your review.
The Company may modify compensation and benefits from time to time as it deems
necessary.
1
<PAGE>
Richard S. Gilbert
March 18, 1998
Your base and bonus compensation for calendar year 1999 will be determined
by the Compensation Committee of the Company's Board of Directors prior to
December 31, 1998, but will include a bi-weekly payment no less than you will
receive in 1998.
To assist you with your move to the Bay Area, the Company will reimburse
your relocation expenses, subject to the terms of the enclosed Relocation
Agreement. In addition, to assist you in purchasing a new home in the Bay Area,
comparable to your $600,000 home in Oregon, the Company will make available to
you through its commercial lenders an interest free loan of up to $1,000,000,
subject to the terms of the enclosed Loan Agreement, to cover the amount by
which the purchase price of your new home exceeds $600,000. The Loan Agreement
calls for the loan to be secured by a deed of trust on your new Bay Area home
but the Company reserves the right to use your stock options as additional
collateral for the loan if it deems this to be necessary. The loan must be
repaid in full by the fifth anniversary of your Starting Date. In the event that
the Company is unable to negotiate a satisfactory arrangement with its
commercial lenders to provide the loan, the Company will cover your own mortgage
payments on an after-tax basis for up to $1,000,000 of mortgage borrowings until
the fifth anniversary of your Starting Date.
At the first meeting of the Company's Board of Directors following your
Starting Date, you will be granted stock options in the amount and upon the
terms set forth in Exhibit A attached hereto (and incorporated by reference
hereby).
As an employee of the Company, you will be expected to abide by Company
rules and regulations, acknowledge in writing that you have read the Company's
Employee Handbook, and, as a condition of your employment, you will be required
to sign and comply with a Proprietary Information and Inventions Agreement which
prohibits unauthorized use or disclosure of the Company's proprietary
information. Normal working hours are from 8:00 a.m. to 5:00 p.m., Monday
through Friday. As an exempt salaried employee, you will be expected to work
additional hours as required by the nature of your work assignments.
2
<PAGE>
Richard S. Gilbert
March 18, 1998
You may terminate your employment with the Company at any time and for any
reason whatsoever simply by notifying the Company. Likewise, the Company may
terminate your employment at any time and for any
reason whatsoever, with or without cause or advance notice. This at-will
employment relationship cannot be changed except in writing signed by a Company
officer.
The employment terms in this letter supersede any other agreements or
promises made to you by anyone, whether oral or written. As required by law,
this offer in subject to satisfactory proof of your right to work in the United
States.
Please sign and date this letter, and return it to me by March 23, 1998, if
you wish to accept employment at the Company under the terms described above.
We look forward to your favorable reply and to a productive and enjoyable
work relationship.
Sincerely,
/s/ Roger L. Evans
Roger L. Evans
Board of Directors
Copper Mountain Networks, Inc.
ACCEPTED AND AGREED TO:
/s/ Richard S. Gilbert
Richard S. Gilbert
DATE: March 22, 1998
--------------
Attachments
3
<PAGE>
EXHIBIT A
Terms of Initial Stock Option Grant To Richard S. Gilbert
---------------------------------------------------------
Terms of Stock Option
- ---------------------
Subject to the terms and conditions of the Company's 1996 Equity Incentive Plan
(the "Plan"), you will be granted an incentive stock option to purchase up to
527,600 shares of the Company's Common Stock, representing 5% of the Company's
stock on a fully diluted basis. The per share exercise price for such option
will be the fair market value of the Company's Common Stock on the date the
option is granted. Such option will vest according to the following schedule:
1/4th of the shares subject to such option will vest on the first anniversary of
your Starting Date, and thereafter, 1/48th of the shares subject to such option
will vest each month for 36 months, such that the option will be fully vested on
the fourth anniversary of your Starting Date. Except as otherwise set forth
herein, all vesting will cease upon termination of your employment with the
Company for any reason.
Acceleration of Vesting Following Change in Control
- ---------------------------------------------------
In the event your service with the Company is involuntarily terminated at any
time without Cause (as defined below) either at the time of or within twelve
(12) months following the occurrence of an event specified in subsection 14(b)
of the Plan (a "Change of Control"), then the vesting of your option and the
time during which your option may be exercised immediately shall be accelerated
such that one half of the unvested portion of your stock option shall become
immediately exercisable. "Cause" means misconduct, including but not limited to:
(i) conviction of any felony or any crime involving moral turpitude or
dishonesty, (ii) participation in a fraud or act of dishonesty against the
Company, (iii) conduct by you which, based upon a good faith and reasonable
factual investigation and determination by the Board of Directors of the
Company, demonstrates gross unfitness to serve, or (iv) the material violation
of any contract between you and the Company or any statutory duty to the Company
that is not corrected within thirty (30) days after written notice to you
thereof. Your physical or mental disability shall not constitute "Cause".
1
<PAGE>
Exhibit A
Terms of Initial Stock Option Grant
Richard S. Gilbert
In the event you voluntarily terminate your service with the Company for Good
Reason (as defined below) either at the time of or within twelve (12) months
following the occurrence of a Change in Control, then the vesting of your option
and the time during which your option may be exercised immediately shall be
accelerated such that one half of the unvested portion of your stock option
shall become immediately exercisable. Good Reason means (i) reduction of your
rate of compensation as in effect immediately prior to the occurrence of a
Change in Control, (ii) failure to provide a package of welfare benefit plans
which, taken as a whole, provides substantially similar benefits to those in
which you are entitled to participate immediately prior to the occurrence of the
Change in Control (except that employee contributions may be raised to the
extent of any cost increases imposed by third parties) or any action by the
Company which would adversely affect your participation or reduce your benefits
under any of such plans, (iii) change in your responsibilities, authority, title
or office resulting in diminution of position, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith which is
remedied by the Company promptly after notice thereof is given by you, (iv)
request that you relocate to a worksite that is more than thirty-five (35) miles
from your prior worksite, unless you accept such relocation opportunity, (v)
failure or refusal of a successor to the Company to assume the Company's
obligations under your option, or (vi) material breach by the Company or any
successor to the Company of any of the material provisions of your option.
<PAGE>
RELOCATION AGREEMENT
--------------------
This RELOCATION AGREEMENT (this "Agreement") is made and entered into as of
----------
March ____, 1998 (the "Execution Date"), by and between Copper Mountain
Networks, Inc., a California corporation (the "Company"), and Richard S. Gilbert
-------
("Employee").
WHEREAS, the Company acknowledges that Employee is a key employee of the
Company; and
WHEREAS, the Company acknowledges the disparity in cost of living and
housing costs between Portland, Oregon, where Employee and his family currently
reside, and the San Francisco Bay Area, and wishes to induce Employee to
relocate from Portland to the San Francisco Bay Area without undue hardship; and
WHEREAS, the Company wishes to help ensure Employee's continued dedication
and loyalty to the Company;
NOW THEREFORE, the Company and Employee hereby agree as follows:
1. Expense Reimbursement. The Company agrees to reimburse employee for
---------------------
all reasonable and customary moving and other relocation expenses to the
extent set forth on the attached Exhibit A. The Company shall pay such
expenses upon delivery to the Company of a receipt or other appropriate
documentation for such expenses.
2. No Employment Rights. Nothing contained in this Agreement is intended
--------------------
or shall be construed to confer upon Employee any rights to employment or
continued employment with the Company, or shall alter in any way the nature
of Employee's current employment with the Company.
3. Governing Law. This Agreement and all acts and transactions pursuant
-------------
hereto and the rights and obligations of the parties hereto shall be
governed, construed and interpreted in accordance with the laws of the
State of California applicable to contracts wholly made and performed in
the State of California.
1
<PAGE>
Relocation Agreement
Richard S. Gilbert
4. Dispute Resolution. All actions or proceedings relating to the
------------------
Agreement shall be maintained in a court located in San Diego County, State
of California, and the parties hereto expressly consent to (i) the personal
jurisdiction of the federal and state courts within San Diego County,
California, and (ii) service of process being effected upon them by
registered mail sent to the address below.
5. Entire Agreement. This Agreement constitutes the entire agreement of
----------------
the parties hereto with respect to the subject matter hereof and supersedes
all prior agreements and understanding related to such subject matter.
6. Modification. This Agreement shall not be amended without the written
------------
consent of both parties hereto.
7. Severability. In the event that any provision hereof becomes or is
------------
declared by a court of competent jurisdiction to be illegal, unenforceable
or void, this Agreement shall continue in full force and effect without
said provision.
8. Construction. This Agreement is the result of negotiations between and
------------
has been reviewed by each of the parties hereto and their respective
counsel; accordingly, the Agreement shall be deemed to be the product of
all of the parties hereto, and no ambiguity shall be construed in favor of
or against any one of the parties hereto.
9. 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.
10. Notices. Any notice required or permitted by this Agreement shall be
-------
in writing and shall be personally delivered or sent by prepaid registered
or certified mail, return receipt requested, addressed to the other party
at the address shown below or at such other address for which such party
gives notice hereunder. Notices sent by mail shall be deemed to have been
given 72 hours after deposit in the United States mail.
2
<PAGE>
Relocation Agreement
Richard S. Gilbert
11. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first written above.
COPPER MOUNTAIN NETWORKS, INC.
By: ________________________
Title: _____________________
Address: 3931 Sorrento Valley Blvd.
San Diego, CA 92121
By: /S/ RICHARD S. GILBERT
---------------------------
Address: 1545 1 Village Drive
Lake Oswego, OR 97034
<PAGE>
Richard S. Gilbert
EXHIBIT A
Moving and Other Relocation Expenses
------------------------------------
A. Moving Expenses
---------------
The following expenses are eligible for reimbursement/payment by the
Company subject to the limitations indicated.
1. Transportation of household goods and automobiles; and
2. Packing and unpacking of household goods. Insurance is provided
based on the reasonable value of household goods.
B. In-Transit Expenses
-------------------
Reasonable in-transit travel expenses for Employee and his family from
the former location to the new location by the most direct route.
C. Sale of Home
------------
The Company will reimburse Employee for reasonable and customary
closing costs of Employee associated with the sale of Employee's primary
residence including:
1. Real Estate Commission not to exceed 6%.
2. Mortgage pre-payment penalties.
3. Tax stamps.
4. Recording Fees.
5. Title Insurance.
<PAGE>
EXHIBIT A
Richard S. Gilbert
D. Purchase of Home
----------------
The Company will reimburse Employee for reasonable and customary costs
incurred in connection with the purchase of a home as follows:
1. Title costs.
2. Appraisal fees.
3. Credit report fees.
4. Transfer tax.
5. Mortgage application fees.
6. Recording fees.
7. Termite/home inspection fees.
E. Tax Gross Up
------------
The Company will pay Employee an amount to provide a tax gross-up
reimbursement of moving and other relocation expenses covered by this Exhibit A.
F. House Hunting Visit
-------------------
If you wish to buy a house, or find an apartment at the new location
before you transfer, one advance visit to the new location by self and spouse
for renters, and up to two visits for home owners purchasing a home will be
reimbursed. Reimbursable expenses include roundtrip tourist class tickets,
meals, lodging and rental car for a total period of up to 3 days for apartment
seeking, and 7 days for home owners visiting for the purpose of purchasing a
home.
G. Temporary Living
----------------
If temporary housing is necessary before moving into a residence,
reimbursement of lodging and rental car (if needed) will be paid up to a maximum
of 120 days.
2
<PAGE>
LOAN AGREEMENT
--------------
Richard S. Gilbert
------------------
This LOAN AGREEMENT (this "Agreement") is entered into as of April 6, 1998, by
---------
and between COPPER MOUNTAIN NETWORKS, INC., a California corporation (the
"Company"), and Richard S. Gilbert ("Borrower").
RECITALS
--------
A. The Company wishes to provide Borrower with assistance in purchasing a
residence by lending Borrower money to help enable Borrower to make such a
purchase.
B. For the foregoing purpose, Borrower desires to have the right to borrow and
the Company is willing to lend to Borrower an amount in cash up to $1,000,000
subject to adjustment as set forth below, which loan shall be secured by a deed
of trust on such residence under the terms and conditions of this Agreement.
NOW, THEREFORE, the Company and Borrower agree as follows:
1. The Loan. Subject to the terms and conditions contained herein, the
--------
Company, upon 30 days advance written request made by Borrower prior to December
31, 1998, will lend to Borrower up to $1,000,000 (the "Loan"). The date on which
----
the Loan is made is referred to as the "Loan Date."
---------
2. The Note. In consideration of the Company's delivery of the Loan on the
--------
Loan Date, Borrower will execute and deliver the Note Secured By Deed of Trust
(the "Note") in substantially the form attached hereto as Exhibit A.
----
3. Interest. The Loan will not bear interest.
--------
4. Deed of Trust. Borrower will additionally execute and deliver the Deed of
-------------
Trust With Assignment Of Rents to the Company as security for Borrower's
obligation to repay the Loan.
5. Use of Proceeds. Borrower agrees that the proceeds of the Loan will be
---------------
used only to purchase the new principal residence of Borrower.
1
<PAGE>
LOAN AGREEMENT
- --------------
Richard S. Gilbert
6. No Employment Rights. Nothing contained in this Agreement or in any of
--------------------
the attachments or exhibits hereto is intended or shall be construed to confer
upon Borrower any right to employment or continued employment with the Company,
or shall alter in any way the nature of Borrower's current employment with the
Company.
7. Successors and Assigns. This Agreement shall inure to the benefit of the
----------------------
respective heirs, personal representatives, successors and assigns of the
parties hereto.
8. Governing Law. This Agreement and all acts and transactions pursuant
-------------
thereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of California
applicable to contracts wholly made and performed in the State of California.
9. Dispute Resolution. All actions or proceedings relating to this Agreement
------------------
shall be maintained in a court located in San Diego County, State of California,
and the parties hereto expressly consent to (i) the personal jurisdiction of the
federal and state courts within San Diego County, California, and (ii) service
of process being effected upon them by registered mail sent to the address set
forth below.
10. Entire Agreement. This Agreement constitutes the entire agreement of the
----------------
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements and understandings related to such subject matter.
11. Modification. This Agreement shall not be amended without the written
------------
consent of both parties hereto.
12. Severability. In the event that any provision hereof becomes or is
------------
declared by a court of competent jurisdiction to be illegal, unenforceable or
void, this Agreement shall continue in full force and effect without said
provision.
2
<PAGE>
LOAN AGREEMENT
- --------------
Richard S. Gilbert
13. Construction. This Agreement is the result of negotiations between and has
------------
been reviewed by each of the parties hereto and their respective counsel;
accordingly, this Agreement shall be deemed to be the product of all of the
parties hereto, and no ambiguity shall be construed in favor of or against any
one of the parties hereto.
14. 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.
15. Notices. Any notice required or permitted by this Agreement shall be in
-------
writing and shall be personally delivered or sent by prepaid registered or
certified mail, return receipt requested, addressed to the other party at the
address shown below or at such other address for which such party gives notice
hereunder. Notices sent by mail shall be deemed to have been given 72 hours
after deposit in the United States mail.
16. Counterparts. This Agreement may be executed in two or more counterparts,
------------
each of which shall be deemed an original and all of which together shall
constitute one instrument.
17. Further Acts. Each party hereto agrees to execute, acknowledge and deliver
------------
or to cause to have executed, acknowledged and delivered, such other and further
instruments and documents as may reasonably be requested by the other to carry
out the purposes of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first written above.
BORROWER: COMPANY:
COPPER MOUNTAIN NETWORKS, INC.
By:
---------------------------------
/s/ R.S. GILBERT
- -------------------------------
Richard S. Gilbert Title:
Address: 15451 Village Drive ------------------------------
Lake Oswego, OR 97034 Address: 3931 Sorrento Valley Blvd.
San Diego, CA 92121
3
<PAGE>
EXHIBIT A
---------
NOTE SECURED BY DEED OF TRUST -- RICHARD S. GILBERT
---------------------------------------------------
$1,000,000 Date:__________________
San Diego, California
FOR VALUE RECEIVED, the undersigned RICHARD S. GILBERT ("Borrower") HEREBY
--------
PROMISES TO PAY to the order of COPPER MOUNTAIN NETWORKS, INC., a Delaware
Corporation (the "Company"), at its principal offices at 3931 Sorrento Valley
Blvd., San Diego, CA 92121, the sum of $1,000,000, on the terms and conditions
specified below:
1. Principal. The principal amount of the loan evidenced by this Note
---------
shall be due and payable in one principal payment of $1,000,000 due and payable
on March 30, 2003.
2. Interest. The loan evidenced by this Note will not bear interest.
--------
3. Application of Payments. Payment shall be made in lawful tender of the
-----------------------
United States and shall be applied to the payment of principal. Prepayment of
principal may be made at any time without penalty.
4. Events of Acceleration. The entire unpaid principal sum this Note,
----------------------
shall, at the option of the Company, become immediately due and payable upon the
occurrence of one or more of the following events:
A. fifteen (15) days following the date the Borrower ceases for any reason
to provide substantial services to the Company; or
B. the failure of the Borrower to execute the Deed of Trust (as defined
below) on his principal residence in California within thirty (30) days of a
request from the Company; or
C. if the Borrower shall sell, convey or alienate said property, or any
part thereof, or shall be divested of this title or any interest therein in any
manner or way, whether voluntarily or involuntarily, without the written consent
of the Company being first had and obtained; or
1
<PAGE>
D. the insolvency of the Borrower, the commission of any act of bankruptcy
by the Borrower, the execution of the Borrower of a general assignment for the
benefit of creditors, the filing by or against the Borrower of any petition in
bankruptcy or any petition for relief under the provisions of the federal
bankruptcy act or any other state or federal law for the relief of debtors and
the continuation of such petition without dismissal for a period of thirty (30)
days or more, the appointment of a receiver or trustee to take possession of any
property or assets of the Borrower, or the attachment of or execution against
any property or assets of the Borrower; or
E. the occurrence of any event of default under the Deed of Trust securing
this Note or any obligation secured thereby.
5. Employment Requirement. The benefits of the interest arrangements under
----------------------
this Note are not transferable by Borrower and are conditioned on the future
performance of substantial services by the Borrower. For purposes of applying
the provisions of this Note, the Borrower shall be considered to provide
substantial services to the Company for so long as the Borrower renders services
as a full-time employee of the Company.
6. Use of Proceeds; Security; Itemized Deductions. The proceeds of the
----------------------------------------------
loan evidenced by this Note were applied solely to the purchase of the
Borrower's principal residence in _______________, California. Payment of this
Note shall be secured by a Deed of Trust With Assignment of Rents (the "Deed of
-------
Trust") on such principal residence. Borrower, however, shall remain personally
- -----
liable for payment of this Note, and assets of the Borrower, in addition to the
collateral under the Deed of Trust, may be applied to the satisfaction of the
Borrower's obligations hereunder. Borrower hereby certifies that he reasonably
expects to be entitled to and will itemize deductions for each year the loan
evidenced by this Note is outstanding.
7. Collection. If action is instituted to collect this Note, the Borrower
----------
promises to pay all costs and expenses (including reasonable attorney fees)
incurred in connection with such action.
8. Waiver. No previous waiver and no failure or delay by the Company in
------
acting with respect to the terms of this Note or the Deed of
2
<PAGE>
Trust shall constitute a waiver of any breach, default, or failure of condition
under this Note, the Deed of Trust or the obligations secured thereby. A waiver
of any term of this Note, the Deed of Trust or any of the obligations secured
thereby must be made in writing and shall be limited to the express terms of
such waiver.
The Borrower waives presentment; demand; notice of dishonor; notice of
default or delinquency; notice of acceleration; notice of protest and
nonpayment; notice of costs, expenses or losses and interest thereon; notice of
interest on interest; and diligence in taking any action to collect any sums
owing under this Note or in proceeding against any of the rights or interests
in or to properties securing payment of this Note.
9. Conflicting Agreements. In the event of any inconsistencies between
----------------------
the terms of this Note and the terms of any other document related to the loan
evidenced by this Note, the terms of this Note shall prevail.
10. Governing Law. This Note shall be governed by and construed in
-------------
accordance with the laws of the State of California applicable to contracts
wholly made and performed in the State of California.
IN WITNESS WHEREOF, Borrower has caused this Note to be executed as of the
date and year first above written.
"BORROWER"
/s/ R.S. GILBERT
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Richard S. Gilbert
3
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EXHIBIT 10.6
M A S T E R L E A S E A G R E E M E N T
MASTER LEASE AGREEMENT(the "Master Lease") dated September 30, 1997 by and
between COMDISCO, INC. ("Lessor") and Copper Mountain Networks, Inc. ("Lessee").
IN CONSIDERATION of the mutual agreements described below, the parties agree as
follows (all capitalized terms are defined in Section 14.18):
1. Property Leased.
Lessor leases to Lessee all of the Equipment described on each Summary Equipment
Schedule. In the event of a conflict, the terms of the applicable Schedule
prevail over this Master Lease.
2. Term.
On the Commencement Date, Lessee will be deemed to accept the Equipment, will be
bound to its rental obligations for each item of Equipment and the term of a
Summary Equipment Schedule will begin and continue through the Initial Term and
thereafter until terminated by either party upon prior written notice received
during the Notice Period. No termination may be effective prior to the
expiration of the Initial Term.
3. Rent and Payment.
Rent is due and payable in advance on the first day of each Rent Interval at the
address specified in Lessor's invoice. Interim Rent is due and payable when
invoiced. If any payment is not made when due, Lessee will pay a Late Charge on
the overdue amount. Upon Lessee's execution of each Schedule, Lessee will pay
Lessor the Advance specified on the Schedule. The Advance will be credited
towards the final Rent payment if Lessee is not then in default. No interest
will be paid on the Advance.
4. Selection; Warranty and Disclaimer of Warranties.
4.1 Selection. Lessee acknowledges that it has selected the Equipment and
disclaims any reliance upon statements made by the Lessor, other than as set
forth in the Schedule.
4.2 Warranty and Disclaimer of Warranties. Lessor warrants to Lessee that, so
long as Lessee is not in default, Lessor will not disturb Lessee's quiet and
peaceful possession, and unrestricted use of the Equipment. To the extent
permitted by the manufacturer, Lessor assigns to Lessee during the term of the
Summary Equipment Schedule any manufacturer's warranties for the Equipment.
LESSOR MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED AS TO ANY MATTER WHATSOEVER,
INCLUDING, WITHOUT LIMITATION, THE MERCHANTABILITY OF THE EQUIPMENT OR ITS
FITNESS FOR A PARTICULAR PURPOSE. Lessor is not responsible for any liability,
claim, loss, damage or expense of any kind (including strict liability in tort)
caused by the Equipment except for any loss or damage caused by the willful
misconduct or negligent acts of Lessor. In no event is Lessor responsible for
special, incidental or consequential damages.
5. Title; Relocation or Sublease; and Assignment.
5.1 Title. Lessee holds the Equipment subject and subordinate to the rights of
the Owner, Lessor, any Assignee and any Secured Party. Lessee authorizes Lessor,
as Lessee's agent, and at Lessor's expense, to prepare, execute and file in
Lessee's name precautionary Uniform Commercial Code financing statements showing
the interest of the Owner, Lessor, and any Assignee or Secured Party in the
Equipment and to insert serial numbers in Summary Equipment Schedules as
appropriate. Lessee will, at its expense, keep the Equipment free and clear from
any liens or encumbrances of any kind (except any caused by Lessor) and will
indemnify and hold the Owner, Lessor, any Assignee and Secured Party harmless
from and against any loss caused by Lessee's failure to do so, except where such
is caused by Lessor.
5.2 Relocation or Sublease. Upon prior written notice, Lessee may relocate
Equipment to any location within the continental United States provided (i) the
Equipment will not be used by an entity exempt from federal income tax, and (ii)
all additional costs (including any administrative fees, additional taxes and
insurance coverage) are reconciled and promptly paid by Lessee.
Lessee may sublease the Equipment upon the reasonable consent of the Lessor and
the Secured Party. Such consent to sublease will be granted if: (i) Lessee meets
the relocation requirements set out above, (ii) the sublease is expressly
subject and subordinate to the terms of the Schedule, (iii) Lessee assigns its
rights in the sublease to Lessor and the Secured Party as additional collateral
and security, (iv) Lessee's obligation to maintain and insure the Equipment is
not altered, (v) all financing statements required to continue the Secured
Party's prior perfected security interest are filed, and (vi) Lessee executes
sublease documents acceptable to Lessor.
No relocation or sublease will relieve Lessee from any of its obligations under
this Master Lease and the relevant Schedule.
5.3 Assignment by Lessor. The terms and conditions of each Schedule have been
fixed by Lessor in order to permit Lessor to sell and/or assign or transfer its
interest or grant a security interest in each Schedule and/or the Equipment to a
Secured Party or Assignee. In that event, the term Lessor will mean the Assignee
and any Secured Party. However, any assignment, sale, or other transfer by
Lessor will not relieve Lessor of its obligations to Lessee and will not
materially change Lessee's duties or materially increase the burdens or risks
imposed on Lessee. The Lessee consents to and will acknowledge such assignments
in a written notice given to Lessee. Lessee also agrees that:
(a) The Secured Party will be entitled to exercise all of Lessor's rights, but
will not be obligated to perform any of the obligations of Lessor. The
Secured Party will not disturb Lessee's quiet and peaceful possession and
unrestricted use of the Equipment so long as Lessee is not in default and
the Secured Party continues to receive all Rent payable under the Schedule;
and
(b) Lessee will pay all Rent and all other amounts payable to the Secured
Party, despite any defense or claim which it has against Lessor. Lessee
reserves its right to have recourse directly against Lessor for any defense
or claim;
(c) Subject to and without impairment of Lessee's leasehold rights in the
Equipment, Lessee holds the Equipment for the Secured Party to the extent
of the Secured Party's rights in that Equipment.
6. Net Lease; Taxes and Fees.
6.1 Net Lease. Each Summary Equipment Schedule constitutes a net lease. Lessee's
obligation to pay Rent and all other amounts due hereunder is absolute and
unconditional and is not subject to any abatement, reduction, set-off, defense,
counterclaim, interruption, deferment or recoupment for any reason whatsoever.
6.2 Taxes and Fees. Lessee will pay when due or reimburse Lessor for all taxes,
fees or any other charges (together with any related interest or penalties not
arising from the negligence of Lessor) accrued for or arising during the term of
each Summary Equipment Schedule against Lessor, Lessee or the Equipment by any
governmental authority (except only Federal, state, local and franchise taxes on
the capital or the net income of Lessor). Lessor will file all personal property
tax returns for the Equipment and pay all such property taxes due. Lessee will
reimburse Lessor for property taxes within thirty (30) days of receipt of an
invoice.
7. Care, Use and Maintenance; Inspection by Lessor.
7.1 Care, Use and Maintenance. Lessee will maintain the Equipment in good
operating order and appearance, protect the Equipment from deterioration, other
than normal wear and tear, and will not use the Equipment for any purpose other
than that for which it was designed. If commercially available and considered
common business practice for each item of Equipment, Lessee will maintain in
force a standard maintenance contract with the manufacturer of the Equipment, or
another party acceptable to Lessor, and will provide Lessor with a complete copy
of that contract. If Lessee has the Equipment maintained by a party other than
the manufacturer or self maintains, Lessee agrees to pay any costs necessary for
the manufacturer to bring the Equipment to then current release, revision and
engineering change levels, and to re-certify the Equipment as eligible for
manufacturer's maintenance at the expiration of the lease term, provided re-
certification is available and is required by Lessor. The lease term will
continue upon the same terms and conditions until recertification has been
obtained.
7.2 Inspection by Lessor. Upon reasonable advance notice, Lessee, during
reasonable business hours and subject to Lessee's security requirements, will
make the Equipment and its related log and maintenance records available to
Lessor for inspection.
8. Representations and Warranties of Lessee. Lessee hereby represents, warrants
and covenants that with respect to the Master Lease and each Schedule executed
hereunder:
(a) The Lessee is a corporation duly organized and validly existing in good
standing under the laws of the jurisdiction of its incorporation, is duly
qualified to do business in each jurisdiction (including the jurisdiction where
the Equipment is, or is to be, located) where its ownership or lease of property
or the conduct of its business requires such qualification, except for where
such lack of qualification would not have a material adverse effect on the
Lessee's business; and has full corporate power and authority to hold property
under the Master Lease and each Schedule and to enter into and perform its
obligations under the Master Lease and each Schedule.
(b) The execution and delivery by the Lessee of the Master Lease and each
Schedule and its performance thereunder have been duly authorized by all
necessary corporate action on the part of the Lessee, and the Master Lease and
each Schedule are not inconsistent with the Lessee's Articles of Incorporation
or Bylaws, do not
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contravene any law or governmental rule, regulation or order
applicable to it, do not and will not contravene any provision of, or constitute
a default under, any indenture, mortgage, contract or other instrument to which
it is a party or by which it is bound, and the Master Lease and each Schedule
constitute legal, valid and binding agreements of the Lessee, enforceable in
accordance with their terms, subject to the effect of applicable bankruptcy and
other similar laws affecting the rights of creditors generally and rules of law
concerning equitable remedies.
(c) There are no actions, suits, proceedings or patent claims pending or, to the
knowledge of the Lessee, threatened against or affecting the Lessee in any court
or before any governmental commission, board or authority which, if adversely
determined, will have a material adverse effect on the ability of the Lessee to
perform its obligations under the Master Lease and each Schedule.
(d) The Equipment is personal property and when subjected to use by the Lessee
will not be or become fixtures under applicable law.
(e) The Lessee has no material liabilities or obligations, absolute or
contingent (individually or in the aggregate), except the liabilities and
obligations of the Lessee as set forth in the Financial Statements and
liabilities and obligations which have occurred in the ordinary course of
business, and which have not been, in any case or in the aggregate, materially
adverse to Lessee's ongoing business.
(f) To the best of the Lessee's knowledge, the Lessee owns, possesses, has
access to, or can become licensed on reasonable terms under all patents, patent
applications, trademarks, trade names, inventions, franchises, licenses,
permits, computer software and copyrights necessary for the operations of its
business as now conducted, with no known infringement of, or conflict with, the
rights of others.
(g) All material contracts, agreements and instruments to which the Lessee is a
party are in full force and effect in all material respects, and are valid,
binding and enforceable by the Lessee in accordance with their respective terms,
subject to the effect of applicable bankruptcy and other similar laws affecting
the rights of creditors generally, and rules of law concerning equitable
remedies.
9. Delivery and Return of Equipment.
Lessee hereby assumes the full expense of transportation and in-transit
insurance to Lessee's premises and installation thereat of the Equipment. Upon
termination (by expiration or otherwise) of each Summary Equipment Schedule,
Lessee shall, pursuant to Lessor's instructions and at Lessee's full expense
(including, without limitation, expenses of transportation and in-transit
insurance), return the Equipment to Lessor in the same operating order, repair,
condition and appearance as when received, less normal depreciation and wear and
tear. Lessee shall return the Equipment to Lessor at 6111 North River Road,
Rosemont, Illinois 60018 or at such other address within the continental United
States as directed by Lessor, provided, however, that Lessee's expense shall be
limited to the cost of returning the Equipment to Lessor's address as set forth
herein. During the period subsequent to receipt of a notice under Section 2,
Lessor may demonstrate the Equipment's operation in place and Lessee will supply
any of its personnel as may reasonably be required to assist in the
demonstrations.
10. Labeling.
Upon request, Lessee will mark the Equipment indicating Lessor's interest with
labels provided by Lessor. Lessee will keep all Equipment free from any other
marking or labeling which might be interpreted as a claim of ownership.
11. Indemnity.
With regard to bodily injury and property damage liability only, Lessee will
indemnify and hold Lessor, any Assignee and any Secured Party harmless from and
against any and all claims, costs, expenses, damages and liabilities, including
reasonable attorneys' fees, arising out of the ownership (for strict liability
in tort only), selection, possession, leasing, operation, control, use,
maintenance, delivery, return or other disposition of the Equipment during the
term of this Master Lease or until Lessee's obligations under the Master Lease
terminate. However, Lessee is not responsible to a party indemnified hereunder
for any claims, costs, expenses, damages and liabilities occasioned by the
negligent acts of such indemnified party. Lessee agrees to carry bodily injury
and property damage liability insurance during the term of the Master Lease in
amounts and against risks customarily insured against by the Lessee on equipment
owned by it. Any amounts received by Lessor under that insurance will be
credited against Lessee's obligations under this Section.
12. Risk of Loss.
Effective upon delivery and until the Equipment is returned, Lessee relieves
Lessor of responsibility for all risks of physical damage to or loss or
destruction of the Equipment. Lessee will carry casualty insurance for each item
of Equipment in an amount not less than the Casualty Value. All policies for
such insurance will name the Lessor and any Secured Party as additional insured
and as loss payee, and will provide for at least thirty (30) days prior written
notice to the Lessor of cancellation or expiration, and will insure Lessor's
interests regardless of any breach or violation by Lessee of any representation,
warranty or condition contained in such policies and will be primary without
right of contribution from any insurance effected by Lessor. Upon the execution
of any Schedule, the Lessee will furnish appropriate evidence of such insurance
acceptable to Lessor.
Lessee will promptly repair any damaged item of Equipment unless such Equipment
has suffered a Casualty Loss. Within fifteen (15) days of a Casualty Loss,
Lessee will provide written notice of that loss to Lessor and Lessee will, at
Lessee's option, either (a) replace the item of Equipment with Like Equipment
and marketable title to the Like Equipment will automatically vest in Lessor or
(b) pay the Casualty Value and after that payment and the payment of all other
amounts due and owing with respect to that item of Equipment, Lessee's
obligation to pay further Rent for the item of Equipment will cease.
13. Default, Remedies and Mitigation.
13.1 Default. The occurrence of any one or more of the following Events of
Default constitutes a default under a Summary Equipment Schedule:
(a) Lessee's failure to pay Rent or other amounts payable by Lessee when due if
that failure continues for five (5) business days after written notice; or
(b) Lessee's failure to perform any other term or condition of the Schedule or
the material inaccuracy of any representation or warranty made by the Lessee in
the Schedule or in any document or certificate furnished to the Lessor hereunder
if that failure or inaccuracy continues for ten (10) business days after written
notice; or
(c) An assignment by Lessee for the benefit of its creditors, the failure by
Lessee to pay its debts when due, the insolvency of Lessee, the filing by Lessee
or the filing against Lessee of any petition under any bankruptcy or insolvency
law or for the appointment of a trustee or other officer with similar powers,
the adjudication of Lessee as insolvent, the liquidation of Lessee, or the
taking of any action for the purpose of the foregoing; or
(d) The occurrence of an Event of Default under any Schedule, Summary Equipment
Schedule or other agreement between Lessee and Lessor or its Assignee or Secured
Party.
13.2 Remedies. Upon the occurrence of any of the above Events of Default,
Lessor, at its option, may:
(a) enforce Lessee's performance of the provisions of the applicable Schedule
by appropriate court action in law or in equity;
(b) recover from Lessee any damages and or expenses, including Default Costs;
(c) with notice and demand, recover all sums due and accelerate and recover the
present value of the remaining payment stream of all Rent due under the
defaulted Schedule (discounted at the same rate of interest at which such
defaulted Schedule was discounted with a Secured Party plus any prepayment fees
charged to Lessor by the Secured Party or, if there is no Secured Party, then
discounted at 6%) together with all Rent and other amounts currently due as
liquidated damages and not as a penalty;
(d) with notice and process of law and in compliance with Lessee's security
requirements, Lessor may enter on Lessee's premises to remove and repossess the
Equipment without being liable to Lessee for damages due to the repossession,
except those resulting from Lessor's, its assignees', agents' or
representatives' negligence; and
(e) pursue any other remedy permitted by law or equity.
The above remedies, in Lessor's discretion and to the extent permitted by law,
are cumulative and may be exercised successively or concurrently.
13.3 Mitigation. Upon return of the Equipment pursuant to the terms of Section
13.2, Lessor will use its best efforts in accordance with its normal business
procedures (and without obligation to give any priority to such Equipment) to
mitigate Lessor's damages as described below. EXCEPT AS SET FORTH IN THIS
SECTION, LESSEE HEREBY WAIVES ANY RIGHTS NOW OR HEREAFTER CONFERRED BY STATUTE
OR OTHERWISE WHICH MAY REQUIRE LESSOR TO MITIGATE ITS DAMAGES OR MODIFY ANY OF
LESSOR'S RIGHTS OR REMEDIES STATED HEREIN. Lessor may sell, lease or otherwise
dispose of all or any part of the Equipment at a public or private sale for cash
or credit with the privilege of purchasing the Equipment. The proceeds from any
sale, lease or other disposition of the Equipment are defined as either:
(a) if sold or otherwise disposed of, the cash proceeds less the Fair Market
Value of the Equipment at the expiration of the Initial Term less the
Default Costs; or
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(b) if leased, the present value (discounted at 3 percent (3%) over the U.S.
Treasury Notes of comparable maturity to the term of the re-lease) of the
rentals for a term not to exceed the Initial Term, less the Default Costs.
Any proceeds will be applied against liquidated damages and any other sums due
to Lessor from Lessee. However, Lessee is liable to Lessor for, and Lessor may
recover, the amount by which the proceeds are less than the liquidated damages
and other sums due to Lessor from Lessee.
14. Additional Provisions.
14.1 Board Attendance. One representative of Lessor will have the right to
attend Lessee's corporate Board of Directors meetings and Lessee will give
Lessor reasonable notice in advance of any special Board of Directors meeting,
which notice will provide an agenda of the subject matter to be discussed at
such board meeting. Lessee will provide Lessor with a certified copy of the
minutes of each Board of Directors meeting within thirty (30) days following the
date of such meeting held during the term of this Master Lease.
14.2 Financial Statements. As soon as practicable at the end of each month (and
in any event within thirty (30) days), Lessee will provide to Lessor the same
information which Lessee provides to its Board of Directors, but which will
include not less than a monthly income statement, balance sheet and statement of
cash flows prepared in accordance with generally accepted accounting principles,
consistently applied (the "Financial Statements"). As soon as practicable at the
end of each fiscal year, Lessee will provide to Lessor audited Financial
Statements setting forth in comparative form the corresponding figures for the
fiscal year (and in any event within ninety (90) days), and accompanied by an
audit report and opinion of the independent certified public accountants
selected by Lessee. Lessee will promptly furnish to Lessor any additional
information (including, but not limited to, tax returns, income statements,
balance sheets and names of principal creditors) as Lessor reasonably believes
necessary to evaluate Lessee's continuing ability to meet financial obligations.
After the effective date of the initial registration statement covering a public
offering of Lessee's securities, the term "Financial Statements" will be deemed
to refer to only those statements required by the Securities and Exchange
Commission.
14.3 Obligation to Lease Additional Equipment. Upon notice to Lessee, Lessor
will not be obligated to lease any Equipment which would have a Commencement
Date after said notice if: (i) Lessee is in default under this Master Lease or
any Schedule; (ii) Lessee is in default under any loan agreement, the result of
which would allow the lender or any secured party to demand immediate payment of
any material indebtedness; (iii) there is a material adverse change in Lessee's
credit standing; or (iv) Lessor determines (in reasonable good faith) that
Lessee will be unable to perform its obligations under this Master Lease or any
Schedule.
14.4 Merger and Sale Provisions. Lessee will notify Lessor of any proposed
Merger at least sixty (60) days prior to the closing date. Lessor may, in its
discretion, either (i) consent to the assignment of the Master Lease and all
relevant Schedules to the successor entity, or (ii) terminate the Lease and all
relevant Schedules. If Lessor elects to consent to the assignment, Lessee and
its successor will sign the assignment documentation provided by Lessor. If
Lessor elects to terminate the Master Lease and all relevant Schedules, then
Lessee will pay Lessor all amounts then due and owing and a termination fee
equal to the present value (discounted at 6%) of the remaining Rent for the
balance of the Initial Term(s) of all Schedules, and will return the Equipment
in accordance with Section 9. Lessor hereby consents to any Merger in which the
acquiring entity has a Moody's Bond Rating of BA3 or better or a commercially
acceptable equivalent measure of creditworthiness as reasonably determined by
Lessor.
14.5 Entire Agreement. This Master Lease and associated Schedules and Summary
Equipment Schedules supersede all other oral or written agreements or
understandings between the parties concerning the Equipment including, for
example, purchase orders. ANY AMENDMENT OF THIS MASTER LEASE OR A SCHEDULE, MAY
ONLY BE ACCOMPLISHED BY A WRITING SIGNED BY THE PARTY AGAINST WHOM THE AMENDMENT
IS SOUGHT TO BE ENFORCED.
14.6 No Waiver. No action taken by Lessor or Lessee will be deemed to constitute
a waiver of compliance with any representation, warranty or covenant contained
in this Master Lease or a Schedule. The waiver by Lessor or Lessee of a breach
of any provision of this Master Lease or a Schedule will not operate or be
construed as a waiver of any subsequent breach.
14.7 Binding Nature. Each Schedule is binding upon, and inures to the benefit of
Lessor and its assigns. LESSEE MAY NOT ASSIGN ITS RIGHTS OR OBLIGATIONS.
14.8 Survival of Obligations. All agreements, obligations including, but not
limited to those arising under Section 6.2, representations and warranties
contained in this Master Lease, any Schedule, Summary Equipment Schedule or in
any document delivered in connection with those agreements are for the benefit
of Lessor and any Assignee or Secured Party and survive the execution, delivery,
expiration or termination of this Master Lease.
14.9 Notices. Any notice, request or other communication to either party by the
other will be given in writing and deemed received upon the earlier of (1)
actual receipt or (2) three days after mailing if mailed postage prepaid by
regular or airmail to Lessor (to the attention of "the Comdisco Venture Group")
or Lessee, at the address set out in the Schedule, (3) one day after it is sent
by courier or (4) on the same day as sent via facsimile transmission, provided
that the original is sent by personal delivery or mail by the sending party.
14.10 Applicable Law. THIS MASTER LEASE HAS BEEN, AND EACH SCHEDULE WILL HAVE
BEEN MADE, EXECUTED AND DELIVERED IN THE STATE OF ILLINOIS AND WILL BE GOVERNED
AND CONSTRUED FOR ALL PURPOSES IN ACCORDANCE WITH THE LAWS OF THE STATE OF
ILLINOIS WITHOUT GIVING EFFECT TO CONFLICT OF LAW PROVISIONS. NO RIGHTS OR
REMEDIES REFERRED TO IN ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE WILL BE
CONFERRED ON LESSEE UNLESS EXPRESSLY GRANTED IN THIS MASTER LEASE OR A SCHEDULE.
14.11 Severability. If any one or more of the provisions of this Master Lease or
any Schedule is for any reason held invalid, illegal or unenforceable, the
remaining provisions of this Master Lease and any such Schedule will be
unimpaired, and the invalid, illegal or unenforceable provision replaced by a
mutually acceptable valid, legal and enforceable provision that is closest to
the original intention of the parties.
14.12 Counterparts. This Master Lease and any Schedule may be executed in any
number of counterparts, each of which will be deemed an original, but all such
counterparts together constitute one and the same instrument. If Lessor grants a
security interest in all or any part of a Schedule, the Equipment or sums
payable thereunder, only that counterpart Schedule marked "Secured Party's
Original" can transfer Lessor's rights and all other counterparts will be marked
"Duplicate."
14.13 Licensed Products. Lessee will obtain no title to Licensed Products which
will at all times remain the property of the owner of the Licensed Products. A
license from the owner may be required and it is Lessee's responsibility to
obtain any required license before the use of the Licensed Products. Lessee
agrees to treat the Licensed Products as confidential information of the owner,
to observe all copyright restrictions, and not to reproduce or sell the Licensed
Products.
14.14 Secretary's Certificate. Lessee will, upon execution of this Master Lease,
provide Lessor with a secretary's certificate of incumbency and authority. Upon
the execution of each Schedule with a purchase price in excess of $1,000,000,
Lessee will provide Lessor with an opinion from Lessee's counsel in a form
acceptable to Lessor regarding the representations and warranties in Section 8.
14.15 Electronic Communications. Each of the parties may communicate with the
other by electronic means under mutually agreeable terms.
14.16 Landlord/Mortgagee Waiver. Lessee agrees to provide Lessor with a
Landlord/Mortgagee Waiver with respect to the Equipment. Such waiver shall be in
a form satisfactory to Lessor.
14.17 Equipment Procurement Charges/Progress Payments. Lessee hereby agrees that
Lessor shall not, by virtue of its entering into this Master Lease, be required
to remit any payments to any manufacturer or other third party until Lessee
accepts the Equipment subject to this Master Lease.
14.18 Definitions.
Advance - means the amount due to Lessor by Lessee upon Lessee's execution of
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each Schedule.
Assignee - means an entity to whom Lessor has sold or assigned its rights as
- --------
owner and Lessor of Equipment.
Casualty Loss - means the irreparable loss or destruction of Equipment.
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Casualty Value - means the greater of the aggregate Rent remaining to be paid
- --------------
for the balance of the lease term or the Fair Market Value of the Equipment
immediately prior to the Casualty Loss. However, if a Casualty Value Table is
attached to the relevant Schedule its terms will control.
Commencement Date - is defined in each Schedule.
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Default Costs - means reasonable attorney's fees and remarketing costs resulting
- -------------
from a Lessee default or Lessor's enforcement of its remedies.
Delivery Date - means date of delivery of Inventory Equipment to Lessee's
- -------------
address.
Equipment - means the property described on a Summary Equipment Schedule and any
- ---------
replacement for that property required or permitted by this Master Lease or a
Schedule.
Event of Default - means the events described in Subsection 13.1.
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Fair Market Value - means the aggregate amount which would be obtainable in an
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arm's-length transaction between an informed and willing buyer/user and an
informed and willing seller under no compulsion to sell.
Initial Term - means the period of time beginning on the first day of the first
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full Rent Interval following the Commencement Date for all items of Equipment
and continuing for the number of Rent Intervals indicated on a Schedule.
Interim Rent - means the pro-rata portion of Rent due for the period from the
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Commencement Date through but not including the first day of the first full Rent
Interval included in the Initial Term.
Late Charge - means the lesser of five percent (5%) of the payment due or the
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maximum amount permitted by the law of the state where the Equipment is located.
Licensed Products - means any software or other licensed products attached to
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the Equipment.
Like Equipment - means replacement Equipment which is lien free and of the same
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model, type, configuration and manufacture as Equipment.
Merger - means any consolidation or merger of the Lessee with or into any other
- ------
corporation or entity, any sale or conveyance of all or substantially all of the
assets or stock of the Lessee by or to any other person or entity in which
Lessee is not the surviving entity.
Notice Period - means not less than ninety (90) days nor more than twelve (12)
- -------------
months prior to the expiration of the lease term.
Owner - means the owner of Equipment.
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Rent - means the rent Lessee will pay for each item of Equipment expressed in a
- ----
Summary Equipment Schedule either as a specific amount or an amount equal to the
amount which Lessor pays for an item of Equipment multiplied by a lease rate
factor plus all other amounts due to Lessor under this Master Lease or a
Schedule.
Rent Interval - means a full calendar month or quarter as indicated on a
- -------------
Schedule.
Schedule - means either an Equipment Schedule or a Licensed Products Schedule
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which incorporates all of the terms and conditions of this Master Lease.
Secured Party - means an entity to whom Lessor has granted a security interest
- -------------
for the purpose of securing a loan.
Summary Equipment Schedule - means a certificate provided by Lessor summarizing
- --------------------------
all of the Equipment for which Lessor has received Lessee approved vendor
invoices, purchase documents and/or evidence of delivery during a calendar
quarter which will incorporate all of the terms and conditions of the related
Schedule and this Master Lease and will constitute a separate lease for the
equipment leased thereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Master Lease on or as
of the day and year first above written.
COPPER MOUNTAIN NETWORKS, INC., COMDISCO, INC.,
as Lessee as Lessor
By: /s/ JOE LYNCH By: /s/ JAMES P. LABE
--------------------------- ------------------------------
Title: V.P. Operations Title: JAMES P. LABE, PRESIDENT
------------------------ ---------------------------
COMDISCO VENTURES DIVISION
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ADDENDUM TO THE MASTER LEASE AGREEMENT
DATED AS OF SEPTEMBER 30, 1997
BETWEEN COMDISCO, INC., AS LESSOR, AND
COPPER MOUNTAIN NETWORKS, INC., AS LESSEE
The undersigned hereby agree that the terms and conditions of the above-
referenced Master Lease Agreement are amended and modified as follows:
1. Section 5, "Title: Relocation or Sublease: and Assignment"
Subsection 5.2, second paragraph, line 8, add the word "reasonably" after
the word "documents."
Subsection 5.3, paragraph (b), first sentence, line 1, add the phrase
"After receipt of written notice of assignment from Lessor" before the
word "Lessee".
2. Section 6, "Net Lease: Taxes and Fees"
Subsection 6.2, add the following paragraph at the end of this subsection:
"Lessee shall not be liable for any taxes, fees or charges to the extent
the same result from any sale or assignment or grant of security interest
by Lessor, or to the extent any such action increases the taxes, fees or
charges that would otherwise be payable. Lessee shall have the right to
contest by proper legal proceedings any taxes levied, as agent for or in
the name of Lessor. Lessor will cooperate in any legal proceedings being
prosecuted by Lessee with regard to any taxes, but Lessee will pay the
expenses in such litigation. Lessee shall have the right to contest in good
faith and by appropriate proceeding the validity or the amount of taxes
unless such contest would adversely affect the title of the Lessor to the
Equipment or would subject it to forfeiture or sale. Lessee shall have the
rights to any refund received as a result of any such contest or proceeding
to the extent Lessee has previously reimbursed Lessor for such taxes."
3. Section 7, "Care, Use and Maintenance; Inspection by Lessor"
Last sentence, insert the following at the end thereof: "or Lessee has
exercised its option to purchase such Equipment."
4. Section 8, "Representations and Warranties of Lessee"
1
<PAGE>
Paragraph (c), line 3, delete "if adversely determined, will" and insert
"are reasonably likely to".
5. Section 9 "Return of Equipment"
Third sentence, insert at the beginning "Provided that the Equipment is not
purchased or the term extended as permitted by the applicable Schedule,".
6. Section 11, "Indemnity"
First sentence, line 6, after the word "Equipment", delete the words
"during the term of this Master lease or until Lessee's obligations under
the Master Lease terminate" and insert "arising from acts or events during
the period from the Commencement Date of each Summary Equipment Schedule
until re-delivery of the Equipment to Lessor in accordance with the terms
of this Master Lease." Second sentence, line 3, insert "or wilful
misconduct" at the end of the sentence.
7. Section 13, "Default, Remedies and Mitigation"
Subsection 13.1:
Paragraph (b), line 1, insert "the applicable" before the word
"Schedule"
Paragraph (c), line 4, insert the following after "powers": "which
petition or appointment is not dismissed or vacated within sixty
(60) days."
Subsection 13.2, introduction, insert "and during the continuance" after
the word "occurrence."
Subsection 13.2, paragraph (d), line 5, insert "or wilful misconduct" after
"negligence"
Subsection 13.3, second sentence, line 1, insert "AND TO THE EXTENT
PERMITTED BY LAW" after the words "IN THIS SECTION".
8. Section 14, "Additional Provisions"
Subsection 14.1., "Board Attendance": Insert the words "at least one of"
after the word "attend" in the first line and insert the word "annually
during the term of the Lease or until an Initial Public Offering, whichever
is later" after the
2
<PAGE>
word "meetings" in the second line of the first sentence. Insert the words
"and executive summaries" after the word "minutes" in the last sentence
Subsection 14.2, "Financial Statements." Delete the first sentence in its
entirety and replace it with the following:
"As soon as practicable at the end of each month (and in any event within
thirty (30) days), Lessee will provide to Lessor a monthly income statement
and balance sheet prepared in accordance with generally accepted accounting
principles, consistently applied (except that such financials will not
include footnotes required by generally accepted accounting principles)
(the "Financial Statements")."
In the second sentence, line 8, delete "ninety (90)" replace with "one
hundred twenty (120)"
Subsection 14.4, "Merger and Sale Provisions." In line 2, delete "sixty
(60)" and replace with "thirty (30)". In line 10 after the words "with
Section 9" add "or purchase the Equipment for a mutually agreeable price,
at Lessee's option." To the end of this Section, add the following:
"Notwithstanding the foregoing, Lessor hereby consents to any Merger
in which the surviving entity has, immediately after the Merger, a net
worth equal to or greater than ten (10) times the aggregate remaining
rentals under this Master Lease."
Subsection 14.7, second sentence, add the following at the end thereof:
"except any permitted assignment in accordance with the terms of Subsection
14.4 of this Master Lease."
Subsection 14.9, line 5, insert "applicable" before "Schedule".
Subsection 14.10, change "Illinois" to "California" in lines 2 and 4 and in
line 6, delete "ARTICLE 2A OF THE UNIFORM COMMERCIAL CODE" and insert
"CALIFORNIA COMMERCIAL CODE SECTIONS 10508-10522, AS AMENDED"
Subsection 14.14, line 4, insert "reasonably" before "acceptable" and in line
5, insert "(a), (b) and (c)" after "8".
Subsection 14.18, "Definitions":
"Casualty Value", line 1, insert "present value of the" after the words
--------------
"greater of the" and line 2, insert "discounted at a rate of 6% per annum"
after the word "term".
3
<PAGE>
"Merger", line 4, following the word "entity", add the words ", provided
------
that no such transactions shall constitute a Merger unless the Lessee's
stockholders, as constituted, immediately before any such transaction, hold
less than fifty percent (50%) of the outstanding voting securities of the
Lessee immediately following such transaction".
COPPER MOUNTAIN NETWORKS, INC. COMDISCO, INC.
as LESSEE as LESSOR
By: /s/ Joe Lynch By: /s/ James P. Labe, Pesident
----------------------------- ------------------------------
James P. Labe, Pesident
Title: Vice President Operations Title: Comdisco Ventures Division
------------------------- ----------------------------
Date: 9/30/97 Date: 9/30/1997
------------------------ ----------------------------
4
<PAGE>
EQUIPMENT SCHEDULE VL-1
DATED AS OF September 30, 1997
TO MASTER LEASE AGREEMENT
DATED AS OF September 30, 1997 (THE "MASTER LEASE")
LESSEE: COPPER MOUNTAIN NETWORKS, INC. LESSOR: COMDISCO, INC.
Admin. Contact/Phone No.: Address for all Notices:
- ------------------------ -----------------------
___________________________ 6111 North River Road
Phone: (619) 453-8799 Rosemont, Illinois 60018
Fax: (619) 453-9244 Attn.: Venture Group
Address for Notices:
- -------------------
3931 Sorrento Valley Road
San Diego, CA 92121
Central Billing Location: Rent Interval: Monthly
- ------------------------ -------------
same as above
Attn.:
Lessee Reference No.:---------------
(24 digits maximum) Interim Rent: None
-------------
Location of Equipment: Initial Term: 48 months
- ---------------------- -------------
same as above (Number of Rent Intervals)
Lease Rate Factor: 2.403%
------------------
Attn.:
EQUIPMENT (as defined below): Advance: None*
--------
*Lessee's commitment fee of $1,500.00 shall be applied towards the first Rent
payment due hereunder.
Equipment specifically approved by Lessor, which shall be delivered to and
accepted by Lessee during the period September 30, 1997 through December 30,
1998 ("Equipment Delivery Period"), for which Lessor receives vendor invoices
approved for payment, up to an aggregate purchase price of $1,225,000.00
("Commitment Amount") available in two (2) phases, Phase I in the amount of
$700,000.00 which shall be available immediately, Phase II, in the amount of
$525,000.00 shall be contingent upon Lessor closing a round of equity financing
in the minimum amount of $4,000,000, excluding custom use equipment, leasehold
improvements, installation costs and delivery costs, rolling stock, special
tooling, "stand-alone" software, application software bundled into computer
hardware, hand held items, molds and fungible items.
<PAGE>
1. Equipment Purchase
This Schedule contemplates Lessor's acquisition of Equipment for lease to
Lessee, either by one of the first three categories listed below or by providing
Lessee with Equipment from the fourth category, in an aggregate value up to the
Commitment Amount referred to on the face of this Schedule. If the Equipment
acquired is of category (i), (ii) , (iii) below, the effectiveness of this
Schedule as it relates to those items of Equipment is contingent upon Lessee's
acknowledgment at the time Lessor acquires the Equipment that Lessee has either
received or approved the relevant purchase documentation between vendor and
Lessor for that Equipment.
(i) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment which is
obtained from a vendor by Lessee for its use subject to Lessor's prior
approval of the Equipment.
(ii) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at
Lessee's site and to which Lessee has clear title and ownership may be
considered by Lessor for inclusion under this Lease (the "Sale-
Leaseback Transaction"). Any request for a Sale-Leaseback Transaction
must be submitted to Lessor in writing (along with accompanying
evidence of Lessee's Equipment ownership satisfactory to Lessor for
all Equipment submitted) no later than October 30, 1997 *. Lessor
will not perform a Sale-Leaseback Transaction for any request or
accompanying Equipment ownership documents which arrive after the date
marked above by an asterisk (*). Further, any sale-leaseback
Equipment will be placed on lease subject to: (1) Lessor prior
approval of the Equipment; and (2) if approved, at Lessor's actual net
appraised Equipment value pursuant to the schedule below:
ORIGINAL EQUIPMENT INVOICE PERCENT OF ORIGINAL MANUFACTURER'S
DATE NET EQUIPMENT COST PAID BY LESSOR
------------- ---------------------------------
Between 5/1/97 and 9/30/97 100%
Between 3/31/97 and 5/30/97 80%
Between 12/30/97 and 3/30/97 70%
Lessee represents that it has paid all California sales tax due on the cost of
that portion of Equipment to be installed in California and agrees to provide
evidence of such payment to Lessor, if specifically requested. As a result of
the election, Lessor agrees that it will not invoice Lessee for use tax on the
monthly rental rate. Lessee understands that this is an irrevocable election to
measure the tax by the Equipment cost and cannot be changed except prior to
installation of the Equipment.
(iii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment which
is obtained from a third party by Lessee for its use subject to
Lessor's prior approval of the Equipment and at Lessor's appraised
value for such used Equipment.
(iv) 800 NUMBER EQUIPMENT. Upon Lessee's use of Comdisco's 1-800 Direct
Service, Lessor will purchase new or used Equipment from a third
party or Lessor will supply new or used Equipment from its inventory
for use by Lessee at rates provided by Lessor.
2. Commencement Date
The Commencement Date for each item of new on-order or used on-order
Equipment will be the install date as confirmed, accepted and approved in
writing by Lessee as set forth on the vendor invoice of which a facsimile
transmission will constitute an original document. The Commencement Date for
sale-leaseback Equipment shall be the date Lessor tenders the purchase price.
The Commencement Date for 800 Number Equipment shall be fifteen (15) days from
the ship date, such ship date to be set forth on the vendor invoice or if
unavailable on the vendor invoice the ship date will be determined by Lessor
upon other supporting shipping documentation. Lessor will summarize all approved
invoices, purchase documentation and evidence of delivery, as applicable,
received in the same calendar month into a Summary Equipment Schedule in the
form attached to this Schedule as Exhibit 1, and the Initial Term will begin the
first day of the calendar month thereafter. Each Summary Equipment Schedule
will contain the Equipment location, description, serial number(s) and cost and
will incorporate the terms and conditions of the Master Lease and this Schedule
and will constitute a separate lease. Notwithstanding the foregoing, if the
Commencement Date is on the first business day of the calendar month, the
Initial Term will commence on the first day of such month.
<PAGE>
3. Option to Extend
So long as no Event of Default has occurred and is continuing hereunder,
and upon written notice no earlier than twelve (12) months and no later than
ninety (90) days prior to the expiration of the Initial Term of a Summary
Equipment Schedule, Lessee will have the right to extend the Initial Term of
such Summary Equipment Schedule for a period of one (1) year. In such event,
the rent to be paid during said extended period shall be mutually agreed upon
and if the parties cannot mutually agree, then the Summary Equipment Schedule
shall continue in full force and effect pursuant to the existing terms and
conditions until terminated in accordance with its terms. The Summary Equipment
Schedule will continue in effect following said extended period until terminated
by either party upon not less than ninety (90) days prior written notice, which
notice shall be effective as of the date of receipt.
4. Purchase Option
So long as no Event of Default has occurred and is continuing hereunder,
and upon written notice no earlier than twelve (12) months and no later than
ninety (90) days prior to the expiration of the Initial Term or the extended
term of the applicable Summary Equipment Schedule, Lessee will have the option
at the expiration of the Initial Term or extend the term of the Summary
Equipment Schedule to purchase all, but not less than all, of the Equipment
listed therein for a purchase price not to exceed 12.5% of the Equipment cost
and upon terms and conditions to be mutually agreed upon by the parties
following Lessee's written notice, plus any taxes applicable at time of
purchase. Said purchase price shall be paid to Lessor days before the expiration
date of the Initial Term or extended term. Title to the Equipment shall
automatically pass to Lessee upon payment in full of the purchase price but, in
no event, earlier than the expiration of the fixed Initial Term or extended
term, if applicable. If the parties are unable to agree on the purchase price or
the terms and conditions with respect to said purchase, then the Summary
Equipment Schedule with respect to this Equipment shall remain in full force and
effect. Notwithstanding the exercise by Lessee of this option and payment of the
purchase price, until all obligations under the applicable Summary Equipment
Schedule have been fulfilled, it is agreed and understood that Lessor shall
retain a purchase money security interest in the Equipment listed therein and
the Summary Equipment Schedule shall constitute a Security Agreement under the
Uniform Commercial Code of the state in which the Equipment is located.
In any event, Lessee may purchase the Equipment on the applicable Summary
Equipment Schedule at any time after the expiration of the Initial Term of the
Summary Equipment Schedule by paying a purchase price not to exceed 12.5% of the
Equipment cost.
5. Technology Exchange Option
If Lessee is not in default, and there is no material adverse change in
Lessee's credit, on or after the expiration of the 12th month of any Summary
Equipment Schedule, Lessee shall have the option once during the term of any
Summary Equipment Schedule, to replace any of the Equipment subject to such
summary Equipment Schedule with new technology equipment ("New Technology
Equipment") utilizing the following guidelines:
A. Equipment being replaced with New Technology Equipment shall have an
original cost equal to or greater than $20,000 and be comprised of full
configurations of equipment.
B. This technology Exchange Option shall be limited to a maximum in the
aggregate of fifty percent (50%) of the original equipment cost and shall not
apply to software.
C. The cost of the New Technology Equipment must be equal to or greater than
the original equipment cost of the replaced equipment, but in no event shall
exceed 150% of the original equipment cost.
D. The remaining lease payments applicable to the equipment being replaced by
the New Technology Equipment will be discounted to present value at 6%.
The wholesale market value of the equipment being replaced will be established
by Comdisco based upon then current market conditions. Upon the return of the
replaced equipment, the wholesale price will be deducted from the present value
of the remaining rentals and the differential will be added to the cost of the
New Technology Equipment in calculating the new rental. The lease for the New
Technology Equipment will contain terms and conditions substantially similar to
those for the replaced equipment and will have an Initial Term not less than the
balance of the remaining Initial Term for the replaced equipment.
6. Option Amount
<PAGE>
So long as no Event of Default shall have occurred and is continuing and
upon Lessee's request, subject to final review by Lessor, Lessor agrees to
provide to Lessee an additional $1,000,000.00 of Equipment upon rates and terms
to be negotiated.
7. Special Terms
The terms and conditions of the Lease as they pertain to this Schedule are
hereby modified and amended as follows:
"Section 3 Rent and Payment", second sentence, line 1, delete "Interim Rent
is due and payable when invoiced" and revise "if" to read "If".
Phase II Financing: Availability of funds under Phase II is contingent
upon issuance by Lessee of a Warrant Agreement in favor of Lessor
substantially in the form attached hereto as Exhibit 2 ("Warrant
Agreement"). The Warrant Agreement will grant Lessor as Warrantholder the
right to purchase that number of fully paid and non-assessable shares of
the Lessee's Preferred Stock equal to $30,000.00 divided by the "Exercise
Price" as defined below. The Warrant Agreement shall be issued upon the
earlier of (i) the closing of the next round of equity financing where the
Lessee raises a minimum of $4,000,000.00 ("Next Round"), or (ii) April 30,
1998. In the event the closing of the Next Round occurs prior to April 30,
1998, the Warrant Agreement shall be for Series C Preferred Stock and the
Exercise Price will be the Next Round closing price per share. In the
event the Next Round does not close on or prior to April 30, 1998, the
Warrant Agreement shall be exercisable for Series B Preferred Stock at an
Exercise Price of $3.39 per share.
Master Lease: This Schedule is issued pursuant to the Lease identified on page
1 of this Schedule. All of the terms and conditions of the Lease are
incorporated in and made a part of this Schedule as if they were expressly set
forth in this Schedule. The parties hereby reaffirm all of the terms and
conditions of the Lease (including, without limitation, the representations and
warranties set forth in Section 8) except as modified herein by this Schedule.
This Schedule may not be amended or rescinded except by a writing signed by both
parties.
COPPER MOUNTAIN NETWORKS, INC. COMDISCO, INC.
AS LESSEE AS LESSOR
BY: /s/ Joe Lynch BY: /s/ James B. Labe
----------------------- ------------------------------
TITLE: V.P. Operations TITLE: JAMES B. LABE, PRESIDENT
-------------------- ---------------------------
COMDISCO VENTURES DIVISION
DATE: 9-30-97 DATE: 9-30-97
-------------------- ----------------------------
<PAGE>
EQUIPMENT SCHEDULE VL-2
DATED AS OF September 30, 1997
TO MASTER LEASE AGREEMENT
DATED AS OF September 30, 1997 (THE "MASTER LEASE")
LESSEE: COPPER MOUNTAIN NETWORKS, INC. LESSOR: COMDISCO, INC.
Admin. Contact/Phone No.: Address for all Notices:
- ------------------------ -----------------------
_________________________ 6111 North River Road
Phone: (619) 453-8799 Rosemont, Illinois 60018
Fax: (619) 453-9244 Attn.: Venture Group
Address for Notices:
- -------------------
3931 Sorrento Valley Road
San Diego, CA 92121
Central Billing Location: Rent Interval: Monthly
- ------------------------ -------------
same as above
Attn.:
Interim Rent: None
------------
Lessee Reference No.: _________________
(24 digits maximum)
Location of Equipment: Initial Term: 48 months
- --------------------- ------------
same as above (Number of Rent Intervals)
Lease Rate Factor: 2.403%
-----------------
Attn.:
EQUIPMENT (as defined below): Advance: $ None
-------
Software and tenant improvements specifically approved by Lessor, which shall be
delivered to and accepted by Lessee during the period September 30, 1997 through
December 30, 1997 ("Equipment Delivery Period") for which Lessor receives vendor
invoices approved for payment, up to an aggregate purchase price of $525,000.00
("Commitment Amount") available in two (2) phases, Phase I in the amount of
$300,000.00 which shall be available immediately, Phase II, in the amount of
$225,000.00 shall be contingent upon Lessor closing a round of equity financing
in the minimum amount of $4,000,000,; excluding custom use equipment,
installation costs and delivery costs, rolling stock, special tooling, hand held
items, molds and fungible items.
1
<PAGE>
1. Equipment Purchase
This Schedule contemplates Lessor's acquisition of Equipment for lease to
Lessee, either by one of the first three categories listed below or by providing
Lessee with Equipment from the fourth category, in an aggregate value up to the
Commitment Amount referred to on the face of this Schedule. If the Equipment
acquired is of category (i), (ii) , (iii) below, the effectiveness of this
Schedule as it relates to those items of Equipment is contingent upon Lessee's
acknowledgment at the time Lessor acquires the Equipment that Lessee has either
received or approved the relevant purchase documentation between vendor and
Lessor for that Equipment.
(i) NEW ON-ORDER EQUIPMENT. Lessor will purchase new Equipment which is
obtained from a vendor by Lessee for its use subject to Lessor's prior
approval of the Equipment.
(ii) SALE-LEASEBACK EQUIPMENT. Any in-place Equipment installed at
Lessee's site and to which Lessee has clear title and ownership may be
considered by Lessor for inclusion under this Lease (the "Sale-
Leaseback Transaction"). Any request for a Sale-Leaseback Transaction
must be submitted to Lessor in writing (along with accompanying
evidence of Lessee's Equipment ownership satisfactory to Lessor for
all Equipment submitted) no later than October 30, 1997*. Lessor will
not perform a Sale-Leaseback Transaction for any request or
accompanying Equipment ownership documents which arrive after the date
marked above by an asterisk (*). Further, any sale-leaseback
Equipment will be placed on lease subject to: (1) Lessor prior
approval of the Equipment; and (2) if approved, at Lessor's actual net
appraised Equipment value pursuant to the schedule below:
ORIGINAL EQUIPMENT INVOICE PERCENT OF ORIGINAL MANUFACTURER'S
DATE NET EQUIPMENT COST PAID BY LESSOR
------------------------ ---------------------------------
Between 5/1/97 and 9/30/97 100%
Lessee represents that it has paid all California sales tax due on the cost of
that portion of Equipment to be installed in California and agrees to provide
evidence of such payment to Lessor, if specifically requested. As a result of
the election, Lessor agrees that it will not invoice Lessee for use tax on the
monthly rental rate. Lessee understands that this is an irrevocable election to
measure the tax by the Equipment cost and cannot be changed except prior to
installation of the Equipment.
(iii) USED ON-ORDER EQUIPMENT. Lessor will purchase used Equipment which
is obtained from a third party by Lessee for its use subject to
Lessor's prior approval of the Equipment and at Lessor's appraised
value for such used Equipment.
(iv) 800 NUMBER EQUIPMENT. Upon Lessee's use of Comdisco's 1-800 Direct
Service, Lessor will purchase new or used Equipment from a third
party or Lessor will supply new or used Equipment from its inventory
for use by Lessee at rates provided by Lessor.
2. Commencement Date
The Commencement Date for each item of new on-order or used on-order
Equipment will be the install date as confirmed, accepted, and approved in
writing by Lessee as set forth on the vendor invoice of which a facsimile
transmission will constitute an original document. The Commencement Date for
sale-leaseback Equipment shall be the date Lessor tenders the purchase price.
The Commencement Date for 800 Number Equipment shall be fifteen (15) days from
the ship date, such ship date to be set forth on the vendor invoice or if
unavailable on the vendor invoice the ship date will be determined by Lessor
upon other supporting shipping documentation. Lessor will summarize all approved
invoices, purchase documentation and evidence of delivery, as applicable,
received in the same calendar month into a Summary Equipment Schedule in the
form attached to this Schedule as Exhibit 1, and the Initial Term will begin the
first day of the calendar month thereafter. Each Summary Equipment Schedule
will contain the Equipment location, description, serial number(s) and cost and
will incorporate the terms and conditions of the Master Lease and this Schedule
and will constitute a separate lease. Notwithstanding the foregoing, if the
Commencement
2
<PAGE>
3. Miscellaneous
In consideration of Lessor financing software and tenant improvements
hereunder, Lessee agrees in addition to its last Monthly Rent Payment to remit
to Lessor an amount equal to 12.5% of Lessor's aggregate cost of software and
tenant improvements provided hereunder.
4. Special Terms
The terms and conditions of the Lease as they pertain to this Schedule are
hereby modified and amended as follows:
(a) Section 9, Delivery and Return of Equipment
-------------------------------------------
Delete second, third and fourth sentences in their entirety.
(b) Phase II Financing
Availability of funds under Phase II is contingent upon issuance by Lessee
of a Warrant Agreement in favor of Lessor substantially in the form
attached hereto as Exhibit 2 ("Warrant Agreement"). The Warrant Agreement
will grant Lessor as Warrantholder the right to purchase that number of
fully paid and non-assessable shares of the Lessee's Preferred Stock equal
to $30,000.00 divided by the "Exercise Price" as defined below. The
Warrant Agreement shall be issued upon the earlier of (i) the closing of
the next round of equity financing where the Lessee raises a minimum of
$4,000,000.00 ("Next Round"), or (ii) April 30, 1998. In the event the
closing of the Next Round occurs prior to April 30, 1998, the Warrant
Agreement shall be for Series C Preferred Stock and the Exercise Price will
be the Next Round closing price per share. In the event the Next Round
does not close on or prior to April 30, 1998, the Warrant Agreement shall
be exercisable for Series B Preferred Stock at an Exercise Price of $3.39
per share.
(c) "Section 3 Rent & Payment," second sentence, line 1, delete "Interim
Rent is due & payable when Invoiced" and revise "if" to read "If
Master Lease: This Schedule is issued pursuant to the Lease identified on page
1 of this Schedule. All of the terms and conditions of the Lease are
incorporated in and made a part of this Schedule as if they were expressly set
forth in this Schedule. The parties hereby reaffirm all of the terms and
conditions of the Lease (including, without limitation, the representations and
warranties set forth in Section 8) except as modified herein by this Schedule.
This Schedule may not be amended or rescinded except by a writing signed by both
parties.
<TABLE>
<CAPTION>
COPPER MOUNTAIN NETWORKS, INC. COMDISCO, INC.
as Lessee as Lessor
<S> <C>
By: /s/ Joe Lynch By: /s/ James P. Labe
----------------------------------- --------------------------------------
Title: V.P. Operations Title: JAMES P. LABE, PRESIDENT
-------------------------------- ----------------------------------
COMDISCO VENTURES DIVISION
Date: 9-30-97 Date: 9-30-97
-------------------------------- -----------------------------------
</TABLE>
3
<PAGE>
EXHIBIT 1
SUMMARY EQUIPMENT SCHEDULE
--------------------------
This Summary Equipment Schedule dated XXXX is executed pursuant to
Equipment Schedule No. X to the Master Lease Agreement dated XXXX between
Comdisco, Inc. ("Lessor") and XXXX ("Lessee"). All of the terms, conditions,
representations and warranties of the Master Lease Agreement and Equipment
Schedule No. X are incorporated herein and made a part hereof, and this Summary
Equipment Schedule constitutes a Schedule for the Equipment on the attached
invoices.
1. For Period Beginning: And Ending:
-------------------- ----------
2. Initial Term Starts on: Initial Term:
---------------------- ------------
(Number of Rent Intervals)
3. Total Summary Equipment Cost:
----------------------------
4. Lease Rate Factor:
-----------------
5. Rent:
----
6. Acceptance Doc Type:
-------------------
4
<PAGE>
[LETTERHEAD OF COMDISCO]
FEDERAL EXPRESS
December 19, 1997
Mr. Greg Peck
Copper Mountain Networks, Inc.
3931 Sorrento Valley Road
San Diego, CA 92121
Re: Replacement Page for VL-2
Dear Greg,
Per your conversations with Pat Maillie, enclosed please find a replacement page
one for the Equipment Schedule VL-2. This page changes the error in the
Equipment Delivery Date from "December 30, 1997" to "December 30, 1998". Please
discard the prior page one and replace it with this new page.
I apologize for any inconvenience this may have caused. If you have any
questions regarding the enclosed, please feel free to call me at (650) 234-1623.
Sincerely,
/s/ Christine Ware
Christine Ware
Portfolio Manager
Attachment
cc: Pat Maillie (w/attachment)
<PAGE>
EQUIPMENT SCHEDULE VL-2
DATED AS OF September 30, 1997
TO MASTER LEASE AGREEMENT
DATED AS OF September 30, 1997 (THE "MASTER LEASE")
LESSEE: COPPER MOUNTAIN NETWORKS, INC. LESSOR: COMDISCO, INC.
Admin. Contact/Phone No.: Address for all Notices:
------------------------ -----------------------
_________________________ 6111 North River Road
Phone: (619) 453-8799 Rosemont, Illinois 60018
Fax: (619) 453-9244 Attn.: Venture Group
Address for Notices:
-------------------
3931 Sorrento Valley Road
San Diego, CA 92121
Central Billing Location: Rent Interval: Monthly
------------------------ -------------
same as above
Attn.:
Interim Rent: None
------------
Lessee Reference No.: _________________
(24 digits maximum)
Location of Equipment: Initial Term: 48 months
--------------------- ------------
same as above (Number of Rent Intervals)
Lease Rate Factor: 2.403%
-----------------
Attn.:
EQUIPMENT (as defined below): Advance: $ None
-------
Software and tenant improvements specifically approved by Lessor, which
shall be delivered to and accepted by Lessee during the period September 30,
1997 through December 30, 1998 ("Equipment Delivery Period") for which Lessor
receives vendor invoices approved for payment, up to an aggregate purchase price
of $525,000.00 ("Commitment Amount") available in two (2) phases, Phase I in the
amount of $300,000.00 which shall be available immediately, Phase II, in the
amount of $225,000.00 shall be contingent upon Lessor closing a round of equity
financing in the minimum amount of $4,000,000,; excluding custom use equipment,
installation costs and delivery costs, rolling stock, special tooling, hand held
items, molds and fungible items.
1
<PAGE>
EXHIBIT 10.7
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT is entered into as of August 14, 1998 by and
between SILICON VALLEY BANK ("Bank") and COPPER MOUNTAIN NETWORKS, INC., a
California corporation ("Borrower").
RECITALS
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Borrower wishes to obtain credit from time to time from Bank, and Bank desires
to extend credit to Borrower. This Agreement sets forth the terms on which Bank
will advance credit to Borrower, and Borrower will repay the amounts owing to
Bank.
AGREEMENT
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The parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION
1.1 Definitions. As used in this Agreement, the following terms shall
have the following definitions:
"Accounts" means all presently existing and hereafter arising
accounts, contact rights, and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods (including, without limitation, the
licensing of software and other technology) or the rendering of services by
Borrower, whether or not earned by performance, and any and all credit
insurance, guaranties, and other security therefor, as well as all merchandise
returned to or reclaimed by Borrower and Borrower's Books relating to any of the
foregoing.
"Advance" or "Advances" means a loan advance under the Committed
Revolving Line.
"Affiliate" means, with respect to any Person, any Person that owns or
controls directly or indirectly such Person, any Person that controls or is
controlled by or is under common control with such Person, and each of such
Person's senior executive officers, directors, partners and, for any Person that
is a limited liability company, such Persons, managers and members.
"Bank Expenses" means all reasonable costs or expenses (including
reasonable attorneys' fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan Documents;
and Bank's reasonable attorneys fees and expenses incurred in amending,
enforcing or defending the Loan Documents, (including fees and expenses of
appeal or review, or those incurred in any Insolvency Proceeding) whether or not
suit is brought.
"Borrower's Books" means all of Borrower's books and records
including, without limitation: ledgers; records concerning Borrower's assets or
liabilities, the Collateral, business operations or financial condition; and all
computer programs, or tape files, and the equipment, containing such
information.
"Borrowing Base" means:
(I) until the earlier to occur of October 31, 1998 or the consummation
of the Private Placement Transaction, an amount equal to: (i) (A) with respect
to those Advances (including Inventory Advances) made up to $3,000,000 or less,
125% of Eligible Accounts, and (B) for those Advances (including Inventory
Advances) made over $3,000,000, 80% of Eligible
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Accounts, plus (ii) the lesser of 25% of the value of Borrower's Eligible
Inventory (valued at the lower of cost or wholesale fair market value) or
$500,000 (such Advances being the "Inventory Advances"), as determined by Bank
with reference to the most recent Borrowing Base Certificate delivered by
Borrower, provided that the aggregate amount of all Inventory Advances may not
exceed the lesser of 25% of the backlog of the Borrower or the total amount of
Obligations outstanding from time to time; and
(II) thereafter, (i) 80 % of Eligible Accounts plus (ii) the lesser of
25 % of the value of Borrower's Eligible Inventory (valued at the lower of cost
or wholesale fair market value) or $500,000 (such Advances being the "Inventory
Advances"), as determined by Bank with reference to the most recent Borrowing
Base Certificate delivered by Borrower, provided that the aggregate amount of
all Inventory Advances may not exceed the lesser of 25% of the backlog of the
Borrower or the total amount of Obligations outstanding from time to time.
"Business Day" means any day that is not a Saturday, Sunday, or other
day on which banks in the State of California are authorized or required to
close.
"Closing Date" means the date of this Agreement.
"Code" means the California Uniform Commercial Code.
"Collateral" means the property described on Exhibit A attached
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hereto.
"Committed Revolving Line" means a credit extension of up to
$4,000,000, provided that the Committed Revolving Line shall be limited to the
amount of $750,000 until the completion by the Bank or its agents of an accounts
receivable audit of the Borrower that is determined to be acceptable to the Bank
in its discretion (and such audit shall have a completion deadline of August 31,
1998).
Committed Equipment Line" means a credit extension of up to
$1,000,000, which shall only be available to the Borrower pursuant to the terms
and conditions hereof and which shall otherwise only be available on and after
the consummation of the Private Placement Transaction.
"Contingent Obligation" means, as applied to any Person, any direct or
indirect liability, contingent or otherwise, of that Person with respect to (i)
any indebtedness, lease, dividend, letter of credit or other obligation of
another Person, including, without limitation, any such obligation directly or
indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by
that Person, or in respect of which that Person is otherwise directly or
indirectly liable; (ii) any obligations with respect to undrawn letters of
credit issued for the account of that Person; and (iii) all obligations arising
under any interest rate, currency or commodity swap agreement, interest rate cap
agreement, interest rate collar agreement, or other agreement or arrangement
designated to protect a Person against fluctuation in interest rates, currency
exchange rates or commodity prices; provided, however, that the term "Contingent
Obligation" shall not include endorsements for collection or deposit in the
ordinary course of business. The amount of any Contingent Obligation shall be
deemed to be an amount equal to the stated or determined amount of the primary
obligation in respect of which such Contingent Obligation is made or, if not
stated or determinable, the maximum reasonably anticipated liability in respect
thereof as determined by such Person in good faith; provided, however, that such
amount shall not in any event exceed the maximum amount of the obligations under
the guarantee or other support arrangement.
"Copyrights" means any and all copyright rights, copyright
applications, copyright registrations and like protections in each work or
authorship and derivative work thereof, whether
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published or unpublished and whether or not the same also constitutes a trade
secret, now or hereafter existing, created, acquired or held.
"Credit Extension" means each Advance, Equipment Advance, or any other
extension of credit by Bank for the benefit of Borrower hereunder.
"Current Assets" means, as of any applicable date, all amounts that
should, in accordance with GAAP, be included as current assets on the
consolidated balance sheet of Borrower and its Subsidiaries as at such date.
"Current Liabilities" means, as of any applicable date, all amounts
that should, in accordance with GAAP, be included as current liabilities on the
consolidated balance sheet of Borrower and its Subsidiaries, as at such date,
plus, to the extent not already included therein, all outstanding Credit
Extensions made under this Agreement, including all Indebtedness that is payable
upon demand or within one year from the date of determination thereof unless
such Indebtedness is renewable or extendable at the option of Borrower or any
Subsidiary to a date more than one year from the date of determination, but
excluding Subordinated Debt.
"Eligible Accounts" means those Accounts that arise in the ordinary
course of Borrower's business that comply with all of Borrower's representations
and warranties to Bank set forth in Section 5.4; provided, that standards of
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eligibility may be fixed and revised from time to time by Bank in Bank's
reasonable judgment and upon notification thereof to Borrower in accordance with
the provisions hereof Unless otherwise agreed to by Bank in writing, Eligible
Accounts shall not include the following:
(a) Accounts that the account debtor has failed to pay within
ninety (90) days of invoice date;
(b) Accounts with respect to an account debtor, fifty percent
(50%) of whose Accounts the account debtor has failed to pay within ninety
(90) days of invoice date;
(c) Accounts with respect to an account debtor, including
Affiliates, whose total obligations to Borrower exceed twenty-five percent
(25%) of all Accounts, to the extent such obligations exceed the
aforementioned percentage, except as approved in writing by Bank, provided
that with respect to each of Northpoint Communications, Rhythms
NetConnections, UUNET/WorldCom and ICG NetCom, such percentage shall be
fifty percent (50%);
(d) Accounts with respect to which the account debtor does not
have its principal place of business in the United States;
(e) Accounts with respect to which the account debtor is a
federal, state, or local governmental entity or any department, agency, or
instrumentality thereof, except for those Accounts of the United States or
any department, agency or instrumentality thereof as to which the payee has
assigned its rights to payment thereof to Bank and the assignment has been
acknowledged, pursuant to the Assignment of Claims Act of 1940, as amended
(31 U.S.C. 3727);
(f) Accounts with respect to which Borrower is liable to the
account debtor, but only to the extent of any amounts owing to the account
debtor (sometimes referred to as "contra" accounts, e.g. accounts payable,
customer deposits, credit accounts etc.);
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(g) Accounts generated by demonstration or promotional equipment,
or with respect to which goods are placed on consignment, guaranteed sale,
sale or return, sale on approval, bill and hold, or other terms by reason
of which the payment by the account debtor may be conditional;
(h) Accounts with respect to which the account debtor is an
Affiliate, officer, employee, or agent of Borrower;
(i) Accounts with respect to which the account debtor disputes
liability or makes any claim with respect thereto as to which Bank
believes, in its sole discretion, that there may be a basis for dispute
(but only to the extent of the amount subject to such dispute or claim),
or is subject to any Insolvency Proceeding, or becomes insolvent, or goes
out of business; and
(j) Accounts the collection of which Bank reasonably determines
to be doubtful.
"Eligible Inventory" means that portion of Borrower's Inventory that
is located at Borrower's principal place of business or such other locations as
are permitted under Section 7.10 and that complies with the representations and
warranties set forth in Section 5.5, but shall in any event exclude used,
returned or obsolete Inventory.
"Equipment" means all present and future machinery, equipment, tenant
improvements, furniture, fixtures, vehicles, tools, parts and attachments in
which Borrower has any interest.
"Equipment Advance" has the meaning set forth in Section 2.1.2.
"Equipment Availability End Date" has the meaning set forth in Section
2.1.2.
"ERISA" means the Employment Retirement Income Security Act of 1974,
as amended, and the regulations thereunder.
"GAAP" means generally accepted accounting principles as in effect in
the United States from time to time.
"Indebtedness" means (a) all indebtedness for borrowed money or the
deferred purchase price of property or services, including without limitation
reimbursement and other obligations with respect to surety bonds and letters of
credit, (b) all obligations evidenced by notes, bonds, debentures or similar
instruments, (c) all capital lease obligations and (d) all Contingent
Obligations.
"Insolvency Proceeding" means any proceeding commenced by or against
any person or entity under any provision of the United States Bankruptcy Code,
as amended, or under any other bankruptcy or insolvency law, including
assignments for the benefit of creditors, formal or informal moratoria,
compositions, extension generally with its creditors, or proceedings seeking
reorganization, arrangement, or other relief
"Intellectual Property Collateral" means
(a) Copyrights, Trademarks, Patents, and Mask Works;
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(b) Any and all trade secrets, and any and all intellectual
property rights in computer software and computer software products now or
hereafter existing, created, acquired or held;
(c) Any and all design rights which may be available to Borrower
now or hereafter existing, created, acquired or held;
(d) Any and all claims for damages by way of past, present and
future infringement of any of the rights included above, with the right,
but not the obligation, to sue for and collect such damages for said use or
infringement of the intellectual property rights identified above;
(e) All licenses or other rights to use any of the Copyrights,
Patents, Trademarks, or Mask Works, and all license fees and royalties
arising from such use to the extent permitted by such license or rights;
(f) All amendments, renewals and extensions of any of the
Copyrights, Trademarks, Patents, or Mask Works; and
(g) All proceeds and products of the foregoing, including without
limitation all payments under insurance or any indemnity or warranty
payable in respect of any of the foregoing.
"Inventory" means all present and future inventory in which Borrower
has any interest, including merchandise, raw materials, parts, supplies, packing
and shipping materials, work in process and finished products intended for sale
or lease or to be furnished under a contact of service, of every kind and
description now or at any time hereafter owned by or in the custody or
possession, actual or constructive, of Borrower, including such inventory as is
temporarily out of its custody or possession or in transit and including any
returns upon any accounts or other proceeds, including insurance proceeds,
resulting from the sale or disposition of any of the foregoing and any documents
of title representing any of the above.
"Investment" means any beneficial ownership of (including stock,
partnership interest or other securities) any Person, or any loan, advance or
capital contribution to any Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Lien" means any mortgage, lien, deed of trust, charge, pledge,
security interest or other encumbrance.
"Loan Documents" means, collectively, this Agreement, any note or
notes executed by Borrower, and any other present or future agreement entered
into between Borrower and/or for the benefit of Bank in connection with this
Agreement, all as amended, extended or restated from time to time.
"Mask Works" means all mask work or similar rights available for the
protection of semiconductor chips, now owned or hereafter acquired;
"Material Adverse Effect" means a material adverse effect on (i) the
business operations or condition (financial or otherwise) of Borrower and its
Subsidiaries taken as a whole or (ii) the ability of Borrower to repay the
Obligations or otherwise perform its obligations under the Loan Documents.
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"Maturity Date" means the later of (i) the Revolving Maturity Date, or
(ii) if the Equipment Advances are outstanding, the date 48 months after the
date hereof
"Negotiable Collateral" means all of Borrower's present and future
letters of credit of which it is a beneficiary, notes, drafts, instruments,
securities, documents of title, and chattel paper.
"Obligations" means all debt, principal, interest, Bank Expenses and
other amounts owed to Bank by Borrower pursuant to this Agreement or any other
agreement, whether absolute or contingent, due or to become due, now existing or
hereafter arising, including any interest that accrues after the commencement of
an Insolvency Proceeding and including any debt, liability, or obligation owing
from Borrower to others that Bank may have obtained by assignment or otherwise.
"Patents" means all patents, patent applications and like protections
including without limitation improvements, divisions, continuations, renewals,
reissues, extensions and continuations-in-part of the same.
"Payment Date" means the first calendar day of each month commencing
on the first such date after the Closing Date and ending on the Revolving
Maturity Date.
"Permitted Indebtedness" means:
(a) Indebtedness of Borrower in favor of Bank arising under this
Agreement or any other Loan Document;
(b) Indebtedness existing on the Closing Date and disclosed in
the Schedule;
(c) Subordinated Debt;
(d) Indebtedness to trade creditors incurred in the ordinary
course of business: and
(e) Indebtedness secured by Permitted Liens, provided that such
Indebtedness incurred in the future for the purchase price of or lease of
equipment shall not exceed, in the aggregate a total of $1,000,000 at any
time outstanding.
"Permitted Investment" means:
(a) Investments existing on the Closing Date disclosed in the
Schedule; and
(b) (i) marketable direct obligations issued or unconditionally
guaranteed by the United States of America or any agency or any State
thereof maturing within one (1) year from the date of acquisition thereof,
(ii) commercial paper maturing no more than one (1) year from the date of
creation thereof and currently having the highest rating obtainable from
either Standard & Poor's Corporation or Moody's Investors Service, Inc.,
and (iii) certificates of deposit maturing no more than one (1) year from
the date of investment therein issued by Bank.
"Permitted Liens" means the following:
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(a) Any Liens existing on the Closing Date and disclosed in the
Schedule or arising under this Agreement or the other Loan Documents;
(b) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith
by appropriate proceedings and as to which adequate reserves are maintained
on Borrower's Books in accordance with GAAP, provided the same have no
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priority over any of Bank's security interests;
(c) Liens (i) upon or in any Equipment acquired or held by
Borrower or any of its Subsidiaries to secure the purchase price of such
Equipment or indebtedness incurred solely for the purpose of financing the
acquisition of such Equipment, or (ii) existing on such equipment at the
time of its acquisition, provided that the Lien is confined solely to the
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property so acquired and improvements thereon, and the proceeds of such
equipment;
(d) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (a) through (c) above, provided that any extension, renewal or
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replacement Lien shall be limited to the property encumbered by the
existing Lien and the principal amount of the indebtedness being extended,
renewed or refinanced does not increase.
"Person" means any individual, sole proprietorship, partnership,
limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint
stock company, estate, entity or governmental agency.
"Prime Rate" means the variable rate of interest, per annum, most
recently announced by Bank, as its "prime rate," whether or not such announced
rate is the lowest rate available from Bank.
"Private Placement Transaction" means the transaction in which the
Borrower receives a minimum of $15,000,000 in net proceeds from a sale of Series
D Preferred stock of the Borrower, which transaction is satisfactory to the
Bank.
"Quick Assets" means, as of any applicable date, the consolidated
cash, cash equivalents, accounts receivable and investments with maturities of
fewer than 90 days of Borrower determined in accordance with GAAP.
"Remaining Months Liquidity" has the meaning set forth in Section
6.10.
"Responsible Officer" means each of the Chief Executive Officer, the
President, the Chief Financial Officer and the Controller of Borrower.
"Revolving Maturity Date" means the day immediately preceding the
first anniversary of the date of this Agreement.
"Schedule" means the schedule of exceptions attached hereto, if any.
"Subordinated Debt" means any debt incurred by Borrower that is
subordinated to the debt owing by Borrower to Bank on terms acceptable to Bank
(and identified as being such by Borrower and Bank) in accordance with the
standard practices of the Bank.
"Subsidiary" means with respect to any Person, corporation,
partnership, company association, joint venture, or any other business entity of
which more than fifty percent (50%) of
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the voting stock or other equity interests is owned or controlled, directly or
indirectly, by such Person or one or more Affiliates of such Person.
"Tangible Net Worth" means as of any applicable date, the consolidated
total assets of Borrower and its Subsidiaries minus, without duplication, (i)
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the sum of any amounts attributable to (a) goodwill, (b) intangible items such
as unamortized debt discount and expense, patents, trade and service marks and
names, copyrights and research and development expenses except prepaid expenses,
and (c) all reserves not already deducted from assets, and (ii) Total
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Liabilities.
"Total Liabilities" means as of any applicable date, any date as of
which the amount thereof shall be determined, all obligations that should, in
accordance with GAAP be classified as liabilities on the consolidated balance
sheet of Borrower, including in any event all Indebtedness, but specifically
excluding Subordinated Debt.
"Trademarks" means any trademark and servicemark rights, whether
registered or not, applications to register and registrations of the same and
like protections, and the entire goodwill of the business of Borrower connected
with and symbolized by such trademarks.
1.2 Accounting and Other Terms. All accounting terms not specifically
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defined herein shall be construed in accordance with GAAP and all calculations
and determinations made hereunder shall be made in accordance with GAAP. When
used herein, the term "financial statements" shall include the notes and
schedules thereto. The terms "including"! "includes" shall always be read as
meaning "including (or includes) without limitation", when used herein or in any
other Loan Document.
2. LOAN AND TERMS OF PAYMENT
2.1 Credit Extensions. Borrower promises to pay to the order of Bank, in
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lawful money of the United States of America, the aggregate unpaid principal
amount of all Credit Extensions made by Bank to Borrower hereunder. Borrower
shall also pay interest on the unpaid principal amount of all Credit Extensions
at rates in accordance with the terms hereof
2.1.1 Advances.
(a) Subject to and upon the terms and conditions of this
Agreement, Bank agrees to make Advances to Borrower in an aggregate
outstanding amount not to exceed (i) the Committed Revolving Line or the
Borrowing Base, whichever is less. Subject to the terms and conditions of
this Agreement, amounts borrowed pursuant to this Section 2.1 may be repaid
and reborrowed at any time during the term of this Agreement.
(b) Whenever Borrower desires an Advance, Borrower will notify
Bank by facsimile transmission or telephone no later than 3:00 p.m. Pacific
time, on the Business Day that the Advance is to be made. Each such
notification shall be promptly confirmed by a Payment/Advance Form in
substantially the form of Exhibit B hereto. Bank is authorized to make
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Advances under this Agreement, based upon instructions received from a
Responsible Officer or a designee of a Responsible Officer, or without
instructions if in Bank's discretion such Advances are necessary to meet
Obligations which have become due and remain unpaid. Bank shall be entitled
to rely on any telephonic notice given by a person who Bank reasonably
believes to be a Responsible Officer or a designee thereof, and Borrower
shall indemnify and hold Bank harmless for any damages or loss suffered by
Bank as a result of such reliance. Bank will credit the amount of Advances
made under this Section 2.1 to Borrower's deposit account.
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(c) The Committed Revolving Line shall terminate on the Revolving
Maturity Date, at which time all Advances under this Section 2.1 and other
amounts due under this Agreement (except as otherwise expressly specified
herein) shall be immediately due and payable.
2.1.2 Equipment Advances.
(a) Subject to and upon the terms and conditions of this
Agreement, AND ONLY ON AND AFTER THE CONSUMMATION OF THE PRIVATE PLACEMENT
TRANSACTION, at any time from the date hereof through twelve (12) months
from the date hereof (the "Equipment Availability End Date"), Bank agrees
to make advances (each an "Equipment Advance" and collectively, the
"Equipment Advances") to Borrower in an aggregate outstanding amount not to
exceed the Committed Equipment Line. To evidence the Equipment Advance or
Equipment Advances, Borrower shall deliver to Bank, at the time of each
Equipment Advance request, an invoice for the equipment to be purchased or
which has been purchased, subject to the following sentence. The Equipment
Advances shall be used only to purchase Equipment purchased on or after
ninety (90) days prior to the date of such Equipment Advance and shall not
exceed one-hundred percent (100%) of the invoice amount of such equipment
approved from time to time by Bank, excluding taxes, shipping, warranty
charges, freight discounts and installation expense. Software may, however,
constitute up to twenty-five percent (25%) of each Equipment Advance. Each
Equipment Advance must be in a minimum amount of $25,000.
(b) Interest shall accrue from the date of each Equipment
Advance at the rate set forth in Section 2.3(a) below and shall be payable
monthly for each month through the month in which the Equipment
Availability End Date falls. Any Equipment Advances that are outstanding on
the Equipment Availability End Date will be payable in 36 equal monthly
installments of principal plus all accrued interest, beginning on the
Payment Date of each month following the Equipment Availability End Date
and ending on the Maturity Date. Equipment Advances, once repaid, may not
be reborrowed.
(c) When Borrower desires to obtain an Equipment Advance,
Borrower shall notify Bank (which notice shall be irrevocable) by facsimile
transmission to be received no later than 3:00 p.m. Pacific time one (1)
Business Day before the day on which the Equipment Advance is to be made.
Such notice shall be substantially in the form of Exhibit B. The notice
shall be signed by a Responsible Officer or its designee and include a copy
of the invoice for the Equipment to be financed.]
2.2 Overadvances. If, at any time or for any reason, the amount of
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Obligations owed by Borrower to Bank pursuant to Section 2.1.1 of this Agreement
is greater than the lesser of (i) the Committed Revolving Line or (ii) the
Borrowing Base, Borrower shall immediately pay to Bank, in cash, the amount of
such excess. Further, if, at any time or for any reason, the amount of
Obligations owed by Borrower to Bank pursuant to Section 2.1.2 of this Agreement
is greater than the lesser of (i) the Committed Equipment Line or (ii) the
borrowing base relating to Equipment Advances as set forth in Section 2.1.2(a)
above, Borrower shall immediately pay to Bank, in cash, the amount of such
excess.
2.3 Interest Rates. Payments. and Calculations.
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(a) Interest Rate. Except as set forth in Section 2.3(b), all Advances
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shall bear interest, on the average daily balance thereof, at a per annum rate
equal to 0.75% percentage points above the Prime Rate, provided that such
interest rate shall be reduced to a per annum rate equal to 0.25% percentage
points above the Prime Rate upon the consummation of the Private Placement
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Transaction. All Equipment Advances shall bear interest at a per annum rate
equal to 0.25% percentage points above the Prime Rate
(b) Default Rate. All Obligations shall bear interest, from and after
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the occurrence of an Event of Default, at a rate equal to three (3) percentage
points above the interest rate applicable immediately prior to the occurrence of
the Event of Default.
(c) Payments. Interest hereunder shall be due and payable on each
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Payment Date. Borrower hereby authorizes Bank to debit any accounts with Bank,
including, without limitation, Account Number 3300026716 for payments of
principal and interest due on the Obligations and any other amounts owing by
Borrower to Bank. Bank will notify Borrower of all debits which Bank has made
against Borrower's accounts. Any such debits against Borrower's accounts in no
way shall be deemed a set-off. Any interest not paid when due shall be
compounded by becoming a part of the Obligations, and such interest shall
thereafter accrue interest at the rate then applicable hereunder.
(d) Computation. In the event the Prime Rate is changed from time to
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time hereafter, the applicable rate of interest hereunder shall be increased or
decreased effective as of 12:01 a.m. on the day the Prime Rate is changed, by an
amount equal to such change in the Prime Rate. All interest chargeable under the
Loan Documents shall be computed on the basis of a three hundred sixty (360) day
year for the actual number of days elapsed.
2.4 Crediting Payments. Prior to the occurrence of an Event of Default,
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Bank shall credit a wire transfer of funds, check or other item of payment to
such deposit account or Obligation as Borrower specifies. After the occurrence
of an Event of Default, the receipt by Bank of any wire transfer of funds,
check, or other item of payment, whether directed to Borrower's deposit account
with Bank or to the Obligations or otherwise, shall be immediately applied to
conditionally reduce Obligations, but shall not be considered a payment in
respect of the Obligations unless such payment is of immediately available
federal funds or unless and until such check or other item of payment is honored
when presented for payment. Notwithstanding anything to the contrary contained
herein, any wire transfer or payment received by Bank after 12:00 noon Pacific
time shall be deemed to have been received by Bank as of the opening of business
on the immediately following Business Day. Whenever any payment to Bank under
the Loan Documents would otherwise be due (except by reason of acceleration) on
a date that is not a Business Day, such payment shall instead be due on the next
Business Day, and additional fees or interest, as the case may be, shall accrue
and be payable for the period of such extension.
2.5 Fees. Borrower shall pay to Bank the following:
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(a) Facility Fee. A Facility Fee equal to $17,500, which fee shall be
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due on the Closing Date and shall be fully earned and non-refundable;
(b) Financial Examination and Appraisal Fees. Bank's customary fees
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and out-of-pocket expenses for Bank's audits of Borrower's Accounts, and for
each appraisal of Collateral and financial analysis and examination of Borrower
performed from time to time by Bank or its agents;
(c) Bank Expenses. Within ten days of demand from Bank, or if an Event
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of Default has occurred and is continuing, upon demand from Bank, all Bank
Expenses incurred through the date hereof, including reasonable attorneys' fees
and expenses, and, after the date hereof, all Bank Expenses, including
reasonable attorneys' fees and expenses, as and when they become due.
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(d) Warrants; Additional Warrants. Borrower shall, concurrently,
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provide Lender with warrants to purchase 25,000 shares of Series C Preferred
Stock of the Borrower, at $4.75 per share, on the terms and conditions in the
Warrant to Purchase Stock and related documents being executed concurrently with
this Agreement. Further, if the Private Placement Transaction is not consummated
on or before October 31, 1998, then Borrower shall provide Lender with
additional warrants to purchase 15,000 shares of Series C Preferred Stock of the
Borrower, at $4.75 per share, on the same terms and conditions as are set forth
in the Warrant to Purchase Stock and related documents being executed
concurrently with this Agreement.
2.6 Additional Costs. In case any law, regulation, treaty or official
----------------
directive or the interpretation or application thereof by any court or any
governmental authority charged with the administration thereof or the compliance
with any guideline or request of any central bank or other governmental
authority (whether or not having the force of law):
(a) subjects Bank to any tax with respect to payments of principal or
interest or any other amounts payable hereunder by Borrower or otherwise with
respect to the transactions contemplated hereby (except for taxes on the overall
net income of Bank imposed by the United States of America or any political
subdivision thereof);
(b) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, Bank; or
(c) imposes upon Bank any other condition with respect to its
performance under this Agreement,
and the result of any of the foregoing is to increase the cost to Bank, reduce
the income receivable by Bank or impose any expense upon Bank with respect to
any loans, Bank shall notify Borrower thereof in writing. Borrower agrees to pay
to Bank the amount of such increase in cost, reduction in income or additional
expense as and when such cost, reduction or expense is incurred or determined,
upon presentation by Bank of a statement of the amount and setting forth Bank's
calculation thereof, all in reasonable detail, which statement shall be deemed
true and correct absent manifest error.
2.7 Term. Except as otherwise set forth herein, this Agreement shall
----
become effective on the Closing Date and, subject to Section 12.7, shall
continue in full force and effect for a term ending on the Maturity Date.
Notwithstanding the foregoing, Bank shall have the right to terminate its
obligation to make Credit Extensions under this Agreement immediately and
without notice upon the occurrence and during the continuance of an Event of
Default. Notwithstanding termination of this Agreement, Bank's lien on the
Collateral shall remain in effect for so long as any Obligations are
outstanding.
3. CONDITIONS OF LOANS
---------- -- -----
3.1 Conditions Precedent to Initial Credit Extension. The obligation of
------------------------------------------------
Bank to make the initial Credit Extension is subject to the condition precedent
that Bank shall have received, in form and substance satisfactory to Bank, the
following:
(a) this Agreement;
(b) a certificate of the Secretary of Borrower with respect to
articles, bylaws, incumbency and resolutions authorizing the execution and
delivery of this Agreement;
(c) an intellectual property security agreement;
-11-
<PAGE>
(d) warrant and related documentation as set forth in Section 2.5(d)
hereof.
(e) financing statements (Forms UCC- 1);
(f) insurance certificate;
(g) payment of the fees and Bank Expenses then due specified in
Section 2.5 hereof;
(h) Certificate of Foreign Qualification (if applicable); and
(i) such other documents, and completion of such other matters, as
Bank may reasonably deem necessary or appropriate.
3.2 Conditions Precedent to all Credit Extensions. The obligation of Bank
---------------------------------------------
to make each Credit Extension, including the initial Credit Extension, is
further subject to the following conditions:
(a) timely receipt by Bank of the Payment/Advance Form as provided in
Section 2.1; and
(b) the representations and warranties contained in Section 5 shall be
true and correct in all material respects on and as of the date of such
Payment/Advance Form and on the effective date of each Credit Extension as
though made at and as of each such date, and no Event of Default shall have
occurred and be continuing, or would result from such Credit Extension. The
making of each Credit Extension shall be deemed to be a representation and
warranty by Borrower on the date of such Credit Extension as to the accuracy of
the facts referred to in this Section 3.2(b).
4. CREATION OF SECURITY INTEREST
-----------------------------
4.1 Grant of Security Interest. Borrower grants and pledges to Bank a
--------------------------
continuing security interest in all presently existing and hereafter acquired or
arising Collateral in order to secure prompt payment of any and all Obligations
and in order to secure prompt performance by Borrower of each of its covenants
and duties under the Loan Documents. Except as set forth in the Schedule, such
security interest constitutes a valid, first priority security interest in the
presently existing Collateral, and will constitute a valid, first priority
security interest in Collateral acquired after the date hereof. Borrower
acknowledges that Bank may place a "hold" on any Deposit Account pledged as
Collateral to secure the Obligations. Notwithstanding termination of this
Agreement, Bank's Lien on the Collateral shall remain in effect for so long as
any Obligations are outstanding.
4.2 Delivery of Additional Documentation Required. Borrower shall from
---------------------------------------------
time to time execute and deliver to Bank, at the request of Bank, all Negotiable
Collateral, all financing statements and other documents that Bank may
reasonably request, in form satisfactory to Bank, to perfect and continue
perfected Bank's security interests in the Collateral and in order to fully
consummate all of the transactions contemplated under the Loan Documents.
4.3 Right to Inspect. Bank (through any of its officers, employees, or
----------------
agents) shall have the right, upon reasonable prior notice, from time to time
during Borrower's usual business hours, to inspect Borrower's Books and to make
copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition of, or any other
matter relating to, the Collateral.
-12-
<PAGE>
5. REPRESENTATIONS AND WARRANTIES
------------------------------
Borrower represents and warrants as follows:
5.1 Due Organization and Qualification. Borrower and each Subsidiary is a
----------------------------------
corporation duly existing and in good standing under the laws of its state of
incorporation and qualified and licensed to do business in, and is in good
standing in, any state in which the conduct of its business or its ownership of
property requires that it be so qualified and the failure to do so could result
in a Material Adverse Effect.
5.2 Due Authorization: No Conflict. The execution, delivery, and
------------------------------
performance of the Loan Documents are within Borrower's powers, have been duly
authorized, and are not in conflict with nor constitute a breach of any
provision contained in Borrower's Articles of Incorporation or Bylaws, nor will
they constitute an event of default under any material agreement to which
Borrower is a party or by which Borrower is bound. Borrower is not in default
under any agreement to which it is a party or by which it is bound, which
default could have a Material Adverse Effect.
5.3 No Prior Encumbrances. Borrower has good and indefeasible title to the
---------------------
Collateral, free and clear of Liens, except for Permitted Liens.
5.4 Bona Fide Eligible Accounts. The Eligible Accounts are bona fide
---------------------------
existing obligations. The service or property giving rise to such Eligible
Accounts has been performed or delivered to the account debtor or to the account
debtor's agent for immediate shipment to and unconditional acceptance by the
account debtor. Borrower has not received notice of actual or imminent
Insolvency Proceeding of any account debtor whose accounts are included in any
Borrowing Base Certificate as an Eligible Account.
5.5 Merchantable Inventory. All Inventory is in all material respects of
----------------------
good and marketable quality, free from all material defects.
5.6 Intellectual Property. Borrower is the sole owner of the Intellectual
---------------------
Property Collateral, except for non-exclusive licenses granted by Borrower to
its customers in the ordinary course of business. Each of the Patents is valid
and enforceable, and no part of the Intellectual Property Collateral has been
judged invalid or unenforceable, in whole or in part, and no claim has been made
that any part of the Intellectual Property Collateral violates the rights of any
third party. Except for and upon the filing with the United States Patent and
Trademark Office with respect to the Patents and Trademarks and the Register of
Copyrights with respect to the Copyrights and Mask Works necessary to perfect
the security interests created hereunder, and except as has been already made or
obtained, no authorization, approval or other action by, and no notice to or
filing with, any United States governmental authority or United States
regulatory body is required either (i) for the grant by Borrower of the security
interest granted hereby or for the execution, delivery or performance of Loan
Documents by Borrower in the United States or (ii) for the perfection in the
United States or the exercise by Bank of its rights and remedies hereunder.
5.7 Name: Location of Chief Executive Office. Except as disclosed in the
----------------------------------------
Schedule, Borrower has not done business and will not without at least thirty
(30) days prior written notice to Bank do business under any name other than
that specified on the signature page hereof The chief executive office of
Borrower is located at the address indicated in Section 10 hereof.
5.8 Litigation. Except as set forth in the Schedule, there are no actions
----------
or proceedings pending, or, to Borrower's knowledge, threatened by or against
Borrower or any Subsidiary before any court or administrative agency in which an
adverse decision could have a Material
-13-
<PAGE>
Adverse Effect or a material adverse effect on Borrower's interest or Bank's
security interest in the Collateral.
5.9 No Material Adverse Change in Financial Statements. All consolidated
--------------------------------------------------
financial statements related to Borrower and any Subsidiary that have been
delivered by Borrower to Bank fairly present in all material respects Borrower's
consolidated financial condition as of the date thereof and Borrower's
consolidated results of operations for the period then ended. There has not been
a material adverse change in the consolidated financial condition of Borrower
since the date of the most recent of such financial statements submitted to Bank
on or about the Closing Date.
5.10 Solvency. The fair saleable value of Borrower's assets (including
--------
goodwill minus disposition costs) exceeds the fair value of its liabilities; the
Borrower is not left with unreasonably small capital after the transactions
contemplated by this Agreement; and Borrower is able to pay its debts (including
trade debts) as they mature.
5.11 Regulatory Compliance. Borrower and each Subsidiary has met the
---------------------
minimum funding requirements of ERISA with respect to any employee benefit plans
subject to ERISA. No event has occurred resulting from Borrower's failure to
comply with ERISA that is reasonably likely to result in Borrower's incurring
any liability that could have a Material Adverse Effect. Borrower is not an
"investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940. Borrower is not
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulations G, T and U of the Board of Governors of the Federal
Reserve System). Borrower has complied with all the provisions of the Federal
Fair Labor Standards Act. Borrower has not violated any statutes, laws,
ordinances or rules applicable to it, violation of which could have a Material
Adverse Effect.
5.12 Environmental Condition. None of Borrower's or any Subsidiary's
-----------------------
properties or assets has ever been used by Borrower or any Subsidiary or, to the
best of Borrower's knowledge, by previous owners or operators, in the disposal
of, or to produce, store, handle, treat, release, or transport, any hazardous
waste or hazardous substance other than in accordance with applicable law; to
the best of Borrower's knowledge, none of Borrower's properties or assets has
ever been designated or identified in any manner pursuant to any environmental
protection statute as a hazardous waste or hazardous substance disposal site, or
a candidate for closure pursuant to any environmental protection statute; no
lien arising under any environmental protection statute has attached to any
revenues or to any real or personal property owned by Borrower or any
Subsidiary; and neither Borrower nor any Subsidiary has received a summons,
citation, notice, or directive from the Environmental Protection Agency or any
other federal, state or other governmental agency concerning any action or
omission by Borrower or any Subsidiary resulting in the release, or other
disposition of hazardous waste or hazardous substances into the environment.
5.13 Taxes. Borrower and each Subsidiary has filed or caused to be filed
-----
all tax returns required to be filed on a timely basis, and has paid, or has
made adequate provision for the payment of, all taxes reflected therein.
5.14 Subsidiaries. Borrower does not own any stock, partnership interest
------------
or other equity securities of any Person, except for Permitted Investments.
5.15 Government Consents. Borrower and each Subsidiary has obtained all
-------------------
consents, approvals and authorizations of, made all declarations or filings
with, and given all notices to, all governmental authorities that are necessary
for the continued operation of Borrower's business as currently conducted.
-14-
<PAGE>
5.16 Full Disclosure. No representation, warranty or other statement made
---------------
by Borrower in any certificate or written statement furnished to Bank contains
any untrue statement of a material fact or omits to state a material fact
necessary in order to make the statements contained in such certificates or
statements not misleading.
6. AFFIRMATIVE COVENANTS
---------------------
Borrower covenants and agrees that, until payment in full of all
outstanding Obligations, and for so long as Bank may have any commitment to make
a Credit Extension hereunder, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its and each of its
-------------
Subsidiaries' corporate existence and good standing in its jurisdiction of
incorporation and maintain qualification in each jurisdiction in which the
failure to so qualify could have a Material Adverse Effect. Borrower shall
maintain, and shall cause each of its Subsidiaries to maintain, to the extent
consistent with prudent management of Borrower's business, in force all
licenses, approvals and agreements, the loss of which could have a Material
Adverse Effect.
6.2 Government Compliance. Borrower shall meet, and shall cause each
---------------------
Subsidiary to meet, the minimum funding requirements of ERISA with respect to
any employee benefit plans subject to ERISA. Borrower shall comply, and shall
cause each Subsidiary to comply, with all statutes, laws, ordinances and
government rules and regulations to which it is subject, noncompliance with
which could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral.
6.3 Financial Statements, Reports, Certificates. Borrower shall deliver to
-------------------------------------------
Bank: (a) as soon as available, but in any event within 25 days after the end of
each month, a company prepared consolidated balance sheet and income statement
covering Borrower's consolidated operations during such period, in a form and
certified by an officer of Borrower reasonably acceptable to Bank; (b)
[reserved]; (c) [reserved]; (d) promptly upon receipt of notice thereof, a
report of any legal actions pending or threatened against Borrower or any
Subsidiary that could result in damages or costs to Borrower or any Subsidiary
of One Hundred Thousand Dollars ($100,000) or more; (e) prompt notice of any
material change in the composition of the Intellectual Property Collateral,
including, but not limited to, any subsequent ownership right of the Borrower in
or to any Copyright, Patent or Trademark not specified in any intellectual
property security agreement between Borrower and Bank or knowledge of an event
that materially adversely effects the value of the Intellectual Property
Collateral; and (f) such budgets, sales projections, operating plans or other
financial information as Bank may reasonably request from time to time.
Within 25 days after the last day of each MONTH, Borrower shall deliver to
Bank a Borrowing Base Certificate signed by a Responsible Officer in
substantially the form of Exhibit C hereto, together with aged listings of
---------
accounts receivable and accounts payable.
Within 25 days after the last day of each MONTH, Borrower shall deliver to
Bank with the MONTHLY financial statements a Compliance Certificate signed by a
Responsible Officer in substantially the form of Exhibit D hereto.
---------
Bank shall have a right from time to time hereafter to audit Borrower's
Accounts at Borrower's expense, provided that such audits will be conducted no
more often than every six (6) months unless an Event of Default has occurred and
is continuing, provided, further, that the first of such audits shall be
completed no later than August 31, 1998.
6.4 Inventory; Returns. Borrower shall keep all Inventory in good and
------------------
marketable condition, free from all material defects. Returns and allowances, if
any, as between Borrower
-15-
<PAGE>
and its account debtors shall be on the same basis and in accordance with the
usual customary practices of Borrower, as they exist at the time of the
execution and delivery of this Agreement. Borrower shall promptly notify Bank of
all returns and recoveries and of all disputes and claims, where the return,
recovery, dispute or claim involves more than Fifty Thousand Dollars ($50,000).
6.5 Taxes. Borrower shall make, and shall cause each Subsidiary to make,
-----
due and timely payment or deposit of all material federal, state, and local
taxes, assessments, or contributions required of it by law, and will execute and
deliver to Bank, on demand, appropriate certificates attesting to the payment or
deposit thereof; and Borrower will make, and will cause each Subsidiary to make,
timely payment or deposit of all material tax payments and withholding taxes
required of it by applicable laws, including, but not limited to, those laws
concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes, and will, upon request, furnish Bank with proof satisfactory to
Bank indicating that Borrower or a Subsidiary has made such payments or
deposits; provided that Borrower or a Subsidiary need not make any payment if
the amount or validity of such payment is (I) contested in good faith by
appropriate proceedings, (ii) is reserved against (to the extent required by
GAAP) by Borrower and (iii) no lien other than a Permitted Lien results.
6.6 Insurance.
---------
(a) Borrower, at its expense, shall keep the Collateral insured
against loss or damage by fire, theft, explosion, sprinklers, and all other
hazards and risks, and in such amounts, as ordinarily insured against by other
owners in similar businesses conducted in the locations where Borrower's
business is conducted on the date hereof. Borrower shall also maintain insurance
relating to Borrower's ownership and use of the Collateral in amounts and of a
type that are customary to businesses similar to Borrower's.
(b) All such policies of insurance shall be in such form, with such
companies, and in such amounts as are reasonably satisfactory to Bank. All such
policies of property insurance shall contain a lender's loss payable
endorsement, in a form satisfactory to Bank, showing Bank as an additional loss
payee thereof and all liability insurance policies shall show the Bank as an
additional insured, and shall specify that the insurer must give at least twenty
(20) days notice to Bank before canceling its policy for any reason. At Bank's
request, Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. All proceeds
payable under any such policy shall, at the option of Bank, be payable to Bank
to be applied on account of the Obligations.
6.7 Principal Depository. Borrower shall maintain its principal depository
--------------------
and operating accounts with Bank.
6.8 Quick Ratio. Borrower shall maintain, as of the last day of each
-----------
calendar month, a ratio of Quick Assets to Current Liabilities of at least 2.00
to 1.0. For purposes of the foregoing, however, Current Liabilities shall not
include deferred revenues. Compliance with the foregoing covenant shall be
effective upon the earlier of (a) the period ending October 31, 1998 or (b) the
month end period in which the Private Placement Transaction has been
consummated.
6.9 Tangible Net Worth. Borrower shall maintain, as of the last day of
------------------
each calendar month, a Tangible Net Worth of not less than $1,250,000 plus the
greater of (a) $8,250,000 or (b) 55% of the proceeds of the Private Placement
Transaction. Compliance with the foregoing covenant shall be effective upon the
earlier of (a) the period ending October 31, 1998 or (b) the month end period in
which the Private Placement Transaction has been consummated.
6.10 Remaining Months Liquidity; Minimum Cash. Borrower shall maintain, as
----------------------------------------
of the last calendar day of each month, the greater of (a) at least 9 months
Remaining Months Liquidity
-16-
<PAGE>
or (b) cash on hand (or cash equivalents) in an aggregate amount equal to two
multiplied by the aggregate amount of Equipment Advances then outstanding.
"Remaining Months Liquidity" is defined as cash on hand (and cash equivalents)
plus 50% of accounts receivable, less any accounts receivable loan balances,
divided by Cash Burn. "Cash Burn" is defined as cash (prior period) minus cash
(current period) plus increases in short and long term borrowings plus increases
in equity (or Subordinated Debt). Compliance with the foregoing covenant shall
be effective only at such time that Equipment Advances are outstanding and, upon
such occurrence, at the earlier of (a) the period ending October 31, 1998 or (b)
the month end period in which the Private Placement Transaction has been
consummated.
6.11 Registration of Intellectual Property Rights.
--------------------------------------------
(a) In the event that Borrower shall register or cause to be
registered (to the extent not already registered) with the United States Patent
and Trademark Office or the United States Copyright Office, as applicable, those
intellectual property rights listed on Exhibits A, B and C to the Intellectual
Property Security Agreement delivered to Bank by Borrower in connection with
this Agreement, or those additional intellectual property rights developed or
acquired by Borrower from time to time, including without limitation revisions
or additions to the intellectual property rights listed on such Exhibits A, B
and C, then Borrower shall execute and deliver such additional instruments and
documents from time to time as Bank shall reasonably request to perfect Bank's
security interest in the Intellectual Property Collateral.
(b) Borrower shall (i) protect, defend and maintain the validity and
enforceability of the Trademarks, Patents, Copyrights, and Mask Works, (ii) use
its best efforts to detect infringements of the Trademarks, Patents, Copyrights
and Mask Works and promptly advise Bank in writing of material infringements
detected and (iii) not allow any Trademarks, Patents, Copyrights, or Mask Works
to be abandoned, forfeited or dedicated to the public without the written
consent of Bank, which shall not be unreasonably withheld, unless Bank
determines that reasonable business practices suggest that abandonment is
appropriate.
(c) Bank shall have the right, but not the obligation, to take, at
Borrower's sole expense, any actions that Borrower is required under this
Section 6.11 to take but which Borrower fails to take, after fifteen (15) days'
written notice to Borrower. Borrower shall reimburse and indemnify Bank for all
reasonable costs and reasonable expenses incurred in the reasonable exercise of
its rights under this Section 6.11.
6.12 Further Assurances. At any time and from time to time Borrower shall
------------------
execute and deliver such further instruments and take such further action as may
reasonably be requested by Bank to effect the purposes of this Agreement.
7. NEGATIVE COVENANTS
------------------
Borrower covenants and agrees that, so long as any Credit Extension
hereunder shall be available and until payment in full of the outstanding
Obligations or for so long as Bank may have any commitment to make any Advances,
Borrower will not do any of the following:
7.1 Dispositions. Convey, sell, lease, transfer or otherwise dispose of
------------
(collectively, a "Transfer"), or permit any of its Subsidiaries to Transfer, all
or any part of its business or property, other than Transfers: (i) of inventory
in the ordinary course of business, (ii) of nonexclusive licenses and similar
arrangements for the use of the property of Borrower or its Subsidiaries in the
ordinary course of business; (iii) that constitute payment of normal and usual
operating expenses in the ordinary course of business;; or (iii) of worn-out or
obsolete Equipment.
-17-
<PAGE>
7.2 Changes in Business, Ownership, or Management, Business Locations.
-----------------------------------------------------------------
Engage in any business, or permit any of its Subsidiaries to engage in any
business, other than the businesses currently engaged in by Borrower and any
business substantially similar or related thereto (or incidental thereto), or
suffer a change in Borrower's ownership of greater than 49% or changes in the
Persons holding the position of the President, Chairman or Chief Financial
Officer of the Borrower as compared to those persons as of the date hereof.
Borrower will not, without at least thirty (30) days prior written notification
to Bank, relocate its chief executive office or add any new offices or business
locations.
7.3 Mergers or Acquisitions. Merge or consolidate, or permit any of its
-----------------------
Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or
substantially all of the capital stock or property of another Person.
7.4 Indebtedness. Create, incur, assume or be or remain liable with
------------
respect to any Indebtedness, or permit any Subsidiary so to do, other than
Permitted Indebtedness.
7.5 Encumbrances. Create, incur, assume or suffer to exist any Lien with
------------
respect to any of its property, or assign or otherwise convey any right to
receive income, including the sale of any Accounts, or permit any of its
Subsidiaries so to do, except for Permitted Liens.
7.6 Distributions. Pay any dividends or make any other distribution or
-------------
payment on account of or in redemption, retirement or purchase of any capital
stock.
7.7 Investments; Loans; Guarantees. Directly or indirectly acquire or own,
------------------------------
or make any Investment in or to any Person, or permit any of its Subsidiaries so
to do, other than Permitted Investments, or make any loans of any money or any
other assets to any Person, or guarantee or otherwise become liable with respect
to the obligations of any other Person.
7.8 Transactions with Affiliates. Directly or indirectly enter into or
----------------------------
permit to exist any material transaction with any Affiliate of Borrower except
for transactions that are in the ordinary course of Borrower's business, upon
fair and reasonable terms that are no less favorable to Borrower than would be
obtained in an arm's length transaction with a nonaffiliated Person.
7.9 Intellectual Property Agreements. Borrower shall not permit the
--------------------------------
inclusion in any material contract to which it becomes a party of any provisions
that could or might in any way prevent the creation of a security interest in
Borrower's rights and interests in any property included within the definition
of the Intellectual Property Collateral acquired under such contracts, except to
the extent that such provisions are necessary in Borrower's exercise of its
reasonable business judgement, in which case written notice thereof shall be
given to Bank.
7.10 Subordinated Debt. Make any payment in respect of any Subordinated
-----------------
Debt, or permit any of its Subsidiaries to make any such payment, except in
compliance with the terms of such Subordinated Debt, or amend any provision
contained in any documentation relating to the Subordinated Debt without Bank's
prior written consent.
7.11 Inventory. Store the Inventory with a bailee, warehouseman, or
---------
similar party unless Bank has received a pledge of any warehouse receipt
covering such Inventory. Except for Inventory sold in the ordinary course of
business and except for such other locations as Bank may approve in writing,
Borrower shall keep the Inventory only at the location set forth in Section 10
hereof and such other locations of which Borrower gives Bank prior written
notice and as to which Borrower signs and files a financing statement where
needed to perfect Bank's security interest.
7.12 Compliance. Become an "investment company" or a company controlled by
----------
an "investment company," within the meaning of the Investment Company Act of
1940, or become
-18-
<PAGE>
principally engaged in, or undertake as one of its important activities, the
business of extending credit for the purpose of purchasing or carrying margin
stock, or use the proceeds of any Advance for such purpose; fail to meet the
minimum funding requirements of ERISA; permit a Reportable Event or Prohibited
Transaction, as defined in ERISA, to occur; fail to comply with the Federal Fair
Labor Standards Act or violate any other law or regulation, which violation
could have a Material Adverse Effect or a material adverse effect on the
Collateral or the priority of Bank's Lien on the Collateral; or permit any of
its Subsidiaries to do any of the foregoing.
8. EVENTS OF DEFAULT
-----------------
Any one or more of the following events shall constitute an Event of
Default by Borrower under this Agreement:
8.1 Payment Default. If Borrower fails to pay, when due, any of the
---------------
Obligations.
8.2 Covenant Default.
(a) If Borrower fails to perform any obligation under Sections 6.3,
6.6, 6.7, 6.8, 6.9, 6.10, 6.11 or 6.12 or violates any of the covenants
contained in Article 7 of this Agreement, or
(b) If Borrower fails or neglects to perform, keep, or observe any
other material term, provision, condition, covenant, or agreement contained in
this Agreement, in any of the Loan Documents, or in any other present or future
agreement between Borrower and Bank and as to any default under such other term,
provision, condition, covenant or agreement that can be cured, has failed to
cure such default within ten (10) days after the occurrence thereof; provided,
however, that if the default cannot by its nature be cured within the ten (10)
day period or cannot after diligent attempts by Borrower be cured within such
ten (10) day period, and such default is likely to be cured within a reasonable
time, then Borrower shall have an additional reasonable period (which shall not
in any case exceed thirty (30) days) to attempt to cure such default, and within
such reasonable time period the failure to have cured such default shall not be
deemed an Event of Default (provided that no Advances will be required to be
made during such cure period);
8.3 Material Adverse Change. If there (i) occurs a material adverse change
-----------------------
in the business, operations, or condition (financial or otherwise) of the
Borrower, or (ii) is a material impairment of the prospect of repayment of any
portion of the Obligations or (iii) is a material impairment of the value or
priority of Bank's security interests in the Collateral;
8.4 Attachment. If any material portion of Borrower's assets is attached,
----------
seized, subjected to a writ or distress warrant, or is levied upon, or comes
into the possession of any trustee, receiver or person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within ten (10) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within ten (10) days
after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contest by Borrower (provided
that no Credit Extensions will be required to be made during such cure period);
-19-
<PAGE>
8.5 Insolvency. If Borrower becomes insolvent, or if an Insolvency
----------
Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within 45 days (provided that no
Advances will be made prior to the dismissal of such Insolvency Proceeding);
8.6 Other Agreements. If there is a default in any agreement to which
----------------
Borrower is a party with a third party or parties resulting in a right by such
third party or parties, whether or not exercised, to accelerate the maturity of
any Indebtedness in an amount in excess of One Hundred Thousand Dollars
($100,000) or that could have a Material Adverse Effect;
8.7 Subordinated Debt. If Borrower makes any payment on account of
-----------------
Subordinated Debt, except to the extent such payment is allowed under any
subordination agreement entered into with Bank;
8.8 Judgments. If a judgment or judgments for the payment of money in an
---------
amount, individually or in the aggregate, of at least Fifty Thousand Dollars
($50,000) shall be rendered against Borrower and shall remain unsatisfied and
unstayed for a period of ten (10) days (provided that no Credit Extensions will
be made prior to the satisfaction or stay of such judgment); or
8.9 Misrepresentations. If any material misrepresentation or material
------------------
misstatement exists as of date made or the date deemed to be made in any
warranty or representation set forth herein or in any certificate or writing
delivered to Bank by Borrower or any Person acting on Borrower's behalf pursuant
to this Agreement or to induce Bank to enter into this Agreement or any other
Loan Document.
8.10 Guaranty. Any guaranty of all or a portion of the Obligations ceases
--------
for any reason to be in full force and effect, or any Guarantor fails to perform
any obligation under any guaranty of all or a portion of the Obligations, or any
material misrepresentation or material misstatement exists now or hereafter in
any warranty or representation set forth in any guaranty of all or a portion of
the Obligations or in any certificate delivered to Bank in connection with such
guaranty, or any of the circumstances described in Sections 8.4, 8.5 or 8.8
occur with respect to any Guarantor.
9. BANK'S RIGHTS AND REMEDIES
----------------- -------
9.1 Rights and Remedies. Upon the occurrence and during the continuance of
-------------------
an Event of Default, Bank may, at its election, without notice of its election
and without demand, do any one or more of the following, all of which are
authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement, by
any of the other Loan Documents, or otherwise, immediately due and payable
(provided that upon the occurrence of an Event of Default described in Section
8.5 all Obligations shall become immediately due and payable without any action
by Bank);
(b) Cease advancing money or extending credit to or for the benefit of
Borrower under this Agreement or under any other agreement between Borrower and
Bank;
(c) Settle or adjust disputes and claims directly with account debtors
for amounts, upon terms and in whatever order that Bank reasonably considers
advisable;
(d) Without notice to or demand upon Borrower, make such payments and
do such acts as Bank considers necessary or reasonable to protect its security
interest in the Collateral. Borrower agrees to assemble the Collateral if Bank
so requires, and to make the Collateral available to Bank as Bank may designate.
Borrower authorizes Bank to enter the premises where the
-20-
<PAGE>
Collateral is located, to take and maintain possession of the Collateral, or any
part of it, and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which in Bank's determination appears to be prior or superior to
its security interest and to pay all expenses incurred in connection therewith.
With respect to any of Borrower's premises, Borrower hereby grants Bank a
license to enter such premises and to occupy the same, without charge in order
to exercise any of Bank's rights or remedies provided herein, at law, in equity,
or otherwise;
(e) Without notice to Borrower set off and apply to the Obligations
any and all (i) balances and deposits of Borrower held by Bank, or (ii)
indebtedness at any time owing to or for the credit or the account of Borrower
held by Bank;
(f) Ship, reclaim, recover, store, finish, maintain, repair, prepare
for sale, advertise for sale, and sell (in the manner provided for herein) the
Collateral. Bank is hereby granted a non-exclusive, royalty-free license or
other right, solely pursuant to the provisions of this Section 9.1, to use,
without charge, Borrower's labels, patents, copyrights, mask works, rights of
use of any name, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any property of a similar nature, as it pertains to the
Collateral, in completing production of, advertising for sale, and selling any
Collateral and, in connection with Bank's exercise of its rights under this
Section 9.1, Borrower's rights under all licenses and all franchise agreements
shall inure to Bank's benefit to the extent permitted under the applicable
license and franchise agreements;
(g) Sell the Collateral at either a public or private sale, or both,
by way of one or more contracts or transactions, for cash or on terms, in such
manner and at such places (including Borrower's premises) as Bank determines is
commercially reasonable, and apply the proceeds thereof to the Obligations in
whatever manner or order it deems appropriate;
(h) Bank may credit bid and purchase at any public sale, or at any
private sale as permitted by law; and
(i) Any deficiency that exists after disposition of the Collateral as
provided above will be paid immediately by Borrower.
(j) Bank shall have a non-exclusive, royalty-free license to use the
Intellectual Property Collateral to the extent reasonably necessary to permit
Bank to exercise its rights and remedies upon the occurrence of an Event of
Default.
9.2 Power of Attorney. Effective only upon the occurrence and during the
-----------------
continuance of an Event of Default, Borrower hereby irrevocably appoints Bank
(and any of Bank's designated officers, or employees) as Borrower's true and
lawful attorney to: (a) send requests for verification of Accounts or notify
account debtors of Bank's security interest in the Accounts; (b) endorse
Borrower's name on any checks or other forms of payment or security that may
come into Bank's possession; (c) sign Borrower's name on any invoice or bill of
lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account
debtors; (d) make, settle, and adjust all claims under and decisions with
respect to Borrower's policies of insurance; and (e) settle and adjust disputes
and claims respecting the accounts directly with account debtors, for amounts
and upon terms which Bank determines to be reasonable; (f) to modify, in its
sole discretion, any intellectual property security agreement entered into
between Borrower and Bank without first obtaining Borrower's approval of or
signature to such modification by amending Exhibit A, Exhibit B, Exhibit C, and
Exhibit D, thereof, as appropriate, to include reference to any right, title or
interest in any Copyrights, Patents, Trademarks, Mask Works acquired by Borrower
after the execution hereof or to delete any reference to any right, title or
interest in any Copyrights, Patents, Trademarks, or Mask Works in which Borrower
no longer has or claims any right, title or interest; (g) to file, in its sole
discretion. one or more financing or continuation statements and amendments
thereto, relative
-21-
<PAGE>
to any of the Collateral without the signature of Borrower where permitted by
law; and (h) to transfer the Intellectual Property Collateral into the name of
Bank or a third party to the extent permitted under the California Uniform
Commercial Code provided Bank may exercise such power of attorney to sign the
name of Borrower on any of the documents described in Section 4.2 regardless of
whether an Event of Default has occurred. The appointment of Bank as Borrower's
attorney in fact, and each and every one of Bank's rights and powers, being
coupled with an interest, is irrevocable until all of the Obligations have been
fully repaid and performed and Bank's obligation to provide advances hereunder
is terminated.
9.3 Accounts Collection. Upon the occurrence and during the continuance of
-------------------
an Event of Default, Bank may notify any Person owing funds to Borrower of
Bank's security interest in such funds and verify the amount of such Account.
Borrower shall collect all amounts owing to Borrower for Bank, receive in trust
all payments as Bank's trustee, and if requested or required by Bank,
immediately deliver such payments to Bank in their original form as received
from the account debtor, with proper endorsements for deposit.
9.4 Bank Expenses. If Borrower fails to pay any amounts or furnish any
-------------
required proof of payment due to third persons or entities, as required under
the terms of this Agreement, then Bank may do any or all of the following: (a)
make payment of the same or any part thereof; (b) set up such reserves under the
Committed Revolving Line as Bank deems necessary to protect Bank from the
exposure created by such failure; or (c) obtain and maintain insurance policies
of the type discussed in Section 6.6 of this Agreement, and take any action with
respect to such policies as Bank deems prudent. Any amounts so paid or deposited
by Bank shall constitute Bank Expenses, shall be immediately due and payable,
and shall bear interest at the then applicable rate hereinabove provided, and
shall be secured by the Collateral. Any payments made by Bank shall not
constitute an agreement by Bank to make similar payments in the future or a
waiver by Bank of any Event of Default under this Agreement.
9.5 Bank's Liability for Collateral. So long as Bank complies with
-------------------------------
reasonable banking practices, Bank shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman. bailee, forwarding agency, or other person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.
9.6 Remedies Cumulative. Bank's rights and remedies under this Agreement,
-------------------
the Loan Documents, and all other agreements shall be cumulative. Bank shall
have all other rights and remedies not expressly set forth herein as provided
under the Code, by law, or in equity. No exercise by Bank of one right or remedy
shall be deemed an election, and no waiver by Bank of any Event of Default on
Borrower's part shall be deemed a continuing waiver. No delay by Bank shall
constitute a waiver, election, or acquiescence by it. No waiver by Bank shall be
effective unless made in a written document signed on behalf of Bank and then
shall be effective only in the specific instance and for the specific purpose
for which it was given.
9.7 Demand: Protest. Borrower waives demand, protest, notice of protest,
---------------
notice of default or dishonor, notice of payment and nonpayment, notice of any
default, nonpayment at maturity, release, compromise, settlement, extension, or
renewal of accounts, documents, instruments, chattel paper, and guarantees at
any time held by Bank on which Borrower may in any way be liable.
10. NOTICES
-------
Unless otherwise provided in this Agreement, all notices or demands by any
party relating to this Agreement or any other agreement entered into in
connection herewith shall be in writing
-22-
<PAGE>
and (except for financial statements and other informational documents which may
be sent by first-class mail, postage prepaid) shall be personally delivered or
sent by a recognized overnight delivery service, by certified mail, postage
prepaid, return receipt requested, or by telefacsimile to Borrower or to Bank,
as the case may be, at its addresses set forth below:
If to Borrower Copper Mountain Networks, Inc.
3931 Sorrento Valley Boulevard
San Diego, California 92121
Attn: John Creelman
FAX: 619-453-1028
If to Bank Silicon Valley Bank
5414 Oberlin Drive, Suite 210
San Diego, CA 92121
Attn: Manager
FAX: 619-535-1611
The parties hereto may change the address at which they are to receive notices
hereunder, by notice in writing in the foregoing manner given to the other.
11. CHOICE OF LAW AND VENUE: JURY WAIVER
------------------------------------
The Loan Documents shall be governed by, and construed in accordance with,
the internal laws of the State of California, without regard to principles of
conflicts of law. Each of Borrower and Bank hereby submits to the exclusive
jurisdiction of the state and Federal courts located in the County of San Diego,
State of California. BORROWER AND BANK EACH HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN,
INCLUDING CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW OR STATUTORY CLAIMS. EACH PARTY RECOGNIZES AND AGREES THAT THE
FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS
AGREEMENT. EACH PARTY REPRESENTS AND WARRANTS THAT IT HAS REVIEWED THIS WAIVER
WITH ITS LEGAL COUNSEL AND THAT IT KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL.
12. GENERAL PROVISIONS
------------------
12.1 Successors and Assigns. This Agreement shall bind and inure to the
----------------------
benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
--------- -------
may be assigned by Borrower without Bank's prior written consent, which consent
may be granted or withheld in Bank's sole discretion. Bank shall have the right
without the consent of, but with notice to Borrower, to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights and benefits hereunder.
12.2 Indemnification. Borrower shall indemnify, defend, protect and hold
---------------
harmless Bank and its officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party in connection with the transactions contemplated by the Loan Documents;
and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by
Bank as a result of or in any way arising out of, following, or consequential to
transactions between Bank and Borrower whether under the Loan Documents, or
otherwise (including without
-23-
<PAGE>
limitation reasonable attorneys fees and expenses), except for losses caused by
Bank's gross negligence or willful misconduct.
12.3 Time of Essence. Time is of the essence for the performance of all
---------------
obligations set forth in this Agreement.
12.4 Severability of Provisions. Each provision of this Agreement shall be
--------------------------
severable from every other provision of this Agreement for the purpose of
determining the legal enforceability of any specific provision.
12.5 Amendments in Writing. Integration. This Agreement cannot be amended
----------------------------------
or terminated except by a writing signed by Borrower and Bank. All prior
agreements, understandings, representations, warranties, and negotiations
between the parties hereto with respect to the subject matter of this Agreement,
if any, are merged into this Agreement and the Loan Documents.
12.6 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.7 Other Loan Agreement. It is the intention of the parties hereto that
--------------------
the MMC/GATX-SVB Loan (as defined in the Schedule hereto) and the agreements
relating thereto shall not modify or otherwise affect the terms and conditions
of this Agreement, including, without limitation, with respect to interest rate,
term, maturity, covenants or otherwise.
12.8 Survival. All covenants, representations and warranties made in this
--------
Agreement shall continue in full force and effect so long as any Obligations
remain outstanding. The obligations of Borrower to indemnify Bank with respect
to the expenses, damages, losses, costs and liabilities described in Section
12.2 shall survive until all applicable statute of limitations periods with
respect to actions that may be brought against Bank have run.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
as of the date first above written.
COPPER MOUNTAIN N WORKS, INC.
By: /s/ John A. Creenman
-------------------------
Title: V.P. Finance/ C.E.O.
-----------------------
By: _________________________
Title: ______________________
SILICON VALLEY BANK
By: /s/ SIGNATURE ILLEGIBLE^^
--------------------------
Title: VP
----------------------
-24-
<PAGE>
EXHIBIT A
The Collateral shall consist of all right, title and interest of Borrower in and
to the following:
(a) All goods and equipment now owned or hereafter acquired, including, without
limitation, all machinery, fixtures, vehicles (including motor vehicles and
trailers), and any interest in any of the foregoing, and all attachments,
accessories, accessions, replacements, substitutions, additions, and
improvements to any of the foregoing, wherever located;
(b) All inventory, now owned or hereafter acquired, including, without
limitation, all merchandise, raw materials, parts, supplies, packing and
shipping materials, work in process and finished products including such
inventory as is temporarily out of Borrower's custody or possession or in
transit and including any returns upon any accounts or other proceeds, including
insurance proceeds, resulting from the sale or disposition of any of the
foregoing and any documents of title representing any of the above;
(c) All contract rights and general intangibles now owned or hereafter
acquired, including, without limitation, goodwill, trademarks, service marks,
trade styles, trade names, patents, patent applications, leases, license
agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, computer programs, computer
discs, computer tapes, literature, reports, catalogs, design rights, income tax
refunds, payments of insurance and rights to payment of any kind;
(d) All now existing and hereafter arising accounts, contract rights,
royalties, license rights and all other forms of obligations owing to Borrower
arising out of the sale or lease of goods, the licensing of technology or the
rendering of services by Borrower, whether or not earned by performance, and any
and all credit insurance, guaranties, and other security therefor, as well as
all merchandise returned to or reclaimed by Borrower;
(e) All documents, cash, deposit accounts, securities, investment property,
letters of credit, certificates of deposit, instruments and chattel paper now
owned or hereafter acquired and Borrower's Books relating to the foregoing;
(f) All copyright rights, copyright applications, copyright registrations and
like protections in each work of authorship and derivative work thereof, whether
published or unpublished, now owned or hereafter acquired; all trade secret
rights, including all rights to unpatented inventions, know-how, operating
manuals, license rights and agreements and confidential information, now owned
or hereafter acquired; all mask work or similar rights available for the
protection of semiconductor chips, now owned or hereafter acquired; all claims
for damages by way of any past, present and future infringement of any of the
foregoing; and
(g) All Borrower's Books relating to the foregoing and any and all claims,
rights and interests in any of the above and all substitutions for, additions
and accessions to and proceeds thereof
<PAGE>
EXHIBIT B
LOAN PAYMENT/ADVANCE TELEPHONE REQUEST FORM
DEADLINE FOR SAME DAY PROCESSING IS 3:00 P.M., P.S.T.
TO: CENTRAL CLIENT SERVICE DIVISION DATE: ________________
FAX#: (408) ____________ TIME: ________________
FROM:_________________________________________________ ______________________
BORROWER'S NAME
FROM:________________________________________________________________________
AUTHORIZED SIGNATURE
PHONE:_______________________________________________________________________
FROM ACCOUNT #_________________________ TO ACCOUNT #_________________________
- ------------------------------------------------------------------------------
REQUESTED TRANSACTION TYPE REQUEST DOLLAR AMOUNT
-------------------------- ---------------------
PRINCIPAL INCREASE (ADVANCE) $____________________
PRINCIPAL PAYMENT (ONLY) $____________________
INTEREST PAYMENT (ONLY) $____________________
PRINCIPAL AND INTEREST (PAYMENT) $____________________
OTHER INSTRUCTIONS:______________________________________________
- ------------------------------------------------------------------------------
All representations and warranties of Borrower stated in the Loan and Security
Agreement are true. correct and complete in all material respects as of the date
of the telephone request for and Advance confirmed by this Advance Request;
provided, however, that those representations and warranties expressly referring
to another date shall be true, correct and complete in all material respects as
of such date.
- ------------------------------------------------------------------------------
BANK USE ONLY:
TELEPHONE REQUEST:
-----------------
The following person is authorized to request the loan payment transfer/loan
advance on the advance designated account and is known to me.
==============================================================================
Authorized Requester
_________________________________
Authorized Signature (Bank)
Phone#___________________________
- ------------------------------------------------------------------------------
<PAGE>
EXHIBIT C
BORROWING BASE CERTIFICATE I
<TABLE>
<CAPTION>
Borrower: Bank Silicon Valley Bank
Commitment Amount: $S
<S> <C> <C>
ACCOUNTS RECEIVABLE
1. Accounts Receivable Book Value as of_____ $_______________
2. Additions (please explain on reverse) $_______________
3. TOTAL ACCOUNTS RECEIVABLE $_______________
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
4. Amounts over 90 days due $_______________
5. Balance of 50% over 90 day accounts $_______________
6. Concentration Limits $_______________
7. Foreign Accounts $_______________
8. Governmental Accounts $_______________
9. Contra Accounts $_______________
10. Promotion or Demo Accounts $_______________
11. Intercompany Employee Accounts $_______________
12. Other (please explain on reverse) $_______________
13. TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS $_______________
14. Eligible Accounts (#3 minus #13) $_______________
15. LOAN VALUE OF ACCOUNTS up to 3MM(125% of #14); over 3MM (80%) $_______________
INVENTORY
16. Inventory Value as of_________ $_______________
17. LOAN VALUE OF INVENTORY (25% of# 16) Max 500K $_______________
BALANCES
18. Maximum Loan Amount $_______________
19. Total Funds Available [Lesser of #18 or (#15 plus #17)] $_______________
20. Present balance owing on Line of Credit $_______________
21. Outstanding under Sublimits ( ) $_______________
22. RESERVE POSITION (#19 minus #20 and #21) $_______________
</TABLE>
The undersigned represents and warrants that the foregoing is true, complete
and correct, and that the information reflected in this Borrowing Base
Certificate complies with the representations and warranties set forth in the
Loan and Security Agreement between the undersigned and Silicon Valley Bank.
COMMENTS:
=============================================
BANK USE ONLY
RECEIVED BY:________________________
DATE:__________________
REVIEWED By:_______________________
COMPLIANCE STATUS: YES / NO
=============================================
_____________________
Authorized Signer
<PAGE>
EXHIBIT D
COMPLIANCE CERTIFICATE
TO: SILICON VALLEY BANK
FROM:
The undersign authorized officer of _________________________________ hereby
certifies that in accordance with the terms and conditions of the Loan and
Security Agreement between Borrower and Bank (the "Agreement"). (i) Borrower is
in complete compliance for the period ending _____________ with all required
covenants except as noted below and (ii) all representations and warranties of
Borrower stated in the Agreement are true and correct in all mental respects as
of the date hereof. Attached herewith are the required documents supporting the
above certification. The Officer further certifies that these are prepared in
accordance with Generally Accepted Accounting Principles (GAAP) and are
consistently applied from one period to the next except as explained in an
accompanying letter or footnotes. The Officer expressly acknowledges that h no
borrowings may be requested by the Borrower at any time or date of determination
that Borrower is not in compliance with any of the terms of the Agreement, and
that such compliance is determined not just at the date this certificate is
delivered.
PLEASE INDICATE COMPLIANCE STATUS BY CIRCLING YES/NO UNDER "COMPLIES" COLUMN.
<TABLE>
<CAPTION>
Reporting Covenant Required Complies
------------------ -------- --------
<S> <C> <C> <C> <C>
Monthly financial statements Monthly within 25 days Yes No
Annual (CPA Audited) FYE within 90 days Yes No
A R & A/P Agings Monthly within 25 days Yes No
Financial Covenant Required Actual Complies
------------------ -------- ------ --------
Maintain on a Monthly Basis (When Applicable):
Minimum Quick Ratio 2.00:1.0 _____:1.0 Yes No
Minimum Tangible Net Worth $1.25MM + 55% 5 $________ Yes No
or placement proceeds min. 8.25MM)
Minimum Cash/RML _____________ _________ Yes No
</TABLE>
================================================
BANK USE ONLY
RECEIVED BY:________________________
DATE:____________________
REVIEWED BY:________________________
COMPLIANCE STATUS: YES / NO
================================================
COMMENTS REGARDING EXCEPTIONS:
______________________ Date:__________________
SIGNATURE
______________________
TITLE
<PAGE>
FINANCING SRAREMENT - FOLLOW INSTRUCTIONS CAREFULLY
THIS FINANCING STATEMENT IS PRESENTED FOR FILING PURSUANT TO THE UNIFORM
COMMERCIAL
CODE AND WILL REMAIN EFFECTIVE, WITH CERTAIN EXCEPTIONS, FOR 5 YEARS FROM DATE
OF FILING.
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C>
A NAME & TEL # OF CONTACT AT FILER (OPTIONAL) B. FILING OFFICE ACCT # (OPTIONAL)
Kathy Gambino 310-471-3000 CA SOS
------------------------------------------------------------------------------
</TABLE>
C RETURN CORY TO: (NAME AND MAILING ADDRESS)
Levy, Small & Lallas
815 Moraga Drive
Los Angeles, CA 90049
ATTN: DOCUMENTATION DEPT.
------------------------------------------------------------------------------
D OPTIONAL DESIGNATION (IF APPLICABLE): [_] LESSOR/LESSEE [_] CONSIGNOR/
CONSIGNEE [_] NON-UCC FILING
1 DEBTOR'S EXACT FULL LEGAL NAME - INSERT ONLY ONE DEBTOR NAME (1 A OR 1 B)
-----------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
COPPER MOUNTAIN NETWORKS, INC.
OR
1B. INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
- ------------------------------------------------------------------------------------------------------------------------------------
1 C MAILING ADDRESS CITY STATE COUNTRY POSTAL CODE
- ------------------------------------------------------------------------------------------------------------------------------------
3931 Sorrento Valley Boulevard San Diego CA USA 92121
- ------------------------------------------------------------------------------------------------------------------------------------
1 D S S OR TAX I.D.# OPTIONAL 1E. TYPE OF ENTITY IF ENTITY'S STATE 1G. ENTITY'S ORGANIZATIONAL I.D.#, IF ANY
ADDNL INFO RE OR COUNTRY OF
ENTITY DEBTOR) ORGANIZATION [_] NONE
- ------------------------------------------------------------------------------------------------------------------------------------
2 ADDITIONAL DEBTOR'S EXACT FULL LEGAL NAME - INSERT ONLY ONE DEBTOR NAME (2A OR 2B)
- ------------------------------------------------------------------------------------------------------------------------------------
2A. ENTITY'S NAME
- ------------------------------------------------------------------------------------------------------------------------------------
OR ---------------------------------------------------------------------------------------------------------------------------------
2B INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
- ------------------------------------------------------------------------------------------------------------------------------------
2C MAILING ADDRESS CITY STATE COUNTRY POSTAL CODE
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
2D S S OR TAX I.D.# OPTIONAL 2E TYPE OF ENTITY 2F. ENTITY STATE 2G. ENTITY'S ORGANIZATIONAL ID #, IF ANY
ADD'NL INFOR RE OR COUNTRY OF
ENTITY DEBTOR\ ORGANIZATION [_] NONE
- ------------------------------------------------------------------------------------------------------------------------------------
3 SECURED PARTY'S (ORIGINAL S/P OR ITS TOTAL ASSIGNEE) EXACT FULL LEGAL NAME INSERT ONLY ONE SECURED PARTY NAME (3A OR 3B)
--------------------------------------------------------------------------------------------------------------------------------
3A ENTITY'S NAME FIRST NAME MIDDLE NAME SUFFIX
SILICON VALLEY BANK
OR ---------------------------------------------------------------------------------------------------------------------------------
3B INDIVIDUAL'S LAST NAME FIRST NAME MIDDLE NAME SUFFIX
--------------------------------------------------------------------------------------------------------------------------------
3C MAILING ADDRESS CITY STATE COUNTRY POSTAL CODE
3003 Tasman Drive, Mail Sort NC-661 Santa Clara CA USA 95054
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
4 THIS FINANCING STATEMENT COVERS THE FOLLOWING TYPES OR ITEMS OF PROPERTY
Debtor hereby grants Secured Party a security interest in all of the
following, whether now owned or hereafter acquired, and wherever located, as
collateral for the payment and performance of all present and future
indebtedness, liabilities, guarantees and obligations of Debtor to Secured
Party: All "accounts," "general intangibles," "chattel paper," "documents,"
"letters of credit," instruments," "deposit accounts," "inventory," "farm
products," "fixtures" and "equipment," as such terms are defined in Division
9 of the California Uniform Commercial Code in effect on the date hereof, and
all other types or items of property described on Exhibit A hereto (but this
Financing Statement shall be fully effective notwithstanding any lack of any
Exhibit A). Debtor is not authorized to sell, transfer, or further encumber
any of the foregoing collateral, except for the sale of finished inventory in
the ordinary course of business
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
5 CHECK [_] THIS FINANCING STATEMENT A SIGNED BY THE SECURED PARTY INSTEAD OF THE 7. IF FILED IN FLORIDA (CHECK ONE)
DEBTOR TO PERFECT A SECURITY INTEREST 7. (A) IN COLLATERAL ALREADY SUBJECT TO A [_] DOCUMENTARY [_] DOCUMENTARY STAMP
SECURITY INTEREST IN ANOTHER;JURISDICTION WHEN IT WAS BROUGHT INTO THIS STATE, OR STAMP TAX PAID TAX NOT APPLICABLE
WHEN THE (IF APPLICABLE) DEBTORS LOCATION WAS CHANGED TO THIS STATE, OR (B) IN
ACCORDANCE WITH OTHER STATUTORY PROVISIONS (ADDITIONAL DATA MAY BE REQUIRED)
- ------------------------------------------------------------------------------------------------------------------------------------
REQUIRED SIGNATURE(S) DEBTOR: COPPER MOUNTAIN NETWORKS, INC. 8. [_] FINANCING STATEMENT IS TO BE FILED (FOR
RECORD) (OR RECORDED) IN THE REAL ESTATE
BY: /s/ JOHN A. CREELMAN TITLE: V.P FINANCE / C.F.O. RECORDS ATTACH ADDENDUM (IF APPLICABLE)
- ------------------------------------------------------------------------------------------------------------------------------------
SECURED PARTY: SILICON VALLEY BANK 9. CHECK TO REQUEST SEARCH CERTIFICATE(S) ON
DEBTOR(S) (ADDITIONAL FEE)
BY: /s/ SIGNATURE ILLEGIBLE TITLE: VP (OPTIONAL) [_] ALL DEBTORS [_] DEBTOR 1 [_] DEBTOR 2
- ------------------------------------------------------------------------------------------------------------------------------------
(1) FILING OFFICER COPY - NATIONAL FINANCINGS STATEMENT (FORM UCC1) &ED PREPARED WITH UCC MASTER SOFTWARE
SNOWMASS SOFTWARE INC. (201)471-2400
</TABLE>
<PAGE>
MEIER MITCHELL & COMPANY, LLC
AUGUST 18, 1998
JOHN CREELMAN
CHIEF FINANCIAL OFFICER
COPPER MOUNTAIN NETWORKS, INC.
6650 LUSK BLVD., SUITE B103
SAN DIEGO, CALIFORNIA 92121
RE: LOAN AND SECURITY AGREEMENT DATED AS OF OCTOBER 4, 1996 BY AND AMONG
SILICON VALLEY BANK AND MMC/GATX PARTNERSHIP NO. 1 (THE "LENDERS") AND
COPPER MOUNTAIN NETWORKS, INC. (FORMERLY COPPER MOUNTAIN COMMUNICATIONS,
INC.) ("COPPER MOUNTAIN" OR THE "COMPANY") (THE "AGREEMENT")
DEAR MR. CREELMAN:
IN ACCORDANCE WITH THE TERMS OF SECTION 7.4 OF THE ABOVE-REFERENCED AGREEMENT,
COPPER MOUNTAIN HAS REQUESTED LENDERS' CONSENT TO THE COMPANY ENTERING INTO A $4
MILLION ACCOUNTS RECEIVABLE FINANCING (THE "ACCOUNTS RECEIVABLE FINANCING") WITH
SILICON VALLEY BANK (THE "NEW LENDER") WHICH WILL RESULT IN NEW LENDER HAVING
(I) A FIRST PRIORITY SECURITY INTEREST IN ALL UNENCUMBERED ASSETS OF THE COMPANY
AND (II) A SECOND PRIORITY INTEREST IN THE COLLATERAL (AS DEFINED IN THE
AGREEMENT).
LENDERS HEREBY CONSENT TO THE COMPANY ENTERING INTO THE ACCOUNTS RECEIVABLE
FINANCING, PROVIDED THE NEW LENDER'S SECURITY INTEREST IN THE COLLATERAL SHALL
BE SUBORDINATE TO THE SECURITY INTEREST OF LENDERS AND PROVIDED FURTHER THAT THE
NEW LENDER AGREES NOT TO FORECLOSE UPON OR OTHERWISE EXERCISE ANY REMEDIES
AGAINST THE COLLATERAL FOR SO LONG AS ANY AMOUNT IS OUTSTANDING UNDER THE
AGREEMENT.
FURTHER, NOT WITHSTANDING ANY PROVISION TO THE CONTRARY IN THE AGREEMENT, THE
LENDERS AND THE COMPANY HEREBY AGREE THAT (I) THE TERM OBLIGATIONS (AS DEFINED
IN THE AGREEMENT) SHALL NOT INCLUDE ANY PRINCIPAL INDEBTEDNESS, INTEREST, FEES
OR ANY OTHER ITEMS OF INDEBTEDNESS UNDER THE ACCOUNTS RECEIVABLE FINANCING
CREDIT FACILITY DOCUMENTATION AND AGREEMENTS, AS MODIFIED FROM TIME TO TIME
(COLLECTIVELY, THE "A/R LOAN DOCUMENTS") AND (II) THE TERM "OBLIGATIONS" (AS
DEFINED IN THE A/R LOAN DOCUMENTS) SHALL NOT INCLUDE PRINCIPAL INDEBTEDNESS,
INTEREST, FEES OR ANY OTHER ITEMS OF INDEBTEDNESS UNDER THE AGREEMENT AND
DOCUMENTATION RELATING THERETO, AS MODIFIED FROM TIME TO TIME. THE TERMS OF THE
AGREEMENT REMAIN UNCHANGED, UNLESS OTHERWISE SPECIFICALLY MODIFIED HEREIN.
<PAGE>
Page 2
John Creelman
August 18, 1998
Agreed and accepted as of the day and year first above written.
MMC/GATX PARTNERSHIP NO. 1
By: Meier Mitchell and Company, as General Partner
/s/ James V. Mitchell
By: James V. Mitchell
Title: Secretary
SILICON VALLEY BANK (as Lender)
By: /s/ [SIGNATURE ILLEGIBLE]^^
---------------------------------
Title: Vice President
---------------------------------
SILICON VALLEY BANK (as New Lender)
By: /s/ [SIGNATURE ILLEGIBLE]^^
---------------------------------
Title: Vice President
---------------------------------
COPPER MOUNTAIN NETWORKS, INC.
By: /s/ JOHN A. CREELMAN
---------------------------------
Title: V.P. Finance / C.F.O.
---------------------------------
<PAGE>
Page 2
John Creelman
August 18, 1998
Agreed and accepted as of the day and year first above written.
MMC/GATX PARTNERSHIP NO. 1
By: Meier Mitchell and Company, as General Partner
/s/ James V. Mitchell
By: James V. Mitchell
Title: Secretary
SILICON VALLEY BANK (as Lender)
By: /s/ [SIGNATURE ILLEGIBLE]^^
---------------------------------
Title: Vice President
---------------------------------
SILICON VALLEY BANK (as New Lender)
By: /s/ [SIGNATURE ILLEGIBLE]^^
---------------------------------
Title: Vice President
---------------------------------
COPPER MOUNTAIN NETWORKS, INC.
By: /s/ JOHN A. CREELMAN
---------------------------------
Title: V.P. Finance / C.F.O.
---------------------------------
<PAGE>
1.7 REPURCHASE ON SALE, MERGER OR CONSOLIDATION OF THE COMPANY.
1.7.1. "ACQUISITION". For the purpose of this Warrant, "Acquisition" means
any sale, license, or other disposition of all or substantially all of the
assets of the Company or any reorganization, consolidation, or merger of the
Company where the holders of the Company's securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity after the transaction.
1.7.2. ASSUMPTION OF WARRANT. If upon the closing of any Acquisition the
successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of this
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly.
1.7.3. NONASSUMPTION. If upon the closing of any Acquisition the successor
entity does not assume the obligations of this Warrant and Holder has not
otherwise exercised this Warrant in full, then the unexercised portion of this
Warrant shall be deemed to have been automatically converted pursuant to Section
1.2 and thereafter Holder shall participate in the acquisition on the same terms
as other holders of the same class of securities of the Company.
-1-
<PAGE>
WARRAMT TO PURCHASE STOCK
----------------------------------------------------------------------
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 STOCK DIVIDENDS, SPLITS, ETC. If the Company declares or pays a dividend
on its common stock (or the Shares if the Shares are securities other than
common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2 RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. Upon any reclassification,
exchange, substitution, or other event that results in a change of the number
and/or class of the securities issuable upon exercise or conversion of this
Warrant, Holder shall be entitled to receive, upon exercise or conversion of
this Warrant, Holder shall be entitled to receive, upon exercise or conversion
of this Warrant, the number and kind of securities and property that Holder
would have received for the Shares if this Warrant had been exercised
immediately before such reclassification, exchange, substitution, or other
event. Such an event shall include any automatic or voluntary conversion of the
outstanding or issuable securities of the Company of the same class or series as
the Shares to common stock pursuant to the terms of the Company's Articles of
Incorporation, including upon the closing of a registered public offering of the
Company's common stock. The Company or its successor shall promptly issue to
Holder a new Warrant for such new securities or other property. The new Warrant
shall provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article 2 including, without
limitation, adjustments to the Warrant Price and to the number of securities or
property issuable upon exercise of the new Warrant. The provisions of this
Section 2.2 shall similarly apply to successive reclassifications, exchanges,
substitutions, or other events.
2.3 ADJUSTMENTS FOR COMBINATIONS, ETC. If the outstanding Shares are combined
or consolidated, by reclassification or otherwise, into a lesser number of
shares, the Warrant Price shall be proportionately increased.
2.4 [Reserved]
2.5 NO IMPAIRMENT. The Company shall not, by amendment of its Articles of
Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2 and
in taking all such action as may be necessary or appropriate to protect Holder's
rights under this Article against impairment. If the Company takes any action
affecting the Shares or its common stock other than as described above that
adversely affects Holder's rights under this Warrant, the Warrant Price shall be
adjusted downward and the number of Shares issuable upon exercise of this
Warrant shall be adjusted upward in such a manner that the aggregate Warrant
Price of this Warrant is unchanged.
2.6 FRACTIONAL SHARES. No fractional Shares shall be issuable upon exercise
or conversion of the Warrant and the number of Shares to be issued shall be
rounded down to the nearest whole Share. If a fractional share interest arises
upon any exercise or conversion of the Warrant, the Company shall eliminate such
fractional share interest by paying Holder amount computed by multiplying the
fractional interest by the fair market value of a full Share.
2.7 CERTIFICATE AS TO ADJUSTMENTS. Upon each adjustment of the Warrant Price,
the Company at its expense shall promptly compute such adjustment, and furnish
Holder with a certificate of its Chief Financial Officer setting forth such
adjustment and the facts upon which such adjustment is based. The Company shall,
upon written request, furnish Holder a certificate setting forth the Warrant
Price in effect upon the date thereof and the series of adjustments leading to
such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page of this Warrant is
not greater than (i) the price per share at which the Shares were last issued in
an armslength transaction in which at least $500,000 of the Shares were sold and
(ii) the fair market value of the Shares as of the date of this Warrant.
(b) All Shares which may be issued upon the exercise of the purchase right
represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and non-assessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
3.2 NOTICE OF CERTAIN EVENTS. If the Company proposes at any time (a) to
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or
-2-
<PAGE>
WARRANT TO PURCHASE STOCK
----------------------------------------------------------------------
sell, lease, license, or convey all or substantially all of its assets, or to
liquidate, dissolve or wind up; then, in connection with each such event, the
Company shall give Holder (1) at least 20 days prior written notice of the date
on which a record will be taken for such dividend, distribution, or subscription
rights (and specifying the date on which the holders of common stock will be
entitled thereto) or for determining rights to vote, if any, in respect of the
matters referred to in (c) and (d) above; (2) in the case of the matters
referred to in (c) and (d) above at least 20 days prior written notice of the
date when the same will take place (and specifying the date on which the holders
of common stock will be entitled to exchange their common stock for securities
or other property deliverable upon the occurrence of such event).
3.3 INFORMATION RIGHTS. So long as the Holder holds this Warrant and/or any
of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) within forty-five (45) days after the end of each of the first three
quarters of each fiscal year, the Company's quarterly, unaudited financial
statements.
3.4 REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED. The Company agrees
that the Shares or, if the Shares are convertible into common stock of the
Company, such common stock, shall be subject to the registration rights set
forth on Exhibit B, if attached.
ARTICLE 4. MISCELLANEOUS.
-------------
4.1 TERM: NOTICE OF EXPIRATION. This Warrant is exercisable, in whole or in
part, at any time and from time to time on or before the Expiration Date set
forth above. The Company shall give Holder written notice of Holder's right to
exercise this Warrant in the form attached as Appendix 2 not more than 90 days
and not less than 30 days before the Expiration Date. If the notice is not so
given, the Expiration Date shall automatically be extended until 30 days after
the date the Company delivers the notice to Holder.
4.2 LEGENDS. This Warrant and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 COMPLIANCE WITH SECURITIES LAWS ON TRANSFER. This Warrant and the Shares
issuable upon exercise this Warrant (and the securities issuable, directly or
indirectly, upon conversion of the Shares, if any) may not be transferred or
assigned in whole or in part without compliance with applicable federal and
state securities laws by the transferor and the transferee (including, without
limitation, the delivery of investment representation letters and legal opinions
reasonably satisfactory to the Company, if reasonably requested by the Company).
The Company shall not require Holder to provide an opinion of counsel if the
transfer is to an affiliate of Holder or if there is no material question as to
the availability of current information as referenced in Rule 144(c), Holder
represents that it has complied with Rule 144(d) and (e) in reasonable detail,
the selling broker represents that it has complied with Rule 144(f), and the
Company is provided with a copy of Holders notice of proposed sale.
4.4 TRANSFER PROCEDURE. Subject to the provisions of Section 4.2, Holder may
transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the securities issuable, directly or indirectly, upon
conversion of the Shares, if any) by giving the Company notice of the portion of
the Warrant being transferred setting forth the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the transferee(s) (and Holder if applicable). Unless
the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.
4.5 NOTICES. All notices and other communications from the Company to the
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
4.6 WAIVER. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 ATTORNEYS FEES. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
-3-
<PAGE>
4.8 GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
COPPER MOUNTAIN NETWORKS, INC.
By /s/ [SIGNATURE ILLEGIBLE]^^
-----------------------------
CHAIRMAN OF THE BOARD, PRESIDENT OR
VICE PRESIDENT
By /s/ [SIGNATURE ILLEGIBLE]^^
-----------------------------
SECRETARY OR ASS'T SECRETARY
-4-
<PAGE>
APPENDIX 1
NOTICE OF EXERCISE
------------------
1. The undersigned hereby elects to purchase _____________ shares of the
Common/Series C Preferred [strike one] Stock of ____________ pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into Shares
in the manner specified in the Warrant. This conversion is exercised with
respect to ________ of the Shares covered by the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares in the
name of the undersigned or in such other name as is specified below:
__________________
(NAME)
__________________
__________________
(ADDRESS)
3. The undersigned represents it is acquiring the shares solely for its own
account and not as a nominee for any other party and not with a view toward the
resale or distribution thereof except in compliance with applicable securities
laws.
_____________________________
(Signature)
_____________________________
(Date)
APPENDIX 2
NOTICE THAT WARRANT IS ABOUT TO EXPIRE
--------------------------------------
_________________,__
(Name of Holder)
(Address of Holder)
Attn: Chief Financial Officer
Dear ______________:
This is to advise you that the Warrant issued to you described below will
expire on _________________, 19__.
Issuer:
Issue Date:
Class of Security Issuable:
Exercise Price per Share:
Number of Shares Issuable:
Procedure for Exercise:
Please contact [name of contact person at (phone number)] with any questions
you may have concerning exercise of the Warrant. This is your only notice of
pending expiration.
(Name of Issuer)
By_____________________
Its____________________
-5-
<PAGE>
Warrant to Purchase Stock
----------------------------------------------------------------------
EXHIBIT A
Not applicable as Series C Preferred already incorporates anti-dilution
provisions as set forth in the articles of incorporation of the Company.
EXHIBIT B
REGISTRATION RIGHTS
The Company and the Holder shall enter into a separate written agreement,
pursuant to which the Shares of common stock issuable upon conversion of the
Shares, shall be deemed "registrable securities" or otherwise entitled to "piggy
back" registration rights in accordance with the terms of Section 2.3 of the
Amended and Restated Investors Rights Agreement by and between the Company and
certain Holders of the Shares of the Company's Preferred Stock (as may be
amended from time to time the "Agreement") provided that Holder, and any
assignee or successor in interest of the Holder, agrees to be bound by the terms
of Section 2 of the Agreement with respect to the Shares and the shares of the
Common Stock issuable upon conversion thereof.
The Company agrees that no amendments will be made to the Agreement which
would have a material adverse impact on Holder's registration rights thereunder
without the consent of Holder. In the event the Company is unable to obtain the
consent of the other parties to the Agreement required in connection with the
foregoing, the Company and the Holder shall enter into a separate Registration
Rights Agreement granting Holder the "piggyback" registration rights
contemplated hereby to the fullest extent not prohibited by the Agreement.
-6-
<PAGE>
INTELLECTUAL PROPERTY SECURITY AGREEMENT
This Intellectual Property Security Agreement is entered into as of August
14, 1998 by and between SILICON VALLEY BANK ("Bank") and Copper Mountain
Networks, Inc. ("Grantor").
RECITALS
--------
A. Bank has agreed to make certain advances of money and to extend
certain financial accommodation to Grantor (the "Loans") in the amounts and
manner set forth in that certain Loan and Security Agreement by and between Bank
and Grantor dated of even date herewith (as the same may be amended, modified or
supplemented from time to time, the "Loan Agreement"; capitalized terms used
herein are used as defined in the Loan Agreement). Bank is willing to make the
Loans to Grantor, but only upon the condition, among others, that Grantor shall
grant to Bank a security interest in certain Copyrights, Trademarks, Patents,
and Mask Works to secure the obligations of Grantor under the Loan Agreement.
B. Pursuant to the terms of the Loan Agreement, Grantor has granted to
Bank a security interest in all of Grantor's right, title and interest, whether
presently existing or hereafter acquired, in, to and under all of the
Collateral.
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, and intending to be legally bound, as collateral security
for the prompt and complete payment when due of its obligations under the Loan
Agreement, Grantor hereby represents, warrants, covenants and agrees as follows:
AGREEMENT
---------
To secure its obligations under the Loan Agreement, Grantor grants and
pledges to Bank a security interest in all of Grantor's right, title and
interest in, to and under its Intellectual Property Collateral (including
without limitation those Copyrights, Patents, Trademarks and Mask Works listed
on Schedules A, B, C, and D hereto), and including without limitation all
proceeds thereof (such as, by way of example but not by way of limitation,
license royalties and proceeds of infringement suits), the right to sue for
past, present and future infringements, all rights corresponding thereto
throughout the world and all re-issues, divisions continuations, renewals,
extensions and continuations-in-part thereof.
This security interest is granted in conjunction with the security interest
granted to Bank under the Loan Agreement. The rights and remedies of Bank with
respect to the security interest granted hereby are in addition to those set
forth in the Loan Agreement and the other Loan Documents, and those which are
now or hereafter available to Bank as a matter of law or equity. Each right,
power and remedy of Bank provided for herein or in the Loan Agreement or any of
the Loan Documents, or now or hereafter existing at law or in equity shall be
cumulative and concurrent and shall be in addition to every right, power or
remedy provided for herein and the exercise by Bank of any one or more of the
rights, powers or remedies provided for in this Intellectual Property Security
Agreement, the Loan Agreement or any of the other Loan
<PAGE>
Documents, or now or hereafter existing at law or in equity, shall not preclude
the simultaneous or later exercise by any person, including Bank, of any or all
other rights, powers or remedies.
IN WITNESS WHEREOF, the parties have cause this Intellectual Property
Security Agreement to be duly executed by its officers thereunto duly authorized
as of the first date written above.
Address of Grantor: GRANTOR:
COPPER MOUNTAIN NETWORKS, INC.
2470 Embarcadero Way By: /s/ [SIGNATURE ILLEGIBLE]^^
-----------------------------
Palo Alto, California 94303 Title: V.P. Finance / C.F.O.
--------------------------
Attn: /s/ John Creelman
----------------------------
BANK:
Address of Bank: SILICON VALLEY BANK
5414 Oberlin Drive, Suite 230 By: /s/ [SIGNATURE ILLEGIBLE]^^
-----------------------------
San Diego, California 92121
Title: V.P.
--------------------------
Attn: ___________________________
<PAGE>
EXHIBIT A
COPYRIGHTS
<TABLE>
<CAPTION>
DESCRIPTION REGISTRATION/APPLICATION REGISTRATION/APPLICATION
NUMBER DATE
<S> <C> <C>
None
</TABLE>
<PAGE>
EXHIBIT B
PATENTS
<TABLE>
<CAPTION>
DESCRIPTION REGISTRATION/PROVISIONAL REGISTRATION/APPLICATION
APPLICATION NUMBER DATE
<S> <C> <C>
Integrated Voice and Data Registration No. July 23, 1998
Processing at Central 37,078/Provisional
Office End of Telephone Application No.
System Local Loop EM 356 967 552 US
</TABLE>
<PAGE>
EXHIBIT C
TRADEMARKS
<TABLE>
<CAPTION>
APPLICATION
MARK COUNTRY REGISTRATION APPLICATION/REGISTRATION DATE
<S> <C> <C> <C>
COPPER MOUNTAIN U.S. Application Intent-to-Use Application filed
No. 75/202,470 11/22/96
COPPEREDGE U.S. Application Intent-to-Use Application filed
No. 75/202,446 11/22/96
COPPEREDGE U.S. Application Intent-to-Use Application filed
(STYLIZED) No. 75/202,469 11/22/96
COPPERMETER U.S. Application Intent-to-Use Application filed
No. 75/355,748 9/10/97
COPPERMETER U.S. Application Intent-to-Use Application filed
(STYLIZED) No. 75/355,451 9/11/97
COPPERROCKET U.S. Application Intent-to-Use Application filed
No. 75/465,729 4/9/98
COPPERROCKET U.S. Application Intent-to-Use Application filed
(STYLIZED) No. 75/496,973 6/5/98
COPPERTHROTTLE U.S. Application Intent-to-Use Application filed
No. 75/354,511 9/10/97
COPPERTHROTTLE U.S. Application Intent-to-Use Application filed
(STYLIZED) No. 75/355,747 9/10/97
RED ROCKET U.S. Application Intent-to-Use Application filed
No. 75/203,042 11/22/96
RED ROCKET U.S. Application Intent-to-Use Application filed
(STYLIZED) No. 75/202,447 11/22/96
WOLF AND U.S. Application Intent-to-Use Application filed
MOUNTAIN DESIGN No. 75/234,607 1/31/97
COPPER MOUNTAIN Tunisia Registration Registered 8/18/97
No. EE.1208
</TABLE>
<PAGE>
EXHIBIT D
MASK WORKS
<TABLE>
<CAPTION>
DESCRIPTION REGISTRATION/PROVISIONAL REGISTRATION/APPLICATION
APPLICATION NUMBER DATE
<S> <C> <C>
None
</TABLE>
<PAGE>
EXHIBIT 10.8
LOAN AND SECURITY AGREEMENT
Agreement No. 1 Dated as of October 4, 1996
by and among
SILICON VALLEY BANK
and
MMC/GATX PARTNERSHIP NO. 1
as lenders
and
COPPER MOUNTAIN COMMUNICATIONS, INC.
a California corporation
6650 Lusk Blvd., Building B-103
San Diego, CA 92121
as borrower
CREDIT AMOUNT: $1,000,000
Commitments: Silicon Valley Bank: $500,000
MMC/GATX Partnership No. 1: $500,000
Repayment Period: 42 months Treasury Note Maturity: 42 months
Final Payment Percentage: 12.5% Loan Margin: 300 basis points
Minimum Funding Amount: $100,000 Total Number of Fundings: 8
Warrants:
Number of shares: 50,000
Class of stock: Series A Preferred
Initial exercise price: $1.00
Commitment Termination Date: December 31, 1997
The terms and information set forth on this cover page are a part of the
attached Loan and Security Agreement, dated as of the date first written above
(this "Agreement"), entered into by and among Silicon Valley Bank, MMC/GATX
Partnership No. 1. (each individually a "Lender" and collectively, "Lenders")
and the borrower ("Borrower") set forth above. The terms and conditions of the
Loan Agreement agreed to between Lenders and Borrower are as follows:
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS............................................................................... 1
AGREEMENT.............................................................................. 1
1. Definitions and Construction................................................. 1
2. Loan and Terms of Payment.................................................... 7
2.1 Commitment; The Credit Amount.......................................... 7
2.2 Use of Proceeds; The Loans............................................. 8
2.3 Procedure for Making Loans............................................. 8
2.4 Amortization of Principal and Interest; Interim Payment; Final
Payment; Loan Fee...................................................... 9
2.5 Prepayments............................................................ 10
2.6 Other Payment Terms.................................................... 10
2.7 Minimum Funding Amount; Number of Fundings per Quarter................. 10
2.8 Crediting Payments..................................................... 10
2.9 Additional Costs....................................................... 11
2.10 Term................................................................... 11
3. Conditions of Loans.......................................................... 11
3.1 Conditions Precedent to Initial Loan.................................... 11
3.2 Conditions Precedent to all Loans....................................... 12
4. Creation of Security Interest................................................ 13
4.1 Grant of Security Interest.............................................. 13
4.2 After-Acquired Property................................................. 13
4.3 Duration of Security Interest........................................... 13
4.4 Possession of Collateral................................................ 13
4.5 Markings on the Collateral.............................................. 13
4.6 Delivery of Additional Documentation Required........................... 14
4.7 Right to Inspect........................................................ 14
5. Representations and Warranties............................................... 14
5.1 Due Organization and Qualification...................................... 14
5.2 Authority............................................................... 14
5.3 Subsidiaries............................................................ 14
5.4 Conflict with Other Instruments, etc.................................... 14
5.5 Authorization; Enforceability........................................... 14
5.6 No Prior Encumbrances................................................... 15
5.7 Name; Location of Chief Executive Office, Principal Place of Business
and Collateral.......................................................... 15
5.8 Litigation.............................................................. 15
5.9 Financial Statements.................................................... 15
5.10 Solvency................................................................ 15
5.11 Environmental Quality................................................... 15
5.12 Taxes................................................................... 15
5.13 Consents and Approvals.................................................. 16
5.14 Trademarks, Patents, Copyrights, Franchises and Licenses................ 16
5.15 Material Contracts...................................................... 16
5.16 Full Disclosure......................................................... 16
6. Affirmative Covenants........................................................ 16
6.1 Good Standing........................................................... 16
6.2 Government Compliance................................................... 16
6.3 Financial Statements, Reports, Certificates............................. 16
</TABLE>
i
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<TABLE>
<S> <C>
6.4 Certificates of Compliance............................................ 17
6.5 Notice of Event of Loss............................................... 17
6.6 Notice of Defaults.................................................... 17
6.7 Taxes................................................................. 17
6.8 Use; Maintenance...................................................... 17
6.9 Insurance............................................................. 17
6.10 Loss; Damage; Destruction and Seizure................................. 18
6.11 Principal Depository.................................................. 19
6.12 Environmental Laws.................................................... 19
6.13 Further Assurances.................................................... 19
7. Negative Covenants........................................................... 19
7.1 Chief Executive Office; Location of Collateral........................ 19
7.2 Extraordinary Transactions and Disposal of Assets..................... 19
7.3 Restructure........................................................... 19
7.4 Liens................................................................. 19
8. Events of Default............................................................ 19
8.1 Payment Default....................................................... 20
8.2 Covenant Default...................................................... 20
8.3 Material Adverse Change............................................... 20
8.4 Attachment............................................................ 20
8.5 Other Agreements...................................................... 20
8.6 Judgments............................................................. 20
8.7 Redemption or Repurchase.............................................. 20
8.8 Misrepresentations.................................................... 20
8.9 Breach of Warrants.................................................... 20
8.10 Enforceability........................................................ 20
8.11 Involuntary Bankruptcy or Insolvency.................................. 21
8.12 Voluntary Bankruptcy or Insolvency.................................... 21
9. Lenders' Rights and Remedies................................................. 21
9.1 Rights and Remedies................................................... 21
9.2 Waiver by Borrower.................................................... 22
9.3 Effect of Sale........................................................ 22
9.4 Power of Attorney in Respect of the Collateral........................ 22
9.5 Lenders' Expenses..................................................... 23
9.6 Remedies Cumulative................................................... 23
9.7 Application of Collateral Proceeds.................................... 23
9.8 Reinstatement of Rights............................................... 23
10. Waivers; Indemnification..................................................... 23
10.1 Demand; Protest....................................................... 23
10.2 Lenders' Liability for Collateral..................................... 24
10.3 Indemnification....................................................... 24
11. Notices...................................................................... 25
12. General Provisions........................................................... 25
12.1 Successors and Assigns................................................ 25
12.2 Time of Essence....................................................... 25
12.3 Severability of Provisions............................................ 26
12.4 Entire Agreement; Construction; Amendments and Waivers................ 26
12.5 Reliance by Lenders................................................... 26
12.6 No Set-Offs by Borrower............................................... 26
12.7 Counterparts.......................................................... 26
12.8 Survival.............................................................. 26
13. Relationship of Parties...................................................... 26
14. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER................................... 27
</TABLE>
ii
<PAGE>
This LOAN AND SECURITY AGREEMENT is entered into as of October 4, 1996, by
and among SILICON VALLEY BANK ("Bank") and MMC/GATX PARTNERSHIP NO. 1, a
California general partnership ("Partnership"), as lenders (Bank and Partnership
are sometimes referred to herein individually as a "Lender" and collectively, as
the "Lenders") and Copper Mountain Communications, Inc., a California
corporation ("Borrower").
RECITALS
--------
Borrower wishes to borrow money from time to time from Lenders, and Lenders
desire to lend money to Borrower. This Agreement sets forth the terms on which
Lenders will lend to Borrower, and Borrower will repay the loans to Lenders.
AGREEMENT
---------
The parties agree as follows:
1. Definitions and Construction.
----------------------------
1.1 Definitions. As used in this Agreement, the following terms shall
-----------
have the following definitions:
"Affiliate" means any Person that owns or controls directly or
---------
indirectly ten percent or more of the stock of another entity, any Person that
controls or is controlled by or is under common control with such Persons or any
Affiliate of such Persons or each of such Person's officers, directors, joint
venturers or partners.
"Basic Rate" means, as of the relevant Funding Date, the per
---------- ---
annum rate of interest (based on a year of 360 days and actual days elapsed)
- -----
equal to the sum of (a) the U.S. Treasury note yield to maturity for a term
equal to the Treasury Note Maturity as quoted in the Western edition of The Wall
--------
Street Journal three days prior to such Funding Date, plus (b) the applicable
- --------------
Loan Margin for the type of Eligible Equipment being financed. Notwithstanding
the foregoing, the Basic Rate shall not exceed the highest rate permitted by
applicable law to be charged on commercial loans.
"Borrower's Books" means all of Borrower's books and records
----------------
including: ledgers; records concerning Borrower's assets or liabilities, the
Collateral, business operations or financial condition; and all computer
programs, or tape files, and the equipment, containing such information.
"Business Day" means any day that is not a Saturday, Sunday, or
------------
other day on which banks in the State of California are authorized or required
to close.
"Code" means the Uniform Commercial Code as adopted and in effect
----
in the State of California, as amended from time to time.
"Collateral" means the Property described on Exhibit A attached
---------- ---------
hereto, including, without limitation, all Financed Equipment listed in any Loan
Agreement Supplement executed from time to time pursuant to Section 4.2.
"Commitment Termination Date" means the date following such term
---------------------------
on the cover page of this Agreement.
1
<PAGE>
"Commitment" means with respect to each Lender the amount set
----------
forth following such term on the cover page of this Agreement and "Commitments"
means all such amounts collectively.
"Contingent Obligation" means, as applied to any Person, any
---------------------
direct or indirect liability, contingent or otherwise, of that Person with
respect to any indebtedness, lease, dividend, letter of credit or other
obligation of another, including any such obligation directly or indirectly
guaranteed, endorsed (otherwise than for collection or deposit in the ordinary
course of business), co-made or discounted or sold with recourse by that Person,
or in respect of which that Person is otherwise directly or indirectly liable.
The amount of any Contingent Obligation shall be equal to the amount of the
obligation so guaranteed or otherwise supported.
"Credit Amount" means the amount set forth following such term on
-------------
the cover page of this Agreement.
"Default" means any event which with the passing of time or the
-------
giving of notice or both would become an Event of Default hereunder.
"Default Rate" means the per annum rate of interest equal to the
------------
Basic Rate plus five percent (5%), but such rate shall in no event be more than
the highest rate permitted by applicable law to be charged on commercial loans.
"Eligible Equipment" means general purpose scientific research,
------------------
production, test and laboratory equipment and Office Equipment and, subject to
the limitations set forth below, Other Equipment, which equipment complies with
all of Borrower's representations and warranties to Lenders and which is and at
all times shall continue to be acceptable to Lenders in all respects. Unless
otherwise agreed to by Lenders:
(a) not more than fifteen percent (15%) of the Financed
Equipment financed with the proceeds of each Loan shall consist of Other
Equipment; and
(b) all Financed Equipment financed with the proceeds of
Loans shall be New Equipment, provided that Lenders, in their sole discretion,
may finance Used Equipment one time only on the initial Funding Date.
"Environmental Claims" means all claims, however asserted, by any
--------------------
Governmental Authority or other Person alleging potential liability or
responsibility for violation of any Environmental Law or for release or injury
to the environment or threat to public health, personal injury (including
sickness, disease or death), property damage, natural resources damage, or
otherwise alleging liability or responsibility for damages (punitive or
otherwise), cleanup, removal, remedial or response costs, restitution, civil or
criminal penalties, injunctive relief, or other type of relief, resulting from
or based upon (a) the presence, placement, discharge, emission or release
(including intentional and unintentional, negligent and non-negligent, sudden or
non-sudden, accidental or non-accidental placement, spills, leaks, discharges,
emissions or releases) of any Hazardous Material at, in, or from Property,
whether or not owned by Borrower, or (b) any other circumstances forming the
basis of any violation, or alleged violation, of any Environmental Law.
"Environmental Laws" means all foreign, federal, state or local
------------------
laws, statutes, common law duties, rules, regulations, ordinances and codes,
together with all administrative orders, directed duties, requests, licenses,
authorizations and permits of, and agreements with, any Governmental
Authorities, in each case relating to environmental, health, safety and land use
matters, including the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, the Clean Air Act, the Federal Water Pollution Control
Act of 1972, the Solid Waste Disposal Act, the
2
<PAGE>
Federal Resource Conservation and Recovery Act, the Toxic Substances Control Act
and the Emergency Planning and Community Right-to-Know Act.
"Environmental Permit" has the meaning set forth in Section 5.11.
--------------------
"Event of Default" has the meaning given to such term in Section 8.
----------------
"Event of Loss" has the meaning given to that term in Section 6.10.
-------------
"Fair Market Value" with respect to an item of Financed Equipment,
-----------------
means a price determined on the basis of and equal in amount to the value which
would be realized in an arm's-length transaction between an informed and willing
buyer-user (other than a used equipment dealer) and an informed and willing
seller under no compulsion to sell, on the assumptions that: such item of
Financed Equipment (i) is being sold "in place and in use," by Borrower; (ii) is
free and clear of all Liens and encumbrances; and (iii) is in the condition
required by Section 6.8. In such determination, cost of removal from the
location of current use shall not be a deduction from such value. If
Partnership, on behalf of Lenders, and Borrower are unable to agree on the Fair
Market Value of such item of Financed Equipment within twenty (20) days prior to
the date on which Fair Market Value is required to be determined, such value
shall be determined in accordance with the foregoing definition by a certified
independent appraiser approved by both Partnership, on behalf of Lenders, and
Borrower, such approvals not to be unreasonably withheld. The appraiser shall be
furnished with a letter of instruction from Partnership concerning the
preparation of the appraisal, together with a copy of this Agreement, a list of
Financed Equipment and, to the extent available, related purchase orders and/or
invoices. The appraiser shall be instructed to deliver its determination in
writing to Partnership and Borrower prior to the date on which such information
is required. The determination made by the appraiser shall be final and binding
on both Lenders and Borrower. The fees and expenses of any appraisal shall be
paid by Borrower, if such appraisal is needed for Lenders' exercise of their
remedies under Section 9, and equally by Partnership and Borrower otherwise.
"Final Payment" means, with respect to each Loan, a payment (in
-------------
addition to and not in substitution for the regular monthly payments of
principal and accrued interest) due on the Maturity Date for such Loan equal to
the Loan Amount for such Loan at such time multiplied by the Final Payment
Percentage.
"Final Payment Percentage" means the percentage set forth
------------------------
following such term on the cover page of this Agreement.
"Financed Equipment" has the meaning given to that term in Exhibit
------------------ -------
A as amended or supplemented from time to time.
- -
"Funding Date" means any date on which a Loan is made to or on
------------
account of Borrower under this Agreement.
"Governmental Authority" means (a) any federal, state, county,
----------------------
municipal or foreign government, or political subdivision thereof, (b) any
governmental or quasi-governmental agency, authority, board, bureau, commission,
department, instrumentality or public body, (c) any court or administrative
tribunal or (d) with respect to any Person, any arbitration tribunal or other
non-governmental authority to whose jurisdiction that Person has consented.
"Hazardous Materials" means all those substances which are regulated
-------------------
by, or which may form the basis of liability under, any Environmental Law,
including all substances identified under any Environmental Law as a pollutant,
contaminant, hazardous waste, hazardous constituent, special waste, hazardous
substance, hazardous material, or toxic substance, or petroleum or petroleum
derived substance or waste.
3
<PAGE>
"Indebtedness" means (a) all indebtedness for borrowed money or the
------------
deferred purchase price of Property or services, including reimbursement and
other obligations with respect to surety bonds and letters of credit, (b) all
obligations evidenced by notes, bonds, debentures or similar instruments, (c)
all capital lease obligations, and (d) all Contingent Obligations.
"Landlord Consent" means a consent in the form of Exhibit C or such
---------------- ---------
other form as Lenders may agree to accept.
"Lenders' Expenses" means all reasonable costs or expenses (including
-----------------
reasonable attorneys' fees and expenses) incurred in connection with the
preparation, negotiation, administration, and enforcement of the Loan
Documents; and Lenders' reasonable attorneys' fees and expenses incurred in
amending, modifying, enforcing or defending the Loan Documents, including in the
exercise of any rights or remedies afforded hereunder or under applicable law,
whether or not suit is brought.
"Lien" means any pledge, bailment, lease, mortgage, hypothecation,
----
conditional sales and title retention agreement, charge, claim, encumbrance or
other lien in favor of any Person.
"Loan" means each advance of credit by Lenders to Borrower under this
----
Agreement according to their respective pro rata share of the Commitments.
"Loan Agreement Supplement" means a supplement to this Agreement in
-------------------------
substantially the form of Exhibit D.
----------
"Loan Amount" means, with respect to each Loan, as of any date, the
-----------
original principal amount of such Loan less the aggregate of all Prepayment
Amounts relating to prepayments of such Loan paid prior to such date.
"Loan Documents" means, collectively, this Agreement, the Warrants,
--------------
the Landlord Consent(s) and all other documents, instruments and agreements
entered into between Borrower and Lenders in connection with this Agreement, all
as amended or extended from time to time.
"Loan Factor" means, with respect to each Loan, the amount set forth
-----------
as a percentage in the Loan Terms Schedule with respect to such Loan, calculated
using the Basic Rate applicable to such Loan.
"Loan Fee" means the non-refundable fee equal to Ten Thousand Dollars
--------
($10,000), previously paid by Borrower to Bank, on behalf of Lenders, in
consideration of Lenders' written proposal to Borrower dated July 2, 1996,
specifying certain terms of the credit facility described in this Agreement,
which fee is to be applied as set forth in Section 2.4(d).
"Loan Margin" means the number of basis points set forth following
-----------
such term on the cover page of this Agreement.
"Loan Terms Schedule" means, with respect to each Loan, the "Loan
-------------------
Terms Schedule" attached to the Loan Agreement Supplement prepared by Lenders in
connection with such Loan.
"Maturity Date" means, with respect to each Loan, the last day of the
-------------
Repayment Period for such Loan, or if earlier, the date of acceleration of such
Loan by Lenders following an Event of Default.
4
<PAGE>
"Minimum Basic Rate" means the rate of interest set forth following
------------------
such term on the cover page of this Agreement.
"Minimum Funding Amount" means the amount set forth following such
----------------------
term on the cover page of this Agreement.
"New Equipment" means Financed Equipment delivered to Borrower by the
-------------
manufacturer or vendor after, upon or not more than ninety (90) days prior to
the Funding Date of the Loan relating to such Financed Equipment, which Financed
Equipment is new and has not been previously used by any Person.
"Obligations" means all debt, principal, interest, fees, charges
-----------
(including all amounts charged to any operating or deposit account maintained by
Borrower at Bank, pursuant to any agreement authorizing Bank to charge such
accounts), obligations, covenants, and duties owing by Borrower to Lenders or
either of them of any kind and description (whether pursuant to or evidenced by
the Loan Documents, or by any other agreement between Lenders and Borrower, and
whether or not for the payment of money), whether direct or indirect, absolute
or contingent, due or to become due, now existing or hereafter arising,
including the principal, interest and Final Payment due with respect to the
Loans, and including any debt, liability, or obligation owing from Borrower to
others that Lenders or either of them may have obtained by assignment or
otherwise, and further including all interest not paid when due and all Lenders'
Expenses that Borrower is required to pay or reimburse by the Loan Documents, by
law, or otherwise.
"Obsolete" means that any item of Financed Equipment is no longer
--------
needed by Borrower in its operations and that it is not reasonably expected to
be needed in the future operations of Borrower.
"Office Equipment" means computer equipment, networking equipment,
----------------
office equipment, office furnishings and laboratory furnishings.
"Other Equipment" means leasehold improvements, intangible Property
---------------
such as computer software and software licenses, equipment specifically designed
or manufactured for Borrower, other intangible Property, limited use Property
and other similar Property.
"Payment Date" has the meaning given to that term in Section 2.4(a).
------------
"Permitted Liens" means the following:
---------------
(a) The Lien created by this Agreement;
(b) Any Liens existing as of the date hereof and disclosed
in Schedule 1;
(c) Liens for taxes, fees, assessments or other governmental
charges or levies, either not delinquent or being contested in good faith by
appropriate proceedings, provided the same have no superior priority over
--------
Lenders' Lien in the Collateral;
(d) Liens (i) upon or in any equipment acquired or held by the
Borrower or any of its subsidiaries, other than Financed Equipment, to secure
the purchase price of such equipment or indebtedness incurred solely for the
purpose of financing the acquisition of such equipment, or (ii) existing on such
equipment at the time of its acquisition, provided that (A) the equipment is not
Financed Equipment and (B) the Lien is confined solely to the Property so
acquired and improvements thereon, and the proceeds of such equipment;
5
<PAGE>
(e) Liens to secure payment of worker's compensation, employment
insurance, old age pensions or other social security obligations of Borrower in
the ordinary course of business of Borrower;
(f) Liens arising from judgments, decrees or attachments to the
extent and only so long as such judgment, decree or attachment has not caused or
resulted in an Event of Default;
(g) Easements, reservations, rights-of-way, restrictions, minor
defects or irregularities in title and other similar Liens affecting real
property not interfering in any material respect with the ordinary conduct of
the business of Borrower;
(h) Liens in favor of customs and revenue authorities arising as
a matter of law to secure payment of customs duties in connection with the
importation of goods;
(i) Liens arising solely by virtue of any statutory or common law
provision relating to bankers' liens, rights of set-off or similar rights and
remedies as to deposit accounts or other funds maintained with a creditor
depository institution; and
(j) Liens incurred in connection with the extension, renewal or
refinancing of the indebtedness secured by Liens of the type described in
clauses (b) and (d) above, provided that any extension, renewal or replacement
--------
Lien shall be limited to the Property encumbered by the existing Lien and the
principal amount of the indebtedness being extended, renewed or refinanced does
not increase.
"Person" means and includes any individual, any partnership, any
------
corporation, any business trust, any joint stock company, any limited liability
company, any unincorporated association or any other entity and any domestic or
foreign national, state or local government, any political subdivision thereof,
and any department, agency, authority or bureau of any of the foregoing.
"Prepayment Amount" means in the case of a mandatory prepayment
-----------------
pursuant to Sections 2.5(a) and 6.10, the original Stated Cost financed under
this Agreement of the item of Financed Equipment with respect to which such
prepayment relates.
"Property" means any interest in any kind of property or asset,
--------
whether real, personal or mixed, whether tangible or intangible.
"Repayment Period" means the period beginning on the first Payment
----------------
Date and continuing for the number of calendar months set forth following such
term on the cover page of this Agreement.
"Responsible Officer" means each of the President and the Chief
-------------------
Financial Officer of Borrower.
"Scheduled Payments" has the meaning given to such term in
------------------
Section 2.4(a).
"Stated Cost" means (i) with respect to New Equipment, the original
-----------
cost to Borrower of the item of New Equipment net of any and all freight,
installation, tax and other soft costs or (ii) with respect to Used Equipment,
the fair market value assigned to such item of Used Equipment by mutual
agreement of Borrower and Lenders at the time of the making of the Loan
financing such item of Used Equipment.
"Stipulated Loan Value" means, with respect to each Loan, the
---------------------
percentage set forth with respect to such Loan in the Loan Terms Schedule for
such Loan, determined as of the
6
<PAGE>
Payment Date on which payment of such amount is to be made, or if such date is
not a Payment Date, on the Payment Date immediately succeeding such date.
"Subsidiary" means any corporation of which a majority of the
----------
outstanding capital stock entitled to vote for the election of directors
(otherwise than as the result of a default) is owned by Borrower directly or
indirectly through Subsidiaries.
"Term" means the period from and after the date hereof until the
----
payment in full of all amounts and liabilities payable under this Agreement and
the other Loan Documents, including principal and interest on the Loans and the
Final Payment with respect to each Loan.
"Treasury Note Maturity" means the period of months set forth
----------------------
following such term on the cover page of this Agreement.
"Used Equipment" means Financed Equipment delivered to Borrower by the
--------------
manufacturer or vendor after, upon or not more than one hundred eighty (180)
days prior to the Funding Date of the Loan relating to such Financed Equipment,
which Financed Equipment is not New Equipment; provided that the term "Used
Equipment" shall in any event include any and all equipment listed on Annex A to
Loan Agreement Supplement No. 1, and provided further that Used Equipment may be
financed with the proceeds of the Initial Loan (and no subsequent loans) under
this Agreement.
"Warrants" means separate warrants in favor of each of the Lenders to
--------
purchase securities of Borrower substantially in the form of Exhibit B.
---------
1.2 Other Interpretive Provisions. References in this Agreement to
-----------------------------
"Articles," "Sections," "Exhibits," "Schedules" and "Annexes" are to recitals,
articles, sections, exhibits, schedules and annexes herein and hereto unless
otherwise indicated. References in this Agreement and each of the other Loan
Documents to any document, instrument or agreement shall include (a) all
exhibits, schedules, annexes and other attachments thereto, (b) all documents,
instruments or agreements issued or executed in replacement thereof, and (c)
such document, instrument or agreement, or replacement or predecessor thereto,
as amended, modified and supplemented from time to time and in effect at any
given time. The words "hereof," "herein" and "hereunder" and words of similar
import when used in this Agreement or any other Loan Document shall refer to
this Agreement or such other Loan Document, as the case may be, as a whole and
not to any particular provision of this Agreement or such other Loan Document,
as the case may be. The words "include" and "including" and words of similar
import when used in this Agreement or any other Loan Document shall not be
construed to be limiting or exclusive. Unless otherwise indicated in this
Agreement or any other Loan Document, all accounting terms used in this
Agreement or any other Loan Document shall be construed, and all accounting and
financial computations hereunder or thereunder shall be computed, in accordance
with generally accepted accounting principles as in effect in the United States
of America from time to time.
2. Loan and Terms of Payment.
-------------------------
2.1 Commitment; The Credit Amount. Subject to the terms and
-----------------------------
conditions of this Agreement and relying upon the representations and warranties
herein set forth as and when made or deemed to be made, Lenders agree to lend to
Borrower, severally and not jointly, from time to time prior to the Commitment
Termination Date, the Loans according to each Lender's pro rata share of the
Commitments; provided that the aggregate principal amount of the Loans shall not
exceed the Credit Amount at such time; provided, further, that the aggregate
principal amount of any Loan shall not exceed the aggregate Stated Cost of the
items of Eligible Equipment being financed with such Loan; and provided,
further, that the aggregate principal amount of any Loans relating to the
financing of leasehold improvements, computer software, software licenses,
equipment specifically designed or manufactured for Borrower, intangible
Property, and other similar Property, shall not exceed in the
7
<PAGE>
aggregate fifteen percent (15%) of the Credit Amount. If prepaid, the principal
of the Loans may not be re-borrowed.
2.2 Use of Proceeds; The Loans.
--------------------------
(a) Use of Proceeds. The proceeds of the Loans shall be used
---------------
solely to reimburse Borrower for the purchase of Eligible Equipment, in each
case in an amount not to exceed the Stated Cost of such Eligible Equipment. All
such Eligible Equipment which is financed or re-financed with the proceeds of
Loans shall be deemed without further action to be Financed Equipment.
(b) The Loans. The Loans shall be repayable in consecutive
---------
monthly installments in accordance with the terms of Section 2.4. Each Lender
may, and is hereby authorized by Borrower to, endorse in its respective books
and records appropriate notations regarding such Lender's interest in the Loans;
provided, however, that the failure to make, or an error in making, any such
- -----------------
notation shall not limit or otherwise affect the Obligations of Borrower
hereunder.
2.3 Procedure for Making Loans.
--------------------------
(a) Notice. Whenever Borrower desires that Lenders make a Loan,
------
Borrower shall so notify Partnership in writing (or by telephone with prompt
confirmation in writing) at least three (3) Business Days in advance of the
desired Funding Date, which notice shall be irrevocable, and shall provide
Lenders with the following information:
(i) a list of the proposed Financed Equipment;
(ii) the principal amount of the requested Loan; and
(iii) the intended use of proceeds of the Loan.
Lenders' obligation to make the initial Loan shall be expressly subject to the
satisfaction of the conditions set forth in Sections 3.1 and 3.2. Lenders'
obligation to make each subsequent Loan shall be expressly subject to the
satisfaction of the conditions set forth in Section 3.2. Lenders shall have the
right, exercisable at any time, to request that Borrower furnish Lenders with
such additional information with respect to the Loan and the Eligible Equipment
to be financed with the Loan proceeds as Lenders shall reasonably request.
(b) Loan Interest Rate. Borrower shall pay interest on the unpaid
------------------
principal amount of each Loan from the first Payment Date after the Funding Date
of such Loan until such Loan has been paid in full, at a per annum rate of
interest equal to the Basic Rate determined by Bank, on behalf of Lenders, as of
the Funding Date for such Loan in accordance with the definition of Basic Rate.
The Basic Rate applicable to each Loan shall not be subject to change in the
absence of a manifest error. All computations of interest on Loans shall be
based on a year of 360 days comprised of twelve (12) months of thirty (30) days
each. Notwithstanding any other provision hereof, the amount of interest payable
hereunder shall not in any event exceed the maximum amount permitted by the law
applicable to interest charged on commercial loans.
(c) Loan Factor and Stipulated Loan Value Calculation. On each
-------------------------------------------------
Funding Date, Lenders shall establish the Loan Factor and Stipulated Loan Value
with respect to such Loan. The Loan Factor shall be calculated in a manner to
fully amortize the Loan over the Repayment Period applicable to such Loan in
equal periodic installments of principal and interest. The Loan Factor and
Stipulated Loan Value applicable to each Loan shall be set forth in the Loan
Agreement Supplement to be executed by Borrower with respect to each Loan and
shall be conclusive in the absence of a manifest error.
8
<PAGE>
(d) Disbursement. Subject to the satisfaction of the conditions
------------
set forth in Sections 3.1 and 3.2 with respect to the initial Loan and the
satisfaction of the conditions set forth in Section 3.2 with respect to each
subsequent Loan, Bank, on behalf of Lenders, shall disburse such Loan by
internal transfer to Borrower's deposit account with Bank. Notwithstanding
anything stated herein to the contrary, Bank shall have no obligation to advance
funds on behalf of Partnership and Bank's obligation to advance funds is
specifically conditioned upon its confirmation of receipt of immediately
available funds representing Partnership's pro rata share of the requested Loan
based upon the Lenders' respective Commitments.
(e) Termination of Commitment to Lend. Notwithstanding anything
---------------------------------
in the Loan Documents, Lenders' obligation to lend the undisbursed portion of
the Credit Amount to Borrower hereunder shall terminate on the earlier of (i) at
the Lenders' sole election, the occurrence and continuance of any Default or
Event of Default hereunder, and (ii) the Commitment Termination Date.
Notwithstanding the foregoing, Lenders' obligation to lend the undisbursed
portion of the Credit Amount to Borrower shall terminate if, in Lenders' sole
judgment, there has been a material adverse change in the general affairs,
management, results of operations, condition (financial or otherwise) or
prospects of Borrower, whether or not arising from transactions in the ordinary
course of business, or there has been any material adverse deviation by Borrower
from the business plan of Borrower presented to and not disapproved by Lenders,
since the date of this Agreement.
2.4 Amortization of Principal and Interest; Interim Payment; Final
--------------------------------------------------------------
Payment; Loan Fee.
- -----------------
(a) Principal and Interest Payments On Payment Dates. Borrower
------------------------------------------------
shall make payments of principal and accrued interest in advance for each Loan
(collectively, "Scheduled Payments"), commencing on the first Business Day of
the month following the Funding Date (or commencing on the Funding Date if the
Funding Date is the first Business Day of the month) with respect to such Loan
and continuing thereafter during the Repayment Period on the first Business Day
of each calendar month (each a "Payment Date"), in an amount equal to the Loan
Factor multiplied by the Loan Amount for such Loan as of such Payment Date. In
any event, all unpaid principal and accrued interest shall be due and payable in
full on the last Payment Date with respect to such Loan.
(b) Interim Payment. In addition to the Scheduled Payments, on
---------------
the Funding Date for each Loan (unless the Funding Date is the first Business
Day of the month) Borrower shall pay to Bank, on behalf of Lenders, an amount
(the "Interim Payment") equal to the initial Loan Amount multiplied by the
product of (i) the quotient derived from dividing the initial Loan Factor with
respect to such Loan by 30, and (ii) the number of days from the Funding Date of
such Loan until the first Payment Date with respect to such Loan.
(c) Final Payment. Unless a Loan is prepaid in full, on the
-------------
Maturity Date with respect to such Loan, Borrower shall pay, in addition to the
unpaid principal and accrued interest and all other amounts due on such date
with respect to such Loan, an amount equal to the Final Payment with respect to
such Loan.
(d) Loan Fee. The Loan Fee is non-refundable, but shall be
--------
applied first, to the fees and expenses of Lenders' counsel in connection with
the preparation and negotiation of this Agreement and the other Loan Documents,
up to an aggregate amount of Two Thousand Five Hundred Dollars ($2,500), and the
balance, if any, shall be applied on a pro rata basis (using the ratio of each
Loan Amount to the total Credit Amount) toward the first payment due from
Borrower to Lenders hereunder on each Funding Date. If Borrower shall not have
borrowed under this Agreement, on or prior to the Commitment Termination Date or
the earlier termination of this Agreement, Loans aggregating in an original
principal amount equal to the Credit Amount, then Lenders, in accordance with
their pro rata share of the Commitments, shall retain any portion of the Loan
Fee not applied as set forth in this Section 2.4(d).
9
<PAGE>
2.5 Prepayments.
------------
(a) Prepayment Upon an Event of Loss. If any Financed Equipment is
--------------------------------
subject to an Event of Loss and Borrower is required to or elects to prepay the
Loan with respect to such Financed Equipment pursuant to Section 6.10, then such
Loan shall be prepaid to the extent and in the manner provided in such section.
(b) Mandatory Prepayment Upon an Acceleration. If the Loans are
-----------------------------------------
accelerated following the occurrence of an Event of Default or otherwise (other
than following an Event of Loss), then Borrower shall immediately pay to Lenders
(i) all unpaid Scheduled Payments with respect to each Loan due prior to the
date of prepayment, (ii) the Stipulated Loan Value with respect to each Loan
multiplied by the Loan Amount of the Loans, and (iii) all other sums, if any,
that shall have become due and payable hereunder with respect to such Loan.
(c) No Other Prepayment. Borrower may not prepay any Loan except upon
-------------------
the occurrence of an event described in Section 2.5(a) or (b) above in which
event the prepayment shall be made as described in such sections.
2.6 Other Payment Terms.
-------------------
(a) Place and Manner. Borrower hereby authorizes Bank, and irrevocably
----------------
constitutes and appoints Bank (and any officer or agent thereof, with full power
of substitution) as its true and lawful attorney-in-fact with full irrevocable
power and authority in the place and stead of Borrower and in the name of
Borrower or in its own name (which appointment is coupled with an interest), to
debit directly from any banking account maintained by Borrower with Lender the
full amount (or any portion thereof) of the Obligations of Borrower to Lenders
hereunder (including all principal, accrued interest, commitment and other fees,
and other amounts chargeable to Borrower under this Agreement) when and as the
same shall become due and payable. It shall be Borrower's responsibility to
ensure that there are sufficient funds in a deposit account with Bank on the
dates that payments are due. If amounts in the deposit account are insufficient,
amounts due and payable shall be paid in immediately available funds in such
manner as Bank shall direct.
(b) Date. Whenever any payment due hereunder shall fall due on a day
----
other than a Business Day, such payment shall be made on the next succeeding
Business Day, and such extension of time shall be included in the computation of
interest or fees, as the case may be.
(c) Default Rate. If either (i) any amounts required to be paid by
------------
Borrower under this Agreement or the other Loan Documents (including principal,
interest, the Final Payment payable with respect to any Loan, and any fees or
other amounts) remain unpaid after such amounts are due, or (ii) an Event of
Default has occurred and is continuing, Borrower shall pay interest on the
aggregate, outstanding balance hereunder from the date due or from the date of
the Event of Default, as applicable, until such past due amounts are paid in
full or until all Events of Defaults are cured or waived, as applicable, at a
per annum rate equal to the Default Rate. All computations of such interest
shall be based on a year of 360 days for actual days elapsed.
2.7 Minimum Funding Amount; Number of Fundings per Quarter. Except
------------------------------------------------------
with the prior consent of Lenders, in Lenders' sole discretion, (i) the amount
of the requested Loan shall not be less than the Minimum Funding Amount and (ii)
there shall be no more than eight total fundings of Loans.
2.8 Crediting Payments. The receipt by Bank of any wire transfer of
------------------
funds, check, or other item of payment shall be immediately applied
conditionally to reduce Obligations, but shall not be considered a payment on
account unless such wire transfer is of immediately available federal funds and
is made to the appropriate deposit account of Bank or unless and until such
check or other
10
<PAGE>
item of payment is honored when presented for payment. Notwithstanding anything
to the contrary contained herein, any wire transfer or payment received by Bank
after 11:00 a.m. California time shall be deemed to have been received by Bank
as of the opening of business on the immediately following Business Day.
2.9 Additional Costs. In case any law, regulation, treaty or official
----------------
directive or the interpretation or application thereof by any court or any
governmental authority charged with the administration thereof or the compliance
with any guideline or request of any central bank or other governmental
authority (whether or not having the force of law):
(a) subjects either Lender to any tax with respect to payments of
principal or interest or any other amounts payable hereunder by Borrower or
otherwise with respect to the transactions contemplated hereby (except for taxes
on the overall net income of such Lender imposed by the United States of America
or any political subdivision thereof); or
(b) imposes, modifies or deems applicable any deposit insurance,
reserve, special deposit or similar requirement against assets held by, or
deposits in or for the account of, or loans by, either Lender; or
(c) imposes upon either Lender any other condition with respect
to their performance under this Agreement,
and the result of any of the foregoing is to hereafter increase the cost to such
Lender, reduce the income receivable by such Lender or impose any expense upon
such Lender with respect to any loans, such Lender shall notify Borrower
thereof. Borrower agrees to pay to such Lender the amount of such increase in
cost, reduction in income or additional expense as and when such cost, reduction
or expense is incurred or determined, upon presentation by such Lender of a
statement in the amount and setting forth such Lender's calculation thereof,
which statement shall be deemed true and correct absent manifest error.
2.10 Term. This Agreement shall become effective upon acceptance by
----
each Lender and shall continue in full force and effect for a term ending on the
Maturity Date of the last Loan made hereunder. Notwithstanding the foregoing,
Lenders shall have the right to terminate this Agreement immediately and without
notice upon the occurrence and during the continuance of an Event of Default.
3. Conditions of Loans.
-------------------
3.1 Conditions Precedent to Initial Loan. The obligation of Lenders
------------------------------------
to make the initial Loan is subject to the condition precedent that Lenders
shall have received, in form and substance satisfactory to Lenders, all of the
following:
(a) This Agreement duly executed by Borrower.
(b) The separate Warrants to be issued to the Bank and
Partnership, each duly executed by Borrower.
(c) A Landlord Consent from the owner of each building in which
Collateral is anticipated to be located as set forth in Schedule 3.
(d) A certificate of the secretary or assistant secretary of
Borrower with copies of the following documents attached: (i) the articles of
incorporation and bylaws of Borrower certified by Borrower as being in full
force and effect on the Funding Date, (ii) incumbency and
11
<PAGE>
representative signatures, and (iii) resolutions authorizing the execution and
delivery of this Agreement and each of the other Loan Documents.
(e) A good standing certificate from Borrower's state of
incorporation and the state in which Borrower's principal place of business is
located, together with certificates of the applicable governmental authorities
stating that Borrower is in compliance with the franchise tax laws of each such
state, each dated as of a recent date.
(f) Evidence of the insurance coverage required by Section 6.9 of
this Agreement.
(g) All necessary consents of shareholders and other third
parties with respect to the execution, delivery and performance of this
Agreement, the Warrants and the other Loan Documents.
(h) Payment of the Loan Fee specified in Section 2.4 hereof and
any other unreimbursed Lenders' Expenses.
(i) Such other documents, and completion of such other matters,
as Lenders may deem necessary or appropriate.
3.2 Conditions Precedent to all Loans. The obligation of Lenders to
---------------------------------
make each Loan, including the initial Loan, is further subject to the following
conditions:
(a) No Default or Event of Default shall have occurred and be
continuing.
(b) Borrower shall have provided to Partnership, on behalf of
Lenders, with respect to the Eligible Equipment which is requested to be
financed with the proceeds of the Loan to be made on such Funding Date, such
invoices, purchase orders, bills of sale, receipts, agreements, canceled checks,
and other documents as Lenders shall reasonably request to evidence the
ownership by Borrower of, the payment in full of the purchase price of, and the
fair market value of, such Eligible Equipment, each in form and substance
reasonably satisfactory to Lenders.
(c) Borrower and Lenders shall have executed a Loan Agreement
Supplement, including a Loan Terms Schedule and a list of Financed Equipment
with respect to the proposed Loan.
(d) Lenders shall have received such documents, instruments and
agreements, including UCC financing statements or amendments to UCC financing
statements, as Lenders shall reasonably request to evidence the perfection and
priority of the security interests granted to Lenders pursuant to Section 4.
(e) Borrower shall have delivered to Bank, on behalf of Lenders,
a subordination agreement, release, or estoppel letter, as appropriate, from any
Person having an existing Lien superior to the Lien of Lenders on any item of
Eligible Equipment which is requested to be financed.
(f) Borrower shall have provided Lenders with a Landlord Consent
from the owner of each new building in which Collateral is anticipated to be
located.
(g) Such other documents, and completion of such other matters,
as Lenders may deem necessary or appropriate.
12
<PAGE>
3.3 Covenant to Deliver. Borrower agrees (not as a condition but as a
-------------------
covenant) to deliver to Lenders each item required to be delivered to Lenders as
a condition to each Loan, if such Loan is advanced. Borrower expressly agrees
that the extension of such Loan prior to the receipt by Lenders of any such item
shall not constitute a waiver by Lenders of Borrower's obligation to deliver
such item.
4. Creation of Security Interest.
-----------------------------
4.1 Grant of Security Interest. Borrower grants to Lenders a valid,
--------------------------
first priority, continuing security interest in all presently existing and
hereafter acquired or arising Collateral in order to secure prompt, full and
complete payment of any and all Obligations and in order to secure prompt, full
and complete performance by Borrower of each of its covenants and duties under
each of the Loan Documents.
4.2 After-Acquired Property. All Financed Equipment which is financed
-----------------------
through Loans and any and all other Property generally described or referred to
as Collateral which is hereafter acquired by Borrower shall ipso facto and
----------
without any further conveyance, assignment or act on the part of Borrower or
Lenders, become and be subject to the security interest herein granted as fully
and completely as though specifically described herein. The list of Financed
Equipment shall be amended and supplemented on each Funding Date by a Loan
Agreement Supplement to incorporate all Financed Equipment financed with the
Loan advanced on such Funding Date; provided, however the failure to so amend
-----------------
and supplement the list of Financed Equipment shall not affect the grant by
Borrower to Lender of the security interest in such Financed Equipment pursuant
to this Section 4. This Agreement and the other documents in connection herewith
may be otherwise supplemented and amended from time to time, as required by
Lender, to reflect additional Collateral to be subject to the security interest
granted pursuant to this Section 4.
4.3 Duration of Security Interest. Lenders' security interest in the
-----------------------------
Collateral shall continue until the payment in full and the satisfaction of all
Obligations, whereupon such security interest shall terminate; provided, however
-----------------
if any item of Financed Equipment is subject to an Event of Loss, then following
the prepayment of the Loan with respect to such item pursuant to Section 2.5,
Lender shall release its security interest in such item of Financed Equipment.
Lenders shall, at Borrower's sole cost and expense, execute such further
documents and take such further actions as may be necessary to effect the
release contemplated by this Section 4.3, including duly executing and
delivering termination statements for filing in all relevant jurisdictions under
the Code.
4.4 Possession of Collateral. So long as no Event of Default has
------------------------
occurred and is continuing, Borrower shall remain in full possession, enjoyment
and control of the Collateral (except only as may be otherwise required by
Lenders for perfection of their security interest therein) and shall be entitled
to manage, operate and use the same and each part thereof with the rights and
franchises appertaining thereto; provided, however that the possession,
-----------------
enjoyment, control and use of the Collateral shall at all times be subject to
the observance and performance of the terms of this Agreement.
4.5 Markings on the Collateral. At Lenders' request at any time
--------------------------
during the Term of the Loan (including any extension thereof), Borrower shall
place in a conspicuous location on each item of Financed Equipment a plaque or
other marking to be supplied by Lenders which reads substantially as follows:
Silicon Valley Bank and MMC/GATX Partnership No. 1 have a first priority
security interest in this item of equipment.
13
<PAGE>
Such plaque or other marking shall not be removed (or if removed or damaged such
plaque or other marking shall be replaced) until the security interest in favor
of Lenders in such item of Collateral is terminated pursuant to this Agreement.
4.6 Delivery of Additional Documentation Required. Borrower shall
---------------------------------------------
from time to time execute and deliver to Bank, on behalf of Lenders, at the
request of either Lender, all financing statements and other documents such
Lender may reasonably request, in form satisfactory to Lenders, to perfect and
continue Lenders' perfected security interests in the Collateral and in order to
consummate fully all of the transactions contemplated under the Loan Documents.
4.7 Right to Inspect. Each Lender (through any of its officers,
----------------
employees, or agents) shall have the right, upon reasonable prior notice, from
time to time during Borrower's usual business hours, to inspect Borrower's Books
and to make copies thereof and to check, test, and appraise the Collateral in
order to verify Borrower's financial condition or the amount, condition of, or
any other matter relating to, the Collateral.
5. Representations and Warranties. Borrower represents, warrants and
------------------------------
covenants as follows:
5.1 Due Organization and Qualification. Borrower is a corporation
----------------------------------
duly existing and in good standing under the laws of its state of incorporation
and qualified and licensed to do business in, and is in good standing in, any
state in which the conduct of its business or its ownership of Property requires
that it be so qualified or in which the Collateral is located, except for such
states as to which any failure so to qualify would not have a material adverse
effect on Borrower.
5.2 Authority. Borrower has all necessary power and authority to
---------
execute, deliver, and perform in accordance with the terms thereof, the Loan
Documents to which it is a party. Borrower has all requisite power and authority
to own and operate its properties and to carry on its businesses as now
conducted.
5.3 Subsidiaries. Borrower has no Subsidiaries, except those listed
------------
in Schedule 4 hereto.
5.4 Conflict with Other Instruments. etc. Neither the execution and
------------------------------------
delivery of any Loan Document to which Borrower is a party nor the consummation
of the transactions therein contemplated nor compliance with the terms,
conditions and provisions thereof will conflict with or result in a breach of
any of the terms, conditions or provisions of the articles of incorporation and
the by-laws, or other organizational documents of Borrower or any law or any
regulation, order, writ, injunction or decree of any court or governmental
instrumentality or any material agreement or instrument to which Borrower is a
party or by which it or any of its properties is bound or to which it or any of
its properties is subject, or constitute a default thereunder or result in the
creation or imposition of any Lien, other than Permitted Liens.
5.5 Authorization; Enforceability. The execution and delivery of this
-----------------------------
Agreement, the granting of the security interest in the Collateral, the
incurring of the Loans, the execution and delivery of the other Loan Documents
to which Borrower is a party and the consummation of the transactions herein and
therein contemplated have each been duly authorized by all necessary action on
the part of Borrower. The Loan Documents have been duly executed and delivered
and constitute legal, valid and binding obligations of Borrower, enforceable in
accordance with their respective terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency or other similar laws of general
application relating to or affecting the enforcement of creditors' rights or by
general principles of equity.
14
<PAGE>
5.6 No Prior Encumbrances. Borrower has good and indefeasible title
---------------------
to the Collateral, free and clear of liens, claims, security interests, or
encumbrances, except for the first priority lien held by the Lenders and except
for other Permitted Liens. Except as disclosed in Schedule 1, Borrower has not
acquired any part of the Collateral from an assignor outside the ordinary course
of such assignor's business.
5.7 Name; Location of Chief Executive Office, Principal Place of
------------------------------------------------------------
Business and Collateral. Except as disclosed in Schedule 2, Borrower has not
- -----------------------
done business under any name other than that specified on the signature page
hereof. The chief executive office, principal place of business, and the place
where Borrower maintains its records concerning the Collateral are presently
located at the addresses set forth on Schedule 3. The Collateral is presently
located at the addresses set forth on Schedule 3.
5.8 Litigation. There are no actions or proceedings pending by or
----------
against Borrower before any court or administrative agency in which an adverse
decision could have a material adverse effect on Borrower or the aggregate value
of the Collateral. Borrower does not have knowledge of any such pending or
threatened actions or proceedings. Borrower will promptly notify Lenders in
writing if any action, proceeding or governmental investigation involving
Borrower is commenced that is reasonably likely to result in damages or costs to
Borrower of One Hundred Thousand Dollars ($100,000) or more.
5.9 Financial Statements. All financial statements relating to
--------------------
Borrower or any Affiliate that have been or may hereafter be delivered by
Borrower to Bank, on behalf of Lenders, present fairly in all material respects
Borrower's financial condition as of the date thereof and Borrower's results of
operations for the period then ended.
5.10 Solvency. Borrower is solvent and able to pay its debts
--------
(including trade debts) as they mature.
5.11 Environmental Quality.
---------------------
(a) Except as specifically disclosed in writing to Lenders, the on-
going operations of Borrower comply in all material respects with all
Environmental Laws.
(b) Except as specifically disclosed in writing to Lenders, Borrower
has obtained all licenses, permits, authorizations and registrations required
under any Environmental Law ("Environmental Permits") and necessary for its
ordinary course operations, all such Environmental Permits are in good standing,
and Borrower is in compliance with all material terms and conditions of such
Environmental Permits.
(c) Except as specifically disclosed in writing to Lenders, neither
Borrower nor any of its present Property or operations is subject to any
outstanding written order from or agreement with any Governmental Authority nor
subject to any judicial or docketed administrative proceeding, respecting any
Environmental Law, Environmental Claim or Hazardous Material.
(d) There are no Hazardous Materials or other conditions or
circumstances existing with respect to any Property, or arising from operations
prior to the date hereof, of Borrower that would reasonably be expected to give
rise to any Environmental Claim with a potential liability of Borrower in excess
of One Hundred Thousand Dollars ($100,000) in the aggregate from any such
condition, circumstance or Property.
5.12 Taxes. Borrower has filed or caused to be filed all tax returns
-----
required to be filed, and has paid, or has made adequate provision for the
payment of, all taxes that are due and payable.
15
<PAGE>
5.13 Consents and Approvals. No approval, authorization or consent of
----------------------
any trustee or holder of any indebtedness or obligation of Borrower or of any
other Person under any such material agreement, contract, lease or license or
similar document or instrument to which Borrower is a party or by which Borrower
is bound, is required to be obtained by Borrower in order to make or consummate
the transactions contemplated under the Loan Documents. To the best of
Borrower's knowledge, all consents and approvals of, filings and registrations
with, and other actions in respect of, all Governmental Authorities required to
be obtained by Borrower in order to make or consummate the transactions
contemplated under the Loan Documents have been, or prior to the time when
required will have been, obtained, given, filed or taken and are or will be in
full force and effect.
5.14 Trademarks, Patents, Copyrights, Franchises and Licenses.
--------------------------------------------------------
Borrower possesses and owns all necessary trademarks, trade names, copyrights,
patents, patent rights, franchises and licenses which are material to the
conduct of its business as now operated.
5.15 Material Contracts. Borrower has disclosed to Lenders in writing
------------------
all currently effective material contracts and agreements (whether written or
oral) to which Borrower is a party. There are no material defaults under any
such contract or agreement by Borrower. Borrower has delivered to Lenders true
and correct copies of all such contracts or agreements (or, with respect to oral
contracts or agreements, written descriptions of the material terms thereof).
5.16 Full Disclosure. No representation, warranty or other statement
---------------
made by Borrower in any Loan Document, certificate or written statement
furnished to Lenders or either of them contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained in such certificates or statements not misleading.
6. Affirmative Covenants. Borrower covenants and agrees that, until the
---------------------
full and complete payment of the Obligations and the termination of the
Commitments, Borrower shall do all of the following:
6.1 Good Standing. Borrower shall maintain its corporate existence
-------------
and its good standing in its jurisdiction of incorporation and maintain
qualification in each jurisdiction in which the failure to so qualify is
reasonably likely to have a material adverse effect on the financial condition,
operations or business of Borrower. Borrower shall maintain in force all
licenses, approvals and agreements, the loss of which is reasonably likely to
have a material adverse effect on its financial condition, operations or
business.
6.2 Government Compliance. Borrower shall comply with all statutes,
---------------------
laws, ordinances and government rules and regulations to which it is subject,
noncompliance with which could materially adversely affect the financial
condition, operations or business of Borrower.
6.3 Financial Statements, Reports, Certificates. Borrower shall
-------------------------------------------
deliver to each Lender: (a) as soon as available, but in any event within thirty
(30) days after the end of each month, a company prepared balance sheet, income
statement and cash flow statement covering Borrower's operations during such
period, certified by a Responsible Officer; (b) as soon as available, but in any
event within ninety (90) days after the end of Borrower's fiscal year, audited
financial statements of Borrower prepared in accordance with generally accepted
accounting principles, consistently applied, together with an unqualified
opinion on such financial statements of a nationally recognized or other
independent public accounting firm reasonably acceptable to Lenders; (c)
promptly upon becoming available, copies of all statements, reports and notices
sent or made available generally by Borrower to its security holders; (d)
immediately upon receipt of notice thereof, a report of any material legal
actions pending or threatened against Borrower that, if adversely determined,
would be reasonably likely to result in damages or costs to Borrower in excess
of One Hundred Thousand Dollars ($100,000); and (e) such other financial
information as Lenders may reasonably request from time to time.
16
<PAGE>
6.4 Certificates of Compliance. Each time financial statements are
--------------------------
furnished pursuant to Section 6.3 above, there shall be delivered to Bank, on
behalf of Lenders, a certificate signed by a Responsible Officer (each an
"Officer's Certificate") with respect to such financial reports to the effect
that: (i) no Event of Default or Default has occurred and is continuing
hereunder since the date of this Agreement or, if later, since the date of the
prior Officer's Certificate or, if such an event or condition has occurred and
is continuing, the nature and extent thereof and the action Borrower proposes to
take with respect thereto, and (ii) Borrower is in compliance with the
provisions of Sections 6 and 7.
6.5 Notice of Event of Loss. As soon as possible, and in any event
-----------------------
within ten (10) days thereafter, Borrower shall notify Bank, on behalf of
Lenders, in writing in reasonable detail of any Event of Loss.
6.6 Notice of Defaults. As soon as possible, and in any event within
------------------
five (5) days after the discovery of a Default or an Event of Default, provide
Bank, on behalf of Lenders, with an Officer's Certificate of Borrower setting
forth the facts relating to or giving rise to such Default or Event of Default
and the action which Borrower proposes to take with respect thereto.
6.7 Taxes. Borrower shall make due and timely payment or deposit of
-----
all federal, state, and local taxes, assessments, or contributions required of
it by law or imposed upon any properties belonging to it, and will execute and
deliver to Bank, on behalf of Lenders, on demand, appropriate certificates
attesting to the payment or deposit thereof; and Borrower will make timely
payment or deposit of all tax payments and withholding taxes required of it by
applicable laws, including those laws concerning F.I.C.A., F.U.T.A., state
disability, and local, state, and federal income taxes, and will, upon request,
furnish Bank, on behalf of Lenders with proof satisfactory to Lenders indicating
that Borrower has made such payments or deposits; provided that Borrower need
not make any payment if the amount or validity of such payment is contested in
good faith by appropriate proceedings and is adequately reserved against by
Borrower.
6.8 Use; Maintenance.
----------------
(a) Borrower, at its expense, shall make all necessary site
preparations and cause the Collateral to be operated in accordance with any
applicable manufacturer's manuals or instructions. So long as no Default or
Event of Default has occurred and is continuing, Borrower shall have the right
to quietly possess and use the Collateral as provided herein without
interference by Lenders.
(b) Borrower, at its expense, shall maintain the Collateral in
good condition, reasonable wear and tear excepted, and will comply in all
material respects with all laws, rules and regulations to which the use and
operation of the Collateral may be or become subject. Such obligation shall
extend to repair and replacement of any partial loss or damage to the
Collateral, regardless of the cause. If maintenance is mandated by manufacturer,
Borrower shall obtain and keep in effect, at all times during the Term
maintenance service contracts with suppliers approved by Lenders, such approval
not to be unreasonably withheld. All parts furnished in connection with such
maintenance or repair shall immediately become part of the Collateral. All such
maintenance, repair and replacement services shall be immediately paid for and
discharged by Borrower with the result that no Lien will attach to the
Collateral.
6.9 Insurance. Borrower shall obtain and maintain for the Term, at
---------
its own expense, (a) "all risk" insurance against loss or damage to the
Collateral, and (b) commercial general public liability insurance (including
contractual liability, products liability and completed operations coverages),
reasonably satisfactory to Lenders and such other insurance against such other
risks of loss and with such terms, as shall in each case be reasonably
satisfactory to or reasonably required by Lenders (as to carriers, amounts,
deductibles and otherwise). The amount of the "all risk" insurance
17
<PAGE>
shall be no less than the Stipulated Loan Value of the Loan Amount applicable to
each Loan and all other then outstanding amounts payable under the Loan
Documents. Such amounts shall be determined to Lenders' reasonable satisfaction
as of each anniversary date of this Agreement and the appropriate amount of
coverage shall be put in effect on the next succeeding renewal or inception date
of such insurance.
The amount of such commercial general public liability insurance (other
than products liability coverage and completed operations insurance) shall be at
least $1,000,000 per occurrence and the amount of such products liability and
completed operations insurance shall be at least $1,000,000 per occurrence;
provided in both cases that if (i) Borrower increases the amount of such
insurance or (ii) Borrower is acquired by a Person carrying more or such
insurance, than Lenders shall be entitled to the benefits of such higher amounts
and Borrower shall promptly provide Lenders with certificates of insurance or
other evidence satisfactory to Lenders that such insurance coverage is in
effect. The deductible with respect to the "all-risk" and product liability
insurance shall not exceed $25,000; otherwise there shall be no deductible with
respect to any insurance required to be maintained hereunder without the prior
written approval of Lenders. Such "all risk" insurance shall: (a) name Lenders
as sole loss payee with respect to the Collateral, (b) provide each insurer's
waiver of its right of subrogation against Lenders and Borrower, and (c) provide
that such insurance (i) shall not be invalidated by any action of, or breach of
warranty by, Borrower of a provision of any of its insurance policies, and (ii)
shall waive set-off, counterclaim or offset against Lenders. Each liability
policy shall (A) name Lenders as an additional insureds and (B) provide that
such insurance shall have cross-liability and severability of interest
endorsements (which shall not increase the aggregate policy limits of Borrower's
insurance). All insurance policies (C) shall provide that Borrower's insurance
shall be primary without a right of contribution of Lenders' insurance, if any,
or any obligation on the part of Lenders to pay premiums of Borrower, and (D)
shall contain a clause requiring the insurer to give Lenders at least thirty
(30) days prior written notice of its cancellation (other than cancellation for
non-payment for which ten (10) days notice shall be sufficient). Borrower shall,
on or prior to the date of and prior to each policy renewal, furnish to Lenders
certificates of insurance or other evidence satisfactory to Lenders that such
insurance coverage is in effect.
6.10 Loss; Damage; Destruction and Seizure.
-------------------------------------
(a) Borrower shall bear the risk of the Financed Equipment being
lost, stolen, destroyed, damaged beyond repair, rendered permanently unfit for
use, or seized by a governmental authority for any reason whatsoever at any time
until the expiration or termination of the Term.
(b) If during the Term any item of Financed Equipment becomes
Obsolete or is lost, stolen, destroyed, damaged beyond repair, rendered
permanently unfit for use, or seized by a governmental authority for any reason
whatsoever for a period equal to at least the remainder of the Term (an "Event
of Loss"), then in each case Lenders shall receive from the proceeds of
insurance maintained pursuant to Section 6.9, from any award paid by the seizing
governmental authority or, to the extent not received from the proceeds of
insurance or award or both, from Borrower, on or before the Payment Date next
succeeding such Event of Loss, an amount equal to the sum of: (i) all accrued
and unpaid Scheduled Payments with respect to such Loan due prior to the next
such Payment Date, (ii) a prepayment in an amount equal to the Stipulated Loan
Value with respect to such Loan multiplied by the Prepayment Amount of each
affected item of Financed Equipment and (iii) all other sums, if any, that shall
have become due and payable hereunder with respect to such Loan, including
interest at the Default Rate with respect to any past due amounts. On the date
of receipt by Lenders of the amount specified above with respect to each such
item of Financed Equipment subject to an Event of Loss, this Agreement shall
terminate as to such Financed Equipment. Except as provided in Section 6.10(c),
any proceeds of insurance maintained by Borrower pursuant to Section 6.9 and
received by Borrower shall be paid to Bank, on behalf of Lenders, promptly upon
their receipt by Borrower. If any proceeds of insurance or awards received from
governmental authorities are in
18
<PAGE>
excess of the amount owed under this Section 6.10, Lenders shall promptly remit
to Borrower the amount in excess of the amount owed to Lenders.
(c) So long as no Event of Default has occurred and is
continuing, any proceeds of insurance maintained pursuant to Section 6.9
received by Lenders or Borrower with respect to an item of Financed Equipment,
the repair of which is practicable, shall, at the election of Borrower, be
applied either to the repair or replacement of such Financed Equipment or, upon
Bank's receipt, on behalf of Lenders, of evidence of the repair or replacement
of the Financed Equipment reasonably satisfactory to Lenders, to the
reimbursement of Borrower for the cost of such repair or replacement. All
replacement parts and equipment acquired by Borrower in replacement of Financed
Equipment pursuant to this Section 6.10(c) shall immediately become part of the
Financed Equipment upon acquisition by Borrower. Borrower shall take such
actions and provide such documentation as may be reasonably requested by Lenders
to protect and preserve their first priority security interest and otherwise to
avoid any impairment of Lenders' rights under the Loan Documents in connection
with such repair or replacement.
6.11 Principal Depository. Borrower shall maintain its principal
--------------------
operating accounts with Bank.
6.12 Environmental Laws. Borrower shall conduct its operations and
------------------
keep and maintain its Property in material compliance with all Environmental
Laws.
6.13 Further Assurances. At any time and from time to time Borrower
------------------
shall execute and deliver such further instruments and take such further action
as may reasonably be requested by Lenders to effect the purposes of this
Agreement.
7. Negative Covenants. Borrower covenants and agrees that until the full
------------------
and complete payment of the Obligations and termination of the Commitments,
Borrower will not do any of the following:
7.1 Chief Executive Office; Location of Collateral. During the
----------------------------------------------
continuance of this Agreement, change the chief executive office or principal
place of business or remove or cause to be removed, except in the ordinary
course of Borrower's business, the Collateral or the records concerning the
Collateral from the premises listed in Schedule 3 without thirty (30) days prior
written notice to Lenders.
7.2 Extraordinary Transactions and Disposal of Assets. Enter into
-------------------------------------------------
any transaction not in the ordinary and usual course of Borrower's business,
including the sale, lease, license or other disposition of, moving, relocation,
or transfer, whether by sale or otherwise, of Borrower's assets, other than (i)
sales of inventory in the ordinary and usual course of Borrower's business as
presently conducted and (ii) sales or other dispositions in the ordinary course
of business of assets, other than Financed Equipment, that have become worn out
or obsolete or that are promptly being replaced.
7.3 Restructure. Change Borrower's name; make any material change in
-----------
Borrower's financial structure or business operations, other than through a sale
of Borrower's equity securities or the completion of a corporate collaboration;
cause, permit, or suffer any material change in Borrower's ownership; or suspend
operation of Borrower's business.
7.4 Liens. Create, incur, assume or suffer to exist any Lien or any
-----
other encumbrance of any kind with respect to any of its Property, whether now
owned or hereafter acquired, except the Permitted Liens.
8. Events of Default. Any one or more of the following events shall
-----------------
constitute an Event of Default by Borrower under this Agreement:
19
<PAGE>
8.1 Payment Default. If Borrower fails to pay when due and payable
---------------
or when declared due and payable in accordance with the Loan Documents, any
portion of the Obligations.
8.2 Covenant Default. If Borrower fails to perform any obligation
----------------
under Sections 6.9, 6.10 or 6.11, or violates any of the covenants contained in
Section 7 of this Agreement, or fails or neglects to perform, keep, or observe
any other material term, provision, condition, covenant, or agreement contained
in this Agreement, in any of the other Loan Documents, or in any other present
or future agreement between Borrower and Lenders and as to any default under
such other term, provision, condition, covenant or agreement that can be cured,
has failed to cure such default within fifteen (15) days after the occurrence of
such default.
8.3 Material Adverse Change. If there occurs a material adverse
-----------------------
change in Borrower's business, or if there is a material impairment of the
prospect of repayment of any portion of the Obligations owing to Lenders or a
material impairment of the value or priority of Lenders' security interests in
the Collateral.
8.4 Attachment. If any material portion of Borrower's assets is
----------
attached, seized, subjected to a writ or distress warrant, or is levied upon, or
comes into the possession of any trustee, receiver or Person acting in a similar
capacity and such attachment, seizure, writ or distress warrant or levy has not
been removed, discharged or rescinded within thirty (30) days, or if Borrower is
enjoined, restrained, or in any way prevented by court order from continuing to
conduct all or any material part of its business affairs, or if a judgment or
other claim becomes a lien or encumbrance upon any material portion of
Borrower's assets, or if a notice of lien, levy, or assessment is filed of
record with respect to any of Borrower's assets by the United States Government,
or any department, agency, or instrumentality thereof, or by any state, county,
municipal, or governmental agency, and the same is not paid within thirty (30)
days after Borrower receives notice thereof, provided that none of the foregoing
shall constitute an Event of Default where such action or event is stayed or an
adequate bond has been posted pending a good faith contesting by Borrower.
8.5 Other Agreements. If there is a default in any agreement to
----------------
which Borrower is a party with a third party or parties resulting in a right by
such third party or parties, whether or not exercised, to accelerate the
maturity of any Indebtedness in a principal amount in excess of One Hundred
Thousand Dollars ($100,000).
8.6 Judgments. If a judgment or judgments for the payment of money
---------
in an amount, individually or in the aggregate, of at least One Hundred Thousand
Dollars ($100,000) shall be rendered against Borrower and shall remain
unsatisfied and unstayed for a period of thirty (30) days.
8.7 Redemption or Repurchase. Borrower shall, after the date of this
------------------------
Agreement, redeem or repurchase (a) any shares of any class or series of its
preferred stock or (b) more than One Hundred Thousand Dollars ($100,000) in the
aggregate of common stock, in each case whether pursuant to a mandatory
redemption or otherwise.
8.8 Misrepresentations. If any material misrepresentation or
------------------
material misstatement exists now or hereafter in any warranty, representation,
statement, or report made to Lenders or either of them by Borrower or any
officer, employee, agent, or director of Borrower.
8.9 Breach of Warrants. If Borrower shall breach the terms of the
------------------
Warrants.
8.10 Enforceability. If any Loan Document shall in any material
--------------
respect cease to be, or Borrower shall assert that any Loan Document is not, a
legal, valid and binding obligation of Borrower enforceable in accordance with
its terms.
20
<PAGE>
8.11 Involuntary Bankruptcy or Insolvency. If a proceeding shall have
------------------------------------
been instituted in a court having jurisdiction in the premises seeking a decree
or order for relief in respect of Borrower in an involuntary case under any
applicable bankruptcy, insolvency or other similar law now or hereafter in
effect, or for the appointment of a receiver, liquidator, assignee, custodian,
trustee (or similar official) of Borrower or for any substantial part of its
property, or for the winding-up or liquidation of its affairs, and such
proceeding shall remain undismissed or unstayed and in effect for a period of
thirty (30) consecutive days or such court shall enter a decree or order
granting the relief sought in such proceeding.
8.12 Voluntary Bankruptcy or Insolvency. If Borrower shall commence a
----------------------------------
voluntary case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, shall consent to the entry of an order for relief in
an involuntary case under any such law, or shall consent to the appointment of
or taking possession by a receiver, liquidator, assignee, trustee, custodian (or
other similar official) of Borrower or for any substantial part of its property,
or shall make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any corporate
action in furtherance of any of the foregoing.
9. Lenders' Rights and Remedies.
----------------------------
9.1 Rights and Remedies. Upon the occurrence and continuance of any
-------------------
Default or Event of Default, Lenders shall have no further obligation to advance
money or extend credit to or for the benefit of Borrower. In addition, upon the
occurrence and during the continuance of an Event Of Default, Lenders shall have
the rights, options, duties and remedies of a secured party as permitted by law
and, in addition to and without limitation of the foregoing, Lenders may, at
their election, without notice of election and without demand, do any one or
more of the following, all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by this Agreement,
by any of the other Loan Documents, or otherwise, including the Stipulated Loan
Value of the Loan Amount of each Loan, immediately due and payable (provided
that upon the occurrence of an Event of Default described in Section 8.11 or
8.12 all Obligations shall become immediately due and payable without any action
by Lenders);
(b) Without notice to or demand upon Borrower, make such
payments and do such acts as Lenders consider necessary or reasonable to
protect their security interest in the Collateral. Borrower agrees to assemble
the Collateral if Lenders so require, and to make the Collateral available to
Lenders as Lenders may designate. Borrower authorizes each Lender to enter the
premises where the Collateral is located, to take and maintain possession of the
Collateral, or any part of it, and to pay, purchase, contest, or compromise any
encumbrance, charge, or lien which in Lenders' determination appears to be prior
or superior to their security interest and to pay all expenses incurred in
connection therewith. With respect to any of Borrower's owned premises, Borrower
hereby grants Lenders a license to enter into possession of such premises and to
occupy the same, without charge, for up to one hundred twenty (120) days in
order to exercise any of Lenders' rights or remedies provided herein, at law, in
equity, or otherwise;
(c) Without notice to Borrower, set off and apply to the
Obligations any and all (i) balances and deposits of Borrower held by Bank, or
(ii) indebtedness at any time owing to or for the credit or the account of
Borrower;
(d) Ship, reclaim, recover, store, finish, maintain, repair,
prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Lenders are hereby granted a license or other right,
solely pursuant to the provisions of this Section 9.1, to use, without charge,
Borrower's labels, patents, copyrights, rights of use of any name, trade
secrets, trade names, trademarks, service marks, and advertising matter, or any
Property of a similar nature, as it pertains to
21
<PAGE>
the Collateral, in completing production of, advertising for sale, and selling
any Collateral and, in connection with Lenders' exercise of their rights under
this Section 9.1, Borrower's rights under all licenses and all franchise
agreements shall inure to Lenders' benefit;
(e) Sell the Collateral at either a public or private sale, or
both, by way of one or more contracts or transactions, for cash or on terms, in
such manner and at such places (including Borrower's premises) as Lenders
determine are commercially reasonable;
(f) Lenders or either of them may credit bid and purchase at any
public sale; and
(g) Any deficiency that exists after disposition of the
Collateral as provided above will be paid immediately by Borrower.
9.2 Waiver by Borrower. Upon the occurrence of an Event of Default,
------------------
to the extent permitted by law, Borrower covenants that it will not at any time
insist upon or plead, or in any manner whatever claim or take any benefit or
advantage of, any stay or extension law now or at any time hereafter in force,
nor claim, take nor insist upon any benefit or advantage of or from any law now
or hereafter in force providing for the valuation or appraisement of the
Collateral or any part thereof prior to any sale or sales thereof to be made
pursuant to any provision herein contained, or to the decree, judgment or order
of any court of competent jurisdiction; nor, after such sale or sales, claim or
exercise any right under any statute now or hereafter made or enacted by any
state or other vise to redeem the Property so sold or any part thereof, and, to
the full extent legally permitted, except as to rights expressly provided
herein, hereby expressly waives for itself and on behalf of each and every
Person, except decree or judgment creditors of Borrower acquiring any interest
in or title to the Collateral or any part thereof subsequent to the date of this
Agreement, all benefit and advantage of any such law or laws, and covenants that
it will not invoke or utilize any such law or laws or otherwise hinder, delay or
impede the execution of any power herein granted and delegated to Lenders, but
will suffer and permit the execution of every such power as though no such
power, law or laws had been made or enacted.
9.3 Effect of Sale. Any sale, whether under any power of sale hereby
--------------
given or by virtue of judicial proceedings, shall operate to divest all right,
title, interest, claim and demand whatsoever, either at law or in equity, of
Borrower in and to the Property sold, and shall be a perpetual bar, both at law
and in equity, against Borrower, its successors and assigns, and against any and
all Persons claiming the Property sold or any part thereof under, by or through
Borrower, its successors or assigns.
9.4 Power of Attorney in Respect of the Collateral. Borrower does
----------------------------------------------
hereby irrevocably appoint each Lender on behalf of Lenders (which appointment
is coupled with an interest) on the occurrence and continuance of a Default or
an Event of Default, the true and lawful attorney in fact of Borrower with full
power of substitution, for it and in its name: (a) to ask, demand, collect,
receive, receipt for, sue for, compound and give acquittance for any and all
rents, issues, profits, avails, distributions, income, payment draws and other
sums in which a security interest is granted under Section 4 with full power to
settle, adjust or compromise any claim thereunder as fully as if Lenders were
Borrowers themselves, (b) to receive payment of and to endorse the name of
Borrower to any items of Collateral (including checks, drafts and other orders
for the payment of money) that come into such Lender's possession or under such
Lender's control, (c) to make all demands, consents and waivers, or take any
other action with respect to, the Collateral, (d) in Lenders' discretion to file
any claim or take any other action or proceedings, either in their own names or
in the name of Borrower or otherwise, which Lenders may reasonably deem
necessary or appropriate to protect and preserve the right, title and interest
of Lenders in and to the Collateral, or (e) to otherwise act with respect
thereto as though Lenders were the outright owner of the Collateral.
22
<PAGE>
9.5 Lenders' Expenses. If Borrower fails to pay any amounts or
-----------------
furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Lenders may do any or all of
the following: (a) make payment of the same or any part thereof; (b) set up such
reserves in Borrower's loan account as Lenders deem necessary to protect Lenders
from the exposure created by such failure; or (c) obtain and maintain insurance
policies of the type discussed in Section 6.9 of this Agreement, and take any
action with respect to such policies as Lenders deem prudent. Any amounts paid
or deposited by Lenders shall constitute Lenders' Expenses, shall be immediately
due and payable, and shall bear interest at the then applicable rate hereinabove
provided, and shall be secured by the Collateral. Any payments made by Lenders
shall not constitute an agreement by Lenders to make similar payments in the
future or a waiver by Lenders of any Event of Default under this Agreement.
9.6 Remedies Cumulative. Lenders' rights and remedies under this
-------------------
Agreement, the Loan Documents, and all other agreements shall be cumulative.
Lenders shall have all other rights and remedies not inconsistent herewith as
provided under the Code, by law, or in equity. No exercise by Lenders or either
of them of one right or remedy shall be deemed an election, and no waiver by
Lenders of any Event of Default on Borrower's part shall be deemed a continuing
waiver. No delay by either Lender shall constitute a waiver, election, or
acquiescence by it or either of them.
9.7 Application of Collateral Proceeds. The proceeds and/or avails of
----------------------------------
the Collateral, or any part thereof, and the proceeds and the avails of any
remedy hereunder (as well as any other amounts of any kind held by Lenders at
the time of or received by Lenders after, the occurrence of an Event of Default
hereunder) shall be paid to and applied as follows:
(a) First, to the payment of out-of-pocket costs and expenses,
including all amounts expended to preserve the value of the Collateral, of
foreclosure or suit, if any, and of such sale and the exercise of any other
rights or remedies, and of all proper fees, expenses, liability and advances,
including reasonable legal expenses and attorneys' fees, incurred or made
hereunder by Lenders;
(b) Second, to the payment to Lenders of the amount then owing or
unpaid on the Loans for Scheduled Payments, the Stipulated Loan Value of the
Loan Amount, and all other Obligations with respect to all Loans, and in case
such proceeds shall be insufficient to pay in full the whole amount so due,
owing or unpaid upon the Loans, then to the unpaid interest thereon, then to
unpaid principal thereof, then to the Stipulated Loan Value of the Loan Amount
with respect to all Loans, and then to the payment of other amounts then payable
to Lenders under any of the Loan Documents; and
(c) Third, to the payment of the surplus, if any, to Borrower,
its successors and assigns, or to whomsoever may be lawfully entitled to receive
the same.
9.8 Reinstatement of Rights. If Lenders shall have proceeded to
-----------------------
enforce any right under this Agreement or any other Loan Document by
foreclosure, sale, entry or otherwise, and such proceedings shall have been
discontinued or abandoned for any reason or shall have been determined
adversely, then and in every such case (unless otherwise ordered by a court of
competent jurisdiction), Lenders shall be restored to their former position and
rights hereunder with respect to the Property subject to the security interest
created under this Agreement.
10. Waivers; Indemnification.
------------------------
10.1 Demand; Protest. Borrower waives demand, protest, notice of
---------------
protest, notice of default or dishonor, notice of payment and nonpayment, notice
of any default, nonpayment at maturity, release, compromise, settlement,
extension, or renewal of accounts, documents, instruments, chattel paper, and
guarantees at any time held by Lenders or either of them on which Borrower may
in any way be liable.
23
<PAGE>
10.2 Lenders' Liability for Collateral. So long as Lenders comply
---------------------------------
with their obligations, if any, under Section 9207 of the Code and reasonable
commercial practices, Lenders shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage
thereto occurring or arising in any manner or fashion from any cause; (c) any
diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other Person whomsoever. All risk of
loss, damage or destruction of the Collateral shall be borne by Borrower.
10.3 Indemnification. Whether or not the transactions contemplated
---------------
hereby shall be consummated:
(a) General Indemnity. Borrower shall pay, indemnify, and hold
-----------------
each Lender and each of their respective officers, directors, employees,
counsel, partners, agents and attorneys-in-fact (each, an "Indemnified Person")
harmless from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses or disbursements
(including Lenders' Expenses and reasonable attorney's fees and the allocated
cost of in-house counsel) of any kind or nature whatsoever with respect to the
execution, delivery, enforcement, performance and administration of this
Agreement and any other Loan Documents, or the transactions contemplated hereby
and thereby, and with respect to any investigation, litigation or proceeding
(including any case, action or proceeding before any court or other Governmental
Authority relating to bankruptcy, reorganization, insolvency, liquidation,
dissolution or relief of debtors or any appellate proceeding) related to this
Agreement or the Loans or the use of the proceeds thereof, whether or not any
Indemnified Person is a party thereto (all the foregoing, collectively, the
"Indemnified Liabilities"); provided, that Borrower shall have no obligation
hereunder to any Indemnified Person with respect to Indemnified Liabilities
arising from the gross negligence or willful misconduct of such Indemnified
Person.
(b) Environmental Indemnity.
-----------------------
(i) Borrower hereby agrees to indemnify, defend and hold
harmless each Indemnified Person, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
charges, expenses or disbursements (including reasonable attorneys' fees and the
allocated cost of in-house counsel and internal environmental audit or review
services), which may be incurred by or asserted against such Indemnified Person
in connection with or arising out of any pending or threatened investigation,
litigation or proceeding, or any action taken by any Person, with respect to any
Environmental Claim arising out of or related to any Property owned, leased or
operated by Borrower. No action taken by legal counsel chosen by any Lender in
defending against any such investigation, litigation or proceeding or requested
remedial, removal or response action (except for actions which constitute fraud,
willful misconduct, gross negligence or material violations of law) shall
vitiate or in any way impair Borrower's obligation and duty hereunder to
indemnify and hold harmless each Lender. Lenders agree to use reasonable efforts
to cooperate with Borrower respecting the defense of any matter indemnified
hereunder, except insofar as and to the extent that their respective interests
may be adverse to Borrower's, in each Lenders' sole discretion.
(ii) In no event shall any site visit, observation, or
testing by any Lender be deemed a representation or warranty that Hazardous
Materials are or are not present in, on, or under the site, or that there has
been or shall be compliance with any Environmental Law. Neither Borrower nor any
other Person is entitled to rely on any site visit, observation, or testing by
any Lender. Except as otherwise provided by law, neither Lender owes any duty of
care to protect Borrower or any other Person against, or to inform Borrower or
any other party of, any Hazardous Materials or any other adverse condition
affecting any site or Property. Neither Lender shall be obligated to disclose to
Borrower or any other Person any report or findings made as a result of, or in
connection with, any site visit, observation, or testing by any Lender.
(c) Survival; Defense. The obligations in this Section 10.3
-----------------
shall survive payment of all other Obligations. At the election of any
Indemnified Person, Borrower shall defend such
24
<PAGE>
Indemnified Person using legal counsel satisfactory to such Indemnified Person
in such Person's sole discretion, at the sole cost and expense of Borrower. All
amounts owing under this Section 10.3 shall be paid within thirty (30) days
after written demand.
11. Notices. Unless otherwise provided in this Agreement, all notices or
-------
demands by any party relating to this Agreement or any other agreement entered
into in connection herewith shall be in writing and (except for financial
statements and other informational documents which may be sent by first-class
mail, postage prepaid) shall be personally delivered or sent by certified mail,
postage prepaid, return receipt requested, or by prepaid facsimile to Borrower
or to Lenders, as the case may be, at their respective addresses set forth
below:
If to Borrower: Copper Mountain Communications, Inc.
6650 Lusk Blvd., Building B-103
San Diego, CA 92121
Attn: Mr. Joe Markee
FAX: (619) 453-9244
If to Bank: Silicon Valley Bank
1731 Embarcadero Road, Suite 220
Palo Alto, CA 94303
Attn: Ms. Rita Pirkl
FAX: (415) 812-0640
If to Partnership: MMC/GATX Partnership No. 1
c/o GATX Capital Corporation
as General Partner and Agent
Four Embarcadero Center
Suite 2200
San Francisco, California 94111
Attention: Contracts Administration
with a copy of any financial information to:
Meier Mitchell & Company
4 Orinda Way, Suite 200-B
Orinda, CA 94563
The parties hereto may change the address at which they are to receive
notices hereunder, by notice in writing in the foregoing manner given to the
other.
12. General Provisions.
------------------
12.1 Successors and Assigns. This Agreement shall bind and inure to
----------------------
the benefit of the respective successors and permitted assigns of each of the
parties; provided, however, that neither this Agreement nor any rights hereunder
may be assigned by Borrower without each Lender's prior written consent, which
consent may be granted or withheld in Lenders' sole discretion. Each Lender
shall have the right without the consent of or notice to Borrower to sell,
transfer, negotiate, or grant participations in all or any part of, or any
interest in such Lender's rights and benefits hereunder.
12.2 Time of Essence. Time is of the essence for the performance of
---------------
all obligations set forth in this Agreement.
25
<PAGE>
12.3 Severability of Provisions. Each provision of this Agreement
--------------------------
shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
12.4 Entire Agreement; Construction; Amendments and Waivers.
------------------------------------------------------
(a) This Agreement and each of the other Loan Documents dated as
of the date hereof, taken together, constitute and contain the entire agreement
among Borrower and Lenders and supersede any and all prior agreements,
negotiations, correspondence, understandings and communications between the
parties, whether written or oral, respecting the subject matter hereof.
(b) This Agreement is the result of negotiations between and has
been reviewed by each of Borrower and Lenders executing this Agreement as of the
date hereof and their respective counsel; accordingly, this Agreement shall be
deemed to be the product of the parties hereto, and no ambiguity shall be
construed in favor of or against Borrower or Lenders. Borrower and Lenders agree
that they intend the literal words of this Agreement and the other Loan
Documents and that no parol evidence shall be necessary or appropriate to
establish Borrower's or any Lender's actual intentions.
(c) Any and all amendments, modifications, discharges or waivers
of, or consents to any departures from any provision of this Agreement or of any
of the other Loan Documents shall not be effective without the written consent
of each party. Any waiver or consent with respect to any provision of the Loan
Documents shall be effective only in the specific instance and for the specific
purpose for which it was given. No notice to or demand on Borrower in any case
shall entitle Borrower to any other or further notice or demand in similar or
other circumstances. Any amendment, modification, waiver or consent effected in
accordance with this Section 12.4 shall be binding upon each Lender and on
Borrower.
12.5 Reliance by Lenders. All covenants, agreements, representations
-------------------
and warranties made herein by Borrower shall, notwithstanding any investigation
by Lenders, be deemed to be material to and to have been relied upon by Lenders.
12.6 No Set-Offs by Borrower. All sums payable by Borrower pursuant
-----------------------
to this Agreement or any of the other Loan Documents shall be payable without
notice or demand and shall be payable in United States Dollars without set-off
or reduction of any manner whatsoever.
12.7 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of
which, when taken together, shall constitute but one and the same Agreement.
12.8 Survival. All covenants, representations and warranties made in
--------
this Agreement shall continue in full force and effect so long as any
Obligations remain outstanding. The obligations of Borrower to indemnify Lenders
with respect to the expenses, damages, losses, costs and liabilities described
in Section 10.3 shall survive until all applicable statute of limitations
periods with respect to actions that may be brought against Lenders have run.
13. Relationship of Parties. Borrower and each Lender acknowledge,
-----------------------
understand and agree that:
(a) The relationship between the Borrower, on the one hand, and
Lenders, on the other, is, and at all time shall remain solely that of a
borrower and lenders. Lenders shall not under any circumstances be construed to
be partners or joint venturers of Borrower or any of its Affiliates; nor shall
the Lenders under any circumstances be deemed to be in a relationship of
confidence or trust or a fiduciary relationship with Borrower or any of its
Affiliates, or to owe any fiduciary duty to Borrower or any of its Affiliates.
Lenders do not undertake or assume any responsibility or duty to Borrower or any
26
<PAGE>
of its Affiliates to select, review, inspect, supervise, pass judgment upon or
otherwise inform the Borrower or any of its Affiliates of any matter in
connection with its or their Property, any Collateral held by any Lender or the
operations of Borrower or any of its Affiliates. Borrower and each of its
Affiliates shall rely entirely on their own judgment with respect to such
matters, and any review, inspection, supervision, exercise of judgment or supply
of information undertaken or assumed by any Lender in connection with such
matters is solely for the protection of Lenders and neither Borrower nor any
Affiliate is entitled to rely thereon.
(b) The relationship between Bank and Partnership is, and at all
time shall remain solely that of co-lenders. Lenders shall not under any
circumstances be construed to be partners or joint venturers of each other; nor
shall the Lenders under any circumstances be deemed to be in a relationship of
confidence or trust or a fiduciary relationship with each other, or to owe any
fiduciary duty to each other. Lenders do not undertake or assume any
responsibility or duty to each other to select, review, inspect, supervise, pass
judgment upon or otherwise inform each other of any matter in connection with
Borrower or Borrower's Property, any Collateral held by any Lender or the
operations of Borrower. Each Lender shall rely entirely on its own judgment with
respect to such matters, and any review, inspection, supervision, exercise of
judgment or supply of information undertaken or assumed by any Lender in
connection with such matters is solely for the protection of such Lender.
14. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. THIS AGREEMENT SHALL BE
------------------------------------------
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE
STATE OF CALIFORNIA, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF
BORROWER AND LENDERS HEREBY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE
AND FEDERAL COURTS LOCATED IN THE COUNTY OF SANTA CLARA, STATE OF CALIFORNIA.
BORROWER AND LENDERS HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF
ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF ANY OF THE LOAN
DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED THEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON
LAW OR STATUTORY CLAIMS.
27
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
COPPER MOUNTAIN COMMUNICATIONS, INC.
By: /s/ JOSEPH D. MARKEE
---------------------------------
Title: President
------------------------------
SILICON VALLEY BANK
By:_________________________________
Title:______________________________
MMC/GATX PARTNERSHIP NO. 1
By: Meier Mitchell & Company
General Partner
By:_________________________________
Name:_______________________________
Title:______________________________
28
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
COPPER MOUNTAIN COMMUNICATIONS, INC.
By:_________________________________
Title:______________________________
SILICON VALLEY BANK
By: /s/ THOMAS P. HILLEBRECHT
---------------------------------
Title: V.P.
------------------------------
MMC/GATX PARTNERSHIP NO. 1
By: Meier Mitchell & Company
General Partner
By:_________________________________
Name:_______________________________
Title:______________________________
28
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
COPPER MOUNTAIN COMMUNICATIONS, INC.
By:_________________________________
Title:______________________________
SILICON VALLEY BANK
By:_________________________________
Title:______________________________
MMC/GATX PARTNERSHIP NO. 1
By: Meier Mitchell & Company
General Partner
By: /s/ James Mitchell
---------------------------------
Name: James Mitchell
-------------------------------
Title: Secretary
------------------------------
28
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
Exhibit A - Collateral
Exhibit B - Form of Warrant
Exhibit C - Form of Landlord Consent
Exhibit D - Form of Loan Agreement Supplement
Schedule 1 - Existing Liens
Schedule 2 - Borrower's Trade Names
Schedule 3 - Location of Collateral
Schedule 4 - Subsidiaries
29
<PAGE>
EXHIBIT A
---------
DEBTOR/BORROWER: Copper Mountain Communications, Inc.
SECURED PARTIES/LENDERS: Silicon Valley Bank, and
MMC/GATX Partnership No. 1
COLLATERAL
----------
The Collateral shall consist of all right, title and interest of Debtor in
and to all the following:
Financed Equipment. All right, title, interest, claims and demands of
------------------
Debtor in and to each and every item of equipment, fixtures or personal property
which is financed with a "Loan" pursuant to that certain Loan and Security
Agreement, dated as of October 4, 1996 (the "Loan Agreement"), by and among
Debtor and Secured Parties, including, without limitation, the equipment,
fixtures and personal property described in Annex A hereto (which such
equipment, fixtures and personal property shall remain subject to the lien of
the Loan Agreement until specifically released pursuant to Section 4.3 of the
Loan Agreement), whether now owned or hereafter acquired, together with all
substitutions, renewals or replacements of and additions, improvements,
accessions and accumulations to any and all of such equipment, fixtures or
personal property (all such equipment, fixtures, personal property, accessories,
parts, appurtenances, substitutions, renewals, replacements, additions,
improvements, accessions and accumulations are herein called, collectively, the
"Financed Equipment"), together with all the rents, issues, income, profits and
avails therefrom and the proceeds thereof, including, without limitation,
insurance, condemnation, requisition or similar payments, and all proceeds from
sales, renewals, releases or other dispositions thereof.
A-1
<PAGE>
ANNEX A
to
Exhibit A
The following represent further specific descriptions of the Financed
Equipment:
FINANCED EQUIPMENT
A-2
<PAGE>
EXHIBIT B
---------
WARRANT
B-1
<PAGE>
Exhibit C
---------
FORM OF LANDLORD'S CONSENT
RECORDING REQUESTED BY
AND WHEN RECORDED RETURN TO:
SILICON VALLEY BANK
1731 Embarcadero Road, Suite 220
Palo Alto, CA 94303
Attn: Rita Pirkl
CONSENT TO REMOVAL OF PERSONAL PROPERTY
KNOW ALL PERSONS BY THESE PRESENTS:
(a) The undersigned has an interest as owner and landlord in the following
described real property (the "Real Property"):
That certain real property in the County of , State of California,
described as:
SEE ATTACHMENT 1 ATTACHED HERETO FOR FULL LEGAL DESCRIPTION, commonly known
as______________________________________________________________________________
(b) Copper Mountain Communications, a California corporation ("Borrower"),
has entered into or will enter into a Loan and Security Agreement with Silicon
Valley Bank and MMC/GATX Partnership No. 1 (collectively, "Lenders") dated as of
October __, 1996 (as amended and supplemented from time to time, the "Loan
Agreement").
(c) Lenders, as a condition to entering into the Loan Agreement, require
that the undersigned consent to the removal by Lenders of the equipment and
other assets covered by the Loan Agreement (hereinafter called "Equipment") from
the Real Property, no matter how it is affixed thereto, and to the other matters
set forth below.
NOW, THEREFORE, for good and sufficient consideration, receipt of which is
hereby acknowledged, the undersigned consents to the placing of the Equipment on
the Real Property, and agrees with Lenders as follows:
1. The undersigned waives and releases each and every right which
undersigned now has, under laws of the State of California or by virtue of the
lease for the Real Property now in effect, to levy or distrain upon for rent, in
arrears, in advance or both, or to claim or assert title to the Equipment that
is already on said Real Property, or may hereafter be delivered or installed
thereon.
2. The Equipment shall be considered to be personal property and
shall not be considered part of the Real Property regardless of whether or by
what means it is or may become attached or affixed to the Real Property.
3. The undersigned will permit Lenders, or their agent or
representative, to enter upon the Real Property for the purpose of exercising
any right they may have under the terms of the Loan Agreement or otherwise,
including, without limitation, the right to remove the Equipment; provided,
however, that if Lenders, in removing the Equipment damage any improvements of
the undersigned on the Real Property, Lenders will, at their expense, cause same
to be repaired.
4. This agreement shall be binding upon the heirs, successors and
assigns of the undersigned and shall inure to the benefit of each Lender and its
respective successors and assigns.
C-1
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this instrument at
______________, this __________, day of 199__.
___________________________________________
By:__________________________________
Title:_______________________________
The foregoing Consent must be acknowledged before a Notary Public.
[ATTACH NOTARY JURAT]
C-2
<PAGE>
ATTACHMENT 1
LEGAL DESCRIPTION OF PREMISES
[To Be Provided By Borrower]
C-3
<PAGE>
EXHIBIT D
---------
FORM OF LOAN AGREEMENT SUPPLEMENT
LOAN AGREEMENT SUPPLEMENT No. [_]
LOAN AGREEMENT SUPPLEMENT No. [_],dated ____________, 199__ ("Supplement"),
to the Loan and Security Agreement dated as of October 4, 1996 (the "Loan
Agreement) by and among Copper Mountain Communications, Inc., a California
corporation ("Borrower"), and Silicon Valley Bank ("Bank") and MMC/GATX
Partnership No. 1, a California general partnership (the "Partnership")
(collectively, "Lenders").
Capitalized terms used herein but not otherwise defined herein are used
with the respective meanings given to such terms in the Loan Agreement.
1. To secure the prompt payment by Borrower of the principal of and
interest on, and all other amounts from time to time outstanding under the Loan
Agreement, and the performance and observance by Borrower of all the agreements,
covenants and provisions contained in the Loan Agreement, Borrower does hereby
grant unto Lenders, their respective successors and assigns, a first priority
security interest in all of Borrower's right, title and interest in each item of
equipment and other property described in Annex A hereto, which equipment and
other property shall be deemed to be additional "Financed Equipment." The list
of Financed Equipment in Annex A hereto shall be construed as a supplement to
Exhibit A to the Loan Agreement and shall form a part thereof, and the Loan
Agreement is hereby incorporated by reference herein and is hereby ratified,
approved and confirmed.
2. Attached as Annex B hereto is the Loan Terms Schedule with respect to
the Loan the proceeds of which will be used to finance the Financed Equipment
listed in Annex A hereto.
3. The proceeds of the Loan should be transferred to Borrower's account
with Bank set forth below:
Bank Name: Silicon Valley Bank
Bank Address: ___________________
Account No.: ___________________
4. Borrower hereby certifies that (a) the foregoing information is true
and correct and authorizes Lenders to endorse in their respective books and
records, the Basic Rate applicable to the Funding Date of the Loan contemplated
in this Loan Agreement Supplement and the principal amount set forth in the Loan
Terms Schedule; (b) the representations and warranties made by Borrower in
Section 5 of the Loan Agreement and in the other Loan Documents are true and
correct on the date hereof and will be true and correct on such Funding Date;
(c) Borrower has met or will by such Funding Date meet all conditions set forth
in Section 3 of the Loan Agreement; (d) Borrower is now, and on such Funding
Date will be, in compliance with the covenants and the requirements contained in
Sections 6 and 7 of the Loan Agreement; and (e) no Default or Event of Default
has occurred and is continuing under the Loan Agreement.
5. This Supplement is being delivered in the State of California.
6. This Supplement may be executed by Borrower and Lenders in separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute but one and the same
instrument.
D-1
<PAGE>
IN WITNESS WHEREOF, Borrower and Lenders have caused this Supplement to be
duly executed and delivered as of this day and year first above written.
COPPER MOUNTAIN COMMUNICATIONS, INC.
By:___________________________________________
Title:________________________________________
SILICON VALLEY BANK
By:___________________________________________
Title:________________________________________
MMC/GATX PARTNERSHIP NO. 1
By: Meier Mitchell & Company
General Partner
By:___________________________________________
Name:_________________________________________
Title:________________________________________
Annex A - Description of Financed Equipment
Annex B - Loan Terms Schedule
D-2
<PAGE>
ANNEX A
to
EXHIBIT D
The Financed Equipment being financed with the Loan for which this Loan
Agreement Supplement is being executed is listed below. Upon the funding of such
Loan, this schedule automatically shall be deemed to be a part of Annex A to
Exhibit A to the Loan Agreement.
FINANCED EQUIPMENT
See Attached Pages.
D-3
<PAGE>
ANNEX B
LOAN TERMS SCHEDULE
Loan Funding Date:____________, 199_
Original Loan Amount: $_________
Loan Factor: _________%
Original Scheduled Payment Amount *: $_________
Final Payment: An additional amount equal to the Final Payment Percentage
multiplied by the original Loan Amount then in effect,
shall be paid on the Maturity Date with respect to such
Loan.
Stipulated Loan Value:
Payment No. Payment Date Stipulated Loan Value /**/
1
2
3
4
...
41
42
...
/*/ The amount of each Scheduled Payment will change as the Loan Amount
changes.
/**/ Each Stipulated Loan Value amount assumes payment of all Scheduled
Payments due on or before the indicated Payment Date.
D-4
<PAGE>
SCHEDULE 1
EXISTING LIENS
None.
<PAGE>
SCHEDULE 2
BORROWER'S TRADE NAMES
None.
<PAGE>
SCHEDULE 3
LOCATION OF CHIEF EXECUTIVE OFFICE; PRINCIPAL
PLACE OF BUSINESS; COLLATERAL
COPPER MOUNTAIN COMMUNICATIONS
6650 Lusk Boulevard
Building B-103
San Diego, CA 92121
<PAGE>
SCHEDULE 4
SUBSIDIARIES
None.
<PAGE>
SCHEDULE 5
SUBSIDIARIES
None.
<PAGE>
[LOGO]
MEIER MITCHELL & COMPANY, LLC
January 9, 1997
Tom Hillebrecht
Silicon Valley Bank
5414 Oberlin Drive, Suite 230
Mail Sort 5C122
San Diego, CA 92121
Re: Loan and Security Agreement among Silicon Valley Bank and MIN4CIGATX
Partnership No. 1 and Copper Mountain Communications, Inc.
Dear Tom:
Enclosed please find three execution copies of Amendment No. 1 to the above-
referenced agreement. The Amendment reflects the change in the due date of the
audited year-end financials from 90 days after year-end to 120 days after year-
end. Once you have your internal green light, please sign all three copies and
forward them to Joe Markee at Copper Mountain. Once he has countersigned the
Amendment, please ask him to keep one for his files, return one to you and one
to me.
If you have any questions, please do not hesitate to call.
Sincerely,
/s/ Kate Andrus
Kathleen M. Andrus
Enclosure
<PAGE>
[LOGO]
MEIER MITCHELL & COMPANY, LLC
January 9, 1997
Joseph D. Markee
President
Copper Mountain Communications
6650 Lusk Boulevard, Bldg. B103
San Diego, California 92121
Re: Amendment No. 1 to Loan and Security Agreement dated as of October 4, 1996
by and among Silicon Valley Bank and MMC/GATX Partnership No. 1 (each
individually a "Lender" and, collectively, "Lenders") and Copper Mountain
Communications, Inc. (the "Agreement")
Dear Joe:
This letter will serve to confirm that Section 6.3 (b) of the above-referenced
Agreement has been amended to read as follows: "as soon as available, but in any
event within one hundred twenty (120) days after the end of Borrower's fiscal
year, audited financial statements of Borrower prepared in accordance with
generally accepted accounting principles, consistently applied, together with an
unqualified opinion on such financial statements of a nationally recognized or
other independent public accounting firm reasonably acceptable to Lenders;".
On or after the date hereof each reference to the Agreement in the Agreement or
in any other document shall mean the Agreement as amended by this Amendment No.
1. Except as specifically amended above, the Agreement shall remain in full
force and effect and is hereby ratified and confirmed. The execution, delivery
and effectiveness of this Amendment No. 1 shall not operate as a waiver of any
right, power, or remedy of Lenders, no constitute a waiver of any provision of
the Agreement.
This Amendment No. 1 may be executed in any number of identical counterparts,
any set of which signed by all the parties hereto shall be deemed to constitute
a complete, executed original for all purposes.
<PAGE>
Page 2
Joseph D. Markee
Amendment No. 1 to Loan and Security Agreement
January 9, 1997
Agreed and accepted as of the day and year first above written.
MMC/GATX PARTNERSHIP NO. 1
By: Meier Mitchell and Company, as General Partner
/s/ James V. Mitchell
By: James V. Mitchell
Title: Secretary
SILICON VALLEY BANK
By:_____________________
Title:__________________
COPPER MOUNTAIN COMMUNICATIONS, INC.
By:____________________
Title:_________________
<PAGE>
[LOGO]
[LETTERHEAD OF SILICON VALLEY BANK APPEARS HERE]
January 17, 1997
Mr. Stan Blackburn
COPPER MOUNTAIN NETWORKS, INC.
6650 Lusk Blvd., Suite. 8103
San Diego, California 92121
Dear Stan,
This letter is intended to acknowledge that Copper Mountain Communications has
notified Silicon Valley Bank of i) its name change to Copper Mountain Networks
and ii) its pending Series B financing round. Silicon Valley Bank hereby grants
its consent to the name change as well as the Series B round.
Additionally, Silicon Valley Bank intends to allow 120 days for the receipt of
Copper Mountain's audited financial statements for the fiscal year ending
December 1996. 1 will contact our counsel to have them prepare a modification to
the loan agreement manifesting this increase from 90 to 120 days.
Should you have any questions and/or concerns regarding the above, please feel
free to contact me at 619-558-3810.
Sincerely,
SILICON VALLEY BANK
/s/ John W. Otterson
John W. Otterson
Senior Vice President
<PAGE>
EXHIBIT 10.9
STANDARD INDUSTRIAL LEASE
Lease Preparation Date: June 4, 1996
Lessor: Public Storage Properties XVIII, Inc., A California Corporation
_____________________________________________________________________________
Lessee: Copper Mountain Communications, Inc., A California Corporation
Trade Name:___________________________________________________________________
1. Lease Terms
1.01 Premises: The Premises referred to in this Lease contain
approximately 9,943 rentable/square feet and are located on Exhibit "A" as
described in Exhibit "Al" attached. The address of the leased Premises is 6650
Lusk Blvd., Suite B102, B103, B202, B203, B204 San Diego, CA 92121
______________________________________________________________________________
1.02 Project: The Project consists of approximately 57,015 rentable/square
feet.
1.03 Lessee's Notice Address: Lessee's Notice Address is the address of
the leased Premises as defined in paragraph 1.01 unless otherwise specified
here: same as 1.01 above
- --------------------------------------------------------------------------------
________________________________________________________________________________
________________________________________________________________________________
1.04 Lessor's Notice Address: Lessor's Notice Address is: 6540 Lusk Blvd.,
Suite C274 San Diego, CA 92121
- --------------------------------------------------------------------------------
________________________________________________________________________________
1.05 Lessee's Permitted Use: General offices for design, light assembly
manufacturing, marketing and related research and development for communications
equipment manufacture.
1.06 Lease Term: The Lease Term commences on June 8, 1996 and ends on June
7, 1999 (36 months, and -0- days).
1.07 Base Monthly Rent: $4,573.78 in lawful money of the United States of
America.
1.08 Security Deposit: $13,721.34 in lawful money of the United States
of America.
1.09 Lease Documentation Fee: $ waived in lawful money of the United
States of America.
1.10 Proportionate Share: Lessee's Proportionate Share is .1743
1.12 Lessee is entitled to unassigned vehicle parking spaces subject to
the provisions of section 10 of this Lease.
2. Demise and Possession
2.01 Lessor leases to Lessee and Lessee leases from Lessor the Premises
described in subsection 1.01. By entering the Premises, Lessee acknowledges that
it has examined the Premises and accepts the Premise in their present condition
subject to any additional work Lessor has agreed to do as stated on Exhibit B.
(1)
2.02 If for any reason Lessor cannot deliver possession of the Premises on
the date the Lease commences, Lessor shall not be subject to any liability nor
shall the validity of this Lease be affected. If Lessee has not caused such
delay there shall be a proportionate reduction of the Base Monthly Rent covering
the period between the commencement of the Lease Term and the date when Lessor
can deliver possession. However, either Lessor or Lessee, unless it is the cause
of the delay, has the right to cancel this Lease by written notification if
possession of the Premises is not delivered within ninety (90) days of the date
the Lease Term commences.
2.01 REFER TO ADDENDUM I.
-1-
<PAGE>
3 BASE MONTHLY RENT
3.0l Base Monthly Rent: On the first day of each calendar month of the
Lease Term, Lessee will pay, without deduction or offset, prior notice or
demand, Base Monthly Rent at the place designated by Lessor. However, the first
month's rent is due and payable upon execution of this Lease. In the event that
the Term of this Lease commences or ends on a day other than the first day of a
calendar month, a prorated amount of Base Monthly Rent shall be due upon
execution and it will be calculated using a thirty (30) day month.
3.02 Cost of Living Adjustment: The Base Monthly Rent is subject to
increase on the expiration of the twelve (12th) calendar month after (a) Lessee
has taken possession of the Premises or, (b) to Lease Term commences, whichever
occurs earlier, and on the expiration of each twelve (12th) month thereafter
("Adjustment Date"). In no event, however, will the amount of Base Monthly Rent
for one twelve (12) month period be less than the Base Monthly Rent for the
preceding twelve (12) month period. STIPULATED BASE RENTAL INCREASES (See below)
A. At the same time the Base Monthly Rent is adjusted, the Security
Deposit will also be adjusted to equal the new Base Monthly Rent amount and the
deficiency is due concurrently with the next payment of Base Monthly Rent.
B. If after this Lease is executed, the Index is discontinued or
revised, Lessor reserves the right to use a conversion factor formula or table
as may be published by the Bureau of Labor Statistics or a different Index in
order to obtain substantially the same result.
3.03 Any installment of rent or any other charge payable which is not paid
within five (5) days after it becomes due will be considered past due and Lessee
will pay to Lessor as Additional Rent a late charge equal to ten percent (10%)
of such installment or the sum of twenty-five dollars ($25.00), whichever is
greater, for each month or fractional month transpiring from the date due until
paid. A twenty-five dollar ($25.00) handling charge will be paid by Lessee to
Lessor for each returned check and, thereafter, Lessee will pay all future
payments of rent or other charges due by money order or cashier's check.
3.04 The amount of the Base Monthly Rent includes projected construction
of Lessee's improvement as indicated on Exhibit "B" attached. In the event that
Lessee requests Lessor to construct additional improvements and/or final
construction costs exceed original estimates, Lessor may increase the Base
Monthly Rent according to the terms and conditions outlined on Exhibit "B", or
elsewhere in this Lease.
4. COMMON AREAS
4.01 Definitions:
"ENTIRE PREMISES": The Premises, the Project (of which the Premises are a
part), the Common Areas, the land upon which the Project and the Common Areas
are located, along with all other improvements and facilities thereon are
collectively referred to as the "Entire Premises"
"COMMON AREAS": "Common Area" is defined as all areas and facilities outside
the Premises and within the exterior boundary line of the Entire Premises that
are provided and designated by Lessor for the non-exclusive use of Lessor,
Lessee and other lessees of the Project and their respective employees, agents,
customers and invitees. Common Areas include, but are not limited to all
parking areas, loading and unloading areas, trash areas, roadways, sidewalks,
walkways, parkways, driveways, corridors, landscaped areas and any restrooms
used in common by lessees.
4.02 Lessee, its employees, agents, customers and invitees have the non-
exclusive right (in common with other lessees, Lessor, and any other person
granted use by Lessor) to use of the Common Areas. Lessee agrees to abide by and
conform to, and to cause its employees, agents, customers and invitees to abide
by and conform to all rules and regulations established by Lessor subject to
provisions of section 26 and the Rule and Regulations attached to this Lease.
STIPULATED RENTAL INCREASES: JUNE 8, 1997 - JUNE 7, 1998 $4772.64
JUNE 8, 1998 - JUNE 7, 1999 $4971.50
-2-
<PAGE>
4.03 Lessor has the right, in its sole discretion, from time to time, to:
1) make changes to the Common Areas, including without limitation, changes in
the location, size, shape and number of driveways, entrances, parking spaces,
parking areas, ingress, egress, direction of driveways, entrances, corridors,
parking areas and walkways; 2) close temporarily any of the Common Areas for
maintenance purposes so long as reasonable access to the Premises remains
available; 3) add additional buildings and improvements to the Common Areas; 4)
use the Common Areas while engaged in making additional improvements, repairs or
alterations to the Entire Premises or any portion thereof; do and perform any
other acts or make any other changes in, to or with respect to the Common Areas
and Entire Premises as Lessor may, in the exercise of sound business judgment,
deem to be appropriate.
5. Additional Rent
5.01 All charges payable by Lessee other than Base Monthly Rent are called
"Additional Rent". Unless this lease provides otherwise, Additional Rent is to
be paid with the next monthly installment of Base Monthly Rent and is subject to
the provisions of 3.03. The term "rent" whenever used in this Lease means Base
Monthly Rent and Additional Rent.
5.02 Operating Costs
A. "Operating Costs" are all costs and expenses of ownership, operation,
maintenance, repair and insurance incurred by Lessor including, but not limited
to, the following: all supplies, materials, labor and equipment, used in or
related to the operation and maintenance of the Common Areas; all utilities,
including but not limited to, water, electricity, gas, heating, lighting, sewer,
waste disposal related to the maintenance or operation of the Common Areas; all
air-conditioning and ventilating costs related to the maintenance or operation
of the Entire Premises; all Lessor's costs in managing, maintaining, repairing,
operating and insuring the Entire Premises, including, for example, clerical,
supervisory, and janitorial staff; all maintenance, management and service
agreements, including but not limited to, janitorial, security, trash removal
related to the maintenance or operation of the Entire Premises; all legal and
accounting costs and fees for licenses and permits related to the ownership and
operation of the Entire Premises; all insurance premiums and costs of fire,
casualty, and liability coverage, rent abatement and earthquake insurance and
any other type of insurance related to the Entire Project; all operation,
maintenance and repair costs to the Common Areas, including but not limited to,
sidewalks, walkways, parkways, parking areas, loading and unloading areas, trash
areas, roadways, driveways, corridors, and landscaped area, including for
example, costs of resurfacing and restriping parking areas; all maintenance and
repair costs of building exteriors (including painting), restrooms used in
common by lessee and signs and directories of the Entire Premises; amortization
(along with reasonable financing charges) of capital improvements made to the
Common Areas which may be required by any government authority or which will
improve the operating efficiency of the Entire Premises; a five percent (5%)
fee for Lessor's supervision of the Common Areas (five percent (5%) of the
total above mentioned costs and expenses incurred in a calendar year). Operating
Costs will not include depreciation of the Entire Premises.
B. Lessee shall pay to Lessor Lessee's Proportionate Share of the
Operating Costs as indicated in subsection 1.10. Such payment shall be paid by
Lessee with and in addition to the monthly payment of Base Monthly Rent. Lessee
shall, if Lessor so elects, pay to Lessor on a monthly basis, in advance, the
amount which Lessor reasonably estimates to be Lessee's Proportionate Share of
the Operating Costs. In the event of such election by Lessor, Lessor shall
periodically determine Lessee's share of the actual Operating Costs, and in the
event that the amount which Lessee has paid to Lessor on account of the
estimated Operating Costs is less than his share of such actual Operating costs,
Lessee shall pay such difference to Lessor on the next rent payment date. In the
event that Lessee has paid to Lessor more than his share of such actual
Operating Costs, the amount of such difference shall be credited against
Lessee's payments of Operating Costs next due.
C. Failure by Lessor to provide Lessee with a statement by April 1st of
each year shall not constitute a waiver by Lessor of its right to collect
Lessee's share of Operating Costs. ln addition, if for any reason Lessor should
not elect to bill Lessee for lump sum Operating Costs or estimates for a
particular calendar year, Lessor's right to charge Lessee for such expenses in
subsequent years is not waived.
5.03 Taxes
A. "Real Property Taxes" are: (i) any fee, license fee, license tax,
business license fee, commercial rental tax, levy, charge, assessment, penalty
or tax imposed by any taxing authority against the Property; (ii) any tax or fee
on Lessor's right to receive, or the receipt of, rent or income from the
Property or against Landlord's business of leasing the Property, (iii) any tax
or charge for fire protection, streets, sidewalks, road maintenance, refuse or
other services provided to the Property by any governmental agency; (iv) any tax
imposed upon this transaction, or based upon a reassessment of the Project due
to a change in ownership or transfer of all or part of Lessor's interest in the
Property; and (v) any charge or fee replacing, substituting for, or in addition
to any tax previously included within the definition of real property tax. Real
Property Taxes do not, however, include Lessor's federal or state income,
franchise, inheritance or estate taxes.
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B. Lessee shall pay to Lessor Lessee's Proportionate Share of the Real
Property Taxes as indicated in subsection 1.10. Such payment shall be paid by
Lessee with and in addition to the monthly payment of Base Monthly Rent. Lessee
shall, if Lessor so elects, pay to Lessor on a monthly basis, in advance, the
amount which Lessor reasonably estimates to be Lessee's Proportionate Share of
the Real Property Taxes. In the event of such election by Lessor, Lessor shall
periodically determine Lessee's share of the actual Real Property Taxes, and in
the event that the amount which Lessee has paid to Lessor on account of the Real
Property Taxes is less than his share of such actual Real Property Taxes, Lessee
shall pay such difference to Lessor on the next rent payment date. In the event
that Lessee has paid to Lessor more than his share of such actual Real Property
Taxes, the amount of such difference shall be credited against Lessee's payment
of Real Property Taxes next due.
C. Personal Property Taxes: Lessee will pay all taxes charged against
trade fixtures, furnishings, equipment or any other personal property belonging
to Lessee. Lessee will have personal property taxes billed separately from the
Project. If any of Lessee's personal property is taxed with the Project, Lessee
will pay Lessor the taxes for the personal property upon demand by Lessor.
5.04 Based on Lessee's Proportionate Share defined in subsection 1.10,
Lessee agrees to pay as Additional Rent to Lessor its share of any parking
charges, utility surcharges, occupancy taxes, or any other costs resulting from
the statutes or regulations, or interpretations thereof, enacted by any
governmental authority in connection with the use or occupancy of the Project or
the parking facilities serving the Project, or any part thereof.
6. Security Deposit
6.01 If Lessee defaults with respect to any provision of this Lease,
Lessor may retain, use or apply all or any part of the Security Deposit to
compensate Lessor for any loss or damage suffered by Lessee's default including
but not limited to, the payment of Base Monthly Rent, Additional Rent or other
rental sums due, and for payment of amounts Lessor is obligated to spend by
reason of Lessee's default. If any portion is so retained, used or applied,
Lessee, upon demand, will deposit with Lessor an amount sufficient to restore
the deposit to its original amount, as adjusted per subsection 3.02. Lessor will
not be required to keep the Security Deposit separate from its general funds,
and Lessee will not be entitled to interest on it. If Lessee fully and
faithfully performs every provision of this Lease, the Security Deposit or a
balance thereof will be returned to Lessee within the time frame permitted by
law. In no event will Lessee have the right to apply any part of the Security
Deposit to any rents payable under this Lease.
7. Lease Documentation Fee
8. Use of Premises; Quiet Conduct
8.01 The Premises may be used and occupied only for Lessee's Permitted Use
as shown in subsection 1.05 and for no other purpose, without obtaining Lessor's
prior written consent. Lessee will comply with all covenants, conditions and
restrictions affecting the Premises. Lessee will promptly comply with all laws,
ordinances, orders and regulations affecting the Premises. Lessee will not
perform any act or carry on any practices that may injure the Project or the
Premises or be a nuisance or menace, or disturb the quiet enjoyment of other
lessees, in the Project including but not limited to equipment which causes
vibration, use or storage of chemicals, heat or noise which is not properly
insulated, or anything which causes noxious or unpleasant odors. Lessee will not
cause, maintain or permit any outside storage on or about the Premises. In
addition, Lessee will not allow any condition or thing to remain on or about the
Premises which diminishes the appearance or aesthetic qualities of the Premises
and/or the Project or the surrounding property. The keeping of a dog or other
animal on or about the Premises is prohibited. (1)
9. Tenant Improvements
9.01 Tenant Improvements to be performed in the Premises, if any, will be
performed in accordance with the terms and provisions entitled "Lessor's Work"
contained in "Exhibit B" attached. Thereafter during the Lease Term, Lessor
will be under no obligation to alter, change, decorate or improve the Premises.
10. Parking
10.01 Lessee and Lessee's customers, suppliers, employees, and invitees
have the non-exclusive right to park in common with other lessees in the parking
facilities as designated by Lessor. Lessee agrees not to overburden the parking
facilities and agrees to cooperate with Lessor and other lessees in the use of
the parking facilities. Lessor reserves the right to, on an equitable basis,
assign specific spaces with or without charge to Lessee as Additional Rent, make
changes in the parking layout from time to time, and to establish reasonable
time limits on parking.
8.01 REFER TO ADDENDUM I.
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11. Utilities
11.01 Lessee will pay for all gas, heat, light, power, electricity, or
other services metered, chargeable to or provided to the Premises. Lessor
reserves the right to install separate meters for any such utility.
11.02 Lessor will not be liable or deemed in default to Lessee nor will
there be any abatement of rent for any interruption or reduction of utilities or
services not caused by any act of Lessor or any act reasonably beyond Lessor's
control. Lessee agrees to comply with energy conservation programs implemented
by Lessor by reason of enacted laws or ordinances.
11.03 Lessee will contract and pay for all telephone and such other
services for the Premises subject to the provisions of subsection 12.03.
12. Alterations, Mechanic's Liens
12.01 Lessee will not make any alterations to the interior of the Premises,
without Lessor's prior written consent which will not be unreasonably withheld.
If Lessor gives its consent, no such alterations will proceed without Lessor's
prior written approval of (i) Lessee's contractor, (ii) certificates of
insurance by Lessee's contractor for public liability and automobile liability
and property damage insurance with limits not less than $1,000,000/$250,000/
$500,000 respectively endorsed to show Lessor as an additional insured and for
worker's compensation as required and (iii) detailed plans and specification for
such work. In addition, before alterations may begin, valid building permits or
other permits or licenses required must be furnished to Lessor, and, once the
alterations begin, Lessee will diligently and continuously pursue their
completion. At Lessor's option, any alterations may become part of the realty
and belong to Lessor. If requested by Lessor, Lessee will pay, prior to the
commencement of construction, an amount determined by Lessor necessary to cover
the costs of demolishing such alterations and/or the cost of returning the
Premises to its condition prior to such alterations. As a further condition to
giving such consent, Lessor may require Lessee to provide Lessor, at Lessee's
sole cost and expense, a payment and performance bond in form acceptable to
Lessor, in a principal amount not less than one and one-half times the estimated
costs of such alterations, to ensure Lessor against any liability for mechanic's
and materialmen's liens and to ensure completion of work and such bond will
continue in force for a period no less than 131 days after the completion of
such work.
12.02 Notwithstanding anything in subsection 12.01, Lessee may, with
written consent of Lessor, install trade fixtures, equipment, and machinery in
conformance with the ordinances of the applicable city and county, and they may
be removed upon termination of this Lease provided the Premises are not damaged
by their removal.
12.03 All private telephone systems and/or other related
telecommunications equipment and lines may not be installed without Lessor's
prior written consent. In addition, if Lessor gives consent all equipment must
be installed within Lessee's Premises and, upon termination of this Lease
removed and the Premises restored to the same condition as before such
installation.
12.04 Lessee will pay all costs for alterations and will keep the
Premises, the Project and the underlying property free from any liens arising
out of work performed for, materials furnished to, or obligation incurred by
Lessee as outlined in the applicable parts of subsection 12.01 above.
12.05 Lessor will have the right to construct or permit construction of
tenant improvements in or about the Project for existing and new lessees and to
alter any public areas in and around the Project. Notwithstanding anything which
may be contained in this Lease, Lessee understands this right of Lessor and
agrees that such construction will not be deemed to constitute a breach of this
Lease by Lessor and Lessee waives any such claim which it might have arising
from such construction.
13. Fire Insurance; Hazards and Liability Insurance
13.01 Except as expressly provided as Lessee's Permitted Use, subsection
1.05, or as otherwise consented to by Lessor in writing, Lessee shall not do or
permit anything to be done within or about the Premises which will increase the
existing rate of insurance on the Project or shall, at its sole cost and
expense, comply with any requirements pertaining to the Premises or any
insurance organization insuring the Project and Project-related apparatus.
Lessee agrees to pay to Lessor, as Additional Rent, any increases in premiums on
policies resulting from Lessee's Permitted Use or other use consented to by
Lessor which increases Lessor's premiums or requires extended coverage by Lessor
to insure the Premises.
13.02 Lessee, at all times during the term of this Lease and at Lessee's
sole expense, will maintain a policy of standard fire and extended coverage
insurance with "all risk" coverage on all Lessee's improvements and alterations
in or about the Premises and on all personal property and equipment to the
extent of at least ninety percent (90%) of their full replacement value. The
proceeds from this policy will be used by Lessee for the replacement of personal
property and equipment and the restoration of Lessee's improvements and/or
alterations. This policy will contain an express waiver, in favor of Lessor, of
any right of subrogation by the insurer.
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13.03 Lessee, at all times during the term of this Lease and at Lessee's
sole expense, will maintain a policy of comprehensive general liability coverage
with limits of not less than $1,000,000 combined single loss for bodily injury
and property damage insuring against all liability of Lessee and its authorized
representatives arising out of or in connection with Lessee's use or occupancy
of the Premises. This policy of insurance will name Lessor as an additional
insured and will include an express waiver of subrogation by the insurer in
favor of Lessor and will release Lessor from claims for damage to any person, to
the Premises, and to the Project, and to Lessee's personal property, equipment,
improvements and alterations in or on the Premises of the Project, caused by or
resulting from risks which are to be insured against by Lessee under this Lease.
13.04 All insurance required to be provided by Lessee under this Lease will
(a) be issued by an insurance company authorized to do business in the state in
which the Premises are located and which is satisfactory to Lessor, (b) be
primary and noncontributing with any insurance carried by Lessor, and (c)
contain an endorsement requiring at least thirty (30) days prior written notice
of cancellation to Lessor before cancellation or change in coverage, scope
or limit of any policy. Lessee will deliver a certificate of insurance or a copy
of the policy to Lessor within thirty (30) days of execution of the Lease and
will provide evidence of renewed insurance coverage at each anniversary, prior
to the expiration of any current policies. Lessee's failure to provide evidence
of this coverage to Lessor may, in Lessor's sole discretion, constitute a
default under this Lease. (1)
14. Indemnification and Waiver of Claim
14.01 Lessee waives all claims against Lessor for damage to any property
in or about the Premises and for injury to any persons, including death
resulting therefrom, regardless of cause or time of occurrence. Lessee will
defend, indemnify and hold Lessor harmless from and against any and all claims,
actions, proceedings, expenses, damages and liabilities, including attorneys'
fees, arising out of, connected with, or resulting from any use of the Premises
by Lessee, its employees, agents, visitors or licensees, except for any damage
or injury which is the direct result of intentional acts by Lessor, its
employees, agents, visitors or licensees.
15. Repairs
15.01 Lessee shall, at its sole expense, keep and maintain the Premises
and every part thereof (excepting air-conditioning, common use equipment,
exterior walls and roofs, which Lessor agrees to repair unless damages are due
to the neglect or intentional acts of Lessee or its agents, employees, visitors,
or licensees), including interior windows, skylights, doors, any store fronts
and the interior of the Premises, in good and sanitary order, condition and
repair. Lessee will, also, at its sole cost keep and maintain all utilities,
fixtures, plumbing and mechanical equipment used by Lessee in good order and
repair and furnish all expendables (light bulbs [unless provided by Lessor],
paper goods, soaps, etc.) used in the Premises. The standard for comparison and
need of repair will be the condition of the Premises at the time of commencement
of this Lease and all repairs will be made by a licensed and bonded contractor
approved by Lessor.
15.02 Lessee will not make repairs to the Premises at the cost of Lessor
whether by deduction of rent or otherwise or vacate the Premises or terminate
the Lease with abatement or termination of rent because repairs are not made. If
during the Term, any alteration, addition or change to the Premises is required
by legal authorities, Lessee, at its sole expense, shall promptly make the same.
Lessor reserves the right to make any such repairs not repaired or maintained in
good condition by Lessee and Lessee shall reimburse Lessor for all such costs
upon demand. If such repairs have not been made within 30 days of notice to
repair by Lessor to Lessee, Lessor may make such repairs and such costs of
repairs shall be at Lessee's expense. Failure to pay expenses within 30 days of
presentation, shall be deemed a breach of this Lease. (2)
16. Auction, Signs, Landscaping
16.01 Lessee will not conduct or permit to be conducted any sale by auction
on the Premises. Lessor will have the right to control landscaping and approve
the placement, size, and quality of signs. Lessee shall comply with the terms
and conditions regarding sign criteria set forth in Exhibit "C" attached. Lessee
will not make alterations or additions to the landscaping and will not place
signs which are visible from the outside of any buildings of the Project without
prior written consent of Lessor. Lessor will have the right in its sole
discretion to withhold its consent. Any signs not in conformity with this Lease
may be removed by Lessor at Lessee's expense.
(1) CONTINUED ON ADDENDUM I, SECTION 13.05.
(2) 15.02 REFER TO ADDENDUM I
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17. Entry By Lessor
17.01 Lessee will permit Lessor and Lessor's agents to enter the Premises
at all reasonable times for the purpose of inspecting the same, or for the
purpose of maintaining the Project, or for the purpose of making repairs,
alterations or additions to any portion of the Project, including the erection
and maintenance of such scaffolding, canopies, fences and props as may be
required, or for the purpose of posting notices of nonresponsibility for
alterations, additions or repairs, or for the purpose of showing the Premises to
prospective tenants during the last six months of the Lease Term, or placing
upon the Project any usual or ordinary "for sale" signs, without any rebate of
rents and without any liability to Lessee for any loss of occupation or quiet
enjoyment of the Premises thereby occasioned. Lessee will permit Lessor at any
time within sixty (60) days prior to the expiration of this Lease, to place upon
the Premises any usual or ordinary "to let" or "to lease" signs. For each of the
above purposes, Lessor will at all times have and retain a key with which to
unlock all of the doors in, upon and about the Premises, excluding Lessee's
vaults and safes. Lessee will not alter any lock or install a new or additional
lock or any bolt on any door of the Premises without the prior written consent
of Lessor, which will not be unreasonably withheld. If Lessor gives its consent,
Lessee will furnish Lessor with a key and Lessor retains the right to charge
Lessee for restoring any altered doors to their condition prior to the
installation of the new or additional locks.
18. Abandonment
18.01 Lessee will not or abandon the Premises at any time during the Lease
Term or permit the Premises to remain unoccupied for a period longer than
fifteen (15) consecutive days during the Lease Term. If Lessee abandons, or
surrenders the Premises, or is dispossessed by process of law, or otherwise, any
personal property belonging to Lessee left in or about the Premises will, at the
option of Lessor be deemed abandoned and may be disposed of by Lessor in the
manner provided for by the laws of the state in which the Premises are located.
19. Destruction
19.01 Should the Premises or the building on the Premises be partially
destroyed by any cause not the fault of Lessee (or any person in or about the
Premises with the consent, expressed or implied, of Lessee), this Lease will
continue in full force and effect and Lessor, at Lessor's own cost and expense,
will promptly commence the work of repairing and restoring the Premises to their
prior condition providing that the work can be accomplished under all applicable
government laws and regulations within sixty (60) working days from the date of
damage at a cost not exceeding twenty-five percent (25%) of the total
replacement cost of the Premises. Within thirty (30) days of the occurrence of
partial destruction, Lessor may terminate this Lease as of the date of the
occurrence if nine (9) months or less remain in the Lease Term.
19.02 Should the Premises or the building in which the Premises are a part
be so far destroyed by any cause not the fault of Lessee (or any person in or
about the Premises with the consent, expressed or implied, of Lessee) that they
cannot be repaired or restored to their former condition within sixty (60) days
of the date of damage or at a cost exceeding twenty-five percent (25%) of the
total replacement cost of the Premises, Lessor may at Lessor's options either:
A. Continue this Lease in full force and effect by repairing and
restoring, at Lessor's own cost and expense, the Premises to their former
condition; or
B. Terminate this Lease by giving Lessee written notice of such
termination.
19.03 Should the Premises be partially or totally destroyed by any cause
of Lessee, or any person in or about the Premises with the consent, expressed or
implied, of Lessee, this Lease will remain in full force and effect and Lessee
shall immediately commence work to repair the damage and diligenty pursue its
completion.
19.04 Any insurance proceeds received by Lessor because of the total or
partial destruction of the Premises or the building on the Premises will be the
sole property of Lessor, free from any claims of Lessee, and may be used by
Lessor for whatever purposes Lessor may desire.
19.05 Should Lessor elect to repair and restore the Premises to their
former condition, or should Lessor be required to restore the Premises to their
former condition, there will be a proportional abatement in the amount of rent
payable during the period of repair and restoration as long as Lessee (or any
person in or about the Premises with the consent, expressed or implied, of
Lessee) is not the cause of the total or partial destruction. The rent due under
the terms of the Lease will be reduced between the date of destruction and the
date of completion of restoration and repairs based on the extent to which
destruction interferes with Lessee's use of the Premises.
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20. Assignment, Subletting and Transfers of Ownership
20.01 Lessee will not directly or indirectly, voluntarily or by operation
of law, assign, sell, mortgage, encumber, convey, or otherwise Transfer all or
any part of Lessee's Leasehold estate, or permit the Premises to be occupied by
anyone other than Lessee and Lessee's employees or sublet the Premises or any
portion thereof (collectively called "Transfer") without Lessor's prior written
consent. If Lessee desires at any time to Transfer this Lease, Lessee shall
first give written notice to Lessor of its desire to do so, which notice shall
contain (a) the identity of the proposed Transferee, (b) the terms and
provisions of the proposed Transfer, (c) the nature of the proposed Transferee's
business to be carried on in the Premises, (d) a detailed summary of the
business background and financial condition of the proposed Transferee, and (e)
such financial information as deemed necessary by Lessor to evaluate any
proposed Transfer. All of the foregoing information shall be provided to Lessor
by Lessee at least sixty (60) days in advance of Lessee's proposed Transfer
date.
20.02 Lessor will not unreasonably withhold its consent to any proposed
Transfer except that such consent need not be granted if: (a) in the reasonable
judgment of Lessor the Transferee is of a character or is engaged in a business
which is not in keeping with the standards of the Lessor for the Project; (b) in
the reasonable judgment of Lessor any purpose for which the Transferee intends
to use the Premises is not in keeping with the standards of Lessor for the
Project; provided in no event may any purpose for which Transferee intends to
use the Premises be in violation of this Lease; (c) the portion of the Premises
subject to the Transfer is not regular in shape with appropriate means of
entering and exiting, including adherence to any local, county or other
governmental codes, or is not otherwise suitable for the normal purposes
associated with such a Transfer; (d) the proposed Transferee be at least as
financially responsible as Lessee was expected to be at the time of the
execution of this Lease or (e) Tenant is in default under this Lease, (1) see
below.
20.03 In the event Lessor consents to a Transfer, Lessee will pay Lessor
the excess, if any, of the rent and other charges reserved in the Transfer over
the allocable portion of the rent and other charges hereunder for that portion
of the Premises subject to the Transfer. For the purpose of this section, the
rent reserved in the Transfer will be deemed to include any lump sum payment or
other consideration given to Lessee in consideration for the Transfer. Lessee
will pay or cause the Transferee to pay to Lessor this additional rent together
with the monthly installments of rent due.
20.04 Any consent to any Transfer which may be given by Lessor, or the
acceptance of any rent, charges or other consideration by Lessor from Lessee or
any third party, will not constitute a waiver by Lessor of the provisions of
this Lease or a release of Lessee from the full performance by it or the
covenants stated herein; and any consent given by Lessor to any Transfer will
not relieve Lessee (or any transferee of Lessee) from the above requirements for
obtaining the written consent of Lessor to any subsequent Transfer.
20.05 If a default under this Lease should occur while the Premises or any
part of the Premises are assigned, sublet or otherwise transferred, Lessor, in
addition to any other remedies provided for within this Lease or by law, may at
its option collect directly from the Transferee all rent or other consideration
becoming due to Lessee under the Transfer and apply these monies against any
sums due to Lessor by Lessee; and Lessee authorizes and directs any Transferee
to make payments of rent or other consideration direct to Lessor upon receipt of
notice from Lessor. No direct collection by Lessor from any Transferee should be
construed to constitute a novation or a release of Lessee or any guarantor of
Lessee from the further performance of its obligations in connection with this
Lease.
20.06 Any Transfer without the Lessor's consent shall be void and shall,
at the option of Lessor, terminate this Lease.
20.07 If Lessee requests a consent of Lessor to any Transfer, then Lessee
shall, upon demand, pay Lessor an administrative fee of One Hundred Fifty
Dollars ($150.00) plus any attorneys' fees reasonably incurred by Lessor in
connection with such request.
21. Breach By Lessee
21.01 Lessee will be in breach of this Lease if at any time during the
term of this Lease (and regardless of the pendency of any bankruptcy,
organization, receivership, insolvency or other proceedings in law, in equity or
before any administrative tribunal which have or might have the effect of
preventing Lessee from complying with the terms of this Lease):
A. Lessee fails to make payment of any installment of Base Monthly Rent,
Additional Rent, or of any other sum herein specified to be paid by Lessee, and
such failure is not cured within three (3) days after Lessor's written notice to
Lessee of such failure of payment, which notice shall be in lieu of and not in
addition to any notice required by statute; or
B. Lessee fails to observe or perform any of its other covenants,
agreements or obligations hereunder, and such failure is not cured within ten
(10) days after Lessor's written notice to Lessee of such failure, which notice
shall be in lieu of and not in addition to any notice required by statute
provided, however, that if the nature of Lessee's obligation is such that more
than ten (10) days are required for performance, then Lessee will not be in
breach if Lessee commences performance within such ten (10) day period and
thereafter diligently prosecutes the same to completion; or
(1) BEYOND NOTICE AND THE EXPIRATION OF ANY APPLICABLE CURE PERIOD.
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C. Lessee becomes insolvent, makes a transfer in fraud of its creditors,
makes a transfer for the benefit of its creditors, voluntarily files for
bankruptcy, is adjudged bankrupt or insolvent in proceedings filed against
Lessee, a receiver, trustee, or custodian is appointed for all or substantially
all of Lessee's assets, fails to pay its debts as they become due, convenes a
meeting of all or a portion of its creditors, or performs any acts of bankruptcy
or insolvency, including the selling of its assets to pay creditors, or
indicates a general inability to pay its obligations hereunder; or
D. Lessee has abandoned the Premises as defined in section 18 above.
22. Remedies of Lessor
22.01 Termination of Lease After Breach: If Lessee breaches this Lease and
abandons the Premises before the end of the term, or if its right to possession
is terminated by Lessor because of Lessee's breach of this Lease, then this
Lease may be terminated by Lessor at its option. On such termination Lessor may
recover from Lessee, in addition to the remedies permitted by law:
A. The worth at the time of award of the unpaid rents which had been
earned at the time of termination;
B. The worth at the time of award of the amount by which the unpaid rents
which would have been earned after termination until the time of award exceeds
the amount of such rental loss that Lessee proves could have been reasonably
avoided;
C. The worth at the time of award of the amount by which the unpaid rents
for the balance of the Lease Term after the time of award exceeds the amount of
such rental loss for such period that Lessee proves could be reasonably avoided;
and
D. Any other amount necessary to compensate Lessor for all the damage
proximately caused by Lessee's breach of its obligations under this Lease, or
which in the ordinary course of events would be likely to result therefrom. The
damage proximately caused by Lessee's breach will include, without limitation,
(i) expenses for cleaning, repairing or restoring the Premises, (ii) expenses
for altering, remodeling or otherwise improving the Premises for the purpose of
reletting, (iii) brokers' fees and commissions, advertising costs and other
expenses of reletting the Premises, (iv) costs of carrying the Premises such as
taxes, insurance premiums, utilities and security precautions, (v) expenses in
retaking possession of the Premises, (vi) attorneys' fees and court costs, (vii)
any unearned brokerage commissions paid in connection with this Lease and (viii)
reimbursement of any previously waived Base Rent or Additional Rent.
22.02 Continuation of Lease After Breach: Notwithstanding the foregoing,
in the event Lessee has breached this Lease and abandoned the Premises, this
Lease, at Lessor's option, will continue in full force and effect so long as
Lessor does not terminate Lessees' right to possession of the Premises, and in
such event Lessor may enforce all of its rights and remedies under this Lease,
including the right to recover rent as it becomes due. For purposes of this
subsection 22.03, the following acts by Lessor will not constitute the
termination of Lessee's right to possession of the premises:
A. Acts of maintenance or preservation or efforts to relet the Premises,
including, but not limited to, alterations, remodeling, redecorating, repairs,
replacements and/or painting as Lessor shall consider advisable for the purpose
of reletting the Premises or any part thereof; or
B. The appointment of a receiver upon the initiative of Lessor to protect
Lessor's interest under this Lease or in the Premises.
22.03 In the event of bankruptcy, Lessee assigns to Lessor all its rights,
title and interest in the Premises as security for its obligations and covenants
set forth in this Lease.
22.04 Definitions and Incidental Rights
A. The "worth at the time of award" of the amounts referred to in
subsection 22.01A, and subsection 22.01B, will be computed by allowing interest
at the rate of ten percent (10%) per annum, The "worth at the time of award" of
the amount referred to above in subsection 22.01C will be computed by
discounting the amount at the discount rate of the Federal Reserve Bank of San
Francisco in effect at the time of award, plus one percent (1%).
B. Any efforts by Lessor to lessen the damages caused by Lessee's breach
of this Lease will not waive Lessor's right to recover the damages set forth
above.
C. Nothing herein will be construed to affect other provisions of this
Lease regarding Lessor's right to indemnification from Lessee for liability
arising prior to the termination of this Lease for personal injuries or property
damage.
-9-
<PAGE>
D. No right or remedy conferred upon or reserved to Lessor in this Lease
is intended to be exclusive of any other right or remedy granted to Lessor by
statute or common law, and each and every such right and remedy will be
cumulative.
23. Surrender of Lease Not Merger
23.01 The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, will not work a merger and will, at the option of
Lessor, terminate all or any existing transfers, or may, at the option of
Lessor, operate as an assignment to it of any or all of such transfers.
24. Attorneys Fees / Collection Charges
24.01 In the event of any legal action or proceeding between the parties
hereto, actual attorneys' fees and expenses of the prevailing party in any such
action or proceeding will be added to the judgment therein. Should Lessor be
named as defendant in any suit brought against Lessee in connection with or
arising out of Lessee's occupancy hereunder, Lessee will pay to Lessor its costs
and expenses incurred in such suit, including actual attorneys' fees.
24.02 If Lessor utilizes the services of any attorney at law for the
purpose of collecting any rent due and unpaid by Lessee after three (3) days'
written notice to Lessee of such nonpayment of rent or in connection with any
other breach of this Lease by Lessee, Lessee agrees to pay Lessor actual
attorneys' fees as determined by Lessor for such services, regardless of the
fact that no legal action may be commenced or filed by Lessor.
25. Condemnation
25.01 If twenty-five percent (25%) or more of the Premises is taken for
any public or quasi-public purpose by any lawful government power or authority,
by exercise of the right of appropriation, reverse condemnation, condemnation or
eminent domain, or sold to prevent such taking, the Lessee or the Lessor may at
its option terminate this Lease as of the effective date thereof. Lessee will
not because of such taking assert any claim against the Lessor or the taking
authority for any compensation because of such taking, and Lessor will be
entitled to receive the entire amount of any award without deduction for any
estate of interest of Lessee. If less than twenty-five percent (25%) of the
Premises is taken, Lessor at its option may terminate this Lease. If Lessor does
not so elect, Lessor will promptly proceed to restore the Premises to
substantially its same condition prior to such partial taking, allowing for any
reasonable effects of such taking, and a proportionate allowance will be made to
Lessee for the rent corresponding to the time during which, and to the part of
the Premises which, Lessee is deprived on account of such taking and
restoration.
26. Rules and Regulations
26.01 Lessee will faithfully observe and comply with the Rules and
Regulations printed on or attached to this Lease and Lessor reserves the right
to modify and amend them as it deems necessary. Lessor will not be responsible
to Lessee for the nonperformance by any other lessee or occupant of the Project
of any of said Rules and Regulations.
26.02 Violation of any such Rules and Regulations shall be deemed a
material breach of the Lease by Lessee.
27. Estoppel Certificate
27.01 Lessee will execute and deliver to Lessor, within ten (10) days of
receiving written notice, a statement in writing certifying that this Lease is
unmodified and in full force and effect (or, if modified, stating the nature of
such modification) and the date to which rent and other charges are paid in
advance, if any, and acknowledging that there are not, to Lessee's knowledge,
any uncured defaults on the part of Lessor hereunder or specifying such defaults
if they are claimed. Any such statement may be conclusively relied upon by any
prospective purchaser or encumbrancer of the Premises. Lessee's failure to
deliver such statement within such time shall be conclusive upon Lessee that (1)
this Lease is in full force and effect, without modification except as may be
represented by Lessor; (2) there are no uncured defaults in Lessor's
performance; and (3) no than one (1) month's rent has been paid in advance./(1)/
Initial: J.M.
------------
28. Sale By Lessor
28.01 In the event of a sale or conveyance by Lessor of the Project the
same shall operate to release Lessor from any liability upon any of the
covenants or conditions, expressed or implied, herein contained in favor of
Lessee, and in such event Lessee agrees to look solely to the responsibility of
the successor in interest of Lessor in and to this Lease. This Lease will not be
affected by any such sale, and Lessee agrees to attorn to the purchaser or
assignee.
Initial: J.M.
------------
(1) SECTION 27.02 CONTINUED ON ADDENDUM I.
-10-
<PAGE>
29. Notices
29.01 All notices, statements, demands, requests, consents, approvals,
authorizations, offers, agreements, appointments or designations under this
Lease by either party to the other will be in writing and will be considered
sufficiently given and served upon the other party if sent by certified mail,
return receipt requested, postage prepaid, and addressed as indicated in
subsection 1.03 and subsection 1.04.
30. Waiver
30.01 The failure of Lessor to insist in any one or more cases upon the
strict performance of any term, covenant or condition of this Lease will not be
construed as a waiver of a subsequent breach of the same or any other covenant,
term or condition; nor shall any delay or omission by Lessor to seek a remedy
for any breach of this Lease be deemed a waiver by Lessor of its remedies or
rights with respect to such a breach.
31. Lessee's Intent, Holding Over
31.01 Lessee will give Lessor, ninety (90) days prior to the expiration of
the Lease Term, written notification of Lessee's intent to either remain in or
vacate the Premises on the Lease Expiration Date. If Lessee does not notify
Lessor by the date specified herein, Lessor deems that Lessee will vacate the
Premises by the Lease Expiration Date and Lessor will have no further
obligation.
31.02 Any holding over after the expiration or termination of the term of
this Lease, or after any notice given by Lessor to Lessee terminating this
Lease, such possession by Lessee will be deemed to be a month-to-month tenancy
terminable on thirty (30) day notice at any time by either party. All provisions
of this Lease, except those pertaining to term and rent, will apply to the
month-to-month tenancy. Lessee will pay Base Monthly Rent in an amount equal to
150% of rent for the last full calendar month during the regular term.
32. Project Plan
32.01 In the event Lessor requires the Premises for use in conjunction
with another suite or for other reasons connected with the Project planning
program, Lessor, upon notifying Lessee in writing, shall have the right to move
Lessee to space in the Project of which the Premises forms a part, at Lessor's
sole cost and expense (excluding private telephone systems which Lessee must
bear the cost of moving and installing), and the terms and conditions of the
original Lease will remain in full force and effect excepting that the Premises
will be in a new location. However if the new space does not meet with Lessee's
approval, Lessee will have the right to cancel this Lease upon giving Lessor
thirty (30) days' notice within ten (10) days of receipt of Lessor's
notification. Should Lessee elect to cancel the Lease as provided in this
paragraph, the effective expiration date will equal the projected move-in date
of the suite Lessor wishes Lessee to move to as indicated in Lessor's written
notification to Lessee.
33. Default of Lessor / Limitation of Liability
33.01 In the event of any default by Lessor hereunder, Lessee agrees to
give notice of such default, by registered mail, to Lessor at Lessor's Notice
Address as stated in subsection 1.04 and to offer Lessor a reasonable
opportunity to cure the default.
33.02 In the event of any actual or alleged failure, breach or default
hereunder by Lessor, Lessee's sole and exclusive remedy will be against Lessor's
interest in the Project, and no partner of Lessor will be sued, be subject to
service of process, or have a judgment obtained against him in connection with
any alleged breach or default, and no writ of execution will be levied against
the assets of any partner of Lessor. The covenants and agreements are
enforceable by Lessor and also by any partner of Lessor.
34. Release of Partners of Lessor
34.01 lf Lessee has any claim against Lessor under or arising out of this
Lease, Lessee's sole recourse shall be against the assets of Lessor and Lessee
further waives any and all right to assert any claim against, or obtain any
damages from, the partners, employees, officers, directors or agents of Lessor.
35. Expansion Clause
35.01 If during the Lease Term, Lessee executes a lease within the Project
for space larger than the present Premises with a lease term at least equal to
that which remains on this Lease or one (1) year, whichever is greater, with a
Base Monthly Rent amount at least equal to the present Base Monthly Rent of this
Lease, this Lease shall be terminated upon the commencement date of the lease
for such substitute space. Notwithstanding the above-stated, Lessee shall remain
obligated to pay for any adjustments in rent pursuant to sections 3, 4 and 5 due
Lessor as a result of Lessee's tenancy hereunder and this obligation shall
survive the termination of this Lease pursuant to this section 35.
Initial: J.M
---------
-11-
<PAGE>
36. Subordination
36.01 Without the necessity of any additional document being executed by
Lessee for the purpose of effecting a subordination, and at the election of
Lessor or any mortgagee with a lien on the Project or any ground lessor with
respect to the Project, this Lease will be subject and subordinate at all time
to (a) all ground leases or underlying leases which may now exist or hereafter
be executed affecting the Project, and (b) the lien of any mortgage or deed of
trust which may now exist or hereafter be executed in any amount for which the
Project, ground leases or underlying leases, or Lessor's interest or estate in
any of said items is specified as security. In the event that any ground lease
or underlying lease terminates for any reason or any mortgage or deed of trust
is foreclosed or a conveyance in lieu of foreclosure is made for any reason,
Lessee will, notwithstanding any subordination, attorn to and become the Lessee
of the successor in interest to Lessor, at the option of such successor in
interest. Lessee covenants and agrees to execute and deliver upon demand by
Lessor and in the form requested by Lessor any additional documents evidencing
the priority or subordination of this Lease with respect to any such ground
lease or underlying leases or the lien of any such mortgage or deed of trust.
Lessee hereby irrevocably appoints Lessor as attorney-in-fact of Lessee to
execute, deliver and record any such document in the name and on behalf of
Lessee. /(1)/
37. Miscellaneous Provisions
37.01 Whenever the singular number is used in this Lease and when required
by the context, the same will include the plural, and the masculine gender will
include the feminine and neuter genders, and the word "person" will include
corporation, firm, partnership, or association. If there be more than one
Lessee, the obligations imposed upon Lessee under this Lease will be joint and
several.
37.02 The headings or titles to paragraphs of this Lease are not a part of
this Lease and will have no effect upon the construction or interpretation of
any part of this Lease.
37.03 This instrument contains all of the agreements and conditions made
between the parties to this Lease and may not be modified orally or in any other
manner than by an agreement in writing signed by all parties to this Lease.
Lessee acknowledges that neither Lessor nor Lessor's agents have made any
representation or warranty as to the suitability of the Premises to the conduct
of Lessee's business. Any agreements, warranties or representations not
expressly contained herein will in no way bind either Lessor or Lessee, and
Lessor and Lessee expressly waive all claims for damages by reason of any
statement, representation, warranty, promise or agreement, if any, not contained
in this Lease.
37.04 Time is of the essence of each term and provision of this Lease.
37.05 Except as otherwise expressly stated, each payment required to be
made by Lessee is in addition to and not in substitution for other payments to
be made by Lessee.
37.06 Subject to section 20, the terms and provisions of this Lease are
binding upon and inure to the benefit of the heirs, executors, administrators,
successors and assigns of Lessor and Lessee.
37.07 All covenants and agreements to be performed by Lessee under any of
the terms of this Lease will be performed by Lessee at Lessee's sole cost and
expense and without any abatement of rent.
37.08 In consideration of Lessor's covenants and agreements hereunder,
Lessee hereby covenants and agrees not to disclose any terms, covenants or
conditions of this Lease to any other party without the prior written consent of
Lessor.
38. Deposit Agreement
38.01 Lessor and Lessee hereby agree that Lessor will be entitled to
immediately endorse and cash Lessee's good faith rent and the Security Deposit
check(s) accompanying this Lease. It is further agreed and understood that such
action will not guarantee acceptance of this Lease by Lessor, but, in the event
Lessor does not accept this Lease, such deposits will be refunded in full to
Lessee. This Lease will be effective only after Lessee has received a copy fully
executed by Lessor.
39. Governing Law
39.01 This Lease is governed by and construed in accordance with the laws
of the state in which the Premises are located, and venue of any suit will be in
the county where the Premises are located.
40. Severability
40.01 If any provision of this Lease is found to be unenforceable, all
other provisions shall remain in full force and effect.
(1) SECTION 36.02 CONTINUED ON ADDENDUM I.
Initial: J.M.
-------------
-12-
<PAGE>
41. Landlord's Lien
41.01 LESSOR HEREUNDER WILL HAVE THE BENEFIT OF, AND THE RIGHT TO, ANY AND
ALL LANDLORD'S LIENS PROVIDED UNDER THE LAW BY WHICH THIS LEASE IS GOVERNED.
42. Special Provisions
42.01 Special provisions of this Lease number 43 through * are attached
---
hereto and made a part hereof. If none, so state in the following space:
* see attached
- ------------------------------------
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease as of the day
and year indicated by Lessor's execution date as written below.
Individuals signing on behalf of a Lessee warrant that they have the
authority to bind their principals. In the event that Lessee is a corporation,
Lessee shall deliver to Lessor, concurrently with the execution and delivery of
this Lease, a certified copy of corporate resolutions adopted by Lessee
authorizing said corporation to enter into and perform the Lease and authorizing
the execution and delivery of the Lease on behalf of the corporation by the
parties executing and delivering this Lease. THIS LEASE, WHETHER OR NOT EXECUTED
BY LESSEE, IS SUBJECT TO ACCEPTANCE BY LESSOR, ACT1NG ITSELF OR BY ITS AGENT
ACTING THROUGH ITS PRES1DENT AND VICE PRES1DENT AT ITS HOME OFFICE.
AND REGIONAL MANAGER
LESSOR Public storage Properties XVIII, Inc LESSEE Copper Mountain
Communications, Inc.,
A California Corporation A California Corporation
________________________________________ ___________________________________
BY: PS COMMERCIAL PROPERTIES GROUP, INC.
AGENT FOR OWNER
By: /s/ Patricia Abbott-Regional Manager By: /s/ Joe Markee - President
-------------------------------------- --------------------------------
AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE
PATRICIA ABBOTT - REGIONAL MANAGER JOE MARKEE - PRESIDENT
- ----------------------------------------- -----------------------------------
Title Title
Date 6-26-96 Date 6/4/96
------------------------------------- -------------------------------
EXECUTION DATE
By_______________________________________ By_________________________________
AUTHORIZED SIGNATURE AUTHORIZED SIGNATURE
_________________________________________ ___________________________________
Title Title
Date_____________________________________ Date_______________________________
ExecutioN Date
-13-
<PAGE>
SPECIAL PROVISIONS
to Standard Industrial Lease
---------------------------------
(insert title of lease)
Dated May 31 19 96
----------, --
by and between
Public Storage Properties XVIII, Inc., A California ("Lessor")
--------------------------------------------------------
Corporation
and Copper Mountain Communications, Inc., A California ("Lessee")
--------------------------------------------------------
Corporation
43. HAZARDOUS MATERIALS
--
43.01 Compliance with Law.
-- -------------------
Lessee, at Lessee's expense, shall comply with all laws, rules,
orders, ordinances, directions, regulations and requirements of federal, state,
county and municipal authorities pertaining to Lessee's use of the Premises and
with the recorded covenants, conditions and restrictions, regardless of when
they become effective, including, without limitation, all applicable federal,
state, and local laws, regulations or ordinances pertaining to air and water
quality, Hazardous Materials (as hereinafter defined), waste disposal, air
emissions and other environmental matters, all zoning and other land use
matters, and utility availability, and with any direction of any public officer
or officers, pursuant to law, which shall impose any duty upon Lessor or Lessee
with respect to the use or occupation of the Premises.
43.02 Use of Hazardous Materials
-- --------------------------
(1) Lessee shall (1) not cause or permit any Hazardous Material to be
brought upon, kept or used in or about the Premises or the Project by Lessee,
its agents, employees, contractors or invitees without the prior written consent
of Lessor, which Lessor shall not unreasonably withhold as long as Lessee
demonstrates to Lessor's reasonable satisfaction that such Hazardous Material is
necessary or useful to Lessee's business and will be used, kept and stored in a
manner that complies with all laws regulating any such Hazardous Material so
brought upon or used or kept in or about the Premises. If Lessee breaches the
obligations stated in the preceding sentence, or if the presence of Hazardous
Material on the Premises or the Project caused or permitted by Lessee results in
contamination of the Premises or the Project, or if contamination of the
Premises or the Project by Hazardous Material otherwise occurs for which Lessee
is legally liable to Lessor for damage resulting therefrom, then Lessee shall
indemnify, defend and hold Lessor harmless from any and all claims, judgements,
damages, penalties, fines, costs, liabilities or losses (including, without
limitation, diminution in value of the Premises or the Project, damages for the
loss or restriction on use of rentable or usable space or of any amenity of the
Premises or the Project, damages arising from any adverse impact on marketing of
space, and sums paid in settlement of claims, attorneys' fees, consultant fees
and expert fees) which arise during or after the Lease term as a result of such
contamination.
<PAGE>
This indemnification of Lessor by Lessee includes, without limitation, costs
incurred in connection with any investigation of site conditions or any clean-
up, remedial, removal or restoration work required by any federal, state or
local governmental agency or political subdivision because of Hazardous Material
present in the soil or ground water on or under the Premises or the Project.
Without limiting the foregoing, if the presence of any Hazardous Material on the
Premises or the Project caused or permitted by Lessee result in any
contamination of the Premises or the Project, Lessee shall promptly take all
actions at its sole expense as are necessary to return the Premises and the
Project to the condition existing prior to the introduction of any such
Hazardous Material to the Premises or the Project; provided that Lessor's
approval of such actions shall first be obtained, which approval shall not
unreasonably withheld so long as such actions would not potentially have any
material adverse long-term or short-term effect on the Premises or the Project.
The foregoing indemnity shall survive the expiration or earlier termination of
this Lease.
(2) Definition of "Hazardous Material". As used herein, the term "Hazardous
----------------------------------
Material" means any hazardous or toxic substance, material or waste, including,
but not limited to, those substances, materials or wastes listed in the United
States Department of Transportation Hazardous Material Table (49 CFR 172.101) or
by the Environmental Protection Agency as hazardous substances (40 CFR Part 302)
and amendments thereto, or such substances, materials and wastes that are or
become regulated under any applicable local, state or federal law.
(3) Disclosure. At the commencement of this Lease, and on January 1 of each
----------
year thereafter (each such date being hereafter called "Disclosure Dates"),
including January 1 of the year after the termination of this Lease, Lessee
shall disclose to Lessor the names and amounts of all Hazardous Materials, or
any combination thereof, which were stored, used or disposed of on or about the
Premises, or which Lessee intends to store, use or dispose of on or about the
Premises.
(4) Inspection. Lessor and its agents shall have the right, but not the
----------
duty, to inspect the Premises and the Project at any time to determine whether
Lessee is complying with the terms of this Lease. If Lessee is not incompliance
with this Lease, Lessor shall have the right to immediately enter upon the
Premises and the Project to remedy any contamination caused by Lessee's failure
to comply notwithstanding any other provision of this Lease. Lessor shall use
its best efforts to minimize interference with Lessee's business but shall not
be liable for any interference caused thereby.
(5) Default. Any default under this Paragraph shall be a material default
-------
enabling Lessor to exercise any of the remedies set forth in this Lease.
<PAGE>
SPECIAL PROVISION
44 USE CLAUSE
Tenant has negotiated the use clause contained in section 1.05 of this
lease. Tenant hereby agrees that the use clause as so written is deemed to be
reasonable for all purposes. Tenant hereby further agrees that this use clause
is enforceable for all purposes and specifically waives all challenges to this
clause now and in the future. The purpose for which this use clause is deemed to
be reasonable and enforceable include, but are not limited to, any and all
future changes tenant may request in the use of the premises, and any and all
circumstances relating to breach of lease, and/or mitigation of damages, and/or
assignment, and/or subletting.
45 SMOKING
Smoking of any kind is strictly prohibited at all times at any
location on this property, except in the designated smoking area which is
located as follows:
Outside the perimeter of building only.
The designated smoking area may be relocated by Lessor at its sole discretion at
any time during the term of the lease.
<PAGE>
SPECIAL PROVISION # 46
--------
Estimated Operating Costs and Property Taxes
Pursuant to Provision 5, "Additional Rent", of this Lease, Lessee shall pay to
Lessor on a monthly basis, in advance, in addition to Lessee's monthly base
rent, the amount of Lessee's Proportionate Share of Operating Cost and Property
Taxes as defined and calculated in accordance with the provisions of Section
5.02, "Operating Cost", and Section 5.03, "Taxes", under this Lease,
respectively. Lessee's initial Proportionate Share of Operating Costs and Real
Property Taxes are estimated by Lessor to be equal to Two thousand eighty-eight
-------------------------
and 03/100 dollars per month
- -------------------------------------------------------------------------------
_______________________________________ ($ 2088.03 ).
* Operating Expenses capped at 10% each year.
<PAGE>
SPECIAL PROVISION 47.00
-----
Tenant Financing: Subject to the terms and conditions of this lease as first
- ----------------
written above, Lessor agrees that Lessee shall have the right, at its
discretion, to mortgage, hypothecate or convey a security interest in Lessee's
equipment and personal property within the Premises as security for its
obligations under any equipment lease or other financing arrangement related to
the conduct of Lessee's business, provided that such equipment and personal
property is not at any time attached to the Premises, and Lessor is not required
to execute any documentation or perform any act in connection therewith.
<PAGE>
ADDENDUM I
This addendum is in conjunction with the Standard Industrial Lease dated June 4,
1996 by and between Public Storage Properties XVIII, Inc., A California
Corporation, Lessor and Copper Mountain Communications Inc. A California
Corporation, Lessee.
2.01 DEMISE AND POSSESSION
Upon delivery of premises Lessee has thirty (30) days to notify Lessor of
any malfunction or of any breakdown of the HVAC unit(s), excluding air balances,
which at all times shall be the sole responsibility of Lessee. Upon delivery of
the premises Lessee has three (3) days to notify Lessor of any burned out light
bulbs which Lessor will correct. Based on Lessor's knowledge of the property
and Lessor's understanding of the ADA as it may apply to the property, Lessor
has no knowledge of any current non-compliance with ADA requirements.
8.01 USE OF PREMISES; QUIET CONDUCT
Notwithstanding any of the foregoing, Lessee shall not be responsible for
making any structural changes to the Premises in order to bring the Premises
into compliance with any laws, codes, ordinances, orders or regulations, unless
(1) such structural changes are necessitated as a direct result of Lessee's
particular use of the Premises or (ii) the requirements for such changes are
triggered as a direct result of any action by Lessee or its agents, employees,
contractors or invitees on the Property.
13.05 FIRE INSURANCE; HAZARDS AND LIABILITY INSURANCE
Lessee and Lessor each hereby release and relieve the other, and waive
their entire right of recovery against the other for lose or damage arising out
of or incident to the perils insured against under paragraph 13, which perils
occur in on, or about the Premises, whether due to the negligence of Lessor or
Lessee or their agents, employees, contractors and /or invitees, Lessee and
Lessor shall upon obtaining the policies of insurance requires hereunder, give
notice to the insurance carrier or carriers that the foregoing mutual waiver of
subrogation is contained in this lease.
15.02 REPAIRS
Notwithstanding any of the foregoing, Lessee shall not be responsible for
making any structural changes to the Premises in order to bring the Premises
into compliance with any laws, codes, ordinances, orders or regulations, unless
(1) such structural changes are necessitated as a direct result of Lessee's
particular use of the Premises or (ii) the requirements for such changes are
triggered as a direct result of any action by Lessee or its agents, employees,
contractors or invitees on the Premises.
27.02 ESTOPPEL CERTIFICATE
Upon written request by Lessee to Lessor specifically referencing this
section 27.02, Lessor will within ten (10) days of receiving written notice
provide the same certificate required of Lessee under section 27.01. Lessor's
failure to deliver such statement within such time shall be conclusive upon
Lessor that (1) this Lease is in full force and effect, without modification
except as may be represented by Lessor (2) there are no uncured defaults in
Lessee's performance; and (3) not more than one (1) month's rent has been paid
in advance.
36.02 SUBROGATION
Upon written request by Lessee to Lessor specifically referencing this
section 36.02, Lessor will within ten (10) days of receiving written notice
request a non-disturbance statement from any lender. The cost of preparing and
executing any such document shall be paid by Lessee and Lessor shall have no
obligation to do anything other than request such documentation and shall not
have any obligation or liability to Lessee or any other party if such
documentation cannot be obtained.
<PAGE>
EXHIBIT A
[FLOORPLAN OF LUSK BOULEVARD APPEARS HERE]
- --------------------------------------------------------------------------------
PS BUSINESS CENTER . SORRENTO MESA II
6540, 6640, 6650, LUSK BOULEVARD, SAN DIEGO, CA 92121
- --------------------------------------------------------------------------------
Page 1 of 2
<PAGE>
Project #01813/01819
SORRENTO MESA II/LUSK II
6540/6640/6650 Lusk Blvd.
San Diego, CA 92121
EXHIBIT A
LEGAL DESCRIPTION
LOTS 2 AND 3 OF LUSK INDUSTRIAL PARK UNIT NO. 5, IN THE CITY OF SAN DIEGO,
COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF NO. 10700,
FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, AUGUST 16, 1983.
EXCEPT THEREFROM ALL COAL, OIL, GAS, PETROLEUM AND OTHER HYDROCARBON SUBSTANCES
IN AND UNDER SUCH PROPERTY, GRANTOR, ITS SUCCESSORS AND ASSIGNS, RETAINING THE
EXCLUSIVE TITLE AND RIGHT TO REMOVE SAID SUBSTANCES, TOGETHER WITH SOLE RIGHT TO
NEGOTIATE AND CONCLUDE LEASES AND AGREEMENT WITH RESPECT TO ALL SUCH SUBSTANCES
UNDER THE PROPERTY, AND TO USE THOSE PORTIONS OF THE PROPERTY WHICH UNDERLIE A
PLANE PARALLEL TO, AND 500 FEET BELOW, THE PRESENT SURFACE OF THE PROPERTY FOR
THE PURPOSE OF PROSPECTING FOR, DEVELOPING AND/OR EXTRACTING SUCH SUBSTANCES
FROM THE PROPERTY BY MEANS OF WELLS DRILLED INTO OR THROUGH SAID PORTIONS OF THE
PROPERTY FROM DRILL SITES LOCATED ON OTHER PROPERTY, IT BEING EXPRESSLY
UNDERSTOOD AND AGREED. THAT GRANTOR, ITS SUCCESSOR AND ASSIGNS SHALL HAVE NO
RIGHT TO ENTER UPON THE SURFACE OF THE PROPERTY OR ANY PORTION THEREOF ABOVE THE
LEVEL OF THE AFORESAID PLANE, AS RESERVED BY LUSK/MIRA MESA, A LIMITED
PARTNERSHIP, IN A DEED RECORDED FEBRUARY 18, 1984, RECORDER'S FILE NO. 84-
058807.
<PAGE>
[FLOORPLAN APPEARS HERE]
PS BUSINESS CENTER - LUSK II
- --------------------------------------------------------------------------------
6650 LUSK BOULEVARD
BUILDING B SUITE B102-B104
SAN DIEGO, CA 92121
4,382 R.S.F
APRIL 26, 96
N.T.S.
[FLOORPLAN APPEARS HERE]
PS BUSINESS CENTER MAGGETTI ELAM ASSOCIATES
6540 LUSK BLVD., SUITE C274 3160 CAMINO DEL RIO S. #207
SAN DIEGO, CA 92121 452-9660 SAN DIEGO, CA 92108 624-0521
<PAGE>
[FLOORPLAN APPEARS HERE]
PS BUSINESS CENTER - LUSK II
- --------------------------------------------------------------------------------
6650 LUSK BOULEVARD
BUILDING B SUITE B204
SAN DIEGO, CA 92121
1,913 R.S.F
APRIL 26, 96
N.T.S.
[FLOORPLAN APPEARS HERE]
PS BUSINESS CENTER MAGGETTI ELAM ASSOCIATES
6540 LUSK BLVD., SUITE C274 3160 CAMINO DEL RIO S. #207
SAN DIEGO, CA 92121 452-9660 SAN DIEGO, CA 92108 624-0521
<PAGE>
[FLOORPLAN APPEARS HERE]
PS BUSINESS CENTER - LUSK II
- --------------------------------------------------------------------------------
6650 LUSK BOULEVARD
BUILDING B SUITE B203
SAN DIEGO, CA 92121
1,824 R.S.F
APRIL 26, 96
N.T.S.
[FLOORPLAN APPEARS HERE]
PS BUSINESS CENTER MAGGETTI ELAM ASSOCIATES
6540 LUSK BLVD., SUITE C274 3160 CAMINO DEL RIO S. #207
SAN DIEGO, CA 92121 452-9660 SAN DIEGO, CA 92108 624-0521
<PAGE>
[FLOORPLAN APPEARS HERE]
PS BUSINESS CENTER - LUSK II
- --------------------------------------------------------------------------------
6550 LUSK BOULEVARD
BUILDING B SUITE B202
SAN DIEGO, CA 92121
1,824 R.S.F.
APR1L 26, 96
N.T.S.
[FLOORPLAN APPEARS HERE]
PS BUSINESS CENTER MAGGETTI ELAM ASSOCIATES
6540 LUSK BLVD., SUITE C274 3160 CAMINO DEL RIO S. #207
SAN DIEGO, CA 92121 452-9660 SAN DIEGO, CA 92108 624-0521
<PAGE>
EXHIBIT "B"
----------
Lessee accepts premises in present condition.
Subject to the provisions of Article 9.01, Lessee accepts the premises in the
condition they are in at the commencement of this lease and shall maintain said
premises in the same condition, order, and repair, excepting only reasonable
wear and tear, arising from the use under this Agreement. Lessee has examined
and knows the condition of the leased premises and agrees that no
representation, except such as are contained herein, have been made to Lessee
respecting the condition of said premises. The taking possession of said
premises by Lessee shall be conclusive that the premises are in good and
satisfactory condition.
<PAGE>
[FLOORPLAN APPEARS HERE]
TENANT SIGN CRITERIA:
Type.Style:
Helvetica Medium Upper & Lower Case, if desired
Logo:
Optional - To be used in conjunction with approved type style
Materia1
Die-cut letters
Color:
Black for buildings not facing Lusk Boulevard
White for buildings facing Lusk Boulevard
Size:
Maximum: see illustration
Mounting Location:
To remain consistant with sign criteria for tenant signage
Note: No sign submittal will be considered if more than
40% of allowable sign area is utilized for positive copy
including all corporate logos. All sign requests must be
submitted on scaled drawings for written approval by
Lessor.
----------------------------------------------------------------------------
For additional information please PS BUSINESS CENTER
contact the Property Manager located
in our Leasing Office.
----------------------------------------------------------------------------
EXHIBIT "C"
<PAGE>
EXHIBIT "D"
-----------
RULES AND REGULATIONS
In order to promote the safety, cleanliness, and aesthetics of the business
park, the following rules and regulations are in effect which may be modified or
amended at any time by Lessor upon notice to Lessee. In the case of conflict
between these regulations and the Lease, the Lease shall be controlling.
1. Furniture, safes/moving. Safes, furniture, or bulky articles shall be
moved in and out of the complex in a manner and at such times so as not to
create an inconvenience to other tenants and is subject to direction and
approval of Lessor. Heavy articles that exceed the structural support of the
premises or exceeds fifty (50) pounds per square foot is not permitted. Any
heavy articles which exceeds load capacity of the elevator to transport it is
not permitted.
2. Windows/signs. All tenant identification signs shall be a type, size, and
color as specified by Lessor and provided at Lessee's expense. No sign, picture,
or advertisement may be placed in the windows, common areas or exterior of the
building. Where Lessor provides standard window coverings, such coverings shall
not be altered, removed or replaced by Lessee. Where Lessor does not provide
standard window coverings, installation of window coverings by Lessee shall be
subject to Lessor's prior written approval.
3. Common area/roof. Sidewalks, common area hallways, stairwells, elevators,
entrances, and exits shall not be obstructed or used by Lessee for any purpose
other than normal ingress and egress. Neither Lessee nor employees or invitees
of Lessee shall go upon the roof of any building.
4. Parking. The parking areas include surface parking, parking structure,
driveways, entrances, exits, pedestrian walkways, and any other areas designated
for parking and shall be regulated and modified by Lessor with respect to
restricted areas, direction and flow of traffic, hours of use, and any other
related facilities. The parking areas shall be used solely for the parking of
passenger vehicles during normal business hours. The parking of trucks,
trailers, recreational vehicles, and campers is not permitted. No vehicle of any
type shall be stored in the parking areas at any time. In the event that a
vehicle is disabled it shall be removed within 48 hours. Maintenance of vehicles
is not permitted in the parking areas. All vehicles shall be parked in
designated parking areas in conformance with all signs and markings and shall
not be parked in areas not designated for parking, in aisles, driveways,
no-parking areas, or in any manner which impedes the flow of traffic. "For Sale"
signs or any other advertising is not permitted on or about any parked vehicle.
Lessor may implement a validation system or other proration with or without
charges to Lessee and/or other users for use of the parking area.
5. Vendors. Lessor reserves the right to prohibit personal goods and service
vendors from access to the building as are related to the safety, care, and
cleanliness of the building and the relief of any financial burden on Landlord
created by the presence of such vendors.
6. Advertising. Lessee shall not use the name of the building in connection
with promoting or advertising Lessee's business except as to Lessees address.
Lessor shall have the right to prohibit the use of the name of the project or
other publicity by Lessee which in Lessor's opinion tends to impair the
reputation of the project or its desireablity for other Lessees. Lessee will
discontinue such publication immediately upon receipt of notice from Lessor.
7. Dangerous articles. Lessee shall not use or keep on the premises or any
part of the project any kerosene, gasoline, or inflammable or combustible fluid
or material or any article deemed extra hazardous.
Page 1 of 3
<PAGE>
8. Nuisance. Lessee shall not keep or allow to be used any fowl or noxious gas
of substance on the premises. Nor shall Lessee occupy or use the premises in any
manner which is objectionable or offensive to other occupants by reason of odor,
noise, vibration, or interference, in any way with other tenants or those having
business therein. No animals or birds shall be brought in or kept about the
premises or any part of the project. Lessee shall maintain the leased premises
free of mice, ants, bugs, or other vermin.
9. Improper conduct. Lessor reserves the right to expel from the business park
any person who is intoxicated or under the influence of liquor or drugs or who
shall act in violation of any of these rules and regulations.
10. Janitorial service. Lessee shall not dispose any dirt or other substance
into the parking areas, landscaping, walkways, or common areas. Lessee shall not
do any act which would create additional costs to maintain the cleanliness of
the project. Lessor shall not be responsible to Lessee for loss of property on
the premises or for any damage done by the janitorial service, employee, or any
other person.
11. Building access. Lessee may have access to the building and premises
between the hours of 8:00 am and 6:00 pm Monday through Friday. Lessor reserves
the right to refuse access to the building in the case of invasion, riot, mob,
or other commotion for safety of the tenants and protection of property. Lessor
shall not be liable for damages for the admission or exclusion of any person
from the building. It Lessee uses the building after regular hours or on non-
business days, Lessee shall keep all entrance doors to the building locked
immediately after entering or leaving the building.
12. Heating/air conditioning. Lessor shall be under no obligation to provide
heating or air conditioning services to the building between the hours of 6:00
pm and 8:00 am and on non-business days. Lessee may request Lessor to provide
additional heating or air conditioning during off hours or non-business days and
should Lessor provide the additional service, Lessor may determine the costs
incurred which Lessee will pay to Lessor. Lessee shall not use any method of
heating or air conditioning other than supplied by Lessor.
13. Locks. Lessee shall not alter any lock or install new or additional lock or
bolt on any door of the premises without prior written consent of Lessor. If
Lessor shall give such consent, Lessee shall furnish a key to such lock. Upon
termination of the tenancy, Lessee must return all keys of the premises to
Lessor.
14. Rest Rooms. The restrooms and facilities shall not be used for any purposes
other than those for which they were constructed. No dirt, trash, or other
foreign substances shall be disposed of therein. No person shall waste water or
tamper with faucets or fixtures. Any damage caused by Lessee, his employees,
agents, or invitees shall be paid for by the Lessee.
15. Requirements of Lessee. Employees of Lessor shall not perform any work or
do anything outside of their regular duties unless under special instruction
from Lessor. Lessee shall give prompt, notice of required maintenance items, for
which Lessor is responsible within the leased premises. Lessee shall give Lessor
prompt notice of any defects in the water, sewage, gas pipes, exterior
electrical lights and fixtures, or other service equipment.
16. Solicitation. Lessee shall not disturb, solicit, or canvas any occupant of
the project and shall cooperate to prevent the same.
Page 2 of 3
<PAGE>
17. Use of premises. The leased premises shall not be used for lodging,
sleeping, cooking, or for any immoral or illegal purpose or for any purpose
that will damage the premises or the reputation thereof. Lessee shall not use
the premises for any purpose other than that specified in the lease covering the
premises.
18. Safety. Lessee shall not do or permit any act or bring anything on the
premises which shall in any way increase rate of fire insurance on the building,
obstruct or interfere with, the right of other tenants, conflict with fire
regulations and fire laws, or conflict ordinances, established by the Board of
Health or other governmental authority.
19. Auction. No auction, public or private, will be permitted.
20. Damage. Walls, floors and ceilings shall not be defaced in any way and no
one shall be permitted to mark, paint, penetrate or in any way mar the building
surfaces, walkways, stairwells, driveways, or parking area. Pictures,
certificates, licenses, and similar items normally used in Lessee's premises
may be carefully attached to the walls by Lessee in a manner to be prescribed by
the Lessor. Upon removal of such items by Lessee, any damage to the walls or
other surfaces shall be repaired by Lessee.
21. Wiring. No electrical wiring, electrical apparatus, or additional outlets
shall be installed without the prior written approval of Lessor. Any such
installation may be removed by Lessor at Lessee's expenses. Lessee may not alter
any existing electrical outlets or overburden them beyond their designed
capacity. Lessor reserves the right to enter the leased premises, with
reasonable notice to tenant, for the purpose of installing additional electrical
wiring and other utilities for the benefit of Lessee or adjoining tenants.
Lessor will direct electricians as to where and how telephone and telegraph
wires are to be introduced. The location of telephones, call boxes, and other
equipment affixed to the premises shall be subject to the approval of Lessor.
22. Exterior. Lessee shall not place any improvement or moveable object
including antennas, awnings, outside furniture, etc. in the parking areas,
landscape areas, on the roof, or other areas outside of the leased premises.
23. General. It is understood that if Lessee, his employees, agents, or
invitees violate any of these rules and regulations which results in any damage
to the property, increases costs of maintenance of the property, or incurs
expenses to reasonably enforce the rules and regulations, Lessee shall pay to
Lessor all such costs as additional rent.
Page 3 of 3
<PAGE>
RULES AND REGULATIONS
FITNESS CENTER & CONFERENCE CENTER AGREEMENT
This supplemental agreement, dated June 4, 1996 is entered into between Public
Storage Properties XVIII, Inc., A California Corporation, hereinafter referred
to as "Lessor" and, Copper Mountain Communications, Inc., A California
Corporation, hereafter referred to as "Lessee" (which shall hereinafter refer to
and include, but not limited to, Lessee, Lessee's employees, and Lessee's
visitors) in this agreement. The Lessor and Lessee entered into a written lease,
referred to in this agreement as the "Lease", on June 8, 1996 for the Premises
located at 6650 Lusk Blvd., Suite B102, B103, B202, B203, B204 San Diego, CA
92121
RULES AND REGULATIONS AS SET FORTH ARE PART OF THE LEASE AND LESSEE, ITS
EMPLOYEES AND VISITORS ARE OBLIGATED TO OBSERVE AND COMPLY WITH THE SAME. LESSOR
MAY MAKE REASONABLE CHANGES FROM TIME TO TIME WITHOUT PRIOR APPROVAL BY LESSEE.
A portion of the Common Areas shall include a Fitness Center and Conference
Center, hereinafter referred to as "Centers". Use of the Centers shall be open
to Lessee during normal business hours, or such other hours as Lessor may
reasonably determine. Lessor will not provide any staff to monitor or supervise
the use of the Centers. Use of the Centers shall be solely at the risk of the
individual using the Centers facilities, and Lessor shall have no responsibility
for Lessee who shall use the Centers. In the event that Lessor suffers any loss
arising out of the use of the Centers by Lessee, said Lessee shall indemnify
Lessor for any such loss. Lessee agrees to abide by such reasonable rules and
regulations as Lessor may promulgate from time to time concerning use of the
Centers. Lessor, at its sole discretion, shall have the right to revoke Lessee's
privileges should Lessee cause damage, abuse or violate any of the rules and
regulations in this agreement or posted within the Centers. Lessee shall also be
solely responsible to reimburse Lessor for any damage caused by Lessee. Access
to the Centers shall be controlled by means selected by Lessor. The Fitness
Center's use is limited to Lessee and its employees only and may only be
accessed by Lessee's visitors when accompanied by Lessee. Lessor shall have the
right to request, from time to time a list of Lessee's employees for the
purposes of controlling unauthorized access to the Centers. Lessee shall notify
Lessor when any of Lessee's employees terminate employment. Initial issuance of
keys or other devices for controlling access to the Centers shall be at no
charge to Lessee, but Lessor reserves the right to impose a reasonable charge to
replace, repair and/or maintain equipment, furniture, access devises or any
other furnishings pertinent to the Centers. Lessee is entitled to 9 Center
access cards and/or keys, if applicable.
In accordance with the paragraphs of your Lease referring to BASE MONTHLY RENT
and ADDITIONAL RENT, If Base Monthly Rent or any Additional Rent is not paid per
your Lease Agreement, Lessor, in its sole discretion, shall have the right to
suspend and/or revoke all Fitness and Conference Center privileges without
further notice and access will be terminated. If Lessee's privileges are
suspended or revoked, Lessee shall still be obligated to pay their pro rata
share, and will receive no reduction or modification of common area maintenance
fees. Reinstatement of Fitness and Conference Center privileges, which is at all
times in the sole discretion of Lessor, may be requested in writing by any
suspended or revoked Lessee. In addition to any and all moneys due and owing
under the Lease, $25.00 per each person reinstated will be charged.
1. HOURS: Normal business hours for the Centers will be posted within the
Centers and shall be subject to reasonable change at the sole discretion of
Lessor. Should Lessee request use of the Center's anytime other than during
normal business hours, Lessor,
<PAGE>
at its sole discretion, reserves the right to grant Lessee's request and Lessor
also reserves the right to charge Lessee $35.00 per hour for such use.
2. ACCESS: Lessee will be issued keys/, access card/s or access code/s, if
applicable, to the Fitness Center with the number to be determined by Lessor.
Lessee shall reserve in advance, on a first come first serve basis with Lessor,
the day and time they would like to reserve the Conference Center. Lessee agrees
that use of their key, access card or code number by anyone other than to whom
it was issued could result in the Centers being closed to said Lessee and all
access keys, cards and codes confiscated. Lessor reserves the right to issue new
access keys, cards or codes.
3. USE OF CENTERS FACILITIES: In order to insure that the Centers are properly
maintained, Lessor reserves the right to temporarily close or limit access to
the Centers at any time during the year. Lessor may close the Centers on legal
holidays, open houses or other promotions. Lessee acknowledges and agrees that
alcoholic beverages, illegal drugs, smoking and/or chewing tobacco is prohibited
in both Fitness and Conference Center's. Lessee is responsible for the disposal
of all food, trash and other items brought into or used within the Center and
Lessor shall not be responsible for the clean up during normal business hours.
4. FACILITY RULES: Lessee will, at all times, make sure that the doors to the
Fitness Center, Conference Center, Bathrooms and Showers remain closed while in
use. All users must provide their own towel and dry off before leaving the
shower area. Lockers are provided on a per visit basis and Lessor is not
responsible for lost, stolen or damaged items. Locks left on lockers overnight
will be cut off and contents donated to charity or discarded. Lessee
acknowledges and agrees that Lessor, its officers, agents and employees, will
not be liable for either loss or damage to Lessee's property or personal
possessions within or on the Centers premises, including but not limited to the
parking facilities.
5. FITNESS CENTER: Lessee must carry a towel at all times while using the
equipment and/or machinery and will wipe clean all sweat after the use of
equipment and/or machinery. Any person using equipment or machinery shall be
familiar with the proper usage and operation prior to such use. It is the sole
duty of Lessee to check and confirm proper functioning of equipment and/or
machinery prior to any use; Lessor is not responsible for any malfunction,
disrepair, breakage, mis-use, or any claim of injury or loss therefrom. Lessee
hereby agrees that they are voluntarily participating in physical exercise and
should use common sense, only the individual can monitor his or her own personal
physical feelings. Immediately stop any sports activity if you feel faint,
dizzy, nauscous, or short of breath. Lessor makes no warranties and no
representations express or implied, other than those set forth herein and Lessee
acknowledges and agrees that they have not relied on any warranties or
representations other than those set in this Rules and Regulations. Lessee is
aware that participation in a sport or physical exercise may result in accidents
or injury, and Lessee assumes the risk connected with the participation in a
sport or exercise represents that Lessee is in good health and suffers from no
physical impairment, disability or ailment preventing Lessee from safety,
comfort, or physical condition, or to that of others. It is advisable that
Lessee consult their physician before undertaking the use of fitness equipment
and/or machinery. Lessee acknowledges that Lessor has not and will not render
any medical services including medical diagnosis of Lessee's physical
condition.
6. INDEMNIFICATION AND WAIVER OF CLAIMS: Lessee waives all claims against
Lessor for damage and/or loss to any real or personal property in or about the
Centers, Property, Project or Premises and for injury to any person, including,
but not limited to, death resulting therefrom, regardless of cause or time of
occurrence. Lessee will defend, indemnify and hold Lessor harmless from and
against all claims, actions, proceedings, expenses, damages and
<PAGE>
liabilities, including attorney's fees, arising out of, connected with, or
resulting from any use of the Centers, Property, Project and Premises including
and to any personal property in or about the Centers, Property, Project and
Premises by Lessee, except for any damage or injury which is the direct result
of intentional acts by Lessor, its employees, agents visitors or licenses.
LESSOR LESSEE
Public Storage Properties XVIII Inc. Copper Mountain Communications
A California Corporation A California Corporation
___________________________________ _______________________________
By: Public Storage Commercial
Properties Group, Inc.
As Agent for Owner
By: /s/ Patricia Abbott By: /s/ Joe Markee
---------------------------- ----------------------------
Patricia Abbott Joe Markee
Title: Regional Manager Title: President
------------------------- -------------------------
Date: 6-26-96 Date: 6/4/96
-------------------------- --------------------------
By:____________________________
Title:_________________________
Date:__________________________
NOTE: Scheduling limitations for Corporate Conference Room
MAXIMUM HOURS per week/per tenant: 5 hours
MAXIMUM HOURS per month/per tenant: 20 hours
MAXIMUM DAY tenant may schedule in advance 30 days
Tenant may not schedule the same time consecutively throughout the month.
<PAGE>
EXHIBIT 10.10
LEASE
BY AND BETWEEN
R. G. HARRIS CO., AND ELIZABETH G. HARRIS, HENRY K. WORKMAN AND DON C.
SHERWOOD, TRUSTEES OF THE HARRIS FAMILY REVOCABLE TRUST
AS LANDLORD
AND
COPPER MOUNTAIN NETWORKS, INC.,
AS TENANT
AUGUST 12, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE 1. REFERENCE................................................ 1
1.1 References............................................... 1
ARTICLE 2. LEASED PREMISES, TERM AND POSSESSION..................... 2
2.1 Demise Of Leased Premises................................ 2
2.2 Right To Use Outside Areas............................... 2
2.3 Lease Commencement Date And Lease Term................... 2
2.4 Delivery Of Possession................................... 3
2.5 Acceptance Of Possession; Tenant Improvement Allowance... 3
2.6 Surrender Of Possession.................................. 3
ARTICLE 3. RENT, SECURITY DEPOSIT AND CREDIT ENHANCEMENTS........... 3
3.1 Base Monthly Rent........................................ 3
3.2 Additional Rent.......................................... 3
3.3 ......................................................... 3
3.4 Payment Of Rent.......................................... 3
3.5 Prepaid Rent............................................. 4
3.6 Security Deposit......................................... 4
3.7 Credit Enhancement....................................... 4
ARTICLE 4. USE OF LEASED PREMISES AND OUTSIDE AREA.................. 4
4.1 Permitted Use............................................ 4
4.2 General Limitations On Use............................... 4
4.3 Signs.................................................... 4
4.4 Compliance With Laws And Private Restrictions............ 4
4.5 Compliance With Insurance Requirements................... 4
4.6 Landlord's Right To Enter................................ 4
4.7 Use Of Outside Areas..................................... 5
4.8 Rules And Regulations.................................... 5
ARTICLE 5. REPAIRS, MAINTENANCE, SERVICES AND UTILITIES............. 5
5.1 Repair And Maintenance................................... 5
(a) Tenant's Obligations................................ 5
(b) Landlord's Obligation............................... 5
5.2 Utilities . . ........................................... 5
5.3 Limitation Of Landlord's Liability....................... 5
ARTICLE 6. ALTERATIONS AND IMPROVEMENTS............................. 5
6.1 By Tenant................................................ 5
6.2 Ownership Of Improvements................................ 6
6.3 Liens.................................................... 6
ARTICLE 7. ASSIGNMENT AND SUBLETTING BY TENANT...................... 6
7.1 By Tenant................................................ 6
7.2 Merger Or Reorganization................................. 6
7.3 Landlord's Election...................................... 6
7.4 Conditions To Landlord's Consent......................... 6
7.5 Effect Of Landlord's Consent............................. 6
ARTICLE 8. LIMITATION ON LANDLORD'S LIABILITY AND INDEMNITY......... 7
8.1 Limitation On Landlord's Liability And Release........... 7
8.2 Tenant's Indemnification Of Landlord..................... 7
ARTICLE 9. INSURANCE................................................ 7
9.1 Tenant's Insurance....................................... 7
9.2 Landlord's Insurance..................................... 8
9.3 Mutual Waiver Of Subrogation............................. 8
ARTICLE 10. DAMAGE To LEASED PREMISES................................ 8
10.1 Landlord's Duty To Restore............................... 8
10.2 Landlord's Right To Terminate............................ 8
10.3 Tenant's Right To Terminate.............................. 9
10.4 Tenant's Waiver.......................................... 9
10.5 Abatement Of Rent........................................ 9
ARTICLE 11. CONDEMNATION............................................. 9
11.1 Tenant's Right To Terminate.............................. 9
</TABLE>
i
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
11.2 Landlord's Right To Terminate.......................... 9
11.3 Restoration............................................ 9
11.4 Temporary Taking....................................... 9
11.5 Division Of Condemnation Award......................... 9
11.6 Abatement Of Rent...................................... 10
11.7 Taking Defined......................................... 10
ARTICLE 12. DEFAULT AND REMEDIES................................... 10
12.1 Events Of Tenant's Default............................. 10
12.2 Landlord's Remedies.................................... 10
12.3 Landlord's Default And Tenant's Remedies............... 11
12.4 Tenant's Waiver........................................ 11
ARTICLE 13. GENERAL PROVISIONS..................................... 11
13.1 Taxes On Tenant's Property............................. 11
13.2 Holding Over........................................... 11
13.3 Subordination To Mortgages............................. 11
13.4 Tenant's Attornment Upon Foreclosure................... 11
13.5 Estoppel Certificate................................... 12
13.6 Transfer By Landlord................................... 12
13.7 Force Majeure.......................................... 12
13.8 Notices................................................ 12
13.9 Attorneys' Fees........................................ 12
13.10 Definitions............................................ 12
(a) Real Property Taxes............................... 12
(b) Landlord's Insurance Costs........................ 13
(c) Property Maintenance Costs........................ 13
(d) Property Operating Expenses....................... 13
(e) Law............................................... 13
(f) Lender............................................ 13
(g) Private Restrictions.............................. 13
(h) Rent.............................................. 13
13.11 General Waivers........................................ 13
13.12 Miscellaneous.......................................... 13
ARTICLE 14. CORPORATE AUTHORITY BROKERS AND ENTIRE AGREEMENT....... 14
14.1 Corporate Authority.................................... 14
14.2 Brokerage Commissions.................................. 14
14.3 Entire Agreement....................................... 14
ARTICLE 15. OPTIONS To EXTEND...................................... 14
ARTICLE 16. HAZARDOUS MATERIAL..................................... 15
16.1 (Insert to follow)..................................... 15
16.2 (Insert to follow)..................................... 15
</TABLE>
ii
<PAGE>
LEASE
THIS LEASE, dated August 12, 1997 for reference purposes only, is made by
and between R. G. HARRIS Co., a California corporation, as to an undivided
72.6568 percent interest, and, Elizabeth G. Harris, Henry K. Workman, and Don C.
Sherwood, as trustees of the Harris Family Revocable Trust, as to an undivided
27,3432 percent interest (collectively, "Landlord") and COPPER MOUNTAIN
NETWORKS, INC., a California corporation ("Tenant"), to be effective and binding
upon the parties as of the date the last of the designated signatories to this
Lease shall have executed this Lease (the "Effective Date of this Lease").
ARTICLE 1.
REFERENCE
1.1 REFERENCES. All references in this Lease to the following terms shall have
the following meaning or refer to the respective address, person, date, time
period, amount, percentage, calendar year or fiscal year as below set forth:
Tenant's Address for Notices: Copper Mountain Networks, Inc.
3931 Sorrento Valley Blvd.
San Diego, California
Attention: Joseph Lynch
Landlord's Address for Notices: R.G. Harris Co.
Harris Family Revocable Trust
P.O. Box 2882
31479 Pacific Coast Highway
Malibu, California 90265
Attention: Henry Workman
Landlord's Representative: Don C. Sherwood, Esq.
Sherwood and Hardgrove
Suite 240
11990 San Vicente Boulevard
Los Angeles, California 90049-5004
Phone Number: (310) 826-2625
Intended Commencement Date: November 1, 1997
Intended Term: four (4) years
Lease Expiration Date: four (4) Years from the Lease
Commencement Date, unless earlier
terminated by Landlord in accordance
with the terms of this Lease, or
extended by Tenant pursuant to Article
15, and subject to termination by Tenant
pursuant to Paragraph 2.3.
Options to Renew: one (1) option to renew for a term of
two (2) years.
First Month's Prepaid Rent: $20,400
Tenant's Security Deposit: $20,400
Credit Enhancement: $100,000 letter of credit (initially)
Tenant Improvement Allowance: $72,000
Tenant's Required Liability
Coverage: $2,000,000 Combined Single Limit
Broker(s): The Irving Hughes Group, Inc.
Property: That certain real property situated in
the City of San Diego, County of San
Diego, State of California, as presently
improved with one building, which real
property is shown on the Site Plan
attached hereto as Exhibit "A" and is
commonly known as or otherwise described
as 3931 Sorrento Valley Blvd., San
Diego, California.
<PAGE>
Building: That certain Building within the Property in
which the Leased Premises are located, which
Building is shown outlined on Exhibit "A" hereto.
Outside Areas: The "Outside Areas" shall mean all areas within
the Property which are located outside the
Building, such as pedestrian walkways, parking
areas, landscaped area, open areas and enclosed
trash disposal areas.
Leased Premises: All the interior space within the Building,
consisting of approximately 24,000 square feet
and, for purposes of this Lease, agreed to
contain said number of square feet, together with
the parking rights described in this Paragraph
1.1. The parties agree that irrespective of the
actual square footage of the Building, the
Building shall be conclusively deemed to consist
of 24,000 square feet for all purposes of this
Lease and there shall be no further adjustment of
any rent payable hereunder if the actual square
footage of the Building is greater than or less
than 24,000 square feet. The Leased Premises are
commonly known as or otherwise described as 3931
Sorrento Valley Blvd., San Diego, California.
Parking: Exclusive use of the south half of the existing
parking lot, from south of the existing fire lane
to the property boundary, as indicated on Exhibit
A.
Base Monthly Rent: The term "Base Monthly Rent" shall mean the
following:
$20,400 per month from the Lease
Commencement Date for a period of twelve
(12) months. At the end of such 12 month
period, and at each anniversary of the Lease
Commencement Date, Base Monthly Rent shall
be increased by 4% per annum compounded
annually. Thus, as of each adjustment date,
the base monthly rent in effect immediately
prior to such adjustment shall be increased
by 4% as of the following day.
Use: office, research and development, light
assembly, engineering and other related legal
uses
Exhibits: The term "Exhibits" shall mean the Exhibits
of this Lease which are described as follows:
Exhibit "A" - Site Plan showing the Property
and delineating the Building in which the
Leased Premises are located.
Exhibit "B" - Hazardous Substances permitted
pursuant to Paragraph 16.1.
ARTICLE 2.
LEASED PREMISES, TERM AND POSSESSION
2.1 DEMISE OF LEASED PREMISES. Landlord hereby leases to Tenant and Tenant
hereby leases from Landlord for the Lease Term and upon the terms and subject to
the conditions of this Lease, that certain interior space described in Article 1
as the Leased Premises. Tenant's lease of the Leased Premises, together with the
appurtenant right to use the Outside Areas as described in Paragraph 2.2 below,
shall be conditioned upon and be subject to the continuing compliance by Tenant
with (i) all the terms and conditions of this Lease, (ii) all Laws governing the
use of the Leased Premises and the Property, (iii) all Private Restrictions,
easements and other matters now of public record respecting the use of the
Leased Premises and Property, and (iv) all reasonable rules and regulations from
time to time established by Landlord.
2.2 RIGHT TO USE OUTSIDE AREAS. As an appurtenant right to Tenant's right to
the use and occupancy of the Leased Premises, Tenant shall have the right to use
the Outside Areas in conjunction with its use of the Leased Premises solely for
the purposes for which they were designated and intended and for no other
purposes whatsoever. In that regard, Tenant shall not be entitled to use the
Outside Areas for storage.
2.3 LEASE COMMENCEMENT DATE AND LEASE TERM. Subject to Paragraph 2.4 below, the
term of this Lease shall begin, and the Lease Commencement Date shall be deemed
to have occurred, on the Intended Commencement Date, as set forth in Article 1
(the "Lease Commencement Date"). The term of this Lease shall in all events end
2.
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on the Lease Expiration Date (as set forth in Article 1). The Lease Term shall
be that period of time commencing on the Lease Commencement Date and ending on
the Lease Expiration Date (the "Lease Term"). In addition, Tenant shall have a
one-time option to terminate this Lease effective at the end of the third year
of the Lease Term, in the event that Tenant desires to lease additional space,
and Landlord is unable to provide such additional space which is acceptable to
Tenant (the "Termination Option"). The Termination Option may be exercised by
written notice to Landlord given not less than six (6) months prior to the third
anniversary of the Lease Commencement Date and payment by Tenant of a lease
termination fee in the amount of $45,000 at the time of such written notice.
2.4 DELIVERY OF POSSESSION. Landlord shall deliver to Tenant possession of the
Leased Premises immediately upon execution of this Lease. Tenant shall be
entitled to occupy the Leased Premises prior to the Lease Commencement Date,
and such occupancy shall be subject to ail of the provisions of this Lease;
provided, however, that Tenant's obligation to pay Base Rent shall not commence
until the Lease Commencement Date. Such early possession shall not advance the
Lease Expiration Date.
2.5 ACCEPTANCE OF POSSESSION; TENANT IMPROVEMENT ALLOWANCE. Landlord agrees
that as of the Lease Commencement Date, the following are or will be in good
working order: the roof (structure and membrane), foundation, structural
elements, truck doors and all existing plumbing, lighting, heating, ventilating
and air conditioning systems and other systems serving the Leased Premises.
Landlord agrees to provide Tenant with the Tenant Improvement Allowance. Tenant
may use the Tenant Improvement Allowance to make improvements and installations
to the Leased Premises, and Landlord shall pay the Tenant Improvement Allowance
to Tenant upon presentation by Tenant of (i) invoices evidencing the work clone
or Installations made, (ii) proof or payment by Tenant of such invoices, and
(iii) appropriate lien waivers from contractors. In the event that Tenant fails
to use the Tenant Improvement Allowance within thirty days of the Lease
Commencement Date. Landlord shall credit the Tenant Improvement Allowance (or so
much of it as may then remain) against Base Monthly Rent or other sums due from
Tenant hereunder. All improvements made pursuant to this paragraph 2.5 shall be
subject to the provisions of paragraph 6.1.
2.6 SURRENDER OF POSSESSION. Immediately prior to the expiration or upon the
sooner termination of this Lease, Tenant shall remove all of Tenant's signs
from the exterior of the Building and shall remove all of Tenant's equipment,
trade fixtures, furniture, supplies, wall decorations and other personal
property from within the Leased Premises, the Building and the Outside Areas,
and shall vacate and surrender the Leased Premises, the Building. the Outside
Arcs and the Property to Landlord in the same condition, broom clean, as existed
at the Lease Commencement Date, reasonable wear and tear excepted. Tenant shall
repair all damage to the Leased Premises, the exterior of the Building and the
Outside Areas caused by Tenant's removal of Tenant's property. Additionally, to
the extent that Landlord shall have notified Tenant in writing at the time the
improvements were completed that it desired to have certain improvements removed
at the expiration or sooner termination of the. Lease, Tenant shall, upon the
expiration or sooner termination of the Lease, remove any such improvements
constructed or installed by Tenant and repair all damage caused by such
removal.
ARTICLE 3.
RENT, SECURITY DEPOSIT AND CREDIT ENHANCEMENTS
3.1 BASE MONTHLY RENT. Commencing on the Lease Commencement Date and continuing
throughout the lease Term, Tenant shall pay to Landlord, without prior demand
therefor, in advance on the first day of each calendar month, the amount set
forth as "Base Monthly Rent" in Article 1 (the "Base Monthly Rent").
3.2 ADDITIONAL RENT. Commencing on the date possession of the Leased Premises
is delivered to Tenant, and continuing throughout the Lease Term, in addition to
the Base Monthly Rent and to the extent not required by Landlord to be
contracted for and paid directly by Tenant, Tenant shall pay to Landlord as
additional rent (the "Additional Rent") the following amounts:
(a) An amount equal to all Property Operating Expenses (as defined in
Article 13) incurred by Landlord. Landlord may estimate the amount of Property
Operating Expenses for any lease year, and Tenant shall be required to pay 1/12
of such estimated amount on the first day of each calendar month of such lease
year. Within 60 days of the end of such lease year, Landlord shall determine the
actual amount of such lease year's Property Operating Expenses. If the actual
amount of such Property Operating Expenses exceeds the amount paid by Tenant in
such lease year, Tenant shall pay Landlord the shortage with the next
installment of Base Monthly Rent. If the actual amount of such Property
Operating Expenses is less than the amount paid by Tenant in such lease year,
Tenant shall be entitled to a credit against future Base Monthly Rent or
Additional Rent or to a refund of any such excess upon termination of this
Lease. Tenant shall have the right to reasonably audit Landlord's calculation of
Property Operating Expenses.
(b) Any other charges or reimbursements due Landlord from Tenant pursuant
to the terms of this Lease.
3.3 If any installment of Base Monthly Rent or Additional Rent is not received
by Landlord from Tenant within ten calendar days after the same becomes due,
Tenant shall pay to Landlord a late charge in an amount equal to the amount
equal to 6% of the Base Monthly Rent or the Additional Rent not so paid. In
addition, Tenant shall also pay Landlord interest on any Base Monthly Rent or
Additional Rent not paid when due, at an interest rate equal to the maximum rate
allowed by law, from the date such amount is due, until such amount is paid in
full.
3.
<PAGE>
3.4 PAYMENT OF RENT. Except as specifically provided otherwise in this Lease,
all rent shall be paid in lawful money of the United States, without any
abatement, reduction or offset for any reason whatsoever, to Landlord at such
address as Landlord may designate from time to time. Tenant's obligation to pay
Base Monthly Rent and all Additional Rent shall be appropriately prorated at the
commencement and expiration of the Lease Term. The failure by Tenant to pay any
Additional Rent as required pursuant to this Lease when due shall be treated the
same as a failure by Tenant to pay Base Monthly Rent when due, and Landlord
shall have the same rights and remedies against Tenant as Landlord would have
had Tenant failed to pay the Base Monthly Rent when due.
3.5 PREPAID RENT. Tenant shall, upon execution of this Lease, pay to Landlord
the amount set forth in Article 1 as "First Month's Prepaid Rent" as prepayment
of rent for credit against the first payment of Base Monthly Rent due hereunder.
3.6 SECURITY DEPOSIT. Tenant has deposited with Landlord the amount set forth
in Article 1 as the "Security Deposit" and provided the letter of credit
described in Paragraph 3.7 below, as security for the performance by Tenant of
the terms of this Lease to be performed by Tenant, and not as prepayment of
rent. Landlord may apply such portion or portions of the Security Deposit as are
reasonably necessary for the following purposes: (i) to remedy any default by
Tenant in the payment of Base Monthly Rent or Additional Rent or a late charge
or interest on defaulted rent, or any other monetary payment obligation of
Tenant under this Lease; (ii) to remedy any other default of Tenant. In the
event the Security Deposit or any portion thereof is so used, Tenant shall pay
to Landlord, promptly upon demand, an amount in cash sufficient to restore the
Security Deposit to the full original sum. Tenant shall not be entitled to any
interest on the Security Deposit. If Landlord transfers the Building or the
Property during the Lease Term, Landlord may pay the Security Deposit to any
subsequent owner in conformity with the provisions of Section 1950.7 of the
California Civil Code and/or any successor statute, in which event the
transferring landlord shall be released from all liability for the return of the
Security Deposit.
3.7 CREDIT ENHANCEMENT. Tenant shall provide Landlord with an irrevocable
standby letter of credit in form reasonably satisfactory to Landlord from an
issuer reasonably satisfactory to Landlord in the initial amount of $100,000 as
additional security for the performance by Tenant of its obligations under this
Lease. The face amount of such letter of credit may be reduced annually by
$25,000 on each anniversary of the Commencement Date, provided only that Tenant
is not then in material default of its obligations under this Lease.
ARTICLE 4.
USE OF LEASED PREMISES AND OUTSIDE AREA
4.1 PERMITTED USE. Tenant shall be entitled to use the Leased Premises solely
for the "Permitted Use" as set forth in Article 1 and for no other purpose
whatsoever.
4.2 GENERAL LIMITATIONS ON USE. Tenant shall not do or permit anything to be
done in or about the Leased Premises, the Building, the Outside Areas or the
Property which does or could (i) jeopardize the structural integrity of the
Building or (ii) cause damage to any part of the Leased Premises, the Building,
the Outside Areas or the Property. Tenant shall not operate any equipment within
the Leased Premises which does or could (i) injure, vibrate or shake the Leased
Premises or the Building, (ii) damage or overload of any electrical, plumbing,
heating, ventilating or air conditioning systems within or servicing the Leased
Premises or the Building. Tenant shall not drain or discharge any fluids in the
landscaped areas or across the paved areas of the Property. Tenant shall not use
any of the Outside Areas for the storage of its materials, supplies, inventory
or equipment and all such materials, supplies, inventory or equipment shall at
all times be stored within the Leased Premises. Tenant shall not commit nor
permit to be committed any waste in or about the Leased Premises, the Building,
the Outside Areas or the Property.
4.3 SIGNS. Tenant may install in the Leased Premises such signage as it shall
desire, subject only to compliance with all applicable Laws and Restrictions,
and subject to having obtained Landlord's consent to such signage, which
Landlord agrees not to unreasonably withhold, delay or condition. Tenant shall
remove all of Tenant's signs, repair any damage caused thereby, and restore the
surface upon which the sign was affixed to its original condition, all to
Landlord's reasonable satisfaction, upon the termination of this Lease.
4.4 COMPLIANCE WITH LAWS AND PRIVATE RESTRICTIONS. Tenant shall abide by and
shall promptly observe and comply with, at its sole cost and expense, all Laws
and Private Restrictions respecting the use and occupancy of the Leased
Premises, the Building, the Outside Areas or the Property including, without
limitation, all Laws governing the use and/or disposal of hazardous materials;
provided, however, that Tenant shall not be responsible for contamination of the
Leased Premises by hazardous materials existing as of the date the Lease
Premises are delivered to Tenant unless caused by Tenant, nor shall Tenant be
required to make any capital repairs or improvements to the Leased Premises
unless such capital repairs or replacements are required by a governmental
authority as the direct result of Tenant's particular use of the Premises.
Tenant's obligation hereunder shall survive the termination of this Lease.
4.5 COMPLIANCE WITH INSURANCE REQUIREMENTS. Tenant shall comply with all
requirements of any insurance company, insurance underwriter, or Board of Fire
Underwriters which are necessary to maintain, at standard rates, the insurance
coverages covering the Leased Premises or the Property carried by either
Landlord or Tenant pursuant to this Lease.
4.
<PAGE>
4.6 LANDLORD'S RIGHT TO ENTER. Landlord and its agents shall have the right to
enter the Leased Premises during normal business hours after giving Tenant
reasonable notice and subject to Tenant's reasonable security measures for the
purpose of (i) inspecting the same; (ii) showing the Leased Premises to
prospective purchasers, mortgagees or, during the last six (6) months of the
Lease Term, tenants; (iii) performing any of Landlord's obligations hereunder;
(iv) posting notices of nonresponsibility (and for such purposes Tenant shall
provide Landlord at least thirty days' prior written notice of any work to be
performed on the Leased Premises). Landlord shall also have the right to enter
the Leased Premises at any time, in case of emergency. Any entry into the Leased
Premises obtained by Landlord in accordance with this paragraph shall not be
deemed to be a forcible or unlawful entry into, or a detainer of, the Leased
Premises, or an eviction, actual or constructive of Tenant from the Leased
Premises or any portion thereof.
4.7 USE OF OUTSIDE AREAS. Tenant, in its use of the Outside Areas, shall at all
times keep the Outside Areas in a safe condition free and clear of all debris,
trash (except within existing enclosed trash areas), inoperable vehicles and the
like.
4.8 RULES AND REGULATIONS. In the event Tenant is no longer the sole tenant of
the Leased Premises, Landlord shall have the right from time to time to
establish reasonable rules and regulations and/or amendments or additions
thereto respecting the use of the Leased Premises and the Outside Areas for the
care and orderly management of the Property.
ARTICLE 5.
REPAIRS, MAINTENANCE, SERVICES AND UTILITIES
5.1 REPAIR AND MAINTENANCE. Subject to the provisions of Article 10, the
parties shall have the following obligations and responsibilities with respect
to the repair and maintenance of the Leased Premises, the Building, the Outside
Areas, and the Property.
(a) TENANT'S OBLIGATIONS. Subject to the obligations of Landlord contained
in subsection (b) below, Tenant shall, at all times during the Lease Term and at
its sole cost and expense, maintain in good order, condition and repair the
Leased Premises and every part thereof including (i) all interior walls, floors
and ceilings, (ii) all electrical wiring, conduits, connectors and fixtures,
(iii) all plumbing, pipes, sinks, toilets, faucets and drains, and (iv) all
lighting fixtures, bulbs and lamps and (v) the roof membrane, exterior (but not
loadbearing) walls, interior windows and doors, (vi) all landscaping and other
improvements to the Outside Areas, and (vii) all building systems. If Tenant
shall fail to perform the required maintenance or fail to make repairs required
of it pursuant to this paragraph within a reasonable period of time following
notice from Landlord to do so, then Landlord may, at its election and without
waiving any other remedy it may otherwise have under this Lease or at law,
perform such maintenance or make such repairs and charge to Tenant, as
Additional Rent, the costs so incurred by Landlord for same.
(b) LANDLORD'S OBLIGATION. Landlord, at Landlord's sole cost (and not to
be included as a Property Operating Expense or Property Maintenance Cost) shall,
at all times during the Lease Term, maintain in good condition and repair the
foundation, roof structure, load-bearing walls, exterior windows, exterior doors
and all structural elements of the Building. Landlord shall also be responsible
for the cost to remediate any code violations of the existing Building or
improvements, before Tenant makes its Tenant Improvements. Notwithstanding the
foregoing, unless such damage is covered by insurance carried by either party or
required to be carried by Landlord under this lease, Tenant shall be responsible
for all damage to the Leased Premises caused by Tenant, or Tenant's agents,
employees, contractors or invitees.
5.2 UTILITIES. Tenant shall pay all charges for water, gas, electricity and
storm and sanitary sewer services supplied to the Leased Premises at Tenant's
request or for its benefit.
5.3 LIMITATION OF LANDLORD'S LIABILITY. Landlord shall not be liable to Tenant
for injury to Tenant, its employees, agents, invitees or contractors, damage to
Tenant's property or loss of Tenant's business or profits, nor shall Tenant be
entitled to terminate this Lease or to any reduction in or abatement of rent by
reason of any failure, interruption, rationing or other curtailment in the
supply of water, electric current, gas or other utility service to the Leased
Premises from any cause, other than Landlord's negligence, willful misconduct or
breach of this Lease.
5.
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ARTICLE 6.
ALTERATIONS AND IMPROVEMENTS
6.1 BY TENANT. Tenant shall not make any alterations to or modifications of the
Leased Premises or construct any improvements within the Leased Premises until
Landlord shall have first approved, in writing, the plans and specifications
therefor, which approval may not be unreasonably withheld, delayed or
conditioned. All such modifications, alterations or improvements, once so
approved, shall be made, constructed or installed by Tenant at Tenant's expense
(including all permit fees and governmental charges related thereto), using a
licensed contractor in substantial compliance with the Landlord-approved plans
and specifications therefor. All work undertaken by Tenant shall be done in
accordance with all Laws and in a good and workmanlike manner using new
materials of good quality. Tenant shall not commence the making of any such
modifications or alterations or the construction of any such improvements until
(i) all required governmental approvals and permits shall have been obtained,
(ii) all requirements regarding insurance imposed by this Lease have been
satisfied and (iii) Tenant shall have given Landlord at lease five business days
prior written notice of its intention to commence such work so that Landlord may
post and file notices of non-responsibility. In no event shall Tenant make any
modification, alterations or improvements whatsoever to the Outside Areas or the
exterior or structural components of the Building. Notwithstanding the
foregoing, Tenant, without Landlord's prior written consent, shall be permitted
to make non-structural alterations to the Building, provided that: (a) such
alterations do not exceed $10,000 individually or $100,000 in the aggregate, (b)
Tenant shall timely provide Landlord with notice of the proposed improvements
including such details as Landlord may reasonably request regarding the proposed
improvements and their estimated cost and (c) Tenant shall, upon Landlord's
request, remove the alteration at the termination of the Lease and restore the
Leased Premises to their condition existing prior to such alteration. Tenant
agrees to provide landlord with copies of plans for all material improvements or
alterations to the Leased Premises, regardless of whether or not Landlord's
consent to such improvements or alterations is required hereunder.
6.2 OWNERSHIP OF IMPROVEMENTS. All modifications, alterations and improvements
made or added to the Leased Premises by Tenant (other than Tenant's inventory,
equipment, movable furniture, wall decorations and trade fixtures) shall be
deemed real property and a part of the Leased Premises, but shall remain the
property of Tenant during the Lease Term. At the expiration or sooner
termination of this Lease, all such modifications, alterations and improvements
(other than Tenant's inventory, equipment, movable furniture, wall decorations
and trade fixtures), shall automatically become the property of Landlord and
shall be surrendered to Landlord as part of the Leased Premises as required
pursuant to Article 2.
6.3 LIENS. Tenant shall keep the Property and every part thereof free from any
lien, and shall pay when due all bills arising out of any work performed,
materials furnished, or obligations incurred by Tenant, its agents, employees or
contractors relating to the Property. If any such claim of lien is recorded
against Tenant's interest in this Lease, the Property or any part thereof,
Tenant shall bond against, discharge or otherwise cause such lien to be entirely
released within thirty (30) days after the same has been recorded. Tenant
further agrees to indemnify and hold harmless any hypothecation or security
device now or hereafter placed upon the Leased Premises, relative to any liens
or claim of liens recorded against Tenant's interest in this Lease, the Property
or any part thereof, arising out of or relating to any work performed, materials
furnished or obligations incurred by Tenant, its agents, employees or
contractors.
ARTICLE 7.
ASSIGNMENT AND SUBLETTING BY TENANT
7.1 BY TENANT. Tenant shall not sublet the Leased Premises or any portion
thereof or assign its interest in this Lease, whether voluntarily or by
operation of Law, without Landlord's prior written consent, which consent shall
not be unreasonably withheld, delayed or conditioned. Any attempted subletting
or assignment without Landlord's prior written consent, at Landlord's election,
shall constitute a default by Tenant under the terms of this Lease. The
acceptance of rent by Landlord from any person or entity other than Tenant, or
the acceptance of rent by Landlord from Tenant with knowledge of a violation of
the provisions of this paragraph, shall not be deemed to be a waiver by Landlord
of any provision of this Article or this Lease or to be a consent to any
subletting by Tenant or any assignment of Tenant's interest in this Lease. Any
sublease of the entire Building shall terminate Tenant's Extension Option
pursuant to Article 15.
7.2 MERGER OR REORGANIZATION. If Tenant is a corporation, any dissolution,
merger, consolidation or other reorganization of Tenant, the sale or other
transfer of the capital stock of Tenant or the sale of substantially all the
assets of Tenant, shall not be deemed an assignment of Tenant's interest in this
Lease. Notwithstanding the foregoing, a transfer of greater than 50% of the
ownership interest of Tenant shall be deemed to be an assignment of this Lease,
except in the case where such transfer is in connection with a public offering
of Tenant's securities or the merger or consolidation of Tenant in a transaction
where the surviving entity or its affiliates are a company of greater net worth
than Tenant. If Tenant is a partnership, a withdrawal or change, voluntary,
involuntary or by operation of Law, of any general partner, or the dissolution
of the partnership, shall not be deemed an assignment of Tenant's interest in
this Lease.
7.3 LANDLORD'S ELECTION. If Tenant shall desire to assign its interest under
the Lease or to sublet the Leased Premises, Tenant must first notify Landlord,
in writing, of its intent to so assign or sublet, at least ten (10) days in
advance of the date it intends to so assign its interest in this Lease or sublet
the Leased Premises, specifying in detail the terms of such proposed assignment
or subletting, including the name of the proposed assignee or
6.
<PAGE>
sublessee, the property assignee's or sublessee's intended use of the Leased
Premises, current financial statements (including a balance sheet, income
statement and statement of cash flow, all prepared in accordance with generally
accepted accounting principles) of such proposed assignee or sublessee, the form
of documents to be used in effectuating such assignment or subletting and such
other information as Landlord may reasonably request. Landlord shall have a
period of ten (10) business days following receipt of such notice and the
required information within which to do one of the following: (i) consent to
such requested assignment or subletting subject to Tenant's compliance with the
conditions set forth in Paragraph 7.4 below, or (ii) refuse to so consent to
such requested assignment or subletting, provided that such consent shall not be
unreasonably withheld, delayed or conditioned.
7.4 CONDITIONS TO LANDLORD'S CONSENT. If Landlord elects to consent to such
requested assignment or subletting, such consent shall be expressly conditioned
upon the occurrence of each of the following conditions:
(a) Landlord having approved in form and substance the assignment or
sublease agreement and any ancillary documents, which approval shall not be
unreasonably withheld by Landlord if the requirements of this Article 7 are
otherwise complied with.
(b) Each such sublessee or assignee having agreed, in writing satisfactory
to Landlord and its counsel and for the benefit of Landlord, to assume, to be
bound by, and to perform the obligations of this Lease to be performed by Tenant
which relate to space being subleased.
(c) Tenant having reimbursed to Landlord all reasonable costs and
reasonable attorneys' fees incurred by Landlord in conjunction with the
processing and documentation of any such requested subletting or assignment (not
to exceed $500 per request).
(d) Tenant having delivered to Landlord a complete and fully-executed
duplicate original of such sublease agreement or assignment agreement (as
applicable) and all related agreements.
7.5 EFFECT OF LANDLORD'S CONSENT. No subletting or assignment, even with the
consent of Landlord, shall relieve Tenant of its personal and primary obligation
to pay rent and to perform all of the other obligations to be performed by
Tenant hereunder. Consent by Landlord to one or more assignments of Tenant's
interest in this Lease or to one or more sublettings of the Leased Premises
shall not be deemed to be a consent to any subsequent assignment or subletting.
ARTICLE 8.
LIMITATION ON LANDLORD'S LIABILITY AND INDEMNITY
8.1 LIMITATION ON LANDLORD'S LIABILITY AND RELEASE. Landlord shall not be
liable to Tenant for, and Tenant hereby releases Landlord and its partners,
principals, members, officers, agents, employees, lenders, attorneys, and
consultants from, any and all liability, whether in contract, tort or on any
other basis, for any injury to or any damage sustained by Tenant, Tenant's
agents, employees or contractors resulting from the Leased Premises, the
Building, the Property or the Outside Areas, except that Tenant does not so
release Landlord from such liability to the extent such damage was proximately
caused by Landlord's negligence, willful misconduct, or breach of this lease.
8.2 TENANT'S INDEMNIFICATION OF LANDLORD. Tenant shall defend with counsel
reasonably satisfactory to Landlord any claims made or legal actions filed or
threatened against Landlord with respect to the violation of any Law, or the
death, bodily injury, personal injury or property damage suffered by any third
party occurring within the Leased Premises (including the Outside Areas and all
other parts of the Leased Premises) or resulting from Tenant's use or occupancy
of the Leased Premises, the Building or the Outside Areas, and Tenant shall
indemnify and hold Landlord, Landlord's partners, principals, members,
employees, agents and contractors harmless from any loss liability, penalties,
or expense resulting therefrom, except to the extent proximately caused by the
negligence or willful misconduct of Landlord or the breach by Landlord of this
lease. This indemnity agreement shall survive the date of the expiration or
sooner termination of this Lease.
ARTICLE 9.
INSURANCE
9.1 TENANT'S INSURANCE. Tenant shall maintain insurance complying with all of
the following:
(a) Tenant shall procure, pay for and keep in full force and effect, at
all times during the Lease Term, the following:
(i) Comprehensive general liability insurance insuring Tenant against
liability for personal injury, bodily injury, death and damage to property
occurring within the Leased Premises, or resulting from Tenant's use or
occupancy of the Leased Premises, the Building, the Outside Areas or the
Property, or resulting from Tenant's activities in or about the Leased Premises
or the Property, with coverage in an amount equal to Tenant's Required Liability
Coverage (as set forth in Article 1), which insurance shall contain a "broad
form liability" endorsement insuring Tenant's performance of Tenant's
obligations to indemnify Landlord as contained in this Lease.
7.
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(ii) Fire and property damage insurance in so-called "fire and
extended coverage" form insuring Tenant against loss from physical damage to
Tenant's personal property, inventory, trade fixtures and improvements within
the Leased Premises with coverage for the full actual replacement cost thereof;
(iii) Workers' compensation insurance and any other employee benefit
insurance sufficient to comply with all laws; and
(iv) With respect to making of alterations or the construction of
improvements or the like undertaken by Tenant, contingent liability and
builder's risk insurance, in an amount and with coverage reasonably satisfactory
to Landlord.
(b) Each policy of liability insurance required to be carried by Tenant
pursuant to this paragraph or actually carried by Tenant with respect to the
Leased Premises or the Property: (i) shall, except with respect to insurance
required by subparagraph (a)(iii) above, name Landlord, and such others as are
designated by Landlord, as additional insureds; (ii) shall be primary insurance
providing that the insurer shall be liable for the full amount of the loss, up
to and including the total amount of liability set forth in the declaration of
coverage, without the right of contribution from or prior payment by any other
insurance coverage of Landlord; (iii) shall be in a form satisfactory to
Landlord; (iv) shall be carried with companies reasonably acceptable to Landlord
with Best's ratings of at least A and XI; (v) shall provide that such policy
shall not be subject to cancellation, lapse or change except after at least
thirty days prior written notice to Landlord, and (vi) shall contain a so-called
"severability" or "cross liability" endorsement. Each policy of property
insurance maintained by Tenant with respect to the Leased Premises or the
Property or any property therein (i) shall provide that such policy shall not be
subject to cancellation, lapse or change except after at least thirty days prior
written notice to Landlord and (ii) shall contain a waiver and/or a permission
to waive by the insurer of any right of subrogation against Landlord, its
partners, principals, members, officers, employees, agents and contractors,
which might arise by reason of any payment under such policy or by reason of any
act or omission of Landlord, its partners, principals, members, officers,
employees, agents and contractors.
(c) Prior to the time Tenant or any of its contractors enters the Leased
Premises, Tenant shall deliver to Landlord, with respect to each policy of
insurance required to be carried by Tenant pursuant to this Article, a copy of
such policy (appropriately authenticated by the insurer as having been issued,
premium paid) or a certificate of the insurer certifying in form satisfactory to
Landlord that a policy has been issued, premium paid, providing the coverage
required by this Paragraph and containing the provisions specified herein. With
respect to each renewal or replacement of any such insurance, the requirements
of this Paragraph must be complied with not less than thirty days prior to the
expiration or cancellation of the policies being renewed or replaced.
9.2 Landlord's Insurance. With respect to insurance maintained by Landlord:
(a) Landlord shall maintain, as the minimum coverage required of it by this
Lease, fire and property damage insurance in so-called "fire and extended
coverage" form insuring Landlord (and such others as Landlord may designate)
against loss from physical damage to the Building with coverage of not less than
one hundred percent (100%) of the full actual replacement cost thereof and
against loss of rents for a period of not less than six months. Such fire and
property damage insurance, at Landlord's election but without any requirements
on Landlord's behalf to do so, (i) may be written in so-called "all risk" form,
excluding only those perils commonly excluded from such coverage by Landlord's
then property damage insurer; (ii) may provide coverage for physical damage to
the improvements so insured for up to the entire full actual replacement cost
thereof; and/or (iii) may be endorsed to cover loss or damage caused by any
additional perils against which Landlord may elect to insure. Notwithstanding
the foregoing, if Landlord elects to carry earthquake or flood insurance,
Landlord may pass through to Tenant as a Property Operating Expense only
reasonable premiums for such coverages if such coverages are available at
commercially reasonable rates and purchased by other owners of similar
properties in the area of the Leased Premises. Under no circumstances, however,
shall Tenant be required to pay or reimburse to Landlord the amount of any
deductibles for such coverages or for premiums for flood or earthquake coverage
exceeding $ 4,000 per year. Landlord shall not be required to cause such
insurance to cover any of Tenant's personal property, inventory, and trade
fixtures, or any modifications, alterations or improvements made or constructed
by Tenant to or within the Leased Premises. Landlord shall use commercially
reasonable efforts to obtain such insurance at competitive rates.
(b) Landlord shall maintain comprehensive general liability insurance
insuring Landlord (and such others as are designated by Landlord) against
liability for personal injury, bodily injury, death, and damage to property
occurring in, on or about, or resulting from the use or occupancy of the
Property, or any portion thereof, with combined single limit coverage of at
least Two Million Dollars ($2,000,000). Landlord may carry such greater coverage
as Landlord or Landlord's Lender, insurance broker, advisor or counsel may from
time to time determine is reasonably necessary for the adequate protection of
Landlord and the Property.
(c) Landlord may maintain any other insurance which in the opinion of its
insurance broker, advisor or legal counsel is prudent in carry under the given
circumstances, provided such insurance is commonly carried by owners of property
similarly situated and operating under similar circumstances.
9.3 Mutual Waiver Of Subrogation. Landlord hereby releases Tenant, and Tenant
hereby releases Landlord and its respective partners, principals, members,
officers, agents, employees and servants, from any and all liability for loss,
damage or injury to the property of the other in or about the Leased Premises or
the Property which is caused by or results from a peril or event or happening
which is covered by insurance actually carried and in force
8.
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at the time of the loss by the party sustaining such loss; provided, however,
that such waiver shall be effective only to the extent permitted by the
insurance covering such loss and to the extent such insurance is not prejudiced
thereby.
ARTICLE 10.
DAMAGE TO LEASED PREMISES
10.1 Landlord's Duty To Restore. If the Leased Premises, the Building or the
Outside Area are damaged by any peril after the Effective Date of this Lease,
Landlord shall restore the same, as and when required by this paragraph, unless
this Lease is terminated by Landlord pursuant to Paragraph 10.2 or by Tenant
pursuant to Paragraph 10.3. If this Lease is not so terminated, then upon the
issuance of all necessary governmental permits, Landlord shall commence and
diligently prosecute to completion the restoration of the Leased Premises, the
Building or the Outside Area, as the case may be, to the extent then allowed by
law, to substantially the same condition in which it existed as of the Lease
Commencement Date and Tenant shall restore any improvements made by it to the
Leased Premises and its trade fixtures. Notwithstanding the foregoing, Landlord
shall have no obligation to restore any Improvements made by Tenant to the
Leased Premises or any of Tenant's personal property, inventory or trade
fixtures.
10.2 Landlord's Right To Terminate. Landlord shall have the option to terminate
this Lease in the event any of the following occurs, which option may be
exercised only by delivery to Tenant of a written notice of election to
terminate within thirty days after the date of such damage or destruction:
(a) The Building is damaged by any peril covered by valid and collectible
insurance actually carried by Landlord and in force at the time of such damage
or destruction (an "insured peril ") to such an extent that the estimated cost
to restore the Building exceeds the lesser of (i) the insurance proceeds
available from insurance actually carried by Landlord unless Tenant agrees to
pay the difference between the cost of restoration and the amount of available
insurance proceeds, or (ii) fifty percent of the then actual replacement cost
thereof;
(b) The Building is damaged by an uninsured peril, which peril Landlord
was not required to insure against pursuant to the provisions of Article 9 of
this Lease.
(c) The Building is damaged by any peril and, because of the laws then in
force, the Building (i) cannot be restored at reasonable cost or (ii) if
restored, cannot be used for the same use being made thereof before such damage.
10.3 Tenant's Right To Terminate. If the Leased Premises, the Building or the
Outside Area are damaged by any peril and Landlord does not elect to terminate
this Lease or is not entitled to terminate this Lease pursuant to this Article,
then as soon as reasonably practicable, Landlord shall furnish Tenant with the
written opinion of Landlord's architect or construction consultant as to when
the restoration work required of Landlord may be complete. Tenant shall have the
option to terminate this Lease in the event any of the following occurs, which
option may be exercised only by delivery to Landlord of a written notice of
election to terminate within thirty (30) days after Tenant receives from
Landlord the estimate of the time needed to complete such restoration:
(a) If the time estimated to substantially complete the restoration
exceeds six (6) months from and after the date the architect's or construction
consultant's written opinion is delivered; or
(b) If the damage occurred within twelve (12) months of the last day of
the Lease Term and the time estimated to substantially complete the restoration
exceeds ninety (90) days from and after the date such restoration is commenced.
10.4 Tenant's Waiver. Landlord and Tenant agree that the provisions of
Paragraph 10.4 above, captioned "Tenant's Right To Terminate", are intended to
supersede and replace the provisions contained in California Civil Code, Section
1932, Subdivision 2, and California Civil Code, Section 1934, and accordingly,
Tenant hereby waives the provisions of such Civil Code Sections and the
provisions of any successor Civil Code Sections or similar laws hereinafter
enacted.
10.5 Abatement Of Rent. In the event of damage to the Leased Premises which
does not result in the termination of this Lease, the Base Monthly Rent and any
Additional Rent shall be temporarily abated during the period of damage in
proportion in the degree to which Tenant's use of the Leased Premises is
impaired by such damage, unless such damage results from the willful act of
Tenant, Tenant's employees or agents.
ARTICLE 11.
CONDEMNATION
11.1 Tenant's Right To Terminate. Except as otherwise provided in Paragraph
11.4 below regarding temporary takings, Tenant shall have the option to
terminate this Lease by notice given within thirty (30) days of a taking, if, as
a result of any taking, (i) all of the Leased Premises is taken, or (ii) twenty-
five percent (25%) or more of the Leased Premises is taken and the part of the
Leased Premises that remains cannot, within a reasonable period of time, be made
suitable for the continued operation of Tenant's business. Tenant must exercise
such option
9.
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within a reasonable period of time, to be effective on the later to occur of (i)
the date that possession of that portion of the Leased Premises that is
condemned is taken by the condemnor or (ii) the date Tenant vacated the Leased
Premises.
11.2 Landlord's Right To Terminate. Except as otherwise provided in Paragraph
11.4 below regarding temporary takings, Landlord shall have the option to
terminate this Lease by notice given within thirty (30) days of a taking, if, as
a result of any taking, (i) all of the Leased Premises is taken, (ii) twenty-
five percent (25%) or more of the Leased Premises is taken and the part of the
Leased Premises that remains cannot, within a reasonable period of time, be made
reasonably suitable for the continued operation of Tenant's business, or (iii)
because of the laws then in force, the Leased Premises may not be used for the
same use being made before such taking, whether or not restored as required by
Paragraph 11.3 below. Any such option to terminate by Landlord must be exercised
within a reasonable period of time, to be effective as of the date possession is
taken by the condemnor.
11.3 Restoration. If any part of the Leased Premises or the Building is taken
and this Lease is not terminated, then Landlord shall, to the extent not
prohibited by laws then in force, repair any damage occasioned thereby to the
remainder thereof to a condition reasonably suitable for Tenant's continued
operations and otherwise, to the extent practicable, in the manner and to the
extent provided in Paragraph 10.1 and Tenant shall repair, as necessary, any
improvements installed by it in the Leased Premises or trade fixture damaged by
such taking.
11.4 Temporary Taking. If a portion of the Leased Premises is temporarily taken
for a period of six months or less and such period does not extend beyond the
Lease Expiration Date, this Lease shall remain in effect. If any portion of the
Leased Premises is temporarily taken for a period which exceeds six months or
which extends beyond the Lease Expiration Date, then the rights of Landlord and
Tenant shall be determined in accordance with Paragraphs 11.1 and 11.2 above.
11.5 Division Of Condemnation Award. Any award made for any taking of the
Property, the Building, or the Leased Premises, or any portion thereof, or the
leasehold interest, shall belong to and be paid to Landlord, and Tenant hereby
assigns to Landlord all of its right, title and interest in any such award;
provided, however, that Tenant shall be entitled to receive any portion of the
award that is made specifically (i) for the taking of personal property,
inventory or trade fixtures belonging to Tenant, (ii) for the interruption of
Tenant's business or its moving costs, or (iii) for the unamortized value of any
leasehold improvements installed and paid for by Tenant, amortized over a four-
year period. The rights of Landlord and Tenant regarding any condemnation shall
be determined as provided in this Article, and each party hereby waives the
provisions of Section 1265.130 of the California Code of Civil Procedure, and
the provisions of any similar law hereinafter enacted, allowing either party to
petition the Supreme Court to terminate this Lease and/or otherwise allocate
condemnation awards between Landlord and Tenant in the event of a taking of the
Leased Premises.
11.6 Abatement Of Rent. In the event of a taking of the Leased Premises which
does not result in a termination of this Lease (including a temporary taking),
then, as of the date possession is taken by the condemning authority, the Base
Monthly Rent shall be reduced in the same proportion that the area of that part
of the Leased Premises so taken (less any addition to the area of the Leased
Premises by reason of any reconstruction) bears to the area of the Leased
Premises immediately prior to such taking.
11.7 Taking Defined. The term "taking" or "taken" as used in this Article 11
shall mean any transfer or conveyance of all or any portion of the Property to a
public or quasi-public agency or other entity having the power of eminent domain
pursuant to or as a result of the exercise of such power by such an agency,
including any inverse condemnation and/or any sale or transfer by Landlord of
all or any portion of the Property to such an agency under threat of
condemnation or the exercise of such power.
ARTICLE 12.
DEFAULT AND REMEDIES
12.1 Events Of Tenant's Default. Tenant shall be in default of its obligations
under this Lease if any of the following events occur:
(a) Tenant shall have failed to pay Base Monthly Rent or any Additional
Rent when due, which failure has continued for five days following written
notice from Landlord; or
(b) Tenant shall have failed to perform any term, covenant or condition of
this Lease (except those requiring the payment of Base Monthly Rent or
Additional Rent, which failures shall be governed by subparagraph (a) above)
within thirty (30) days after written notice from Landlord to Tenant specifying
the nature of such failure and requesting Tenant to perform same (provided that,
if longer than thirty days is reasonably required in order to perform such term,
covenant or condition, Tenant shall have such longer period provided that Tenant
has commenced to cure such failure and is diligently prosecuting such cure to
completion).
12.2 Landlord's Remedies. In the event of any default by Tenant, Landlord shall
have the following remedies, in addition to all other rights and remedies
provided by law or otherwise provided in this Lease, to which Landlord may
resort cumulatively, or in the alternative:
10.
<PAGE>
(a) Landlord may, at Landlord's election, keep this Lease in effect and
enforce, by an action at law or in equity, all of its rights and remedies under
this Lease including, without limitation, (i) the right to recover the rent and
other sums as they become due by appropriate legal action, (ii) the right to
make payments required by Tenant, or perform Tenant's obligations and be
reimbursed by Tenant for the cost thereof with interest at the then maximum rate
of interest not prohibited by law from the date the sum is paid by Landlord
until Landlord is reimbursed by Tenant, and (iii) the remedies of injunctive
relief and specific performance to prevent Tenant from violating the terms of
this Lease and/or to compel Tenant to perform its obligations under this Lease,
as the case may be.
(b) Landlord may, at Landlord's election, terminate this Lease by giving
Tenant written notice of termination, in which event this Lease shall terminate
on the date set forth for termination in such notice. Any termination under this
subparagraph shall not relieve Tenant from its obligation to pay to Landlord all
Base Monthly Rent and Additional Rent then or thereafter due, or any other sums
due or thereafter accruing to Landlord, or from any claim against Tenant for
damages previously accrued or then or thereafter accruing. In no event shall any
one or more of the following actions by Landlord, in the absence of a written
election by Landlord to terminate this Lease constitute a termination of this
Lease:
(i) Appointment of a receiver or keeper in order to protect
Landlord's interest hereunder;
(ii) Consent to any subletting of the Leased Premises or assignment
of this Lease by Tenant, whether pursuant to the provisions hereof or otherwise;
or
(iii) Any reasonable action taken by Landlord or its partners,
principals, members, officers, agents, employees, or servants, which is intended
to mitigate the adverse effects of any breach of this Lease by Tenant,
including, without limitation, any action taken to maintain and preserve the
Leased Premises or any action taken to relet the Leased Premises or any portion
thereof for the account at Tenant and in the name of Tenant.
(c) In the event Landlord terminates this Lease, Landlord shall be
entitled, at Landlord's election, to the rights and remedies provided in
California Civil Code Section 1951.2, as in effect on the Effective Date of this
Lease. For purposes of computing damages pursuant to Section 1951.2, an interest
rate equal to the maximum rate of interest not prohibited by law shall be used
where permitted. Such damages shall include, without limitation:
(i) The worth at the time of award of the amount by which the unpaid
rent for the balance of the term after the time of award exceeds the amount of
such rental loss that Tenant proves could be reasonably avoided, computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco, at the time of award plus one percent; and
(ii) Any other amount reasonably necessary to compensate Landlord for
all detriment proximately caused by Tenant's failure to perform Tenant's
obligations under this Lease, or which in the ordinary course of things would be
likely to result therefrom, including without limitation, the following: (i)
expenses for cleaning, repairing or restoring the Leased Premises, (ii) broker's
fees allocable to the remainder of the term of this Lease, advertising costs and
other expenses of reletting the Leased Premises; (iii) expenses incurred in
removing, disposing of and/or storing any of Tenant's personal property,
inventory or trade fixtures remaining therein; (iv) reasonable attorney's fees,
expert witness fees, court costs and other reasonable expenses incurred by
Landlord (but not limited to taxable costs) in retaking possession of the Leased
Premises, establishing damages hereunder, and releasing the Leased Premises; and
(v) any other expenses, costs or damages otherwise reasonably incurred or
suffered as a result of Tenant's default.
12.3 Landlord's Default And Tenant's Remedies. Landlord shall not be in default
hereunder unless Landlord fails to perform obligations required of Landlord
within a reasonable time, but in no event later than thirty (30) days after
written notice by Tenant specifying wherein Landlord has failed to perform such
obligation; provided that if the nature of Landlord's obligation is such that
more than thirty (30) days are required for performance, then Landlord shall not
be in default if Landlord commences performance within such thirty (30) day
period and thereafter diligently pursues the same to completion. In the event of
Landlord's default, Tenant may then proceed in equity or at law to compel
Landlord to perform its obligations and/or to recover damages proximately caused
by such failure to perform (except as and to the extent Tenant has waived its
right to damages as provided in this Lease).
12.4 Tenant's Waiver. Landlord and Tenant agree that the provisions of
Paragraph 12.3 above are intended to supersede and replace the provisions of
California Civil Code Sections 1932(1), 1941 and 1942, and accordingly, Tenant
hereby waives the provisions of California Civil Code Sections 1932(1), 1941 and
1942 and/or any similar or successor law regarding Tenant's right to terminate
this Lease or to make repairs and deduct the expenses of such repairs from the
rent due under this Lease.
ARTICLE 13.
GENERAL PROVISIONS
13.1 Taxes On Tenant's Property. Tenant shall pay before delinquency any and
all taxes, assessments, license fees, use fees, permit fees and public charges
of whatever nature or description levied, assessed or imposed against Tenant by
a governmental agency arising out of, caused by reason of or based upon Tenant's
estate in this Lease,
11.
<PAGE>
Tenant's ownership of property, improvements made by Tenant to the Leased
Premises or the Outside Areas. If any such taxes, assessments, fees or public
charges are levied against Landlord, Landlord's property, the Building or the
Property, Landlord shall have the right to require Tenant to pay such taxes.
13.2 Holding Over. This Lease shall terminate without further notice on the
Lease Expiration Date (as set forth in Article 1). Any holding over by Tenant
after expiration of the Lease Term shall neither constitute a renewal nor
extension of this Lease nor give Tenant any rights in or to the Leased Premises
except as expressly provided in this Paragraph. Any such holding over to which
Landlord has consented shall be construed to be a tenancy from month to month,
on the same terms and conditions herein specified insofar as applicable.
13.3 Subordination To Mortgages. This Lease is subject to and subordinate to
all ground leases, mortgages and deeds of trust which affect the Building or the
Property and which are of public record as of the Effective Date of this Lease,
and to all renewals, modifications, consolidations, replacements and extensions
thereof. However, if the lessor under any such ground lease or any lender
holding any such mortgage or deed of trust shall advise Landlord that it desires
or requires this Lease to be made prior and superior thereto, then, upon written
request of Landlord to Tenant, Tenant shall promptly execute, acknowledge and
deliver any and all customary or reasonable documents or instruments which
Landlord and such lessor or lender deems necessary or desirable to make this
Lease prior thereto. Tenant hereby consents to Landlord's ground leasing the
land underlying the Building or the Property and/or encumbering the Building or
the Property as security for future loans on such terms as Landlord shall
desire, all of which future ground leases, mortgages or deeds of trust shall be
subject to and subordinate to this Lease. However, if any lessor under any such
future ground lease or any lender holding such future mortgage or deed of trust
shall desire or require that this Lease be made subject to and subordinate to
such future ground lease, mortgage or deed of trust, then Tenant agrees, within
ten days after Landlord's written request therefor, to execute, acknowledge and
deliver to Landlord any and all documents or instruments requested by Landlord
or by such lessor or lender as may be necessary or proper to assure the
subordination of this Lease to such future ground lease, mortgage or deed of
trust, but only if such lessor or lender agrees to recognize Tenant's rights
under this Lease and agrees not to disturb Tenant's quiet possession of the
Leased Premises so long as Tenant is not in default under this Lease. If
Landlord assigns the Lease as security for a loan, Tenant agrees to execute such
documents as are reasonably requested by the lender and to provide reasonable
provisions in the Lease protecting such lender's security interest which are
customarily required by institutional lenders making loans secured by a deed of
trust.
13.4 Tenant's Attornment Upon Foreclosure. Tenant shall, upon request, attorn
(i) to any purchaser of the Building or the Property at any foreclosure sale or
private sale conducted pursuant to any security instruments encumbering the
Building or the Property, (ii) to any grantee or transferee designated in any
deed given in lieu of foreclosure of any security interest encumbering the
Building or the Property, or (iii) to the lessor under an underlying ground
lease of the land underlying the Building or the Property, should such ground
lease be terminated; provided that such purchaser, grantee or lessor recognizes
Tenant's rights under this Lease.
13.5 Estoppel Certificate. Tenant will, following any request by Landlord,
promptly execute and deliver to Landlord an estoppel certificate (i) 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, (ii) stating the date to which the rent
and other charges are paid in advance, if any, (iii) acknowledging that there
are not, to Tenant's knowledge, any uncured defaults on the part of Landlord
hereunder, or specifying such defaults if any are claimed, and (iv) certifying
such other information about this Lease as may be reasonably requested by
Landlord, its Lender or prospective lenders, investors or purchasers of the
Building or the Property.
13.6 Transfer By Landlord. Landlord and its successors in interest shall have
the right to transfer their interest in the Building, the Property, or any
portion thereof at any time and to any person or entity. In the event of any
such transfer, the Landlord originally named herein (and in the case of any
subsequent transfer, the transferor), from the date of such transfer, (i) shall
be automatically relieved, without any further act by any person or entity, of
all liability for the performance of the obligations of the Landlord hereunder
which may accrue after the date of such transfer and (ii) shall be relieved of
all liability for the performance of the obligations of the Landlord hereunder
which have accrued before the date of transfer if its transferee agrees to
assume and perform all such prior obligations of the Landlord hereunder. Tenant
shall attorn to any such transferee. After the date of any such transfer, the
term "Landlord" as used herein shall mean the transferee of such interest in the
Building or the Property.
13.7 Force Majeure. The obligations of each of the parties under this Lease
(other than the obligations to pay money) shall be temporarily excused if such
party is prevented or delayed in performing such obligations by reason of any
strikes, lockouts or labor disputes; government restrictions, regulations,
controls, action or inaction; civil commotion; or extraordinary weather, fire or
other acts of God.
13.8 Notices. Any notice required or desired to be given by a party regarding
this Lease shall be in writing and shall be personally served, or in lieu of
personal service may be given by reputable overnight courier service, postage
prepaid, addressed to the other party as follows:
If to Landlord: R.G. Harris Company
P.O. Box 2882
31479 Pacific Coast Highway
Malibu, California 90265
Attention: Henry Workman
12.
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with a copy to: Sherwood and Hardgrove
Suite 240
11990 San Vicente Boulevard
Los Angeles, California 90049-5004
Attention: Don C. Sherwood
If to Tenant: Copper Mountain Networks, Inc.
3931 Sorrento Valley Blvd.
San Diego, California
Attention: Joseph Lynch
with a copy to: Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, California 94306
Attention: Toni Pryor Wise
Any notice given in accordance with the foregoing shall be deemed received upon
actual receipt or refusal to accept delivery.
13.9 Attorneys' Fees. In the event any party shall bring any action,
arbitration proceeding or legal proceeding alleging a breach of any provision of
this Lease, to recover rent, to terminate this Lease, or to enforce, protect,
determine or establish any term or covenant of this Lease or rights or duties
hereunder of either party, the prevailing party shall be entitled to recover
from the non-prevailing party as a part of such action or proceeding, or in a
separate action for that purpose brought within one year from the determination
of such proceeding, reasonable attorneys' fees, expert witness fees, court costs
and other reasonable expenses incurred by the prevailing party.
13.10 Definitions. Any term that is given a special meaning by any provision in
this Lease shall, unless otherwise specifically stated, have such meaning
wherever used in this Lease or in any Addenda or amendment hereto. In addition
to the terms defined in Article 1, the following terms shall have the following
meanings:
(a) Real Property Taxes. The term "Real Property Tax" or "Real Property
Taxes" shall each mean (i) all taxes, assessments, levies and other charges of
any kind or nature whatsoever, general and special, foreseen and unforeseen
(including all installments of principal and interest required to pay any
general or special assessments for public improvements and any increases
resulting from reassessments caused by any change in ownership or new
construction), now or hereafter imposed by any governmental or quasi-
governmental authority or special district having the direct or indirect power
to tax or levy assessments, which are levied or assessed for whatever reason
against the Property or any portion thereof, or Landlord's interest herein, or
the fixtures, equipment and other property of Landlord that is an integral part
of the Property and located thereon, or Landlord's business of owning, leasing
or managing the Property or the gross receipts, income or rentals from the
Property, and (ii) all charges, levies or fees imposed by any governmental
authority against Landlord by reason of or based upon the use of or number of
parking spaces within the Property, the amount of public services or public
utilities used or consumed (e.g. water, gas, electricity, sewage or waste water
disposal) at the Property, the number of person employed by tenants of the
Property, the size (whether measured in area, volume, number of tenants or
whatever) or the value of the Property, or the type of use or uses conducted
within the Property. If any Real Property Tax is partly based upon property or
rents unrelated to the Property, then only that part of such Real Property Tax
that is fairly allocable to the Property shall be included within the meaning of
the terms "Real Property Tax" or "Real Property Taxes." Notwithstanding the
foregoing, the terms "Real Property Tax" or "Real Property Taxes" shall not
include estate, inheritance, transfer, gift or franchise taxes of Landlord or
the federal or state income tax imposed on Landlord's income from all sources.
(b) Landlord's Insurance Costs. The term "Landlord's Insurance Costs"
shall mean the costs to Landlord to carry and maintain the policies of fire and
property damage insurance for the Building and the Property and general
liability and any other insurance required or permitted to be carried by
Landlord pursuant to Article 9.
(c) Property Maintenance Costs. The term "Property Maintenance Costs"
shall mean all costs and expenses (except Landlord's Insurance Costs and Real
Property Taxes) paid or incurred by Landlord in protecting, operating,
maintaining, repairing, replacing and preserving the Property and all parts
thereof, including without limitation, (i) professional management fees (not
exceeding 2 1/2 % of the amount of Base Monthly Rent, if such fees are paid to
Landlord or an affiliate or agent of Landlord, (ii) the amortizing portion of
any costs incurred by Landlord in the making of any modifications, alterations
or improvements required by any governmental authority as set forth in Article
6, which are so amortized during the Lease Term, and (iii) such other costs as
may be paid or incurred with respect to operating, maintaining, and preserving
the Property, such as repairing and painting the exterior surfaces, of the
Building, repairing, replacing, and resurfacing paved areas, repairing and
replacing structural parts of the Building, and repairing and replacing when
necessary, electrical, plumbing, heating, ventilating and air conditioning
systems serving the Building. Notwithstanding the foregoing, Property
Maintenance Costs shall not include the costs of environmental remediation or
costs attributable to the tenancy of others at the Property, or Landlord's
repair and maintenance obligations pursuant to paragraph 5.1(b). All capital
items determined in accordance with generally accepted accounting principles
(excluding in any case items which are Landlord's obligations under paragraph
5.1(b)), shall be amortized over their useful life and included as a Property
Operating Expense.
13.
<PAGE>
(d) Property Operating Expenses. The term "Property Operating Expenses"
shall mean and include all Real Property Taxes, plus all Landlord's Insurance
Costs, plus all Property Maintenance Costs.
(e) Law. The term "Law" shall mean any judicial decisions and any
statute, constitution, ordinance, resolution, regulation, rule, administrative
order, or other requirements of any municipal, county, state, federal, or other
governmental agency or authority having jurisdiction over the parties to this
Lease, the Leased Premises, the Building or the Property, or any of them, in
effect either at the Effective Date of this Lease or at any time during the
Lease Term, including, without limitation, any regulation, order, or policy of
any quasi-official entity or body (e.g. a board of fire examiners or a public
utility or special district).
(F) Lender. The term "Lender" shall mean the holder of any promissory
note or other evidence of indebtedness secured by the Property or any portion
thereof.
(g) Private Restrictions. The term "Private Restrictions" shall mean (as
they may exist from time to time) any and all covenants, conditions and
restrictions, private agreements, easements, and any other recorded documents or
instruments affecting the use of the Property, the Building, the Leased
Premises, or the Outside Areas.
(h) Rent. The term "Rent" shall mean collectively Base Monthly Rent and
all Additional Rent.
13.11 General Waivers. One party's consent to or approval of any act by the
other party requiring the first party's consent or approval shall not be deemed
to waive or render unnecessary the first party's consent to or approval of any
subsequent similar act by the other party. No waiver of any provision hereof, or
any waiver of any breach of any provision hereof, shall be effective unless in
writing and signed by the waiving party. The receipt by Landlord of any rent or
payment with or without knowledge of the breach of any other provision hereof
shall not be deemed a waiver of any such breach. No delay or omission in the
exercise of any right or remedy accruing to either party upon any breach by the
other party under this Lease shall impair such right or remedy or be construed
as a waiver of any such breach theretofore or thereafter occurring. The waiver
by either party of any breach of any provision of this Lease shall not be deemed
to be a waiver of any subsequent breach of the same or any other provisions
herein contained.
13.12 Miscellaneous. Should any provisions of this Lease prove to be invalid or
illegal, such invalidity or illegality shall in no way affect, impair or
invalidate any other provisions hereof, and such remaining provisions shall
remain in full force and effect. Time is of the essence with respect to the
performance of every provision of this Lease in which time of performance is a
factor. Any copy of this Lease which is executed by the parties shall be deemed
an original for all purposes. This Lease shall, subject to the provisions
regarding assignment, apply to and bind the respective heirs, successors,
executors, administrators and assigns of Landlord and Tenant. The term "party"
shall mean Landlord or Tenant as the context implies. If Tenant consists of more
than one person or entity, then all members of Tenant shall be jointly and
severally liable hereunder. This Lease shall be construed and enforced in
accordance with the Laws of the State in which the Leased Premises are located.
The captions in this Lease are for convenience only and shall not be construed
in the construction or interpretation of any provision hereof. When the context
of this Lease requires, the neuter gender includes the masculine, the feminine,
a partnership, corporation, limited liability company, joint venture, or other
form of business entity, and the singular includes the plural. The terms
"must,""shall," "will," and "agree" are mandatory. The term "may" is permissive.
When a party is required to do something by this Lease, it shall do so at its
sole cost and expense without right of reimbursement from the other party unless
specific provision is made therefor. Landlord and Tenant shall both be deemed to
have drafted this Lease, and the rule of construction that a document is to be
construed against the drafting party shall not be employed in the construction
or interpretation of this Lease.
ARTICLE 14.
CORPORATE AUTHORITY,
BROKERS AND ENTIRE AGREEMENT
14.1 Corporate Authority. If Tenant is a corporation, each individual
executing this Lease on behalf of such corporation represents and warrants that
Tenant has the full right and legal authority to enter into this Lease, and that
he or she is duly authorized to execute and deliver this Lease on behalf of
Tenant in accordance with its terms.
14.2 Brokerage Commissions. Landlord and Tenant each represent, warrant and
agree that it has not had any dealings with any real estate broker(s), leasing
agent(s), finder(s) or salesmen, other than the Brokers (as named in Article 1)
with respect to the lease by it of the Leased Premises pursuant to this Lease,
and that it will indemnify, defend with competent counsel, and hold the other
harmless from any liability for the payment of any real estate brokerage
commissions, leasing commissions or finder's fees claimed by any other real
estate broker(s), leasing agent(s), finder(s), or salesmen to be earned or due
and payable by reason of its agreement or promise (implied or otherwise) to pay
such a commission or finder's fee by reason of its leasing the Leased Premises
pursuant to this Lease. Landlord agrees to assume all obligations and
responsibility with respect to payment of the Brokers and to indemnify, defend
and hold Tenant harmless therefrom. Landlord shall pay Broker a commission equal
to 3% of the Base Monthly Rent payable during the second, third and fourth year
of this Lease. Such commission shall be paid 50% upon execution of this Lease by
Landlord and Tenant and 50% upon the Lease Commencement Date. No further
commission shall be due as the result of any exercise of option rights by the
Tenant.
14.3 Entire Agreement. This Lease and the Exhibits (as described in Article
1), which Exhibits are by this reference incorporated herein, constitute the
entire agreement between the parties, and there are no other
14.
<PAGE>
agreements, understandings or representations between the parties relating to
the lease by Landlord of the Leased Premises to Tenant, except as expressed
herein.
ARTICLE 15.
OPTIONS TO EXTEND
15.1 Subject to the condition set forth in clause (b) below, Tenant shall have
the option to extend the term of this Lease ("Extension Option") for a period of
two (2) years from the expiration of the fourth year of the Lease Term (the
"Extension Period"), subject to the following conditions:
(a) The Extension Option shall be exercised, if at all, by notice of
exercise given to Landlord by Tenant not less than nine (9) months prior to the
expiration of the fourth year of the Lease Term; and
(b) Tenant is not in material default under any of the terms, covenants or
conditions of this Lease, either at the time Tenant exercises the Extension
Option or on the commencement date of the Extension Period.
15.2 In the event the Extension Option is exercised in a timely fashion, the
Lease shall be extended for a period of two (2) years upon all of the terms and
conditions of this Lease, provided that the Base Monthly Rent for each extension
period shall be equal to ninety-five percent (95%) of the "Fair Market Rent" for
the Leased Premises. For purposes hereof, "Fair Market Rent" shall mean the Base
Monthly Rent determined pursuant to the process described below.
15.3 Within 15 days after receipt of Tenant's notice of exercise, Landlord
shall notify Tenant in writing of Landlord's estimate of the Base Monthly Rent
for the applicable extension period, based on the provisions of Paragraph 15.2
above. The parties shall have 15 days to meet and agree on the amount of Base
Monthly Rent. If the parties are unable to so agree within such period, Tenant
shall have the right either to (i) accept Landlord's statement of Base Monthly
Rent as the Base Monthly Rent for the applicable extension period; or (ii) elect
to arbitrate Landlord's estimate of Fair Market Rent, such arbitration to be
conducted pursuant to the provisions hereof. If Tenant elects arbitration, the
arbitration shall be concluded within 60 days after the date of Tenant's
election, subject to extension for an additional 30-day period if a third
arbitrator is required and does not act in a timely manner.
15.4 The parties shall each select a person to act as the arbitrator on its
behalf within fifteen days of delivery by Tenant to Landlord of its election to
arbitrate. Each arbitrator shall be qualified as a real estate appraiser with at
least ten years' experience and familiar with the Fair Market Rent of similar
industrial, research and development, or office space in the vicinity of the
Property used for a use similar to that of the Leased Premises. If either party
fails to notify the other of the appointment of its arbitrator, within or by the
time above specified, then the arbitrator appointed by the one party shall be
the arbitrator to determine the issue. In the event that two arbitrators are
chosen pursuant to Paragraph, the arbitrators so chosen shall, within 15 days
after the second arbitrator is appointed determine the Fair Market Rent. If the
two arbitrators shall be unable to agree upon a determination of Fair Market
Rent within such 15-day period, they, themselves, shall appoint a third
arbitrator, who shall be a competent and impartial person with qualifications
similar to those required of the first two arbitrators pursuant to. In the event
they are unable to agree upon such appointment within seven days after
expiration of such 15-day period, the third arbitrator shall be selected by the
parties themselves, if they can agree thereon, within a further period of 15
days. If the parties do not so agree, then either party, on behalf of both, may
request appointment of such a qualified person by the then American Arbitration
Association or any judge of the Superior Court of San Diego county, acting in
his or her private and not in his or her official capacity. The three
arbitrators shall determine the Fair Market Rent of the Leased Premises within
15 days after the appointment of the third arbitrator. Each party shall pay the
fee and expenses of its respective arbitrator and both shall share the fee and
expenses of the third arbitrator.
ARTICLE 16.
HAZARDOUS MATERIAL
16.1 Other then those listed on Exhibit B and reasonable amounts of those
materials commonly used for office and janitorial uses and petroleum products in
vehicles, all of which have been preapproved by Landlord, Tenant shall not cause
or permit any Hazardous Substances (as hereinafter defined) to be used, stored,
generated or disposed of on or in the Leased Premises or the Property by Tenant,
Tenant's agents, employees, contractors or invitees, without first obtaining
Landlord's written consent. If Hazardous Substances are used, stored, generated
or disposed of on or in the Leased Premises or the Property except as permitted
above, or if the Leased Premises or the Property become contaminated in any
manner for which Tenant is legally liable, Tenant shall indemnity and hold
harmless the Landlord from any and all claims, damages, fines, judgments,
penalties, costs, liabilities or losses (including without limitation, a
decrease in value of the Leased Premises and the Property, damages due to loss
or restriction of rentable or usable space, or any damages due to adverse impact
on marketing of the leased Premises and the Property, and any and all sums paid
for settlement of claims, attorneys fees, consultant and expert fees) arising as
a result of such contamination by Tenant. This indemnification includes without
limitation, any and all costs incurred due to any investigation of the site or
any cleanup, removal or restoration mandated by a federal, state or local agency
or political subdivision. Without limitation of the foregoing, if Tenant causes
or permits the presence of any Hazardous Substance on the Leased Premises or the
Property and such results in contamination, Tenant shall promptly, at its sole
expense, take any and all necessary actions required by any regulatory agency
having jurisdiction over the property to remediate the condition of the Leased
Premises and the Property. Tenant shall first obtain Landlord's written approval
for any such remedial action.
15.
<PAGE>
16.2 As used herein the term "Hazardous Substance" means any substance which is
toxic, ignitible, reactive or corrosive and which is regulated by any local
government, the State of California or the United States government. "Hazardous
Substance" includes any and all material or substances which are defined as
"hazardous waste", "extremely hazardous waste" or a "hazardous substance"
pursuant to state, federal or local governmental law. "Hazardous Substance"
includes, but is not restricted to asbestos, polychlorobiphinyls ("PCB's") and
petroleum.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of the
respective dates below set forth with the intent to be legally bound thereby as
of the Effective Date of this Lease first above set forth.
LANDLORD:
R. G. Harris Co., a
California corporation
Dated: 8/13/97 By: /s/ SIGNATURE ILLEGIBLE
----------------- ----------------------------
Title: PRESIDENT
-------------------------
/s/ Elizabeth G. Harris
-------------------------------
Elizabeth G. Harris, Trustee of the
Harris Family Revocable Trust
/s/ Henry K. Workman
-------------------------------
Henry K. Workman, Trustee of the
Harris Family Revocable Trust
/s/ Don C. Sherwood
-------------------------------
Don C. Sherwood, Trustee of the
Harris Family Revocable Trust
TENANT:
Copper Mountain Networks, Inc., a
California corporation
Dated: 8 - 12 - 97 By: Joe Lynch
------------ ----------------------------
Title: V.P. Operations
-------------------------
16.
<PAGE>
EXHIBIT A
SITE PLAN
[SITE PLAN APPEARS HERE]
<PAGE>
EXHIBIT B
HAZARDOUS SUBSTANCES
NONE
18.
<PAGE>
EXHIBIT 10.11
INDUSTRIAL GROSS LEASE
PARTIES
THIS LEASE is made on the date indicated at the end hereof, between STUART
LEEB AND ASSOCIATES and Copper Mountain Networks, Inc. hereinafter called
respectively Lessor and Lessee.
PREMISES
1. Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, those certain premises known as 2470 Embarcadero Way, Palo Alto, CA
94303 an area comprising 13,800 square feet more or less of floor space
("The Premises") described on the plans attached hereto marked Exhibit "A".
1(b). Lessee's Share, as used herein in connection with taxes and
building maintenance increases is the ratio that the number of leasable
square feet in the Premises bears to the total leasable square feet in the
Building and other improvements in which the Premises are located, which
ratio shall be 25.3% percent.
USE OF PREMISES
2(a). The Premises shall be used as general office, R&D, sales &
marketing & training and any other lawful use related thereto and for no other
purpose, without the prior written consent of Lessor, which shall not be
unreasonably withheld.
2(b). Lessee shall not do or cause or permit anything to be done in or
about The Premises or bring or keep anything therein which will in any way
increase the then existing rate of, or otherwise affect, any fire or other
insurance upon the building, or any of its contents; or which will in any
way conflict with any law, ordinance, rule or regulation which may now or
hereafter be enacted or promulgated by a public authority, and by the
National Board of Fire Underwriters or any other similar body now or
hereafter constituted; or create a nuisance; or in any way obstruct or
interfere with the rights of the Lessees or occupants of the building, or
injure or annoy them; or commit or suffer to be committed any waste upon
The Premises; or use or allow The Premises to be used for any improper,
immoral, unlawful or objectionable purpose; or place any loads upon the
floor, walls or ceiling which endanger the building; or obstruct the
sidewalk or passageways or stairways in front of, within, or adjacent to
the building, or do or permit to be done anything in any way tending to
disturb the occupants, neighboring property or tending to injure the
reputation or appearance of the building.
TERM
3. The term of this lease shall be for 3 years and 0 months,
commencing on the 1st day of May, 1998, or such later date as is provided
by Paragraph 7 below, and ending on the 30th day of April, 2001, inclusive.
RENTAL
4(a). Lessee agrees to pay to Lessor at 1900 Embarcadero Road, Suite
201, Palo Alto, CA 94303 or elsewhere as designated from time to time by
Lessor in lawful money of the United States of America, without deduction
or offset, except as otherwise provided herein, a monthly base rental of
thirty seven thousand nine hundred fifty and no/100 ($37,950.00) per month.
Such sum shall be paid monthly in advance promptly on the first day of each
calendar month during the term of this lease, except that in the event the
commencement and termination dates of the term are other than the first and
last calendar days of a month, the first and last payments shall be
appropriate fractions of the regular monthly rental.
TAX INCREASES PAW BY LESSEE
4(b). Lessee shall pay as additional rental Lessee's Share of all
increases in Project Taxes (Project 7 Tax Increases) levied and assessed
against the building, other improvements, and land of which The Premises are
a part over and above the Project Taxes levied and assessed against such
property for the base year which the 1998 calendar year.
(i) Notification. Following payment of the 2nd installment of
the bill for Project Taxes for each tax year after the base year, Lessor
shall notify Lessee of Lessor's calculation of Lessee's proportionate share
of the Project Tax Increases and together with such notice shall furnish
Lessee with a copy of the tax bill. Lessee shall reimburse Lessor for
Lessee's proportionate share of the Project Tax Increases not later than
thirty (30) days after receipt of the tax bill.
<PAGE>
(ii) Partial Years. At the commencement and at the termination of
the Lease, Lessee's share of Project Tax Increases for that period (or periods)
of taxation shall be prorated, based on the ratio of the term of the Lease
within each such tax period to the full tax period.
(iii) Impounds. If any beneficiary of a security instrument
encumbering the Project, Building or any interest therein requires Lessor to
impound taxes, assessments or insurance premiums on a periodic basis during the
Lease term, Lessee, upon notice from Lessor indicating this requirement, shall
pay Lessee's percentage share of the increased amounts required to be impounded
(based on Lessee's percentage share of Project Tax Increases and in lieu of
Lessee paying its share of such impounded amounts as Project Tax Increases) to
Lessor on a periodic basis in accordance with the beneficiary's requirements.
Lessor shall impound such amounts received from Lessee in accordance with the
requirements of the beneficiary.
(iv) Later Improvements. Lessee shall not be liable for real
property taxes (whether the taxes result from increased rate and/or valuation)
attributable to additional improvements to the building in which The Premises
are located that are constructed after the commencement of the term of this
Lease, unless the additional improvements are constructed for Lessee's sole
benefit.
(v) Project Taxes. The term "Project Taxes" as used in this Lease
shall collectively mean (to the extent any of the following are not paid by
Lessee pursuant to Subparagraph (vi) below) all: real estate taxes; personal
property taxes; taxes computed or based on rental income (including without
limitation any value added tax or municipal business tax but excluding federal,
state and municipal net income taxes); excise taxes; gross receipts taxes; sales
and/or use taxes; and all other governmental, quasi-governmental or special
district impositions of any kind, regardless of whether now customary or within
the contemplation of the parties hereto and regardless of whether resulting from
increased rate and/or valuation, or whether extraordinary or ordinary, general
or special, which during the Lease term are assessed or imposed upon Lessor
and/or become chargeable against the Project or The Premises, Building, Common
Area and/or Parcel tinder or by virtue of any present or future laws,
regulations, or other requirements of any governmental authority or quasi-
governmental authority or special district having the direct or indirect power
to tax or levy assessments whatsoever. The term "Taxes" shall include (to the
extent the same are not paid by Lessee pursuant to Subparagraph (vi) below),
without limitation: the cost to Lessor of contesting the amount or validity or
applicability of any Project Taxes.
(vi) Other Taxes. Lessee shall pay the following:
(A) Lessee shall pay, or cause to be paid, (or reimburse
Lessor as additional rent if Lessor is assessed) before delinquency, any and all
taxes levied or assessed, and which become payable for any period during the
term hereof, upon all Lessee's leasehold improvements in excess of the value of
Lessee's tenant improvement allowance, fixtures, and personal property located
in The Premises; except only that which has been paid for by Lessor and is the
standard of the Building. In the event any or all of the Lessee's excess
leasehold improvements, or personal property shall be assessed and taxed with
the Project, Lessee shall pay to Lessor such taxes prior to delinquency. If
Lessee's excess leasehold improvements, fixtures, and personal property are not
separately assessed on the tax statement or bill, Lessor's good faith
determination of the amount of such taxes application to such improvements and
property shall be conclusive determination of Lessee's obligation to pay such
amount as so determined by Lessor.
(B) Lessee shall pay (or reimburse lessor if Lessor is
assessed, as additional rent), prior to delinquency or within ten (10) days of
receipt of a statement thereof, any and all other taxes, levies, assessments, or
surcharges payable by Lessor or Lessee and relating to this Lease or The
Premises (other than Lessor's net income, succession, transfer, gift,
franchise, estate, or inheritance taxes), whether or not now customary or within
the contemplation of the parties hereto, now in force or which may hereafter
become effective, including but not limited to taxes: (I) upon, allocable to, or
measured by the area of The Premises or on the Rentals payable hereunder,
including without limitation any gross income, gross receipts, excise, or other
tax levied by the state, any political subdivision thereof, city or federal
government with respect to the receipt of such Rentals; (II) upon or with
respect to the use, possession, occupancy, leasing, operation and management of
The Premises or any portion thereof; (III) upon this transaction or any document
to which Lessee is a party creating or transferring an interest or an estate in
The Premises; or (IV) imposed as a means of controlling or abating environmental
pollution or the use of energy, including, without limitation, any parking
taxes, levies or charges or vehicular regulations imposed by any governmental
agency. In the event any such taxes are payable by Lessor and it shall not be
lawful for Lessee to reimburse Lessor for such taxes, then the Rentals payable
hereunder shall be increased to net Lessor the net Rental after imposition of
any such tax upon Lessor as would have been payable to Lessor prior to the
imposition of any such tax.
COST OF LIVING RENT INCREASE FACTOR
4(c). In addition to the rent reserved in Subparagraphs 4(a) and 4(b)
above, at the end of the 12th month of the lease, and at the end of every 12th
month period thereafter, the rental shall be adjusted for the succeeding
12th month
2
<PAGE>
period, by 3% per square foot.
BUILDING MAINTENANCE EXPENSE INCREASE PAID BY LESSEE
4(d). Building Maintenance Expense Increases. Lessee shall pay to
Lessor as additional rent Lessee's percentage share of any increase in Building
Maintenance Increases as defined in Subparagraph (iv) below from the base year
(Calendar 1998) to each calendar year thereafter.
(i) Yearly Statements. At the end of each calendar year
(following the base year) during the lease term, Lessor will notify Lessee of
Lessee's proportionate share of Building Maintenance Expense Increases. Lessor
shall deliver a detailed statement of Lessor's calculations. Lessee shall pay
Lessor without deduction or offset Lessee's shared such of such Building
Maintenance Expense Increases within fifteen (15) days of such notification.
(ii) Partial Years. If Lease commencement or expiration shall
be on a day other than the last day of a calendar year, Lessee's obligation to
pay Building Maintenance Increases shall be based on the increases for the
entire calendar year in which the Lease expiration falls, prorated on the basis
which the number of days from the commencement of such calendar year to and
including such expiration date bears to 365. The termination of this Lease shall
not affect the obligation of Lessee pursuant to this Subsection 4(d).
(iii) No Reduction of Base Rent. Notwithstanding anything
contained in this Paragraph 4(d) to the contrary, expressed or implied, Rentals
payable by Lessee shall in no event be less than the Base Rent specified in
Paragraph 4(a) as adjusted pursuant to Paragraph 4(c).
(iv) Building Maintenance Increases Defined. "Building
Maintenance Increases' shall be defined as all direct costs of operation,
maintenance, repair and management of the buildings or project as determined by
generally accepted accounting practices. Said expenses as used herein shall
include, but not be limited to, all sums expended in connection with all general
maintenance and repairs, service and repair of the mechanical system, cleaning,
janitorial and sweeping services; maintenance and repair of sprinkler systems,
service agreements on equipment maintenance and repair of parking area and
parking structures, if any; the costs of complying with rules, regulations and
orders of governmental authorities (provided that any such costs which must be
considered capita improvements under standard accounting practices will be
amortized as Building Maintenance Expenses over five years); the cost of
contesting the validity or applicability of any governmental enactments which
may affect Building Maintenance Expenses; public liability, property damage and
fire extended coverage insurance, (in such amounts and providing such
coverage as determined in Lessor's sole discretion and which may include without
limitation, liability, all risk property, Lessor's risk liability, war risk,
vandalism, malicious mischief, sprinkler leakage, boiler and machinery,
rental income, earthquake, flood and worker's compensation insurance).
Lessor may cause any or all of said services to be provided by an independent
contractor or contractors, or they may be rendered by Lessor. In the event
Lessor makes capital improvements which have the effect of reducing Building
Maintenance Increases, Lessor may amortize its investment in said improvements
as an Building Maintenance Expense in accordance with generally accepted
accounting practices provide that such amortization is not at a rate greater
than the actual savings in Building Maintenance Increases. It is the intent of
the parties hereto that Building Maintenance Increases shall include every cost
paid or incurred by Lessor in connection with the operation, maintenance,
repair and management of the Buildings and the specific examples of Building
Maintenance Increases stated in this paragraph are in way intended to, and shall
not limit the costs comprising Building Maintenance Increases, nor shall such
examples be deemed to obligate Lessor to incur costs or to provide such services
or to take such actions except as Lessor may be express required in other
portions of this Lease, or except as Lessor, in its sole discretion, may elect.
The maintenance of the Buildings shall be within the sole discretion of Lessor
and all cost incurred by Lessor in good faith shall be deemed conclusively
binding on Lessee. In the event that less than ninety-five percent (95% of the
Project is occupied during any calendar year, all Building Maintenance Increases
on the statements provided by Lessor shall be adjusted for each calendar year to
equal Lessor's reasonable estimate of Building Maintenance Increases had ninety-
five percent (95%) of the total rentable area of the Project been occupied.
Statement of Building Maintenance Increases provided by Lessor shall be final
and binding upon both Lessor and Lessee.
3
<PAGE>
LATE CHARGE
4(e). The monthly base rental is due on the first day of each month.
Lessee acknowledges that late payment by Lessee to Lessor of base rental
and other rent payments such as Property Taxes and Building Maintenance
Increases will cause Lessor to incur costs not contemplated by this Lease,
the exact amount of such costs being extremely difficult and impracticable
to fix. Such costs include, without limitation, processing and accounting
charges, and late charges that may be imposed on Lessor by the terms of any
encumbrance and note secured by any encumbrance covering The Premises.
Therefore, if any amount of rent due from Lessee is not received by Lessor
at Lessor's office, by 5:00 p.m. on the tenth (10th) day after the due
date, Lessee shall pay to Lessor an additional sum of five percent (5%) of
the overdue rent as a late charge. An additional late charge of one-half of
one percent (1/2 of 1%) of the overdue rent shall be paid by Lessee to
Lessor for each day rent is not received after the tenth day of the month
up to a maximum of 5%. The parties agree that these late charges represent
a fair and reasonable estimate of the costs that Lessor will incur by
reason of late payment by Lessee. Acceptance of any late charge shall not
constitute a waiver of Lessee's default with respect to the overdue amount,
or prevent Lessor from exercising any of the other rights and remedies
available to Lessor.
INTEREST ON UNPAID RENT
4(f). In addition to the Late Charge provided for in Paragraph 4(e)
above, rent not paid when due shall bear interest at the rate of ten
percent (10%) per annum from the date due until paid.
RECEIPT AND SECURITY DEPOSIT
5. Lessor hereby acknowledges receipt of one hundred thirteen
thousand, eight hundred fifty and no/100s ($113,850.00), of which
$37,950.00 represents the 1st month(s) rent and $75,900.00 is a security
deposit to be held by Lessor as security for the performance by Lessee of
the provisions of this Lease. If the rent increases under provisions of
this Lease, Lessee, on the demand of Lessor, shall increase the amount of
such security deposit in like proportion. If Lessee is in default, Lessor
can use the security deposit, or any portion of it, to cure the default or
to compensate Lessor for all damage sustained by Lessor resulting from
Lessee's default. Lessee shall within ten days of Lessor's demand pay to
Lessor a sum equal to the portion of the security deposit expended or
applied by Lessor as provided in this paragraph so as to maintain the
security deposit in the sum as required under this paragraph. If Lessee is
not in default at the expiration or termination of this Lease, Lessor shall
return the security deposit to Lessee; provided, however, Lessor may
withhold all or a reasonable portion of said deposit for a reasonable
period of time needed to inspect the Premises for damage excepting
reasonable wear and tear or tenant improvements Lessor may want removed per
Paragraph 11 and to calculate and secure payment of Lessee's share of
Project Taxes and Building Maintenance Increases. Lessor's obligations with
respect to the security deposit are those of a debtor and not a trustee.
Lessor can maintain the security deposit separate a apart from Lessor's
general funds or can commingle the security deposit with Lessor's general
and other funds. Lessor shall not be required to pay Lessee interest on the
security deposit
6. Lessor shall furnish for Lessee's use in the adjacent parking lot
as shown on Exhibit B which is a part of Lessor's property fifty five (55)
parking spaces. If Lessee uses spaces than the above number, Lessor shall
have the right to have Lessee's cars moved at Lessee's cost. Lessor shall
have the right to select said parking spaces and mark the spaces at its own
expense.
POSSESSION
7. If Lessor, for any reason whatsoever, cannot deliver possession
of The Premises to Lessee at the commencement of the said term, as
hereinbefore specified, this Lease shall not be void or voidable, nor shall
the term herein specified be in any way extended, nor shall Lessor be
liable to Lessee for any loss or damage resulting therefrom; but in that
event there shall be a proportionate deduction of rent covering the period
between the commencement of the said term and the time when Lessor can
deliver possession. If, for any reason, The Premises have not been
completed as of commencement of said term, a certificate of Lessor's
architect as to the date of completion shall be final and possession of
The Premises shall be deemed delivered as of that date. The provisions of
subdivision 1 of Section 1932 of the California Civil Code shall not apply
to this Lease and Lessee waives the benefit thereof.
DELAY IN PERFORMANCE
8. Lessor shall in no way be responsible or liable for lost time or
delay in performance of any of the terms or conditions of this Lease,
caused or occasioned by action of governmental authorities, civil
commotions, strikes, fires, acts of God or the public enemy, act or default
of any Lessee, inability labor or materials, or any other cause beyond the
reasonable control of Lessor, whether similar to the matters
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herein specifically enumerated or not, and any such lost time or delay
shall extend by a like time any period by Lessor and shall not be deemed a
breach of or a failure to perform this Lease or any part thereof, except to
the extent arising from or relating to the negligence or willful misconduct
of Lessor or its breach hereunder.
SIGNS
9. Lessor reserves the exclusive right to the roof, and to all
exterior walls or parts of The Premises, and access thereto, and the same
are not any part of The Premises leased under this Lease. Lessee agrees no
signs, advertisements or notices whatsoever shall be inscribed, painted,
affixed or displayed on, to or any part of the outside or inside, or on the
roof or windows of The Premises, without the written consent of Lessor
which shall not be unreasonably withheld. Any signs so placed on The
Premises shall be so placed upon the understanding and agreement that
Lessee will remove same at the termination of the tenancy herein created
and repair any damage or injury to The Premises caused thereby, and if not
so removed by Lessee, then Lessor may have same so removed at Lessee's
expense.
ABANDONMENT AND SURRENDER
10. Lessee shall not during the term hereof abandon The Premises
except with the express written consent of Lessor. No act of Lessor,
whether acceptance of the keys to The Premises, or otherwise, shall
constitute an acceptance of surrender of The Premises unless the same shall
be in writing and be expressly in of surrender of The Premises. If Lessee
shall abandon, vacate or surrender The Premises, or be by process of law,
or otherwise, any personal property belonging to Lessee and left on The
Premises shall be deemed abandoned, to the extent permitted under
applicable law, except such property as may be mortgaged to Lessor.
INSTALLATION OF PARTITIONS ALTERATION AND REMODELING
11. Lessee 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 Lessor first had and obtained which consent shall
not be unreasonably withheld and any alterations, additions or improvements
to or of The Premises except movable furniture trade fixtures, shall at
once become a part of the realty and belong to the Lessor. In the event
Lessor consents to the making of any alterations, additions or improvements
to The Premises by Lessee, the same shall be made by Lessee at Lessee's
sole cost and expense, and any contractor or person selected by Lessee to
make the same must first be approved of in writing by Lessor. Lessor may
condition Lessor's approval of any proposed alteration, addition or
improvements on Lessee's paying for any costs expenses incurred by Lessor
for any work required to be done to the Common Area or the Premises of
other tenants in the project by any governmental authority in connection
with Lessee's proposed alteration, addition or improvement. Upon expiration
or sooner termination of the term of this Lease, Lessee shall within a
reasonable period after any request by Lessor, at Lessee's sole cost and
expense, forthwith and with all due diligence remove any alterations,
additions or improvements made by Lessee after the commencement of the term
of this Lease, designated by Lessor to be removed, and Lessee shall,
forthwith and with all due diligence at its sole cost and expense, repair
any damage to the building caused by such removal.
ENVIRONMENTAL OBLIGATIONS, WARRANTY AND HOLD HARMLESS AGREEMENT BY LESSEE
12. Lessee shall not, without Lessor's prior written consent (which
consent may be granted or denied in Lessor's sole discretion), install,
bring into or release from the premises any (i) asbestos-containing
materials, (ii) electrical transformers, fluorescent light fixtures with
ballasts or other equipment containing PCB's or (iii) toxic or hazardous
waste material, chemicals or substances which are not in compliance with
existing laws and regulations. All materials which constitute hazardous,
extremely hazardous or toxic materials under any law or regulation
promulgated by any federal, state, city, or other public authority and
which are used, stored, treated, disposed of or released from the premises
by Lessee or its representative, agents, employees or invitees, shall be
used, stored, treated, released and disposed of in accordance with all such
applicable laws and regulations. Lessee shall indemnify Lessor against and
hold Lessor harmless from all losses, costs, damages, expenses and
liabilities, including attorney's fees, incurred or suffered by Lessor as a
result of any use, storage, treatment, release or disposal of any toxic,
hazardous or extremely hazardous materials in or about the premises by
Lessee or its representative, agents, employees or invitees, regardless of
whether such use, storage, treatment, release or disposal was in violation
of any such law or regulation. The indemnification obligations of Lessee
under this paragraph shall survive the termination of this lease.
REPAIRS
13(a). If Lessee is the original Lessee of the described Premises and
if The Premises are not complete as of the date of the Lease, prior to
entry Lessee shall have examined and inspected and shall know the condition
of The Premises and every part thereof. Under all circumstances by entry
hereunder Lessee accepts The Premises as being in good, sanitary order,
condition and repair. Lessee shall at Lessee's sole cost and expense,
maintain, repair and keep the interior of The Premises and each and every
part
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thereof and all appurtenances thereto (including without limitation,
interior walls, ceilings, doors, door frames, wiring, electrical outlets,
exterior lights and screens in and around the entrances and window areas,
glazing and skylights in or bordering The Premises), in good condition and
repair during the term of this Lease, damage thereto by earthquake, act of
God or the elements alone excepted. Lessee shall not be required to
maintain and repair the roof, exterior walls, foundations, concrete slabs
below the floor and other structural portions of The Premises, unless
damage thereto is caused by reason of any act or omission of Lessee of
Lessee or its agents, servants or employees. Lessee hereby waivers all
rights to make repairs at the expense of Lessor as provided by any law,
statute or ordinance now or hereafter in effect.
13(b). Notwithstanding the foregoing, Lessee shall, at Lessee's sole
cost and expense, keep in good condition and repair damage to or breakage
of any glass in or around the demised Premises from any cause whatever,
unless such damage or breakage is caused directly by Lessor or his agents.
Lessee shall upon the expiration or sooner termination of the term hereof
surrender The Premises to Lessor in the same condition as when received,
ordinary wear and tear and damage from casualty and causes casualty
beyond the reasonable control of Lessee excepted.
13(c). Notwithstanding any provision to the contrary in this Lease,
all damage or injury done to The Premises by Lessee or by any person who
may be or upon The Premises with Lessee's consent shall be paid for the
Lessee.
13(d). Lessee shall reimburse Lessor for all costs of maintenance and
repair of the HVAC system which serves the Premises. Such costs shall
include, but shall not be limited to, regularly scheduled inspections,
maintenance, repairs and replacement parts. Notwithstanding the previous
sentence, if any heat exchanger needs replacement. Lessee shall pay
installation costs only. Lessor will be responsible for the cost of the
heat exchanger itself.
13(e). Lessee shall comply with all laws concerning the Premises and
Lessee's use of the Premises including, but not limited to, the obligation,
at Lessee's cost, to alter, maintain and restore the Premises in compliance
and conformity with all laws relating to the conditions, use, and occupancy
of the Premises during the Term.
LIENS
14. If Lessee shall make any repairs, alterations, additions or
improvements as provided in Paragraphs 11 and 12 hereof, if shall not take
any such action until two (2) business days after giving Lessor written
notice of such proposed action in order that Lessor may post appropriate
notices to avoid any liability for liens. Lessee shall at all times permit
such notices to be posted and to remain posted until the completion and
acceptance of such work. If any mechanic's materialmen's liens are at any
time against The Premises, the building or the underlying land in
connection with work done by or at the order of Lessee, they shall be
discharged, released, bonded, or suspended by Lessee within thirty (30)
days of the date of filing.
WAIVER OF LESSOR'S LIABILITY FOR INJURY OR DAMAGE
15(a). Lessor shall be liable to Lessee for any damage to Lessee's
property from any cause. Lessee waivers all claims against Lessor for
damage to person or property arising for any reason, except that Lessor
shall be liable to Lessee for damage to Lessee resulting from the wrongful
or negligent acts or omissions of Lessor or its authorized representatives
or a breach by Lessor of its obligations hereunder.
15(b). Lessee shall hold Lessor harmless from all damages arising out
of any damage to any person or property occurring in or about The Premises
and the building in which The Premises are located. Provided, however,
Lessor shall be liable to Lessee for damage resulting from wrongful or
negligent acts or omissions of Lessor or its authorized representatives,
and Lessor shall hold Lessee harmless from all damages arising out of any
such acts or omissions or a breach by Lessor of its obligations hereunder.
A party's obligation under this paragraph to indemnity and hold the
other party harmless shall be limited to the sum that exceeds the amount of
amount of insurance proceeds, if any, received by the party indemnified. As
used in this Lease, "to hold harmless" means to defend and indemnify from
all liability, losses, penalties, damages, costs, expenses (including,
without limitation, attorneys' fee), causes of action, claims, or judgments
arising out of or related to any damage to any person or property.
FIRE INSURANCE
16(a). Lessor shall keep the permanent improvements to The Premises
insured against loss or damage by fire, including Rental loss coverage with
extended coverage, vandalism and malicious mischief endorsement, in an
amount sufficient to prevent Lessor from becoming a co-insurer under the
terms of the applicable policy or policies, but in all events in an amount
not less than ninety percent (90%) of the full insurable value as
determined form time to time. The term "full insurable value" shall mean
the actual replacement cost (exclusive of the cost excavation, foundations
and footings below the basement floor) without deduction for physical
depreciation. The full insurance value shall include the value of Lessee
improvements provided that, (a) Lessor may rely on the value of Lessor may
rely on the value of Lessee improvements given Lessor in
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writing from time to time, and (b) Lessor shall not be liable to Lessee for
the difference between Lessee loss and the proceeds paid by the insurer
which may result from the insurer's disagreement over the extra loss or
whether a loss is covered as an insured risk, or which may result from
Lessee reporting the wrong value. Losses paid under any such policy shall
be payable to Lessor, and/or to any mortgagee of Lessor is named in such
policy. The premium for such insurance shall be deemed a "Building
Maintenance Expense" and shall be proportionately reimbursed by Lessee as
provided in Subparagraph 4(d).
16(b). WAIVER-OF SUBROGATION. Each party ("insured") hereby waives
and does hereby agree to obtain from each insurance carrier of the insured
a "subrogation waiver endorsement" waiving, its rights of recovery, to the
extent of insurance proceeds, against the other party, the other party's
officers, directors, agents, representatives, employees, and successors,
and assigns with respect to any loss or damages, including consequential
loss or damage to the insured's property caused by or occasioned by any
peril or perils (including negligent acts) covered by any policy or
policies carried by the insured.
LIABILITY INSURANCE
17. Lessee shall purchase and maintain at Lessee's sole cost and
expense such policy or policies insurance insuring Lessee and Lessor (as
their interests appear) and without other limitations against damage
resulting in bodily injury to or the death of any person or persons and/or
damage to property, and to maintain and/or renew such policy or policies
shall have either a combined single liability limit of at least $ 1,000,000
insuring against damage to or loss of property and injury or death to
persons, or a minimum amount of $500,000 for injury to or death of any one
person and $ 1,000,000 because of injury to or death of any number of
persons greater than one in any one accident and $ 500,000 covering damage
to property. Lessee shall have the right at any time to increase the said
insurance above the minimums hereinabove set forth. Lessor shall have the
right upon and prior to any anniversary date of the policy to request an
increase in minimum amounts hereinabove specified, provided Lessor
determines that the existing coverage is less than such amounts as is
customarily carried by similar tenants of similar premises. Lessee shall
provide Lessor with current written proof of all insurance coverages
required by this paragraph such proof of name Stuart Leeb as an additional
insured, no later than ten (10) days after execution of the Lease and
thereafter no later than thirty (30) days after the effective date of any
renewal, change or cancellation of any of the required insurance coverages.
If the parties cannot agree to such increase the same shall be submitted to
arbitration as herein elsewhere provided.
ENTRY BY LESSOR
18. Lessee shall permit Lessor and his agents with reasonable notice,
to enter into and upon the demised Premises at all reasonable times for the
purpose of protecting owner's reversions, or of inspecting the demised
Premises for the purpose of maintaining the building in which the demised
Premises are situated, and for the purpose of making repairs, alterations
or additions to any other portion of the building or for the purpose of
posting notices of nonresponsibility for alterations, additions, or
repairs, without any rebate of rent to Lessee or damages for any loss of
occupation or quiet enjoyment of The Premises thereby occasioned and may
for purpose erect scaffolding and other necessary structures which are
reasonably required by the character or work to be performed. Lessor and
his agents may at reasonable hours and after ninety (90) days prior to
expiration of this Lease, enter upon said Premises and exhibit the same to
prospective Lessees or purchase thereof. For each of the aforesaid
purposes, Lessor shall at all times have and retain a key or Lessee shall
provide Lessor with a key with which to unlock all of the doors in, upon
and about The Premises, excluding Lessee's vaults and safes, and Lessor
shall have the right to use any and all means which Lessor may deemed
proper to open said doors in an emergency, in order to obtain entry to the
Premises, and any entry to The Premises obtained by Lessor by said means,
or otherwise, shall not under any circumstances be construed deemed to be a
forcible or unlawful entry into or a detainer of The Premises, or an
eviction of Lessee from The Premises or any portion thereof, provided
however that Lessor shall promptly restore any damage caused by its entry,
except when entry is necessary due to an emergency caused harmful or
negligent acts or omissions of Lessee or its authorized representatives.
RIGHTS RESERVED TO LESSOR
19. Lessor reserves the following rights exercisable with notice and
without liability to Lessee damage or injury to property, person or
business (all claims for damage being hereby released) and with effecting
and eviction or disturbance of Lessee's use or possession or giving rise to
any claim for setoffs, abatement of rent: (i) to change the name or street
address of the building, (ii) to install and maintain signs on the exterior
and interior of the building, (iii) to designate all sources furnishing
sign painting and lettering, ice, mineral or drinking water, beverages,
foods, towels, vending machines or toilet supplies used or consumed on The
Premises, and (iv) to grant to anyone the exclusive right to conduct any
business or rent any service in the building, provided such exclusive right
shall not operate to exclude Lessee form the use expressly permitted by
Paragraph 2(a).
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UTILITIES AND SERVICES
20. Lessee shall pay for all water, gas, heat, light, power,
telephone and other utilities and services supplied to the Premises,
together with any taxes thereon. If any such services are not separately
metered to Lessee, Lessee shall pay a reasonable proportion to be
determined by Lessor of all charges jointly metered with other premises.
Lessor may cause a water meter or electric current meter to be installed in
the Premises, so as to measure the amount of water and electric current
consumed for any such other use. The reasonable cost of any such meters and
of installation, maintenance and repair thereof shall be paid for by Lessee
and Lessee shall pay promptly upon demand therefor by Lessor for all such
services by the county or the local public utility, as the case may be,
furnishing the same.
DAMAGE BY FIRE, ETC.
21. In the event of injury or damage to The Premises by fire or other
casualty Lessee shall give immediate notice to the Lessor. In the event The
Premises or the building are damaged by fire or other casualty, Lessor
shall forthwith repair the same provided such repairs can be made within
sixty (60) days under the laws and regulations of the state, federal,
county and municipal authorities and this Lease shall remain in full force
and effect, except that Lessee shall be entitled to a proportionate
reduction of rent while such repairs are being made, such proportionate
reduction to be based upon the extent to which the making of such repairs
shall interfere with the business carried on by Lessee in The Premises. If
such repairs cannot be made within sixty (60) days, Lessor shall have the
option either (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 paragraph provided or (2) to give notice to Lessee at
any time within thirty (30) days after such damage terminating this Lease
as of a date of such damage. In the event of the giving of such notice,
this Lease shall expire and all interest of the Lessee in The Premises
shall terminate on such date so specified in such notice and the rent,
reduced by any proportionate reduction based upon the extent, if any, to
which said damage interfered with the business carried on by Lessee in The
Premises, shall be paid up to the date of such termination, the Lessor
agreeing to refund to the Lessee any rent and deposit according to terms in
Paragraph 5. theretofore paid for any period of time subsequent to such
date.
The provisions of Section 1932, Subdivision 2 and Section 1933, Subdivision
4, of the Civil Code of California are hereby waived by Lessee.
ASSIGNMENT AND SUBLETTING
22(a). PROHIBITIONS IN GENERAL. Lessee shall not (whether
voluntarily, involuntarily, or by operation of law) (i) assign or transfer
Lessee's interest in this Lease or in The Premises, (ii) allow all or any
part of The Premises to be sublet, occupied, or used by any person or
entity other than Lessee, (iii) transfer any right appurtenant to this
Lease or The Premises, (iv) mortgage or encumber the Lease (or otherwise
use the Lease as a security device) in any manner, or (v) permit any person
to assume or succeed to any interest whatsoever in this Lease, without
Lessor's prior written consent in each instance. Provided that Lessee is
not in default under this Lease, if Lessor has not exercised its rights
under Subsections 22(f(i) or (ii), Lessor shall not unreasonably withhold
its consent to a sublease of the Premises subject, nevertheless, to the
restrictions limitations and conditions set forth in this Paragraph 22.
Lessor's consent to any such assignment, sublease, encumbrance, or transfer
(collectively "Transfer") shall be evidenced by Lessor's signature in the
Assumption Agreement provided for in Subparagraph 22(c) below. Any Transfer
without Lessor's consent shall constitute a default by Lessee and shall be
void. Lessor's consent to any one Transfer shall not constitute a waiver of
the provisions of this Paragraph 22 as to any subsequent Transfer nor a
consent to any subsequent Transfer; further, Lessor's consent to any one
transfer shall not release Lessee from Lessee's obligations under this
Lease. The provisions of this Subparagraph 22(a) expressly apply to all
heirs, successors, sublessees, assigns and transferees of Lessee. In the
event Lessor consents to a proposed Transfer, such Transfer shall be valid
and the transferee shall have the right to take possession of The Premises
only if the Assumption Agreement described in Subparagraph 22(c) below is
executed and delivered to Lessor. Lessee shall have paid the costs and fees
described in Subparagraph 22(i) below, and an executed counterpart of the
assignment, sublease or other document evidencing the Transfer is delivered
to Lessor and such Transfer document contains the same terms and conditions
as stated in Lessee's notice given to Lessor pursuant to Subparagraph 22(d)
below, except for any such modifications Lessor has consented to in
writing. The acceptance of Rentals by Lessor from any person or entity
other than Lessee shall not be deemed to be a waiver by Lessor of any
provision of this Lease or to be consent to any assignment or subletting.
22(b). COLLECTION OF RENT. Lessee irrevocably assigns to Lessor, as
security for Lessee's obligations under this Lease, all rent not otherwise
payable to Lessor by reason of any Transfer of all or any part of The
Premises or this Lease. Lessor, as assignee of Lessee, or a receiver for
Lessee appointed on Lessor's application, may collect such rent and apply
it toward Lessee's obligations under this Lease; provided,
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however, that until the occurrence of any default by Lessee which default
is continuing after notice and the expiration of any applicable grace
period, or except as provided by the provisions of Subparagraph 22(f)(iii)
below, Lessee shall have the right to collect such rent.
22(C). ASSUMPTION AGREEMENT. As a condition to Lessor's consent to
any Transfer of Lessee's interest in this Lease or the Premises, Lessee and
Lessee's assignee, sublessee, encumbrancer, or transferee (collectively
"Transferee"), shall execute a written Assumption Agreement, in a
commercially reasonable form approved by Lessor which Agreement shall
include a provision that Lessee's Transferee shall expressly assume all
obligations of Lessee under this Lease, and shall be jointly and severally
liable with Lessee for the performance of all conditions, covenants, and
obligations under this Lease from the effective date of the Transfer of
Lessee's interest in this Lease.
22(D). REQUEST FOR TRANSFER. Lessee shall give Lessor at least
fifteen (15) days prior written notice of any desired Transfer and of the
proposed terms of such Transfer, including but not limited to: the name and
legal composition of the proposed Transferee; an financial statement of the
proposed Transferee prepared in accordance with generally accepted
accounting principles within one year prior to the proposed effective date
of the Transfer; the nature of the proposed Transferee's business to be
carried on in The Premises; the payment to be made or other consideration
to be given on account of the Transfer; and other such pertinent
information as may be requested by Lessor, all in sufficient detail to
enable Lessor to evaluate the proposed Transfer and the prospective
Transferee. Lessee's notice shall not be deemed to have been served or
given until such time as Lessee has provided Lessor with all information
specified above and all additional information requested by Lessor pursuant
to this Subparagraph 22(d). Lessee shall immediately notify Lessor of any
modification to the proposed terms of such Transfer.
22(E) NO BONUS VALUE. It is the intent of the parties hereto that
this Lease shall confer upon Lessee only the right to use and occupy The
Premises, and to exercise such other rights as are conferred upon Lessee by
this Lease. The parties agree that this Lease is not intended to have a
bonus value, nor to serve as a vehicle whereby Lessee may profit by a
future Transfer of this Lease or the right to use or occupy The Premises as
a result of any favorable terms contained herein or any future changes in
the market for leased space. It is the intent of the parties that such
bonus value that may attach to this Lease shall be and remain the exclusive
property of Lessor.
22(F) LESSOR'S RIGHTS. In the event that Lessee seeks to make any
Transfer of its interest in this Lease or The Premises, Lessor shall have
the right to withhold its consent to such Transfer, as permitted pursuant
to Subparagraphs 22(f)(i) through 22(f)(iii) below. Without otherwise
limiting the criteria upon wich Lessor may withhold its consent to any
proposed Transfer, if Lessor withholds its consent where the proposed
Transferee's net worth (according to generally accepted accounting
principles) is less that the greater of: the net worth of Lessee
immediately prior to the Transfer, or the net worth of Lessee at the time
this Lease is executed, such withholding of conset shall be presumptively
reasonable. The following rights are in addition to Lessor's right to
withhold its consent to any Transfer, and may be exercised by Lessor in its
sole discretion without limiting Lessor in the exercise of any other right
or remedy at law or in equity which Lessor may have by reason of such
Transfer.
(I) TERMINATE LEASE. Lessor may terminate this Lease and
release Lessee from any further liability hereunder by sending Lessee
written notice of such termination within thirty (30) days after notice of
intent to Transfer is deemed given by Lessee pursuant to Subparagraph 22(d)
above; provided, however, that Lessee may withdraw its notice of intent at
any time within ten (10) days after Lessor's notice of termination is given
to Lessee, in which event this Lease shall continue in full force and
effect. Lessee's withdrawal of its notice of intent shall be evidenced by
written notice thereof from Lessee received by Lessor within such ten (10)
day period. If Lessor elects to terminate this Lease and if Lessee does not
withdraw its notice of intent, Lessee shall surrender The Premises,
pursuant to the terms of this Lease, within sixty (60) days following the
giving by Lessee of its notice of intent.
(II) ACQUISITION OF LESSEE'S INTEREST. Lessor may, within
fifteen (15) days after notice of intent to Transfer is deemed given by
Lessee pursuant to Subparagraph 22(d) above, acquire the interest in this
Lease and The Premises that Lessee proposes to Transfer, on the same terms
and conditions as the proposed Transfer.
(III) CONSENT WITH CONDITIONS. Lessor may impose the
following as conditions to Lessor's consent:
(A) Except as provided in Subparagraph
22(f)(iii)(C) below, Lessor may consent to the proposed Transfer and, as a
condition to such consent Lessor shall have the right to require that all
rent paid by the Transferee, including but not limited to any rent in
excess of the Rentals to be paid under this Lease, shall be paid directly
to Lessor as additional rent at the time and place specified in this Lease.
For the purpose of this Paragraph 22, the term "rent" shall include any
consideration of any kind received, or to be received, by Lessee (or any
Sublessee of Lessee) from the Transferee, if such sums are related to
Lessee's interest in this Lease or in The Premises, including, but not
limited to, key money, bonus money, and payments for Lessee's personal
property in excess of the book value thereof. The term "personal property"
as used in this Subsection shall include, without limitation, assets,
fixtures, inventory, accounts, goodwill, equipment, furniture, general
intangibles, and any capital stock or other equity ownership interest of
Lessee.
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(B) Lessor may, as a condition to its consent to
any proposed Transfer, require that either Lessee or the proposed
Transferee cure, on or before the proposed effective date of such Transfer,
any and all uncured defaults hereunders; provided, however, in no event
shall Lessor's failure to condition its consent upon such cure be deemed to
be a waiver of any such default or Lessor's rights and remedies under this
Lease or law in regard thereto. If Lessor has elected to impose such cure
as a condition to its consent and such condition is not satisfied by the
effective date of the Transfer, the Transfer shall be voidable at Lessor's
option.
(C) Lessor may consent to a proposed sublease and,
as a condition to such consent Lessor shall have the right to require that
an amount equal to any and all rent (as defined in Subparagraph 22(f)(iii)A
above) payable by the Sublessee in excess of the pro rata Rentals payable
by Lessee hereunder (the Premises) shall be paid by Lessee to Lessor as
additional rent at the time and place specified in Paragraph 4(a) of this
Lease; provided, however, that Lessee shall be entitled to retain only that
portion of the regular monthly excess rent payments made by such Sublessee
equal to the amount attributable to the monthly amortization of the cost of
nonbuilding standard leasehold imporvements attributable to the sublet
space paid for by Lessee and which will remain on The Premises after the
expiration or sooner termination of this Lease. The monthly amortization of
such nonbuilding standard improvements shall be calculated by dividing the
cost of such improvements attributable to the sublet space, without
interest, by the aggregate number of months within the initial term of this
Lease. No such Sublessee shall be entitled to assign its sublease or
further sublet The Premises without the prior written consent of Lessor,
not to be unreasonably withheld.
22(G). CORPORATION AND PARTNERSHIPS. If Lessee is a partnership, a
withdrawal or substitution (whether voluntary, involuntary or by operation
of law and whether occurring at one time or over a period of time) of any
partner(s) owning 50% or more of the partnership, any assignment(s) of 50%
or more (cumulatively) of any interest in the capital or profits of the
partnership, or the dissolution of the partnership shall be deemed a
Transfer of this Lease. If Lessee is a corporation, any dissolution,
merger, consolidation or other reorganization of Lessee, any sale or
transfer (or cumulative sales or transfers) of the capital stock of Lessee
in excess of 50%, or any sale (or cumulative sales) of 51% of the value of
the assets of Lessee shall be deemed a Transfer of this Lease. This Section
22(g) shall not apply to corporations the capital stock of which is
publicly traded.
22(H). REASONABLE PROVISIONS. Lessee expressly agrees that the
provisions of this Paragraph 22 are not unreasonable standards or
conditions for purposes of Section 1951.4(b)(2) of the California Civil
Code, as amended from time to time.
22(I). ATTORNEYS' FEES AND COSTS. Lessee shall pay, as additional
rent, Lessor's reasonable costs and reasonable attorrneys' fees incurred
for reviewing, investing, processing and/or documenting any requested
Transfer, whether or not Lessor's consent is granted but not more than
$2,000. Lessee's security deposit may be withheld by Lessor for a period of
time needed to determine and secure payment of these fees and costs as
provided in Paragraph 5 of this Lease.
22(J). MISCELLANEOUS. Regardless of Lessor's consent, no subletting
or assignment or other transfer shall release Lessee of Lessee's obligation
or alter the primary liability of Lessee to pay the Rentals and to perform
all other obligations to be performed by Lessee hereunder. The acceptance
of rent by Lessor from any other person shall not be deemed to be a waiver
by Lessor of any provision hereof. Consent to one assignment or subletting
or other transfer shall not be deemed consent to any subsequent assignment
or subletting or other transfer. In the event of default by any assignee of
Lessee or any successor of Lessee in the performance of any of the terms
hereof, Lessor may proceed directly against Lessee without the necessity of
exhausting remedies against said assignee or successor. Lessor may agree
with assignee of Lessee to make amendments or modifications to this Lease
which do not materially increase the burden of the Lessee, without
notifying Lessee, or any successor of Lessee, and without obtaining its or
their consent thereto and such action shall not relieve Lessee of liability
under this Lease.
22(K). TRANSFER BY LESSOR. Lessor may transfer or assign its interest
in this Lease at any time, and in the event of such transfer or assignment,
the term "Lessor" as used in this Lease shall be limited to and include at
the time in question only such transferee or assignee and in the event of
any such transfer and assumption of the obligation of Lessor by such
transferee, the Lessor herein named shall be freed and relieved from and
after the date of such transfer of all liability as respects the
performance of any covenants or obligations on the part of the Lessor
contained in this Lease, except respecting the security deposit.
DEFAULT
23(A). Lessee shall by that fact be in default under this Lease
whenever payment of any rental or other monies due hereunder shall not have
been made within ten (10) days of when due. Lessee shall be in default
under this Lease for failure to observe any other covenant or condition
hereof other than payment of monies and other than default as provided
under Paragraph 24(b) below, if such failure is not corrected within thirty
(30) days after notice thereof is received by Lessee from Lessor.
23(b). Lessee shall by that fact be in default under this Lease
whenever it shall be involved in financial difficulties evidenced by:
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<PAGE>
(I) its written admission of its inability to pay debts
generally as they become due;
(II) its making of an assignment for the benefit of its
creditors;
(III) its consent to the appointment of a receiver or trustee
for all or a substantial part of its properties;
(IV) filing by it of a petition in bankruptcy, for
reorganization or other debtors' relief under federal or state statutes;
(V) the entry of a court order approving a bankruptcy
petition filed against it or appointing a receiver or trustee for all or
substantial part of its property, which order shall not have been vacated,
set aside or otherwise terminated within sixty days from the date of entry
or unstayed for a period of thirty days;
(VI) the entry of a court order sequestering or otherwise
taking into custody all or substantially all of its property which order
shall not have been vacated, set aside or otherwise terminated within
ninety days from the date of entry or unstayed for a period of thirty days;
and
(VII) an adjudication that it is bankrupt.
REMEDIES
24(A). Lessor shall have the following remedies if Lessee commits a
default. These remedies are not exclusive; they are cumulative in addition
to any remedies now or later allowed by law.
24(B). Lessor can continue this Lease in full force and effect, and
the Lease will continue in effect as long as Lessor does not terminate
Lessee's right to possession, and Lessor shall have the right to collect
rent when due. During the period Lessee is in default Lessor can enter the
premises and relet them, or any part of them, to third Parties for Lessee's
account. Lessee shall be liable immediately to Lessor for all costs Lessor
incurs in reletting The Premises, including without limitation, brokers'
commissions, expenses of necessary alterations to return The Premises to
conditions required hereunder, and like costs. Reletting can be for a
period shorter or longer than the remaining term of this Lease. Lessee
shall pay to Lessor the rent due under this Lease on the dates the rent is
due, less the rent Lessor receives from any reletting. No act by Lessor
allowed by this Paragraph shall terminate this Lease unless Lessor notifies
Lessee in writing that Lessor elects to terminate Lessee's right to
possession of The Premises.
24(C). Lessor can terminate Lessee's right to possession of The
Premises at any time. No act by Lessor other than giving notice to Lessee
shall terminate this Lease. Acts of maintenance, efforts to relet The
Premises, or the appointment of a receiver on Lessor's initiative to
protect Lessor's interest under this Lease shall not constitute a
termination of Lessee's right to possession. On termination, Lessor has
the right to recover from Lessee:
(I) the worth, at the time of the award of the unpaid rent
that had been earned at the time of termination of this Lease;
(II) the worth, at the time of the award of the amount by
which the unpaid rent that would have been earned after the date of
termination of this lease until the time of award exceeds the amount
of the loss of rent that Lessee proves could have been reasonably avoided;
(III) the worth, at the time of the award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of the loss of rent that Lessee proves could have been
reasonably avoided; and
(IV) any other amount, and court costs, necessary to
compensate Lessor for all detriment proximately caused by Lessee's default.
"The worth, at the time of the award", as used in (i) and (ii) of this
paragraph, is to be computed by allowing interest (as provided in Paragraph
4(f). "The worth, at the time of the award", as referred to in (iii) of
this paragraph, is to be computed by discounting the amount of the discount
rate of the Federal Reserve Bank of San Francisco at the time of the award,
plus 1%.
ATTORNEYS' FEES
25. If either party commences an action against the other party
arising out of or in connection with this Lease, the prevailing party shall
be entitled to have and recover from the losing party reasonable attorneys'
fees and costs of suit.
26. (Reserved)
TRANSFER OF SECURITY
27. Such security as required in Paragraph 5 of this Lease to be
given by Lessee to secure the faithful performance of all or any of the
covenants of this Lease on the part of Lessee may be transferred and/or
delivered by Lessor, to any purchaser or assignee of Lessor's reversionary
interest, and in the event
11
<PAGE>
that the reversion be sold, thereupon Lessor shall be discharged from any
further liability in reference thereto.
WAIVER
28. Lessor's or Lessee's failure to take advantage of any default or
breach of covenant on the part of Lessee or Lessor, respectively, shall not
be or construed as a waiver thereof, nor shall any custom or practice which
may grow up between the parties in the course of administering this
instrument be construed to waive or to lessen the right of Lessor or Lessee
to insist upon the performance by Lessee or Lessor, respectively, of any
term, covenant or condition hereof, or to exercise any rights given him on
account of any such default. A waiver by the Lessor or Lessee of a
particular breach or default shall not be deemed to be a waiver of the same
or any other subsequent breach or default. The subsequent acceptance of
rent hereunder by Lessor shall not be deemed to be a waiver of any
preceding breach by Lessee of any term, covenant or condition of this
Lease, other than the failure of Lessee to pay the particular rental so
accepted, regardless of Lessor's knowledge of such preceding breach at the
time of acceptance of such rent.
HOLDING OVER
29. If, with Lessor's consent, Lessee holds possession of The
Premises after the term of this Lease, Lessee shall become a Lessee from
month to month upon the terms herein specified, but at the monthly rental
specified in the agreement consenting to such holding over payable in
advance on or before the first day of each month. Lessee shall continue in
possession until such tenancy shall be terminated by Lessor, or until
Lessee shall have given to Lessor a written notice at least one month prior
to the date of termination of such monthly tenancy of its intention to
terminate such tenancy.
If, without Lessor s consent, Lessee shall retain possession of the
leased Premises or part thereof after termination hereof, by lapse of time
or otherwise, then Lessee shall pay Lessor for each day of such retention
150% of the amount of the daily fixed rental for the last period prior to
the date of such termination and also pay all damages sustained by Lessor
by reason of such retention, or, if Lessor gives notice to Lessee of
Lessor's election thereof, such holding over shall constitute renewal of
this Lease for a period, from month to month or for six months, whichever
shall be specified in such notice, whichever shall be specified in such
notice but acceptance by Lessor of rent after such termination shall not
constitute a renewal, this provision not to waive Lessor's right of reentry
or any other right.
Unless Lessor exercises the option hereby given it, Lessee shall be a
lessee at sufferance only, whether or not Lessor shall accept any rent from
Lessee while Lessee is so holding over.
ARBITRATION
30. If any difference shall arise between the parties hereto as to
their rights or liabilities under this Lease, such difference shall be
determined by arbitration under the rules of the American Arbitration
Association. The arbitrators' decisions shall be final as to the contents
and interpretation of this Lease and as to the proper mode of carrying the
same into effect.
12
<PAGE>
Upon request, Lessee and Lessor shall execute a recordable short-form
counterpart of this Lease.
RIGHT OF LESSOR TO PERFORM FOR LESSEE
32. All covenants and obligations to be performed by Lessee under the
terms of this Lease shall be at the sole cost and expense of Lessee without
any abatement of rent except as otherwise provided herein. If Lessee shall
fail to pay any sum of money, other than rent, required to be paid by it
hereunder or shall fail to perform any other act on its part to be
performed hereunder, and such failure shall continue to fifteen (15) days
after notice thereof by Lessor to Lessee, Lessor may, but shall not be
obligated so to do, and without waiving or releasing Lessee from any
obligations of Lessee, make any such payment or perform any such payment or
perform any such other act of Lessee's part to be made or performed as in
this Lease provided. All sums so paid by Lessor and all necessary
incidental costs, from the date of such payment by Lessor in connection
with the performance of any such act by Lessor shall be additional rent
hereunder and shall be payable to Lessor within 15 days after presentation
of an invoice on demand or at the option of Lessor payable in such
installments as Lessor may elect and may be added to any rent then due or
thereafter becoming due under this Lease, and Lessee shall pay any such sum
or sums. Lessor shall have (in addition to any other right or remedy of
Lessor) the same rights and remedies in the event of the nonpayment thereof
by Lessee as in the case of default by Lessee in the payment of rent
hereunder.
EMINENT DOMAIN
33. If the premises or the building or the underlying land shall be
taken as a result of the exercise of the power of eminent domain, this
Lease and all right, title and interest of Lessee hereunder shall cease and
come to an end on the date of vesting of title in the condemning authority
pursuant to such proceeding, and Lessor shall be entitled to and shall
receive the total award made in such proceedings including any award made
for the value of the leasehold estate of the Lessee and any other claim of
Lessee, and the Lessee hereby assigns such awards to Lessor, and the same
shall be dealt with as between Lessor and Lessee as provided in the next
sentence of this paragraph. The total award made in such proceeding, less
the expenses incurred by Lessor, including reasonable counsel fees in
connection with such proceeding, shall be apportioned between Lessor and
Lessee as follows:
(I) Lessee shall be entitled to receive "Lessee's unamortized
cost of adaptation" as herein after in this paragraph defined; and
(II) Lessor shall be entitled to receive the balance of such
total award. The term "Lessee's unamortized cost of adaptation" as used in
this Paragraph 34 shall be computed by multiplying the cost to Lessee of
doing the work done and permitted pursuant to the provisions of Paragraph
11 (less any sum for which Lessee shall have been reimbursed by Lessor),
all as certified to Lessor by the principal accounting officer of Lessee,
by a fraction, the numerator of which shall be the number of full years of
the term of this Lease which are unexpired at the date of vesting of title
in the proceeding and the denominator of which shall be the total number of
years in the original term of this Lease. A "year" is defined for the
purposes of this paragraph as any period of 12 consecutive calendar months.
RULES
34. The rules and regulations attached to this Lease, as well as such
rules and regulations as may be hereafter adopted by Lessor for the safety,
care and cleanliness of The Premises and the preservation of good order
thereon, are hereby expressly made a part hereof, and Lessee agrees to obey
all such rules and regulations. Lessor shall not be responsible to Lessee
for the nonperformance by any other Lessee or occupant of the building of
any of said rules and regulations.
NO SEPARATE AGREEMENTS AND BROKERS' COMMISSIONS
35. Lessee agrees that Lessor and his agents have made no
representation or agreements that are not contained in this Lease, and
Lessee agrees that its execution of this Lease was not in reliance upon any
information which the Lessee received by way of brochure, advertisement,
verbally or otherwise, and that this Lease comprises the entire
understanding of the parties.
Lessor and Lessee agree that the only broker that procured this Lease is
Randy Gabrielson and Kristi Walsh, Cornish & Carey Commercial
______________________________________________________________________________.
TIME AND NOTICES
36. Time is of the essence of this Lease. All notices to be given to
Lessee may be given in writing, served personally or by depositing the same
in the United States mail certified, return receipt requested, postage
prepaid, and addressed to
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<PAGE>
Lessee at such address as Lessee has designated in writing to Lessor. All
notices to Lessor shall be address to Lessor at
1900 Embarcadero Road #201
Palo Alto, CA 94303.
37. The following is a complete list of the documents attached to and
made a part of this Lease:
EXHIBIT NO. DESCRIPTION
A Premises
- ----------- --------------------------------------
B Location in the Project
- ----------- --------------------------------------
C Additional Terms & Conditions
- ----------- --------------------------------------
D Option to Extend The Lease
- ----------- --------------------------------------
E Option to Extend the Lease
- ----------- --------------------------------------
F Option to Extend the Lase
- ----------- --------------------------------------
___________ ______________________________________
IN WITNESS WHEREOF, Lessor and Lessee have executed this Lease on the dates
indicated below:
LESSOR LESSEE
/s/ SIGNATURE ILLEGIBLE^^ Copper Mountain Networks, Inc.
- ----------------------------- -------------------------------------
[for] Stuart Leeb, Owner Name of Company
3/9/98 A California Corporation
- ----------------------------- -------------------------------------
Date Corporation
By: /s/ Joe Markee
-------------------------------------
Joe Markee, President
_____________________________________
3/2/98
-------------------------------------
Date
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<PAGE>
EXHIBIT A
[FLOOR PLAN APPEARS HERE]
2470 Embarcadero Way
Palo Alto, CA 94303
13,800 s/f
<PAGE>
[PLAN APPEARS HERE]
BAYLANDS BUSINESS PARK
EXHIBIT B
LOCATION IN THE PROJECT
<PAGE>
EXHIBIT C
ADDITIONAL TERMS AND CONDITIONS
TENANT IMPROVEMENTS: Lessor, at lessor's sole cost and expense shall provide the
following improvements to the Suite:
a) Re-carpet the Suite with building standard office grade carpet in a
color to be chosen by Lessee. The choice shall be subject to Lessor's
approval, which shall not be unnecessarily withheld.
b) Repaint all interior walls in a color to be chosen by Lessee. The
choice shall be subject to Lessor's approval, which shall not be
unnecessarily withheld.
c) Clean all HVAC registers.
d) Replace any damaged or stained ceiling tiles.
e) Install new building standard VCT tile to be chosen by Lessee in the
large room marked VCT on Exhibit A of this Lease. The choice of tile
shall be subject to Lessor's approval, which shall not be unnecessarily
withheld.
f) Replace with glass doors 1 set of double doors marked with the letter
"F" on Exhibit A of this Lease.
g) Remove one wall marked with an "R" on Exhibit A of this Lease.
h) Warrant that to the best of Lessor's knowledge all operating systems
including HVAC, plumbing, electrical and the roof are in good working
order.
i) Lessor grants to Lessee a 30 day grace period following commencement of
this Lease in which to report to Lessor any existing condition which
was not in good, sanitary order, condition and repair upon occupancy as
required in Paragraph 13(a) of the Lease.
j) Lessor, at Lessor's sole cost and expense, shall comply with Title 24
and The American's with Disabilities Act (ADA) as required by the City
of Palo Alto prior to commencement of this Lease. Lessee shall not be
responsible for any requirements associated with the American With
Disabilities Act (ADA) which are triggered by the initial improvements
provided by Lessor prior to occupancy at the commencement of this
Lease. Lessee shall be responsible for any compliance requirements
associated with the American With Disabilities Act (ADA) which are
triggered by action(s) of Lessee after commencement of this Lease and
throughout the term of the Lease.
PARAGRAPH 4(D)(IV):
Notwithstanding anything to the contrary in the foregoing, the following costs
and items shall be excluded from Building maintenance Expenses:
a) any depreciation on the Building and project;
b) interest on debt or amortization payments on mortgages and deeds of trust
secured by the Building or project or any underlying ground lease;
c) costs of repairs and general maintenance paid from insurance proceeds but
excluding amount of any deductibles paid by Lessor;
d) structural repairs or replacements such as roof coverings shall be included
except that Lessor must amortize the cost of such items over 5 years.
e) capital improvements subsequent to the initial construction and development
of the Building or project, unless specifically enumerated in the definition
of Building Maintenance Expenses;
f) costs of special services rendered to individual tenants (including Lessee)
for which a special charge is made;
g) costs of improvements for other tenants in the Building or project;
h) costs of the Lessor for which a tenant is obligated to reimburse Lessor
including, for example, taxes and property insurance premiums on
improvements for tenants of the Building that are above the building
standard;
<PAGE>
i) costs incurred by Lessor due to violations of any of the terms and
conditions of any lease in the Building;
J) any other cost or expense which, under generally accepted accounting
principles, consistently applied would not be considered a normal operating
or maintenance expense.
PARAGRAPH 7:
Notwithstanding anything to the contrary contained herein, if Lessor has not
delivered the Premises substantially completed to Lessee on or before June 30,
1998 for any reason, Lessee shall have the right thereafter to cancel this
Lease, and upon such cancellation, Lessor shall return all sums theretofore
deposited by Lessee with Lessor, and neither party shall have any further
liability to the other.
PARAGRAPH 11:
Notwithstanding anything to the contrary contained in this Lease: (a) Lessee
shall not be required to remove (i) any of the initial Tenant Improvements (as
identified in Exhibit C) constructed by or on behalf of Lessee, (ii) any
alterations, additions or improvements for which Lessee has obtained Lessor's
consent, unless Lessor has indicated, at the time of granting such consent, that
such removal will be required; (b) Lessee shall not be required to obtain
Lessor's consent to any alterations, additions or improvements which do not cost
more that $5,000 in each instance, are not structural in nature, are in
compliance with current building codes of the City of Palo Alto, do not affect
Building systems or are not visible from the exterior of the Premises. Lessee
must notify Lessor of any improvements installed without Lessor's approval, and
upon request of Lessor such improvements may be required to be removed upon
termination of the Lease without prior notice from Lessor at the time of
construction of the improvements.
PARAGRAPH 12:
Lessor represents and warrants to Lessee that to the best of Lessor's knowledge
on the commencement of the term hereof, The Premises and any improvements to be
constructed by Lessor are free from contamination by any toxic or hazardous
materials (hereinafter "Hazardous Materials") which are currently regulated by
any federal, state, or local government, or agency thereof"
PARAGRAPH 13(B):
Lessor represents and warrants to lessee that to the best of Lessor's knowledge
that on the commencement of the term hereof, that (a) the Premises and any
improvements to be constructed by Lessor are free from structural defects and
(b) comply with all applicable laws, ordinances, codes, rules and regulations,
(c) the Building's elevators, loading docks; doors, roof, plumbing, electrical
and HVAC systems are in good order and condition and operating properly.
PARAGRAPH 13(E):
Notwithstanding the foregoing or anything to the contrary contained in this
Lease, Lessee shall not be responsible for compliance with any laws, codes,
ordinances, rules, regulations or other governmental directives where such
compliance is not related specifically to Lessee's use and occupancy of the
Premises. For example, if any governmental authority should require the Building
or the Premises to be structurally strengthened against earthquake, or should
require the removal of asbestos from the premises and such measures are imposed
as a general requirement applicable to all tenants rather than as a condition to
Lessee's specific use or occupancy of the Premises, such work shall be performed
by and at the sole cost of Lessor. Lessor reserves the right to include in the
Building Maintenance Increases (See Paragraph 4(d)(iv)) compliance costs which
will benefit the project as a whole over time.
<PAGE>
I) costs incurred by Lessor due to violations of any of the terms and
conditions of any lease in the Building;
J) any other cost or expense which, under generally accepted accounting
principles, consistently applied would not be considered a normal operating
or maintenance expense.
PARAGRAPH 7:
Notwithstanding anything to the contrary contained herein, if Lessor has not
delivered the Premises substantially completed to Lessee on or before June 30,
1998 for any reason, Lessee shall have the right thereafter to cancel this
Lease, and upon such cancellation, Lessor shall return all sums theretofore
deposited by Lessee with Lessor, and neither party shall have any further
liability to the other.
PARAGRAPH 11:
Notwithstanding anything to the contrary contained in this Lease: (a) Lessee
shall not be required to remove (i) any of the initial Tenant Improvements (as
identified in Exhibit C)constructed by or on behalf of Lessee, (ii) any
alterations, additions or improvements for which Lessee has obtained Lessor's
consent, unless Lessor has indicated, at the time of granting such consent, that
such removal will be required; (b) Lessee shall not be required to obtain
Lessor's consent to any alterations, additions or improvements which do not cost
more that $3,000 in eash instance, are not structural in nature, are in
compliance with current building codes of the City of Palo Alto, do not affect
Building systems or are not visible from the exterior of the Premises. Lessee
must notify Lessor of any improvements installed without Lessor's approval, and
upon request of Lessor such improvements may be required to be removed upon
termination of the Lease without prior notice from Lessor at the time of
construction of the improvements.
PARAGRAPH 12:
Lessor represents and warrants to Leasee that to the best of Lessor's knowledge
on the commencement of the term hereof, the Premises and any improvements to be
constructed by Lessor are free from contamination by any toxic or hazardous
materials (hereinafter "Hazardous Materials") which are currently regulated by
any federal, state, or local government, or agency thereof".
PARAGRAPH 13(B):
Lessor represents and warrants to Lessee that to the best of Lessor's knowledge
that on the commencement of the term hereof, that (a) the Premises and any
improvements to be constructed by Lessor are free from structural defects and
(b) comply with all applicable laws, ordinances, codes, rules and regulations,
(c) the Building's elevators, loading docks, doors, roof, plumbing, electrical
and HVAC systems are in good order and condition and operating property.
PARAGRAPH 13(E);
Notwithstanding the foregoing or anything to the contrary contained in this
Lease, Lessee shall not be responsible for compliance with any laws, codes,
ordinances, rules, regulations or other governmental directives where such
compliance is not related specifically to Lessee's use and occupancy of the
Premises. For example, if any governmental authority should require the Building
or the Premises to be structurally strengthened against earthquake, or should
require the removal of asbestos from the premises and such measures are imposed
as a general requirement applicable to all tenants rather than as a condition to
Leesee's specific use or occupancy of the Premises, such work shall be performed
by and at the sole cost of Lessor. Lessor reserves the right to include in the
Building Maintenance Increases (See Paragraph 4(d) (iv)) compliance costs which
will benefit the project as a whole over time.
<PAGE>
PARAGRAPH 13(F):
Add the following sentence: Lessor agrees that at all times it will maintain the
structural portions of the building, parking areas, common areas, sprinkler
systems, and all portions of the project which are the responsibility of Lessor
in good condition and repair and shall operate the Project as a quality Business
Park.
PARAGRAPH 22(A):
Insert the following: Lessor's approval will not be unreasonably withheld.
Lessor shall have no right to any sums or other economic consideration resulting
from any Permitted Transfer.
PARAGRAPH 22(E):
Lessee shall first be entitled to deduct therefrom all reasonable cost incurred
in connection with the assignment or sublease, including but not limited to
tenant improvements, brokerage fees, advertising and legal fees.
Paragraph 22(f)(i):
Lessor may not recapture and/or terminate the Lease if a sub-lease involves less
than 50% of the Premises
PARAGRAPH 34:
Lessor agrees that the Rules and Regulations of the Building, attached to the
Lease shall not be changed, revised, or enforced in any unreasonable way by
Lessor, nor modified or added to by Lessor in such a way as to interfere with
Lessee's permitted use of the Premises set forth in the Lease. Lessor shall not
enforce the Rules and Regulations in an unreasonable way or a manner which shall
unreasonably interfere with Lessee's permitted use hereunder.
LESSOR'S LIEN.
Notwithstanding anything herein to the contrary, Lessor waives any and all
rights, title and interest Lessor now has, or hereafter may have, whether
statutory or otherwise, to Lessee's inventory, equipment, furnishings, trade
fixtures, books and records, personal property, and tenant improvements paid for
by Lessee located at the Premises (singly and/or collectively, the
"Collateral"). Lessor acknowledges that Lessor has no lien, right, claim,
interest or title in or to the Collateral. Lessor further agrees that Lessee
shall have the right, at its discretion, to mortgage, pledge, hypothecate or
grant a security interest in the Collateral as security for its obligations
under any equipment lease or other financing arrangement related to the conduct
of Lessee's business at the Premises. Lessor further agrees to execute and
deliver within three (3) business days any UCC filing statement or other
documentation required to be executed in connection with any such lease or
financing arrangement.
LESSEE'S TRADE FIXTURES AND EQUIPMENT.
Notwithstanding the foregoing, all trade fixtures, signs, equipment, furniture,
or other personal property of whatever kind and nature kept or installed on the
Premises by Lessee shall not become the property of Lessor or a part of the
realty no matter how affixed to the Premises and may be removed by Lessee at any
time and from time to time during the entire term of this Lease. Upon request of
Lessee or its assignees or any subtenant, Lessor shall execute and deliver any
real estate consent or waiver forms submitted by any vendors, equipment,
lessors, chattel mortgagees, or holders or owners of any trade fixtures, signs,
equipment, furniture, or other personal property of any kind and description
kept or installed on the Premises setting forth that Lessor waives, in favor of
the vendor, equipment lessor, chattel mortgagee, or any holder or owner, any
superior lien, claim, interest or other right therein. Lessor shall further
acknowledge that property
<PAGE>
covered by the consent or waiver forms is personal property and is not to become
a part of the realty no matter how affixed thereto, and that such property may
be removed from the Premises by the vendor, equipment lessor, chattel mortgagee,
owner, or holder at any time upon default in the terms of such chattel mortgage
or other similar documents, free and clear of any claim or lien of Lessor.
Lessee shall promptly repair any damage caused by the removal of such property,
whether effected by Lessee or Lessee's vendors, chattel mortgagees, or equipment
lessors.
RIGHT OF EARLY ENTRY:
Lessee, upon approval of Lessor, shall have the right to enter the Premises
prior to the commencement of the term to take reasonable preparatory measures
for its occupancy of the Premises, including, without limitation, the
installation of its trade fixtures, furnishings, and telephone,
telecommunications and computer equipment. Such entry shall be subject to all of
the terms and conditions of this Lease, except that Lessee shall not be required
to pay any rent on account thereof.
<PAGE>
EXHIBIT D
OPTION TO EXTEND:
- -----------------
A Lessee is granted one option to extend this Lease, such option to be for a 1
- year period, on the same terms and conditions as contained herein, except
that the monthly base rental rate provided for in Paragraph(s) 4(a) of this
Lease shall be at the then market rate. Lessee shall advise Lessor of its
intent to exercise this option, in writing, not more than 210 nor than
180 days prior to the end of the expiring term. If Lessee fails to exercise
this option within the time required, the option shall be void.
B The parties shall have thirty (30) days after Lessor receives the option
notice in which to agree on the monthly base rental for the extended term
during that period, they shall immediately complete and sign the agreement
scheduled below.
C If the parties are unable to agree on the monthly base rental for the
extended term within that period, the monthly base rental shall be
determined by arbitration in accordance with the Real Estate Valuation
Arbitration Rules of the American Arbitration Association. Lessee shall be
responsible for initiating the arbitration proceeding and advancing 1/2 the
administration fee charged by the American Arbitration Association within 15
days of the expiration of the 30-day period described in Paragraph (B)
above. If Lessee fails to so initiate such arbitration within that period,
the option shall be void, and the Lease shall expire at the end of the term,
that date being April 30, 2001.
D In setting the fair market monthly base rental value for the extended term,
the arbitrator shall consider what monthly rents are being paid and what
rent escalation provisions are being included on recently executed leases
for similar terms, for spaces which are reasonably similar to the premise,
with similar amenities and in the general neighborhood of the premises, but
shall exclude the value of all tenant improvements made by Lessee to the
Premises at Lessee's cost.
E Upon receiving written notice of the arbitrator's determination of the fair
market monthly rental, the parties shall complete and sign the agreement
scheduled below stating the base monthly rental at that rate. Lessor shall
credit Lessee, against the next rental payment due, an amount equal to one-
half the administrative fee for such arbitration paid by Lessee, and the
arbitrator's fee, if any, shall be paid one-half by each party.
F Upon execution of this option, the term shall be extended to April 30, 2002
To be completed when the Option is exercised:
By signing below the parties acknowledge:
(i) Lessee has exercised this option on the date indicated below Lessee's
signature. The term for this Lease has thus been extended to ________________.
(ii) The parties have agreed (or have determined by arbitration) that the
monthly base rental for the extended term provided in this Option Agreement
shall be $ ______________________.
(iii) The provision for a Cost of Living Increase at the end of every
_________________ month as provided in Paragraph 4(c) of the Lease shall
continue to apply except that the monthly base rental rate for purposes of this
Cost of Living Increase shall be the rate shown in (i) above and the date on
which the base rent is determined shall be changed to the period ending
___________________________.
_____________________________ _________________________
Lessor Lessee
_____________________________ _________________________
Date Date
<PAGE>
EXHIBIT E
OPTION TO EXTEND:
- ----------------
A Lessee is granted one option to extend this Lease, such option to be for a
1 - year period, on the same terms and conditions as contained herein, except
that the monthly base rental rate provided for in Paragraph(s) 4(a) of this
Lease shall be at the then market rate. Lessee shall advise Lessor of its
intent to exercise this option, in writing, not more than 210 nor less than
180 days prior to the end of the expiring term. If Lessee fails to exercise
this option within the time required, the option shall be void.
B The parties shall have thirty (30) days after Lessor receives the option
notice in which to agree on the monthly base rental for the extended term
during that period, they shall immediately complete and sign the agreement
scheduled below.
C If the parties are unable to agree on the monthly base rental for the
extended term within that period, the monthly base rental shall be
determined by arbitration in accordance with the Real Estate Valuation
Arbitration Rules of the American Arbitration Association. Lessee shall be
responsible for initiating the arbitration proceeding and advancing 1/2 the
administration fee charged by the American Arbitration Association within 15
days of the expiration of the 30-day period described in Paragraph (B)
above. If Lessee fails to so initiate such arbitration within that period,
the option shall be void, and the Lease shall expire at the end of the term,
that date being April 30, 2002.
D In setting the fair market monthly base rental value for the extended term,
the arbitrator shall consider what monthly rents are being paid and what
rent escalation provisions are being included on recently executed leases
for similar terms, for spaces which are reasonably similar to the premises,
with similar amenities and in the general neighborhood of the premises, but
shall exclude the value of all tenant improvements made by Lessee to the
Premises at Lessee's cost.
E Upon receiving written notice of the arbitrator's determination of the fair
market monthly rental, the parties shall complete and sign the agreement
scheduled below stating the base monthly rental at that rate. Lessor shall
credit Lessee, against the next rental payment due, an amount equal to one-
half the administrative fee for such arbitration paid by Lessee, and the
arbitrator's fee, if any, shall be paid one-half by each party.
F Upon execution of this option, the term shall be extended to April 30, 2003.
________________________________________________________________________________
To be completed when the Option is exercised:
By signing below the parties acknowledge:
(i) Lessee has exercised this option on the date indicated below Lessee's
signature. The term for this Lease has thus been extended to _________________.
(ii) The parties have agreed (or have determined by arbitration) that the
monthly base rental for the extended term provided in this Option Agreement
shall be $ ____________________________.
(iii) The provision for a Cost of Living Increase at the end of every
_________________ month as provided in Paragraph 4(c) of the Lease shall
continue to apply except that the monthly base rental rate for purposes of this
Cost of Living Increase shall be the rate shown in (i) above and the date on
which the base rent is determined shall be changed to the period ending
___________________________.
_____________________________ ____________________________
Lessor Lessee
_____________________________ ____________________________
Date Date
<PAGE>
EXHIBIT F
---
OPTION TO EXTEND:
- ----------------
A Lessee is granted one option to extend this Lease, such option to be for a
1 - year period, on the same terms and conditions as contained herein,
except that the monthly base rental rate provided for in Paragraph(s) 4(a)
of this Lease shall be at the then market rate. Lessee shall advise Lessor
of its intent to exercise this option, in writing, not more than 210 nor
less than 180 days prior to the end of the expiring term. If Lessee fails to
exercise this option within the time required, the option shall be void.
B The parties shall have thirty (30) days after Lessor receives the option
notice in which to agree on the monthly base rental for the extended term
during that period, they shall immediately complete and sign the agreement
scheduled below.
C If the parties are unable to agree on the monthly base rental for the
extended term within that period, the monthly base rental shall be
determined by arbitration in accordance with the Real Estate Valuation
Arbitration Rules of the American Arbitration Association. Lessee shall be
responsible for initiating the arbitration proceeding and advancing 1/2 the
administration fee charged by the American Arbitration Association within 15
days of the expiration of the 30-day period described in Paragraph (B)
above. If Lessee fails to so initiate such arbitration within that period,
the option shall be void, and the Lease shall expire at the end of the term,
that date being April 30, 2003.
D In setting the fair market monthly base rental value for the extended term,
the arbitrator shall consider what monthly rents are being paid and what
rent escalation provisions are being included on recently executed leases
for similar terms, for spaces which are reasonably similar to the premises,
with similar amenities and in the general neighborhood of the premises, but
shall exclude the value of all tenant improvements made by Lessee to the
Premises at Lessee's cost.
E Upon receiving written notice of the arbitrator's determination of the fair
market monthly rental, the parties shall complete and sign the agreement
scheduled below stating the base monthly rental at that rate. Lessor shall
credit Lessee, against the next rental payment due, an amount equal to one-
half the administrative fee for such arbitration paid by Lessee, and the
arbitrator's fee, if any, shall be paid one-half by each party.
F Upon execution of this option, the term shall be extended to April 30, 2004.
________________________________________________________________________________
To be completed when the Option is exercised:
By signing below the parties acknowledge:
(i) Lessee has exercised this option on the date indicated below Lessee's
signature. The term for this Lease has thus been extended to __________________
________________.
(ii) The parties have agreed (or have determined by arbitration) that the
monthly base rental for the extended term provided in this Option Agreement
shall be $ ____________________________.
(iii) The provision for a Cost of Living Increase at the end of every
_________________ month as provided in Paragraph 4(c) of the Lease shall
continue to apply except that the monthly base rental rate for purposes of this
Cost of Living Increase shall be the rate shown in (i) above and the date on
which the base rent is determined shall be changed to the period ending
___________________________.
___________________________ ___________________________
Lessor Lessee
___________________________ ___________________________
Date Date
<PAGE>
EXHIBIT 10.12
SOUTH RIM
Industrial Real Estate Triple Net Sublease
ARTICLE I
BASIC TERMS
This Article One contains the Basic Terms of this Sublease between the Landlord
and Tenant named below. This Sublease is subject to the Master Lease identified
in Section 2.1 below. Other Articles, Sections and Subsections of the Sublease
referred to in this Article One explain and define the Basic Terms and are to be
read in conjunction with the Basic Terms.
1.1 DATE OF SUBLEASE. July 20, 1998
1.2 LANDLORD. PALOMAR ENTERPRISES, INC.
Address of Landlord: P.O. Box 462947, Escondido, CA 92046-2947
1.3 TENANT. COPPER MOUNTAIN NETWORKS, INC., a California corporation
Address of Tenant: 5744 Pacific Center Boulevard, San Diego, CA 92121
1.4 PREMISES. In consideration of the rents, covenants and agreement on the
part of the Tenant to be paid and performed, the Landlord subleases to the
Tenant, and Tenant subleases from Landlord, those certain Premises
identified on Exhibit "A" attached hereto and by this reference
incorporated herein. The premises are deemed to be approximately 10,735
square feet of space, and are situated within that certain building
("Building") known as Building C and located at 5744 Pacific Center Blvd.,
Suite 301, San Diego, CA 92121. The Building is situated within that
certain project ("Project") known as SOUTH RIM, located at the north side
of Pacific Center Boulevard between McKellar Court and Pacific Heights
Boulevard, San Diego, California, more particularly identified on Exhibit
"B" attached hereto and by this reference incorporated herein.
1.5 SUBLEASE TERM. Sixty (60) months beginning on September 1, 1998 or such
other date as is specified in this Sublease, and ending on August 31, 2003
(see Article Two).
1.6 PERMITTED USES. The Premises shall be used and occupied only for General
offices, light manufacturing and warehousing (see Article Two).
1.7 TENANT'S GUARANTOR. (If none, so state.) None
1.8 INITIAL SECURITY DEPOSIT. (See Section 3.3)
Ten Thousand One Hundred Ninety-eight and No/100 Dollars ($10,198.00)
1.9 RENT AND OTHER CHARGES PAYABLE BY TENANT.
1.9.1 BASE RENT. Ten Thousand One Hundred Ninety-eight and No/100 Dollars
($10,198.00) Per month for the first twelve (12) months.
1.9.2 OTHER PERIODIC PAYMENTS: ADDITIONAL RENT. (i) Real Property Taxes;
(ii) Utilities; (iii) Insurance Premiums; (iv) Common Area Charges; (v)
Impounds for Insurance Premiums and Property Taxes; (vi) Maintenance,
Repairs and Alterations (see Articles Four and Six).
1.10 RIDERS. The following Riders are attached to and made a part of this
Sublease: (If none, so state.)
1) Additional Provisions
2) Exhibits A, B & C
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ARTICLE II
SUBLEASE TERM
2.1 MASTER LEASE. Palomar Enterprises, Inc. as ground lessee of the real
property improved with and identified as the Project, and the San Diego Unified
School District ("District") as lessor entered into that certain lease dated
February 14, 1989 (the "Master Lease"). Landlord is successor in interest to
under the Master Lease. The Master Lease provides that Landlord may construct
improvements and sublease portions thereof to tenants. Accordingly, and subject
to the Master Lease, Landlord is entering into this sublease with Tenant.
2.2 SUBLEASE OF PREMISES FOR SUBLEASE TERM. Landlord subleases the Premises to
Tenant and Tenant subleases the Premises from Landlord for the Sublease Term.
The Sublease Term is for the period stated in Section 1.5 above and shall begin
and end on the dates specified in Section 1.5 above, unless the beginning or end
of the Sublease Term is changed under any provision of this Sublease. The
"Commencement Date" shall be the date specified in Section 1.5 above for the
beginning of the Sublease Term, unless advanced or delayed under any provision
of this Sublease.
2.3 DELAY IN COMMENCEMENT. Landlord shall not be liable to Tenant if Landlord
does not deliver possession of the Premises to Tenant on the first date
specified in Section 1.5 above. Landlord's non-delivery of the Premises to
Tenant on that date shall not affect this Sublease or the obligations of Tenant
under this Sublease. However, the Commencement Date shall be delayed until
possession of the Premises is delivered to Tenant. The Sublease Term shall be
extended for a period equal to the delay in delivery of possession of the
Premises to Tenant, plus the number of days necessary to end the Sublease Term
on the last day of a month. If Landlord does not deliver possession of the
Premises to Tenant within ninety (90) days after the first date specified in
Section 1.5 above, Tenant may elect to cancel this Sublease by giving written
notice to Landlord within ten (10) days after the 90-day period ends. If Tenant
gives such notice, the Sublease shall be cancelled and neither Landlord nor
Tenant shall have any further obligations to the other. If Tenant does not give
such notice, Tenant's right to cancel the Sublease shall expire and the Sublease
Term shall commence upon the delivery of possession of the Premises to Tenant.
If delivery of possession of the Premises to Tenant is delayed, Landlord and
Tenant shall, upon such delivery, execute an amendment to this Sublease setting
forth the Commencement Date and expiration date of the Sublease. For purposes
of this Section 2.3, Landlord's delivery of possession of the Premises shall
mean the earlier of (i) the date Tenant occupies all or any portion of the
Premises, or (ii) the date upon which the Premises are substantially complete in
accordance with Exhibit A.
2.4 EARLY OCCUPANCY. If Tenant occupies the Premises prior to the Commencement
Date, Tenant's occupancy of the Premises shall be subject to all of the
provisions of this Sublease. Early occupancy of the Premises shall not advance
the expiration date of this Sublease.
2.5 HOLDING OVER. Tenant shall vacate the Premises upon the expiration or
earlier termnination of this Sublease. Tenant shall reimburse Landlord for and
indemnify Landlord against all damages incurred by Landlord from any delay by
Tenant in vacating the Premises. If Tenant remains in possession of all or any
part of the Premises after the expiration of the term hereof, with or without
the express or implied consent of Landlord, such tenancy shall be from month-to-
month only and not a renewal hereof or an extension for any further term, and in
such case, Base Rent then in effect shall be increased by twenty-five percent
(25%) and other monetary sums due hereunder shall be payable in the amount and
at the time specified in this Sublease; and such month-to-month tenancy shall be
subject to every other term, covenant and agreement contained herein, except
that the month-to-month tenancy will be terminable in thirty (30) days notice
given at any time by either party.
2.6 SURRENDER OF PREMISES. Upon the termination of the Sublease, Tenant shall
surrender the premises to Landlord in the condition specified in and according
to Section 6.7.
ARTICLE III
BASE RENT
3.1 TIME AND MANNER OF PAYMENT. Upon execution of this Sublease, Tenant shall
pay Landlord the Base Rent in the amount stated in Subsection 1.9.1 above for
the first month of the Sublease Term. On the first day of the second month of
the Sublease Term and each month thereafter, Tenant shall pay Landlord the Base
Rent in United States currency, in advance, without offset, deduction or prior
demand. The Base Rent shall be payable at Landlord's address or at such other
place as Landlord may designate in writing.
3.2 INCREASE. The Base Rent shall be increased on an annual basis (see Addendum
to Lease).
3.3 SECURITY DEPOSIT INCREASES.
3.3.1 DEPOSIT. Upon the execution of this Sublease, Tenant shall deposit
with Landlord a cash security Deposit in the amount set forth in Section 1.8
above. Landlord may apply all or part of the security Deposit to any unpaid rent
or other charges due from Tenant or to cure any other defaults of Tenant. If
Landlord uses any part of the Security Deposit, Tenant shall restore the
Security Deposit its full amount within ten (10) days after Landlord's written
request. Tenant's failure to do so shall be a material default under this
Sublease. No Interest shall be paid on the Security Deposit. Landlord shall not
be required to keep the Security Deposit separate from its other accounts and no
trust relationship created with respect to the Security Deposit.
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3.3.2 INCREASE IN DEPOSIT.
3.1 TERMINATION; ADVANCE PAYMENTS. Upon termination of this Sublease under
Article Seven (Damage or Destruction), Article Eight (Condemnation), or any
other termination not resulting from Tenant default, and after Tenant has
vacated the Premises in the manner required by this Sublease, an equitable
adjustment shall be made concerning advance rent, any other advance payments
made by Tenant to Landlord, and accrued real property taxes, and Landlord shall
refund the unused portion of the Security Deposit to Tenant or Tenant's
succcssor.
ARTICLE IV
OTHER CHARGES PAYABLE BY TENANT
4.1 ADDITIONAL RENT. All charges payable by Tenant other than Base Rent are
called "Additional Rent." Unless this Sublease provides otherwise, all
Additional Rent shall be paid with the next monthly installment of Base Rent
and shall be in United States currency. The term "rent" shall mean Base Rent and
Additional Rent.
4.2. REAL PROPERTY TAXES.
4.2.1 PAYMENT OF TAXES. Tenant shall pay its proportionate share of all
real property taxes and general and special assessments, levied and assessed
against the Project of which the Premises are a part. Tenant's proportionate
share of real property taxes shall be the ratio that the total number of square
feet in the Premises bears to the total number of sub-leasable square feet in
the Project. Each year Landlord shall notify Tenant of Landlord's calculation
of Tenant's proportionate share of the real property taxes and together with
such notice shall furnish Tenant with a copy of the tax bill. If any
supplemental tax bills are delivered with respect to the Project, Landlord may
notify Tenant of Landlord's new calculation of Tenant's proportionate share of
real property taxes as soon as such supplemental tax bill is received. Subject
to Section 4.8 below, Tenant shall reimburse Landlord for Tenant's proportionate
share of the Real Property Taxes semiannually no later than fifteen (15) days
before the taxing authority's delinquency date.
4.2.2 DEFINlTION OF "REAL PROPERTY TAX." "Real Property Tax" means: (i)
any fee, license fee, license tax, commercial rental tax, levy, charge,
assessment, penalty or tax (other than inheritance or estate taxes) imposed by
any authority having the direct or indirect power to tax, including any City,
County, State or Federal government, or any school, agriculture, lighting,
drainage or other improvement district thereof, as against any legal or
equitable interest of Landlord in the Premises; (ii) any tax on the Landlord's
right to receive, or the receipt of, rent or income from the Premises or against
Landlord's business of leasing the Premises; (iii) any tax or charge for fire
protection, streets, sidewalks, road maintenance, refuse or other services
provided to the Premises by any governmental agency; (iv) any tax imposed upon
this transaction or based upon a reassessment of the Premises due to a change in
ownership or transfer of all or part of Landlord's interest in the Premises; and
(v) any charge or fee replacing any tax previously included within the
definition of Real Property Tax. "Real Property Tax" does not, however, include
Landlord's Federal or State income, franchise, inheritance or estate taxes.
4.2.3 JOINT ASSESSMENT. If the Premises is not separately assessed,
Tenant's share of the Real Property Tax payable by Tenant under Subsection 4.2.1
shall be determined from reasonably available information. Landlord shall make a
reasonable determination of Tenant's proportionate share of such real property
tax and Tenant shall pay such share to Landlord within fifteen (15) days after
receipt of Landlord's written statement.
4.2.4 PERSONAL PROPERTY TAXES.
(a) Tenant shall pay prior to delinquency all taxes charged against
trade fixtures, furnishings, equipment or any other personal property belonging
to Tenant. Tenant shall attempt to have such personal property taxed separately
from the Premises.
(b) If any such taxes on Tenant's personal property are levied
against Landlord or Landlord's Premises, or if the assessed value of the
Premises is increased by the inclusion therein of a value placed upon such
personal property or trade fixtures of Tenant, then Landlord, after written
notice to Tenant, shall have the right to pay the taxes based upon such
increased assessments, regardless of the validity thereof, but only under proper
protest if requested by Tenant in writing. If Landlord shall do so, then Tenant
shall, upon demand, repay to Landlord the taxes levied against Landlord, or the
proportion of such taxes resulting from such increase in the assessment. In any
such event, however, Tenant, at Tenant's sole cost and expense, shall have the
right, in the name of Landlord and with Landlord's full cooperation, to bring
suit in any court of competent jurisdiction to recover the amount of any such
taxes so paid under protest; any amount so recovered to belong to Tenant,
(c) If any of Tenant's personal property is taxed with the
Premises, Tenant shall pay Landlord the taxes for the personal property within
fifteen (15) days after Tenant receives a written statement from Landlord for
such personal property taxes.
4.2.5 TENANT'S RIGHT TO CONTEST TAXES. Tenant may attempt to have the
assessed valuation of the Premises reduced or may initiate proceedings to
contest the Real Property Tax. If required by law, Landlord shall join in the
proceedings brought by Tenant. However, Tenant shall pay all costs of the
proceedings, including any costs or fees incurred by Landlord. Upon the final
determination of any proceeding or contest, Tenant shall immediately pay the
excess Real Property Tax due, together with all costs, charges, interest and
penalties incidental to the proceedings. If Tenant does not pay the excess
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Real Property Tax when due and contests such taxes, Tenant shall not be in
default under this Sublease for nonpayment of such taxes if Tenant deposits
funds with Landlord or opens an interest bearing account reasonably acceptable
to Landlord in the joint names of Landlord and Tenant. The amount of such
deposit shall be sufficient to pay the excess Real Property Tax plus a
reasonable estimate of the interest, costs, charges and penalties which may
accrue if Tenant's action is unsuccessful, less any applicable tax impound
previously paid by Tenant to Landlord. The deposit shall be applied to the
excess Real Property Tax due, as determined at such proceedings. The excess Real
Property Tax shall be paid under protest from such deposit if such payment under
protest is necessary to prevent the Premises from being sold under a "tax sale"
or similar enforcement proceeding.
4.3 UTILITIES. Tenant shall arrange for and pay, directly to the appropriate
supplier, the cost of all natural gas, heat, light, power, sewer, telephone,
water and other utilities and services supplied to the Premises. Landlord will
cooperate in attempting to have each of the utilities supplied to the Premises
separately metered. However if any such utilities or services are jointly
metered with other premises within the Project, Landlord shall make a reasonable
determination of Tenant's proportionate share of the cost of such utilities and
services, based on information reasonably available to Landlord, and Tenant
shall pay such share to Landlord within fifteen (15) days after receipt of
Landlord's written statement of such cost.
4.4 INSURANCE PREMIUMS.
4.4.1 LIABILITY INSURANCE. During the Sublease Term, Landlord shall
maintain a policy of comprehensive public liability insurance at Tenant's
expense, insuring Landlord against liability arising out of the ownership, use,
occupancy or maintenance of the Premises. The initial amount of such insurance
shall be at least $5,000,000.00, and shall be subject to periodic increase based
upon inflation, increased liability awards, recommendations of professional
insurance advisers, and other relevant factors. However, the amount of such
insurance shall not limit Tenant's liability nor relieve Tenant of any
obligation hereunder. The policy shall contain cross-liability endorsements, if
applicable, and shall insure Tenant's performance of the indemnity provisions of
Section 5.4. Tenant shall, at Tenant's expense, maintain such other liability
insurance as Tenant deems necessary to protect Tenant. Landlord shall provide
proof of insurance, naming Tenant's Premises as a named insured within 30 from
the Commencement Date.
4.4.2 HAZARD AND RENTAL INCOME INSURANCE. During the Sublease Term,
Landlord shall, at Tenant's expense, maintain policies of insurance covering
loss of or damage to the Premises to the extent of at least one hundred percent
(100%) of its replacement value. Such policies shall provide protection against
all perils included within the classification of fire, extended coverage,
vandalism, malicious mischief, and any other perils which Landlord deems
necessary. Landlord may obtain insurance coverage for Tenant's building
improvements installed by Tenant in or on the Premises. Tenant shall, at
Tenant's expense, maintain such primary or additional insurance on its fixtures,
equipment and building improvements as Tenant deems necessary to protect its
interest. During the Sublease Term, Landlord may also maintain a rental income
insurance policy at Tenant's expense, with loss payable to Landlord in an amount
equal to one year's Base Rent (as adjusted periodically), estimated Real
Property Taxes and insurance premiums. Tenant shall not do or permit to be done
anything which invalidates any such insurance policies. Landlord shall provide
proof of insurance, naming Tenant's Premises as a named insured within 30 from
the Commencement Date.
4.4.3 PAYMENT OF PREMIUMS; INSURANCE POLICIES. Tenant shall pay its pro
rata share of the premiums for maintaining the insurance required by Subsections
4.4.1 and 4.4.2. Tenant's pro rate share of all such premiums shall be based on
the same proportion as used for payment of taxes pursuant to Subsection 4.2.1
hereof. All such amounts will be due and payable upon ten (10) days written
notice.
4.4.4 INCREASE IN FIRE INSURANCE PREMIUM. Tenant agrees that it will not
keep, use, manufacture, assemble, sell or offer for sale in or upon the
Premises any article which may be prohibited by the standard form of fire
insurance policy. Tenant agrees to pay any increase in premiums for fire and
extended coverage insurance that may be charged during the term of this Sublease
on the amount of such insurance which may be carried by Landlord on said
Premises or the building of which it is a part, resulting from the acts or
omissions of the Tenant, its agents, servants or employees, or the use or
occupancy of the Premises by the Tenant or from the type of materials or
products stored, manufactured, assembled or sold by Tenant in the Premises,
whether or not Landlord has consented to the same. In determining whether
increased premiums are the result of Tenant's use of the Premises, a schedule,
issued by the organization making the insurance rate on the Premises, showing
the various components of such rate, shall be conclusive evidence of the several
items and charges which make up the fire insurance rate on the Premises.
Landlord shall provide proof of insurance, naming Tenant's Premises as a named
insured within 30 from the Commencement Date.
4.4.5 WAIVER OF SUBROGATION. Landlord and Tenant each hereby waive any and
all rights of recovery against the other or against the officers, employees,
agents and representatives of the other, on account of loss or damage occasioned
to such waiving party or its property or the property of others under its
control, to the extent that such loss or damage is insured against under any
fire and extended coverage insurance policy which either may have in force at
the time of such loss or damage. Tenant shall, upon the policies of insurance
required under this Sublease, give notice to the Insurance carrier or carriers
that the foregoing mutual waiver of subrogation is contained in this Sublease.
4.5 COMMON AREAS.
4.5.1 DEFINITION; LOCATION. As used in this Sublease, "Common Areas" shall
mean all areas within the Project which are available for the common use of
tenants of the Project and which are not leased or held for the exclusive use of
tenants of the Project or which are not leased or held for the exclusive use of
Tenant or other tenants, including, but not limited to, parking areas,
driveways, sidewalks, loading areas, retaining walls, truck serviceways,
pedestrian malls, stairs, ramps, restrooms, access roads, corridors, landscaping
and planted areas. Landlord may from time to time change the size, location,
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nature and use of the Common Areas, including converting Common Areas into
leasable areas, construction of additional parking facilities (including
parking structures) in the Common Areas, and increasing or decreasing Common
Area land and/or facilities. Tenant acknowledges that such activities may
result in occasional inconvenience to Tenant from time to time. Such
activities and changes shall be expressly permitted if they do not materially
affect Tenant's use of the Premises.
4.5.2 USE OF COMMON AREAS. Subject to other provisions of this Sublease,
Tenant shall have the nonexclusive right (in common with other tenants and all
others to whom Landlord has granted or may grant such rights) to use the Common
Areas for the purposes intended, subject to such reasonable rules and
regulations as Landlord may establish from time to time. Tenant shall abide by
such rules and regulations and shall use its best effort to cause others who use
the Common Areas with Tenant's expressed or implied permission to abide by
Landlord's rules and regulations. At any time, Landlord may close any Common
Areas to perform any acts in and to the Common Areas as, in Landlord's judgment,
may be desirable to improve the Project. Tenant shall not, at any time,
intentionally interfere with the rights of Landlord, other tenants, or any other
person entitled to use the Common Areas.
4.5.3 VEHICLE PARKING. Tenant shall be entitled to use 3.8 vehicle parking
spaces in the Project for each 1,000 (One Thousand) square feet within the
Premises without paying any additional rent. Tenant's parking shall not be
reserved and shall be limited to vehicles no larger than standard size
automobiles or pickup utility vehicles. Tenant shall not cause large trucks or
other large vehicles to be parked within the Project or on the adjacent public
streets. Vehicles shall be parked only in striped parking spaces and not in
driveways, loading areas or other locations not specifically designated for
parking. If Tenant parks more vehicles in the parking area than the number
identified herein, such conduct shall be a material breach of the Sublease.
4.5.4. MAINTENANCE OF COMMON AREAS. Landlord shall maintain the Common
Areas in good order, condition and repair and shall operate the Project, in
Landlord's sole discretion, as a first class industrial/commercial real property
development. Tenant shall pay Tenant's pro rata share (as defined below) of all
costs incurred by Landlord for the operation and maintenance of the Common Area.
Common Area costs include, but are not limited to, costs and expenses for the
following: gardening and landscaping, pest extermination services; utilities,
water and sewage charges; maintenance of signs (other than Tenant's signs);
premiums for liability, property damage, fire and other types of casualty
insurance on the Common Areas and all Common Area improvements; all personal
property taxes levied on or attributable to personal property used in connection
with the Common Areas; straight-line depreciation on personal property owned by
Landlord which is consumed in the operation or maintenance of the Common Areas;
rental or lease payments paid by Landlord for rented or leased personal property
used in the operation or maintenance of the Common Areas; the reasonable rental
value of any Common Area located within any building situated within the
Project; fees for management of the Project and Common Areas; fees for required
licenses and permits; repairing, resurfacing, repaving, maintaining, painting,
lighting, cleaning, refuse removal, security and similar items; reserves; and a
reasonable allowance to Landlord for Landlord's supervision of the Common Areas
(not to exceed five percent (5%) of the total of all other Common Area costs for
the calendar year). Landlord may cause any or all of such services to be
provided by third parties, or by entities associated with Landlord. Common Area
costs shall not include depreciation of real property which forms part of the
Common Areas. Landlord may, at Landlord's election, estimate in advance and
charge to Tenant monthly as Common Area costs, all real property taxes for which
Tenant is liable under the Sublease, all insurance premiums for which Tenant is
liable under the Sublease, and all maintenance and repair costs for which Tenant
is liable under the Sublease.
4.5.5 TENANT'S SHARE AND PAYMENT. Tenant shall pay Tenant's annual pro
rata share of all estimated Common Area costs, in advance, in monthly
installments on the first day of each month during the Sublease Term (prorated
for any fractional month). Tenant's pro rata share shall be calculated by
dividing the square foot area of the Premises, as set forth in Section 1.4 of
the Sublease, by the aggregate square foot area of the leaseable area within the
Project, whether currently leased or not upon the date the computation is made.
Landlord may adjust such estimates at any time and from time to time based upon
Landlord's experience and reasonable anticipation of costs. Such adjustments
shall be effective as of the next rent payment date after notice to Tenant.
Within thirty (30) days after the end of each calendar year of the Sublease
Term, Landlord shall deliver to Tenant a statement prepared in accordance with
generally accepted accounting principles setting forth, in reasonable detail,
the actual Common Area costs paid or incurred by Landlord during the preceding
calendar year and Tenant's pro rata share. Upon receipt of such statement, there
shall be an adjustment between Landlord and Tenant with payment to or credit
given by Landlord (as the case may be) so that Landlord shall receive the entire
amount of Tenant's share of such costs and expenses for such period. Any changes
in the Common Area costs and/or the aggregate area leased or held for lease for
the exclusive use of all tenants of the Project during the Lease Term shall be
effective on the first day of the month after such change occurs.
4.5.5.1 ALTERNATIVE PAYMENT. Notwithstanding the foregoing,
Landlord has the right to notify Tenant on a monthly or other basis of the
actual amount Landlord has expended for all Common Area costs incurred during
the previous month or period. Such notice shall also set forth Tenant's pro rata
share of such actual costs. Upon receipt of such statement, Tenant shall pay
with the next monthly installment of rent Tenant's pro rata share of the actual
Common Area costs incurred during the previous month or period.
4.5.6 ADDITIONAL AREAS. In addition to the Common Areas and costs
associated therewith described in this Section 4.5, Landlord may, but is not
obligated to, provide certain additional spaces and areas within the Project
("Additional Areas") as (and included within the definition of) Common Areas.
The Additional Areas may include, but are not limited to, an office used by and
subject to the exclusive control of Landlord for leasing and/or managing the
Project, a conference room available on a reserved basis for use by tenants
within the Project during normal business hours, and a locker room facility for
use by tenants of the Project and their employees that are employed at the
Project. Common Area costs for which Tenant is liable for its pro rata share as
described in Section 4.5.4 shall include costs of operating and the reasonable
rental value of the space occupied by the Additional Areas.
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4.6 LATE CHARGES. Tenants failure to pay rent promptly may cause Landlord to
incur unanticipated costs. The exact amount of such costs is impractical or
extremely difficult to ascertain. Such costs may include, but are not limited
to, processing and accounting charges and late charges which may be imposed on
Landlord by any ground sublease, mortgage or trust deed encumbering the
Premises. Therefore, if Landlord does not receive any rent payment within five
(5) days after it becomes due, Tenant shall pay Landlord a late charge equal to
ten percent (l0%) of the overdue amount. The parties agree that such late charge
represents a fair and reasonable estimate of the costs Landlord will incur by
reason of such late payment.
4.6.1 REPEATED LATE CHARGES. In the event that a late charge is payable
under this Sublease, whether or not collected, for two installments of Base
Rent during any one calendar year of the Sublease Term, then the Base Rent
shall automatically become due and payable quarterly in advance, rather than
monthly. All monies paid to Landlord under this provision may be commingled
with other monies of Landlord and shall not bear interest.
4.7 INTEREST ON PAST DUE OBLIGATIONS. Any amount owed by Tenant to Landlord
which is not paid when due shall bear interest at the rate of fifteen percent
(15%) per annum or at the highest rate then permitted by law, whichever is less,
from the due date of such amount. However, interest shall not be payable on late
charges to be paid by Tenant under this Sublease. The payment of interest on
such amounts shall not excuse or cure any default by Tenant under this Sublease.
If the interest rate specified in this Sublease is higher than the rate
permitted by law, the interest rate is hereby decreased to the maximum legal
interest rate permitted by law.
4.8 IMPOUNDS FOR INSURANCE PREMIUMS AND REAL PROPERTY TAXES. If requested by
any ground lessor or lender to whom Landlord has granted a security interest in
the Premises or the Project, if Landlord deems it necessary in Landlord's sole
and absolute discretion, or if Tenant is more than ten (10) days late in the
payment of rent more than once in any consecutive twelve (12) month period,
Tenant shall pay Landlord a sum equal to one-twelfth (1/12) of the annual Real
Property Tax and/or insurance premiums payable by Tenant under this Sublease,
together with each payment of Base Rent. Such payments shall be paid to the
ground lessor or lender if required or held by Landlord in an impound account
with no obligation to pay the Tenant interest thereon. The amount of the Real
Property Tax and insurance premiums when unknown shall be reasonably estimated
by Landlord. Funds in the impound account shall be applied by Landlord to the
payment of real property taxes and insurance premiums when due. Any deficiency
of funds in the impound account shall be paid by Tenant to Landlord upon written
request. If Tenant is in material default under this Sublease, Landlord may
apply any funds in the impound account to any obligation then due under this
Sublease.
ARTICLE V
USE OF PREMISES
5.1 PERMITTED USES. Tenant may use the Premises only for the Permitted Uses set
forth in Section 1.6 above.
5.2 MANNER OF USE.
5.2.1 OBJECTIONABLE USES. Tenant shall not do or permit anything to be
done in or about the Premises which will in any way obstruct or interfere with
or infringe on the rights of other occupants of the building, or injure or annoy
them, or use or allow the Premises to be used for any improper, immoral, or
objectionable purposes; nor shall Tenant cause, maintain or permit any nuisance
in, on or about the Premises or commit or suffer to be committed any waste in,
on or about the Premises. Tenant shall not be liable to Landlord for any other
occupant's failure to so conduct itself.
5.2.2 NONPERMITTED USES. Tenant shall not do or permit to be done in or
about the Premises, nor bring, keep or permit to be brought or kept therein,
anything which is prohibited by or 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, or which is prohibited by any standard form
of fire insurance policy or will in any way increase the existing rate of or
affect any fire or other insurance upon the building or any part thereof or any
of its contents, or cause a cancellation of any insurance policy covering the
building or any part thereof or any of its contents. Tenant shall comply with
all governmental laws, ordinances and regulations applicable to the Premises,
and the requirements of any Board of Fire Underwriters or other similar body now
or hereafter instituted, with any order, directive or certificate of occupancy
issued pursuant to any law, ordinance or regulation by any public officer
insofar as the same relates to or affects the condition, use or occupancy of
the Premises, including but not limited to, requirements of structural changes
necessitated by Tenant's acts, occupancy or use of the Premises, all at Tenant's
sole expense. The judgment of any court of competent jurisdiction shall be
conclusive in establishing such violations between Landlord and Tenant.
5.2.3 NOXIOUS ODORS. Tenant shall not use, keep or permit to be used or
kept any foul or noxious gas or substance in the Premises, or permit or suffer
the Premises to be occupied or used in a manner offensive or objectionable to
the Landlord or other occupants of the building by reason of noise, odors and/or
vibrations, or interfere in any way with other Tenants or those having business
therein, nor shall any animals or birds be brought in or kept in or about the
Premises or the building. Tenant shall not conduct any auction on the Premises.
No cooking shall be done or permitted by any Tenant on the Premises, nor shall
the Premises be used for the storage of merchandise, for washing clothes, for
lodging, or for any improper, objectionable or immoral purposes. Tenant shall
not use or keep in the Premises or the building any kerosene, gasoline or
inflammable or combustible fluid or material, or use any method of heating or
air conditioning other than that supplied by Landlord.
5.2.4 PERMIT. Tenant shall obtain and pay for all permits required for
Tenant's occupancy of the
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rules, regulations, orders and requirements regulating the use by Tenant of the
Premises, including the Occupational Health and Safety Act.
5.3 SIGNS AND AUCTIONS.
5.3.1 AUCTION. Tenant shall not conduct, or permit to be conducted, any
sale by auction on the Premises.
5.3.2 PROHIBITED SIGNS. Tenant shall not place, or suffer to be placed or
maintained, on any exterior door, wall or window of the Premises any sign,
awning or canopy, or advertising matter or other thing of any kind, and will not
place or maintain any decoration, lettering or advertising matter on the glass
of any window or door, or that can be seen through the glass, of the Premises
without Landlord's prior written approval. Tenant further agrees to maintain
such sign, awning, canopy, decoration, lettering, advertising matter or thing as
may be approved, in good condition and repair at all times.
5.3.3 SIGN CRITERIA. Tenant is responsible for installation of sign, which
includes all costs and labor, in accordance with the criteria described on
Exhibit "C".
5.4 HAZARDOUS MATERIALS
5.4.1 PROHIBITION OF STORAGE. Tenant shall not cause or permit any
Hazardous Material (as hereinafter defined) to be brought upon, kept or used in
or about the Premises or the Project by Tenant, its agents, employees,
contractors or invitees, other than those expressly permitted by Landlord and
identified below. If Tenant breaches the obligation stated in the preceding
sentence, or if the presence of Hazardous Materials on the Premises caused or
permitted by Tenant (including Hazardous Material specifically permitted and
identified below) results in contamination of the Premises, or if contamination
of the Premises by Hazardous Material otherwise occurs for which Tenant is
legally liable to Landlord for damage resulting therefrom, then Tenant shall
indemnify, defend and hold Landlord, its agents and contractors harmless from
any and all claims, judgments, damages, penalties, fines, costs, liabilities, or
losses (including without limitation diminution in value of the Premises or any
portion of the Project damages for the loss or restriction on use of rentable or
usable space or of any amenity of the Premises or Project, damages arising from
any adverse impact on marketing of space in the Premises or the Project and sums
paid in settlement of claims, attorneys' fees, consultant fees and expert fees)
which arise during or after the Sublease Term as a result of such contamination.
This indemnification of Landlord by Tenant includes, without limitation, costs
incurred in connection with any investigation of site conditions or any cleanup,
remedial, removal, or restoration work required by any federal, state or local
governmental agency or political subdivision because of Hazardous Material
present in the soil or ground water on or under the Premises. Without limiting
the foregoing, if the presence of any Hazardous Material on the Premises caused
or permitted by Tenant results in any contamination of the Premises, Tenant
shall promptly take all actions at its sole expense as are necessary to return
the Premises to the condition existing prior to the introduction of any such
Hazardous Material to the Premises, provided that Landlord's approval of such
action shall first be obtained, which approval shall not be unreasonably
withheld so long as such actions would not potentially have any material adverse
long-term or short-term effect on the Premises or the Project.
5.4.2 TERMINATION OF LEASE. Notwithstanding the provisions of Paragraph
5.4.1 above, if (i) any anticipated use of the Premises by Tenant or any
proposed assignee or sublessee of Tenant involves generation, storage, use,
treatment or disposal of Hazardous Material, (ii) Tenant or the proposed
assignee or sublessee has been required by any prior landlord, lender or
governmental authority to take remedial action in connection with Hazardous
Material contaminating a property if the contamination resulted from such
party's action or use of the property in question, or (iii) Tenant or the
proposed assignee or sublessee is subject to an enforcement order issued by any
governmental authority in connection with the use, disposal or storage of a
Hazardous Material, Landlord shall have the right to terminate the Lease in
Landlord's sole and absolute discretion (with respect to any such matter
involving Tenant) and it shall not be unreasonable for Landlord to withhold its
consent to any proposed assignment or subletting (with respect to any such
matter involving a proposed assignee or sublessee).
5.4.3 TESTING. At any time prior to the expiration of the Sublease Term,
Landlord shall have the right at its own expense to conduct appropriate tests of
water and soil and to deliver to Tenant the results of such tests to
demonstrate that contamination in excess of legally permissible levels has
occurred as a result of Tenant's use of the Premises. Tenant shall further be
solely responsible for and shall defend, indemnify and hold the Landlord, its
agents and contractors harmless from and against all claims, costs and
liabilities including actual attorneys' fees and costs, arising of or in
connection with any removal, clean up, restoration and materials required
hereunder to return the Premises and any other property of whatever nature to
their condition existing prior to the commencement date of the lease.
5.4.4 UNDERGROUND TANKS. If underground or other storage tanks storing
Hazardous Materials are placed on the Premises by Tenant, Tenant's Contractors
or Agents. Tenant shall monitor the storage tanks, maintain appropriate records,
implement reporting procedures, properly close any underground storage tanks,
and take or cause to be taken all other steps necessary or required under the
California Administrative Code, Title 23, Chapter 3, Subchapter 16, "Underground
Storage Tank Regulations," and Division 20, Chapter 6.7 of the California Health
& Safety Code, "Underground Storage of Hazardous Substances," as they now exist
or may hereafter be adopted or amended.
5.4.5 TENANT'S OBLIGATIONS. Tenant's obligations under this Paragraph 5.4
shall survive the termination of the Sublease. During any period of time
employed by Tenant after the Termination of this Sublease to complete the
removal from the Premises of any such Hazardous Materials, Lessee shall continue
to pay the full rental in accordance with this Sublease, which rental shall be
prorated daily.
5.4.6 DEFINITION OF "HAZARDOUS MATERIAL." As used herein, the term
"Hazardous Material"
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means any hazardous or toxic substance, material or waste which is or becomes
regulated by any local governmental authority, the State of California or the
United States Government. The term "Hazardous Material" includes, without
limitation, any material or substance which is (i) defined as a "hazardous
waste," "extremely hazardous waste" or "restricted hazardous waste" under
Sections 25115, 25117 or 25122.7, or listed pursuant to Section 25140, of the
California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste
Control Law), (ii) defined as a "hazardous substance" under Section 25316 of
the California Health and Safety Code, Division 2, Chapter 6.8 (Carpenter-
Presly-Tanner Hazardous Substance Account Act), (iii) defined as a "hazardous
material," "hazardous substance" or "hazardous waste" under Section 25501 of the
California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous
Substances) (v) petroleum, (vi) asbestos, (vii) listed under Article 9 and
defined as hazardous or extremely hazardous pursuant to Article 11 of Title 22
of the California Administrative Code, Division 4, Chapter 20, (viii) designated
as a "hazardous substance" pursuant to Section 311 of the Federal Water
Pollution Control Act (33 U.S.C. Section 1317), (ix) defined as a "hazardous
waste" pursuant to Section 1004 of the Federal Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901 et.seq. (42 U.S.C. Section 6903), or (x)
defined as a "hazardous substance" pursuant to Section 101 of the Comprehensive
Environmental Response Compensation and Liability Act, 42 U S.C. Section 9601
et.seq. (42 U.S.C. Section 9601).
5.5 INDEMNIFICATION OF LANDLORD. With the exception of gross negligence or
willful misconduct on the part of the Landlord, Tenant shall indemnify Landlord
and save it harmless from and against any and all claims, actions, damages,
liability and expense in connection with loss of life personal injury and/or
damage to property arising from or out of any occurrence in, upon or about the
Premises, or the occupancy or use by Tenant of the Premises or any part thereof,
or occasioned wholly or in part by any act of omission of Tenant, its agents,
contractors, employees, servants, tenants or concessionaires. Tenant shall
further indemnify and hold Landlord harmless from and against any and all claims
arising from any breach or default in performance of any obligation on Tenant's
part to be performed under the terms of this Sublease, or arising from any act,
neglect, fault or omission of Tenant or its agents, contractors, employees,
servants, tenants or concessionaires, and from and against all costs, attorneys'
fees, expenses and liabilities incurred in connection with such claim or any
action or proceeding brought thereon. In case any action or proceeding shall be
brought against Landlord by reason of any such claim, Tenant upon notice from
Landlord shall defend the same at Tenant's expense by counsel approved in
writing by Landlord. 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 whatsoever except (i) that which is
caused by the failure of Landlord to observe any of the terms and conditions of
this Sublease where such failure has persisted for an unreasonable period of
time after written notice of such failure, and (ii) Landlord's gross negligence
or intentional misconduct. Tenant hereby waives all its claims in respect
thereof against Landlord.
5.6 In the event that the Master Lease is terminated for any reason, then Tenant
shall have the right to terminate this sublease.
5.7 LANDLORD'S ACCESS. Landlord or its agents may enter the Premises at all
reasonable times to show the Premises to potential buyers, investors or tenants
or other parties, or for any other purpose Landlord deems necessary. Landlord
shall give Tenant prior notice of such entry, except in the case of an
emergency. Landlord may place customary "For Sale" or "For Sublease" signs on
the Premises.
5.8 QUIET POSSESSION. If Tenant pays the rent and complies with all other terms
of this Sublease, Tenant may occupy and enjoy the Premises for the full Sublease
Term, subject to the provisions of this Sublease.
5.9 WINDOW COVERING. Landlord shall select and install a standard window
covering for use throughout the Project, including all windows in the Premises.
ARTICLE VI
CONDITION OF PREMISES;
MAINTENANCE, REPAIRS AND ALTERATIONS
6.1 EXISTING CONDITIONS. Tenant accepts the Premises in its condition as of the
execution of the Sublease, subject to any other provisions of this Sublease and
to all recorded matters, laws, ordinances and governmental regulations and
orders. Tenant acknowledges that neither Landlord nor any agent of Landlord has
made any representation as to the suitability of the Premises for Tenant's
intended use. The Landlord represents that the HVAC, water, electrical and
plumbing systems are all in good working order and that the premises are in
compliance with the ADA.
6.2 EXEMPTION OF LANDLORD FROM LIABILITY; WAIVER. Landlord shall not be liable
for any damage or injury to the person, business (or any loss of income
therefrom), goods, wares, merchandise or other property of Tenant, Tenant's
employees, invitees, customers or any other person in or about the Premises,
whether such damage or injury is caused by or results from: (a) fire, steam,
electricity, water, gas or rain; (b) the breakage, leakage, obstruction or other
defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or
lighting fixtures or any other cause; (c) conditions arising in or about the
Premises or upon other portions of any building of which the Premises is a part,
or from other sources or places; or (d) any act or omission of any other tenant
of any building of which the Premises is a part. Landlord shall not be liable
for any such damage or injury even though the cause of or the means of repairing
such damage or injury are not accessible to Tenant. Tenant, as a material part
of the consideration to be rendered to Landlord, hereby waives all claims
against Landlord for the foregoing damages from the aforementioned arising at
any time. The provisions of this Section 6.2 shall not however, exempt Landlord
from liability for Landlord's gross negligence or willful misconduct.
6.3 TENANT'S OBLIGATIONS.
6.3.1 MAINTENANCE AND REPAIR. Tenant shall keep the Premises (including
all nonstructural interior and exterior areas, systems and equipment, all glass,
glazing, window moldings, partitions, doors, door hardware, interior painting,
fixtures and appurtenances thereof [including electrical, lighting, plumbing and
plumbing fixtures]) in good order, condition and repair during the Sublease
Term. Tenant shall promptly
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replace any portion of the Premises or system or equipment in the Premises which
cannot be fully repaired regardless of whether the benefit of such replacement
extends beyond the Sublease Term. Tenant shall also maintain a preventive
maintenance contract providing for the regular inspection and maintenance of the
heating and air conditioning system (including leaks around ducts, pipes, vents,
or other parts of the air conditioning) by a licensed heating and air
conditioning contractor. However, Landlord shall have the right, upon written
notice to Tenant, to undertake the responsibility for preventive maintenance of
the heating and air conditioning system, at Tenant's expense. It is the
intention of the Landlord and Tenant that, at all times during the Sublease
Term, Tenant shall maintain the Premises in an attractive first-class and fully
operative condition.
6.3.2 TENANT EXPENSE. All of Tenant's obligations to maintain and repair
shall be accomplished at Tenant's sole expense. If Tenant refuses or neglects to
repair properly as required hereunder and to the reasonable satisfaction of
Landlord, Landlord may, on ten (10) days' prior notice (except that no notice
shall be required in case of emergency) enter the property and perform such
repair and maintenance on behalf of Tenant without liability to Tenant for any
loss or damage that may accrue to Tenant's merchandise, fixtures, or other
property or to Tenant's business by reason thereof, and upon completion thereof,
Tenant shall pay Landlord's costs for making such repairs plus ten percent (10%)
for overhead upon presentation of bill therefor, as additional rent. Said bill
shall include interest at ten percent (10%) on said costs from the date of
completion of repairs by Landlord.
6.4 LANDLORD'S OBLIGATIONS. Landlord shall be responsible for the maintenance
and repair of structural portions of the Premises and Common Areas and Parking
Lots. As used herein, structural portions of the Premises shall only refer to
the foundation and slabs, exterior walls, load bearing walls and exterior roof
of the building in which the Premises is located. If Landlord is required to
make repairs to structural portions by reason of Tenant's conduct or activities,
Landlord may add the cost of such repairs to the rent which shall thereafter
become due if Tenant refuses or neglects to repair property as required
hereunder, and to the reasonable satisfaction of Landlord as soon as reasonably
possible after written demand, Landlord may make such repairs without liability
to Tenant for any loss or damage that may accrue to Tenant's merchandise,
fixtures or other property or to Tenant's business by reason thereof, and upon
completion thereof, Tenant shall pay Landlord as additional rent Landlord's cost
for making such repairs, plus twenty percent (20%) for overhead upon
presentation of bill thereafter. Said bill shall include interest at ten percent
(10%) per year on said cost from the date of completion of repairs by Landlord.
The Tenant shall pay its pro rata share, computed in accordance with Subsection
4.2.1 hereof, of all repairs by Landlord to the structural portions of the
building where the Premises are located. All such amounts shall be due and
payable upon five (5) days written notice from Landlord.
6.5 ALTERATIONS, ADDITIONS, AND IMPROVEMENTS.
6.5.1 PROHIBITED ACTIONS. Tenant shall not make any alterations, additions
or improvements to the Premises without Landlord's prior written consent, except
for non-structural alterations which do not exceed Five Thousand Dollars
($5,000) in cost cumulatively over the Sublease Term and which are not visible
from the outside of any building of which the Premises is part. Landlord may
require Tenant to provide demolition and/or lien and completion bonds in form
and amount satisfactory to Landlord Tenant shall promptly remove any
alterations, additions, or improvements constructed in violation of this
Subsection 6.5.1 upon Landlord's written request. All alterations, additions,
and improvements will be accomplished in good and workmanlike manner, in
conformity with all applicable laws and regulations and by a contractor approved
by Landlord. Upon completion of any such work, Tenant shall provide Landlord
with "as built" plans, copies of all construction contracts, and proof of
payment for all labor and materials. Any additions to, or alterations of, the
Premises, except moveable furniture and trade fixtures shall become at once a
part of the Premises and belong to Landlord. However, this shall not prevent the
Tenant from installing trade fixtures, machinery or other trade equipment in
conformance to all applicable ordinances of the above-specified city and county,
and the same may be removed upon the termination of this Sublease, provided the
Premises is not damaged by such removal, and Tenant shall not then be in default
under the terms and conditions of this Sublease.
6.5.2 PAYMENT BY TENANT. Tenant shall pay when due all claims for labor and
material furnished to the Premises. Tenant shall give Landlord at least thirty
(30) days prior written notice of the commencement of any work on the Premises.
Landlord may elect to record and post notices of nonresponsibility on the
Premises.
6.5.3 FREEDOM FROM LIENS. Tenant shall keep the Premises, all other
property therein and the Building free from any liens arising out of any work
performed, material furnished or obligations incurred by Tenant, and shall
indemnify, hold harmless and defend Landlord from any liens and encumbrances
arising out of any work performed or materials furnished by or at the direction
of Tenant. In the event that Tenant shall not, within twenty (20) days following
the imposition of any such lien cause such lien to be released of record by
payment or posting of a proper bond, Landlord shall have in addition to all
other remedies provided herein and by law, the right, but no obligation, to
cause the same to be released by such means as it shall deem proper, including
payment of the claim giving rise to such lien. All such sums paid by Landlord
and all expenses incurred by it in connection therewith including attorneys'
fees and costs, shall be payable to Landlord by Tenant on demand with interest
at the maximum rate allowed by law.
6.5.4 WRITTEN NOTIFICATION REQUIRED. Tenant will notify Landlord in
writing thirty (30) days prior to commencing any alterations or additions to
allow Landlord time to file notices of nonresponsibility. The Landlord reserves
the right to approve any contractor and method of payment, prior to said
contractor making any improvements to the Premises.
6.5.5 COMMON AREA CONSTRUCTION. Tenant acknowledges that from time to time
Landlord must be required to construct, alter, or improve Common Areas within
the Project. Landlord will attempt to minimize any disruption to Tenant's
business, but Tenant hereby releases Landlord from any and all claims pertaining
to such construction, alteration, or improvement.
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6.6 RULES AND REGULATIONS.
6.6.1 The Tenant agrees as follows:
(1) Landlord shall arrange for a trash collection service which will
provide and periodically empty trash containers placed in designated areas for
use by Tenant and other tenants in the Project. Tenant shall be responsible for
placing all of its garbage and trash in such trash containers.
(2) No aerial shall be erected on the roof or exterior walls of the
Premises, or on the grounds, without in each instance, the written consent of
the Landlord. Any aerial so installed without such written consent shall be
subject to removal without notice at any time.
(3) No loudspeakers, televisions, phonographs, radios, or other
devices shall be used in a manner so as to be heard or seen outside of the
Premises without the prior written consent of the Landlord.
(4) The outside areas immediately adjoining the Premises shall be
kept clean and free from dirt and rubbish by the Tenant to the satisfaction of
the Landlord and Tenant shall not place or permit any obstruction or materials
in such areas. No exterior storage shall be allowed without permission in
writing from Landlord.
(5) The plumbing facilities shall not be used for any other purpose
than that for which they are constructed, and no foreign substance of any kind
shall be thrown therein, and the expense of any breakage, stoppage, or damage
resulting from a violation of this provision shall be borne by Tenant who
shall, or whose employees, agents or invitees shall have caused it.
(6) Tenant shall not burn any trash or garbage of any kind in or about
the Premises, or the Project.
(7) The sidewalks, halls, passages, exits, entrances, and stairways in
and about the Project shall not be obstructed by any of the tenants or used by
them for any purpose other than for ingress to and egress from their
respective Premises. The halls, passages, exits, entrances, stairways,
balconies and roof are not for the use of the general public and the Landlord
shall in all cases retain the right to control and prevent access thereto by
all persons whose presence in the judgment of the Landlord shall be prejudicial
to the safety, character, reputation and interests of the Project and their
Tenants, provided that nothing herein contained shall be constructed to
prevent such access to persons with whom the Tenant normally deals in the
ordinary course of Tenant's business unless such persons are engaged in illegal
activities. No Tenant and no employees or invitees of any Tenant shall go upon
the roof of the building without Landlord's Prior Consent.
(8) No additional locks or bolts of any kind shall be placed upon any
of the doors or windows by Tenant, nor shall any changes be made in existing
locks or the mechanisms thereof. Tenant must, upon the termination of Tenant's
tenancy, restore to Landlord all keys of stores, offices and toilet rooms
either furnished to or otherwise procured by Tenant, and in the event of the
loss of any keys so furnished Tenant shall pay to Landlord the cost thereof.
(9) No Tenant shall lay linoleum or other similar floor covering so
that the same shall be affixed to the floor of the Premises in any manner
except by a paste, or other material, which may easily be removed with water,
the use of cement or other similar adhesive materials being expressly
prohibited. The method of affixing any such linoleum or other similar floor
covering to the floor, as well as the method of affixing carpets or rugs to the
Premises, shall be subject to approval by Landlord. The expense of repairing any
damage resulting from a violation of this rule shall be borne by Tenant by whom,
or by whose agents, clerks, employees, or visitors, the damage shall have been
caused.
(10) Tenant will not install blinds, shades, awnings, or other form of
inside or outside window covering, or window ventilators or similar devices,
without the prior written consent of Landlord.
Landlord reserves the right from time to time to amend or supplement the
foregoing rules and regulations, and to adopt and promulgate additional rules
and regulations applicable to the Premises. Notice of such rules and regulations
and amendments and supplements thereto, if any, shall be given to the Tenant and
Tenant agrees to comply with all such rules and regulations upon receipt of
notice to Tenant from Landlord. Landlord shall not be liable in any way to
Tenant for any damage or inconvenience caused by any other Tenant's non-
compliance with these rules and regulations.
6.7 CONDITION UPON TERMINATION. Upon the termination of the Sublease, Tenant
shall surrender the Premises to Landlord, broom-clean and in the same condition
as received except for ordinary wear and tear which Tenant was not otherwise
obligated to remedy under any provision of this Sublease. However, Tenant
shall not be obligated to repair any damage which Landlord is required to repair
under Article Seven (Damage or Destruction). In addition, Landlord may require
Tenant to remove any alterations, additions or improvements (whether or not made
with Landlord's consent) prior to the termination of the Sublease and to restore
the Premises to its prior condition, all at Tenant's expense. All alterations,
additions and improvements which Landlord has not required Tenant to remove
shall become Landlord's property and shall be surrendered to Landlord upon the
termination of the Sublease, except that Tenant may remove any of Tenant's
machinery or equipment which can be removed without material damage to the
Premises. Tenant shall repair, at Tenant's expense, any damage to the Premises
caused by the removal of any such machinery or equipment. In no event, however,
shall Tenant remove any of the following materials or equipment without
Landlord's prior written consent: any power wiring or power panels or lighting
fixtures; wall coverings; drapes, blinds or other window coverings: carpets or
other floor coverings; heaters, air conditioners or any other heating or air
conditioning equipment; fencing or security gates; or other similar building
operating equipment and decorations.
6.8 MAINTENANCE OF COMMON AREAS. Landlord shall maintain the Common Areas as
set forth in Section 4.5 above.
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ARTICLE VII
DAMAGE OR DESTRUCTION
7.1 PARTIAL DAMAGE TO PREMISES. Tenant shall notify Landlord in writing
immediately upon the occurrence of any damage to the Premises or the Building.
If the Premises or the Building is only partially damaged and if the proceeds
received by Landlord from the insurance policies described in Subsection 4.4.2
are sufficient to pay for the necessary repairs, this Sublease shall remain in
effect and Landlord shall repair the damage as soon as reasonably possible.
Landlord may elect to repair any damage to Tenant's fixtures, equipment, or
improvements. If the insurance proceeds received by Landlord are not sufficient
to pay the entire cost of repair, or if the cause of the damage is not covered
by the insurance policies which Landlord maintains under Subsection 4.4.2,
Landlord may elect either to (a) repair the damage as soon as reasonably
possible, in which case this Sublease shall remain in full force and effect or
(b) terminate this Sublease as of the date the damage occurred. Landlord shall
notify Tenant within thirty (30) days after receipt of notice of the occurrence
of the damage, whether Landlord elects to repair the damage or terminate the
Sublease. If the damage was due to an act or omission of Tenant the difference
between the actual cost of repair and any insurance proceeds received by
Landlord. If Landlord elects to terminate this Sublease, Tenant may elect to
continue this Sublease in full force and effect, in which case Tenant shall
repair any damage to the Premises and any building in which the Premises is
located. Tenant shall pay the cost of such repairs, except that, upon
satisfactory completion of such repairs, Landlord shall deliver to Tenant any
insurance proceeds received by Landlord for the damage repaired by Tenant.
Tenant shall give Landlord written notice of such election within ten (10) days
after receiving Landlord's termination notice. If the damage to the Premises
occurs during the last six (6) months of the Sublease Term, Landlord may elect
to terminate this Sublease as of the date the damage occurred, regardless of the
sufficiency of any insurance proceeds and Landlord may retain at such proceeds.
In such event, Landlord shall not be obligated to repair or restore the Premises
and Tenant shall have no right to continue this Sublease. Landlord shall notify
Tenant of its election within thirty (30) days after receipt of notice of the
occurrence of the damage.
PARTIAL DAMAGE TO PREMISES (Continued). This section 7.1 shall not apply to any
damage to the Premises or the Building, the cost of repair of which is less than
five percent (5%) of the replacement value of the Premises or Building.
7.2 TOTAL OR SUBSTANTIAL DESTRUCTION. If the Premises is totally or
substantially destroyed by any cause whatsoever, or if the Premises is in a
building which is substantially destroyed (even though the Premises is not
totally or substantially destroyed), this Sublease shall, at the election of
either Party terminate as of the date the destruction occurred regardless of
whether Landlord receives any insurance proceeds. However, if the Premises can
be rebuilt within one (1) year after the date of destruction, Landlord may elect
to rebuild the Premises at Landlord's own expense (with all insurance proceeds
being made available to the Landlord to apply against such costs), in which case
the tenant will have a right of first refusal to re-sublease the Premises.
Landlord shall notify Tenant of such election within thirty (30) days after the
occurrence of total or substantial destruction. If the destruction was caused by
an act of omission of Tenant, Tenant shall pay Landlord the difference between
the actual cost of rebuilding and any insurance proceeds received by Landlord.
7.3 UNINSURED CASUALTY. In the event the Premises are destroyed to the extent of
fifteen percent (15%) or more of the replacement value thereof by any casualty
not covered under the fire and extended coverage insurance covered by Landlord
or Tenant, then Landlord may elect to terminate this Sublease. In the event of
such termination the rights and obligations of the parties hereunder shall
cease. If the Landlord does not elect to so terminate, then the Landlord shall
promptly commence repairing such damage at the Landlord's cost and expense.
7.4 LANDLORD'S OBLIGATIONS. Landlord shall not be required to repair any
injury or damage by fire or other cause, or to make any restoration or
replacement of any panelings, decorations, partitions, railings, floor
coverings, office fixtures or any other Improvements or property installed in
the Premises by Tenant or at the direct or indirect expense of Tenant which are
not part of the original Tenant improvements paid for by Landlord. Tenant shall
be required to restore or replace same in the event of damage except for damage
caused solely by the Landlord's negligence or intentional misconduct. Tenant
shall have no claim against Landlord for any damage suffered by reason of any
such damage, destruction, repair or restoration, nor shall Tenant have the right
to terminate this Sublease as the result of any statutory provision now or
hereafter in effect pertaining to the damage and destruction of the Premises,
except as expressly provided herein.
7.5 TEMPORARY REDUCTION OF RENT. If the Premises are destroyed or damaged and
Landlord or Tenant repairs or restores the Premises pursuant to the provisions
of this Article Seven, any rent payable during the period of such damage,
repair and/or restoration shall be reduced to reflect the degree to which
Tenant's use of Premises is impaired. Except for such possible reduction in
payments required from the Tenant, Tenant shall not be entitled to any
compensation, reduction, or reimbursement from Landlord as a result of any
damage, destruction, repair, or restoration of or to the Premises. (See Page
11a).
TEMPORARY REDUCTION OF RENT (Continued). In the event of repair, reconstruction
restoration by Landlord as provided herein, the rental to be paid under this
Lease shall be abate proportionately to the degree to which Tenant's use of the
Premises is impaired during the period such repair, reconstruction, or
restoration.
7.6 WAIVER. Tenant waives the protection of any statute, code or judicial
decision which grants a tenant the right to terminate a sublease in the event
of damage or destruction of the premises. Tenant agrees that the provisions of
this Article Seven shall govern the rights and obligations of Landlord and
Tenant in the event of any damage or destruction of the Premises.
ARTICLE VII
CONDEMNATION
8.1 CONDEMNATION. If all or any portion of the Premises is taken under the power
of eminent domain
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or sold under the threat of that power (all of which are called "Condemnation"),
this Sublease shall terminate as to the part taken or sold on the date the
condemning authority takes title or possession whichever occurs first. If more
than twenty percent (20%) of the floor area of the Premises is taken either
Landlord or Tenant may terminate this Sublease as of the date the condemning
authority takes title or possession, by delivering written notice to the other
within ten (10) days after receipt of written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority)
takes possesson). If more than twenty percent (20%) of all subleaseable space in
the building in which the Premises are located is taken the Landlord may elect
to terminate this Sublease by delivering such notice to Tenant. If neither
Landlord nor Tenant terminates this Sublease, this Sublease shall remain in
effect as to the portion of the Premises not taken, except that the Base Rent
shall be reduced in proportion to the reduction in the floor area of the
Premises. Any Condemnation award or payment shall be distributed in the
following order: (a) first, to any ground lessor, mortgagee or beneficiary under
a deed of trust encumbering the Premises, the amount of its interest in the
Premises and the Tenant hereby assigns any other rights which the Tenant may
have now or in the future to any other award to the Landlord; (b) second, to
Tenant, only the amount of any award specifically designated for loss of or
damage to Tenant's trade fixtures or removable personal property, and the Tenant
hereby assigns any other rights which the Tenant may have now or in the future
to any other award to the Landlord, and (c) third, to Landlord, the remainder of
such award, whether as compensation for reduction in the value of the
subleasehold, the taking of the fee, or otherwise, If this Sublease is not
terminated, Landlord shall repair any damage to the Premises caused by the
Condemnation, except that Landlord shall not be obligated to repair any damage
for which Tenant has been reimbursed by the condemning authority. If the
severance damages received by Landlord are not sufficient to pay for such
repair, Landlord shall have the right to either terminate this Sublease or make
such repair at Landlord's expense.
ARTICLE IX
ASSIGNMENT AND SUBLETTING
9.1 LANDLORD'S CONSENT REQUIRED. No portion of the Premises or of Tenant's
interest in this Sublease may be acquired by any other person or entity, whether
by assignment, mortgage, sublease transfer, operation of law, or act of Tenant,
without Landlord's prior written consent which shall not be unreasonably
withheld, except as provided in Section 9.2 below. Any attempted transfer
without consent shall be void and shall constitute a noncurable breach of this
Sublease.
9.2 TENANT AFFILIATE. Tenant may assign this Sublease or sublease the Premises
without Landlord's consent, to any corporation which controls, is controlled by
or is under common control with Tenant, or to any corporation resulting from the
merger of or consolidation with Tenant or to any entity which acquires
substantially all of Tenant's voting stock ("Tenant's Affiliate"). In the event
that Tenant's Affiliate has a net worth of less than twenty-five million dollars
($25,000,000.00) then Landlord's written consent to assign shall be required. In
such case, any Tenant's Affiliate shall assume in writing all of Tenant's
obligations under this Sublease, but the Tenant shall remain primarily liable
hereunder.
9.3 NO RELEASE OF TENANT. No transfer permitted by this Article Nine, whether
with or without Landlord's consent, shall release Tenant or change Tenant's
primary liability to pay the rent and to perform all other obligations of Tenant
under this Sublease. Landlord's acceptance of rent from any other person is not
a waiver of any provision of this Article Nine. Consent to one transfer is not a
consent to any subsequent transfer. If Tenant's transferee defaults under this
Sublease, Landlord may proceed directly against Tenant without pursuing remedies
against the transferee. Landlord may consent to subsequent assignments or
modifications of this Sublease by Tenant's transferee, without notifying Tenant
or obtaining its consent. Such action shall not relieve Tenant's liability under
this Sublease.
9.4 LANDLORD'S ELECTION. Tenant's request for consent to any transfer described
in Section 9.1 above shall be accompanied by a written statement setting forth
the details of the proposed transfer, including the name, business and financial
condition of the prospective transferee, financial details of the proposed
transfer (e.g., the term of and rent and security deposit payable under any
assignment or sublease), and any other information Landlord deems relevant.
Landlord shall have the right (a) to withhold consent, if reasonable; (b) to
grant consent; or (c) if the transfer Is a sublease of the Premises or an
assignment of this Sublease, to terminate this Sublease as of the effective date
of such sublease or assignment, in which case Landlord may elect to enter into a
direct sublease with the proposed assignee or subtenant.
9.5 NO MERGER. No merger shall result from Tenant's sublease of the Premises
under this Article Nine, Tenant's surrender of this Sublease or the termination
of this Sublease in any other manner. In any such event, Landlord may terminate
any or all subtenancies or succeed to the interest of Tenant as sublandlord
thereunder.
ARTICLE X
DEFAULTS; REMEDIES
10.1 COVENANTS AND CONDITIONS. Tenant's performance of each of Tenant's
obligations under this Sublease is a condition as well as a covenant. Tenant's
right to continue in possession of the Premises is conditioned upon such
performance. Time is of the essence in the performance of all covenants and
conditions.
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10.2 DEFAULTS. Tenant shall be in material default under this Sublease:
10.2.1 VACATION OR ABANDONMENT. If Tenant abandons the Premises or if
such abandonment of the Premises results in the cancellation of any insurance
described in Section 4.4; or
10.2.2 FAILURE TO PAY. If Tenant fails to pay rent or any other charge
required to be paid by Tenant, as and when due; or
10.2.3 FAILURE TO PERFORM. If Tenant fails to perform any of Tenant's
nonmonetary obligations under this Sublease for a period of fifteen (15) days
after written notice from Landlord; provided that if more time is required to
complete such performance, Tenant shall not be in default if Tenant commences
such performance within the fifteen (15) day period and thereafter diligently
pursues its completion. However, Landlord shall not be required to give such
notice if Tenant's failure to perform constitutes a non-curable breach of this
Sublease. The notice required by this Subsection is intended to satisfy any and
all notice requirements imposed by law on Landlord and is not in addition to any
such requirement.
10.2.4 OTHER DEFAULTS. (i) If Tenant makes a general assignment or
general arrangement for the benefit of creditors; (ii) if a petition for
adjudication of bankruptcy or for reorganization or rearrangement is filed by
or against Tenant and is not dismissed within thirty (30) days; (iii) if a
trustee or receiver is appointed to take possession of substantially all of
Tenant's assets located at the Premises or of Tenant's interest in this Sublease
and possession is not restored to Tenant within thirty (30) days; or (iv) if
substantially all of Tenant's assets located at the Premises or of Tenant's
interest in this Sublease is subjected to attachment, execution or other
judicial seizure which is not discharged within thirty (30) days. If a court of
competent jurisdiction determines that any of the acts described in this
Subsection 10.2.4 is not a default under this Sublease, and a trustee is
appointed to take possession (or If Tenant remains a debtor in possession) and
such trustee or Tenant transfers Tenant's interest hereunder, then Landlord
shall receive. as Additional Rent, the difference between the rent (or any other
consideration) paid in connection with such assignment or sublease and the rent
payable by Tenant hereunder.
10.3 REMEDIES. On the occurrence of any material default by Tenant, Landlord
may, at any time thereafter, with or without notice or demand and without
limiting Landlord in the exercise of any right or remedy which Landlord may
have:
10.3.1 TERMINATION OF POSSESSION. Terminate Tenant's right to possession
of the Premises by any lawful means, in which case this Sublease shall terminate
and Tenant shall immediately surrender possession of the Premises to Landlord.
In such event Landlord shall have the immediate right to reenter and remove all
persons and property and such property may be removed and stored in a public
warehouse or elsewhere at the cost of, and for the account of Tenant, all
without service of notice or resort to legal process and without being deemed
guilty of trespass, or becoming liable for any loss or damage which may be
occasioned thereby; and Landlord shall be entitled to recover from Tenant all
damages incurred by Landlord by reason of Tenant's default, including (i) the
worth at the time of the award of all Base Rent, Additional Rent and other
charges which were earned or were payable at the time of the termination; (ii)
the worth at the time of the award of the amount by which the unpaid Base Rent,
Additional Rent and other charges which would have been earned or were payable
after termination until the time of the award exceeds the amount of such rental
loss that Tenant proves could have been reasonably avoided; (iii) the worth at
the time of the award of the amount by which the unpaid Base Rent, Additional
Rent and other charges which would have been payable for the balance of the term
after the time of award exceeds the amount of such rental loss that Tenant
proves could have been reasonably avoided; and (iv) any other amount necessary
to compensate Landlord for all the detriment proximately caused by Tenant's
failure to perform its obligations under the Sublease or which in the ordinary
course of things would be likely to result therefrom, including, but not limited
to, any costs or expenses incurred by Landlord in maintaining or preserving the
Premises after such default, the cost of recovering possession of the Premises,
expenses of reletting, including necessary renovation or alteration of the
Premises, Landlord's reasonable attorneys' fees incurred in connection
therewith, and any real estate commissions or other such fees paid or payable.
As used in subparts (i) and (ii) above, the "worth at the time of the award" is
computed by allowing interest on unpaid amounts at the rate of ten percent (10%)
per annum, or such lesser amount as may then be the maximum lawful rate. As used
in subpart (iii) above, the "worth at the time of the award" is computed by
discounting such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of the award, plus one percent (1%). If Tenant shall have
abandoned the Premises, Landlord shall have the option of (i) retaking
possession of the Premises and recovering from Tenant the amount specified in
this Subsection 10.3.1, or (ii) proceeding under Subsection 10.3.2.
10.3.2 MAINTENANCE OF POSSESSION. Maintain Tenant's right to possession,
in which case this Sublease 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 tinder this Sublease, including
the right to recover the rent as it becomes due hereunder.
10.3.3 OTHER REMEDIES. Pursue any other remedy now or hereafter available
to Landlord under the laws or judicial decisions of the state in which the
Premises is located.
10.4 THE RIGHT TO RELET THE PREMISES. Should Landlord elect to re-enter, as
herein provided, or should it take possession pursuant to legal proceedings or
pursuant to any notice provided for by law, it may either terminate this
Sublease or it may from time to time without terminating this Sublease, make
such alterations and repairs as may be necessary in order to relet the property,
and relet said property or any part thereof for such term or terms (which may be
for a term extending beyond the term of this Sublease) and at such rental or
rentals and upon such other terms and conditions as Landlord in its sole
discretion may deem advisable; upon each such reletting all rentals received by
the Landlord from such reletting shall be applied, first, to the repayment of
any indebtedness other than rent due hereunder from Tenant to Landlord; second,
to the
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payment of any costs and expenses of such reletting, including brokerage fees
and attorneys' fees and of costs of such alterations and repairs; third, to the
payment of rent due and unpaid hereunder, and the residue, if any, shall be held
by Landlord and applied in payment of future rent as the same may become due and
payable hereunder. If such rentals received from such reletting during any month
are less than that to be paid during that month by Tenant hereunder, Tenant
shall pay any such deficiency to Landlord. Such deficiency shall be calculated
and paid monthly. No such re-entry or taking possession of said property by
Landlord shall be construed as an election on its part to terminate this
Sublease unless a written notice of such intention be given to Tenant or unless
the termination thereof be decreed by a court of competent jurisdiction.
10.5 WAIVER OF RIGHTS OF REDEMPTION. Tenant hereby expressly waives any and all
rights of redemption granted by or under any present or future laws in the
event of Tenant being evicted or dispossessed for any cause, or in the event of
Landlord obtaining possession of the Premises, by reason of an uncured material
default by Tenant of any of the covenants or conditions of this Sublease, or
otherwise.
10.6 CUMULATIVE REMEDIES. Landlords exercise of any right or remedy shall not
prevent it from exercising any other right or remedy.
ARTICLE XI
PROTECTION OF CREDITORS
11.1 SUBORDINATION
11.1.1 LANDLORD'S ELECTION. This Sublease is and shall remain subordinate
to the Master Lease. In addition, Landlord shall have the right to require
Tenant to subordinate this Sublease to any other ground lease deed of trust or
mortgage encumbering the Premises, any advances made on the security thereof and
any renewals, modifications, consolidations, replacements or extensions thereof,
whenever made or recorded. However, Tenants right to quiet possession of the
Premises during the Sublease Term shall not be disturbed if Tenant pays the rent
and performs all of Tenant's obligations under this Sublease and is not
otherwise in default. It any ground lessor, beneficiary or mortgagee elects to
have this Sublease pier to the lien of its ground sublease, deed of trust or
mortgage and gives written notice thereof to Tenant, this Sublease shall be
deemed prior to such ground sublease, deed of trust or mortgage whether this
Sublease is dated prior or subsequent to the date of said ground sublease, deed
of trust or mortgage or the date of recording thereof.
11.1.2 ADDITIONAL DOCUMENTS. Tenant agrees to execute any documents
required to effectuate such subordination or to make this Sublease prior to the
lien of any ground sublease, mortgage or deed of trust, as the case may he, and
failing to do so within ten (10) days after written demand, does hereby make,
constitute and irrevocably appoint Landlord as Tenant's attorney-in-fact and in
Tenant's name, place and stead, to do so.
11.2 ATTORNMENT. If Landlord's interest in the Premises is acquired by any
ground lessor, beneficiary under a deed of trust, mortgagee, or purchaser at a
foreclosure sale, Tenant shall attorn to the transferee of or successor to
Landlord's interest in the Premises and recognize such transferee or successor
as Landlord under this Sublease. Tenant waives the protection of any statute or
rule of law which gives or purports to give Tenant any right to terminate this
Sublease or surrender possession of the Premises upon the transfer of Landlord's
interest.
11.3 SIGNING OF DOCUMENTS. Tenant shall sign and deliver any instrument or
documents necessary or appropriate to evidence any such attornment or
subordination or agreement to do so. If Tenant fails to do so within (10) days
after written request, Tenant hereby makes, constitutes and irrevocably appoints
Landlord, or any transferee or successor of Landlord, the attorney-in-fact of
Tenant to execute and deliver any such instrument or document.
11.4 ESTOPPEL CERTIFICATES.
11.4.1 LANDLORD'S REQUEST. Upon Landlord's written request, Tenant shall
execute, acknowledge and deliver to Landlord a written statement certifying: (1)
that none of the terms or provisions of this Sublease have been changed (or if
they have been changed, stating how they have been changed); (ii) that this
Sublease has not been cancelled or terminated; (iii) the last date of payment of
the Base Rent and other charges and the time period covered by such payment; and
(iv) that Landlord is not in default tinder this Sublease (or, if the Landlord
is claimed to be in default, stating why). Tenant shall deliver such statement
to Landlord within ten (10) days after Landlord's request. Any such statement by
Tenant may be given by Landlord to any prospective purchaser or encumbrancer of
the Premises. Such purchaser or encumbrancer may rely conclusively upon such
statement as true and correct.
11.4.2 FAILURE TO DELIVER. If Tenant does not deliver such statement to
Landlord within such ten (10) day period, Landlord, and any prospective
purchaser or encumbrancer, may conclusively presume and rely upon the following
facts: (i) that the terms and provisions of this Sublease have not been changed
except as otherwise represented by Landlord; (ii) that this Sublease has not
been cancelled or terminated except as otherwise represented by Landlord; (iii)
that not more than one month's Base Bent or other charges have been paid in
advance; and (iv) that Landlord is not in default under the Sublease. In such
event, Tenant shall be estopped from denying the truth of such facts.
11.5 TENANT'S FINANCIAL CONDITION. Within ten (10) days after written request
from Landlord, Tenant shall deliver to Landlord such financial statements as are
reasonably required by Landlord to verify the net worth of Tenant, or any
assignee, subtenant, or guarantor of Tenant. In addition, Tenant shall deliver
to any lender or proposed purchaser of the Premises designated by Landlord any
financial statements
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required by such lender to facilitate the sale, financing or refinancing of the
Premises. Tenant represents and warrants to Landlord that each such financial
statement is a true and accurate statement of the date of such statement. All
financial statements shall be confidential and shall be used only for the
purposes set forth herein.
ARTICLE XII
LEGAL COSTS
12.1 LEGAL PROCEEDINGS. Tenant shall reimburse Landlord, upon demand, for any
costs or expenses incurred by Landlord in connection with any material default
of Tenant under this Sublease, whether or not suit is commenced or judgment
entered. Such costs shall include legal fees and costs incurrent for the
negotiation of a settlement, enforcement of rights or otherwise. Furthermore, if
any action for breach of or to enforce the provisions of this Sublease is
commenced, the court in such action shall award to the party in whose favor a
judgment is entered, a reasonable sum as attorneys' fees and costs Such
attorneys' fees and costs shall be paid by the losing party in such action.
Tenant shall also indemnify Landlord against and hold Landlord harmless from all
costs, expenses, demands and liability incurred by Landlord if Landlord becomes
or is made a party to any claim or action (a) instituted by Tenant or by any
third party against Tenant, or by or against any person holding any interest or
using the Premises by license of or agreement with Tenant; (b) for foreclosure
of any lien for labor or material furnished to or for Tenant or such other
person; (c) otherwise arising out of or resulting from any act or transaction of
Tenant or such other person; or (d) necessary to protect Landlord's interest
under this Sublease in a bankruptcy proceeding, or other proceeding under Title
11 of the United States Code, as amended Tenant shall defend Landlord against
any such claim or action at Tenant's expense with counsel reasonably acceptable
to Landlord or, at Landlord's election, Tenant shall reimburse Landlord for any
legal fees or costs incurred by Landlord in any such claim or action.
12.2 LANDLORD'S CONSENT. Tenant shall pay Landlord's reasonable attorneys' fees
incurred in connection with Tenant's request for Landlord's consent under
Article Nine (Assignment and Subletting) or in connection with any other act
which Tenant proposes to do and which requires Landlord's consent.
ARTICLE XIII
MISCELLANEOUS PROVISIONS
13.1 SUBSTITUTED PREMISES.
13.2 LANDLORD'S LIABILITY; CERTAIN DUTIES.
13.2.1 LANDLORD. As used in this Sublease, the term "Landlord" means only
the current owner or owners of the leasehold estate under the Master Lease at
the time in question. Each Landlord is obligated to perform the obligations of
Landlord under this Sublease only during the time such Landlord owns such
interest or title. Any Landlord who transfers its title or interest is relieved
of all liability with respect to the obligations of Landlord under this Sublease
to be performed on or after the date of transfer. However, each Landlord shall
deliver to its transferee all funds previously paid by Tenant if such funds have
not yet been applied under the terms of this Sublease.
13.2.2 WRITTEN NOTICE. Tenant shall give written notice of any failure by
Landlord to perform any of its obligations under this Sublease to Landlord and
to the district, any ground lessor, mortgages or beneficiary under any deed of
trust encumbering the Premises whose name and address have been furnished to
Tenant in writing. Landlord shall not be in default under this Sublease unless
Landlord (or the district, or such ground lessor, mortgagee or beneficiary)
falls to cure such non-performance within thirty (30) days after receipt of
Tenant's notice. However, if such non-performance reasonably requires more than
thirty (30) days to cure, Landlord shall not be in default if such cure is
commenced within such thirty (30) day period and thereafter diligently pursued
to completion.
13.3 SEVERABILITY. A determination by a court of competent jurisdiction that
any provision of this Sublease or any part thereof is illegal or unenforceable
shall not cancel or Invalidate the remainder of such provision or this Sublease,
which shall remain in full force and effect:
13.4 INTERPRETATION. The captions of the Articles or Sections of this Sublease
are to assist the parties in reading this Sublease and are not a part of the
terms or provisions of this Sublease.
15
<PAGE>
The masculine, feminine and neuter genders shall each include the other. In any
provision relating to the conduct, acts or omissions of Tenant, the term
"Tenant" shall include Tenant's agents, employees, contractors, invitees,
successors or others using the Premises with Tenant's expressed or implied
permission.
13.5 INCORPORATION OF PRIOR AGREEMENTS; MODIFICATIONS. This Sublease is the
only agreement between the parties pertaining to the sublease of the Premises
and no other agreements are effective. All amendments to this Sublease shall be
in writing and signed by all parties. Any other attempted amendment shall be
void.
13.6 NOTICES. All notices required or permitted under this Sublease shall be in
writing and shall be personally delivered or sent by certified mail, return
receipt requested, postage prepaid. Notices to Tenant shall be delivered to the
address specified in Section 1.3 above, except that upon Tenant's taking
possession of the Premises, the Premises shall be Tenant's address for notice
purposes. Notices to Landlord shall be delivered to the address specified in
Section 1.2 above. All notices shall be effective upon personal delivery or
three (3) days after deposit in the U.S. Mail. Either party may change its
notice address upon written notice to the other party.
13.7 WAIVERS. All waivers must be in writing and signed by the waiving party.
Landlord's failure to enforce any provision of this Sublease or its acceptance
of rent shall not be a waiver and shall not prevent Landlord from enforcing
that provision or any other provision of this Sublease in the future. No
statement on a payment check from Tenant or in a letter accompanying a payment
check shall be binding on Landlord. Landlord may, with or without notice to
Tenant, negotiate such check without being bound to the conditions of such
statement.
13.8 NO RECORDATlON. Tenant shall not record this Sublease without prior
written consent from Landlord. However, either party may require that a "Short
Form" memorandum of this Sublease be executed by both parties and recorded.
13.9 BINDING EFFECT; CHOICE OF LAW. This Sublease binds any party who legally
acquires any rights or interest in this Sublease from Landlord or Tenant.
However, Landlord shall have no obligation to Tenant's successor unless the
rights or interests of Tenant's successor are acquired in accordance with the
terms of this Sublease. The laws of the state in which the Premises are located
shall govern this Sublease.
13.10 CORPORATE AUTHORITY; PARTNERSHIP AUTHORITY. If Tenant or Landlord is a
corporation, each person signing this Sublease on behalf of Tenant represents
and warrants that he has full authority to do so and that this Sublease binds
the corporation. Within five (5) days after this Sublease is signed, Tenant
shall deliver to Landlord a certified copy of a resolution of Tenant's Board of
Directors authorizing the execution of this Sublease or other evidence of such
authority reasonably acceptable to Landlord. If Tenant is a partnership, each
person signing this Sublease for Tenant represents and warrants that he is a
general partner of the partnership, that he has full authority to sign for the
partnership and that this Sublease binds the partnership and all general
partners of the partnership. Tenant shall give written notice to Landlord of any
general partner's withdrawal or addition. Within five (5) days after this
Sublease is signed, Tenant shall deliver to Landlord a copy of Tenant's recorded
statement of partnership or certificate of limited partnership.
13.11 JOINT AND SEVERAL LIABILITY. All parties signing this Sublease as Tenant
shall be jointly and severally liable for all obligations of Tenant.
13.12 FORCE MAJEURE. If Landlord cannot perform any of its obligations due to
events beyond Landlord's control, the time provided for performing such
obligations shall be extended by a period of time equal to the duration of such
events. Events beyond Landlord's control include, but are not limited to, acts
of God, war, civil commotion, labor disputes, strikes, fire, flood or other
casualty, shortages of labor or material, government regulation or restriction
and weather conditions.
13.13 NO OPTION. The submission of this Sublease for examination does not
constitute a reservation of or option to sublease the Premises and this Sublease
becomes effective only upon execution and delivery thereof by Landlord and
Tenant.
TENANT: LANDLORD:
Copper Mountain Networks, Inc., Palomar Enterprises, Inc.,
a California corporation a California corporation
/s/ John A. Creelman
- ----------------------------------------- /s/ [SIGNATURE ILLEGIBLE]^^
BY: John A. Creelman, V.P. of Finance/CFO BY:------------------------------
Signed on Tuesday August 4, 1998 Signed on 8/10/98
--------------------------------- ----------------------
at ______________________________________ at ESCONDIDO, CA
------------------------------
10/1/89 Initials: J.A.C.
-----------
16
<PAGE>
ADDITIONAL PROVISIONS
SUBLEASE RIDER
This Additional Provisions Sublease Rider ("Rider") is attached to and made a
part of that certain Industrial Real Estate Triple Net Sublease dated July 20,
1998 between Palomar Enterprises, Inc., A California corporation as Landlord,
and Copper Mountain Networks, Inc., a California corporation as Tenant,
covering the Premises commonly known as 5744 Pacific Center Boulevard, Suite
301, San Diego, CA 92121 San Diego, California (the "Sublease"). The terms used
in this Rider shall have the same definitions as set forth in the Sublease and
the other riders attached to and a part of the Sublease. The provisions of this
Rider shall supersede any inconsistent or conflicting provisions of the
Sublease, including the other riders attached to and made a part of the
Sublease.
1. TENANT IMPROVEMENTS:
Landlord and Tenant hereby agree that plans and specifications for the
improvements of the Tenant's area will be approved by the Landlord and
the Tenant jointly which shall not be unreasonably withheld by
Landlord. Landlord shall be responsible for the construction associated
with the tenant improvements illustrated and set forth in Exhibit "B"
which shall be attached hereto and made a part of this lease at a later
date. Landlord shall provide Tenant with a "Tenant Improvement
Allowance" equal to Thirty-two Thousand Two Hundred Five Dollars
($32,205.00) to complete construction and the Tenant Improvements in
accordance with the plans and specifications outlined in Exhibit "B".
The above mentioned Tenant Improvement Allowance shall include all
architectural planning and permitting fees. Any additional cost
associated with construction of the tenant improvements shall be paid
for by the Tenant at Tenant's sole cost and expense.
Tenant shall pay to Landlord, upon Landlord's written demand, all
contractor's invoices in excess of the above mentioned Tenant
Improvement Allowance for the overage tenant improvement costs.
Landlord (at it's own expense) agrees to reinstall two grade level
roll-up doors and remove any refuse (including but not limited to the
batteries and battery rack on the Premises), prior to the Commencement
Date of this Sublease.
2. RENTAL SCHEDULE:
Months 1-12 / $10,198.00 per Month + operating expenses
Months 13-24 / $10,504.00 per Month + operating expenses
Months 25-36 / $10,819.00 per Month + operating expenses
Months 37-48 / $11,144.00 per Month + operating expenses
Months 49-60 / $11,478.00 per Month + operating expenses
3. TERMINATION CLAUSE:
Provided Tenant is not in material default of this lease, Tenant shall
have the option to terminate this lease agreement on October 31, 2000
by giving the Landlord at least six (6) months prior written notice and
paying a termination buyout fee in the amount of Forty Thousand Dollars
($40,000.00) at the time notice is given. Tenant shall also have the
option to terminate this lease on October 31, 2001 by giving Landlord
at least six (6) months prior written notice and paying a termination
fee in the amount of Twenty-five Thousand Dollars ($25,000.00) at the
time notice is given.
<PAGE>
MODIFICATIONS TO THE SUBLEASE BETWEEN COPPER MOUNTAIN NETWORKS, INC.
AND PALOMAR ENTERPRISES INC.
Insert #13 Sublease Rider - Landlord (at it's own expense) agrees to reinstall
two grade level roll-up doors and remove any refuse (including but not limited
to the batteries and battery rack on the Premises), prior to the Commencement
Date of this Sublease.
<PAGE>
EXHIBIT A
[PLAN APPEARS HERE]
<PAGE>
EXHIBIT B
TO BE ATTACHED AT A LATER DATE
<PAGE>
FLOOR PLAN APPEARS HERE]
EXHIBIT C
<PAGE>
EXHIBIT 10.13
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION
OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE
APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE
PROVISIONS OF SECTION 7 OF THIS WARRANT.
COPPER MOUNTAIN COMMUNICATIONS. INC.
-----------------------------------
WARRANT TO PURCHASE 40,000 SHARES
OF SERIES A PREFERRED STOCK
THIS CERTIFIES THAT, for value received, MMC/GATX Partnership No. 1 is
entitled to subscribe for and purchase 40,000 shares of the fully paid and
nonassessable Series A Preferred Stock, $0.001 par value (as adjusted pursuant
to Section 4 hereof, the "Shares") of Copper Mountain Communications, Inc., a
California corporation (the "Company"), at the price of One Dollar ($1.00) per
share (such price and such other price as shall result, from time to time, from
the adjustments specified in Section 4 hereof is herein referred to as the
"Warrant Price"), subject to the provisions and upon the terms and conditions
hereinafter set forth. As used herein, (a) the term "Series Preferred" shall
mean the Company's presently authorized Series A Preferred Stock, and any stock
into or for which such Series A Preferred Stock may hereafter be converted or
exchanged, (b) the term "Date of Grant" shall mean October 4, 1996, and (c) the
term "Other Warrants" shall mean any other warrants issued by the Company in
connection with the transaction with respect to which this Warrant was issued,
and any warrant issued upon transfer or partial exercise of this Warrant. The
term "Warrant" as used herein shall be deemed to include Other Warrants unless
the context clearly requires otherwise.
1. Term. The purchase right represented by this Warrant is exercisable, in
----
whole or in part, at any time and from time to time from the Date of Grant
through the later of (i) ten (10) years after the Date of Grant or (ii) five (5)
years after the closing of the Company's initial public offering of its Common
Stock effected pursuant to a Registration Statement on Form S-1 (or its
successor) filed under the Securities Act of 1933, as amended (the "Act").
2. Method of Exercise; Payment; Issuance of New Warrant. Subject to
----------------------------------------------------
Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, by
either, at the election of the holder hereof, (a) the surrender of this Warrant
(with the notice of exercise form attached hereto as Exhibit A duly executed) at
the principal office of the
1
<PAGE>
Company and by the payment to the Company, by check, of an amount equal to the
then applicable Warrant Price multiplied by the number of Shares then being
purchased, or (b) if in connection with a registered public offering of the
Company's securities, the surrender of this Warrant (with the notice of exercise
form attached hereto as Exhibit A-1 duly executed) at the principal office of
the Company together with notice of arrangements reasonably satisfactory to the
Company for payment to the Company either by check or from the proceeds of the
sale of shares to be sold by the holder in such public offering of an amount
equal to the then applicable Warrant Price per share multiplied by the number of
Shares then being purchased. The person or persons in whose name(s) any
certificate(s) representing shares of Series Preferred shall be issuable upon
exercise of this Warrant shall be deemed to have become the holder(s) of record
of, and shall be treated for all purposes as the record holder(s) of, the shares
represented thereby (and such shares shall be deemed to have been issued)
immediately prior to the close of business on the date or dates upon which this
Warrant is exercised. In the event of any exercise of the rights represented by
this Warrant, certificates for the shares of stock so purchased shall be
delivered to the holder hereof as soon as possible and in any event within
thirty days after such exercise and, unless this Warrant has been fully
exercised or expired, a new Warrant representing the portion of the Shares, if
any, with respect to which this Warrant shall not then have been exercised shall
also be issued to the holder hereof as soon as possible and in any event within
such thirty-day period.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be issued
---------------------------------------
upon the exercise of the rights represented by this Warrant will, upon issuance
pursuant to the terms and conditions herein, be fully paid and nonassessable,
and free from all taxes, liens and charges with respect to the issue thereof.
During the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized, and reserved for the
purpose of the issue upon exercise of the purchase rights evidenced by this
Warrant, a sufficient number of shares of its Series Preferred to provide for
the exercise of the rights represented by this Warrant and a sufficient number
of shares of its Common Stock to provide for the conversion of the Series
Preferred into Common Stock.
4. Adjustment of Warrant Price and Number of Shares. The number and kind
------------------------------------------------
of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) Reclassification or Merger. In case of any reclassification, change
--------------------------
or conversion of securities of the class issuable upon exercise of this Warrant
(other than a change in par value, or from par value to no par value, or from no
par value to par value, or as a result of a subdivision or combination), or in
case of any merger of the Company with or into another corporation (other than a
merger with another corporation in which the Company is the acquiring and the
surviving corporation and which does not result in any reclassification or
change of outstanding securities
2
<PAGE>
issuable upon exercise of this Warrant), or in case of any sale of all or
substantially all of the assets of the Company, the Company, or such successor
or purchasing corporation, as the case may be, shall duly execute and deliver to
the holder of this Warrant a new Warrant (in form and substance satisfactory to
the holder of this Warrant), so that the holder of this Warrant shall have the
right to receive, at a total purchase price not to exceed that payable upon the
exercise of the unexercised portion of this Warrant, and in lieu of the shares
of Series Preferred theretofore issuable upon exercise of this Warrant, the kind
and amount of shares of stock, other securities, money and property receivable
upon such reclassification, change or merger by a holder of the number of shares
of Series Preferred then purchasable under this Warrant. Such new Warrant shall
provide for adjustments that shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Section 4. In addition, in the event
that all the authorized shares of Series Preferred are converted into shares of
Common Stock or any other series or class of capital stock of the Company or in
the case of any amendment or waiver of any of the terms of the antidilution
protection of the Series Preferred, then this Warrant shall be deemed to be
amended so that the holder of this Warrant shall continue to be entitled to
antidilution protection as nearly equivalent as may be practicable to the
antidilution protection applicable to the Series Preferred on the Date of Grant,
and the Company shall duly execute and deliver to the holder of this Warrant a
supplement hereto to such effect, in form and substance satisfactory to the
holder of this Warrant. The provisions of this subparagraph (a) shall similarly
apply to successive reclassifications, changes, mergers, consolidations,
transfers, amendments and waivers.
(b) Subdivision or Combination of Shares. If the Company at any time
------------------------------------
while this Warrant remains outstanding and unexpired shall subdivide or combine
its outstanding shares of Series Preferred, the Warrant Price shall be
proportionately decreased in the case of a subdivision or increased in the case
of a combination, effective at the close of business on the date the subdivision
or combination becomes effective.
(c) Stock Dividends and Other Distributions. If the Company at any
---------------------------------------
time while this Warrant is outstanding and unexpired shall (i) pay a dividend
with respect to Series Preferred payable in Series Preferred, or (ii) make any
other distribution with respect to Series Preferred (except any distribution
specifically provided for in the foregoing subparagraphs (a) and (b)) of Series
Preferred, then the Warrant Price shall be adjusted, from and after the date of
determination of shareholders entitled to receive such dividend or distribution,
to that price determined by multiplying the Warrant Price in effect immediately
prior to such date of determination by a fraction (i) the numerator of which
shall be the total number of shares of Series Preferred outstanding immediately
prior to such dividend or distribution, and (ii) the denominator of which shall
be the total number of shares of Series Preferred outstanding immediately after
such dividend or distribution.
3
<PAGE>
(d) Adjustment of Number of Shares. Upon each adjustment in the
------------------------------
Warrant Price, the number of Shares of Series Preferred purchasable hereunder
shall be adjusted, to the nearest whole share, to the product obtained by
multiplying the number of Shares purchasable immediately prior to such
adjustment in the Warrant Price by a fraction, the numerator of which shall be
the Warrant Price immediately prior to such adjustment and the denominator of
which shall be the Warrant Price immediately thereafter.
(e) Antidilution Rights. The other antidilution rights applicable to
-------------------
the Shares and the Common Stock of the Company are set forth in Section 3(d) of
the Company's Articles of Incorporation, as amended through the Date of Grant
(the "Charter"), a true and complete copy of which is attached hereto as Exhibit
B. Such antidilution rights shall not be restated, amended, modified or waived
in any manner that is adverse to the holder hereof without such holder's prior
written consent. The Company shall promptly provide the holder hereof with any
restatement, amendment, modification or waiver of the Charter promptly after the
same has been made.
5. Notice of Adjustments. Whenever the Warrant Price or the number of
---------------------
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make a certificate signed by its chief financial officer setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment. the method by which such adjustment was calculated, and the
Warrant Price and the number of Shares purchasable hereunder after giving effect
to such adjustment, which shall be mailed (without regard to Section 13 hereof,
by first class mail, postage prepaid) to the holder of this Warrant. In
addition, whenever the conversion price or conversion ratio of the Series
Preferred shall be adjusted, the Company shall make a certificate signed by its
chief financial officer setting forth, in reasonable detail, the event requiring
the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated, and the conversion price or ratio of the Series
Preferred after giving effect to such adjustment, and shall cause copies of such
certificate to be mailed (without regard to Section 13 hereof, by first class
mail, postage prepaid) to the holder of this Warrant.
6. Fractional Shares. No fractional shares of Series Preferred will be
-----------------
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor based on the fair market
value of the Series Preferred on the date of exercise as reasonably determined
in good faith by the Company's Board of Directors.
7. Compliance with Securities Act: Disposition of Warrant or Shares of
-------------------------------------------------------------------
Series Preferred.
----------------
(a) Compliance with Securities Act. The holder of this Warrant, by
------------------------------
acceptance hereof, agrees that this Warrant, and the shares of Series Preferred
to be
4
<PAGE>
issued upon exercise hereof and any Common Stock issued upon conversion thereof
are being acquired for investment and that such holder will not offer, sell or
otherwise dispose of this Warrant, or any shares of Series Preferred to be
issued upon exercise hereof or any Common Stock issued upon conversion thereof
except under circumstances which will not result in a violation of the Act. Upon
exercise of this Warrant, unless the Shares being acquired are registered under
the Act or an exemption from such registration is available, the holder hereof
shall confirm in writing, by executing the form attached as Schedule 1 to
Exhibit A hereto, that the shares of Series Preferred so purchased (and any
shares of Common Stock issued upon conversion thereof) are being acquired for
investment and not with a view toward distribution or resale. This Warrant and
all shares of Series Preferred issued upon exercise of this Warrant and all
shares of Common Stock issued upon conversion thereof (unless registered under
the Act) shall be stamped or imprinted with a legend in substantially the
following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS
RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii)
RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR
(iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE WARRANT UNDER
WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY."
In addition, in connection with the issuance of this Warrant, the holder
specifically represents to the Company by acceptance of this Warrant as follows:
(1) The holder is aware of the Company's business affairs and financial
condition, and has acquired information about the Company sufficient to reach an
informed and knowledgeable decision to acquire this Warrant. The holder is
acquiring this Warrant for its own account for investment purposes only and not
with a view to, or for the resale in connection with, any "distribution" thereof
for purposes of the Act.
(2) The holder understands that this Warrant has not been registered under
the Act in reliance upon a specific exemption therefrom, which exemption depends
upon, among other things, the bona fide nature of the holder's investment intent
as expressed herein. In this connection, the holder understands that, in the
view of the SEC, the statutory basis for such exemption may be unavailable if
the holder's representation was predicated solely upon a present intention to
hold the Warrant for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Warrant, or for a period of one year or any other fixed
period in the future.
5
<PAGE>
(3) The holder further understands that this Warrant must be held
indefinitely unless subsequently registered under the Act and any applicable
state securities laws, or unless exemptions from registration are otherwise
available. Moreover, the holder understands that, except as provided in Section
9 hereof, the Company is under no obligation to register this Warrant.
(4) The holder is aware of the provisions of Rule 144 and 144A, promulgated
under the Act, which, in substance, permit limited public resale of "restricted
securities" acquired, directly or indirectly, from the issuer thereof (or from
an affiliate of such issuer), in a non-public offering subject to the
satisfaction of certain conditions, if applicable, including, among other
things: The availability of certain public information about the Company, the
resale occurring not less than two years after the party has purchased and paid
for the securities to be sold; the sale being made through a broker in 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 amount of securities being sold during any three-month period
not exceeding the specified limitations stated therein.
(5) The holder further understands that at the time it wishes to sell this
Warrant there may be no public market upon which to make such a sale, and that,
even if such a public market then exists, the Company may not be satisfying the
current public information requirements of Rule 144 and 144A, and that, in such
event, the holder may be precluded from selling this Warrant under Rule 144 and
144A even if the two-year minimum holding period had been satisfied.
(6) The holder further understands that in the event all of the
requirements of Rule 144 and 144A are not satisfied, registration under the Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, not withstanding the fact that Rule 144 and 144A are not
exclusive, the Staff of the SEC has expressed its opinion that persons proposing
to sell private placement securities other than in a registered offering and
otherwise than pursuant to Rule 144 and 144A will have a substantial burden of
proof in establishing that an exemption from registration is available for such
offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
(b) Disposition of Warrant or Shares. With respect to any offer, sale
--------------------------------
or other disposition of this Warrant or any shares of Series Preferred acquired
pursuant to the exercise of this Warrant prior to registration of such Warrant
or shares, the holder hereof and each subsequent holder of this Warrant agree to
give written notice to the Company prior thereto, describing briefly the manner
thereof, together with a written opinion of such holder's counsel, if reasonably
requested by the Company, to the effect that such offer, sale or other
disposition may be effected without registration or qualification (under the Act
as then in effect or any federal or state law then in effect) of this Warrant or
such shares of Series Preferred or Common Stock and indicating whether or not
under the Act certificates for this
6
<PAGE>
Warrant or such shares of Series Preferred to be sold or otherwise disposed of
require any restrictive legend as to applicable restrictions on transferability
in order to ensure compliance with such law. Promptly upon receiving such
written notice and reasonably satisfactory opinion, if so requested, the
Company, as promptly as practicable. shall notify such holder that such holder
may sell or otherwise dispose of this Warrant or such shares of Series Preferred
or Common Stock, all in accordance with the terms of the notice delivered to the
Company. If a determination has been made pursuant to this subsection (b) that
the opinion of counsel for the holder is not reasonably satisfactory to the
Company, the Company shall so notify the holder promptly after such
determination has been made and shall specify in detail the legal analysis
supporting any such conclusion. Notwithstanding the foregoing, this Warrant or
such shares of Series Preferred or Common Stock may, as to such federal laws, be
offered, sold or otherwise disposed of in accordance with Rule 144 or 144A under
the Act, provided that the Company shall have been furnished with such
information as the Company may reasonably request to provide a reasonable
assurance that the provisions of Rule 144 or 144A have been satisfied. Each
certificate representing this Warrant or the shares of Series Preferred thus
transferred (except a transfer pursuant to Rule 144 or 144A) shall bear a legend
as to the applicable restrictions on transferability in order to ensure
compliance with such laws, unless in the aforesaid opinion of counsel for the
holder, such legend is not required in order to ensure compliance with such
laws. The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions.
(c) Excepted Transfers. Neither any restrictions of any legend
------------------
described in this Warrant nor the requirements of Section 7(b) above shall apply
to any transfer without any additional consideration of, or grant of a security
interest in, this Warrant or any part hereof (i) to a partner of the holder if
the holder is a partnership, (ii) by the holder to a partnership of which the
holder is a general partner, or (iii) to any affiliate of the holder if the
holder is a corporation; provided, however, in any such transfer, the transferee
-----------------
shall on the Company's request agree in writing to be bound by the terms of this
Warrant as if an original signatory hereto.
8. Rights as Shareholders; Information. No holder of this Warrant, as
-----------------------------------
such, shall be entitled to vote or receive dividends or be deemed the holder of
Series Preferred or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon the holder of this Warrant, as such, any of
the rights of a shareholder of the Company or any right to vote for the election
of directors or upon any matter submitted to shareholders at any meeting
thereof, or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein. Notwithstanding the foregoing, the Company will
transmit to the holder of this Warrant such information, documents and reports
as are generally distributed to the holders of any class or
7
<PAGE>
series of the securities of the Company concurrently with the distribution
thereof to the shareholders.
9. [Intentionally Deleted.]
10. Additional Rights.
-----------------
10.1 Secondary Sales. The Company agrees that it will not interfere
---------------
with the holder of this Warrant in obtaining liquidity if opportunities to make
secondary sales of the Company's securities become available. To this end, the
Company will promptly provide the holder of this Warrant with the same notice
(if any) as it provides to other holders of the Company's securities of any
offer to acquire from the Company's security holders more than five percent (5%)
of the total voting power of the Company and will not interfere with the holder
in arranging the sale of this Warrant to the person or persons making such
offer.
10.2 Mergers. The Company will provide the holder of this Warrant
-------
with at least 30 days' notice of the terms and conditions of any proposed (i)
sale, lease, exchange, conveyance or other disposition of all or substantially
all of its property or business, or (ii) merger into or consolidation with any
other corporation (other than a wholly-owned subsidiary of the Company), or any
other transaction (including a merger or other reorganization) or series of
related transactions, in which more than 50% of the voting power of the Company
is disposed of.
10.3 Right to Convert Warrant into Common Stock: Net Issuance.
--------------------------------------------------------
(a) Right to Convert. In addition to and without limiting the
----------------
rights of the holder under the terms of this Warrant, the holder shall have the
right to convert this Warrant or any portion thereof (the "Conversion Right")
into shares of Series Preferred (or Common Stock if the Series Preferred has
been automatically converted into Common Stock) as provided in this Section 10.3
at any time or from time to time during the term of this Warrant. Upon exercise
of the Conversion Right with respect to a particular number of shares subject to
this Warrant (the "Converted Warrant Shares"), the Company shall deliver to the
holder (without payment by the holder of any exercise price or any cash or other
consideration) (X) that number of shares of fully paid and nonassessable Series
Preferred (or Common Stock if the Series Preferred has been automatically
converted into Common Stock) equal to the quotient obtained by dividing the
value of this Warrant (or the specified portion hereof) on the Conversion Date
(as defined in subsection (b) hereof), which value shall be determined by
subtracting (A) the aggregate Warrant Price of the Converted Warrant Shares
immediately prior to the exercise of the Conversion Right from (B) the aggregate
fair market value of the Converted Warrant Shares issuable upon exercise of this
Warrant (or the specified portion hereof) on the Conversion Date (as herein
defined) by (Y) the fair market value of one share of Series Preferred (or
8
<PAGE>
Common Stock if the Series Preferred has been automatically converted into
Common Stock) on the Conversion Date (as herein defined).
Expressed as a formula, such conversion shall be computed as follows:
X = B - A
-----
Y
Where: X = the number of shares of Series Preferred (or Common Stock) 'that
may be issued to holder
Y = the fair market value (FMV) of one share of Series Preferred (or
Common Stock)
A = the aggregate Warrant Price (i.e., Converted Warrant Shares x
Warrant Price)
B = the aggregate FMV (i.e., FMV x Converted Warrant Shares)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined).
(b) Method of Exercise. The Conversion Right may be exercised by the
------------------
holder by the surrender of this Warrant at the principal office of the Company
together with a notice of exercise substantially in the form attached hereto as
Exhibit A-2, specifying that the holder thereby intends to exercise the
Conversion Right and indicating the number of shares subject to this Warrant
that are being surrendered (referred to in subsection (a) hereof as the
Converted Warrant Shares) in exercise of the Conversion Right. Such conversion
shall be effective upon receipt by the Company of this Warrant together with the
aforesaid notice of exercise, or on such later date as is specified therein (the
"Conversion Date"), and, at the election of the holder hereof, may be made
contingent upon the closing of the sale of the Company's Common Stock to the
public in a public offering pursuant to a Registration Statement under the Act
(a "Public Offering"). Certificates for the shares issuable upon exercise of the
Conversion Right and, if applicable, a new warrant evidencing the balance of the
shares remaining subject-to this Warrant, shall be issued as of the Conversion
Date and shall be delivered to the holder within thirty (30) days following the
Conversion Date. Any conversion from Series Preferred to Common Stock shall be
in a ratio of one (1) share of Common Stock for each share of Series Preferred
(as adjusted herein and in the Charter). On the Date of Grant, the Series
Preferred purchasable under this Warrant represents underlying shares of Common
Stock at $1.00 per share.
9
<PAGE>
(c) Determination of Fair Market Value. For purposes of this Section
----------------------------------
10.3, "fair market value" of a share of Series Preferred (or Common Stock if the
Series Preferred has been automatically converted into Common Stock) as of a
particular date (the "Determination Date") shall mean:
(i) If the Conversion Right is exercised in connection with and
contingent upon a Public Offering, and if the Company's Registration Statement
relating to such Public Offering ("Registration Statement") has been declared
effective by the SEC, then the initial "Price to Public" specified in the final
prospectus with respect to such offering multiplied by the number of shares
of Common Stock into which each share of Series Preferred is then convertible.
(ii) If the Conversion Right is not exercised in connection with
and contingent upon a Public Offering, then as follows:
(A) If traded on a securities exchange or the Nasdaq
National Market, the fair market value of the Common Stock shall be deemed to be
the average of the closing or last reported sale prices of the Common Stock on
such exchange or market over the 30-day period ending five business days prior
to the Determination Date, and the fair market value of the Series Preferred
shall be deemed to be such fair market value of the Common Stock multiplied by
the number of shares of Common Stock into which each share of Series Preferred
is then convertible;
(B) If otherwise traded in an over-the-counter market, the
fair market value of the Common Stock shall be deemed to be the average of the
closing ask prices of the Common Stock over the 30-day period ending five
business days prior to the Determination Date, and the fair market value of the
Series Preferred shall be deemed to be such fair market value of the Common
Stock multiplied by the number of shares of Common Stock into which each share
of Series Preferred is then convertible; and
(C) If there is no public market for the Common Stock, then
fair market value shall be determined by mutual agreement of the holder of this
Warrant and the Company, and if the holder and the Company are unable to so
agree, at the Company's sole expense by an investment banker of national
reputation selected by the Company and reasonably acceptable to the holder of
this Warrant.
11. Representations and Warranties. The Company represents and warrants to
------------------------------
the holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by the Company
and is a valid and binding obligation of the Company enforceable in accordance
with its terms, subject to laws of general application relating to
10
<PAGE>
bankruptcy, insolvency and the relief of debtors and the rules of law or
principles at equity governing specific performance, injunctive relief and other
equitable remedies;
(b) The Shares have been duly authorized and reserved for issuance by
the Company and, when issued in accordance with the terms hereof, will be
validly issued, fully paid and nonassessable;
(c) The rights, preferences, privileges and restrictions granted to or
imposed upon the Series Preferred and the holders thereof are as set forth in
the Charter, as amended to the Date of the Grant, a true and complete copy of
which has been delivered to the original holder of this Warrant and is attached
hereto as Exhibit
B;
(d) The shares of Common Stock issuable upon conversion of the Shares
have been duly authorized and reserved and, when issued in accordance with the
terms of the Charter, as amended, will be validly issued, fully paid and
nonassessable; and
(e) The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Charter or by-laws, do
not and will not contravene any law, governmental rule or regulation, judgment
or order applicable to the Company, and do not and will not conflict with or
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument of which the Company is a party or by
which it is bound or require the consent or approval of, the giving of notice
to, the registration or filing with or the taking of any action in respect of or
by, any Federal, state or local government authority or agency or other person,
except for the filing of notices pursuant to federal and state securities laws,
which filings will be effected by the time required thereby.
(f) There are no actions, suits, audits, investigations or proceedings
pending or, to the knowledge of the Company, threatened against the Company in
any court or before any governmental commission, board or authority which, if
adversely determined, will have a material adverse effect on the ability of the
Company to perform its obligations under this Warrant.
12. Modification and Waiver. This Warrant and any provision hereof may be
-----------------------
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
13. Notices. Any notice, request, communication or other document required
-------
or permitted to be given or delivered to the holder hereof or the Company shall
be delivered, or shall be sent by certified or registered mail, postage prepaid,
to
11
<PAGE>
each such holder at its address as shown on the books of the Company or to the
Company at the address indicated therefor on the signature page of this Warrant.
14. Binding Effect on Successors. This Warrant shall be binding upon any
----------------------------
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Series Preferred issuable upon the exercise or
conversion of this Warrant shall survive the exercise, conversion and
termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit 6f the successors and assigns of the holder
hereof. The Company will, at the time of the exercise or conversion of this
Warrant, in whole or in part, upon request of the holder hereof but at the
Company's expense, acknowledge in writing its continuing obligation to the
holder hereof in respect of any rights (including, without limitation, any right
to registration of the shares of Registrable Securities to which the holder
hereof shall continue to be entitled after such exercise or conversion in
accordance with this Warrant; provided, that the failure of the holder hereof to
--------
make any such request shall not affect the continuing obligation of the Company
to the holder hereof in respect of such rights.
15. Lost Warrants or Stock Certificates. The Company covenants to the
-----------------------------------
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
16. Descriptive Headings. The descriptive headings of the several
--------------------
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
17. Governing Law. This Warrant shall be construed and enforced in
-------------
accordance with, and the rights of the parties shall be governed by, the laws of
the State of California.
18. Survival of Representations Warranties and Agreements. All
-----------------------------------------------------
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.
19. Remedies. In case any one or more of the covenants and agreements
--------
contained in this Warrant shall have been breached, the holders hereof (in the
case of
12
<PAGE>
a breach by the Company), or the Company (in the case of a breach by a holder),
may proceed to protect and enforce their or its rights either by suit in equity
and/or by action at law, including, but not limited to, an action for damages as
a result of any such breach and/or an action for specific performance of any
such covenant or agreement contained in this Warrant.
20. Value. The Company and the holder of this Warrant agree that the value
-----
of this Warrant and the Other Warrants on the Date of Grant is $100.00.
21. Acceptance. Receipt of this Warrant by the holder hereof shall
----------
constitute acceptance of and agreement to the foregoing terms and conditions.
22. No Impairment of Rights. The Company will not, by amendment of its
-----------------------
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
holder of this Warrant against impairment.
COPPER MOUNTAIN
COMMUNICATIONS, INC.
By: /s/ JOSEPH D. MARKEE
-----------------------------------
Title: President
--------------------------------
Address: 6650 Lusk Blvd B103
------------------------------
San Diego CA 92131
Date: October 4, 1996
13
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
To: Copper Mountain Communications, Inc.
1. The undersigned hereby elects to purchase __________ shares of Series A
Preferred Stock of Copper Mountain Communications, Inc., pursuant to the terms
of the attached Warrant, and tenders herewith payment of the purchase price of
such shares in full.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below:
______________________________
(Name)
______________________________
______________________________
(Address)
3. The undersigned represents that the aforesaid shares are being acquired
for the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares. In support
thereof, the undersigned has executed an Investment Representation Statement
attached hereto as Schedule 1.
(Signature)
(Date)
14
<PAGE>
EXHIBIT A-1
NOTICE OF EXERCISE
To: Copper Mountain Communications, Inc. (the "Company")
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement on Form S- filed __________ 199_ the undersigned hereby elects to
purchase __________ shares of Series A Preferred Stock of the Company (or such
lesser number of shares as may be sold on behalf of the undersigned at the
Closing) pursuant to the terms of the attached Warrant.
2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such ___________ shares.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $__________ or, if less, the net proceeds
due the undersigned from the sale of shares in the aforesaid public offering. If
such net proceeds are less than the purchase price for such shares, the
undersigned agrees to deliver the difference to the Company prior to the
Closing.
(Signature)
(Date)
15
<PAGE>
EXHIBIT A-2
NOTICE OF EXERCISE OF NET ISSUANCE CONVERSION RIGHTS
To: Copper Mountain Communications, Inc.
1. The undersigned, the registered holder of the Warrant delivered
herewith (the "Warrant"), hereby elects to exercise the Conversion Right (as
defined in Section 10.3 of the Warrant) as provided herein, __________ shares
subject to the Warrant are being surrendered hereby in exercise of the
Conversion Right. The number of shares to be issued pursuant to this exercise
shall be determined by reference to the formula in Section 10.3(a) of the
Warrant, which requires the use of the "fair market value" of the Company's
stock. As of the Determination Date (as defined in the Warrant), the "fair
market value" of one share of Series Preferred Stock (or Common Stock if the
Series A Preferred Stock has been automatically converted' into Common Stock)
shall be determined in the manner provided in Section 10.3(c) of the Warrant,
which amount has been determined by the undersigned (or agreed to by the holder
of the Warrant and Copper Mountain Communications, Inc.) to be $__________ per
share. Therefore, __________ shares are to be issued to the undersigned pursuant
to this exercise.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below:
______________________________
(Name)
______________________________
______________________________
(Address)
3. The undersigned represents that the aforesaid shares are being acquired
for the account of the undersigned for investment and not with a view to, or for
resale in connection with, the distribution thereof and that the undersigned has
no present intention of distributing or reselling such shares. In support
thereof, the undersigned has executed an Investment Representation Statement
attached hereto as Schedule I.
(Signature)
16
<PAGE>
(Date)
17
<PAGE>
Schedule 1
----------
INVESTMENT REPRESENTATION STATEMENT
Purchaser:
Company: Copper Mountain Communications, Inc.
Security: Series A Preferred Stock
Amount:
Date:
In connection with the purchase of the above-listed securities and
underlying Common Stock (the "Securities"), the undersigned (the "Purchaser")
represents to the Company as follows:
(a) The Purchaser is aware of the Company's business affairs and financial
condition, and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. The Purchaser is
purchasing the Securities for its own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933, as amended (the "Act").
(b) The Purchaser understands that, the Securities have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of the
Purchaser's investment intent as expressed herein. In this connection, the
Purchaser understands that, in the view of the Securities and Exchange
Commission ("SEC"), the statutory basis for such exemption may be unavailable if
the Purchaser's representation was predicated solely upon a present intention to
hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future.
(c) The Purchaser further understands that the Securities must be held
indefinitely unless subsequently registered under the Act or unless an exemption
from registration is otherwise available. Moreover, the Purchaser understands
that the Company is under no obligation to register the Securities except as set
forth in the Warrant under which the Securities are being acquired. In addition,
the Purchaser understands that the certificate evidencing the Securities will be
imprinted with the legend referred to in the Warrant under which the Securities
are being purchased.
18
<PAGE>
(d) The Purchaser is aware of the provisions of Rule 144 and 144A,
promulgated under the Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among other
things: The availability of certain public information about the Company, the
resale occurring not less than two years after the party has purchased and paid
for the securities to be sold; the sale being made through a broker in 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 amount of securities being sold during any three-month period
not exceeding the specified limitations stated therein.
(e) The Purchaser further understands that at the time it wishes to sell
the Securities there may be no public market upon which to make such a sale, and
that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 and 144A, and
that, in such event, the Purchaser may be precluded from selling the Securities
under Rule 144 and 144A even if the two-year minimum holding period had been
satisfied.
(f) The Purchaser further understands that in the event all of the
requirements of Rule 144 and 144A are not satisfied, registration under the Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
Purchaser:
DATE: __________ 199_
19
<PAGE>
EXHIBIT B
---------
Articles of Incorporation, as Amended
20
<PAGE>
EXHIBIT 10.14
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION MAY BE EFFECTED
WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS RELATED THERETO, (ii) AN OPINION
OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATIONS ARE NOT REQUIRED, (iii) RECEIPT OF NO-ACTION LETTERS FROM THE
APPROPRIATE GOVERNMENTAL AUTHORITIES, OR (iv) OTHERWISE COMPLYING WITH THE
PROVISIONS OF SECTION 7 OF THIS WARRANT.
COPPER MOUNTAIN COMMUNICATIONS, INC.
------------------------------------
WARRANT TO PURCHASE 10,000 SHARES
OF SERIES A PREFERRED STOCK
THIS CERTIFIES THAT, for value received, SILICON VALLEY BANK is entitled to
subscribe for and purchase 10,000 shares of the fully paid and nonassessable
Series A Preferred Stock, $0.001 par value (as adjusted pursuant to Section 4
hereof, the "Shares") of Copper Mountain Communications, Inc., a California
corporation (the "Company"), at the price of One Dollar ($1.00) per share (such
price and such other price as shall result, from time to time, from the
adjustments specified in Section 4 hereof is herein referred to as the "Warrant
Price"), subject to the provisions and upon the terms and conditions hereinafter
set forth. As used herein, (a) the term "Series Preferred" shall mean the
Company's presently authorized Series A Preferred Stock, and any stock into or
for which such Series A Preferred Stock may hereafter be converted or exchanged,
(b) the term "Date of Grant" shall mean October 4, 1996, and (c) the term "Other
Warrants" shall mean any other warrants issued by the Company in connection with
the transaction with respect to which this Warrant was issued, and any warrant
issued upon transfer or partial exercise of this Warrant. The term "Warrant" as
used herein shall be deemed to include Other Warrants unless the context clearly
requires otherwise.
1. Term. The purchase right represented by this Warrant is exercisable,
----
in whole or in part, at any time and from time to time from the Date of Grant
through the later of (i) ten (10) years after the Date of Grant or (ii) five (5)
years after the closing of the Company's initial public offering of its Common
Stock effected pursuant to a Registration Statement on Form S-1 (or its
successor) filed under the Securities Act of 1933, as amended (the "Act").
2. Method of Exercise; Payment; Issuance of New Warrant. Subject to
----------------------------------------------------
Section 1 hereof, the purchase right represented by this Warrant may be
exercised by the holder hereof, in whole or in part and from time to time, by
either, at the election of the holder hereof, (a) the surrender of this Warrant
(with the notice of exercise form attached hereto as Exhibit A duly executed) at
the principal office of the
1
<PAGE>
Company and by the payment to the Company, by check, of an amount equal to the
then applicable Warrant Price multiplied by the number of Shares then being
purchased, or (b) if in connection with a registered public offering of the
Company's securities, the surrender of this Warrant (with the notice of exercise
form attached hereto as Exhibit A-1 duly executed) at the principal office of
the Company together with notice of arrangements reasonably satisfactory to the
Company for payment to the Company either by check or from the proceeds of the
sale of shares to be sold by the holder in such public offering of an amount
equal to the then applicable Warrant Price per share multiplied by the number of
Shares then being purchased. The person or persons in whose name(s) any
certificate(s) representing shares of Series Preferred shall be issuable upon
exercise of this Warrant shall be deemed to have become the holder(s) of record
of, and shall be treated for all purposes as the record holder(s) of, the shares
represented thereby (and such shares shall be deemed to have been issued)
immediately prior to the close of business on the date or dates upon which this
Warrant is exercised. In the event of any exercise of the rights represented by
this Warrant, certificates for the shares of stock so purchased shall be
delivered to the holder hereof as soon as possible and in any event within
thirty days after such exercise and, unless this Warrant has been fully
exercised or expired, a new Warrant representing the portion of the Shares, if
any, with respect to which this Warrant shall not then have been exercised shall
also be issued to the holder hereof as soon as possible and in any event within
such thirty-day period.
3. Stock Fully Paid; Reservation of Shares. All Shares that may be issued
---------------------------------------
upon the exercise of the rights represented by this Warrant will, upon issuance
pursuant to the terms and conditions herein, be fully paid and nonassessable,
and free from all taxes, liens and charges with respect to the issue thereof.
During the period within which the rights represented by this Warrant may be
exercised, the Company will at all times have authorized, and reserved for the
purpose of the issue upon exercise of the purchase rights evidenced by this
Warrant, a sufficient number of shares of its Series Preferred to provide for
the exercise of the rights represented by this Warrant and a sufficient number
of shares of its Common Stock to provide for the conversion of the Series
Preferred into Common Stock.
4. Adjustment of Warrant Price and Number of Shares. The number and kind
------------------------------------------------
of securities purchasable upon the exercise of this Warrant and the Warrant
Price shall be subject to adjustment from time to time upon the occurrence of
certain events, as follows:
(a) Reclassification or Merger. In case of any reclassification,
--------------------------
change or conversion of securities of the class issuable upon exercise of this
Warrant (other than a change in par value, or from par value to no par value, or
from no par value to par value, or as a result of a subdivision or combination),
or in case of any merger of the Company with or into another corporation (other
than a merger with another corporation in which the Company is the acquiring and
the surviving corporation and which does not result in any reclassification or
change of outstanding securities
2
<PAGE>
issuable upon exercise of this Warrant), or in case of any sale of all or
substantially all of the assets of the Company, the Company, or such successor
or purchasing corporation, as the case may be, shall duly execute and deliver to
the holder of this Warrant a new Warrant (in form and substance satisfactory to
the holder of this Warrant), so that the holder of this Warrant shall have the
right to receive, at a total purchase price not to exceed that payable upon the
exercise of the unexercised portion of this Warrant, and in lieu of the shares
of Series Preferred theretofore issuable upon exercise of this Warrant, the kind
and amount of shares of stock, other securities, money and property receivable
upon such reclassification, change or merger by a holder of the number of shares
of Series Preferred then purchasable under this Warrant. Such new Warrant shall
provide for adjustments that shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Section 4. In addition, in the event
that all the authorized shares of Series Preferred are converted into shares of
Common Stock or any other series or class of capital stock of the Company or in
the case of any amendment or waiver of any of the terms of the antidilution
protection of the Series Preferred, then this Warrant shall be deemed to be
amended so that the holder of this Warrant shall continue to be entitled to
antidilution protection as nearly equivalent as may be practicable to the
antidilution protection applicable to the Series Preferred on the Date of Grant,
and the Company shall duly execute and deliver to the holder of this Warrant a
supplement hereto to such effect, in form and substance satisfactory to the
holder of this Warrant. The provisions of this subparagraph (a) shall similarly
apply to successive reclassifications, changes, mergers, consolidations,
transfers, amendments and waivers.
(b) Subdivision or Combination of Shares. If the Company at any time
------------------------------------
while this Warrant remains outstanding and unexpired shall subdivide or combine
its outstanding shares of Series Preferred, the Warrant Price shall be
proportionately decreased in the case of a subdivision or increased in the case
of a combination, effective at the close of business on the date the subdivision
or combination becomes effective.
(c) Stock Dividends and Other Distributions. If the Company at any
---------------------------------------
time while this Warrant is outstanding and unexpired shall (i) pay a dividend
with respect to Series Preferred payable in Series Preferred, or (ii) make any
other distribution with respect to Series Preferred (except any distribution
specifically provided for in the foregoing subparagraphs (a) and (b)) of Series
Preferred, then the Warrant Price shall be adjusted, from and after the date of
determination of shareholders entitled to receive such dividend or distribution,
to that price determined by multiplying the Warrant Price in effect immediately
prior to such date of determination by a fraction (i) the numerator of which
shall be the total number of shares of Series Preferred outstanding immediately
prior to such dividend or distribution, and (ii) the denominator of which shall
be the total number of shares of Series Preferred outstanding immediately after
such dividend or distribution.
3
<PAGE>
(d) Adjustment of Number of Shares. Upon each adjustment in the
------------------------------
Warrant Price, the number of Shares of Series Preferred purchasable hereunder
shall be adjusted, to the nearest whole share, to the product obtained by
multiplying the number of Shares purchasable immediately prior to such
adjustment in the Warrant Price by a fraction, the numerator of which shall be
the Warrant Price immediately prior to such adjustment and the denominator of
which shall be the Warrant Price immediately thereafter.
(e) Antidilution Rights. The other antidilution rights applicable to
-------------------
the Shares and the Common Stock of the Company are set forth in Section 3(d) of
the Company's Articles of Incorporation, as amended through the Date of Grant
(the "Charter"), a true and complete copy of which is attached hereto as Exhibit
B. Such antidilution rights shall not be restated, amended, modified or waived
in any manner that is adverse to the holder hereof without such holder's prior
written consent. The Company shall promptly provide the holder hereof with any
restatement, amendment, modification or waiver of the Charter promptly after the
same has been made.
5. Notice of Adjustments. Whenever the Warrant Price or the number of
---------------------
Shares purchasable hereunder shall be adjusted pursuant to Section 4 hereof, the
Company shall make a certificate signed by its chief financial officer setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Warrant Price and the number of Shares purchasable hereunder after giving effect
to such adjustment, which shall be mailed (without regard to Section 13 hereof,
by first class mail, postage prepaid) to the holder of this Warrant. In
addition, whenever the conversion price or conversion ratio of the Series
Preferred shall be adjusted, the Company shall make a certificate signed by its
chief financial officer setting forth, in reasonable detail, the event requiring
the adjustment, the amount of the adjustment, the method by which such
adjustment was calculated, and the conversion price or ratio of the Series
Preferred after giving effect to such adjustment, and shall cause copies of such
certificate to be mailed (without regard to Section 13 hereof, by first class
mail, postage prepaid) to the holder of this Warrant.
6. Fractional Shares. No fractional shares of Series Preferred will be
-----------------
issued in connection with any exercise hereunder, but in lieu of such fractional
shares the Company shall make a cash payment therefor based on the fair market
value of the Series Preferred on the date of exercise as reasonably determined
in good faith by the Company's Board of Directors.
7. Compliance with Securities Act: Disposition of Warrant or Shares of
-------------------------------------------------------------------
Series Preferred.
----------------
(a) Compliance with Securities Act. The holder of this Warrant, by
------------------------------
acceptance hereof, agrees that this Warrant, and the shares of Series Preferred
to be
4
<PAGE>
issued upon exercise hereof and any Common Stock issued upon conversion thereof
are being acquired for investment and that such holder will not offer, sell or
otherwise dispose of this Warrant, or any shares of Series Preferred to be
issued upon exercise hereof or any Common Stock issued upon conversion thereof
except under circumstances which will not result in a violation of the Act. Upon
exercise of this Warrant, unless the Shares being acquired are registered under
the Act or an exemption from such registration is available, the holder hereof
shall confirm in writing, by executing the form attached as Schedule 1 to
Exhibit A hereto, that the shares of Series Preferred so purchased (and any
shares of Common Stock issued upon conversion thereof) are being acquired for
investment and not with a view toward distribution or resale. This Warrant and
all shares of Series Preferred issued upon exercise of this Warrant and all
shares of Common Stock issued upon conversion thereof (unless registered under
the Act) shall be stamped or imprinted with a legend in substantially the
following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT (i) EFFECTIVE REGISTRATION STATEMENTS
RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY
SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATIONS ARE NOT REQUIRED, (iii)
RECEIPT OF NO-ACTION LETTERS FROM THE APPROPRIATE GOVERNMENTAL AUTHORITIES, OR
(iv) OTHERWISE COMPLYING WITH THE PROVISIONS OF SECTION 7 OF THE WARRANT UNDER
WHICH THESE SECURITIES WERE ISSUED, DIRECTLY OR INDIRECTLY."
In addition, in connection with the issuance of this Warrant, the holder
specifically represents to the Company by acceptance of this Warrant as follows:
(1) The holder is aware of the Company's business affairs and financial
condition, and has acquired information about the Company sufficient to reach an
informed and knowledgeable decision to acquire this Warrant. The holder is
acquiring this Warrant for its own account for investment purposes only and not
with a view to, or for the resale in connection with, any "distribution" thereof
for purposes of the Act.
(2) The holder understands that this Warrant has not been registered under
the Act in reliance upon a specific exemption therefrom, which exemption depends
upon, among other things, the bona fide nature of the holder's investment intent
as expressed herein. In this connection, the holder understands that, in the
view of the SEC, the statutory basis for such exemption may be unavailable if
the holder's representation was predicated solely upon a present intention to
hold the Warrant for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Warrant, or for a period of one year or any other fixed
period in the future.
5
<PAGE>
(3) The holder further understands that this Warrant must be held
indefinitely unless subsequently registered under the Act and any applicable
state securities laws, or unless exemptions from registration are otherwise
available. Moreover, the holder understands that, except as provided in Section
9 hereof, the Company is under no obligation to register this Warrant.
(4) The holder is aware of the provisions of Rule 144 and 144A,
promulgated under the Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among other
things: The availability of certain public information about the Company, the
resale occurring not less than two years after the party has purchased and paid
for the securities to be sold; the sale being made through a broker in 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 amount of securities being sold during any three-month period
not exceeding the specified limitations stated therein.
(5) The holder further understands that at the time it wishes to sell this
Warrant there may be no public market upon which to make such a sale, and that,
even if such a public market then exists, the Company may not be satisfying the
current public information requirements of Rule 144 and 144A, and that, in such
event, the holder may be precluded from selling this Warrant under Rule 144 and
144A even if the two-year minimum holding period had been satisfied.
(6) The holder further understands that in the event all of the
requirements of Rule 144 and 144A are not satisfied, registration under the Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, not withstanding the fact that Rule 144 and 144A are not
exclusive, the Staff of the SEC has expressed its opinion that persons proposing
to sell private placement securities other than in a registered offering and
otherwise than pursuant to Rule 144 and 144A will have a substantial burden of
proof in establishing that an exemption from registration is available for such
offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
(b) Disposition of Warrant or Shares. With respect to any offer, sale
--------------------------------
or other disposition of this Warrant or any shares of Series Preferred acquired
pursuant to the exercise of this Warrant prior to registration of such Warrant
or shares, the holder hereof and each subsequent holder of this Warrant agree to
give written notice to the Company prior thereto, describing briefly the manner
thereof, together with a written opinion of such holder's counsel, if reasonably
requested by the Company, to the effect that such offer, sale or other
disposition may be effected without registration or qualification (under the Act
as then in effect or any federal or state law then in effect) of this Warrant or
such shares of Series Preferred or Common Stock and indicating whether or not
under the Act certificates for this
6
<PAGE>
Warrant or such shares of Series Preferred to be sold or otherwise disposed of
require any restrictive legend as to applicable restrictions on transferability
in order to ensure compliance with such law. Promptly upon receiving such
written notice and reasonably satisfactory opinion, if so requested, the
Company, as promptly as practicable shall notify such holder that such holder
may sell or otherwise dispose of this Warrant or such shares of Series Preferred
or Common Stock, all in accordance with the terms of the notice delivered to the
Company. If a determination has been made pursuant to this subsection (b) that
the opinion of counsel for the holder is not reasonably satisfactory to the
Company, the Company shall so notify the holder promptly after such
determination has been made and shall specify in detail the legal analysis
supporting any such conclusion. Notwithstanding the foregoing, this Warrant or
such shares of Series Preferred or Common Stock may, as to such federal laws, be
offered, sold or otherwise disposed of in accordance with Rule 144 or 144A under
the Act, provided that the Company shall have been furnished with such
information as the Company may reasonably request to provide a reasonable
assurance that the provisions of Rule 144 or 144A have been satisfied. Each
certificate representing this Warrant or the shares of Series Preferred thus
transferred (except a transfer pursuant to Rule 144 or 144A) shall bear a legend
as to the applicable restrictions on transferability in order to ensure
compliance with such laws, unless in the aforesaid opinion of counsel for the
holder, such legend is not required in order to ensure compliance with such
laws. The Company may issue stop transfer instructions to its transfer agent in
connection with such restrictions.
(c) Excepted Transfers. Neither any restrictions of any legend
------------------
described in this Warrant nor the requirements of Section 7(b) above shall apply
to any transfer without any additional consideration of, or grant of a security
interest in, this Warrant or any part hereof (i) to a partner of the holder if
the holder is a partnership, (ii) by the holder to a partnership of which the
holder is a general partner, or (iii) to any affiliate of the holder if the
holder is a corporation; provided, however, in any such transfer, the transferee
-------- -------
shall on the Company's request agree in writing to be bound by the terms of this
Warrant as if an original signatory hereto.
8. Rights as Shareholders; Information. No holder of this Warrant, as
-----------------------------------
such, shall be entitled to vote or receive dividends or be deemed the holder of
Series Preferred or any other securities of the Company which may at any time be
issuable on the exercise hereof for any purpose, nor shall anything contained
herein be construed to confer upon the holder of this Warrant, as such, any of
the rights of a shareholder of the Company or any right to vote for the election
of directors or upon any matter submitted to shareholders at any meeting
thereof, or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until this Warrant shall have been exercised
and the Shares purchasable upon the exercise hereof shall have become
deliverable, as provided herein. Notwithstanding the foregoing, the Company will
transmit to the holder of this Warrant such information, documents and reports
as are generally distributed to the holders of any class or
7
<PAGE>
series of the securities of the Company concurrently with the distribution
thereof to the shareholders.
9. [lntentionally Deleted.]
10. Additional Rights.
-----------------
10.1 Secondary Sales. The Company agrees that it will not interfere
---------------
with the holder of this Warrant in obtaining liquidity if opportunities to make
secondary sales of the Company's securities become available. To this end, the
Company will promptly provide the holder of this Warrant with the same notice
(if any) as it provides to other holders of the Company's securities of any
offer to acquire from the Company's security holders more than five percent (5%)
of the total voting power of the Company and will not interfere with the holder
in arranging the sale of this Warrant to the person or persons making such
offer.
10.2 Mergers. The Company will provide the holder of this Warrant
-------
with at least 30 days' notice of the terms and conditions of any proposed (i)
sale, lease, exchange, conveyance or other disposition of all or substantially
all of its property or business, or (ii) merger into or consolidation with any
other corporation (other than a wholly-owned subsidiary of the Company), or any
other transaction (including a merger or other reorganization) or series of
related transactions, in which more than 50% of the voting power of the Company
is disposed of.
10.3 Right to Convert Warrant into Common Stock: Net Issuance.
--------------------------------------------------------
(a) Right to Convert. In addition to and without limiting the
----------------
rights of the holder under the terms of this Warrant, the holder shall have the
right to convert this Warrant or any portion thereof (the "Conversion Right")
into shares of Series Preferred (or Common Stock if the Series Preferred has
been automatically converted into Common Stock) as provided in this Section 10.3
at any time or from time to time during the term of this Warrant. Upon exercise
of the Conversion Right with respect to a particular number of shares subject to
this Warrant (the "Converted Warrant Shares"), the Company shall deliver to the
holder (without payment by the holder of any exercise price or any cash or other
consideration) (X) that number of shares of fully paid and nonassessable Series
Preferred (or Common Stock if the Series Preferred has been automatically
converted into Common Stock) equal to the quotient obtained by dividing the
value of this Warrant (or the specified portion hereof) on the Conversion Date
(as defined in subsection (b) hereof), which value shall be determined by
subtracting (A) the aggregate Warrant Price of the Converted Warrant Shares
immediately prior to the exercise of the Conversion Right from (B) the aggregate
fair market value of the Converted Warrant Shares issuable upon exercise of this
Warrant (or the specified portion hereof) on the Conversion Date (as herein
defined) by (Y) the fair market value of one share of Series Preferred (or
8
<PAGE>
Common Stock if the Series Preferred has been automatically converted into
Common Stock) on the Conversion Date (as herein defined).
Expressed as a formula, such conversion shall be computed as follows:
X = B - A
-----
Y
Where: X = the number of shares of Series Preferred (or Common Stock) that
may be issued to holder
Y = the fair market value (FMV) of one share of Series Preferred (or
Common Stock)
A = the aggregate Warrant Price (i.e., Converted Warrant Shares x
Warrant Price)
B = the aggregate FMV (i.e., FMV x Converted Warrant Shares)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Date (as hereinafter defined).
(b) Method of Exercise. The Conversion Right may be exercised by the
------------------
holder by the surrender of this Warrant at the principal office of the Company
together with a notice of exercise substantially in the form attached hereto as
Exhibit A-2, specifying that the holder thereby intends to exercise the
Conversion Right and indicating the number of shares subject to this Warrant
that are being surrendered (referred to in subsection (a) hereof as the
Converted Warrant Shares) in exercise of the Conversion Right. Such conversion
shall be effective upon receipt by the Company of this Warrant together with the
aforesaid notice of exercise, or on such later date as is specified therein (the
"Conversion Date"), and, at the election of the holder hereof, may be made
contingent upon the closing of the sale of the Company's Common Stock to the
public in a public offering pursuant to a Registration Statement under the Act
(a "Public Offering"). Certificates for the shares issuable upon exercise of the
Conversion Right and, if applicable, a new warrant evidencing the balance of the
shares remaining subject to this Warrant, shall be issued as of the Conversion
Date and shall be delivered to the holder within thirty (30) days following the
Conversion Date. Any conversion from Series Preferred to Common Stock shall be
in a ratio of one (1) share of Common Stock for each share of Series Preferred
(as adjusted herein and in the Charter). On the Date of Grant, the Series
Preferred purchasable under this Warrant represents underlying shares of Common
Stock at $1.00 per share.
9
<PAGE>
(c) Determination of Fair Market Value. For purposes of this Section
----------------------------------
10.3, "fair market value" of a share of Series Preferred (or Common Stock if the
Series Preferred has been automatically converted into Common Stock) as of a
particular date .(the "Determination Date") shall mean:
(i) If the Conversion Right is exercised in connection with and
contingent upon a Public Offering, and if the Company's Registration Statement
relating to such Public Offering ("Registration Statement") has been declared
effective by the SEC, then the initial "Price to Public" specified in the final
prospectus with respect to such offering multiplied by the number of shares of
Common Stock into which each share of Series Preferred is then convertible.
(ii) If the Conversion Right is not exercised in connection with
and contingent upon a Public Offering, then as follows:
(A) If traded on a securities exchange or the Nasdaq
National Market, the fair market value of the Common Stock shall be deemed to be
the average of the closing or last reported sale prices of the Common Stock on
such exchange or market over the 30-day period ending five business days prior
to the Determination Date, and the fair market value of the Series Preferred
shall be deemed to be such fair market value of the Common Stock multiplied by
the number of shares of Common Stock into which each share of Series Preferred
is then convertible;
(B) If otherwise traded in an over-the-counter market, the
fair market value of the Common Stock shall be deemed to be the average of the
closing ask prices of the Common Stock over the 30-day period ending five
business days prior to the Determination Date, and the fair market value of the
Series Preferred shall be deemed to be such fair market value of the Common
Stock multiplied by the number of shares of Common Stock into which each share
of Series Preferred is then convertible; and
(C) If there is no public market for the Common Stock, then
fair market value shall be determined by mutual agreement of the holder of this
Warrant and the Company, and if the holder and the Company are unable to so
agree, at the Company's sole expense by an investment banker of national
reputation selected by the Company and reasonably acceptable to the holder of
this Warrant.
11. Representations and Warranties. The Company represents and warrants to
------------------------------
the holder of this Warrant as follows:
(a) This Warrant has been duly authorized and executed by the Company
and is a valid and binding obligation of the Company enforceable in accordance
with its terms, subject to laws of general application relating to
10
<PAGE>
bankruptcy insolvency and the relief of debtors and the rules of law or
principles at equity governing specific performance, injunctive relief and other
equitable remedies;
(b) The Shares have been duly authorized and reserved for issuance by
the Company and, when issued in accordance with the terms hereof, will be
validly issued, fully paid and nonassessable;
(c) The rights, preferences, privileges and restrictions granted to
or imposed upon the Series Preferred and the holders thereof are as set forth in
the Charter, as amended to the Date of the Grant, a true and complete copy of
which has been delivered to the original holder of this Warrant and is attached
hereto as Exhibit B;
(d) The shares of Common Stock issuable upon conversion of the Shares
have been duly authorized and reserved and, when issued in accordance with the
terms of the Charter, as amended, will be validly issued, fully paid and
nonassessable; and
(e) The execution and delivery of this Warrant are not, and the
issuance of the Shares upon exercise of this Warrant in accordance with the
terms hereof will not be, inconsistent with the Company's Charter or by-laws, do
not and will not contravene any law, governmental rule or regulation, judgment
or order applicable to the Company, and do not and will not conflict with or
contravene any provision of, or constitute a default under, any indenture,
mortgage, contract or other instrument of which the Company is a party or by
which it is bound or require the consent or approval of, the giving of notice
to, the registration or filing with or the taking of any action in respect of or
by, any Federal, state or local government authority or agency or other person,
except for the filing of notices pursuant to federal and state securities laws,
which filings will be effected by the time required thereby.
(f) There are no actions, suits, audits, investigations or
proceedings pending or, to the knowledge of the Company, threatened against the
Company in any court or before any governmental commission, board or authority
which, if adversely determined, will have a material adverse effect on the
ability of the Company to perform its obligations under this Warrant.
12. Modification and Waiver. This Warrant and any provision hereof may be
-----------------------
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
13. Notices. Any notice, request, communication or other document required
-------
or permitted to be given or delivered to the holder hereof or the Company shall
be delivered, or shall be sent by certified or registered mail, postage prepaid,
to
11
<PAGE>
each such holder at its address as shown on the books of the Company or to the
Company at the address indicated therefor on the signature page of this Warrant.
14. Binding Effect on Successors. This Warrant shall be binding upon any
----------------------------
corporation succeeding the Company by merger, consolidation or acquisition of
all or substantially all of the Company's assets, and all of the obligations of
the Company relating to the Series Preferred issuable upon the exercise or
conversion of this Warrant shall survive the exercise, conversion and
termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the successors and assigns of the holder
hereof The Company will, at the time of the exercise or conversion of this
Warrant, in whole or in part, upon request of the holder hereof but at the
Company's expense, acknowledge in writing its continuing obligation to the
holder hereof in respect of any rights (including, without limitation, any right
to registration of the shares of Registrable Securities to which the holder
hereof shall continue to be entitled after such exercise or conversion in
accordance with this Warrant; provided, that the failure of the holder hereof to
--------
make any such request shall not affect the continuing obligation of the Company
to the holder hereof in respect of such rights.
15. Lost Warrants or Stock Certificates. The Company covenants to the
-----------------------------------
holder hereof that, upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any such loss, theft or destruction, upon
receipt of an indemnity reasonably satisfactory to the Company, or in the case
of any such mutilation upon surrender and cancellation of such Warrant or stock
certificate, the Company will make and deliver a new Warrant or stock
certificate, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
Warrant or stock certificate.
16. Descriptive Headings. The descriptive headings of the several
--------------------
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
17. Governing Law. This Warrant shall be construed and enforced in
-------------
accordance with, and the rights of the parties shall be governed by, the laws of
the State of California.
18. Survival of Representations Warranties and Agreements. All
-----------------------------------------------------
representations and warranties of the Company and the holder hereof contained
herein shall survive the Date of Grant, the exercise or conversion of this
Warrant (or any part hereof) or the termination or expiration of rights
hereunder. All agreements of the Company and the holder hereof contained herein
shall survive indefinitely until, by their respective terms, they are no longer
operative.
19. Remedies. In case any one or more of the covenants and agreements
--------
contained in this Warrant shall have been breached, the holders hereof (in the
case of
12
<PAGE>
a breach by the Company), or the Company (in the case of a breach by a holder),
may proceed to protect and enforce their or its rights either by suit in equity
and/or by action at law, including, but not limited to, an action for damages as
a result of any such breach and/or an action for specific performance of any
such covenant or agreement contained in this Warrant.
20. Value. The Company and the holder of this Warrant agree that the value
-----
of this Warrant and the Other Warrants on the Date of Grant is $100.00.
21. Acceptance. Receipt of this Warrant by the holder hereof shall
----------
constitute acceptance of and agreement to the foregoing terms and conditions.
22. No Impairment of Rights. The Company will not, by amendment of its
-----------------------
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
action as may be necessary or appropriate in order to protect the rights of the
holder of this Warrant against impairment.
COPPER MOUNTAIN
COMMUNICATIONS, INC.
By: /s/ JOSEPH D. MARKEE
--------------------------------
Title: President
-----------------------------
Address: 6650 Lusk Blvd Ste B103
---------------------------
San Diego CA 92121
Date: October 4, 1996
13
<PAGE>
EXHIBIT A
NOTICE OF EXERCISE
To: Copper Mountain Communications, Inc.
1. The undersigned hereby elects to purchase __________ shares of Series
A Preferred Stock of Copper Mountain Communications, Inc., pursuant to the terms
of the attached Warrant, and tenders herewith payment of the purchase price of
such shares in full.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below:
_____________________________
(Name)
_____________________________
_____________________________
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
In support thereof, the undersigned has executed an Investment Representation
Statement attached hereto as Schedule 1.
(Signature)
(Date)
14
<PAGE>
EXHIBIT A-1
NOTICE OF EXERCISE
To: Copper Mountain Communications, Inc. (the "Company")
1. Contingent upon and effective immediately prior to the closing (the
"Closing") of the Company's public offering contemplated by the Registration
Statement on Form S-__, filed ________, 199__ the undersigned hereby elects to
purchase __________ shares of Series A Preferred Stock of the Company (or such
lesser number of shares as may be sold on behalf of the undersigned at the
Closing) pursuant to the terms of the attached Warrant.
2. Please deliver to the custodian for the selling shareholders a stock
certificate representing such ___________ shares.
3. The undersigned has instructed the custodian for the selling
shareholders to deliver to the Company $__________ or, if less, the net proceeds
due the undersigned from the sale of shares in the aforesaid public offering. If
such net proceeds are less than the purchase price for such shares, the
undersigned agrees to deliver the difference to the Company prior to the
Closing.
(Signature)
(Date)
15
<PAGE>
EXHIBIT A-2
NOTICE OF EXERCISE OF NET ISSUANCE CONVERSION RIGHTS
To: Copper Mountain Communications, Inc.
1. The undersigned, the registered holder of the Warrant delivered
herewith (the "Warrant"), hereby elects to exercise the Conversion Right (as
defined in Section 10.3 of the Warrant) as provided herein. __________ shares
subject to the Warrant are being surrendered hereby in exercise of the
Conversion Right. The number of shares to be issued pursuant to this exercise
shall be determined by reference to the formula in Section 10.3(a) of the
Warrant, which requires the use of the "fair market value" of the Company's
stock. As of the Determination Date (as defined in the Warrant), the "fair
market value" of one share of Series Preferred Stock (or Common Stock if the
Series A Preferred Stock has been automatically converted into Common Stock)
shall be determined in the manner provided in Section 10.3(c) of the Warrant,
which amount has been determined by the undersigned (or agreed to by the holder
of the Warrant and Copper Mountain Communications, Inc.) to be $__________ per
share. Therefore, __________ shares are to be issued to the undersigned pursuant
to this exercise.
2. Please issue a certificate or certificates representing said shares in
the name of the undersigned or in such other name or names as are specified
below:
_____________________________
(Name)
_____________________________
_____________________________
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.
In support thereof, the undersigned has executed an Investment Representation
Statement attached hereto as Schedule 1.
(Signature)
(Date)
16
<PAGE>
Schedule 1
----------
INVESTMENT REPRESENTATION STATEMENT
Purchaser:
Company: Copper Mountain Communications, Inc.
Security: Series A Preferred Stock
Amount:
Date:
In connection with the purchase of the above-listed securities and
underlying Common Stock (the "Securities") the undersigned (the "Purchaser")
represents to the Company as follows:
(a) The Purchaser is aware of the Company's business affairs and financial
condition, and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Securities. The Purchaser is
purchasing the Securities for its own account for investment purposes only and
not with a view to, or for the resale in connection with, any "distribution"
thereof for purposes of the Securities Act of 1933, as amended (the "Act").
(b) The Purchaser understands that the Securities have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of the
Purchaser's investment intent as expressed herein. In this connection, the
Purchaser understands that, in the view of the Securities and Exchange
Commission ("SEC"), the statutory basis for such exemption may be unavailable if
the Purchaser's representation was predicated solely upon a present intention to
hold these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future.
(c) The Purchaser further understands that the Securities must be held
indefinitely unless subsequently registered under the Act or unless an exemption
from registration is otherwise available. Moreover, the Purchaser understands
that the Company is under no obligation to register the Securities except as set
forth in the Warrant under which the Securities are being acquired. In addition,
the Purchaser understands that the certificate evidencing the Securities will be
imprinted with the legend referred to in the Warrant under which the Securities
are being purchased.
17
<PAGE>
(d) The Purchaser is aware of the provisions of Rule 144 and 144A,
promulgated under the Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among other
things: The availability of certain public information about the Company, the
resale occurring not less than two years after the party has purchased and paid
for the securities to be sold; the sale being made through a broker in 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 amount of securities being sold during any three-month period
not exceeding the specified limitations stated therein.
(e) The Purchaser further understands that at the time it wishes to sell
the Securities there may be no public market upon which to make such a sale, and
that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 and 144A, and
that, in such event, the Purchaser may be precluded from selling the Securities
under Rule 144 and 144A even if the two-year minimum holding period had been
satisfied.
(f) The Purchaser further understands that in the event all of the
requirements of Rule 144 and 144A are not satisfied, registration under the Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
Purchaser:
Date: __________, 199_
18
<PAGE>
EXHIBIT B
---------
Articles of Incorporation, as Amended
19
<PAGE>
EXHIBIT 10.15
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series C Preferred Stock of
Copper Mountain Networks, Inc.
Dated as of October 29, 1997 (the "Effective Date")
WHEREAS, Copper Mountain Networks, Inc., a California corporation (the
"Company") has entered into a Master Lease Agreement dated as of September 30,
1997, Equipment Schedules Nos. VL-1 and VL-2 dated as of September 30, 1997, and
related Summary Equipment Schedules (collectively, the "Leases") with Comdisco,
Inc., a Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Leases, the right to purchase shares of its Series C Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
----------------------------------------------
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe to and purchase, from the Company, 8,421 fully paid and non-assessable
shares of the Company's Series C Preferred Stock ("Preferred Stock") at a
purchase price of $4.75 per share (the "Exercise Price"). The number and
purchase price of such shares are subject to adjustment as provided in Section 8
hereof.
2. TERM OF THE WARRANT AGREEMENT.
-----------------------------
Except as otherwise provided for herein, the term of this Warrant Agreement
and the right to purchase Preferred Stock as granted herein shall commence on
the Effective Date and shall be exercisable for a period of (i) ten (10) years
or (ii) five (5) years from the effective date of the Company's initial public
offering, whichever is longer.
3. EXERCISE OF THE PURCHASE RIGHTS.
-------------------------------
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder, in whole or in part, at any time, or from time to time, prior
to the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise in the form attached hereto
as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly
upon receipt of the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and in no event later than twenty-one
(21) days thereafter, the Company shall issue to the Warrantholder a certificate
for the number of shares of Preferred Stock purchased and shall execute the
acknowledgment of exercise in the form attached hereto as Exhibit II (the
"Acknowledgment of Exercise") indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
-1-
<PAGE>
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be
exercised under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred
Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public offering of
the Company's Common Stock, and if the Company's Registration Statement
relating to such public offering has been declared effective by the SEC,
then the fair market value per share shall be the product of (x) the
initial "Price to Public" specified in the final prospectus with respect to
the offering and (y) the number of shares of Common Stock into which each
share of Preferred Stock is convertible at the time of such exercise;
(ii) if this Warrant is exercised after, and not in connection with the
Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value
shall be deemed to be the product of (x) the average of the closing
prices over a twenty-one (21) day period ending three days before the
day the current fair market value of the securities is being
determined and (y) the number of shares of Common Stock into which
each share of Preferred Stock is convertible at the time of such
exercise; or
(b) if actively traded over-the-counter, the fair market value
shall be deemed to be the product of (x) the average of the closing
bid and asked prices quoted on the NASDAQ system (or similar system)
over the twenty-one (21) day period ending three days before the day
the current fair market value of the securities is being determined
and (y) the number of shares of Common Stock into which each share of
Preferred Stock is convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
current fair market value of Preferred Stock shall be the product of (x)
the highest price per share which the Company could obtain from a willing
buyer (not a current employee or director) for shares of Common Stock sold
by the Company, from authorized but unissued shares, as determined in good
faith by its Board of Directors and (y) the number of shares of Common
Stock into which each share of Preferred Stock is convertible at the time
of such exercise, unless the Company shall become subject to a merger,
acquisition or other consolidation pursuant to which the Company is not the
surviving party, in which case the fair market value of Preferred Stock
shall be deemed to be the value received by the holders of the Company's
Preferred Stock on a common equivalent basis pursuant to such merger or
acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
---------------------
(a) Authorization and Reservation of Shares. During the term of this
---------------------------------------
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required to
-----------------------
be reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration under the
Securities Act of 1933, as amended ("1933 Act"), as then in effect, or any
similar Federal statute then enforced, or any state securities law, required by
reason of any transfer involved in such conversion), or listing on any domestic
securities exchange, before such shares may be issued upon the exercise or
partial exercise of this warrant, the Company will, at its expense and as
expeditiously as possible, use its best efforts to
-2-
<PAGE>
cause such shares to be duly registered, listed or approved for listing on such
domestic securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
-----------------------------
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
------------------------
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
----------------------
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
-----------------
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
-------------------------
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation whether or not the Company is the surviving corporation, or the sale
of all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of preferred stock or other securities of the successor corporation
resulting from such Merger Event, equivalent in value to that which would have
been issuable if Warrantholder had exercised this Warrant immediately prior to
the Merger Event. In any such case, appropriate adjustment (as determined in
good faith by the Company's Board of Directors) shall be made in the application
of the provisions of this Warrant Agreement with respect to the rights and
interest of the Warrantholder after the Merger Event to the end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
--------------------------
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
If all of the Preferred Stock is converted into shares of Common Stock in
connection with a registration of the Company's Common Stock under the 1933 Act
or otherwise pursuant to Section E. 3. of Article III of the Company's Articles
of Incorporation, then this Warrant shall automatically become exercisable for
that number of shares of Common Stock equal to the number of shares of Common
Stock that would have been received if this Warrant had been exercised in full
and the shares of Preferred Stock received thereupon had been simultaneously
converted into shares of Common Stock immediately prior to such event, and the
Exercise Price shall be automatically adjusted to equal the amount obtained by
dividing (i) the aggregate Exercise Price of the shares of Preferred Stock for
which this Warrant was exerciseable immediately prior to such conversion, by
(ii) the number of shares of Common Stock for which this Warrant is exercisable
immediately after such conversion.
(c) Subdivision or Combination of Shares. If the Company at any time shall
------------------------------------
combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
---------------
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the
-3-
<PAGE>
Company's stock, then the Exercise Price shall be adjusted, from and after the
record date of such dividend or distribution, to that price determined by
multiplying the Exercise Price in effect immediately prior to such record date
by a fraction (i) the numerator of which shall be the total number of all shares
of the Company's stock outstanding immediately prior to such dividend or
distribution, and (ii) the denominator of which shall be the total number of all
shares of the Company's stock outstanding immediately after such dividend or
distribution. The Warrantholder shall thereafter be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of shares of Preferred
Stock (calculated to the nearest whole share) obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
shares of Preferred Stock issuable upon the exercise hereof immediately prior to
such adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment.
(e) Antidilution Rights. Additional antidilution rights applicable to
-------------------
the Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit IV (the "Charter"). The
--
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter. The Company shall provide
Warrantholder with prior written notice of any issuance of its stock or other
equity security to occur after the Effective Date of this Warrant, which notice
shall include (a) the price at which such stock or security is to be sold, (b)
the number of shares to be issued, and (c) such other information as necessary
for Warrantholder to determine if a dilutive event has occurred.
(f) Notice of Adjustments. If: (i) the Company shall declare any dividend
---------------------
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) the Company shall offer for subscription prorata to the holders
of any class of its Preferred or other convertible stock any additional shares
of stock of any class or other rights; (iii) there shall be any Merger Event;
(iv) there shall be an initial public offering; or (v) there shall be any
voluntary dissolution, liquidation or winding up of the Company; then, in
connection with each such event, the Company shall send to the Warrantholder:
(A) at least twenty (20) days' prior written notice of the date on which the
books of the Company shall close or a record shall be taken for such dividend,
distribution, subscription rights (specifying the date on which the holders of
Preferred Stock shall be entitled thereto) or for determining rights to vote in
respect of such Merger Event, dissolution, liquidation or winding up; (B) in the
case of any such Merger Event, dissolution, liquidation or winding up, at least
twenty (20) days' prior written notice of the date when the same shall take
place (and specifying the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such Merger Event, dissolution, liquidation or winding up); and
(C) in the case of a public offering, the Company shall give the Warrantholder
at least twenty (20) days written notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(g) Timely Notice. Failure to timely provide such notice required by
-------------
subsection (f) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
--------------------------------------------------------
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
------------------------------
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever; provided, however, that
the Preferred Stock issuable pursuant to this Warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Charter and Bylaws, as amended. The issuance of certificates for
shares of Preferred Stock upon exercise of the Warrant Agreement shall be made
without charge to the Warrantholder for any issuance tax in respect thereof, or
other cost incurred by the Company in connection with such exercise and the
related issuance of shares of Preferred Stock. The Company shall not be required
to pay any tax which may be payable in respect of any transfer involved and the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
-------------
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of
-4-
<PAGE>
the Company, and this Warrant Agreement is not inconsistent with the Company's
Charter or Bylaws, does not contravene any law or governmental rule, regulation
or order applicable to it, do not and will not contravene any provision of, or
constitute a default under, any indenture, mortgage, contract or other
instrument to which it is a party or by which it is bound, and the Leases and
this Warrant Agreement constitute a legal, valid and binding agreement of the
Company, enforceable in accordance with its terms (except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization or other
similar laws relating to the enforcement of creditors' rights generally and
general principles of equity relating to the availability of remedies).
(c) Consents and Approvals. No consent or approval of, giving of notice
----------------------
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
-----------------
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. In addition:
(i) The authorized capital of the Company consists of 22,695,536 shares
of Common Stock, of which 1,474,694 shares are issued and outstanding as of
October 29, 1997, and 7,302,464 shares of Preferred Stock, of which (A)
2,773,000 shares have been designated as Series A Preferred Stock, of
which, 2,723,000 shares are issued and outstanding as of October 29, 1997,
(B) 1,999,464 shares have been designated as Series B Preferred Stock, of
which 1,852,063 shares are issued and outstanding as of October 29, 1997,
and (C) 2,530,000 shares have been designated as Series C Preferred Stock,
of which 2,310,533 are issued and outstanding as of October 29, 1997. The
shares of the Company's Preferred Stock outstanding as of October 29, 1997
are convertible into shares of Common Stock on a one-for-one basis.
(ii) As of October 29, 1997, the Company has reserved for issuance to
employees, directors, officers and consultants of the Company 1,194,300
shares of Common Stock pursuant to outstanding stock options under its 1996
Equity Incentive Plan (the "1996 Plan") and 660,642 shares of Common Stock
pursuant to future stock awards to be approved by the Company's Board of
Directors under the 1996 Plan. As of October 29, 1997, the Company has also
reserved for issuance 50,000 shares of Series A Preferred Stock pursuant to
outstanding warrants and 147,401 shares of Series B Preferred Stock
pursuant to outstanding warrants. As of October 29, 1997, and except with
respect to (A) the conversion privileges of the Company's Preferred Stock,
(B) obligations to issue an aggregate 8,125 shares of Common Stock to
certain consultants for services rendered, and (C) obligations to issue
certain warrants to purchase Series C Preferred Stock to Comdisco, Inc.,
there are no other options, warrants, conversion privileges or other rights
presently outstanding to purchase or otherwise acquire any authorized but
unissued shares of the Company's capital stock or other securities of the
Company.
(iii) In accordance with the Company's Articles of Incorporation, no
shareholder of the Company has preemptive rights to purchase new issuances
of the Company's capital stock.
(e) Insurance. The Company has in full force and effect insurance
---------
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Other Commitments to Register Securities. Except as set forth in the
----------------------------------------
Amended and Restated Investors' Rights Agreement dated as of October 29, 1997,
the Company is not, pursuant to the terms of any other agreement currently in
existence, under any obligation to register under the 1933 Act any of its
presently outstanding securities or any of its securities which may hereafter be
issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
------------------
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the applicable state
securities laws.
(h) Compliance with Rule 144. At the written request of the Warrantholder,
------------------------
who proposes to sell Preferred Stock issuable upon the exercise of the Warrant
in compliance with Rule 144 promulgated by the Securities and Exchange
Commission, the Company shall furnish to the Warrantholder, within ten days
after receipt of such request, a written statement confirming the Company's
compliance with the filing requirements of the Securities and Exchange
Commission as set forth in such Rule, as such Rule may be amended from time to
time.
-5-
<PAGE>
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
--------------------------------------------------
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or the
------------------
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that this Warrant and
-------------
the Preferred Stock issuable upon exercise of this Warrant are not registered
under the 1933 Act or qualified under applicable state securities laws on the
ground that the issuance contemplated by this Warrant Agreement will be exempt
from the registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
-------------------------------------
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever
the restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience in
--------------
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
-----------------------
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1934 Act (the "1934 Act"), or file reports pursuant to
Section 15(d), of the 1934 Act, or if a registration statement covering the
securities under the 1933 Act is not in effect when it desires to sell (i) the
rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii)
the Preferred Stock issuable upon exercise of the right to purchase, it may be
required to hold such securities for an indefinite period. The Warrantholder
also understands that any sale of its rights to purchase Preferred Stock or
Preferred Stock which might be made by it in reliance upon Rule 144 under the
1933 Act may be made only in accordance with the terms and conditions of that
Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor" within
-------------------
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
-6-
<PAGE>
11. TRANSFERS.
---------
Subject to the terms and conditions contained in Section 10 hereof and
subject to compliance with applicable securities laws, this Warrant Agreement
and all rights hereunder are transferable in whole or in part by the
Warrantholder and any successor transferee, provided, however, in no event shall
the number of transfers of the rights and interests in all of the Warrants
exceed three (3) transfers. The transfer shall be recorded on the books of the
Company upon receipt by the Company of a notice of transfer in the form attached
hereto as Exhibit III (the "Transfer Notice"), at its principal offices and the
payment to the Company of all transfer taxes and other governmental charges
imposed on such transfer.
12. MISCELLANEOUS.
-------------
(a) Effective Date. The provisions of this Warrant Agreement shall be
--------------
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall
be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
---------------
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
-------------
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts. This Warrant 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.
(e) Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, Attention: James Labe, Venture
Group, cc: Legal Department, Attention: General Counsel, (and/or, if by
facsimile, (847)518-5465 and (847)518-5088) and (ii) to the Company at 3931
Sorrento Valley Road, San Diego, California 92121, Attention: President (and/or
if by facsimile, (619-453-9244) or at such other address as any such party may
------------
subsequently designate by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
--------
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
-----------------------
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions of
--------
the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
------------
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended by
----------
a written instrument signed by the Company and by the Warrantholder.
-7-
<PAGE>
(k) Additional Documents. The Company, upon execution of this Warrant
--------------------
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above.
(l) Market Stand-Off Agreement. The Warrantholder hereby agrees that it
--------------------------
shall not sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by it (other than those included in the
registration) for a period specified by a representative of the underwriters of
Common Stock (or other securities) of the Company not to exceed one hundred
eighty (180) days following the effective date of a registration statement of
the Company filed under the Securities Act, provided that:
(i) such agreement shall apply only to the Company's initial public
offering; and
(ii) all officers and directors of the Company enter into similar
agreements.
The Warrantholder agrees to execute and deliver such other agreements as
may be reasonably requested by the Company or the underwriter which are
consistent with the foregoing or which are necessary to give further effect
thereto. The obligations described in this paragraph shall not apply to a
registration relating solely to employee benefit plans on Form S-8 or similar
forms that may be promulgated in the future, or a registration relating solely
to a Commission Rule 145 transaction on Form S-4 or similar forms that may be
promulgated in the future. The Company may impose stop-transfer instructions
with respect to the shares of Common Stock (or other securities) subject to the
foregoing restriction until the end of said one hundred eighty (180) day period.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
Company: COPPER MOUNTAIN NETWORKS, INC.
By: /s/ JOSEPH D. MARKEE
------------------------------------
Title: President
------------------------------------
Warrantholder: COMDISCO, INC.
By: /s/ JAMES P. LABE
------------------------------------
Title: President
------------------------------------
-8-
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
To: ____________________________
(1) The undersigned Warrantholder hereby elects to purchase _______ shares of
the Series C Preferred Stock of Copper Mountain Networks, Inc., pursuant to
the terms of the Warrant Agreement dated the ______ day of October __, 1997
(the "Warrant Agreement") between Copper Mountain Networks, Inc. and the
Warrantholder, and tenders herewith payment of the purchase price for such
shares in full, together with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Series C Preferred Stock of Copper
Mountain Networks, Inc., the undersigned hereby confirms and acknowledges
the investment representations and warranties made in Section 10 of the
Warrant Agreement. Such representations and warranties are true and
correct as of the date set forth below.
(3) Please issue a certificate or certificates representing said shares of
Series C Preferred Stock in the name of the undersigned or in such other
name as is specified below.
_________________________________
(Name)
_________________________________
(Address)
Warrantholder: COMDISCO, INC.
By: _________________________
Title: _________________________
Date: _________________________
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<PAGE>
EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
The undersigned ____________________________________, hereby acknowledge
receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase ____ shares
of the Series C Preferred Stock of Copper Mountain Networks, Inc., pursuant to
the terms of the Warrant Agreement, and further acknowledges that ______ shares
remain subject to purchase under the terms of the Warrant Agreement.
Company: COPPER MOUNTAIN NETWORKS, INC.
By: ___________________________________
Title: ___________________________________
Date: ___________________________________
-10-
<PAGE>
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form and
supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
___________________________________________________________________
(Please Print)
whose address is___________________________________________________
___________________________________________________________________
Dated: ____________________________________
Holder's Signature: _______________________
Holder's Address: _______________________
____________________________________________
Signature Guaranteed: ____________________________________________
NOTE: The signature to this Transfer Notice must correspond with the name as it
appears on the face of the Warrant Agreement, without alteration or
enlargement or any change whatever. Officers of corporations and those
acting in a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant Agreement.
-11-
<PAGE>
EXHIBIT 10.16
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AS
AMENDED, OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO OR AN OPINION OF COUNSEL (WHICH MAY BE COMPANY COUNSEL)
REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES
LAWS.
WARRANT AGREEMENT
To Purchase Shares of the Series C Preferred Stock of
Copper Mountain Networks, Inc.
Dated as of April 27, 1998 (the "Effective Date")
WHEREAS, Copper Mountain Networks, Inc., a California corporation (the
"Company") has entered into a Master Lease Agreement dated as of September 30,
1997, Equipment Schedules Nos. VL-1 and VL-2 dated as of September 30, 1997, and
related Summary Equipment Schedules (collectively, the "Leases") with Comdisco,
Inc., a Delaware corporation (the "Warrantholder"); and
WHEREAS, the Company desires to grant to Warrantholder, in consideration
for such Leases, the right to purchase shares of its Series C Preferred Stock;
NOW, THEREFORE, in consideration of the Warrantholder executing and
delivering such Leases and in consideration of mutual covenants and agreements
contained herein, the Company and Warrantholder agree as follows:
1. GRANT OF THE RIGHT TO PURCHASE PREFERRED STOCK.
----------------------------------------------
The Company hereby grants to the Warrantholder, and the Warrantholder is
entitled, upon the terms and subject to the conditions hereinafter set forth, to
subscribe to and purchase, from the Company, 6,316 fully paid and non-assessable
shares of the Company's Series C Preferred Stock ("Preferred Stock") at a
purchase price of $4.75 per share (the "Exercise Price"). The number and
purchase price of such shares are subject to adjustment as provided in Section 8
hereof.
2. TERM OF THE WARRANT AGREEMENT.
-----------------------------
Except as otherwise provided for herein, the term of this Warrant Agreement
and the right to purchase Preferred Stock as granted herein shall commence on
the Effective Date and shall be exercisable for a period of (i) ten (10) years
or (ii) five (5) years from the effective date of the Company's initial public
offering, whichever is longer.
3. EXERCISE OF THE PURCHASE RIGHTS.
-------------------------------
The purchase rights set forth in this Warrant Agreement are exercisable by
the Warrantholder, in whole or in part, at any time, or from time to time, prior
to the expiration of the term set forth in Section 2 above, by tendering to the
Company at its principal office a notice of exercise in the form attached hereto
as Exhibit I (the "Notice of Exercise"), duly completed and executed. Promptly
upon receipt of the Notice of Exercise and the payment of the purchase price in
accordance with the terms set forth below, and in no event later than twenty-one
(21) days thereafter, the Company shall issue to the Warrantholder a certificate
for the number of shares of Preferred Stock purchased and shall execute the
acknowledgment of exercise in the form attached hereto as Exhibit II (the
"Acknowledgment of Exercise") indicating the number of shares which remain
subject to future purchases, if any.
The Exercise Price may be paid at the Warrantholder's election either (i)
by cash or check, or (ii) by surrender of Warrants ("Net Issuance") as
determined below. If the Warrantholder elects the Net Issuance method, the
Company will issue Preferred Stock in accordance with the following formula:
X = Y(A-B)
------
A
-1-
<PAGE>
Where: X = the number of shares of Preferred Stock to be issued to the
Warrantholder.
Y = the number of shares of Preferred Stock requested to be exercised
under this Warrant Agreement.
A = the fair market value of one (1) share of Preferred Stock.
B = the Exercise Price.
For purposes of the above calculation, current fair market value of
Preferred Stock shall mean with respect to each share of Preferred Stock:
(i) if the exercise is in connection with an initial public offering
of the Company's Common Stock, and if the Company's Registration Statement
relating to such public offering has been declared effective by the SEC,
then the fair market value per share shall be the product of (x) the
initial "Price to Public" specified in the final prospectus with respect to
the offering and (y) the number of shares of Common Stock into which each
share of Preferred Stock is convertible at the time of such exercise;
(ii) if this Warrant is exercised after, and not in connection with
the Company's initial public offering, and:
(a) if traded on a securities exchange, the fair market value
shall be deemed to be the product of (x) the average of the closing
prices over a twenty-one (21) day period ending three days before the
day the current fair market value of the securities is being
determined and (y) the number of shares of Common Stock into which
each share of Preferred Stock is convertible at the time of such
exercise; or
(b) if actively traded over-the-counter, the fair market value
shall be deemed to be the product of (x) the average of the closing
bid and asked prices quoted on the NASDAQ system (or similar system)
over the twenty-one (21) day period ending three days before the day
the current fair market value of the securities is being determined
and (y) the number of shares of Common Stock into which each share of
Preferred Stock is convertible at the time of such exercise;
(iii) if at any time the Common Stock is not listed on any securities
exchange or quoted in the NASDAQ System or the over-the-counter market, the
current fair market value of Preferred Stock shall be the product of (x)
the highest price per share which the Company could obtain from a willing
buyer (not a current employee or director) for shares of Common Stock sold
by the Company, from authorized but unissued shares, as determined in good
faith by its Board of Directors and (y) the number of shares of Common
Stock into which each share of Preferred Stock is convertible at the time
of such exercise, unless the Company shall become subject to a merger,
acquisition or other consolidation pursuant to which the Company is not the
surviving party, in which case the fair market value of Preferred Stock
shall be deemed to be the value received by the holders of the Company's
Preferred Stock on a common equivalent basis pursuant to such merger or
acquisition.
Upon partial exercise by either cash or Net Issuance, the Company shall
promptly issue an amended Warrant Agreement representing the remaining number of
shares purchasable hereunder. All other terms and conditions of such amended
Warrant Agreement shall be identical to those contained herein, including, but
not limited to the Effective Date hereof.
4. RESERVATION OF SHARES.
---------------------
(a) Authorization and Reservation of Shares. During the term of this
---------------------------------------
Warrant Agreement, the Company will at all times have authorized and reserved a
sufficient number of shares of its Preferred Stock to provide for the exercise
of the rights to purchase Preferred Stock as provided for herein.
(b) Registration or Listing. If any shares of Preferred Stock required to
-----------------------
be reserved hereunder require registration with or approval of any governmental
authority under any Federal or State law (other than any registration under the
Securities Act of 1933, as amended ("1933 Act"), as then in effect, or any
similar Federal statute then enforced, or any state securities law, required by
reason of any transfer involved in such conversion), or listing on any domestic
securities exchange, before such shares may be issued upon the exercise or
partial exercise of this warrant, the Company will, at its expense and as
expeditiously as possible, use its best efforts to
-2-
<PAGE>
cause such shares to be duly registered, listed or approved for listing on such
domestic securities exchange, as the case may be.
5. NO FRACTIONAL SHARES OR SCRIP.
-----------------------------
No fractional shares or scrip representing fractional shares shall be
issued upon the exercise of the Warrant, but in lieu of such fractional shares
the Company shall make a cash payment therefor upon the basis of the Exercise
Price then in effect.
6. NO RIGHTS AS SHAREHOLDER.
------------------------
This Warrant Agreement does not entitle the Warrantholder to any voting
rights or other rights as a shareholder of the Company prior to the exercise of
the Warrant.
7. WARRANTHOLDER REGISTRY.
----------------------
The Company shall maintain a registry showing the name and address of the
registered holder of this Warrant Agreement.
8. ADJUSTMENT RIGHTS.
-----------------
The purchase price per share and the number of shares of Preferred Stock
purchasable hereunder are subject to adjustment, as follows:
(a) Merger and Sale of Assets. If at any time there shall be a capital
-------------------------
reorganization of the shares of the Company's stock (other than a combination,
reclassification, exchange or subdivision of shares otherwise provided for
herein), or a merger or consolidation of the Company with or into another
corporation whether or not the Company is the surviving corporation, or the sale
of all or substantially all of the Company's properties and assets to any other
person (hereinafter referred to as a "Merger Event"), then, as a part of such
Merger Event, lawful provision shall be made so that the Warrantholder shall
thereafter be entitled to receive, upon exercise of the Warrant, the number of
shares of preferred stock or other securities of the successor corporation
resulting from such Merger Event, equivalent in value to that which would have
been issuable if Warrantholder had exercised this Warrant immediately prior to
the Merger Event. In any such case, appropriate adjustment (as determined in
good faith by the Company's Board of Directors) shall be made in the application
of the provisions of this Warrant Agreement with respect to the rights and
interest of the Warrantholder after the Merger Event to the end that the
provisions of this Warrant Agreement (including adjustments of the Exercise
Price and number of shares of Preferred Stock purchasable) shall be applicable
to the greatest extent possible.
(b) Reclassification of Shares. If the Company at any time shall, by
--------------------------
combination, reclassification, exchange or subdivision of securities or
otherwise, change any of the securities as to which purchase rights under this
Warrant Agreement exist into the same or a different number of securities of any
other class or classes, this Warrant Agreement shall thereafter represent the
right to acquire such number and kind of securities as would have been issuable
as the result of such change with respect to the securities which were subject
to the purchase rights under this Warrant Agreement immediately prior to such
combination, reclassification, exchange, subdivision or other change.
If all of the Preferred Stock is converted into shares of Common Stock in
connection with a registration of the Company's Common Stock under the 1933 Act
or otherwise pursuant to Section E. 3. of Article III of the Company's Articles
of Incorporation, then this Warrant shall automatically become exercisable for
that number of shares of Common Stock equal to the number of shares of Common
Stock that would have been received if this Warrant had been exercised in full
and the shares of Preferred Stock received thereupon had been simultaneously
converted into shares of Common Stock immediately prior to such event, and the
Exercise Price shall be automatically adjusted to equal the amount obtained by
dividing (i) the aggregate Exercise Price of the shares of Preferred Stock for
which this Warrant was exerciseable immediately prior to such conversion, by
(ii) the number of shares of Common Stock for which this Warrant is exercisable
immediately after such conversion.
(c) Subdivision or Combination of Shares. If the Company at any time shall
------------------------------------
combine or subdivide its Preferred Stock, the Exercise Price shall be
proportionately decreased in the case of a subdivision, or proportionately
increased in the case of a combination.
(d) Stock Dividends. If the Company at any time shall pay a dividend
---------------
payable in, or make any other distribution (except any distribution specifically
provided for in the foregoing subsections (a) or (b)) of the
-3-
<PAGE>
Company's stock, then the Exercise Price shall be adjusted, from and after the
record date of such dividend or distribution, to that price determined by
multiplying the Exercise Price in effect immediately prior to such record date
by a fraction (i) the numerator of which shall be the total number of all shares
of the Company's stock outstanding immediately prior to such dividend or
distribution, and (ii) the denominator of which shall be the total number of all
shares of the Company's stock outstanding immediately after such dividend or
distribution. The Warrantholder shall thereafter be entitled to purchase, at the
Exercise Price resulting from such adjustment, the number of shares of Preferred
Stock (calculated to the nearest whole share) obtained by multiplying the
Exercise Price in effect immediately prior to such adjustment by the number of
shares of Preferred Stock issuable upon the exercise hereof immediately prior to
such adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment.
(e) Antidilution Rights. Additional antidilution rights applicable to the
-------------------
Preferred Stock purchasable hereunder are as set forth in the Company's
Certificate of Incorporation, as amended through the Effective Date, a true and
complete copy of which is attached hereto as Exhibit IV (the "Charter"). The
--
Company shall promptly provide the Warrantholder with any restatement,
amendment, modification or waiver of the Charter. The Company shall provide
Warrantholder with prior written notice of any issuance of its stock or other
equity security to occur after the Effective Date of this Warrant, which notice
shall include (a) the price at which such stock or security is to be sold, (b)
the number of shares to be issued, and (c) such other information as necessary
for Warrantholder to determine if a dilutive event has occurred.
(f) Notice of Adjustments. If: (i) the Company shall declare any dividend
---------------------
or distribution upon its stock, whether in cash, property, stock or other
securities; (ii) the Company shall offer for subscription prorata to the holders
of any class of its Preferred or other convertible stock any additional shares
of stock of any class or other rights; (iii) there shall be any Merger Event;
(iv) there shall be an initial public offering; or (v) there shall be any
voluntary dissolution, liquidation or winding up of the Company; then, in
connection with each such event, the Company shall send to the Warrantholder:
(A) at least twenty (20) days' prior written notice of the date on which the
books of the Company shall close or a record shall be taken for such dividend,
distribution, subscription rights (specifying the date on which the holders of
Preferred Stock shall be entitled thereto) or for determining rights to vote in
respect of such Merger Event, dissolution, liquidation or winding up; (B) in the
case of any such Merger Event, dissolution, liquidation or winding up, at least
twenty (20) days' prior written notice of the date when the same shall take
place (and specifying the date on which the holders of Preferred Stock shall be
entitled to exchange their Preferred Stock for securities or other property
deliverable upon such Merger Event, dissolution, liquidation or winding up); and
(C) in the case of a public offering, the Company shall give the Warrantholder
at least twenty (20) days written notice prior to the effective date thereof.
Each such written notice shall set forth, in reasonable detail, (i) the
event requiring the adjustment, (ii) the amount of the adjustment, (iii) the
method by which such adjustment was calculated, (iv) the Exercise Price, and (v)
the number of shares subject to purchase hereunder after giving effect to such
adjustment, and shall be given by first class mail, postage prepaid, addressed
to the Warrantholder, at the address as shown on the books of the Company.
(g) Timely Notice. Failure to timely provide such notice required by
-------------
subsection (f) above shall entitle Warrantholder to retain the benefit of the
applicable notice period notwithstanding anything to the contrary contained in
any insufficient notice received by Warrantholder. The notice period shall begin
on the date Warrantholder actually receives a written notice containing all the
information specified above.
9. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
--------------------------------------------------------
(a) Reservation of Preferred Stock. The Preferred Stock issuable upon
------------------------------
exercise of the Warrantholder's rights has been duly and validly reserved and,
when issued in accordance with the provisions of this Warrant Agreement, will be
validly issued, fully paid and non-assessable, and will be free of any taxes,
liens, charges or encumbrances of any nature whatsoever; provided, however, that
the Preferred Stock issuable pursuant to this Warrant Agreement may be subject
to restrictions on transfer under state and/or Federal securities laws. The
Company has made available to the Warrantholder true, correct and complete
copies of its Charter and Bylaws, as amended. The issuance of certificates for
shares of Preferred Stock upon exercise of the Warrant Agreement shall be made
without charge to the Warrantholder for any issuance tax in respect thereof, or
other cost incurred by the Company in connection with such exercise and the
related issuance of shares of Preferred Stock. The Company shall not be required
to pay any tax which may be payable in respect of any transfer involved and the
issuance and delivery of any certificate in a name other than that of the
Warrantholder.
(b) Due Authority. The execution and delivery by the Company of this
-------------
Warrant Agreement and the performance of all obligations of the Company
hereunder, including the issuance to Warrantholder of the right to acquire the
shares of Preferred Stock, have been duly authorized by all necessary corporate
action on the part of
-4-
<PAGE>
the Company, and this Warrant Agreement is not inconsistent with the Company's
Charter or Bylaws, does not contravene any law or governmental rule, regulation
or order applicable to it, do not and will not contravene any provision of, or
constitute a default under, any indenture, mortgage, contract or other
instrument to which it is a party or by which it is bound, and the Leases and
this Warrant Agreement constitute a legal, valid and binding agreement of the
Company, enforceable in accordance with its terms (except as such enforceability
may be limited by applicable bankruptcy, insolvency, reorganization or other
similar laws relating to the enforcement of creditors' rights generally and
general principles of equity relating to the availability of remedies).
(c) Consents and Approvals. No consent or approval of, giving of notice
----------------------
to, registration with, or taking of any other action in respect of any state,
Federal or other governmental authority or agency is required with respect to
the execution, delivery and performance by the Company of its obligations under
this Warrant Agreement, except for the filing of notices pursuant to Regulation
D under the 1933 Act and any filing required by applicable state securities law,
which filings will be effective by the time required thereby.
(d) Issued Securities. All issued and outstanding shares of Common Stock,
-----------------
Preferred Stock or any other securities of the Company have been duly authorized
and validly issued and are fully paid and nonassessable. All outstanding shares
of Common Stock, Preferred Stock and any other securities were issued in full
compliance with all Federal and state securities laws. In addition:
(i) The authorized capital of the Company consists of 22,697,536
shares of Common Stock, of which 1,474,694 shares are issued and
outstanding as of April 27, 1998, and 7,302,464 shares of Preferred Stock,
of which (A) 2,773,000 shares have been designated as Series A Preferred
Stock, of which, 2,723,000 shares are issued and outstanding as of April
27, 1998, (B) 1,999,464 shares have been designated as Series B Preferred
Stock, of which 1,852,063 shares are issued and outstanding as of April 27,
1998, and (C) 2,530,000 shares have been designated as Series C Preferred
Stock, of which 2,422,361 are issued and outstanding as of April 27, 1998.
The shares of the Company's Preferred Stock outstanding as of April 28,
1998 are convertible into shares of Common Stock on a one-for-one basis.
(ii) As of April 27, 1998, the Company has reserved for issuance to
employees, directors, officers and consultants of the Company 1,283,200
shares of Common Stock pursuant to outstanding stock options under its 1996
Equity Incentive Plan (the "1996 Plan") and 571,742 shares of Common Stock
pursuant to future stock awards to be approved by the Company's Board of
Directors under the 1996 Plan. As of October 29, 1997, the Company has
also reserved for issuance 50,000 shares of Series A Preferred Stock
pursuant to outstanding warrants and 147,401 shares of Series B Preferred
Stock pursuant to outstanding warrants. As of April 27, 1998, and except
with respect to (A) the conversion privileges of the Company's Preferred
Stock, (B) obligations to issue an aggregate 1,250 shares of Common Stock
to certain consultants for services rendered, and (C) obligations to issue
certain warrants to purchase Series C Preferred Stock to Comdisco, Inc.,
there are no other options, warrants, conversion privileges or other rights
presently outstanding to purchase or otherwise acquire any authorized but
unissued shares of the Company's capital stock or other securities of the
Company.
(iii) In accordance with the Company's Articles of Incorporation, no
shareholder of the Company has preemptive rights to purchase new issuances
of the Company's capital stock.
(e) Insurance. The Company has in full force and effect insurance
---------
policies, with extended coverage, insuring the Company and its property and
business against such losses and risks, and in such amounts, as are customary
for corporations engaged in a similar business and similarly situated and as
otherwise may be required pursuant to the terms of any other contract or
agreement.
(f) Other Commitments to Register Securities. Except as set forth in the
----------------------------------------
Amended and Restated Investors' Rights Agreement dated as of October 29, 1997,
the Company is not, pursuant to the terms of any other agreement currently in
existence, under any obligation to register under the 1933 Act any of its
presently outstanding securities or any of its securities which may hereafter be
issued.
(g) Exempt Transaction. Subject to the accuracy of the Warrantholder's
------------------
representations in Section 10 hereof, the issuance of the Preferred Stock upon
exercise of this Warrant will constitute a transaction exempt from (i) the
registration requirements of Section 5 of the 1933 Act, in reliance upon Section
4(2) thereof, and (ii) the qualification requirements of the applicable state
securities laws.
(h) Compliance with Rule 144. At the written request of the Warrantholder,
------------------------
who proposes to sell Preferred Stock issuable upon the exercise of the Warrant
in compliance with Rule 144 promulgated by the Securities and Exchange
Commission, the Company shall furnish to the Warrantholder, within ten days
after receipt
-5-
<PAGE>
of such request, a written statement confirming the Company's compliance with
the filing requirements of the Securities and Exchange Commission as set forth
in such Rule, as such Rule may be amended from time to time.
10. REPRESENTATIONS AND COVENANTS OF THE WARRANTHOLDER.
--------------------------------------------------
This Warrant Agreement has been entered into by the Company in reliance
upon the following representations and covenants of the Warrantholder:
(a) Investment Purpose. The right to acquire Preferred Stock or the
------------------
Preferred Stock issuable upon exercise of the Warrantholder's rights contained
herein will be acquired for investment and not with a view to the sale or
distribution of any part thereof, and the Warrantholder has no present intention
of selling or engaging in any public distribution of the same except pursuant to
a registration or exemption.
(b) Private Issue. The Warrantholder understands (i) that this Warrant and
-------------
the Preferred Stock issuable upon exercise of this Warrant are not registered
under the 1933 Act or qualified under applicable state securities laws on the
ground that the issuance contemplated by this Warrant Agreement will be exempt
from the registration and qualifications requirements thereof, and (ii) that the
Company's reliance on such exemption is predicated on the representations set
forth in this Section 10.
(c) Disposition of Warrantholder's Rights. In no event will the
-------------------------------------
Warrantholder make a disposition of any of its rights to acquire Preferred Stock
or Preferred Stock issuable upon exercise of such rights unless and until (i) it
shall have notified the Company of the proposed disposition, and (ii) if
requested by the Company, it shall have furnished the Company with an opinion of
counsel (which counsel may either be inside or outside counsel to the
Warrantholder) satisfactory to the Company and its counsel to the effect that
(A) appropriate action necessary for compliance with the 1933 Act has been
taken, or (B) an exemption from the registration requirements of the 1933 Act is
available. Notwithstanding the foregoing, the restrictions imposed upon the
transferability of any of its rights to acquire Preferred Stock or Preferred
Stock issuable on the exercise of such rights do not apply to transfers from the
beneficial owner of any of the aforementioned securities to its nominee or from
such nominee to its beneficial owner, and shall terminate as to any particular
share of Preferred Stock when (1) such security shall have been effectively
registered under the 1933 Act and sold by the holder thereof in accordance with
such registration or (2) such security shall have been sold without registration
in compliance with Rule 144 under the 1933 Act, or (3) a letter shall have been
issued to the Warrantholder at its request by the staff of the Securities and
Exchange Commission or a ruling shall have been issued to the Warrantholder at
its request by such Commission stating that no action shall be recommended by
such staff or taken by such Commission, as the case may be, if such security is
transferred without registration under the 1933 Act in accordance with the
conditions set forth in such letter or ruling and such letter or ruling
specifies that no subsequent restrictions on transfer are required. Whenever
the restrictions imposed hereunder shall terminate, as hereinabove provided, the
Warrantholder or holder of a share of Preferred Stock then outstanding as to
which such restrictions have terminated shall be entitled to receive from the
Company, without expense to such holder, one or more new certificates for the
Warrant or for such shares of Preferred Stock not bearing any restrictive
legend.
(d) Financial Risk. The Warrantholder has such knowledge and experience in
--------------
financial and business matters as to be capable of evaluating the merits and
risks of its investment, and has the ability to bear the economic risks of its
investment.
(e) Risk of No Registration. The Warrantholder understands that if the
-----------------------
Company does not register with the Securities and Exchange Commission pursuant
to Section 12 of the 1934 Act (the "1934 Act"), or file reports pursuant to
Section 15(d), of the 1934 Act, or if a registration statement covering the
securities under the 1933 Act is not in effect when it desires to sell (i) the
rights to purchase Preferred Stock pursuant to this Warrant Agreement, or (ii)
the Preferred Stock issuable upon exercise of the right to purchase, it may be
required to hold such securities for an indefinite period. The Warrantholder
also understands that any sale of its rights to purchase Preferred Stock or
Preferred Stock which might be made by it in reliance upon Rule 144 under the
1933 Act may be made only in accordance with the terms and conditions of that
Rule.
(f) Accredited Investor. Warrantholder is an "accredited investor" within
-------------------
the meaning of the Securities and Exchange Rule 501 of Regulation D, as
presently in effect.
11. TRANSFERS.
---------
Subject to the terms and conditions contained in Section 10 hereof and
subject to compliance with applicable securities laws, this Warrant Agreement
and all rights hereunder are transferable in whole or in part by the
Warrantholder and any successor transferee, provided, however, in no event shall
the number of transfers of
-6-
<PAGE>
the rights and interests in all of the Warrants exceed three (3) transfers. The
transfer shall be recorded on the books of the Company upon receipt by the
Company of a notice of transfer in the form attached hereto as Exhibit III (the
"Transfer Notice"), at its principal offices and the payment to the Company of
all transfer taxes and other governmental charges imposed on such transfer.
12. MISCELLANEOUS.
-------------
(a) Effective Date. The provisions of this Warrant Agreement shall be
--------------
construed and shall be given effect in all respects as if it had been executed
and delivered by the Company on the date hereof. This Warrant Agreement shall
be binding upon any successors or assigns of the Company.
(b) Attorney's Fees. In any litigation, arbitration or court proceeding
---------------
between the Company and the Warrantholder relating hereto, the prevailing party
shall be entitled to attorneys' fees and expenses and all costs of proceedings
incurred in enforcing this Warrant Agreement.
(c) Governing Law. This Warrant Agreement shall be governed by and
-------------
construed for all purposes under and in accordance with the laws of the State of
Illinois.
(d) Counterparts. This Warrant 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.
(e) Notices. Any notice required or permitted hereunder shall be given in
-------
writing and shall be deemed effectively given upon personal delivery, facsimile
transmission (provided that the original is sent by personal delivery or mail as
hereinafter set forth) or seven (7) days after deposit in the United States
mail, by registered or certified mail, addressed (i) to the Warrantholder at
6111 North River Road, Rosemont, Illinois 60018, Attention: James Labe, Venture
Group, cc: Legal Department, Attention: General Counsel, (and/or, if by
facsimile, (847)518-5465 and (847)518-5088) and (ii) to the Company at 3931
Sorrento Valley Road, San Diego, California 92121, Attention: President (and/or
if by facsimile, (619-453-9244) or at such other address as any such party may
------------
subsequently designate by written notice to the other party.
(f) Remedies. In the event of any default hereunder, the non-defaulting
--------
party may proceed to protect and enforce its rights either by suit in equity
and/or by action at law, including but not limited to an action for damages as a
result of any such default, and/or an action for specific performance for any
default where Warrantholder will not have an adequate remedy at law and where
damages will not be readily ascertainable. The Company expressly agrees that it
shall not oppose an application by the Warrantholder or any other person
entitled to the benefit of this Agreement requiring specific performance of any
or all provisions hereof or enjoining the Company from continuing to commit any
such breach of this Agreement.
(g) No Impairment of Rights. The Company will not, by amendment of its
-----------------------
Charter or through any other means, avoid or seek to avoid the observance or
performance of any of the terms of this Warrant, but will at all times in good
faith assist in the carrying out of all such terms and in the taking of all such
actions as may be necessary or appropriate in order to protect the rights of the
Warrantholder against impairment.
(h) Survival. The representations, warranties, covenants and conditions of
--------
the respective parties contained herein or made pursuant to this Warrant
Agreement shall survive the execution and delivery of this Warrant Agreement.
(i) Severability. In the event any one or more of the provisions of this
------------
Warrant Agreement shall for any reason be held invalid, illegal or
unenforceable, the remaining provisions of this Warrant Agreement shall be
unimpaired, and the invalid, illegal or unenforceable provision shall be
replaced by a mutually acceptable valid, legal and enforceable provision, which
comes closest to the intention of the parties underlying the invalid, illegal or
unenforceable provision.
(j) Amendments. Any provision of this Warrant Agreement may be amended by
----------
a written instrument signed by the Company and by the Warrantholder.
(k) Additional Documents. The Company, upon execution of this Warrant
--------------------
Agreement, shall provide the Warrantholder with certified resolutions with
respect to the representations, warranties and covenants set forth in
subparagraphs (a) through (d), (f) and (g) of Section 9 above.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be executed by its officers thereunto duly authorized as of the Effective
Date.
-7-
<PAGE>
Company: COPPER MOUNTAIN NETWORKS, INC.
By: /s/ JOSEPH D. MARKEE
--------------------------------------
Title: President
------------------------------------
Warrantholder: COMDISCO, INC.
By: /s/ JAMES P. LABE
--------------------------------------
Title: President
------------------------------------
-8-
<PAGE>
EXHIBIT I
NOTICE OF EXERCISE
To: ____________________________
(1) The undersigned Warrantholder hereby elects to purchase _______ shares of
the Series C Preferred Stock of Copper Mountain Networks, Inc., pursuant to
the terms of the Warrant Agreement dated the ______ day of October __, 1997
(the "Warrant Agreement") between Copper Mountain Networks, Inc. and the
Warrantholder, and tenders herewith payment of the purchase price for such
shares in full, together with all applicable transfer taxes, if any.
(2) In exercising its rights to purchase the Series C Preferred Stock of Copper
Mountain Networks, Inc., the undersigned hereby confirms and acknowledges
the investment representations and warranties made in Section 10 of the
Warrant Agreement. Such representations and warranties are true and
correct as of the date set forth below.
(3) Please issue a certificate or certificates representing said shares of
Series C Preferred Stock in the name of the undersigned or in such other
name as is specified below.
_________________________________
(Name)
_________________________________
(Address)
Warrantholder: COMDISCO, INC.
By: ___________________________
Title: ________________________
Date: _________________________
-9-
<PAGE>
EXHIBIT II
ACKNOWLEDGMENT OF EXERCISE
The undersigned ____________________________________, hereby acknowledge
receipt of the "Notice of Exercise" from Comdisco, Inc., to purchase ____ shares
of the Series C Preferred Stock of Copper Mountain Networks, Inc., pursuant to
the terms of the Warrant Agreement, and further acknowledges that ______ shares
remain subject to purchase under the terms of the Warrant Agreement.
Company: COPPER MOUNTAIN NETWORKS, INC.
By: ___________________________________
Title: ________________________________
Date: _________________________________
-10-
<PAGE>
EXHIBIT III
TRANSFER NOTICE
(To transfer or assign the foregoing Warrant Agreement execute this form and
supply required information. Do not use this form to purchase shares.)
FOR VALUE RECEIVED, the foregoing Warrant Agreement and all rights
evidenced thereby are hereby transferred and assigned to
_________________________________________________________________
(Please Print)
whose address is_________________________________________________
_________________________________________________________________
Dated: ___________________________________
Holder's Signature: ______________________
Holder's Address: ______________________
___________________________________________
Signature Guaranteed: ___________________________________________
NOTE: The signature to this Transfer Notice must correspond with the name as it
appears on the face of the Warrant Agreement, without alteration or
enlargement or any change whatever. Officers of corporations and those
acting in a fiduciary or other representative capacity should file proper
evidence of authority to assign the foregoing Warrant Agreement.
-11-
<PAGE>
EXHIBIT 10.17
THIS WARRANT AND THE SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
CORPORATION AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
____________________________________
WARRANT TO PURCHASE STOCK
WARRANT TO PURCHASE 25,000 ISSUE DATE: AUGUST 14, 1998
SHARES OF THE SERIES C PREFERRED EXPIRATION DATE: AUGUST 14, 2003
STOCK OF COPPER MOUNTAIN NETWORKS, INITIAL EXERCISE PRICE: $4.75 PER SHARE
INC.
THIS WARRANT CERTIFIES THAT, for the agreed upon value of $1.00 and for other
good and valuable consideration. SILICON VALLEY BANK ("Holder") is entitled to
purchase the number of fully paid and non-assessable shares of the class of
securities (the "Shares") of the corporation (the "Company") at the initial
exercise price per Share (the "Warrant Price") all as set forth above and as
adjusted pursuant to Article 2 of this Warrant, subject to the provisions and
upon the terms and conditions set forth in this Warrant.
ARTICLE 1. EXERCISE.
1.1 METHOD OF EXERCISE. Holder may exercise this Warrant by delivering a
duly executed Notice of Exercise in substantially the form attached as Appendix
1 to the principal office of the Company. Unless Holder is exercising the
conversion right set forth in Section 1.2. Holder shall also deliver to the
Company a check for the aggregate Warrant Price for the Shares being purchased.
1.2 CONVERSION RIGHT. In lieu of exercising this Warrant as specified in
Section 1.1. Holder may from time to time convert this Warrant, in whole or in
part, into a number of Shares determined by dividing (a) the aggregate fair
market value of the Shares or other securities otherwise issuable upon exercise
of this Warrant minus the aggregate Warrant Price of such Shares by (b) the fair
market value of one Share. The fair market value of the Shares shall be
determined pursuant Section 1.4.
1.3 [Reserved]
1.4 FAIR MARKET VALUE. If the Shares are traded in a public market. The
fair market value of the Shares shall be the closing price of the Shares (or the
closing price of the Company's stock into which the Shares are convertible)
reported for the business day immediately before Holder delivers its Notice of
Exercise to the Company. If the Shares are not traded in a public market, the
Board of Directors of the Company shall determine fair market value in its
reasonable good faith judgment.
1.5 DELIVERY OF CERTIFICATE AND NEW WARRANT. Promptly after Holder exercises
or converts this Warrant, the Company shall deliver to Holder certificates for
the Shares acquired and if this Warrant has not been fully exercised or
converted and has not expired a new Warrant representing the Shares not so
acquired.
1.6 REPLACEMENT OF WARRANTS. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and in the case of loss, theft or destruction, on delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company or, in the
case of mutilation, or surrender and cancellation of this Warrant, the Company
at its expense shall execute and deliver, in lieu of this Warrant, a new warrant
of like tenor.
1.7 REPURCHASE ON SALE, MERGER OR CONSOLIDATION OF THE COMPANY.
1.7.1. "ACQUISITION". For the purpose of this Warrant, "Acquisition" means
any sale, license, or other disposition of all or substantially all of the
assets of the Company, or any reorganization, consolidation, or merger of the
Company where the holders of the Company's securities before the transaction
beneficially own less than 50% of the outstanding voting securities of the
surviving entity after the transaction.
1.7.2. ASSUMPTION OF WARRANT. If upon the closing of any Acquisition the
successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of this
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly.
1.7.3. NONASSUMPTION. If upon the closing of any Acquisition the successor
entity does not assume the obligations of this Warrant and Holder has not
otherwise exercised this Warrant in full, then the unexercised portion of this
Warrant shall be deemed to have been automatically converted pursuant to Section
1.2 and thereafter Holder shall participate in the acquisition on the same terms
as other holders of the same class of securities of the Company.
-1-
<PAGE>
Warrant to Purchase Stock
---------------------------------------------------------------------
ARTICLE 2. ADJUSTMENTS TO THE SHARES.
2.1 STOCK DIVIDENDS, SPLITS, ETC. If the Company declares or pays a dividend
on its common stock (or the Shares if the Shares are securities other than
common stock) payable in common stock, or other securities, subdivides the
outstanding common stock into a greater amount of common stock, or, if the
Shares are securities other than common stock, subdivides the Shares in a
transaction that increases the amount of common stock into which the Shares are
convertible, then upon exercise of this Warrant, for each Share acquired, Holder
shall receive, without cost to Holder, the total number and kind of securities
to which Holder would have been entitled had Holder owned the Shares of record
as of the date the dividend or subdivision occurred.
2.2 RECLASSIFICATION, EXCHANGE OR SUBSTITUTION. Upon any reclassification,
exchange, substitution, or other event that results in a change of the number
and/or class of the securities issuable upon exercise or conversion of this
Warrant, Holder shall be entitled to receive, upon exercise or conversion of
this Warrant, the number and kind of securities and property that Holder would
have received for the Shares if this Warrant had been exercised immediately
before such reclassification, exchange, substitution, or other event. Such an
event shall include any automatic or voluntary conversion of the outstanding or
issuable securities of the Company of the same class or series as the Shares to
common stock pursuant to the terms of the Company's Articles of Incorporation,
including upon the closing of a registered public offering of the Company's
common stock. The Company or its successor shall promptly issue to Holder a new
Warrant for such new securities or other property. The new Warrant shall provide
for adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 2 including, without limitation,
adjustments to the Warrant Price and to the number of securities or property
issuable upon exercise of the new Warrant. The provisions of this Section 2.2
shall similarly apply to successive reclassifications, exchanges, substitutions,
or other events.
2.3 ADJUSTMENTS FOR COMBINATIONS, ETC. If the outstanding Shares are
combined or consolidated, by reclassification or otherwise, into a lesser number
of shares, the Warrant Price shall be proportionately increased.
2.4 [Reserved]
2.5 NO IMPAIRMENT. The Company shall not, by amendment of its Articles of
Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out of all the provisions of this Article 2
and in taking all such action as may be necessary or appropriate to protect
Holder's rights under this Article against impairment. If the Company takes any
action affecting the Shares or its common stock other than as described above
that adversely affects Holder's rights under this Warrant, the Warrant Price
shall be adjusted downward and the number of Shares issuable upon exercise of
this Warrant shall be adjusted upward in such a manner that the aggregate
Warrant Price of this Warrant is unchanged.
2.6 FRACTIONAL SHARES. No fractional Shares shall be issuable upon exercise
or conversion of the Warrant and the number of Shares to be issued shall be
rounded down to the nearest whole Share. If a fractional share interest arises
upon any exercise or conversion of the Warrant, the Company shall eliminate such
fractional share interest by paying Holder amount computed by multiplying the
fractional interest by the fair market value of a full Share.
2.7 CERTIFICATE AS TO ADJUSTMENTS. Upon each adjustment of the Warrant
Price, the Company at its expense shall promptly compute such adjustment, and
furnish Holder with a certificate of its Chief Financial Officer setting forth
such adjustment and the facts upon which such adjustment is based. The Company
shall, upon written request, furnish Holder a certificate setting forth the
Warrant Price in effect upon the date thereof and the series of adjustments
leading to such Warrant Price.
ARTICLE 3. REPRESENTATIONS AND COVENANTS OF THE COMPANY.
3.1 REPRESENTATIONS AND WARRANTIES. The Company hereby represents and
warrants to the Holder as follows:
(a) The initial Warrant Price referenced on the first page of this Warrant
is not greater than (i) the price per share at which the Shares were last issued
in an arms-length transaction in which at least $500,000 of the Shares were sold
and (ii) the fair market value of the Shares as of the date of this Warrant.
(b) All Shares which may be issued upon the exercise of the purchase right
represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and non-assessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
3.2 NOTICE OF CERTAIN EVENTS. If the Company proposes at any time (a) to
declare any dividend or distribution upon its common stock, whether in cash,
property, stock, or other securities and whether or not a regular cash dividend;
(b) to offer for subscription pro rata to the holders of any class or series of
its stock any additional shares of stock of any class or series or other rights;
(c) to effect any reclassification or recapitalization of common stock; (d) to
merge or consolidate with or into any other corporation, or
-2-
<PAGE>
sell, lease, license, or convey all or substantially all of its assets, or to
liquidate, dissolve or wind up; then, in connection with each such event, the
Company shall give Holder (1) at least 20 days prior written notice of the date
on which a record will be taken for such dividend, distribution, or subscription
rights (and specifying the date on which the holders of common stock will be
entitled thereto) or for determining rights to vote, if any, in respect of the
matters referred to in (c) and (d) above; (2) in the case of the matters
referred to in (c) and (d) above at least 20 days prior written notice of the
date when the same will take place (and specifying the date on which the holders
of common stock will be entitled to exchange their common stock for securities
or other property deliverable upon the occurrence of such event).
3.3 INFORMATION RIGHTS. So long as the Holder holds this Warrant and/or any
of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) within forty-five (45) days after the end of each of the first three
quarters of each fiscal year, the Company's quarterly, unaudited financial
statements.
3.4 REGISTRATION UNDER SECURITIES ACT OF 1933, AS AMENDED. The Company
agrees that the Shares or, if the Shares are convertible into common stock of
the Company, such common stock, shall be subject to the registration rights set
forth on Exhibit B, if attached.
ARTICLE 4. MISCELLANEOUS.
-------------
4.1 TERM: NOTICE OF EXPIRATION. This Warrant is exercisable, in whole or in
part, at any time and from time to time on or before the Expiration Date set
forth above. The Company shall give Holder written notice of Holder's right to
exercise this Warrant in the form attached as Appendix 2 not more than 90 days
and not less than 30 days before the Expiration Date. If the notice is not so
given, the Expiration Date shall automatically be extended until 30 days after
the date the Company delivers the notice to Holder.
4.2 LEGENDS. This Warrant and the Shares (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 COMPLIANCE WITH SECURITIES LAWS ON TRANSFER. This Warrant and the Shares
issuable upon exercise this Warrant (and the securities issuable, directly or
indirectly, upon conversion of the Shares, if any) may not be transferred or
assigned in whole or in part without compliance with applicable federal and
state securities laws by the transferor and the transferee (including, without
limitation, the delivery of investment representation letters and legal opinions
reasonably satisfactory to the Company, if reasonably requested by the Company).
The Company shall not require Holder to provide an opinion of counsel if the
transfer is to an affiliate of Holder or if there is no material question as to
the availability of current information as referenced in Rule 144(c), Holder
represents that it has complied with Rule 144(d) and (e) in reasonable detail,
the selling broker represents that it has complied with Rule 144(f), and the
Company is provided with a copy of Holders notice of proposed sale.
4.4 TRANSFER PROCEDURE. Subject to the provisions of Section 4.2, Holder may
transfer all or part of this Warrant or the Shares issuable upon exercise of
this Warrant (or the securities issuable, directly or indirectly, upon
conversion of the Shares, if any) by giving the Company notice of the portion of
the Warrant being transferred setting forth the name, address and taxpayer
identification number of the transferee and surrendering this Warrant to the
Company for reissuance to the transferee(s) (and Holder if applicable). Unless
the Company is filing financial information with the SEC pursuant to the
Securities Exchange Act of 1934, the Company shall have the right to refuse to
transfer any portion of this Warrant to any person who directly competes with
the Company.
4.5 NOTICES. All notices and other communications from the Company to the
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or such holder from time
to time.
4.6 WAIVER. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
4.7 ATTORNEYS FEES. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
-3-
<PAGE>
4.8 GOVERNING LAW. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.
COPPER MOUNTAIN NETWORKS, INC.
By /s/ [SIGNATURE ILLEGIBLE]^^
------------------------------------
Chairman of the Board, President or
Vice President
By /s/ JOSEPH D. MARKEE
-------------------------------------
Secretary or Ass't Secretary
-4-
<PAGE>
APPENDIX 1
NOTICE OF EXERCISE
------------------
1. The undersigned hereby elects to purchase _____________ shares of the
Common/Series C Preferred [strike one] Stock of ___________ pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price of such shares in full.
1. The undersigned hereby elects to convert the attached Warrant into Shares
in the manner specified in the Warrant. This conversion is exercised with
respect to _______ of the Shares covered by the Warrant.
[Strike paragraph that does not apply.]
2. Please issue a certificate or certificates representing said shares in the
name of the undersigned or in such other name as is specified below:
__________________
(NAME)
__________________
__________________
(ADDRESS)
3. The undersigned represents it is acquiring the shares solely for its own
account and not as a nominee for any other party and not with a view toward the
resale or distribution thereof except in compliance with applicable securities
laws.
____________________________
(Signature)
____________________________
(Date)
APPENDIX 2
NOTICE THAT WARRANT IS ABOUT TO EXPIRE
--------------------------------------
______________, ___
(Name of Holder)
(Address of Holder)
Attn: Chief Financial Officer
Dear_________:
This is to advise you that the Warrant issued to you described below will
expire on _________________, 19__.
Issuer:
Issue Date:
Class of Security Issuable:
Exercise Price per Share:
Number of Shares Issuable:
Procedure for Exercise:
Please contact [name of contact person at (phone number)] with any questions
you may have concerning exercise of the Warrant. This is your only notice of
pending expiration.
(Name of Issuer)
By____________________________
Its___________________________
-5-
<PAGE>
EXHIBIT A
Not applicable as Series C Preferred already incorporates anti-dilution
provisions as set forth in the articles of incorporation of the Company.
EXHIBIT B
REGISTRATION RIGHTS
The Company and the Holder shall enter into a separate written agreement,
pursuant to which the Shares of common stock issuable upon conversion of the
Shares, shall be deemed "registrable securities" or otherwise entitled to "piggy
back" registration rights in accordance with the terms of Section 2.3 of the
Amended and Restated Investors Rights Agreement by and between the Company and
certain Holders of the Shares of the Company's Preferred Stock (as may be
amended from time to time the "Agreement") provided that Holder, and any
assignee or successor in interest of the Holder, agrees to be bound by the terms
of Section 2 of the Agreement with respect to the Shares and the shares of the
Common Stock issuable upon conversion thereof.
The Company agrees that no amendments will be made to the Agreement which
would have a material adverse impact on Holder's registration rights thereunder
without the consent of Holder. In the event the Company is unable to obtain the
consent of the other parties to the Agreement required in connection with the
foregoing, the Company and the Holder shall enter into a separate Registration
Rights Agreement granting Holder the "piggyback" registration rights
contemplated hereby to the fullest extent not prohibited by the Agreement.
-6-
<PAGE>
EXHIBIT 10.18
AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
COPPER MOUNTAIN NETWORKS, INC.
OCTOBER 9, 1998
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 1. General......................................................... 2
1.1 Definitions..................................................... 2
SECTION 2. Registration; Restrictions on Transfer.......................... 3
2.1 Restrictions on Transfer........................................ 3
2.2 Demand Registration............................................. 4
2.3 Piggyback Registrations......................................... 6
2.4 Form S-3 Registration........................................... 7
2.5 Expenses of Registration........................................ 8
2.6 Obligations of the Company...................................... 8
2.7 Termination of Registration Rights.............................. 9
2.8 Delay of Registration; Furnishing Information................... 10
2.9 Indemnification................................................. 10
2.10 Assignment of Registration Rights............................... 12
2.11 Amendment of Registration Rights................................ 12
2.12 Limitation on Subsequent Registration Rights.................... 12
2.13 "Market Stand-Off" Agreement.................................... 13
2.14 Rule 144 Reporting.............................................. 13
SECTION 3. Covenants of the Company........................................ 14
3.1 Basic Financial Information and Reporting....................... 14
3.2 Inspection Rights............................................... 14
3.3 Confidentiality of Records...................................... 15
3.4 Reservation of Common Stock..................................... 15
3.5 Employee Lock-Up and Stock Vesting.............................. 15
3.6 Proprietary Information and Inventions Agreement................ 15
3.7 Directors' Liability and Indemnification........................ 15
3.8 Board Observation Rights........................................ 15
3.9 Nondisclosure Agreement......................................... 16
3.10 Qualified Small Business........................................ 17
3.11 Legends......................................................... 19
3.12 Issuance of Additional Shares................................... 19
</TABLE>
i.
<PAGE>
<TABLE>
<S> <C> <C>
3.13 Directed Share Program.......................................... 19
3.14 Termination of Covenants........................................ 20
SECTION 4. Rights of First Refusal......................................... 20
4.1 Subsequent Offerings............................................ 20
4.2 Exercise of Rights.............................................. 20
4.3 Rights of Oversubscription...................................... 20
4.4 Issuance of Equity Securities to Other Persons.................. 21
4.5 Termination of Rights of First Refusal.......................... 21
4.6 Transfer of Rights of First Refusal............................. 21
4.7 Excluded Securities............................................. 21
SECTION 5. Miscellaneous................................................... 22
5.1 Governing Law................................................... 22
5.2 Survival........................................................ 22
5.3 Successors and Assigns.......................................... 22
5.4 Entire Agreement................................................ 22
5.5 Severability.................................................... 23
5.6 Amendment and Waiver............................................ 23
5.7 Delays or Omissions............................................. 23
5.8 Notices......................................................... 23
5.9 Attorneys' Fees................................................. 24
5.10 Titles and Subtitles............................................ 24
5.11 Counterparts.................................................... 24
5.12 Aggregation of Holdings......................................... 24
</TABLE>
ii.
<PAGE>
COPPER MOUNTAIN NETWORKS, INC.
AMENDED AND RESTATED
INVESTORS' RIGHTS AGREEMENT
THIS AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT (the "Agreement") is
entered into as of the 9th day of October, 1998, by and among COPPER MOUNTAIN
NETWORKS, INC., a California corporation (the "Company") and the purchasers of
the Company's Series A Preferred Stock ("Series A Preferred Stock"), Series B
Preferred Stock ("Series B Preferred Stock"), Series C Preferred Stock ("Series
C Preferred Stock") and Series D Preferred Stock ("Series D Preferred Stock")
set forth on Exhibit A hereto. The purchasers of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and the Series D Preferred
Stock set forth on Exhibit A hereto shall be referred to hereinafter as the
"Investors" and each individually as an "Investor." The term "Investor" shall
include Silicon Valley Bank solely with respect to Section 2 hereof.
RECITALS
WHEREAS, certain of the Investors hold shares of the Company's Series A
Preferred Stock, Series B Preferred Stock and Series C Preferred Stock and such
Investors possess certain rights pursuant to that certain Amended and Restated
Investors' Rights Agreement dated October 29, 1997 (the "Prior Agreement");
WHEREAS, the undersigned Investors who hold Series A Preferred Stock,
Series B Preferred Stock and Series C Preferred Stock desire to terminate the
Prior Agreement and to accept the rights created pursuant hereto in lieu of the
rights granted to them under the Prior Agreement;
WHEREAS, the Company desires to grant Silicon Valley Bank rights solely
with respect to Section 2 hereof and Silicon Valley Bank agrees to be bound by
the obligations set forth in Section 2 as an "Investor" and "Holder" hereunder;
WHEREAS, the Company proposes to sell and issue up to 3,300,000 shares of
its Series D Preferred Stock (the "Series D Financing") to certain of the
Investors pursuant to a Series D Preferred Stock Purchase Agreement of even date
herewith (the "Purchase Agreement");
WHEREAS, as a condition to entering into the Purchase Agreement, the
purchasers of the Company's Series D Preferred Stock have requested that the
Company extend to them the registration rights, information rights and other
rights set forth below; and
WHEREAS, in connection with the consummation of the Series D Financing, the
Company and the Investors desire to provide for rights to be granted to and
covenants to be made with the Investors and the Investors and the Company hereby
agree that this Agreement shall govern the rights of the Investors as to certain
matters as set forth herein and the Investors who are parties to the Prior
Agreement hereby agree that the Prior Agreement shall be superseded and replaced
in its entirety by this Agreement.
1.
<PAGE>
NOW, THEREFORE, in consideration of the mutual promises, representations,
warranties, covenants and conditions set forth in this Agreement and in the
Purchase Agreement, the parties mutually agree as follows:
SECTION 1. GENERAL
1.1 DEFINITIONS. As used in this Agreement the following terms shall have
the following respective meanings:
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"HOLDER" means any person owning of record Registrable Securities or
any assignee of record of such Registrable Securities in accordance with Section
2.10 hereof.
"INITIAL PUBLIC OFFERING" means the Company's first public offering of
its Common Stock registered under the Securities Act.
"PREFERRED STOCK" means the Company's Series A Preferred Stock, Series
B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock.
"REGISTER," "REGISTERED," AND "REGISTRATION" refer to a registration
effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of effectiveness of such
registration statement or document.
"REGISTRABLE SECURITIES" means (i) Common Stock of the Company issued
or issuable upon conversion of the Shares; (ii) for purposes of Section 2 hereof
only, Common Stock of the Company issued to Silicon Valley Bank upon exercise of
a warrant to purchase 25,000 shares of Series C Preferred Stock issued to
Silicon Valley Bank; and (iii) any Common Stock of the Company issued as (or
issuable upon the conversion or exercise of any warrant, right or other security
which is issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of, such above-described securities.
Notwithstanding the foregoing, Registrable Securities shall not include any
securities sold by a person to the public either pursuant to a registration
statement or Rule 144 under the Securities Act or sold in a private transaction
in which the transferor's rights under Section 2 of this Agreement are not
assigned.
"REGISTRABLE SECURITIES THEN OUTSTANDING" shall be the number of
shares determined by calculating the total number of shares of the Company's
Common Stock that are Registrable Securities and either (1) are then issued and
outstanding or (2) are issuable pursuant to then exercisable or convertible
securities.
"REGISTRATION EXPENSES" shall mean all expenses incurred pursuant to
Sections 2.2, 2.3 and 2.4 hereof, including, without limitation, all SEC and
blue sky registration and filing fees, printing expenses, transfer agent and
registrar fees, fees and disbursements of counsel for the Company, fees and
disbursements of one special counsel for the Holders (not to exceed $10,000) and
the expense of any independent accountants incident to or required thereby (but
excluding the compensation of regular employees of the Company which shall be
paid in any event by the Company).
2.
<PAGE>
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SELLING EXPENSES" shall mean all underwriting discounts and selling
commissions applicable to the sale.
"SHARES" shall mean the Preferred Stock held by the Investors listed
on Exhibit A hereto and their permitted assigns.
"FORM S-3" means such form under the Securities Act as in effect on
the date hereof or any successor registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"SEC" OR "COMMISSION" means the Securities and Exchange Commission.
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER
2.1 RESTRICTIONS ON TRANSFER.
(A) Each Holder agrees not to make any disposition of all or any
portion of the Shares or Registrable Securities unless and until:
(I) 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
(II) (A) The transferee has agreed in writing to be bound by
the terms of this Agreement, (B) such Holder 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 (C) if
reasonably requested by the Company, such Holder shall have furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such shares under the
Securities Act. It is agreed that the Company will not require opinions of
counsel for transactions made pursuant to Rule 144 except in unusual
circumstances.
(III) Notwithstanding the provisions of paragraphs (i) and (ii)
above, no such registration statement or opinion of counsel shall be necessary
for a transfer by a Holder which is (A) a partnership to its partners or former
partners in accordance with partnership interests, (B) a corporation to its
subsidiaries or to its shareholders in accordance with their interest in the
corporation, (C) a limited liability company to its members or former members in
accordance with their interest in the limited liability company, (D) a trust to
its grantors in accordance with their trust interests, or (E) to the Holder's
family member or trust for the benefit of an individual Holder; provided that in
each case the transferee will be subject to the terms of this Agreement to the
same extent as if he were an original Holder hereunder.
(B) Each certificate representing Shares or Registrable Securities
shall (unless otherwise permitted by the provisions of the Agreement) be stamped
or otherwise imprinted with
3.
<PAGE>
a legend substantially similar to the following (in addition to any legend
required under applicable state securities laws or as provided elsewhere in this
Agreement):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT"), AS AMENDED, AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR UNLESS THE COMPANY HAS RECEIVED AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS COUNSEL
THAT SUCH REGISTRATION IS NOT REQUIRED.
(C) The Company shall be obligated to reissue promptly unlegended
certificates at the request of any holder thereof if the holder shall have
obtained an opinion of counsel (which counsel may be counsel to the Company)
reasonably acceptable to the Company to the effect that the securities proposed
to be disposed of may lawfully be so disposed of without registration,
qualification or legend.
(D) Any legend endorsed on an instrument pursuant to applicable state
securities laws and the stop-transfer instructions with respect to such
securities shall be removed upon receipt by the Company of an order of the
appropriate blue sky authority authorizing such removal.
2.2 DEMAND REGISTRATION.
(A) Subject to the conditions of this Section 2.2, if the Company
shall receive a written request from the Holders of more than twenty-five
percent (25%) of the shares of Preferred Stock then outstanding (or shares of
Common Stock issued upon conversion of the Preferred Stock or a combination of
such issued Common Stock and such Preferred Stock) (the "Initiating Holders")
that the Company file a registration statement under the Securities Act covering
the registration of Registrable Securities, then the Company shall, within
thirty (30) days of the receipt thereof, give written notice of such request to
all Holders, and subject to the limitations of this Section 2.2, use its best
efforts to effect, as soon as practicable, the registration under the Securities
Act of all Registrable Securities that the Holders request to be registered.
(B) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 2.2
or any request pursuant to Section 2.4 and the Company shall include such
information in the written notice referred to in Section 2.2(a) or Section
2.4(a), as applicable. In such event, the right of any Holder to include its
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting (unless otherwise mutually agreed by
a majority in interest of the Initiating Holders and such Holder) to the extent
provided herein. All Holders proposing to distribute their securities through
such underwriting and the Company shall enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by a majority in interest of the Initiating Holders (which
underwriter or underwriters shall be
4.
<PAGE>
reasonably acceptable to the Company). Notwithstanding any other provision of
this Section 2.2 or Section 2.4, if the underwriter advises the Company that
marketing factors require a limitation of the number of securities to be
underwritten (including Registrable Securities) then the Company shall so advise
all Holders of Registrable Securities which would otherwise be underwritten
pursuant hereto, and the number of shares that may be included in the
underwriting shall be allocated to the Holders of such Registrable Securities
hereunder on a pro rata basis based on the number of Registrable Securities held
by all such Holders (including the Initiating Holders). Any Registrable
Securities excluded or withdrawn from such underwriting shall be withdrawn from
the registration.
(C) The Company shall not be required to effect a registration
pursuant to this Section 2.2:
(I) prior to the earlier of (A) September 30, 2000 or (B) six
months after the Initial Public Offering; or
(II) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than Five Million Dollars ($5,000,000), unless such
registration pertains to the Company's Initial Public Offering, in which case
the Company shall not be required to effect such registration unless the
aggregate gross proceeds of such offering and the per share issuance price are
sufficient to cause the automatic conversion to Common Stock of all outstanding
shares of the Company's Preferred Stock; or
(III) after the Company has effected two (2) registrations
pursuant to this Section 2.2, and such registrations have been declared or
ordered effective; or
(IV) during the period commencing with the filing of a
registration statement pertaining to the Initial Public Offering and ending on
the date one hundred eighty (180) days following the effective date of such
registration statement; provided that the Company makes reasonable good faith
efforts to cause such registration statement to become effective; or
(V) if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 2.2, a certificate signed by the
Chairman of the Board of the Company stating that the Company has engaged in
discussions with underwriters regarding an Initial Public Offering and intends
to file a registration statement related thereto as soon as practicable, in
which event the Company shall have the right to defer the filing requested by
the Initiating Holders for a period of not more than one hundred twenty (120)
days after receipt of the request of the Initiating Holders, or
(VI) if the Company shall furnish to Holders requesting a
registration statement pursuant to this Section 2.2, a certificate signed by the
Chairman of the Board of the Company stating that in the good faith judgment of
the Board of Directors of the Company, it would be seriously detrimental to the
Company and its shareholders for such registration statement to be effected at
such time, in which event the Company shall have the right to defer such filing
for a period of not more than ninety (90) days after receipt of the request of
the
5.
<PAGE>
Initiating Holders; provided that such right to delay a request shall be
exercised by the Company not more than twice in any twelve (12) month period.
2.3 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least thirty (30) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements relating to secondary offerings of securities of the
Company, but excluding registration statements relating to employee benefit
plans or with respect to corporate reorganizations or other transactions under
Rule 145 of the Securities Act) and will afford each such Holder an opportunity
to include in such registration statement all or part of such Registrable
Securities held by such Holder. Each Holder desiring to include in any such
registration statement all or any part of the Registrable Securities held by it
shall, within fifteen (15) days after the above-described notice from the
Company, so notify the Company in writing. Such notice shall state the intended
method of disposition of the Registrable Securities by such Holder. If a Holder
decides not to include all of its Registrable Securities in any registration
statement thereafter filed by the Company, such Holder shall nevertheless
continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statements as may be filed by
the Company with respect to offerings of its securities, all upon the terms and
conditions set forth herein.
(A) UNDERWRITING. If the registration statement under which the
Company gives notice under this Section 2.3 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 2.3 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company; second, to the Holders on a pro rata
basis based on the total number of Registrable Securities held by the Holders;
and third, to any shareholder of the Company (other than a Holder) on a pro rata
basis. No such reduction shall reduce the amount of securities of the selling
Holders included in the registration below twenty-five percent (25%) of the
total amount of securities being offered in such registration, unless such
offering is the Initial Public Offering and such registration does not include
shares of any other selling shareholders, in which event any or all of the
Registrable Securities of the Holders may be excluded in accordance with the
immediately preceding sentence.
(B) RIGHT TO TERMINATE REGISTRATION. The Company shall have the right
to terminate or withdraw any registration initiated by it under this Section 2.3
prior to the effectiveness of such registration whether or not any Holder has
elected to include securities in such registration. The Registration Expenses of
such withdrawn registration shall be borne by the Company in accordance with
Section 2.5 hereof.
6.
<PAGE>
2.4 FORM S-3 REGISTRATION. Following the Company's Initial Public
Offering, the Company will use its best efforts to qualify for an offering on
Form S-3 (or any successor to Form S-3) or any similar short-form registration
statement. In case the Company shall receive from any Holder or Holders of
Registrable Securities a written request or requests that the Company effect a
registration on Form S-3 (or any successor to Form S-3) or any similar short-
form registration statement and any related qualification or compliance with
respect to all or a part of the Registrable Securities owned by such Holder or
Holders, the Company will:
(A) promptly give written notice of the proposed registration, and
any related qualification or compliance, to all other Holders of Registrable
Securities; and
(B) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within
fifteen (15) days after receipt of such written notice from the Company;
provided, however, that the Company shall not be obligated to effect any such
registration, qualification or compliance pursuant to this Section 2.4:
(I) if Form S-3 (or any successor or similar form) is not
available for such offering by the Holders, or
(II) if the Holders, together with the holders of any other
securities of the Company entitled to inclusion in such registration, propose to
sell Registrable Securities and such other securities (if any) at an aggregate
price to the public of less than Five Hundred Thousand Dollars ($500,000), or
(III) if the Company shall furnish to the Holders a certificate
signed by the Chairman of the Board of Directors of the Company stating that in
the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its shareholders for such Form S-3
Registration to be effected at such time, in which event the Company shall have
the right to defer the filing of the Form S-3 Registration Statement for a
period of not more than ninety (90) days after receipt of the request of the
Holder or Holders under this Section 2.4; provided, that such right to delay a
request shall be exercised by the Company not more than once in any twelve (12)
month period, or
(IV) if the Company has, within the twelve (12) month period
preceding the date of such request, already effected two (2) registrations on
Form S-3 for the Holders pursuant to this Section 2.4, or
(V) in any particular jurisdiction in which the Company would
be required to qualify to do business or to execute a general consent to service
of process in effecting such registration, qualification or compliance.
(C) Subject to the foregoing, the Company shall file a Form S-3
Registration Statement covering the Registrable Securities and other securities
so requested to be registered as soon as practicable after receipt of the
request or requests of the Holders.
7.
<PAGE>
2.5 EXPENSES OF REGISTRATION. Except as specifically provided herein, all
Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.2, Section 2.3 or Section 2.4
herein shall be borne by the Company. All Selling Expenses incurred in
connection with any registrations hereunder, shall be borne by the holders of
the securities so registered pro rata on the basis of the number of shares so
registered. The Company shall not, however, be required to pay for expenses of
any registration proceeding begun pursuant to Section 2.2 or 2.4, the request of
which has been subsequently withdrawn by the Initiating Holders unless (a) the
withdrawal is made based upon material adverse information concerning the
Company of which the Initiating Holders were not aware at the time of such
request or (b) the Holders of a majority of Registrable Securities agree to
forfeit their right to one requested registration pursuant to Section 2.2 or
Section 2.4, as applicable, in which event such right shall be forfeited by all
Holders). If the Holders are required to pay the Registration Expenses, such
expenses shall be borne by the holders of securities (including Registrable
Securities) requesting such registration in proportion to the number of shares
for which registration was requested. If the Company is required to pay the
Registration Expenses of a withdrawn offering pursuant to clause (a) above, then
the Holders shall not forfeit their rights pursuant to Section 2.2 or Section
2.4 to a demand registration.
2.6 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(A) prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective, and, upon the request of the
Holders of a majority of the Registrable Securities registered thereunder, keep
such registration statement effective for up to one hundred twenty (120) days
or, if earlier, until the Holder or Holders have completed the distribution
related thereto; provided, however, that such 120-day period shall be extended
by the number of days such Holder or Holders are not permitted to sell pursuant
to either a written lock-up agreement with an underwriter of the Company's
securities or a written request of an underwriter of the Company's securities to
refrain from selling Registrable Securities;
(B) prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement 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) furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them;
(D) use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that the Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions;
8.
<PAGE>
(E) in the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement;
(F) 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 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;
(G) furnish, at the request of a majority of the Holders
participating in the registration, on the date that such Registrable Securities
are delivered to the underwriters for sale, if such securities are being sold
through underwriters, or, if such securities are not being sold through
underwriters, on the date that the registration statement with respect to such
securities becomes effective, (i) an opinion, dated as of such date, of the
counsel representing the Company for the purposes of such registration, in form
and substance as is customarily given to underwriters in an underwritten public
offering and reasonably satisfactory to a majority in interest of the Holders
requesting registration, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities and (ii) a letter
dated as of such date, from the independent certified public accountants of the
Company, in form and substance as is customarily given by independent certified
public accountants to underwriters in an underwritten public offering and
reasonably satisfactory to a majority in interest of the Holders requesting
registration, addressed to the underwriters, if any, and if permitted by
applicable accounting standards, to the Holders requesting registration of
Registrable Securities;
(H) use its best efforts to have the Company's Common Stock listed on
the Nasdaq National Market or a stock exchange; and
(I) use its best efforts to obtain a transfer agent, a registrar and
a cusip number for the Company's Common Stock.
2.7 TERMINATION OF REGISTRATION RIGHTS. All registration rights granted
under this Section 2 shall terminate and be of no further force and effect after
the fifth anniversary of the closing of the Company's Initial Public Offering.
In addition, a Holder's registration rights shall expire if (i) the Company has
completed its Initial Public Offering and is subject to the provisions of the
Exchange Act and (ii) all Registrable Securities held by and issuable to such
Holder (and its affiliates, partners and former partners) may be sold under Rule
144 during any ninety (90) day period.
9.
<PAGE>
2.8 DELAY OF REGISTRATION; FURNISHING INFORMATION.
(A) No Holder shall have any right to obtain or seek an injunction
restraining or otherwise delaying any such registration as the result of any
controversy that might arise with respect to the interpretation or
implementation of this Section 2.
(B) It shall be a condition precedent to the obligations of the
Company to take any action pursuant to Section 2.2, 2.3 or 2.4 that the selling
Holders shall furnish to the Company such information regarding themselves, the
Registrable Securities held by them and the intended method of disposition of
such securities as shall be reasonably required to effect the registration of
their Registrable Securities.
2.9 INDEMNIFICATION. In the event any Registrable Securities are included
in a registration statement under Sections 2.2, 2.3 or 2.4:
(A) To the maximum extent permitted by law, the Company will
indemnify and hold harmless each Holder, the partners, officers, directors and
legal counsel of each Holder, any underwriter (as defined in the Securities Act)
for such Holder and each person, if any, who controls such Holder or underwriter
within the meaning of the Securities Act or the Exchange Act, against any
losses, claims, damages, or liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation
commenced or threatened to which they may become subject, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or violations
(collectively a "Violation") by the Company: (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the 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 (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by such registration statement; and the Company will reimburse each such
Holder, partner, officer or director, legal counsel, underwriter or controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided however, that the indemnity agreement contained in this Section
2.9(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 shall not be unreasonably withheld, nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon a Violation which
occurs in reliance upon and in conformity with written information furnished
expressly for use in connection with such registration by such Holder, partner,
officer, director, underwriter or controlling person of such Holder.
(B) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration qualifications or compliance is being effected, indemnify and hold
harmless the Company, each of its directors, its officers, and legal counsel and
each person, if any, who controls the Company within the
10.
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meaning of the Securities Act, any underwriter and any other Holder selling
securities under such registration statement or any of such other Holder's
partners, directors or officers or any person who controls such Holder, against
any losses, claims, damages or liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation or
threatened litigation to which the Company or any such director, officer, legal
counsel, controlling person, underwriter or other such Holder, or partner,
director, officer or controlling person of such other Holder may become subject
under the Securities Act, the Exchange Act or other federal or state law,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and
in conformity with written information furnished by such Holder under an
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration; and each such Holder will reimburse any legal
or other expenses reasonably incurred by the Company or any such director,
officer, legal counsel, controlling person, underwriter or other Holder, or
partner, officer, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action if it is judicially determined that there was such a
Violation; provided, however, that the indemnity agreement contained in this
Section 2.9(b) 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 Holder, which consent shall not be unreasonably withheld;
provided further, that in no event shall any indemnity under this Section 2.9
exceed the net proceeds from the offering received by such Holder.
(C) Promptly after receipt by an indemnified party under this Section
2.9 of notice of the commencement of any action (including any governmental
action), such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 2.9, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party shall
have the right to retain its own counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual
or potential differing interests between such indemnified party and any other
party represented by such counsel in such proceeding. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.9, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 2.9.
(D) If the indemnification provided for in this Section 2.9 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability 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 Violation(s)
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that resulted in such loss, claim, damage or liability, as well as any other
relevant equitable considerations. The relative fault of the indemnifying party
and of the indemnified party shall be determined by a court of law 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; provided, that in no event shall any
contribution by a Holder hereunder exceed the proceeds from the offering
received by such Holder.
(E) The obligations of the Company and Holders under this Section 2.9
shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this agreement. 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 as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation.
2.10 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company to
register Registrable Securities pursuant to this Section 2 may be assigned by a
Holder to a transferee or assignee of Registrable Securities which (i) is a
subsidiary, parent, general partner, grantor, limited partner or retired partner
of a Holder, (ii) is a Holder's family member or trust for the benefit of an
individual Holder, or (iii) acquires at least one hundred thousand (100,000)
shares of Registrable Securities (as adjusted for stock splits and
combinations); provided, however, (A) the transferor shall, within ten (10) days
after such transfer, furnish to the Company written notice of the name and
address of such transferee or assignee and the securities with respect to which
such registration rights are being assigned and (B) such transferee shall agree
to be subject to all restrictions set forth in this Agreement.
2.11 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2 may
be amended and the observance thereof may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of (i) the Company; (ii) the Holders of at least two-thirds of
the Registrable Securities then outstanding, voting together as a separate
class; and (iii) if such amendment materially adversely affects solely the
rights, preferences and privileges of the Series D Preferred Stock, the written
consent of the holders of at least fifty percent (50%) of the Series D Preferred
Stock then outstanding, voting together as a separate class shall also be
required. Any amendment or waiver effected in accordance with this Section 2.11
shall be binding upon each Holder and the Company. By acceptance of any
benefits under this Section 2, Holders of Registrable Securities hereby agree to
be bound by the provisions of this Section 2.11 hereunder.
2.12 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date of this
Agreement, the Company shall not, without the prior written consent of the
Holders of fifty percent (50%) of the Registrable Securities then outstanding,
enter into any agreement with any holder or prospective holder of any securities
of the Company that would grant such holder registration rights.
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2.13 "MARKET STAND-OFF" AGREEMENT. Each Holder hereby agrees that such
Holder shall not sell or otherwise transfer or dispose of any Registrable
Securities held by such Holder (other than those included in the registration)
for a period specified by the representative of the underwriters of Common Stock
(or other securities) of the Company not to exceed one hundred eighty (180) days
following the effective date of a registration statement of the Company filed
under the Securities Act, provided that:
(I) such agreement shall apply only to the Company's Initial
Public Offering;
(II) all officers and directors of the Company, each Holder and
holders of at least one percent (1%) of the Company's outstanding shares of
capital stock (calculated on an as-converted-to-common-stock basis) enter into
similar agreements; and
(III) such agreement shall provide that any discretionary waiver
or termination of the restrictions of such agreement by the Company or
representatives of the underwriters shall apply to all persons subject to such
agreement pro rata based on the number of shares held if such waiver or
termination exceeds 25,000 shares of Common Stock (or other securities on an as-
converted basis) per individual or 100,000 shares of Common Stock (or other
securities on an as-converted basis) in the aggregate.
Each Holder agrees to execute and deliver such other agreements as may be
reasonably requested by the Company or the underwriter which are consistent with
the foregoing or which are necessary to give further effect thereto. The
obligations described in this Section 2.13 shall not apply to a registration
relating solely to employee benefit plans on Form S-8 or similar forms that may
be promulgated in the future, or a registration relating solely to a Commission
Rule 145 transaction on Form S-4 or similar forms that may be promulgated in the
future. The Company may impose stop-transfer instructions with respect to the
shares of Common Stock (or other securities) subject to the foregoing
restriction until the end of said one hundred eighty (180) day period.
2.14 RULE 144 REPORTING. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its commercially reasonable best efforts to:
(A) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act, at all times after the effective date of
the first registration filed by the Company for an offering of its securities to
the general public;
(B) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act;
(C) So long as a Holder owns any Registrable Securities, furnish to
such Holder forthwith upon request: a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 of the Securities
Act, and of the Exchange Act (at any time after it has become subject to such
reporting requirements); a copy of the most recent
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annual or quarterly report of the Company; and such other reports and documents
as a Holder may reasonably request in availing itself of any rule or regulation
of the SEC allowing it to sell any such securities without registration.
SECTION 3. COVENANTS OF THE COMPANY
3.1 BASIC FINANCIAL INFORMATION AND REPORTING.
(A) The Company will maintain true books and records of account in
which full and correct entries will be made of all its business transactions
pursuant to a system of accounting established and administered in accordance
with generally accepted accounting principles consistently applied, and will set
aside on its books all such proper accruals and reserves as shall be required
under generally accepted accounting principles consistently applied.
(B) As soon as practicable after the end of each fiscal year of the
Company, and in any event within one hundred twenty (120) days thereafter, the
Company will furnish each Investor a consolidated balance sheet of the Company,
as at the end of such fiscal year, and a consolidated statement of income and a
consolidated statement of cash flows of the Company, for such year, all 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. Such financial statements shall be
accompanied by a report and opinion thereon by independent public accountants of
national standing selected by the Company's Board of Directors.
(C) The Company will furnish each Investor, as soon as practicable
after the end of the first, second and third quarterly accounting periods in
each fiscal year of the Company, and in any event within forty-five (45) days
thereafter, a consolidated balance sheet of the Company as of the end of each
such quarterly period, and a consolidated statement of income and a consolidated
statement of cash flows of the Company for such period and for the current
fiscal year to date, prepared in accordance with generally accepted accounting
principles, with the exception that no notes need be attached to such statements
and year-end audit adjustments may not have been made.
(D) So long as an Investor (with its affiliates) shall own not less
than two hundred fifty thousand (250,000) shares of Registrable Securities (as
adjusted for stock splits and combinations) (a "Major Investor"), the Company
will furnish each such Major Investor at least thirty (30) days prior to the
beginning of each fiscal year an annual budget and operating plans for such
fiscal year (and as soon as available, any subsequent revisions thereto).
(E) For a period of three (3) years following the Company's Initial
Public Offering, the Company shall furnish to each Major Investor copies of the
Company's Form 10-Ks, Form 10-Qs, Form 8-Ks and Annual Reports to shareholders
promptly after such documents are filed with the SEC.
3.2 INSPECTION RIGHTS. Each Major Investor shall have the right to visit
and inspect any of the properties of the Company or any of its subsidiaries, and
to discuss the affairs, finances and accounts of the Company or any of its
subsidiaries with its officers, and to review such information as is reasonably
requested all at such reasonable times and as often as may be
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reasonably requested; provided, however, that the Company shall not be obligated
under this Section 3.2 with respect to a competitor of the Company or with
respect to information which the Board of Directors determines in good faith is
confidential and should not, therefore, be disclosed.
3.3 CONFIDENTIALITY OF RECORDS. Each Investor agrees to use, and to use
its best efforts to insure that its authorized representatives use, the same
degree of care as such Investor uses to protect its own confidential information
to keep confidential any information furnished to it which the Company
identifies as being confidential or proprietary (so long as such information is
not in the public domain), except that such Investor may disclose such
proprietary or confidential information to any partner, subsidiary or parent of
such Investor for the purpose of evaluating its investment in the Company as
long as such partner, subsidiary or parent is advised of and agrees to be bound
by the confidentiality provisions of this Section 3.3.
3.4 RESERVATION OF COMMON STOCK. The Company will at all times reserve
and keep available, solely for issuance and delivery upon the conversion of its
Preferred Stock, all Common Stock issuable from time to time upon such
conversion.
3.5 EMPLOYEE LOCK-UP AND STOCK VESTING. Unless otherwise approved by the
Board of Directors, all stock options and other stock equivalents issued after
the date of this Agreement to employees, directors, consultants and other
service providers shall be subject to a "market stand-off" requirement
substantially similar to that set forth in Section 2.13 hereof and shall be
subject to vesting as follows: (i) twenty-five percent (25%) of such stock
shall vest at the end of the first year following the earlier of the date of
issuance or such person's services commencement date with the company, and (ii)
seventy-five percent (75%) of such stock shall vest on a monthly basis over the
remaining three (3) years. With respect to any shares of stock purchased by any
such person, the Company's repurchase option shall provide that upon such
person's termination of employment or service with the Company, with or without
cause, the Company or its assignee (to the extent permissible under applicable
securities laws and other laws) shall have the option to purchase at cost any
unvested shares of stock held by such person.
3.6 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT. The Company shall
require all employees and consultants to execute and deliver a Proprietary
Information and Inventions Agreement in a form acceptable to the Investors and
the Company.
3.7 DIRECTORS' LIABILITY AND INDEMNIFICATION. The Company's Articles of
Incorporation and Bylaws shall provide (i) for elimination of the liability of
directors to the maximum extent permitted by law and (ii) for indemnification of
directors for acts on behalf of the Company to the maximum extent permitted by
law.
3.8 BOARD OBSERVATION RIGHTS. So long as Intel Corporation ("Intel") and
its affiliates continue to own at least Two Hundred Fifty Thousand (250,000)
shares of the Company's Series B Preferred Stock, until the effectiveness of the
registration statement covering the Company's Initial Public Offering, the
Company shall allow one representative designated by Intel (which representative
shall be approved by the Company's Board of Directors, such approval not to be
unreasonably withheld) to attend all meetings of the Company's Board of
Directors in a nonvoting capacity, and, in connection therewith, the
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Company shall give such representative copies of all notices, minutes, consents
and other materials, financial or otherwise (including annual budgets and
operating plans), which the Company provides to its Board of Directors;
provided, however, that at the request of the Board of Directors, the Intel
representative will leave the meeting (or not be provided with materials) if and
when (and only with respect to the limited period or materials that) the Board
of Directors believes in good faith that sensitive information will be discussed
or disclosed that should not be shared with Intel employees.
3.9 NONDISCLOSURE AGREEMENT.
(A) The terms and conditions of the investment in the Company by Intel
Corporation ("Intel"), including pursuant to this Agreement, the Series D Stock
Purchase Agreement (the "Purchase Agreement") the Voting Agreement and the Right
of First Refusal and Co-Sale Agreement (the "Co-Sale Agreement") (collectively,
the "Financing Terms"), 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) Within sixty (60) days of the Closing, the Company may issue a
press release disclosing that Intel has invested in the Company; provided that
the release does not disclose any of the Financing Terms and the final form of
the press release is approved in advance in writing by Intel. No other
announcement regarding Intel's investment in the Company 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.
(C) 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 Intel is
an Investor in the Company to any third parties without the requirement for the
consent of any other party or nondisclosure obligations; and (iii) Intel may
disclose its investment in the Company and the Financing Terms to third parties
or to the public at its sole discretion and, if it does so, the other parties
hereto shall have the right to disclose to third parties any such information
disclosed in a press release or other public announcement by Intel.
(D) In the event that any party is requested or becomes legally
compelled (including without limitation, pursuant to securities laws
regulations) to disclose the Financing Terms, in contravention of the provisions
of this Section 3.9, such party (the "Disclosing Party") shall provide Intel
with prompt written notice of that fact so that Intel 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 Financing Terms 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 Intel.
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(E) The provisions of this Section 3.9 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 board observer) shall be governed by the
terms of the Corporate Non-Disclosure Agreement No. 91232 dated February 18,
1998, executed by the Company and Intel, and any Confidential Information
Transmittal Records provided in connection therewith.
(F) All notices required under this section shall be made pursuant to
Section 5.8 of this Agreement.
3.10 QUALIFIED SMALL BUSINESS.
(A) During the period of time (the "Investor's Holding Period") any
shares of Preferred Stock are held by an Investor or a transferee in whose hands
such shares of Preferred Stock are eligible for classification as Qualified
Small Business Stock (a "Qualified Transferee"), the Company will use its
commercially reasonable best efforts to satisfy the "active business
requirement" of section 1202(e) of the Code. Without limiting the foregoing,
during the Investor's Holding Period the Company will use its commercially
reasonable best efforts to use at least 80 percent (by value) of its assets in
one or more "qualified trades or businesses," defined in section 1202(e)(3) of
the Code as any trade or business other than:
(I) any trade or business involving the performance of services
in the fields of health, law, engineering, architecture, accounting, actuarial
science, performing arts, consulting, athletics, financial services, brokerage
services or any other trade or business the principal asset of which is the
reputation or skill of one or more employees;
(II) any banking, insurance, financing, leasing, investing or
similar business;
(III) any farming business (including the business of raising or
harvesting trees);
(IV) any business involving the production or extraction of
products of a character with respect to which a deduction is allowable under
section 613 or 613A of the Code (relating to depletion); or
(V) any business of operating a hotel, motel, restaurant or
similar business.
(B) During the Investor's Holding Period, the Company will use its
commercially reasonable best efforts not to permit more than 10 percent of the
value of the Company's assets (in excess of liabilities) to consist of stock or
securities of any other corporation which is not a subsidiary of the Company
(other than assets described in section 1202(e)(6) of the Code, relating to
working capital). For purposes of this Section 3.10 (b), a subsidiary is a
corporation in which the Company owns more than 50 percent of the combined
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voting power of all classes of voting stock and more than 50 percent in value of
all outstanding stock of such corporation.
(C) During the Investor's Holding Period, the Company will use its
commercially reasonable best efforts not to permit more than 10 percent of the
total value of the Company's assets to consist of real property not used in the
active conduct of a qualified trade or business. For purposes of this Section
3.10 (c), the ownership of, dealing in or renting of real property is not
treated as the active conduct of a qualified trade or business.
(D) During the Investor's Holding Period, the Company shall submit all
such reports to its shareholders and to the Internal Revenue Service ("IRS") as
may be prescribed by the IRS. In addition, within ten (10) days after any
Investor has delivered to the Company a written request therefor, the Company
shall deliver to such Investor a certificate, executed by the Company's Chief
Executive Officer or Chief Financial Officer and in a form satisfactory to the
Investor, informing the Investor whether such Investor's interest in the Company
constitutes "qualified small business stock" as defined in Section 1202(c) of
the Code; provided, however, that the Company shall not be required to provide
more than four (4) such certificates to any Investor in any 12 month period. The
Company's obligation to furnish such certificate pursuant to this Section 3.10
(d) shall continue notwithstanding the fact that a class of the Company's stock
may be traded on an established securities market.
(E) During the Investor's Holding Period, the Company shall notify
each Investor (i) at least 10 business days prior to taking or omitting to take
any action which action or omission could reasonably be expected to cause the
Preferred Stock to cease to be eligible for classification as Qualified Small
Business Stock and (ii) of any other action or occurrence that constitutes a
breach of the Company's covenants set forth herein, as soon as practicable after
the Company becomes aware that such other action or occurrence has occurred or
is proposed to occur. The Company acknowledges that, in such event, an Investor
or Qualified Transferee may wish to sell such Investor's or Qualified
Transferee's Preferred Stock promptly and, in such event, the Company will use
its commercially reasonable best efforts, subject to compliance with applicable
securities laws, to facilitate such a sale of Preferred Stock by any Investor or
Qualified Transferee.
(F) For the one-year period following the date of issuance of the
Series D Preferred shares, the Company shall not redeem or otherwise repurchase
shares of its stock having an aggregate value (at the time of purchase) which,
when combined with the aggregate value of shares redeemed or repurchased during
the period commencing on the date that is one year prior to the date hereof
("the Redemption Measurement Date"), other than Excluded Repurchases, would
exceed five percent of the value of all of the Company's outstanding stock on
the Redemption Measurement Date.
(G) During the Investor's Holding Period, and to the extent that each
of the following limits do not prevent the Company from relocating its assets or
hiring employees outside California to improve the profitability or productivity
of the Company, the Company will use its commercially reasonable best efforts:
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(I) to use at least 80 percent (by value) of its assets in the
active conduct of one or more qualified trades or businesses within California,
determined in accordance with section 18152.5(e) of the Revenue & Taxation Code;
and
(II) to have no more than 20 percent of the Company's total
payroll expense be attributable to employment located outside of California.
(H) During the Investor's Holding Period, the Company shall submit
all such reports to its shareholders and to the California Franchise Tax Board
("FTB") as may be prescribed by the FTB, including filing FTB Form 3565, Small
Business Stock Questionnaire, with its California franchise or income tax return
for the current income year and providing a copy of the same to the Investors.
(I) During the Investor's Holding Period, the Company shall notify
each Investor at least 15 days prior to taking or omitting to take any action
which action or omission could reasonably be expected to cause the Shares to
cease to be eligible for classification as California Qualified Small Business
Stock, in which case the provisions of the last sentence of Subsection (e) of
this Section 3.10 shall apply.
(J) All covenants of the Company contained in this Section 3.10 shall
survive and remain in effect following the completion of the Initial Public
Offering; provided, however, that, following the Initial Public Offering, and
subject to the Company's continuing obligations under Sections 3.10(d) and (e)
above, the Company shall not be prohibited from taking or omitting to take any
action which would cause the capital stock of the Company to cease to be
eligible for classification as Qualified Small Business Stock if the Board of
Directors of the Company expressly determines in good faith that such action or
omission is necessary to protect the best interests of the Company and its
shareholders.
3.11 LEGENDS. The Company shall within sixty (60) days after the Closing
Date cause each of the shares of the Company's Common and Preferred Stock to
bear the legends required by the Purchase Agreement, the Voting Agreement and
the Right of First Refusal and Co-Sale Agreement.
3.12 ISSUANCE OF ADDITIONAL SHARES. The Company will not issue any
authorized but unissued shares of Series D Preferred Stock without the consent
of the Company's Board of Directors, which consent shall include the director
nominee of the Investors affiliated with Technology Crossover Management II,
L.L.C.
3.13 DIRECTED SHARE PROGRAM. In the event of an Initial Public Offering,
the Company shall request that the managing underwriters of the Initial Public
Offering establish a directed share program (the "Program") in connection with
the Initial Public Offering. The Program shall consist of at least that number
of shares of capital stock determined by dividing $2,000,000 by the Initial
Public Offering price (the "Program Shares"). The Company shall cause the
managing underwriters to give priority to the holders of the Company's Series D
Preferred Stock (the "Series D Holders") with respect to the Program Shares in
allocating the shares available for purchase in the Program. The Series D
Holders, pro rata in accordance with their relative holdings of Series D
Preferred Stock, shall have the option, but not the obligation, to
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purchase all or any portion of the Program Shares at the Initial Public Offering
price. Series D Holders exercising the right to purchase their full pro rata
amount of the Program Shares shall have the further right to purchase any non-
fully exercising Series D Holder's Program Shares. The Program Shares shall be
subject to the 180 day lock-up pursuant to Section 2.13 hereof.
3.14 TERMINATION OF COVENANTS. With the exception of Section 3.10 hereof,
all covenants of the Company contained in Section 3 of this Agreement shall
expire and terminate as to each Investor upon the effectiveness of the
registration statement pertaining to the Initial Public Offering; provided,
however, that the covenants set forth in Section 3.1(e) will expire three (3)
years after the closing of the Company's Initial Public Offering.
SECTION 4. RIGHTS OF FIRST REFUSAL.
4.1 SUBSEQUENT OFFERINGS. Each Investor shall have a right of first
refusal to purchase its Pro Rata Share of all Equity Securities, as defined
below, that the Company may, from time to time, propose to sell and issue after
the date of this Agreement, other than the Equity Securities excluded by Section
4.7 hereof. Each Investor's "Pro Rata Share" is equal to the ratio of (A) the
number of shares of the Company's Common Stock (including all shares of Common
Stock issued or issuable upon conversion of the Shares or upon the exercise of
any outstanding warrants or options) which such Investor is deemed to be a
holder immediately prior to the issuance of such Equity Securities to (B) the
total number of shares of the Company's outstanding Common Stock (including all
shares of Common Stock issued or issuable upon conversion of the Shares or upon
the exercise of any outstanding warrants or options) immediately prior to the
issuance of the Equity Securities. The term "Equity Securities" shall mean (i)
any Common Stock, Preferred Stock or other security of the Company, (ii) any
security convertible, with or without consideration, into any Common Stock,
Preferred Stock or other security (including any option to purchase such a
convertible security), (iii) any security carrying any warrant or right to
subscribe to or purchase any Common Stock, Preferred Stock or other security or
(iv) any such warrant or right.
4.2 EXERCISE OF RIGHTS. If the Company proposes to issue any Equity
Securities, it shall give each Investor written notice of its intention,
describing the Equity Securities, the price and the terms and conditions upon
which the Company proposes to issue the same. Each Investor shall have fifteen
(15) days from the giving of such notice to agree to purchase its Pro Rata Share
of the Equity Securities 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. Notwithstanding the
foregoing, the Company shall not be required to offer or sell such Equity
Securities to any Investor who would cause the Company to be in violation of
applicable federal securities laws by virtue of such offer or sale. If the price
of the Equity Securities is not in cash, then the Board of Directors shall
determine the fair market value cash equivalent of such Equity Securities for
purposes of this notice.
4.3 RIGHTS OF OVERSUBSCRIPTION. If not all of the Investors elect to
purchase their Pro Rata Share of the Equity Securities (unless a material
portion of the Equity Securities are to be issued to an investor who (together
with its affiliates) has not previously invested in the Company and a majority
in interest of the Investors elect not to purchase their Pro Rata Shares of such
Equity Securities), in which case the Right of Oversubscription set forth herein
shall not
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apply), then the Company shall promptly notify in writing the Investors who do
so elect and shall offer such Investors the right to acquire such unsubscribed
shares (the "Unsubscribed Shares"). Each such Investor shall have five (5) days
after receipt of such notice to notify the Company of its election to purchase
all or a portion thereof of the Unsubscribed Shares. However, if more than one
such Investor elects to purchase the Unsubscribed Shares, each such Investor
shall be entitled to purchase only the portion of such Unsubscribed Shares equal
to (A) the number of shares of the Company's Common Stock (including all shares
of Common Stock issued or issuable upon conversion of the Shares) held by such
Investor immediately prior to the issuance of the Equity Securities divided by
(B) the total number of shares of the Company's Common Stock (including all
shares of Common Stock issued or issuable upon conversion of the Shares) held by
all such Investors who elect to purchase the Unsubscribed Shares immediately
prior to the issuance of the Equity Securities.
4.4 ISSUANCE OF EQUITY SECURITIES TO OTHER PERSONS. If the Investors fail
to exercise in full the rights of first refusal, the Company shall have ninety
(90) days thereafter to sell the Equity Securities in respect of which the
Investor's rights were not exercised, at a price and upon general terms and
conditions materially no more favorable to the purchasers thereof than specified
in the Company's notice to the Investors pursuant to Section 4.2 hereof. If the
Company has not sold such Equity Securities within ninety (90) days of the
notice provided pursuant to Section 4.2, the Company shall not thereafter issue
or sell any Equity Securities, without first offering such securities to the
Investors in the manner provided above.
4.5 TERMINATION OF RIGHTS OF FIRST REFUSAL. The rights of first refusal
and over subscription established by this Section 4 shall not apply to the
Company's Initial Public Offering, and shall terminate upon the effective date
of the registration statement pertaining to the Initial Public Offering.
4.6 TRANSFER OF RIGHTS OF FIRST REFUSAL. The rights of first refusal of
each Investor under this Section 4 may be transferred to the same parties,
subject to the same restrictions as any transfer of registration rights pursuant
to Section 2.10.
4.7 EXCLUDED SECURITIES. The rights of first refusal and over subscription
established by this Section 4 shall have no application to any of the following
Equity Securities:
(A) Common Stock (and/or options, warrants or other Common Stock
purchase rights issued pursuant to such options, warrants or other rights) and
Series A Preferred Stock issued or to be issued to employees, officers or
directors of, or consultants or advisors to the Company or in connection with
services rendered to the Company or any subsidiary, pursuant to stock purchase
or stock option plans or other arrangements that are approved by the Board of
Directors;
(B) stock issued pursuant to any rights or agreements outstanding as
of the date of this Agreement, options and warrants outstanding as of the date
of this Agreement, and stock issued pursuant to any such rights or agreements
granted after the date of this Agreement, provided that the rights of first
refusal established by this Section 4 applied with respect to the initial sale
or grant by the Company of such rights or agreements;
21.
<PAGE>
(C) any Equity Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business
combination;
(D) shares of Common Stock issued in connection with any stock split,
stock dividend or recapitalization by the Company;
(E) shares of Common Stock issued upon conversion of the Shares;
(F) any Equity Securities issued pursuant to any equipment leasing
arrangement, or debt financing from a bank or similar financial institution;
(G) any Equity Securities that are issued by the Company pursuant to
a registration statement filed under the Securities Act; and
(H) shares of the Company's Common Stock or Preferred Stock issued in
connection with strategic transactions involving the Company and other entities,
including (A) joint ventures, manufacturing, marketing or distribution
arrangements or (B) technology transfer or development arrangements; provided
that such strategic transactions and the issuance of shares therein, has been
approved by the Company's Board of Directors.
SECTION 5. MISCELLANEOUS.
5.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of California as applied to agreements among
California residents entered into and to be performed entirely within
California.
5.2 SURVIVAL. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by any Holder 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 pursuant hereto 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.
5.3 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 Registrable Securities from time to time; provided, however, that
prior to the receipt by the Company of adequate written notice of the transfer
of any Registrable Securities specifying the full name and address of the
transferee, the Company may deem and treat the person listed as the holder of
such shares in its records as the absolute owner and holder of such shares for
all purposes, including the payment of dividends or any redemption price.
5.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules hereto,
the Purchase Agreement and the other documents delivered pursuant thereto
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.
22.
<PAGE>
5.5 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.
5.6 AMENDMENT AND WAIVER.
(A) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of: (i) the Company; (ii) the
Holders of at least two-thirds of the Registrable Securities then outstanding,
voting as a separate class; and (iii) if such amendment materially adversely
affects solely the rights, preferences, and privileges of the Series D Preferred
Stock, the written consent of the holders of at least fifty percent (50%) of the
Series D Preferred Stock then outstanding, voting together as a separate class
shall also be required.
(B) Except as otherwise expressly provided, the obligations of the
Company and the rights of the Holders under this Agreement may be waived only
with the written consent of: (1) the Holders of at least a two-thirds of the
Registrable Securities; and, (2) if such waiver materially adversely affects
solely the rights, preferences or privileges of the Series D Preferred Stock the
written consent of the holders of at least fifty percent (50%) of the Series D
Preferred Stock then outstanding shall also be required.
(C) Sections 3.8 and 3.9 of this Agreement may not be amended or
modified, and no waiver with respect thereto shall be effective, without the
written consent of Intel.
(D) Section 3.10, Section 3.12, Section 3.13 and Section 3.14 (as
relates to Section 3.10, Section 3.12 and Section 3.13) of this Agreement may
not be amended or modified, and no waiver with respect thereto shall be
effective, without the written consent of Technology Crossover Management II,
L.L.C.
5.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
5.8 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
party to be notified at the address or addresses as set
23.
<PAGE>
forth on the signature pages hereof or Exhibit A hereto or at such other address
or addresses as such party may designate by ten (10) days advance written notice
to the other parties hereto.
5.9 ATTORNEYS' FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
5.10 TITLES AND SUBTITLES. The titles of the sections and subsections of
this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
5.11 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.
5.12 AGGREGATION OF HOLDINGS. All shares of Preferred Stock (or Common
Stock issuable or issued upon conversion thereof) held or acquired by affiliated
entities or persons shall be aggregated together for purposes of determining the
availability of any rights under this Agreement.
24.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this INVESTORS' RIGHTS
AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY:
COPPER MOUNTAIN NETWORKS, INC.
By: /s/ RICHARD GILBERT
_________________________________________
Richard Gilbert
President and Chief Executive Officer
INVESTORS:
TCV II, V.O.F.
a Netherlands Antilles General Partnership
By: Technology Crossover Management II, L.L.C.,
Its: Investment General Partner
By: /s/ ROBERT C. BENSKY
_________________________________________
Robert C. Bensky
Chief Financial Officer
TECHNOLOGY CROSSOVER VENTURES II, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.
Its: General Partner
By: /s/ ROBERT C. BENSKY
_________________________________________
Robert C. Bensky
Chief Financial Officer
25.
<PAGE>
TCV II (Q), L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.
Its: General Partner
By: /s/ ROBERT C. BENSKY
_________________________________________
Robert C. Bensky
Chief Financial Officer
TCV II STRATEGIC PARTNERS, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.
Its: General Partner
By: /s/ ROBERT C. BENSKY
_________________________________________
Robert C. Bensky
Chief Financial Officer
TECHNOLOGY CROSSOVER VENTURES II, C.V.
a Netherlands Antilles Limited Partnership
By: Technology Crossover Management II, L.L.C.
Its: Investment General Partner
By: /s/ ROBERT C. BENSKY
_________________________________________
Robert C. Bensky
Chief Financial Officer
JULIET CHALLENGER, INC.
By: /s/ ANDREW H. McQUARRIE
_________________________________________
Andrew H. McQuarrie
Vice President
26.
<PAGE>
HENRY L. HILLMAN, ELSIE HILLIARD HILLMAN AND
C.G. GREFENSTETTE, TRUSTEES OF THE HENRY L.
HILLMAN TRUST U/A DATED NOV. 18, 1985
By: /s/ C.G. GREFENSTETTE
_________________________________________
C.G. Grefenstette, Trustee
C.G. GREFENSTETTE AND THOMAS G. BIGLEY,
TRUSTEES, U/A/T DATED 12/30/76 FOR CHILDREN
OF JULIET LEA HILLMAN SIMONDS
By: /s/ C.G. GREFENSTETTE
__________________________________________
C.G. Grefenstette, Trustee
By: /s/ THOMAS G. BIGLEY
__________________________________________
Thomas G. Bigley, Trustee
C.G. GREFENSTETTE AND THOMAS G. BIGLEY,
TRUSTEES U/A/T DATED 12/30/76 FOR CHILDREN
OF HENRY LEA HILLMAN, JR.
By: /s/ C.G. GREFENSTETTE
_________________________________________
C.G. Grefenstette, Trustee
By: /s/ THOMAS G. BIGLEY
_________________________________________
Thomas G. Bigley, Trustee
C.G. GREFENSTETTE AND THOMAS G. BIGLEY,
TRUSTEES U/A/T DATED 12/30/76 FOR CHILDREN
OF WILLIAM TALBOTT HILLMAN
By: /s/ C.G. GREFENSTETTE
_________________________________________
C.G. Grefenstette, Trustee
By: /s/ THOMAS G. BIGLEY
_________________________________________
Thomas G. Bigley, Trustee
27.
<PAGE>
C.G. GREFENSTETTE AND THOMAS G. BIGLEY,
TRUSTEES U/A/T DATED 12/30/76 FOR CHILDREN
OF AUDREY HILLMAN FISHER
By: /s/ C.G. GREFENSTETTE
_________________________________________
C.G. Grefenstette, Trustee
By: /s/ THOMAS G. BIGLEY
_________________________________________
Thomas G. Bigley, Trustee
THE HILLMAN FOUNDATION
By: /s/ ROBERT W. WERTZ
_________________________________________
Ronald W. Wertz
President
HENRY L. HILLMAN FOUNDATION
By: /s/ RONALD W. WERTZ
_________________________________________
Ronald W. Wertz
President
CHARTER GROWTH CAPITAL, L.P.
By: /s/ KEVIN J. McQUILLAN
_________________________________________
Kevin J. McQuillan
CGC INVESTORS, L.P.
By: /s/ KEVIN J. McQUILLAN
_________________________________________
Kevin J. McQuillan
28.
<PAGE>
CHARTER GROWTH CAPITAL CO-INVESTMENT FUND, L.P.
By: /s/ KEVIN J. McQUILLAN
_________________________________________
Kevin J. McQuillan
RHO MANAGEMENT TRUST I
By: RHO Management Company, Inc.
As Investment Advisor
By: /s/ JOSHUA RUCH
_________________________________________
Name: Joshua Ruch
_______________________________________
Title: President
______________________________________
MORGAN STANLEY VENTURE PARTNERS III, L.P.
By: /s/ ROBERT LOARIE
_________________________________________
Robert Loarie
MORGAN STANLEY VENTURE INVESTORS III, L.P.
By: /s/ ROBERT LOARIE
_________________________________________
Robert Loarie
THE MORGAN STANLEY VENTURE PARTNERS
ENTREPRENEUR FUND, L.P.
By: /s/ ROBERT LOARIE
_________________________________________
Robert Loarie
UMBTRU
By: /s/ JOHN DeMARCO
_________________________________________
John DeMarco
29.
<PAGE>
BAYVIEW INVESTORS V, L.P.
By: /s/ TERRY OTTON
_________________________________________
Terry Otton
CFO Robertson Stephens
LINCOLN INVESTORS, L.P.
By: CHM Capital Management Corp.
Its General Partner
By: /s/ COREY M. HOROWITZ
_________________________________________
Corey M. Horowitz
Its President
ANDREESSEN 1996 LIVING TRUST
By: /s/ MICHAEL MOHR
_________________________________________
Michael Mohr, Trustee
ULTIMA PARTNERS LIMITED
By: /s/ GLORIA J. HIGGINS
_________________________________________
Gloria J. Higgins
RANDALL M. BAUM & BETSY S. BAUM, TRUSTEES
FBO THE BAUM FAMILY REV TRUST
UTA DATED 2-21-97
By: /s/ RANDALL M. BAUM
_________________________________________
Randall M. Baum, Trustee
30.
<PAGE>
CANAAN EQUITY, L.P.
By: Canaan S.B.I.C. Partners II LLC
Its General Partner
By: /s/ ERIC A. YOUNG
_________________________________________
Eric A. Young
Member/Manager
INTERWEST PARTNERS VI, LP
By: InterWest Management Partners VI, LLC
Its General Partner
By: /s/ PHILIP T. GIANOS
_________________________________________
Philip T. Gianos
General Partner
INTERWEST INVESTORS VI, LP
By: InterWest Management Partners VI, LLC
Its General Partner
By: /s/ PHILIP T. GIANOS
_________________________________________
Philip T. Gianos
General Partner
GREYLOCK EQUITY LIMITED PARTNERSHIP
By: Greylock Equity GP Limited
Its General Partner
By: /s/ ROGER EVANS
_________________________________________
Roger Evans
A General Partner
31.
<PAGE>
SUTTER HILL VENTURES
a California Limited Partnership
By: /s/ TRENCH COXE
_________________________________________
Tench Coxe
General Partner
TOW PARTNERS
a California Limited Partnership
By: /s/ PAUL M. WYTH
_________________________________________
Paul M. Wyth
General Partner
ANVEST, L.P.
By: /s/ DAVID L. ANDERSON
_________________________________________
David L. Anderson
General Partner
/s/ G. LEONARD BAKER, JR.
____________________________________________
G. Leonard Baker, Jr.
/s/ DAVID L. ANDERSON
____________________________________________
David L. Anderson
/s/ WILLIAM H. YOUNGER, JR.
____________________________________________
William H. Younger, Jr.,
Trustee of the Younger Living Trust
/s/ S. MASTON
____________________________________________
Wells Fargo Bank, Trustee
SHV M/P/T FBO William H. Younger, Jr.
/s/ TENCH COXE
____________________________________________
Tench Coxe
32.
<PAGE>
/s/ S. MASTON
____________________________________________
Wells Fargo Bank, Trustee
SHV M/P/T FBO Tench Coxe
/s/ RONALD L. PERKINS
____________________________________________
Ronald L. Perkins
/s/ S. MASTON
____________________________________________
Wells Fargo Bank, Trustee
SHV M/P/T FBO Sherryl W. Hossack, Acct. No. 506192
MATRIX PARTNERS IV, L.P.
By: Matrix IV Management Co., L.P.
Its General Partner
By: /s/ JOHN C. BOYLE
_________________________________________
John C. Boyle
General Partner
MATRIX IV ENTREPRENEURS FUND, L.P.
By: Matrix IV Management Co., L.P.
Its General Partner
By: /s/ JOHN C. BOYLE
_________________________________________
John C. Boyle
General Partner
GC&H INVESTMENTS
By: /s/ JOHN L. CARDOZA
_________________________________________
John L. Cardoza
Executive Partner
33.
<PAGE>
WS INVESTMENT COMPANY 97B
By: /s/ STEVEN BOCHNER
--------------------------------------
Steven Bochner
COMDISCO, INC.
By: /s/ JIM LABE
--------------------------------------
Jim Labe
President of Comdisco Ventures Division
INTEL CORPORATION
By: /s/ ARVIND SODHANI
--------------------------------------
Name: Arvind Sodhani
------------------------------------
Title: Vice President & Treasurer
-----------------------------------
/s/ JOSEPH D. MARKEE
- -----------------------------------------
Joseph D. Markee
/s/ DAVID HELFRICH
- -----------------------------------------
David Helfrich
/s/ MOLLY MILLER
- -----------------------------------------
Molly Miller
/s/ KEVIN GALLAGHER
- -----------------------------------------
Kevin Gallagher
Gallagher Public Relations
34.
<PAGE>
/s/ RICHARD GILBERT
____________________________________________
Richard Gilbert
KOREA TECHNOLOGY BANKING CORPORATION
By: /s/ JUNG-KYOO YANG
_________________________________________
Jung-Kyoo Yang
Chief Officer/International Business
/s/ DAVID MARINO
____________________________________________
David Marino
/s/ CRAIG IRVING
____________________________________________
Craig Irving
/s/ JASON HUGHES
____________________________________________
Jason Hughes
/s/ WILLIAM SAHLMAN
____________________________________________
William Sahlman
/s/ NICK LIPPIS
____________________________________________
Nick Lippis
/s/ GREGORY SANDS
____________________________________________
Gregory Sands
SAUNDERS HOLDING, L.P.
By: /s/ DAVID GOLOB
____________________________________________
David Golob
/s/ DAVID L. ANDERSON
____________________________________________
David L. Anderson, Trustee
The Anderson Living Trust
35.
<PAGE>
EXHIBITS
Exhibit A -- Schedule of Investors
<PAGE>
EXHIBIT A
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
NAME AND ADDRESS
----------------
<S> <C>
TCV II, V.O.F. InterWest Investors VI, L.P.
56 Main Street, Suite 210 3000 Sand Hill Road
Millburn, New Jersey 07041 Building 3, Suite 255
(973) 467-5320 Menlo Park, California 94025
575 High Street, Ste. 400
Palo Alto, CA 94301
(650) 614-8200
Technology Crossover Ventures II, L.P. InterWest Partners VI, L.P.
56 Main Street, Suite 210 3000 Sand Hill Road
Millburn, New Jersey 07041 Building 3, Suite 255
(973) 467-5320 Menlo Park, California 94025
575 High Street, Ste. 400
Palo Alto, CA 94301
(650) 614-8200
TCV II (Q), L.P. Canaan Equity, L.P.
56 Main Street, Suite 210 2884 Sand Hill Road, Ste. 115
Millburn, New Jersey 07041 Menlo Park, CA 94205
(973) 467-5320
575 High Street, Ste. 400
Palo Alto, CA 94301
(650) 614-8200
TCV II Strategic Partners, L.P. Matrix Partners IV, L.P.
56 Main Street, Suite 210 2500 Sand Hill Road, Suite 113
Millburn, New Jersey 07041 Menlo Park, CA 94025
(973) 467-5320 (415) 854-3131
575 High Street, Ste. 400
Palo Alto, CA 94301
(650) 614-8200
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS
----------------
<S> <C>
Technology Crossover Ventures II. C.V. Greylock Equity Limited Partnership
56 Main Street, Suite 210 One Federal Street, 26th Floor
Millburn, New Jersey 07041 Boston, MA 02110
(973) 467-5320 (415) 493-5600
575 High Street, Ste. 400 755 Page Mill Road, Suite A-100
Palo Alto, CA 94301 Palo Alto, CA 94304-1018
(650) 614-8200 Attn: Roger Evans
(650) 493-5525
Juliet Challenger, Inc. Sutter Hill Ventures,
Attn: Andrew H. McQuarrie a California Limited Partnership
824 Market Street, Suite 900 755 Page Mill Road
Wilmington, DE 19801 Suite A-200
Palo Alto, CA 94304
(650) 493-5600
Henry L. Hillman, Elsie Hilliard Hillman C.G. Grefenstette and Thomas G. Bigley,
and C.G. Grefenstette, Trustees of the Trustees U/A/T dated 12/30/76 for
Henry L. Hillman Trust U/A dated Children of Audrey Hillman Fisher
Nov. 18, 1985 Attn: Maurice White
Attn: Maurice White 1800 Grant Building
1800 Grant Building Pittsburgh, PA 15219
Pittsburgh, PA 15219 (412) 338-3457
(412) 338-3457
C.G. Grefenstette and Thomas G. Bigley, The Hillman Foundation
Trustees U/A/T dated 12/30/76 for Children Attn: Maurice White
of Juliet Lea Hillman Simonds 2000 Grant Building
Attn: Maurice White Pittsburgh, PA 15219
1800 Grant Building (412) 338-3457
Pittsburgh, PA 15219
(412) 338-3457
C.G. Grefenstette and Thomas G. Bigley, Henry L. Hillman Foundation
Trustees U/A/T dated 12/30/76 for Children Attn: Maurice White
of Henry Lea Hillman, Jr. 2000 Grant Building
Attn: Maurice White Pittsburgh, PA 15219
1800 Grant Building (412) 338-3457
Pittsburgh, PA 15219
(412) 338-3457
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS
----------------
<S> <C>
C.G. Grefenstette and Thomas G. Bigley, Charter Growth Capital
Trustees U/A/T dated 12/30/76 for Children Attn: Kevin J. McQuillan
of William Talbott Hillman 525 University Avenue, Suite 1500
Attn: Maurice White Palo Alto, CA 94301
1800 Grant Building (650) 325-6953
Pittsburgh, PA 15219
(412) 338-3457
CGC Investors, L.P. William Kevin Gallagher
Attn: Kevin J. McQuillan 1301 Marina Village Parkway, Ste. 215
525 University Avenue, Suite 1500 Alameda, CA 94501
Palo Alto, CA 94301 (510) 749-6800
(650) 325-6953
Morgan Stanley Venture Investors III, L.P. Morgan Stanley Venture Partners
Attn: Robert Loarie III, L.P.
3000 Sand Hill Road Attn: Robert Loarie
Building 4, Suite 250 3000 Sand Hill Road
Menlo Park, CA 94025 Building 4, Suite 250
(650) 233-2500 Menlo Park, CA 94025
(650) 233-2500
Charter Growth Capital Co-Investment Fund, L.P. Morgan Stanley Venture Partners
Attn: Kevin J. McQuillan Entrepreneur Fund, L.P.
525 University Avenue, Suite 1500 Attn: Robert Loarie
Palo Alto, CA 94301 3000 Sand Hill Road
(650) 325-6953 Building 4, Suite 250
Menlo Park, CA 94025
(650) 233-2500
UMBTRU Bayview Investors V, L.P.
Attn: John DeMarco c/o BancBoston Robertson Stephens
UMB Bank Attn: Terry Otton
1 Battery Park Plaza, 8/th/ Floor 555 California Street, Suite 2600
New York, NY 10004 San Francisco, CA 94104
(212) 968-1990 (415) 676-2936
Lincoln Investors, L.P. Randall M. Baum & Betsy S. Baum
Attn: Corey M. Horowitz Trustees FBO The Baum Family
885 Third Avenue, Suite 2900 Rev Trust UTA dated 2-21-97
New York, NY 10022 2180 Carmelita Avenue
(212) 829-5770 Hillsborough, CA 94010
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS
----------------
<S> <C>
Matrix IV Entrepreneurs Fund, L.P. Ultima Partners Limited
2500 Sand Hill Road, Suite 113 Attn: Gloria J. Higgins
Menlo Park, CA 94025 Synetics S.F.S. Inc.
(650) 854-3131 1775 Sherman Street, Suite 1350
Denver, CO 80203
(303) 832-0815
David L. Anderson Tow Partners,
755 Page Mill Road a California Limited Partnership
Suite A-200 755 Page Mill Road, Suite A-200
Palo Alto, CA 94304 Palo Alto, CA 94304
(650) 493-5600 (650) 493-5600
Andreessen 1996 Living Trust William H. Younger, Jr., Trustee
c/o Michael G. Mohr of the Younger Living Trust
16615 Lark Avenue, Suite 101 755 Page Mill Road
Los Gatos, CA 95030 Suite A-200
(408) 358-3316 Palo Alto, CA 94304
(650) 493-5600
Intel Corporation Wells Fargo Bank, Trustee
Treasury Department, SC4-210 SHV M/P/T FBO Sherryl W. Hossack
Attn: Laila Partridge c/o Wells Fargo Bank
2200 Mission College Blvd. Business Retirement Programs
Santa Clara, CA 95052 Account. No. 506192
(408) 765-5446 Attention: Vicki Bandel
MAC 0101 021
420 Montgomery, 2nd Floor
San Francisco, CA 94104
(415) 396-2260
Joseph D. Markee David Helfrich
c/o Copper Mountain Networks, Inc. c/o Copper Mountain Networks, Inc.
3931 Sorrento Valley Boulevard 3931 Sorrento Valley Boulevard
San Diego, CA 92121 San Diego, CA 92121
Ronald L. Perkins Comdisco Ventures
755 Page Mill Road Attn: Jill Hanses
Suite A-200 6111 North River Road
Palo Alto, CA 94304 Rosemont, IL 60018
(650) 493-5600 (847) 518-5466
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS
----------------
<S> <C>
GC&H Investments Korea Technology Banking Corporation
c/o Cooley Godward llp Attn: Mr. Sung Kyoo Yang
One Maritime Plaza, 20th Floor Chief Officer, International Business
San Francisco, CA 94111 KTB Building, 20/th/ Floor
45-21 Yoido-dong, Youngdeungpo-ku
Seoul 150-010 Korea
(82-2) 3878-7691
Wells Fargo Bank, Trustee Craig Irving
SHV M/P/T FBO William H. Younger, Jr. 510 West Broadway, Suite 2020
Attention: Vicki Bandel San Diego, CA 92101
MAC 0101 021
420 Montgomery,2/nd/ Floor
San Francisco, CA 94104
Gallagher Public Relations David B. Marino
1301 Marina Village Parkway, Ste. 215 510 West Broadway, Suite 2020
Alameda, CA 94501 San Diego, CA 92101
(510) 749-6800
Jason Hughes
Anvest L.P. 510 West Broadway, Suite 2020
755 Page Mill Road San Diego, CA 92101
Suite A-200
Palo Alto, CA 94304
(650) 493-5600
Molly M. Miller Richard Gilbert
2628 Laguna Street Copper Mountain Networks
San Francisco, CA 94123 2470 Embarcadero Way
Palo Alto, CA 94303
(650) 858-8500
Wells Fargo Bank Trustee Tench Coxe
SHV M/P/T FBO Tench Coxe 755 Page Mill Road
Attn: Vicki Bandel Suite A-200
420 Montgomery Street, 2/nd/ Floor Palo Alto, CA 94304
MAC 0101 021 (650) 493-5600
(415) 396-3739
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NAME AND ADDRESS
----------------
<S> <C>
Nick Lippis G. Leonard Baker, Jr.
13 Patriots Way 755 Page Mill Road
Hingham, MA 02043 Suite A-200
Palo Alto, CA 94304
(650) 493-5600
William Sahlman David L. Anderson, Trustee
Harvard Business School The Anderson Living Trust
Baker West 373, Folgers Field Station 755 Page Mill Road, Suite A-200
Boston, MA 02163 Palo Alto, CA 94304
(650) 493-5600
David Golob Saunders Holding, L.P.
755 Page Mill Road, Suite A-200 755 Page Mill Road, Suite A-200
Palo Alto, CA 94304 Palo Alto, CA 94304
(650) 493-5600 (650) 493-5600
</TABLE>
<PAGE>
EXHIBIT 10.19
COPPER MOUNTAIN NETWORKS, INC.
RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT
This RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT (the "Agreement") is made
as of this 9th day of October, 1998, by and among COPPER MOUNTAIN NETWORKS,
INC., a California corporation (the "Company"), the holders of the Company's
Series D Preferred Stock listed on Exhibit A hereto (the "Investors"), and
JOSEPH D. MARKEE, MARK HANDZEL and RICHARD GILBERT (the "Founders").
RECITALS
WHEREAS, the Investors are purchasing shares of the Company's Series D
Preferred Stock (the "Series D Preferred Stock") pursuant to that certain Series
D Preferred Stock Purchase Agreement (the "Purchase Agreement") dated as of the
date hereof, among the Investors and the Company;
WHEREAS, such Investors were induced by the Company to purchase the Series
D Preferred Stock in part by the agreement of the Company and the Founders to
enter into this Agreement; and
WHEREAS, the parties desire to enter into this Agreement in order to grant
rights of first refusal and co-sale to each Investor.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS.
(A) "Co-Sale Stock" shall mean shares of the Company's Common Stock or
Preferred Stock now owned or subsequently acquired by the Founders. The number
of shares of Co-Sale Stock owned by each Founder is set forth on Exhibit B,
which Exhibit shall automatically be amended from time to time to reflect
changes in the number of shares owned by the Founders.
(B) "Common Stock" shall mean the Company's Common Stock and shares of
Common Stock issued or issuable upon conversion of the Company's Preferred
Stock, or upon exercise of any options to acquire such shares.
(C) "Preferred Stock" shall mean the Company's Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock.
2. SALES BY FOUNDERS.
(A) NOTICE REQUIREMENT. If any Founder proposes to sell or transfer any
shares of Co-Sale Stock in one or more transactions, then such Founder shall
promptly give written notice
1.
<PAGE>
(the "Notice") simultaneously to the Company and to each of the Investors at
least sixty (60) days prior to the closing of such sale or transfer. The Notice
shall contain the information required by Section 64(a) of the Company's Bylaws
(a copy of which is attached hereto as Exhibit C). In the event that the sale or
transfer is being made pursuant to the provisions of Sections 3(a) and 3(b)
hereof, the Notice shall state under which section (and subsection, if
applicable) the sale or transfer is being made.
(B) COMPANY'S RIGHT OF FIRST REFUSAL. Each Investor hereby acknowledges
and agrees that the Co-Sale Stock is subject to the Company's right of first
refusal set forth in Section 64 of the Company's Bylaws (a copy of which is
attached hereto as Exhibit C). Notwithstanding any contrary provision set forth
in Exhibit C attached hereto, the Company shall give written notice to the
Founder and to all Investors of its election whether or not to purchase Co-Sale
Stock pursuant to the terms of Exhibit C (the "Company Notice") and shall
complete its purchase of the Co-Sale Stock before the expiration of thirty (30)
days from the Company's receipt of the Notice.
(C) INVESTORS' RIGHT OF FIRST REFUSAL. If the Company does not purchase
the Co-Sale Stock available pursuant to its rights described under Section 2(b)
above, then each Investor shall then have the right, exercisable upon written
notice to the Founder (with a copy to the Company) within twenty (20) days of
the date of such Investors receipt of the Company Notice described in Section
2(b), to purchase its Pro Rata Share, as defined below, of such Co-Sale Stock on
the same terms and conditions set forth in the Notice.
(I) For purposes of this Section 2, each Investor's Pro Rata Share
shall be equal to the product obtained by multiplying (x) the aggregate number
of shares of Co-Sale Stock covered by the Notice (less shares purchased by the
Company pursuant to Section 2(b)) by (y) a fraction the numerator of which is
the number of shares of Common Stock owned by the Investor (on an as-if-
converted basis) at the time of the sale or transfer and the denominator of
which is the total number of shares of Common Stock owned by all of the
Investors (on an as-if-converted basis) at the time of the sale or transfer.
(II) Each Investor shall have a right of over allotment, as set forth
in this sub-Section (ii), to purchase shares of Co-Sale Stock not purchased by
the Company or other Investors. Upon any Investor's failure to purchase its Pro
Rata Share, the Founder shall promptly thereafter, via subsequent written notice
delivered within seven (7) calendar days (the "Subsequent Written Notice"),
inform each Investor that elects to purchase all the shares of Co-Sale Stock
available to it (a "Fully Exercising Investor") of any other Investor's failure
to do likewise. During the ten (10) calendar day period commencing after the
Subsequent Written Notice is delivered to each Fully Exercising Investor, each
Fully Exercising Investor may elect to purchase its "Additional Pro Rata Share"
(as defined below) of the shares of Co-Sale Stock for which other Investors were
entitled to subscribe but for which such Investors did not so subscribe, upon
the same terms which the Founder is proposing or is to dispose of such shares,
and the Founder shall sell such shares of Co-Sale Stock to the Fully Exercising
Investor pursuant to such proposed terms. Each Fully Exercising Investor's
"Additional Pro Rata Share" shall mean the ratio of the number of shares of
Common Stock of the Company (including the number of shares of Common Stock into
which the shares of Preferred Stock are then convertible) held by the Fully
Exercising Investor immediately prior to the Founder's proposed sale of the
shares
2.
<PAGE>
of Co-Sale Stock divided by the total number of shares of Common Stock of
the Company (including the number of shares of Common Stock into which the
shares of Preferred Stock are then convertible) held by all Fully Exercising
Investors immediately prior to the Founder's proposed sale of the shares of Co-
Sale Stock.
(D) INVESTORS' CO-SALE RIGHT.
(I) Should the Investors and/or the Company fail to exercise their
respective rights to purchase all of the shares of Co-Sale Stock described in
the Notice issued pursuant to Section 2(a) following the exercise or expiration
of the rights of purchase described in Sections 2(b) and 2(c), then the Founder
will, via written notice, inform all Investors of such fact and permit the
Investors to participate in the sale of such shares of Co-Sale Stock at the same
price, and upon the same terms upon which the Founder is proposing or is to
dispose of such shares of Co-Sale Stock in accordance with the provisions of
Section 2(d)(ii) herein. Such written notice is hereinafter referred to as the
"Co-Sale Notice."
The Co-Sale Notice shall specify the number of shares of Co-Sale Stock to
be sold by the Founder, the sales price, the purchasers and all other terms of
sale, shall be titled "Co-Sale Notice" and shall be delivered to each Investor
within seven (7) calendar days after all Investors exercise or decline to
exercise their right of first refusal and over-allotment rights, as set forth in
this Section 2.
(II) Within seven (7) calendar days of its receipt of the Co-Sale
Notice, each Investor shall notify the Founder of such Investor's intent to sell
to the prospective purchaser of the Co-Sale Stock (or at the Investor's option
and demand, to the Founder, who hereby agrees to purchase in the event that a
direct sale from the Founder to the prospective purchaser is consummated) all or
any part of the Investor's "Co-Sale Allocation" pursuant to the terms the
Founder proposes to sell the Co-Sale Stock. For purposes of this section
2(d)(ii), an Investor's "Co-Sale Allocation" with respect to any single sale of
shares of Co-Sale Stock by a Founder shall be equal to the product obtained by
multiplying (x) the aggregate number of shares of Co-Sale Stock covered by the
Notice (as reduced by any purchases pursuant to Sections 2(b) or 2(c)) by (y) a
fraction the numerator of which is the number of shares of Common Stock owned by
the Investor at the time of the sale or transfer (on an as-if-converted basis)
and the denominator of which is the total number of shares of Common Stock owned
by the selling Founder and all of the Investors at the time of the sale or
transfer (on an as-if-converted basis).
(E) INVESTOR'S FAILURE TO NOTIFY. If, on or before the latest to occur of:
(i) twenty (20) calendar days after receipt by an Investor of the Company
Notice; (ii) ten (10) calendar days after receipt by an Investor of the
Subsequent Written Notice; and, (iii) seven (7) calendar days after receipt by
an Investor of the Co-Sale Notice, the Investor does not send notice to the
Founder of such Investor's intent to exercise its rights of first refusal or
right of co-sale pursuant to Sections 2(c) and (d), respectively, then the
Founder shall be free to sell shares of Co-Sale Stock to such prospective
purchasers, but only on the same terms and conditions as provided for in the
Notice; provided, however, that in the event such shares are not sold within
ninety (90) days of the date of the Notice, such shares of Co-Sale Stock shall
once again be subject to the right of first refusal and right of co-sale as
provided for herein.
3.
<PAGE>
(F) DELIVERY REQUIREMENTS. Each Investor shall effect its participation in
any Founder's sale of shares of Co-Sale Stock by promptly delivering to the
Founder for transfer to the prospective purchaser:
(I) one or more certificates, properly endorsed for transfer, which
represent that number of shares of Preferred Stock which is at such time
convertible into the number of shares of Common Stock which such Investor elects
to sell; provided, however, that if the prospective purchaser objects to the
delivery of Preferred Stock in lieu of Common Stock, such Investor shall convert
such Preferred Stock into Common Stock and deliver such Common Stock in lieu
thereof. The Company agrees to make any such conversion concurrent with the
actual transfer of such shares to the purchaser; and,
(II) if necessary, an Assignment Separate from Certificate, via
facsimile or otherwise, which represents the Investor's Pro Rata Share, as that
term is defined in Section 2(c)(i) hereof, Additional Pro Rata Share, as that
term is defined in Section 2(c)(ii) hereof, or the Investor's Co-Sale
Allocation, as that term is defined in Section 2(d)(ii) hereof (the "Assignment
Separate from Certificate"). The Company agrees to effect any such assignment
concurrent with the actual transfer of such shares to the purchaser.
(G) TRANSFER OF CO-SALE STOCK; REMITTANCE OF SALE PROCEEDS. The stock
certificate or certificates that the Investor delivers to the Founder pursuant
to Section 2(f)(i) shall be transferred to the prospective purchaser in
consummation of the sale of the Co-Sale Stock pursuant to the terms and
conditions specified in the Notice, and the Founder shall concurrently therewith
remit to such Investor that portion of the sale proceeds to which such Investor
is entitled by reason of its participation in such sale. To the extent that any
prospective purchaser or purchasers prohibits such assignment or otherwise
refuses to purchase shares or other securities from an Investor exercising its
rights of co-sale hereunder, the Founder shall not sell to such prospective
purchaser or purchasers any shares of Co-Sale Stock unless and until,
simultaneously with such sale, the Founder shall purchase such shares or other
securities from such Investor.
3. EXEMPT TRANSFERS.
(A) Notwithstanding the foregoing, the rights of first refusal and the co-
sale rights of the Investors (the "Rights") shall not apply to (i) any pledge of
Co-Sale Stock made pursuant to a bona fide loan transaction with a financial
institution that creates a mere security interest, or (ii) any transfer to the
ancestors, descendants or spouse of a Founder or to trusts for the benefit of
such persons or such Founder and any subsequent transfer involving a
distribution from such trusts to such beneficiaries; provided that in the event
of any transfer made pursuant to one of the exemptions provided by clauses (i)
and (ii) above, (A) such Founder shall inform the Company and the Investors in
writing of such pledge or transfer prior to effecting it and (B) the pledgee or
transferee shall furnish the Company and the Investors with a written agreement
to be bound by and to comply with all provisions of Section 2 hereof.
Notwithstanding anything to the contrary in this Agreement, such transferred Co-
Sale Stock pursuant to the terms hereof shall remain "Co-Sale Stock" hereunder,
and such pledgee or transferee shall be treated as a " Founder" for purposes of
this Agreement.
4.
<PAGE>
(B) The Company's right of first refusal described in Section 2(b) above
shall be subject to such limitations and conditions as set forth in Section 64
of the Company's Bylaws.
(C) This Agreement is subject to, and shall in no manner limit the right
which the Company may have to repurchase securities from the Founders provided
that any repurchases by the Company shall remain subject to any limitations in
the Company's Amended and Restated Articles of Incorporation.
4. PROHIBITED TRANSFERS.
(A) In the event that a Founder should sell any Co-Sale Stock in
contravention of the co-sale rights of each Investor under this Agreement (a
"Prohibited Transfer"), each Investor, in addition to such other remedies as may
be available at law, in equity or hereunder, shall have the put option provided
below, and such Founder shall be bound by the applicable provisions of such
option.
(B) In the event of a Prohibited Transfer, each Investor shall have the
right to sell to such Founder the type and number of shares of Common Stock
equal to the number of shares each Investor would have been entitled to transfer
to the purchaser under Section 2(d) hereof had the Prohibited Transfer been
effected pursuant to and in compliance with the terms hereof. Such sale shall be
made on the following terms and conditions:
(I) The price per share at which the shares are to be sold to such
Founder shall be equal to the price per share paid by the purchaser to the
Founder in such Prohibited Transfer. The Founder shall also reimburse each
Investor for any and all fees and expenses, including legal fees and expenses,
incurred pursuant to the exercise or the attempted exercise of the Investor's
rights under Section 2(d).
(II) Within ninety (90) days after the later of the dates on which
the Investor (a) received notice of the Prohibited Transfer or (b) otherwise
became aware of the Prohibited Transfer, each Investor shall, if exercising the
option created hereby, deliver to the Founder the certificate or certificates
representing shares to be sold, each certificate to be properly endorsed for
transfer.
(III) The Founder shall, upon receipt of the certificate or
certificates for the shares to be sold by an Investor, pursuant to this Section
4(b), pay the aggregate purchase price therefor and the amount of reimbursable
fees and expenses, as specified in Section 4(b)(i), in cash or by other means
acceptable to the Investor.
(C) Notwithstanding the foregoing, any attempt by a Founder to transfer Co-
Sale Stock in violation of Section 2(b) hereof shall be voidable at the option
of the Company, and any attempt by a Founder to transfer Co-Sale Stock in
violation of Sections 2(c) or 2(d) hereof shall be voidable at the option of a
majority in interest of the Investors if, with respect to a transfer in
violation of Section 2(d), a majority in interest of the Investors does not
elect to exercise the put option set forth in this Section 4. The Company
agrees it will not effect such a transfer nor will it treat any alleged
transferee as the holder of such shares without the written consent of a
majority in interest of the Investors.
5.
<PAGE>
5. LEGEND.
(A) Each certificate representing shares of Co-Sale Stock now or hereafter
owned by the Founders or issued to any person in connection with a transfer
pursuant to Section 3(a) hereof shall be endorsed with the following legend:
"THE SALE, PLEDGE, HYPOTHECATION OR TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO THE
TERMS AND CONDITIONS OF A CERTAIN RIGHT OF FIRST REFUSAL AND
CO-SALE AGREEMENT BY AND AMONG THE SHAREHOLDER, THE COMPANY
AND CERTAIN HOLDERS OF STOCK OF THE COMPANY. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE
SECRETARY OF THE COMPANY."
(B) The Founders agree that the Company may instruct its transfer agent to
impose transfer restrictions on the shares represented by certificates bearing
the legend referred to in Section 5(a) above to enforce the provisions of this
Agreement and the Company agrees to promptly do so. The legend shall be removed
upon termination of this Agreement.
6. MISCELLANEOUS.
(A) CONDITIONS TO EXERCISE OF RIGHTS. Exercise of the Rights under this
Agreement shall be subject to and conditioned upon, and each Founder and the
Company shall use their best efforts to assist, each other party hereto in,
compliance with applicable laws.
(B) GOVERNING LAW. This Agreement, and the rights of the parties hereto,
shall be governed by and construed under the laws of the State of California as
applied to agreements among California residents entered into and to be
performed entirely within California.
(C) AMENDMENT. Any provision of this Agreement may be amended and the
observance thereof may be waived (either generally or in a particular instance
and either retroactively or prospectively), only by the written consent of (i)
as to the Company, only by the Company, (ii) as to the Investors, by persons
holding at least at least a majority in interest of the Series D Preferred
Stock, voting as a separate class, and (iii) as to the Founders, by persons
holding at least a majority in interest of the Common Stock held by the Founders
and their assignees.
(D) ENTIRE AGREEMENT; ASSIGNMENT OF RIGHTS. This Agreement constitutes the
entire agreement between the parties relative to the specific subject matter
hereof. Any previous agreement among the parties relative to the specific
subject matter hereof is superseded by this Agreement. This Agreement and the
rights and obligations of the parties hereunder shall inure to the benefit of,
and be binding upon, their respective successors, assigns and legal
representatives.
(E) TERM. Notwithstanding anything herein to the contrary, the Rights held
by the Investors with respect to Co-Sale Stock shall terminate upon the closing
of a firm commitment
6.
<PAGE>
underwritten public offering pursuant to an effective registration statement
under the Securities Act of 1933, as amended, covering the offer and sale of the
Company's Common Stock.
(F) 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
party to be notified at the address or addresses as set forth on the signature
page hereof or at such other address or addresses as such party may designate by
ten (10) days advance written notice to the other parties hereto.
(G) SEVERABILITY. In the event one or more of the provisions of this
Agreement should, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provisions of this Agreement, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.
(H) ATTORNEYS' FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
(I) 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.
(J) The exercise or non-exercise of the rights of the Company or the
Investors hereunder to participate in one or more sales of a Founder's shares of
Co-Sale Stock made by the Founder shall not adversely affect the Company's or
such Investor's rights to participate in subsequent sales of any such shares of
Co-Sale Stock to the terms hereof.
(K) Without limiting the rights of each party hereto to pursue all other
legal and equitable rights available to such party for any other party's failure
to perform its obligations under this Agreement, each such party acknowledges
and agrees that the remedy at law for any failure to perform obligations
hereunder would be inadequate and all such parties shall be entitled to specific
performance, injunctive relief or other equitable remedies in the event of any
such failure.
7.
<PAGE>
The foregoing Right of First Refusal and Co-Sale Agreement is hereby
executed as of the date first above written.
COMPANY:
COPPER MOUNTAIN NETWORKS, INC.
By: /s/ RICHARD GILBERT
__________________________________________
Its: President and Chief Executive Officer
FOUNDERS:
/s/ JOSEPH D. MARKEE
_____________________________________
Joseph D. Markee
/s/ MARK HANDZEL
_____________________________________
Mark Handzel
/s/ RICHARD GILBERT
_____________________________________
Richard Gilbert
INVESTORS:
TCV II, V.O.F.
a Netherlands Antilles General Partnership
By: Technology Crossover Management II, L.L.C.,
Its: Investment General Partner
By: /s/ ROBERT C. BENSKY
__________________________________
Robert C. Bensky
Chief Financial Officer
8.
<PAGE>
TECHNOLOGY CROSSOVER VENTURES II, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.
Its: General Partner
By: /s/ ROBERT C. BENSKY
_____________________________________
Robert C. Bensky
Chief Financial Officer
TCV II (Q), L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.
Its: General Partner
By: /s/ ROBERT C. BENSKY
_____________________________________
Robert C. Bensky
Chief Financial Officer
TCV II STRATEGIC PARTNERS, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.
Its: General Partner
By: /s/ ROBERT C. BENSKY
_____________________________________
Robert C. Bensky
Chief Financial Officer
TECHNOLOGY CROSSOVER VENTURES II, C.V.
a Netherlands Antilles Limited Partnership
By: Technology Crossover Management II, L.L.C.
Its: Investment General Partner
By: /s/ ROBERT C. BENSKY
_____________________________________
Robert C. Bensky
Chief Financial Officer
JULIET CHALLENGER, INC.
By: /s/ ANDREW H. McQUARRIE
_____________________________________
Andrew H. McQuarrie
Vice President
9.
<PAGE>
HENRY L. HILLMAN, ELSIE HILLIARD HILLMAN AND
C.G. GREFENSTETTE, TRUSTEES OF THE HENRY L.
HILLMAN TRUST U/A DATED NOV. 18, 1985
By: /s/ C.G. GREFENSTETTE
_____________________________________
C.G. Grefenstette, Trustee
C.G. GREFENSTETTE AND THOMAS G. BIGLEY,
TRUSTEES, U/A/T DATED 12/30/76 FOR CHILDREN
OF JULIET LEA HILLMAN SIMONDS
By: /s/ C.G. GREFENSTETTE
_____________________________________
C.G. Grefenstette, Trustee
By: /s/ THOMAS G. BIGLEY
_____________________________________
Thomas G. Bigley, Trustee
C.G. GREFENSTETTE AND THOMAS G. BIGLEY,
TRUSTEES U/A/T DATED 12/30/76 FOR CHILDREN
OF HENRY LEA HILLMAN, JR.
By: /s/ C.G. GREFENSTETTE
_____________________________________
C.G. Grefenstette, Trustee
By: /s/ THOMAS G. BIGLEY
_____________________________________
Thomas G. Bigley, Trustee
C.G. GREFENSTETTE AND THOMAS G. BIGLEY,
TRUSTEES U/A/T DATED 12/30/76 FOR CHILDREN
OF WILLIAM TALBOTT HILLMAN
By: /s/ C.G. GREFENSTETTE
_____________________________________
C.G. Grefenstette, Trustee
By: /s/ THOMAS G. BIGLEY
_____________________________________
Thomas G. Bigley, Trustee
10.
<PAGE>
C.G. GREFENSTETTE AND THOMAS G. BIGLEY,
TRUSTEES U/A/T DATED 12/30/76 FOR CHILDREN
OF AUDREY HILLMAN FISHER
By: /s/ C.G. GREFENSTETTE
__________________________________
C.G. Grefenstette, Trustee
By: /s/ THOMAS G. BIGLEY
__________________________________
Thomas G. Bigley, Trustee
THE HILLMAN FOUNDATION
By: /s/ RONALD W. WERTZ
__________________________________
Ronald W. Wertz
President
HENRY L. HILLMAN FOUNDATION
By: /s/ RONALD W. WERTZ
__________________________________
Ronald W. Wertz
President
CHARTER GROWTH CAPITAL, L.P.
By: /s/ KEVIN J. McQUILLAN
__________________________________
Kevin J. McQuillan
CGC INVESTORS, L.P.
By: /s/ KEVIN J. McQUILLAN
__________________________________
Kevin J. McQuillan
11.
<PAGE>
CHARTER GROWTH CAPITAL CO-INVESTMENT FUND, L.P.
By: /s/ KEVIN J. McQUILLAN
__________________________________
Kevin J. McQuillan
RHO MANAGEMENT TRUST I
By: RHO Management Company, Inc.
As Investment Advisor
By: /s/ JOSHUA RUCH
__________________________________
Name: Joshua Ruch
________________________________
Title: President
_______________________________
MORGAN STANLEY VENTURE PARTNERS III, L.P.
By: /s/ ROBERT LOARIE
__________________________________
Robert Loarie
MORGAN STANLEY VENTURE INVESTORS III, L.P.
By: /s/ ROBERT LOARIE
__________________________________
Robert Loarie
THE MORGAN STANLEY VENTURE PARTNERS
ENTREPRENEUR FUND, L.P.
By: /s/ ROBERT LOARIE
__________________________________
Robert Loarie
UMBTRU
By: /s/ JOHN DeMARCO
__________________________________
John DeMarco
12.
<PAGE>
BAYVIEW INVESTORS V, L.P.
By: /s/ TERRY OTTON
__________________________________
Terry Otton
CFO Robertson Stephens
LINCOLN INVESTORS, L.P.
By: CMH Capital Management Corp.
Its General Partner
By: /s/ COREY M. HOROWITZ
__________________________________
Corey M. Horowitz
President
ANDREESSEN 1996 LIVING TRUST
By: /s/ MICHAEL MOHR
__________________________________
Michael Mohr, Trustee
ULTIMA PARTNERS LIMITED
By: /s/ GLORIA J. HIGGINS
__________________________________
Gloria J. Higgins
RANDALL M. BAUM & BETSY S. BAUM, TRUSTEES
FBO THE BAUM FAMILY REV TRUST
UTA DATED 2-21-97
By: /s/ RANDALL M. BAUM
__________________________________
Randall M. Baum, Trustee
CANAAN EQUITY, L.P.
By: Canaan Equity Partners, LLC
Its General Partner
By: /s/ ERIC A. YOUNG
__________________________________
Eric A. Young
Member/Manager
13.
<PAGE>
INTERWEST PARTNERS VI, LP
By: InterWest Management Partners VI, LLC
Its General Partner
By /s/ PHILIP T. GIANOS
__________________________________
Philip T. Gianos
General Partner
INTERWEST INVESTORS VI, LP
By: InterWest Management Partners VI, LLC
Its General Partner
By /s/ PHILIP T. GIANOS
__________________________________
Philip T. Gianos
General Partner
GREYLOCK EQUITY LIMITED PARTNERSHIP
By: Greylock Equity GP Limited
Its General Partner
By /s/ ROGER EVANS
__________________________________
Roger Evans
A General Partner
SUTTER HILL VENTURES
a California Limited Partnership
By /s/ TENCH COXE
__________________________________
Tench Coxe
General Partner
TOW PARTNERS
A California Limited Partnership
By /s/ PAUL M. WYTHES
__________________________________
Paul M. Wythes
General Partner
14.
<PAGE>
/s/ G. LEONARD BAKER, JR.
_____________________________________
G. Leonard Baker, Jr.
/s/ DAVID L. ANDERSON
_____________________________________
David L. Anderson, Trustee
The Anderson Living Trust
/s/ WILLIAM H. YOUNGER, JR.
_____________________________________
Wells Fargo Bank Trustee
SHV M/P/T FBO William H. Younger, Jr.
/s/ TENCH COXE
_____________________________________
Wells Fargo Bank Trustee
SHV M/P/T FBO Tench Coxe
/s/ RONALD L. PERKINS
_____________________________________
Ronald L. Perkins
/s/ SHERRYL W. HOSSACK
_____________________________________
Wells Fargo Bank, Trustee
SHV M/P/T FBO Sherryl W. Hossack, Acct. No. 506192
MATRIX PARTNERS IV, L.P.
By: Matrix IV Management Co., L.P.,
Its General Partner
By /s/ JOHN C. BOYLE
___________________________________
John C. Boyle
General Partner
MATRIX IV ENTREPRENEURS FUND, L.P.
By: Matrix IV Management Co., L.P.,
Its General Partner
By /s/ JOHN C. BOYLE
___________________________________
John C. Boyle
General Partner
15.
<PAGE>
COMDISCO, INC.
By /s/ JIM LABE
___________________________________
Jim Labe
President of Comdisco Ventures Division
INTEL CORPORATION
By /s/ ARVIND SODHANI
___________________________________
Name: Arvind Sodhani
________________________________
Title: Vice President & Treasurer
______________________________
GC&H INVESTMENTS
By /s/ JOHN L. CARDOZA
___________________________________
John L. Cardoza
Executive Partner
KOREA TECHNOLOGY BANKING CORPORATION
By /s/ JUNG-KYOO YANG
___________________________________
Jung-Kyoo Yang
Chief Officer/International Business
/s/ MOLLY MILLER
_____________________________________
Molly Miller
/s/ WILLIAM KEVIN GALLAGHER
_____________________________________
William Kevin Gallagher
/s/ RICHARD GILBERT
_____________________________________
Richard Gilbert
16.
<PAGE>
GALLAGHER PUBLIC RELATIONS
By:__________________________________
Name:________________________________
/s/ GREGORY SANDS
_____________________________________
Gregory Sands
17.
<PAGE>
EXHIBIT A
LIST OF INVESTORS
<TABLE>
<CAPTION>
NUMBER OF SHARES OF AGGREGATE
NAME AND ADDRESS SERIES D PREFERRED PURCHASE PRICE
- ---------------- ------------------- --------------
<S> <C> <C>
TCV II, V.O.F. 12,031 $ 93,240.25
56 Main Street, Suite 210
Millburn, New Jersey 07041
(973) 467-5320
575 High Street, Ste. 400
Palo Alto, CA 94301
(650) 614-8200
Technology Crossover Ventures II, L.P. 370,354 2,870,243.50
56 Main Street, Suite 210
Millburn, New Jersey 07041
(973) 467-5320
575 High Street, Ste. 400
Palo Alto, CA 94301
(650) 614-8200
TCV II (Q), L.P. 284,733 2,206,680.75
56 Main Street, Suite 210
Millburn, New Jersey 07041
(973) 467-5320
575 High Street, Ste. 400
Palo Alto, CA 94301
(650) 614-8200
TCV II Strategic Partners, L.P. 50,530 391,607.50
56 Main Street, Suite 210
Millburn, New Jersey 07041
(973) 467-5320
575 High Street, Ste. 400
Palo Alto, CA 94301
(650) 614-8200
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OF AGGREGATE
NAME AND ADDRESS SERIES D PREFERRED PURCHASE PRICE
- ---------------- ------------------- --------------
<S> <C> <C>
Technology Crossover Ventures II, C.V. 56,546 $ 438,231.50
56 Main Street, Suite 210
Millburn, New Jersey 07041
(973) 467-5320
575 High Street, Ste. 400
Palo Alto, CA 94301
(650) 614-8200
Juliet Challenger, Inc. 326,613 2,531,250.75
Attn: Andrew H. McQuarrie
824 Market Street, Suite 900
Wilmington, DE 19801
Henry L. Hillman, Elsie Hilliard Hillman and 73,889 572,639.75
C.G. Grefenstette, Trustees of the Henry L.
Hillman Trust U/A dated
Attn: Maurice White
Nov. 18, 1985
1800 Grant Building
Pittsburgh, PA 15219
(412) 338-3696
C.G. Grefenstette and Thomas G. Bigley, 24,677 191,246.75
Trustees, U/A/T dated 12/30/76 for Children
of Juliet Lea Hillman Simonds
Attn: Maurice White
1800 Grant Building
Pittsburgh, PA 15219
(412) 338-3696
C.G. Grefenstette and Thomas G. Bigley, 24,677 191,246.75
Trustees, U/A/T dated 12/30/76 for Children
of Henry Lea Hillman, Jr.
Attn: Maurice White
1800 Grant Building
Pittsburgh, PA 15219
(412) 338-3696
C.G. Grefenstette and Thomas G. Bigley, 24,677 191,246.75
Trustees, U/A/T dated 12/30/76 for Children
of William Talbott Hillman
Attn: Maurice White
1800 Grant Building
Pittsburgh, PA 15219
(412) 338-3696
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OF AGGREGATE
NAME AND ADDRESS SERIES D PREFERRED PURCHASE PRICE
- ---------------- ------------------- --------------
<S> <C> <C>
C.G. Grefenstette and Thomas G. Bigley, 24,677 $ 191,246.75
Trustees, U/A/T dated 12/30/76 for Children
of Audrey Hillman Fisher
Attn: Maurice White
1800 Grant Building
Pittsburgh, PA 15219
(412) 338-3696
The Hillman Foundation 48,774 377,998.50
Attn: Maurice White
2000 Grant Building
Pittsburgh, PA 15219
(412) 338-3696
Henry L. Hillman Foundation 32,661 253,122.75
Attn: Maurice White
2000 Grant Building
Pittsburgh, PA 15219
(412) 338-3696
Charter Growth Capital, L.P. 391,883 3,037,093.25
Attn: Kevin J. McQuillan
525 University Avenue, Suite 1500
Palo Alto, CA 94301
(650) 325-6953
CGC Investors, L.P. 28,126 217,976.50
Attn: Kevin J. McQuillan
525 University Avenue, Suite 1500
Palo Alto, CA 94301
(650) 325-6953
Charter Growth Capital Co-Investment Fund, L.P. 70,314 544,933.50
Attn: Kevin J. McQuillan
525 University Avenue, Suite 1500
Palo Alto, CA 94301
(650) 325-6953
Rho Management Trust I 258,065 2,000,003.75
Attn: Danielle Bodor
767 Fifth Avenue
New York, NY 10153
(212) 848-0427
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OF AGGREGATE
NAME AND ADDRESS SERIES D PREFERRED PURCHASE PRICE
- ---------------- ------------------- --------------
<S> <C> <C>
Morgan Stanley Venture Partners III, L.P. 198,116 $1,535,399.00
Attn: Robert Loarie
3000 Sand Hill Road
Building 4, Suite 250
Menlo Park, CA 94025
(650) 234-5500
Morgan Stanley Venture Investors III, L.P. 19,022 147,420.50
Attn: Robert Loarie
3000 Sand Hill Road
Building 4, Suite 250
Menlo Park, CA 94025
(650) 234-5500
Morgan Stanley Venture Entrepreneur 8,668 67,177.00
Fund, L.P.
Attn: Robert Loarie
3000 Sand Hill Road
Building 4, Suite 250
Menlo Park, CA 94025
(650) 234-5500
UMBTRU 129,032 999,998.00
Attn: John DeMarco
UMB Bank
1 Battery Park Plaza, 8/th/ Floor
New York, NY 10004
(212) 968-1990
Bayview Investors V, L.P. 38,710 300,002.50
c/o BancBoston Robertson Stephens
Attn: Terry Otton
555 California Street, Suite 2600
San Francisco, CA 94104
(415) 676-2936
Lincoln Investors, L.P. 25,806 199,996.50
Attn: Corey M. Horowitz
885 Third Avenue, Suite 2900
New York, NY 10022
(212) 829-5770
Andreessen 1996 Living Trust 25,806 199,996.50
c/o Michael G. Mohr
16615 Lark Avenue, Suite 101
Los Gatos, CA 95032
(408) 358-3316
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OF AGGREGATE
NAME AND ADDRESS SERIES D PREFERRED PURCHASE PRICE
- ---------------- ------------------- --------------
<S> <C> <C>
Ultima Partners Limited 25,806 $ 199,996.50
Attn: Gloria J. Higgins
Synetics S.F.S. Inc.
1775 Sherman Street, Suite 1350
Denver, CO 80203
(303) 832-0815
Randall M. Baum and Betsy S. Baum, Trustees 6,452 50,003.00
FBO The Baum Family Rev Trust
2180 Carmelita Avenue
Hillsborough, CA 94010
Canaan Equity, L.P. 58,527 453,584.25
2884 Sand Hill Road, Ste. 115
Menlo Park, CA 94205
InterWest Partners VI, L.P. 56,771 439,975.25
3000 Sand Hill Road
Building 3, Suite 255
Menlo Park, California 94025
InterWest Investors VI, LP 1,756 13,609.00
3000 Sand Hill Road
Building 3, Suite 255
Menlo Park, California 94025
Greylock Equity Limited Partnership 147,805 1,145,488.75
One Federal Street, 26th Floor
Boston, MA 02110
755 Page Mill Road
Suite A-100
Palo Alto, CA 94304-1018
Attn: Roger Evans
(650) 493-5525
Sutter Hill Ventures 110,855 859,126.25
a California Limited Partnership
755 Page Mill Road, Suite A-200
Palo Alto, CA 94304
(650) 493-5600
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OF AGGREGATE
NAME AND ADDRESS SERIES D PREFERRED PURCHASE PRICE
- ---------------- ------------------- --------------
<S> <C> <C>
Tow Partners 4,918 $ 38,114.50
a California Limited Partnership
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
(650) 493-5600
David L. Anderson 8,512 65,968.00
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
(650) 493-5600
G. Leonard Baker, Jr. 8,512 65,968.00
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
(650) 493-5600
Gregory Sands 645 4,998.75
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
(650) 493-5600
Ronald L. Perkins 882 6,835.50
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
(650) 493-5600
Wells Fargo Bank, Trustee 4,918 38,114.50
SHV M/P/T FBO Tench Coxe
Attn: Vicki Bandel
MAC 0101 021
420 Montgomery Street, 2/nd/ Floor
San Francisco, CA 94104
Wells Fargo Bank, Trustee 294 2,278.50
SHV M/P/T FBO Sherryl W. Hossack
Attention: Vicki Bandel
MAC 0101 021
420 Montgomery, 2/nd/ Floor
San Francisco, CA 94104
(415) 396-3739
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OF AGGREGATE
NAME AND ADDRESS SERIES D PREFERRED PURCHASE PRICE
- ---------------- ------------------- --------------
<S> <C> <C>
Wells Fargo Bank, Trustee 8,269 $ 64,084.75
SHV M/P/T FBO William H. Younger, Jr.
Attention: Vicki Bandel
MAC 0101 021
420 Montgomery, 2/nd/ Floor
San Francisco, CA 94104
(415) 396-3739
Matrix Partners IV, L.P. 71,704 555,706.00
2500 Sand Hill Road, Suite 113
Menlo Park, CA 94025
(650) 854-3131
Matrix IV Entrepreneurs Fund, L.P. 3,774 29,248.50
2500 Sand Hill Road, Suite 113
Menlo Park, CA 94025
(650) 854-3131
Comdisco Ventures 7,860 60,915.00
6111 North River Road
Attn: Jill Hanses
Rosemont, IL 60018
(847) 518-5466
Intel Corporation 135,989 1,053,914.75
Treasury Department, SC4-210
Attn: Lyla Partridge
2200 Mission College Blvd.
Santa Clara, CA 95052
(408) 765-5446
GC&H Investments 2,990 23,172.50
c/o Cooley Godward llp
One Maritime Plaza, 20th Floor
San Francisco, CA 94111
Korea Technology Banking Corporation 8,361 64,797.75
Attn: Mr. Jung Kyoo Yang
Chief Officer, International Business
KTB Building, 20/th/ Floor
45-21 Yoido-dong, Youngdeungpo-ku
Seoul 150-010 Korea
(82-2) 3787-7691
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OF AGGREGATE
NAME AND ADDRESS SERIES D PREFERRED PURCHASE PRICE
- ---------------- ------------------- --------------
<S> <C> <C>
Richard Gilbert 1,422 $ 11,020.50
Copper Mountain Networks
2470 Embarcadero Way
Palo Alto, CA 94303
(650) 858-8500
Gallagher Public Relations 159 1,232.25
1301 Marina Village Parkway, Ste. 215
Alameda, CA 94501
(510) 749-6800
William Kevin Gallagher 119 922.25
1301 Marina Village Parkway, Ste. 215
Alameda, CA 94501
(510) 749-6800
Molly M. Miller 119 922.25
Worlds at Work
2628 Laguna Street
San Francisco, CA 94123
(415) 567-6375
</TABLE>
<PAGE>
EXHIBIT B
LIST OF FOUNDERS
Co-Sale Stock
-------------
<TABLE>
<CAPTION>
Founder Common Stock Preferred Stock
- ------- ------------ ---------------
<S> <C> <C>
Joseph D. Markee 518,868 50,000 (Series A),
50,000 (Series B)
Mark Handzel 518,868 0
Richard Gilbert 0 0
</TABLE>
<PAGE>
EXHIBIT C
SECTION 64 OF THE COMPANY'S BYLAWS
SECTION 64. RIGHT OF FIRST REFUSAL. No shareholder shall sell, assign,
pledge, or in any manner transfer any of the shares of Common Stock of the
corporation or any right or interest therein, whether voluntarily or by
operation of law, or by gift or otherwise, except by a transfer which meets the
requirements hereinafter set forth in this bylaw:
(A) If the shareholder desires to sell or otherwise transfer any of
his shares of Common Stock, then the shareholder shall first give written notice
thereof to the corporation. The notice shall name the proposed transferee and
state the number of shares to be transferred, the proposed consideration, and
all other terms and conditions of the proposed transfer.
(B) For thirty (30) days following receipt of such notice, the
corporation shall have the option to purchase all (but not less than all) of the
shares of Common Stock specified in the notice at the price and upon the terms
set forth in such notice; provided, however, that, with the consent of the
shareholder, the corporation shall have the option to purchase a lesser portion
of the shares of Common Stock specified in said notice at the price and upon the
terms set forth therein. In the event of a gift, property settlement or other
transfer in which the proposed transferee is not paying the full price for the
shares of Common Stock, and that is not otherwise exempted from the provisions
of this Section 64, the price shall be deemed to be the fair market value of the
Common Stock at such time as determined in good faith by the Board of Directors.
In the event the corporation elects to purchase all of the shares of Common
Stock or, with consent of the shareholder, a lesser portion of the shares of
Common Stock, it shall give written notice to the transferring shareholder of
its election and settlement for said shares of Common Stock shall be made as
provided below in paragraph (d).
(C) The corporation may assign its rights hereunder.
(D) In the event the corporation and/or its assignee(s) elect to
acquire any of the shares of Common Stock of the transferring shareholder as
specified in said transferring shareholder's notice, the Secretary of the
corporation shall so notify the transferring shareholder and settlement thereof
shall be made in cash within thirty (30) days after the Secretary of the
corporation receives said transferring shareholder's notice; provided that if
the terms of payment set forth in said transferring shareholder's notice were
other than cash against delivery, the corporation and/or its assignee(s) shall
pay for said shares of Common Stock on the same terms and conditions set forth
in said transferring shareholder's notice.
(E) In the event the corporation and/or its assignees(s) do not elect
to acquire all of the shares of Common Stock specified in the transferring
shareholder's notice, said transferring shareholder may, within the sixty-day
period following the expiration of the option rights granted to the corporation
and/or its assignees(s) herein, transfer the shares of Common Stock specified in
said transferring shareholder's notice which were not acquired by the
corporation and/or its assignees(s) as specified in said transferring
shareholder's notice. All shares of Common Stock so sold by said transferring
shareholder shall continue to be subject to the provisions of this bylaw in the
same manner as before said transfer.
<PAGE>
(F) Anything to the contrary contained herein notwithstanding, the
following transactions shall be exempt from the provisions of this bylaw:
(1) A shareholder's transfer of any or all shares of Common Stock
held either during such shareholder's lifetime or on death by will or intestacy
to such shareholder's immediate family or to any custodian or trustee for the
account of such shareholder or such shareholder's immediate family or to any
limited partnership of which the shareholder, members of such shareholder's
immediate family or any trust for the account of such shareholder or such
shareholder's immediate family will be the general of limited partner(s) of such
partnership. "Immediate family" as used herein shall mean spouse, lineal
descendant, father, mother, brother, or sister of the shareholder making such
transfer.
(2) A shareholder's bona fide pledge or mortgage of any shares of
Common Stock with a commercial lending institution, provided that any subsequent
transfer of said shares of Common Stock by said institution shall be conducted
in the manner set forth in this bylaw.
(3) A shareholder's transfer of any or all of such shareholder's
shares of Common Stock to the corporation or to any other shareholder of the
corporation.
(4) A shareholder's transfer of any or all of such shareholder's
shares of Common Stock to a person who, at the time of such transfer, is an
officer or director of the corporation.
(5) A corporate shareholder's transfer of any or all of its
shares of Common Stock pursuant to and in accordance with the terms of any
merger, consolidation, reclassification of shares or capital reorganization of
the shareholder, or pursuant to a sale of all or substantially all of the stock
or assets of a corporate shareholder.
(6) A corporate shareholder's transfer of any or all of its
shares of Common Stock to any or all of its shareholders.
(7) A transfer by a shareholder which is a limited or general
partnership to any or all of its partners or former partners.
In any such case, the transferee, assignee, or other recipient
shall receive and hold such stock subject to the provisions of this bylaw, and
there shall be no further transfer of such stock except in accord with this
bylaw.
(G) The provisions of this bylaw may be waived with respect to any
transfer either by the corporation, upon duly authorized action of its Board of
Directors, or by the shareholders, upon the express written consent of the
owners of a majority of the voting power of the corporation (excluding the votes
represented by those shares to be transferred by the transferring shareholder).
This bylaw may be amended or repealed either by a duly authorized action of the
Board of Directors or by the shareholders, upon the express written consent of
the owners of a majority of the voting power of the corporation.
<PAGE>
(H) Any sale or transfer, or purported sale or transfer, of Common
Stock of the corporation shall be null and void unless the terms, conditions,
and provisions of this bylaw are strictly observed and followed.
(I) The foregoing right of first refusal shall terminate on either of
the following dates, whichever shall first occur:
(1) On March 9, 2006; or
(2) Upon the date securities of the corporation are first
offered to the public pursuant to a registration statement filed with, and
declared effective by, the United States Securities and Exchange Commission
under the Securities Act of 1933, as amended.
(J) The certificates representing shares of Common Stock of the
corporation shall bear on their face the following legend so long as the
foregoing right of first refusal remains in effect:
"The shares represented by this Certificate are subject to a right of
first refusal option in favor of the Corporation and/or its
Assignee(s), as provided in the Bylaws of the Corporation."
<PAGE>
EXHIBIT 10.20
COPPER MOUNTAIN NETWORKS, INC.
VOTING AGREEMENT
THIS VOTING AGREEMENT (the "Agreement") is made and entered into this 9th
day of October, 1998, by and among COPPER MOUNTAIN NETWORKS, INC., a California
corporation (the Company"), and the persons and entities listed on Exhibit A
hereto (the "Investors").
WITNESSETH:
WHEREAS, the Company proposes to sell shares of its Series D Preferred
Stock (the "Series D Preferred Stock") to the Investors pursuant to the Series D
Preferred Stock Purchase Agreement (the "Purchase Agreement") of even date
herewith (the "Financing");
WHEREAS, the Company and the holders of the Company's Series A Preferred
Stock (the "Series A Holders"), Series B Preferred Stock (the "Series B
Holders"), and Series C Preferred Stock (the "Series C Holders") wish to ensure
that Greylock Equity Partnership ("Greylock"), Sutter Hill Ventures, a
California Limited Partnership (together with its affiliated funds, "Sutter
Hill") and Matrix Partners IV, L.P. (together with its affiliated fund,
"Matrix") which directly or indirectly control certain Series A Holders, Series
B Holders and Series C Holders will be represented on the Company's Board of
Directors by the directors they each nominate; and
WHEREAS, the Company and the holders of the Company's Series D Preferred
Stock (the "Series D Holders") wish to ensure that Technology Crossover
Management II, L.L.C. (together with its affiliated funds, "TCV"), a limited
liability company which directly or indirectly controls certain Series D
Holders, will be represented on the Company's Board of Directors by the director
TCV nominates.
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE 1
VOTING
1.1 COMMON SHARES; INVESTOR SHARES. The Investors each agree to hold all
shares of voting capital stock of the Company now owned or hereinafter acquired
by them (including but not limited to all shares of Common Stock issued upon
conversion of the Company's Series A, Series B, Series C and Series D Preferred
Stock) registered in their respective names or beneficially owned by them as of
the date hereof (and any and all other securities of the Company legally or
beneficially acquired by each of the Investors after the date hereof)
(hereinafter collectively referred to as the "Investor Shares") subject to, and
to vote the Investor Shares in accordance with, the provisions of this
Agreement.
1.
<PAGE>
1.2 VOTING. Following the closing of the Financing, in connection with any
election of directors of the Company, whether at a shareholder meeting or by
written consent, each Investor severally agrees to cause the Investor Shares
then owned by each Investor or as to which such Investor has voting power to be
voted to elect or cause the election of the following director nominees:
(A) a nominee of TCV, from among the following persons
affiliated with TCV: Richard H. Kimball or Jay C. Hoag or some other person
reasonably acceptable to a majority of the Company's Board of Directors in
office immediately prior to such election (which nominee shall initially be Rick
Kimball);
(B) a nominee of Sutter Hill Ventures ("Sutter Hill"),
reasonably acceptable to a majority of the Companys Board of Directors in office
immediately prior to such election, which nominee shall initially be Tench Coxe;
(C) a nominee of Greylock Equity Limited Partnership
("Greylock"), reasonably acceptable to a majority of the Companys Board of
Directors in office immediately prior to such election, which nominee shall
initially be Roger Evans;
(D) a nominee of Matrix Partners IV, L.P. ("Matrix"), reasonably
acceptable to a majority of the Companys Board of Directors in office
immediately prior to such election, which nominee shall initially be John Boyle;
(E) Joseph D. Markee, provided Mr. Markee is an employee of the
Company on the date of such election;
(F) the Company's Chief Executive Officer on the date of such
election; and
(G) with respect to any remaining Board positions necessary to
constitute the full authorized number of directors, each Investor shall cause
his or her Investor Shares to be voted to elect or cause the election of the
nominees approved by a majority of the Board of Directors in office immediately
prior to such election.
1.3 VACANCIES. In the event that any nominee designated in accordance with
Sections 1.2(a), 1.2(b), 1.2(c) or 1.2(d) above to serve as a member of the
Company's Board of Directors resigns or is removed during his or her term of
office, the resulting vacancy on the Board of Directors shall be filled by a
nominee designated as provided for under the applicable subsection of Section
1.2 and each of the Investors hereto shall vote their respective Investor Shares
in accordance with Section 1.2 above. The Company shall collect the written
consent of shareholders holding a sufficient number of shares to fill such
vacancy as provided for herein, or shall promptly call a special meeting of the
shareholders in order to fill such vacancy as provided for herein. The removal
from the Board of Directors of any director designated in accordance with the
foregoing procedures shall only be at the written consent of the party with the
right to
2.
<PAGE>
designate such director pursuant to the applicable subsection of Section 1.2 and
if such party votes to remove such director, then the parties hereunder shall
likewise so vote.
1.4 The voting agreement provided in Sections 1.2 and 1.3 above is coupled
with an interest and may not be revoked, waived or amended without the consent
of the Company and the Investors holding at least a majority of the outstanding
Investor Shares, including in such majority (i) the shares held by TCV, if TCV's
right to nominate a director is affected thereby; (ii) the shares held by Sutter
Hill if Sutter Hill's right to nominate a director is affected; (iii) the shares
held by Greylock if Greylock's right to nominate a director is affected; and
(iv) the shares held by Matrix if Matrix's right to nominate a director is
affected.
1.5 LEGEND.
1.5.1 Concurrently with the execution of this Agreement, there shall
be imprinted or otherwise placed on certificates representing the Investor
Shares the following restrictive legend (the "Legend"):
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
THE TERMS AND CONDITIONS OF A VOTING AGREEMENT WHICH PLACES
CERTAIN RESTRICTIONS ON THE VOTING OF THE SHARES REPRESENTED
HEREBY. ANY PERSON ACCEPTING ANY INTEREST IN SUCH SHARES
SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL
THE PROVISIONS OF SUCH AGREEMENT. A COPY OF SUCH VOTING
AGREEMENT WILL BE FURNISHED TO THE RECORD HOLDER OF THIS
CERTIFICATE WITHOUT CHARGE UPON WRITTEN REQUEST TO THE
COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS."
1.5.2 The Company agrees that, during the term of this Agreement, it
will not remove, and will not permit to be removed (upon registration of
transfer, reissuance of otherwise), the Legend from any such certificate and
will place or cause to be placed the Legend on any new certificate issued to
represent Investor Shares theretofore represented by a certificate carrying the
Legend.
1.6 SUCCESSORS. The provisions of this Agreement shall be binding upon the
successors in interest to any of the Investor Shares. The Company shall not
permit the transfer of any of the Investor Shares on its books or issue a new
certificate representing any of the Investor Shares unless and until the person
to whom such security is to be transferred shall have executed a written
Agreement, substantially in the form of this Agreement, pursuant to which such
person becomes a party to this Agreement and agrees to be bound by all the
provisions hereof as if such person were an Investor.
1.7 OTHER RIGHTS. Except as provided by this Agreement, each Investor
shall exercise the full rights of a shareholder with respect to the Investor
Shares.
3.
<PAGE>
ARTICLE 2
TERMINATION
2.1 This Agreement shall continue in full force and effect from the date
hereof through the earliest of the following dates, on which it shall terminate
in its entirety:
2.1.1 The closing of a firmly underwritten public offering of the
Company's Common Stock pursuant to a registration statement filed with, and
declared effective under the Securities Act of 1933, as amended covering the
offer and sale of the Company's Common Stock; or
2.1.2 Subject to the requirements of Section 1.4 above, the date as
of which the parties hereto terminate this Agreement by written consent of a
majority in interest of the Investors.
ARTICLE 3
MISCELLANEOUS
3.1 FURTHER ACTION. If and whenever the Investor Shares are sold, such
selling Investor or the personal representative thereof, shall do all things and
execute and deliver all documents and make all transfers, and cause any
transferee of the Investor Shares to do all things and execute and deliver all
documents, as may be necessary to consummate such sale consistent with the terms
and conditions of this Agreement.
3.2 SPECIFIC PERFORMANCE. The parties hereto hereby declare that it is
impossible to measure in money the damages which will accrue to a party hereto
or to their heirs, personal representatives, or assigns by reason of a failure
to perform any of the obligations under this Agreement and agree that the terms
of this Agreement shall be specifically enforceable. If any party hereto or his
heirs, personal representatives, or assigns institutes any action or proceeding
to specifically enforce the provisions hereof, any person against whom such
action or proceeding is brought hereby waives the claim or defense therein that
such party or such personal representative has an adequate remedy at law, and
such person shall not offer in any such action or proceeding the claim or
defense that such remedy at law exists.
3.3 GOVERNING LAW. This Agreement, and the rights of the parties hereto,
shall be governed by and construed in accordance with the laws of the State of
California as such laws apply to agreements among California residents made and
to be performed entirely within the State of California.
3.4 SEVERABILITY. If any provision of this Agreement is held to be invalid
or unenforceable, the validity and enforceability of the remaining provisions of
this Agreement shall not be affected thereby.
4.
<PAGE>
3.5 SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective heirs, successors, assigns,
administrators, executors and other legal representatives.
3.6 ADDITIONAL SHARES. In the event that subsequent to the date of this
Agreement any shares or other securities (other than any shares or securities of
another corporation issued to the Company's shareholders pursuant to a plan of
merger) are issued on, or in exchange for, any of the Investor Shares by reason
of any stock dividend, stock split, consolidation of shares, reclassification or
consolidation involving the Company, such shares or securities shall be deemed
to be Investor Shares for purposes of this Agreement.
3.7 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed an original but all of which together
shall constitute one and the same agreement.
3.8 WAIVER. No waivers of any breach of this Agreement extended by any
party hereto to any other party shall be construed as a waiver of any rights or
remedies of any other party hereto or with respect to any subsequent breach.
3.9 ATTORNEY'S FEES. In the event that any suit or action is instituted to
enforce any provision in this Agreement, the prevailing party shall be entitled
to all costs and expenses of maintaining such suit or action, including
reasonable attorneys' fees.
3.10 ENTIRE AGREEMENT. This Agreement and Exhibit A hereto, along with the
Purchase Agreement and each of the Exhibits thereto, constitute the full and
entire understanding and agreement between the parties with regard to the
subjects hereof and thereof 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.
[THIS SPACE INTENTIONALLY LEFT BLANK]
5.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
COMPANY:
COPPER MOUNTAIN NETWORKS, INC.
By:/s/ RICHARD GILBERT
-------------------------------------------------
Richard Gilbert
President and Chief Executive Officer
INVESTORS:
TCV II, V.O.F.
a Netherlands Antilles General Partnership
By: Technology Crossover Management II, L.L.C.,
Its: Investment General Partner
By:/s/ ROBERT C. BENSKY
-------------------------------------------------
Robert C. Bensky
Chief Financial Officer
TECHNOLOGY CROSSOVER VENTURES II, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.
Its: General Partner
By:/s/ ROBERT C. BENSKY
-------------------------------------------------
Robert C. Bensky
Chief Financial Officer
TCV II (Q), L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.
Its: General Partner
By:/s/ ROBERT C. BENSKY
-------------------------------------------------
Robert C. Bensky
Chief Financial Officer
6.
<PAGE>
TCV II STRATEGIC PARTNERS, L.P.
a Delaware Limited Partnership
By: Technology Crossover Management II, L.L.C.
Its: General Partner
By:/s/ ROBERT C. BENSKY
-------------------------------------------
Robert C. Bensky
Chief Financial Officer
TECHNOLOGY CROSSOVER VENTURES II, C.V.
a Netherlands Antilles Limited Partnership
By: Technology Crossover Management II, L.L.C.
Its: Investment General Partner
By:/s/ ROBERT C. BENSKY
-------------------------------------------
Robert C. Bensky
Chief Financial Officer
JULIET CHALLENGER, INC.
By:/s/ ANDREW H. McQUARRIE
-------------------------------------------
Andrew H. McQuarrie
Vice President
HENRY L. HILLMAN, ELSIE HILLIARD HILLMAN AND
C.G. GREFENSTETTE, TRUSTEES OF THE HENRY L.
HILLMAN TRUST U/A DATED NOV. 18, 1985
By:/s/ C.G. GREFENSTETTE
-------------------------------------------
C.G. Grefenstette, Trustee
7.
<PAGE>
C.G. GREFENSTETTE AND THOMAS G. BIGLEY,
TRUSTEES, U/A/T DATED 12/30/76 FOR CHILDREN
OF JULIET LEA HILLMAN SIMONDS
By:/s/ C.G. GREFENSTETTE
-------------------------------------
C.G. Grefenstette, Trustee
By:/s/ THOMAS G. BIGLEY
-------------------------------------
Thomas G. Bigley, Trustee
C.G. GREFENSTETTE AND THOMAS G. BIGLEY,
TRUSTEES U/A/T DATED 12/30/76 FOR CHILDREN
OF HENRY LEA HILLMAN, JR.
By:/s/ C.G. GREFENSTETTE
-------------------------------------
C.G. Grefenstette, Trustee
By:/s/ THOMAS G. BIGLEY
-------------------------------------
Thomas G. Bigley, Trustee
C.G. GREFENSTETTE AND THOMAS G. BIGLEY,
TRUSTEES U/A/T DATED 12/30/76 FOR CHILDREN
OF WILLIAM TALBOTT HILLMAN
By:/s/ C.G. GREFENSTETTE
-------------------------------------
C.G. Grefenstette, Trustee
By:/s/ THOMAS G. BIGLEY
-------------------------------------
Thomas G. Bigley, Trustee
8.
<PAGE>
C.G. GREFENSTETTE AND THOMAS G. BIGLEY,
TRUSTEES U/A/T DATED 12/30/76 FOR CHILDREN
OF AUDREY HILLMAN FISHER
By:/s/ C.G. GREFENSTETTE
_____________________________________
C.G. Grefenstette, Trustee
By:/s/ THOMAS G. BIGLEY
_____________________________________
Thomas G. Bigley, Trustee
THE HILLMAN FOUNDATION
By:/s/ RONALD W. WERTZ
_____________________________________
Ronald W. Wertz
President
HENRY L. HILLMAN FOUNDATION
By:/s/ RONALD W. WERTZ
_____________________________________
Ronald W. Wertz
President
CHARTER GROWTH CAPITAL, L.P.
By:/s/ KEVIN J. McQUILLAN
_____________________________________
Kevin J. McQuillan
CGC INVESTORS, L.P.
By:/s/ KEVIN J. McQUILLAN
_____________________________________
Kevin J. McQuillan
CHARTER GROWTH CAPITAL CO.-INVESTMENT FUND, L.P.
By:/s/ KEVIN J. McQUILLAN
_____________________________________
Kevin J. McQuillan
9.
<PAGE>
RHO MANAGEMENT TRUST I
By: RHO Management Company, Inc.
As Investment Advisor
By:/s/ JOSHUA RUCH
---------------------------------
Name: Joshua Ruch
-------------------------------
Title: President
------------------------------
MORGAN STANLEY VENTURE PARTNERS III, L.P.
By:/s/ ROBERT LOARIE
---------------------------------
Robert Loarie
MORGAN STANLEY VENTURE INVESTORS III, L.P.
By:/s/ ROBERT LOARIE
---------------------------------
Robert Loarie
THE MORGAN STANLEY VENTURE PARTNERS
ENTREPRENEUR FUND, L.P.
By:/s/ ROBERT LOARIE
---------------------------------
Robert Loarie
UMBTRU
By:/s/ JOHN DeMARCO
---------------------------------
John DeMarco
BAYVIEW INVESTORS V, L.P.
By:/s/ TERRY OTTON
---------------------------------
Terry Otton
CFO Robertson Stephens
10.
<PAGE>
LINCOLN INVESTORS, L.P.
By: CMH Capital Management Corp.
Its General Partner
By:/s/ COREY M. HOROWITZ
---------------------------------
Corey M. Horowitz
President
ANDREESSEN 1996 LIVING TRUST
By:/s/ MICHAEL MOHR
---------------------------------
Michael Mohr, Trustee
ULTIMA PARTNERS LIMITED
By:/s/ GLORIA J. HIGGINS
---------------------------------
Gloria J. Higgins
RANDALL M. BAUM & BETSY S. BAUM, TRUSTEES
FBO THE BAUM FAMILY REV TRUST
UTA DATED 2-21-97
By:/s/ RANDALL M. BAUM
---------------------------------
Randall M. Baum, Trustee
CANAAN EQUITY, L.P.
By: Canaan Equity Partners, LLC
Its General Partner
By:/s/ ERIC A. YOUNG
---------------------------------
Eric A. Young
Member/Manager
11.
<PAGE>
INTERWEST PARTNERS VI, LP
By: InterWest Management Partners VI, LLC
Its General Partner
By /s/ PHILIP T. GIANOS
----------------------------------------
Philip T. Gianos
General Partner
INTERWEST INVESTORS VI, LP
By: InterWest Management Partners VI, LLC
Its General Partner
By /s/ PHILIP T. GIANOS
----------------------------------------
Philip T. Gianos
General Partner
GREYLOCK EQUITY LIMITED PARTNERSHIP
By: Greylock Equity GP Limited
Its General Partner
By /s/ ROGER EVANS
----------------------------------------
Roger Evans
A General Partner
SUTTER HILL VENTURES
a California Limited Partnership
By /s/ TENCH COXE
----------------------------------------
Tench Coxe
General Partner of the General Partner
12.
<PAGE>
TOW PARTNERS
A California Limited Partnership
By /s/ PAUL M. WYTH
----------------------------------------
Paul M. Wyth
General Partner
/s/ G. LEONARD BAKER, JR.
__________________________________________
G. Leonard Baker, Jr.
/s/ DAVID L. ANDERSON
__________________________________________
David L. Anderson
/s/ WILLIAM H. YOUNGER, JR.
__________________________________________
Wells Fargo Bank, Trustee
SHV M/P/T FBO William H. Younger, Jr.
/s/ TENCH COXE
__________________________________________
Wells Fargo Bank, Trustee
SHV M/P/T FBO Tench Coxe
/s/ RONALD L. PERKINS
__________________________________________
Ronald L. Perkins
/s/ SHERRYL W. HOSSACK
__________________________________________
Wells Fargo Bank, Trustee
SHV M/P/T FBO Sherryl W. Hossack, Acct. No. 506192
MATRIX PARTNERS IV, L.P.
By: Matrix IV Management Co., L.P.,
Its General Partner
By /s/ JOHN C. BOYLE
----------------------------------------
John C. Boyle
General Partner
13.
<PAGE>
MATRIX IV ENTREPRENEURS FUND, L.P.
By: Matrix IV Management Co., L.P.,
Its General Partner
By /s/ JOHN C. BOYLE
----------------------------------------
John C. Boyle
General Partner
COMDISCO, INC.
By /s/ JIM LABE
----------------------------------------
Jim Labe
President of Comdisco Ventures Division
INTEL CORPORATION
By /s/ ARVIND SODHANI
----------------------------------------
Name: Arvind Sodhani
-------------------------------------
Title: Vice President & Treasurer
------------------------------------
GC&H INVESTMENTS
By /s/ JOHN L. CARDOZA
----------------------------------------
John L. Cardoza
Executive Partner
KOREA TECHNOLOGY BANKING CORPORATION
By /s/ JUNG-KYOO YANG
----------------------------------------
Jung-Kyoo Yang
Chief Officer/International Business
/s/ MOLLY MILLER
- ----------------------------------------
Molly Miller
14.
<PAGE>
/s/ WILLIAM KEVIN GALLAGHER
- ------------------------------------------
William Kevin Gallagher
/s/ RICHARD GILBERT
- ------------------------------------------
Richard Gilbert
GALLAGHER PUBLIC RELATIONS
By:
---------------------------------------
Name:
---------------------------------------
/s/ GREGORY SANDS
- ------------------------------------------
Gregory Sands
/s/ JOSEPH D. MARKEE
- ------------------------------------------
Joseph D. Markee
/s/ MARK HANDZEL
- ------------------------------------------
Mark Handzel
15.
<PAGE>
EXHIBIT A
SCHEDULE OF INVESTORS
<TABLE>
<CAPTION>
NUMBER OF SHARES OF AGGREGATE
NAME AND ADDRESS SERIES D PREFERRED PURCHASE PRICE
- ---------------- ------------------ --------------
<S> <C> <C>
TCV II, V.O.F. 12,031 $ 93,240.25
56 Main Street, Suite 210
Millburn, New Jersey 07041
(973) 467-5320
575 High Street, Ste. 400
Palo Alto, CA 94301
(650) 614-8200
Technology Crossover Ventures II, L.P. 370,354 2,870,243.50
56 Main Street, Suite 210
Millburn, New Jersey 07041
(973) 467-5320
575 High Street, Ste. 400
Palo Alto, CA 94301
(650) 614-8200
TCV II (Q), L.P. 284,733 2,206,680.75
56 Main Street, Suite 210
Millburn, New Jersey 07041
(973) 467-5320
575 High Street, Ste. 400
Palo Alto, CA 94301
(650) 614-8200
TCV II Strategic Partners, L.P. 50,530 391,607.50
56 Main Street, Suite 210
Millburn, New Jersey 07041
(973) 467-5320
575 High Street, Ste. 400
Palo Alto, CA 94301
(650) 614-8200
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OF AGGREGATE
NAME AND ADDRESS SERIES D PREFERRED PURCHASE PRICE
- ---------------- ------------------ --------------
<S> <C> <C>
Technology Crossover Ventures II, C.V. 56,546 $ 438,231.50
56 Main Street, Suite 210
Millburn, New Jersey 07041
(973) 467-5320
575 High Street, Ste. 400
Palo Alto, CA 94301
(650) 614-8200
Juliet Challenger, Inc. 326,613 2,531,250.75
Attn: Andrew H. McQuarri
824 Market Street, Suite 900
Wilmington, DE 19801
Henry L. Hillman, Elsie Hilliard Hillman and 73,889 572,639.75
C.G. Grefenstette, Trustees of the Henry L.
Hillman Trust U/A dated
Nov. 18, 1985
Attn: Maurice White
1800 Grant Building
Pittsburgh, PA 15219
(412) 338-3696
C.G. Grefenstette and Thomas G. Bigley, 24,677 191,246.75
Trustees, U/A/T dated 12/30/76 for Children
of Juliet Lea Hillman Simonds
Attn: Maurice White
1800 Grant Building
Pittsburgh, PA 15219
(412) 338-3696
C.G. Grefenstette and Thomas G. Bigley, 24,677 191,246.75
Trustees, U/A/T dated 12/30/76 for Children
of Henry Lea Hillman, Jr.
Attn: Maurice White
1800 Grant Building
Pittsburgh, PA 15219
(412) 338-3696
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OF AGGREGATE
NAME AND ADDRESS SERIES D PREFERRED PURCHASE PRICE
- ---------------- ------------------ --------------
<S> <C> <C>
C.G. Grefenstette and Thomas G. Bigley, 24,677 $ 191,246.75
Trustees, U/A/T dated 12/30/76 for Children
of William Talbott Hillman
Attn: Maurice White
1800 Grant Building
Pittsburgh, PA 15219
(412) 338-3696
C.G. Grefenstette and Thomas G. Bigley, 24,677 191,246.75
Trustees, U/A/T dated 12/30/76 for Children
of Audrey Hillman Fisher
Attn: Maurice White
1800 Grant Building
Pittsburgh, PA 15219
(412) 338-3696
The Hillman Foundation 48,774 377,998.50
Attn: Maurice White
2000 Grant Building
Pittsburgh, PA 15219
(412) 338-3696
Henry L. Hillman Foundation 32,661 253,122.75
Attn: Maurice White
2000 Grant Building
Pittsburgh, PA 15219
(412) 338-3696
Charter Growth Capital, L.P. 391,883 3,037,093.25
Attn: Kevin J. McQuillan
525 University Avenue, Suite 1500
Palo Alto, CA 94301
(650) 325-6953
CGC Investors, L.P. 28,126 217,976.50
Attn: Kevin J. McQuillan
525 University Avenue, Suite 1500
Palo Alto, CA 94301
(650) 325-6953
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Number of Shares of Aggregate
Name and Address Series D Preferred Purchase Price
- ---------------- ------------------ --------------
<S> <C> <C>
Charter Growth Capital Co-Investment Fund, 70,314 $ 544,933.50
L.P.
Attn: Kevin J. McQuillan
525 University Avenue, Suite 1500
Palo Alto, CA 94301
(650) 325-6953
Rho Management Trust I 258,065 2,000,003.75
Attn: Danielle Bodor
767 Fifth Avenue
New York, NY 10153
(212) 848-0427
Morgan Stanley Venture Partners III, L.P. 198,116 1,535,399.00
Attn: Robert Loarie
3000 Sand Hill Road
Building 4, Suite 250
Menlo Park, CA 94025
(650) 234-5500
Morgan Stanley Venture Investors III, L.P. 19,022 147,420.50
Attn: Robert Loarie
3000 Sand Hill Road
Building 4, Suite 250
Menlo Park, CA 94025
(650) 234-5500
Morgan Stanley Venture Entrepreneur 8,668 67,177.00
Fund, L.P.
Attn: Robert Loarie
3000 Sand Hill Road
Building 4, Suite 250
Menlo Park, CA 94025
(650) 234-5500
UMBTRU 129,032 999,998.00
Attn: John DeMarco
UMB Bank
1 Battery Park Plaza, 8th Floor
New York, NY 10004
(212) 968-1990
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OF AGGREGATE
NAME AND ADDRESS SERIES D PREFERRED PURCHASE PRICE
- ---------------- ------------------ --------------
<S> <C> <C>
Bayview Investors V, L.P. 38,710 $ 300,002.50
c/o BancBoston Robertson Stephens
Attn: Terry Otton
555 California Street, Suite 2600
San Francisco, CA 94104
(415) 676-2936
Lincoln Investors, L.P. 25,806 199,996.50
Attn: Corey M. Horowitz
885 Third Avenue, Suite 2900
New York, NY 10022
(212) 829-5770
Andreessen 1996 Living Trust 25,806 199,996.50
c/o Michael G. Mohr
16615 Lark Avenue, Suite 101
Los Gatos, CA 95032
(408) 358-3316
Ultima Partners Limited 25,806 199,996.50
Attn: Gloria J. Higgins
Synetics S.F.S. Inc.
1775 Sherman Street, Suite 1350
Denver, CO 80203
(303) 832-0815
Randall M. Baum and Betsy S. Baum, Trustees 6,452 50,003.00
FBO The Baum Family Rev Trust
2180 Carmelita Avenue
Hillsborough, CA 94010
Canaan Equity, L.P. 58,527 453,584.25
2884 Sand Hill Road, Ste. 115
Menlo Park, CA 94205
InterWest Partners VI, L.P. 56,771 439,975.25
3000 Sand Hill Road
Building 3, Suite 255
Menlo Park, California 94025
InterWest Investors VI, LP 1,756 13,609.00
3000 Sand Hill Road
Building 3, Suite 255
Menlo Park, California 94025
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OF AGGREGATE
NAME AND ADDRESS SERIES D PREFERRED PURCHASE PRICE
- ---------------- ------------------ --------------
<S> <C> <C>
Greylock Equity Limited Partnership 147,805 $1,145,488.75
One Federal Street, 26th Floor
Boston, MA 02110
755 Page Mill Road
Suite A-100
Palo Alto, CA 94304-1018
Attn: Rover Evans
(650) 493-5525
Sutter Hill Ventures 110,855 859,126.25
a California Limited Partnership
755 Page Mill Road, Suite A-200
Palo Alto, CA 94304
(650) 493-5600
Tow Partners 4,918 38,114.50
a California Limited Partnership
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
(650) 493-5600
David L. Anderson 8,512 65,968.00
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
(650) 493-5600
G. Leonard Baker, Jr. 8,512 65,968.00
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
(650) 493-5600
Gregory Sands 645 4,998.75
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
(650) 493-5600
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OF AGGREGATE
NAME AND ADDRESS SERIES D PREFERRED PURCHASE PRICE
- ---------------- ------------------ --------------
<S> <C> <C>
Ronald L. Perkins 882 $ 6,835.50
755 Page Mill Road
Suite A-200
Palo Alto, CA 94304
(650) 493-5600
Wells Fargo Bank, Trustee 4,918 38,114.50
SHV M/P/T FBO Tench Coxe
Attn: Vicki Bandel
MAC 0101 021
420 Montgomery Street, 2nd Floor
San Francisco, CA 94104
Wells Fargo Bank, Trustee 294 2,278.50
SHV M/P/T FBO Sherryl W. Hossack
Attention: Vicki Bandel
MAC 0101 021
420 Montgomery, 2nd Floor
San Francisco, CA 94104
(415) 396-3739
Wells Fargo Bank, Trustee 8,269 64,084.75
SHV M/P/T FBO William H. Younger, Jr.
Attention: Vicki Bandel
MAC 0101 021
420 Montgomery, 2nd Floor
San Francisco, CA 94104
(415) 396-3739
Matrix Partners IV, L.P. 71,704 555,706.00
2500 Sand Hill Road, Suite 113
Menlo Park, CA 94025
(650) 854-3131
Matrix IV Entrepreneurs Fund, L.P. 3,774 29,248.50
2500 Sand Hill Road, Suite 113
Menlo Park, CA 94025
(650) 854-3131
Comdisco Ventures 7,860 60,915.00
6111 North River Road
Attn: Jill Hanses
Rosemont, IL 60018
(847) 518-5466
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OF AGGREGATE
NAME AND ADDRESS SERIES D PREFERRED PURCHASE PRICE
- ---------------- ------------------ --------------
<S> <C> <C>
Intel Corporation 135,989 $1,053,914.75
Treasury Department, SC4-210
Attn: Laila Partridge
2200 Mission College Blvd.
Santa Clara, CA 95052
GC&H Investments 2,990 23,172.50
c/o Cooley Godward llp
One Maritime Plaza, 20th Floor
San Francisco, CA 94111
Korea Technology Banking Corporation 8,361 64,797.75
Attn: Mr. Jung Kyoo Yang
Chief Officer, International Business
KTB Building, 20th Floor
45-21 Yoido-dong, Youngdeungpo-ku
Seoul 150-010 Korea
(82-2) 3787-7691
Richard Gilbert 1,422 11,020.50
Copper Mountain Networks
2470 Embarcadero Way
Palo Alto, CA 94303
(650) 858-8500
Gallagher Public Relations 159 1,232.25
1301 Marina Village Parkway, Ste. 215
Alameda, CA 94501
(510) 749-6800
William Kevin Gallagher 119 922.25
1301 Marina Village Parkway, Ste. 215
Alameda, CA 94501
(510) 749-6800
Molly M. Miller 119 922.25
Worlds at Work
2628 Laguna Street
San Francisco, CA 94123
(415) 567-6375
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES OF AGGREGATE
NAME AND ADDRESS SERIES D PREFERRED PURCHASE PRICE
- ---------------- ------------------ --------------
<S> <C> <C>
Joseph D. Markee (1) 0
Copper Mountain Networks
3931 Sorrento Valley Boulevard
San Diego, CA 92121
(619) 453-8799
Mark Handzel (2) 0
Copper Mountain Networks, Inc.
3931 Sorrento Valley Boulevard
San Diego, CA 92121
(619) 453-8799
</TABLE>
(1) Holds 518,868 shares of Common Stock; 50,000 shares of Series A Preferred
and 50,000 shares of Series B Preferred.
(2) Holds 518,868 shares of Common Stock.
<PAGE>
EXHIBIT 10.21
COPPER MOUNTAIN COMMUNICATIONS, INC.
FOUNDER STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 11th day of March, 1996 by and between
Copper Mountain Communications, Inc., a California corporation (the
"Corporation"), and Joseph D. Markee (the "Purchaser").
WHEREAS, pursuant to Section 408 of the California General Corporation Law,
the Corporation desires to issue, and the Purchaser desires to acquire, stock of
the Corporation as herein described, on the terms and conditions hereinafter set
forth;
WHEREAS, the issuance of Common Stock hereby is in connection with a
compensatory benefit plan for the employees, directors, officers, advisers or
consultants of the Corporation and is intended to comply with the provisions of
Rule 701 promulgated by the Securities and Exchange Commission (the "SEC") under
the Securities Act of 1933, as amended (the "Act").
NOW, THEREFORE, IT IS AGREED between the parties as follows:
1. The Purchaser hereby agrees to purchase from the Corporation, and the
Corporation hereby agrees to sell to the Purchaser, an aggregate of five hundred
eighteen thousand, eight hundred and sixty-eight (518,868) shares of the Common
Stock of the Corporation (the "Stock") at $0.04 per share, for an aggregate
purchase price of $20,754.72 payable as follows:
Cash............................................................ $ 0
Promissory Note in the form set forth in Exhibit C,
subject to pledge in the form set forth in Exhibit D............ $20,754.72
Cancellation of indebtedness of the Corporation................. $ 0
2. In accordance with Section 408(b) of the California General
Corporation Law, the shares to be purchased by the Purchaser pursuant to this
Agreement (hereinafter sometimes collectively referred to as the "Stock") shall
be subject to the repurchase options of the Corporation set forth in
subparagraphs (a) and (b) below ("Purchase Option"):
(A) In the event the Purchaser ceases to be an employee of the
Corporation for any reason (including death), or no reason, with or without
cause, then the Corporation shall have the right at any time within ninety (90)
days after said cessation or such longer period as may be determined by the
Company if such later repurchase is deemed necessary by the Company for
treatment of its stock as Qualified
1.
<PAGE>
Small Business Stock under Section 1202 of the Internal Revenue Code of 1986, as
amended and regulations promulgated thereunder, to exercise its option to
repurchase from the Purchaser or his personal representative, as the case may
be, at the total price per share indicated above as paid by the Purchaser for
such Stock ("Option Price"), up to but not exceeding the number of shares of
stock which have not vested under the provisions of paragraph (b) below. As used
herein, employment with the Corporation shall include (i) serving as an officer
or director of the Corporation, (ii) performing services as a consultant to the
Corporation, and (iii) employment with a "parent" or "subsidiary" of the
Corporation as those terms are defined in Sections 424(e) and (f) of the
Internal Revenue Code of 1986, as amended.
(B) The Corporation may exercise its Purchase Option only as to the
maximum portion of the stock specified by the percentage given by this formula:
(48-Number of full months since the Employment Start Date) divided by 48.
Your Employment Start Date is March 11, 1996.
(C) In addition, if at any time during the term of the Purchase
Option set forth in paragraph 2(a) above there occurs: (a) a merger or
consolidation involving the Corporation, in which the Corporation is not the
surviving corporation, except a merger intended solely to reincorporate the
Corporation under a new jurisdiction, (b) a reverse merger in which the
Corporation is the surviving corporation but the shares of the Corporation's
Common Stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of other
securities, cash or otherwise, or (c) any other capital reorganization in which
more than fifty percent (50%) of the shares of the Corporation entitled to vote
are exchanged, then, in such event, the Purchase Option may be assigned to any
successor of the Corporation, and the Purchase Option shall apply if the
Purchaser shall cease for any reason to be an employee of such successor or a
parent or subsidiary (as defined above) on the same basis as set forth above. In
that case, references herein to the "Corporation" shall be deemed to refer to
such successor, its parents and subsidiaries.
(D) The Corporation shall be entitled to pay for any shares purchased
pursuant to its Purchase Option at the Corporation's option in cash or by offset
against any indebtedness owing to the Corporation by Purchaser (including
without limitation any Note given in payment for the Stock).
(E) Nothing in this Agreement shall affect in any manner whatsoever
the right or power of the Corporation (or a parent or subsidiary of the
Corporation) to terminate Purchaser's employment for any reason, with or without
cause.
3. The Purchase Option shall be exercised by written notice signed by an
officer of the Corporation or by any assignee or assignees of the Corporation
and
2.
<PAGE>
delivered or mailed as provided in paragraph 13. Such notice shall identify the
number of shares to be purchased and shall notify the Purchaser of the time,
place and date for settlement of such purchase, which shall be scheduled by the
Corporation within one hundred twenty (120) days from the date of cessation of
employment.
4. If, from time to time during the term of the Purchase Option:
(I) There is any stock dividend or other distribution of cash and/or
property, stock split or other change in the character or amount of any of
the outstanding securities of the Corporation; or
(II) There is any consolidation, merger or sale of all, or
substantially all of the assets of the Corporation;
then, in such event, any and all new, substituted or additional securities or
other property to which the Purchaser is entitled by reason of its ownership of
Stock shall be immediately subject to the Purchase Option and be included in the
word "Stock" for all purposes of the Purchase Option with the same force and
effect as the shares of the Stock presently subject to the Purchase Option.
While the total Option Price shall remain the same after each such event, the
Option Price per share of Stock upon exercise of the Purchase Option shall be
appropriately adjusted.
5. All certificates representing any shares of Stock of the Corporation
subject to the provisions of this Agreement shall have endorsed thereon legends
in substantially the following forms (in addition to any other legend which may
be required by other agreements between the parties hereto):
(I) "The shares represented by this certificate are subject to an
option set forth in an agreement between the Corporation and the registered
holder, or his predecessor in interest, a copy of which is on file at the
principal office of this Corporation. Any transfer or attempted transfer of
any shares subject to such option is void without the prior express written
consent of the issuer of these shares."
(II) "The securities represented by this Certificate have been
acquired for investment and have not been registered under the Securities
Act of 1933. Such shares may not be sold or transferred in the absence of
such registration or unless the Company receives at its option either an
opinion of counsel or other evidence reasonably acceptable to it to the
effect that such sale or transfer is exempt from the registration and
prospectus delivery requirements of said Act. Copies of the Agreement
covering the purchase of these shares and restricting their transfer may be
obtained upon written request made by the holder of record of this
certificate to the Secretary of the Corporation at its principal offices."
3.
<PAGE>
(III) "The shares represented by this Certificate are subject to a
right of first refusal option in favor of the Corporation and/or its Assignee(s)
as provided in the Bylaws of the Corporation."
(IV) Any legend required by the California Commissioner of
Corporations or other state securities laws.
6. Purchaser acknowledges that he is aware that the Stock to be issued to
him by the Corporation pursuant to this Agreement has not been registered under
the Act, and that the Stock is deemed to constitute "restricted securities"
under Rule 701 and Rule 144 promulgated under the Act. In this connection,
Purchaser warrants and represents to the Corporation that Purchaser is
purchasing the Stock for Purchaser's own account and Purchaser has no present
intention of distributing or selling said stock except as permitted under the
Act and Section
7. 25102(f) of the California Corporations Code. Purchaser further
warrants and represents that Purchaser has either (i) preexisting personal or
business relationships with the Corporation or any of its officers, directors or
controlling persons, or (ii) the capacity to protect his own interests in
connection with the purchase of the Stock by virtue of the business or financial
expertise of himself or of professional advisors to the Purchaser who are
unaffiliated with and who are not compensated by the Corporation or any of its
affiliates, directly or indirectly. Purchaser further acknowledges that the
exemption from registration under Rule 144 will not be available for at least
three years from the date of sale of the Stock unless at least two years from
the date of sale (i) a public trading market then exists for the Common Stock of
the Corporation, (ii) adequate information concerning the Corporation is then
available to the public, and (iii) other terms and conditions of Rule 144 are
complied with; and that any sale of the Stock may be made only in limited
amounts in accordance with such terms and conditions and that exemption from
registration under Rule 701 will not be available until ninety days after the
Corporation becomes subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934 and that after such date the Stock may be
resold by persons other than affiliates in reliance on Rule 144 without
compliance with paragraphs (c),(d),(e) and (h) thereof, and by affiliates
without compliance with paragraph (d) thereof.
8. The Purchaser agrees that during the one hundred eighty (180) day
period following the effective date of a registration statement of the
Corporation filed under the Act the Purchaser shall not, to the extent requested
by the Corporation and any underwriter, sell or otherwise transfer or dispose of
(other than to donees who agree to be similarly bound), or enter into any
hedging or similar transaction with the same economic effect as a sale, any
Common Stock of the Corporation held by the Purchaser at any time during such
period (the "Purchaser's Registrable Securities") except Common Stock included
in such registration; provided, however, that:
4.
<PAGE>
(A) such agreement shall be applicable only to the first such
registration statement of the Corporation which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and
(B) all officers and directors of the Corporation enter into similar
agreements. In order to enforce the foregoing covenant, the Corporation may
impose stop-transfer instructions with respect to the Purchaser's Registrable
Securities (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
9. The Purchaser shall not transfer by sale, assignment, hypothecation,
donation or otherwise any of the Stock or any interest therein subject to the
Purchase Option without the prior express written consent of the issuer of the
shares. As security for his faithful performance of the terms of this Agreement
and to insure the availability for delivery of Purchaser's Stock upon exercise
of the Purchase Option herein provided for, the Purchaser agrees, at the closing
hereunder, to deliver to and deposit with the Secretary of the Corporation
("Escrow Agent"), as Escrow Agent in this transaction, three stock assignments
duly endorsed (with date and number of shares blank) in the form attached hereto
as Exhibit B, together with a certificate or certificates evidencing all of the
Stock subject to the Purchase Option; said documents are to be held by the
Escrow Agent and delivered by said Escrow Agent pursuant to the Joint Escrow
Instructions of the Corporation and the Purchaser set forth in Exhibit A
attached hereto and incorporated by this reference, which instructions shall
also be delivered to the Escrow Agent at the closing hereunder.
10. The Corporation shall not be required (i) to transfer on its books any
shares of Stock of the Corporation which shall have been transferred in
violation of any of the provisions set forth in this Agreement or (ii) to treat
as owner of such shares or to accord the right to vote as such owner or to pay
dividends to any transferee to whom such shares shall have been so transferred.
11. Subject to the provisions of paragraphs 7, 8 and 9 above, the
Purchaser (but not any unapproved transferee) shall exercise all rights and
privileges of a shareholder of the Corporation with respect to the Stock.
12. Paragraphs 2, 3 and 4 of this Agreement shall terminate upon the
exercise in full or expiration of the Purchase Option, whichever first occurs.
13. The parties agree to execute such further instruments and to take such
further action as may reasonably be necessary to carry out the intent of this
Agreement.
14. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid,
5.
<PAGE>
addressed to the other party hereto at his address hereinafter shown below its
signature or at such other address as such party may designate by ten (10) days
advance written notice to the other party hereto.
15. This Agreement shall inure to the benefit of the successors and
assigns of the Corporation and, subject to the restrictions on transfer herein
set forth, be binding upon the Purchaser, its successors, and assigns. The
Purchase Option of the Corporation hereunder shall be assignable by the
Corporation at any time or from time to time, in whole or in part.
16. The Purchaser shall reimburse the Corporation for all costs incurred
by the Corporation in enforcing the performance of, or protecting its rights
under, any part of this Agreement, including reasonable costs of investigation
and attorneys' fees. It is the intention of the parties that the Corporation,
upon exercise of the Purchase Option and payment of the Option Price, pursuant
to the terms of this Agreement, shall be entitled to receive the Stock, in
specie, in order to have such Stock available for future issuance without
dilution of the holdings of other shareholders. Furthermore, it is expressly
agreed between the parties that money damages are inadequate to compensate the
Corporation for the Stock and that the Corporation shall, upon proper exercise
of the Purchase Option, be entitled to specific enforcement of its rights to
purchase and receive said Stock.
17. This Agreement shall be governed by and construed in accordance with
the laws of the State of California. The parties agree that any action brought
by either party to interpret or enforce any provision of this Agreement shall be
brought in, and each party agrees to, and does hereby, submit to the
jurisdiction and venue of, the appropriate state or federal court for the
district encompassing the Corporation's principal place of business.
18. The parties agree to take all such further action(s) as may reasonably
be necessary to carry out and consummate this Agreement as soon as practicable,
and to take whatever steps may be necessary to obtain any governmental approval
in connection with or otherwise qualify the issuance of the securities that are
the subject of this Agreement. The closing hereunder, including payment for and
delivery of the Stock, shall occur at the offices of the Corporation on March
11, 1996 or at such other time and place as the parties may mutually agree.
19. This Agreement is not an employment contract and nothing in this
Agreement shall be deemed to create in any way whatsoever any obligations on the
part of the Purchaser to continue in the employ of the Corporation or of the
Corporation to continue the Purchaser in the employ of the Corporation.
20. Purchaser acknowledges that this Agreement has been prepared on behalf
of the Company by Cooley Godward Castro Huddleson & Tatum, counsel to the
Company
6.
<PAGE>
and that Cooley Godward does not represent, and is not acting on behalf of,
Purchaser. Purchaser has been provided with an opportunity to consult with its
own counsel with respect to this Agreement.
21. This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof. This Agreement may not be amended,
modified or revoked, in whole or in part, except by an agreement in writing
signed by each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
COPPER MOUNTAIN COMMUNICATIONS, INC.
/s/ JOSEPH D. MARKEE
________________________________________
Joseph D. Markee
President
Address: 455 Rancho La Mirada
Escondido, California 92025
PURCHASER
/s/ JOSEPH D. MARKEE
________________________________________
Joseph D. Markee
Address: 455 Rancho La Mirada
Escondido, California 92025
ATTACHMENTS:
Exhibit A -- Joint Escrow Instructions
Exhibit B -- Stock Assignment Separate from Certificate
Exhibit C -- Promissory Note
Exhibit D -- Pledge Agreement
7.
<PAGE>
EXHIBIT A
JOINT ESCROW INSTRUCTIONS
Secretary
Copper Mountain Communications, Inc.
455 Rancho La Mirada
Escondido, California 92025
Dear Sir or Madam:
As Escrow Agent for both COPPER MOUNTAIN COMMUNICATIONS, INC., a California
corporation ("Corporation"), and the undersigned purchaser of stock of the
Corporation ("Purchaser"), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Founder Stock
Purchase Agreement ("Agreement"), dated March 11, 1996, to which a copy of these
Joint Escrow Instructions is attached as Exhibit A, in accordance with the
following instructions:
1. In the event the Corporation or an assignee shall elect to exercise
the Purchase Option set forth in the Agreement, the Corporation or its assignee
will give to Purchaser and you a written notice specifying the number of shares
of stock to be purchased, the purchase price, and the time for a closing
hereunder at the principal office of the Corporation. Purchaser and the
Corporation hereby irrevocably authorize and direct you to close the transaction
contemplated by such notice in accordance with the terms of said notice.
2. At the closing you are directed (a) to date any stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Corporation against the
simultaneous delivery to you of the purchase price of the number of shares of
stock being purchased pursuant to the exercise of the Purchase Option.
3. Purchaser irrevocably authorizes the Corporation to deposit with you
any certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as specified in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as his attorney-in-
fact and agent for the term of this escrow to execute with respect to such
securities and other property all documents of assignment and/or transfer and
all stock certificates necessary or appropriate to make all securities
negotiable and complete any transaction herein contemplated.
4. This escrow shall terminate upon expiration or exercise in full of the
Purchase Option, whichever occurs first.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of
1.
<PAGE>
same to any pledgee entitled thereto or, if none, to Purchaser and shall be
discharged of all further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties or
their assignees. You shall not be personally liable for any act you may do or
omit to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while
acting in good faith and any act done or omitted by you pursuant to the advice
of your own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree of any court,
you shall not be liable to any of the parties hereto or to any other person,
firm or corporation by reason of such compliance, notwithstanding any such
order, judgment or decree being subsequently reversed, modified, annulled, set
aside, vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authority or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under any
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel (including without
limitation the firm of Cooley Godward Castro Huddleson & Tatum) and other
experts as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be Secretary of the Corporation or if you shall resign by written
notice to each party. In the event of any such termination, the Corporation may
appoint any officer or assistant officer of the Corporation as successor Escrow
Agent and Purchaser hereby confirms the appointment of such successor or
successors as his attorney-in-fact and agent to the full extent of your
appointment.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
2.
<PAGE>
14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities, you
may (but are not obligated to) retain in your possession without liability to
anyone all or any part of said securities until such dispute shall have been
sealed either by mutual written agreement of the parties concerned or by a final
order, decree or judgment of a court of competent jurisdiction after the time
for appeal has expired and no appeal has been perfected, but you shall be under
no duty whatsoever to institute or defend any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
any United States Post Box, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties hereunto entitled at the
following addresses, or at such other addresses as a party may designate by ten
days' written notice to each of the other parties hereto:
CORPORATION: Copper Mountain Communications, Inc.
455 Rancho La Mirada
Escondido, California 92025
PURCHASER: Joseph D. Markee
455 Rancho La Mirada
Escondido, California 92025
ESCROW AGENT: Secretary
Copper Mountain Communications, Inc.
455 Rancho La Mirada
Escondido, California 92025
16. By signing these Joint Escrow Instructions you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns. It is
understood and agreed that references to "you" or "your" herein refer to the
original Escrow agent and to any and all successor Escrow Agents. It is
understood and agreed that the Corporation may at any time or
3.
<PAGE>
from time to time assign its rights under the Agreement and these Joint Escrow
Instructions in whole or in part.
VERY TRULY YOURS,
COPPER MOUNTAIN COMMUNICATIONS, INC.
____________________________________________
Joseph D. Markee
President
PURCHASER:
____________________________________________
Joseph D. Markee
ESCROW AGENT:
_____________________________
Joseph D. Markee
Secretary
4.
<PAGE>
EXHIBIT B
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, Joseph D. Markee hereby sells, assigns and transfers
unto Copper Mountain Communications, Inc., a California corporation (the
"Company"), pursuant to that certain Founder Stock Purchase Agreement, dated
March 11, 1996 by and between the undersigned and the Company (the "Agreement"),
_____________________________________________________ shares of Common Stock of
the Company standing in the undersigned's name on the books of the Company
represented by Certificate No(s). _______ and does hereby irrevocably constitute
and appoint the Company's Secretary attorney to transfer said stock on the books
of the Company with full power of substitution in the premises. This Assignment
may only be used in connection with the repurchase of shares of Common Stock
issued to the undersigned pursuant to the Agreement that remain subject to the
Company's right of repurchase in accordance with and subject to the terms and
conditions of the Agreement.
DATED: ________________
________________________________________
JOSEPH D. MARKEE
<PAGE>
EXHIBIT C
PROMISSORY NOTE
$20,754.72 San Diego, California
March 11, 1996
FOR VALUE RECEIVED, the undersigned hereby unconditionally promises to pay
to the order of COPPER MOUNTAIN COMMUNICATIONS, INC., a California corporation
(the "Company"), at 455 Rancho La Mirada, Escondido, California, or at such
other place as the holder hereof may designate in writing, in lawful money of
the United States of America and in immediately available funds, the principal
sum of twenty thousand seven hundred fifty-four Dollars and seventy-two Cents
($20,754.72) together with interest accrued from the date hereof on the unpaid
principal at the rate of 5.5% per annum, or the maximum rate permissible by law
(which under the laws of the State of California shall be deemed to be the laws
relating to permissible rates of interest on commercial loans), whichever is
less, as follows:
All outstanding principal and accrued interest under this Note shall become
due and payable on March 11, 2000 provided, however, that in the event that the
undersigned's employment by or association with the Company is terminated for
any reason prior to payment in full of this Note, this Note shall be accelerated
and all remaining unpaid principal and interest shall become due and payable
immediately after such termination.
If the undersigned fails to pay any of the principal and accrued interest
when due, the Company, at its sole option, shall have the right to accelerate
this Note, in which event the entire principal balance and all accrued interest
shall become immediately due and payable, and immediately collectible by the
Company pursuant to applicable law.
This Note may be prepaid at any time without penalty. All money paid toward
the satisfaction of this Note shall be applied first to the payment of interest
as required hereunder and then to the retirement of the principal.
The full amount of this Note is secured by a pledge of shares of Common
Stock of the Company, and is subject to all of the terms and provisions of the
Founder Stock Purchase Agreement and the Pledge Agreement, each of even date
herewith, between the undersigned and the Company.
The undersigned hereby represents and agrees that the amounts due under
this Note are not consumer debt, and are not incurred primarily for personal,
family or household purposes, but are for business and commercial purposes only.
1.
<PAGE>
The undersigned hereby waives presentment, protest and notice of protest,
demand for payment, notice of dishonor and all other notices or demands in
connection with the delivery, acceptance, performance, default or endorsement of
this Note.
The holder hereof shall be entitled to recover, and the undersigned agrees
to pay when incurred, all costs and expenses of collection of this Note,
including without limitation, reasonable attorneys' fees.
This Note shall be governed by, and construed, enforced and interpreted in
accordance with, the laws of the State of California, excluding conflict of laws
principles that would cause the application of laws of any other jurisdiction.
Signed:_______________________________
Joseph D.Markee
2.
<PAGE>
EXHIBIT D
PLEDGE AGREEMENT
1. As collateral security for the payment of that certain $20,754.72
promissory note issued this date to JOSEPH D. MARKEE ("Pledgee") by the
undersigned (hereinafter called "indebtedness"), the undersigned hereby assigns,
transfers to and pledges with the Pledgee the securities listed on Schedule 1
hereto which were this day delivered to be deposited with Pledgee, together with
any stock rights, rights to subscribe, dividends paid in cash or other property
in connection with the complete or partial liquidation of Pledgee, stock
dividends, dividends paid in stock, new securities or other property except cash
dividends other than liquidating dividends to which the undersigned is or may
hereafter become entitled to receive on account of such property, and in the
event that the undersigned receives any such, the undersigned will immediately
deliver it to Pledgee to be held by Pledgee hereunder in the same manner as the
property originally pledged hereunder. All property assigned, transferred to and
pledged with Pledgee under this paragraph is hereinafter called "collateral."
2. At any time, without notice, and at the expense of the undersigned,
Pledgee in its name or in the name of its nominee or of the undersigned may, but
shall not be obligated to: (1) collect by legal proceedings or otherwise all
dividends (except cash dividends other than liquidating dividends), interest,
principal payments and other sums now or hereafter payable upon or on account of
said collateral; (2) enter into any extension, reorganization, deposit, merger,
or consolidation agreement, or any agreement in any way relating to or affecting
the collateral, and in connection therewith may deposit or surrender control of
such collateral thereunder, accept other property in exchange for such
collateral and do and perform such acts and things as it may deem proper, and
any money or property received in exchange for such collateral shall be applied
to the indebtedness or thereafter held by it pursuant to the provisions hereof;
(3) insure, process and preserve the collateral; (4) cause the collateral to be
transferred to its name or to the name of its nominee; (5) exercise as to such
collateral all the rights, powers, and remedies of an owner, except that so long
as the indebtedness is not in default the undersigned shall retain all voting
rights as to the collateral.
3. The undersigned agrees to pay prior to delinquency all taxes, charges,
liens and assessments against the collateral, and upon the failure of the
undersigned to do so Pledgee at its option may pay any of them and shall be the
sole judge of the legality or validity thereof and the amount necessary to
discharge the same.
4. All advances, charges, costs and expenses, including reasonable
attorneys' fees, incurred or paid by Pledgee in exercising any right, power or
remedy conferred by this agreement, or in the enforcement thereof, shall become
a part of the indebtedness
1.
<PAGE>
secured hereunder and shall be paid to Pledgee by the undersigned immediately
and without demand.
5. At the option of Pledgee and without necessity of demand or notice,
all or any part of the indebtedness of the undersigned shall immediately become
due and payable irrespective of any agreed maturity, upon the happening of any
of the following events: (1) failure to keep or perform any of the terms or
provisions of this agreement; (2) default in the payment of principal or
interest when due; (3) the levy of any attachment, execution or other process
against the collateral; or (4) the insolvency, commission of an act of
bankruptcy, general assignment for the benefit of creditors, filing of any
petition in bankruptcy or for relief under the provisions of Title 11, United
States Code, Bankruptcy, of, by, or against the undersigned.
6. In the event of the nonpayment of any indebtedness when due, whether
by acceleration or otherwise, or upon the happening of any of the events
specified in the last preceding paragraph, Pledgee may then, or at any time
thereafter, at its election, apply, set off, collect or sell in one or more
sales, or take such steps as may be necessary to liquidate and reduce to cash in
the hands of Pledgee in whole or in part, with or without any previous demands
or demand of performance or notice or advertisement, the whole or any part of
the collateral in such order as Pledgee may elect, and any such sale may be made
either at public or private sale at its place of business or elsewhere, or at
any broker's board or securities exchange, either for cash or upon credit or for
future delivery; provided, however, that if such disposition is at private sale,
then the purchase price of the collateral shall be equal to the public market
price then in effect, or, if at the time of sale no public market for the
collateral exists, then, in recognition of the fact that the sale of the
collateral would have to be registered under the Securities Act of 1933 and that
the expenses of such registration are commercially unreasonable for the type and
amount of collateral pledged hereunder, Pledgee and the undersigned hereby agree
that such private sale shall be at a purchase price mutually agreed to by
Pledgee and the undersigned or, if the parties cannot agree upon a purchase
price, then at a purchase price established by a majority of three independent
appraisers knowledgeable of the value of such collateral, one named by the
undersigned within 10 days after written request by the Pledgee to do so, one
named by Pledgee within such 10 day period, and the third named by the two
appraisers so selected, with the appraisal to be rendered by such body within 30
days of the appointment of the third appraiser. The cost of such appraisal,
including all appraiser's fees, shall be charged against the proceeds of sale as
an expense of such sale. Pledgee may be the purchaser of any or all collateral
so sold and hold the same thereafter in its own right free from any claim of the
undersigned or right of redemption. Demands of performance, notices of sale,
advertisements and presence of property at sale are hereby waived, and Pledgee
is hereby authorized to sell hereunder any evidence of debt pledged to it. Any
sale hereunder may be conducted by any officer or agent of Pledgee.
2.
<PAGE>
7. The proceeds of the sale of any of the collateral and all sums
received or collected by Pledgee from or on account of such collateral shall be
applied by Pledgee to the payment of expenses incurred or paid by Pledgee in
connection with any sale, transfer or delivery of the collateral, to the payment
of any other costs, charges, attorneys' fees or expenses mentioned herein, and
to the payment of the indebtedness or any part hereof, all in such order and
manner as Pledgee in its discretion may determine. Pledgee shall pay any balance
to the undersigned.
8. Pledgee shall be under no duty or obligation whatsoever to make or
give any presentments, demands for performance, notices of non-performance,
protests, notices of protest or notices of dishonor in connection with any
obligations or evidences of indebtedness held by Pledgee as collateral, or in
connection with any obligations or evidences of indebtedness which constitute in
whole or in part the indebtedness secured hereunder.
9. Pledgee may at any time deliver the collateral or any part thereof to
the undersigned and the receipt of the undersigned shall be a complete and full
acquittance for the collateral so delivered, and Pledgee shall thereafter be
discharged from any liability or responsibility therefor.
10. Upon the transfer of all or any part of the indebtedness Pledgee may
transfer all or any part of the collateral and shall be fully discharged
thereafter from all liability and responsibility with respect to such collateral
so transferred, and the transferee shall be vested with all the rights and
powers of Pledgee hereunder with respect to such collateral so transferred; but
with respect to any collateral not so transferred Pledgee shall retain all
rights and powers hereby given.
11. Until all indebtedness shall have been paid in full the power of sale
and all other rights, powers and remedies granted to Pledgee hereunder shall
continue to exist and may be exercised by Pledgee at any time and from time to
time irrespective of the fact that the indebtedness or any part thereof may have
become barred by any statute of limitations, or that the personal liability of
the undersigned may have ceased.
12. Pledgee agrees that so long as the indebtedness is not in default,
shares of Common Stock held hereunder as collateral for the indebtedness shall
be released from pledge as the indebtedness is paid. Such releases shall be at
the rate of one share for each $0.04 of principal amount of indebtedness paid.
Release from pledge, however, shall not result in release from the provisions of
those certain Joint Escrow Instructions, if any, of even date herewith among the
parties to this Pledge Agreement and the Escrow Agent named therein or from the
Purchase Option of Copper Mountain Communications, Inc., if any, set forth in
the Founder Stock Purchase Agreement dated March 11, 1996 between the parties to
this Pledge Agreement.
3.
<PAGE>
13. The rights, powers and remedies given to Pledgee by this agreement
shall be in addition to all rights, powers and remedies given to Pledgee by
virtue of any statute or rule of law. Pledgee may exercise its Pledgee's lien or
right of setoff with respect to the indebtedness in the same manner as if the
indebtedness were unsecured. Any forbearance or failure or delay by Pledgee in
exercising any right, power or remedy hereunder shall not be deemed to be a
waiver of such right, power or remedy, and any single or partial exercise of any
right, power or remedy hereunder shall not preclude the further exercise
thereof; and every right, power and remedy of Pledgee shall continue in full
force and effect until such right, power or remedy is specifically waived by an
instrument in writing executed by Pledgee.
Dated: March 11, 1996
_______________________________________
Joseph D. Markee
ATTACHMENT:
Schedule 1
4.
<PAGE>
SCHEDULE 1
TO
PLEDGE AGREEMENT
Common Stock 518,868 shares
5.
<PAGE>
EXHIBIT 10.22
COPPER MOUNTAIN NETWORKS, INC.
FIRST AMENDMENT TO
FOUNDER STOCK PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO FOUNDER STOCK PURCHASE AGREEMENT, dated as of the
12th day of June 1998 (the "Agreement"), is an amendment to the previously
executed Founder Stock Purchase Agreement dated as of the 11th day of March
1996, by and between Copper Mountain Networks, Inc., a California corporation
(the "Corporation"), and Joseph D. Markee (the "Purchaser").
RECITALS
Whereas, as of March 11, 1996, the Corporation issued, and the Purchaser
acquired, stock of the Corporation on the terms and conditions set forth in the
Founder Stock Purchase Agreement attached hereto as Exhibit A; and
WHEREAS, the Corporation and the Purchaser desires to amend section 2(b)
regarding the release of shares from the Corporation's Purchase Option (the
"Purchase Option").
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants set forth herein, the parties hereto agree as follows:
1. AMENDMENT OF SECTION 2(B) OF FOUNDER STOCK PURCHASE AGREEMENT. Section
2(b) of the Agreement is hereby amended and restated to read as follows:
(B) "One hundred percent (100%) of the Stock shall initially be
subject to the Purchase Option. The Stock shall vest and be released from
the Purchase Option on a monthly basis over four years measured from the
Employment Start Date (as set forth below), until all the Stock is released
from the Purchase Option. In the event Purchaser's service with the Company
is involuntarily terminated at any time without Cause (as defined below)
either at the time of or within twelve (12) months following the occurrence
of an event specified in subsection 14(b) of the Company's 1996 Equity
Incentive Plan (a "Change in Control"), then upon such termination vesting
of the Stock shall immediately be accelerated as to one-half of the
unvested portion of the Stock and such shares shall be released from the
Purchase Option. "Cause" means misconduct, including but not limited to:
(i) conviction of any felony or any crime involving moral turpitude or
dishonesty, (ii) participation in a fraud or act of dishonesty against the
Company, (iii) conduct by Purchaser which, based upon a good faith and
reasonable factual investigation and determination by the Board of
Directors of the Company, demonstrates gross
<PAGE>
unfitness to serve, or (iv) the material violation of any contract between
Purchaser and the Company or any statutory duty to the Company that is not
corrected within thirty (30) days after written notice to Purchaser
thereof. Purchaser's physical or mental disability shall not constitute
"Cause."
In the event Purchaser voluntarily terminates his service with the Company
for Good Reason (as defined below) either at the time of or within twelve
(12) months following the occurrence of a Change in Control, then upon such
termination vesting of the Stock shall immediately be accelerated as to
one-half of the unvested portion of the Stock and such shares shall be
released from the Purchase Option. "Good Reason" means (i) reduction of
Purchaser's rate of compensation as in effect immediately prior to the
occurrence of a Change in Control, (ii) failure to provide a package of
welfare benefit plans which, taken as a whole, provides substantially
similar benefits to those in which Purchaser is entitled to participate
immediately prior to the occurrence of the Change in Control (except that
employee contributions may be raised to the extent of any cost increases
imposed by third parties) or any action by the Company which would
adversely affect Purchaser's participation or reduce Purchaser's benefits
under any of such plans, (iii) change in Purchaser's responsibilities,
authority, title or office resulting in diminution of position, excluding
for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith which is remedied by the Company promptly after notice
thereof is given by Purchaser, (iv) request that Purchaser relocate to a
worksite that is more than thirty-five (35) miles from Purchaser's prior
worksite, unless Purchaser accepts such relocation opportunity, (v) failure
or refusal of a successor to the Company to assume the Company's
obligations under this Agreement, or (vi) material breach by the Company or
any successor to the Company of any of the material provisions of this
Agreement.
Your Employment Start Date is March 11, 1996."
2. COUNTERPARTS. This First Amendment to Founder Stock Purchase
Agreement may be executed in counterparts, each of which shall be deemed an
original and together shall constitute one instrument.
2.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
to Founder Stock Purchase Agreement as of the day and year first above written.
COPPER MOUNTAIN NETWORKS, INC.
/s/ RICHARD GILBERT
_____________________________________________
Richard Gilbert
President and Chief Executive Officer
Address: 3931 Sorrento Valley Boulevard
San Diego, California 92121
PURCHASER
/s/ JOSEPH D. MARKEE
_____________________________________________
Joseph D. Markee
Address: 455 Rancho La Mirada
Escondido, California 92025
ATTACHMENTS:
Exhibit A -- Founder Stock Purchase Agreement
3.
<PAGE>
EXHIBIT A
FOUNDER STOCK PURCHASE AGREEMENT
4.
<PAGE>
EXHIBIT 10.23
COPPER MOUNTAIN COMMUNICATIONS, INC.
FOUNDER STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of the 11th day of March, 1996 by and between
Copper Mountain Communications, Inc., a California corporation (the
"Corporation"), and Mark J. Handzel (the "Purchaser").
WHEREAS, pursuant to Section 408 of the California General Corporation Law,
the Corporation desires to issue, and the Purchaser desires to acquire, stock of
the Corporation as herein described, on the terms and conditions hereinafter set
forth;
WHEREAS, the issuance of Common Stock hereby is in connection with a
compensatory benefit plan for the employees, directors, officers, advisers or
consultants of the Corporation and is intended to comply with the provisions of
Rule 701 promulgated by the Securities and Exchange Commission (the "SEC") under
the Securities Act of 1933, as amended (the "Act").
NOW, THEREFORE, IT IS AGREED between the parties as follows:
1. The Purchaser hereby agrees to purchase from the Corporation, and the
Corporation hereby agrees to sell to the Purchaser, an aggregate of five hundred
eighteen thousand, eight hundred and sixty-eight (518,868) shares of the Common
Stock of the Corporation (the "Stock") at $0.04 per share, for an aggregate
purchase price of $20,754.72 payable as follows:
Cash............................................................$ 0
Promissory Note in the form set forth in Exhibit C,
subject to pledge in the form set forth in Exhibit D............$20,754.72
Cancellation of indebtedness of the Corporation.................$ 0
2. In accordance with Section 408(b) of the California General
Corporation Law, the shares to be purchased by the Purchaser pursuant to this
Agreement (hereinafter sometimes collectively referred to as the "Stock") shall
be subject to the repurchase options of the Corporation set forth in
subparagraphs (a) and (b) below ("Purchase Option"):
(A) In the event the Purchaser ceases to be an employee of the
Corporation for any reason (including death), or no reason, with or without
cause, then the Corporation shall have the right at any time within ninety (90)
days after said cessation or such longer period as may be determined by the
Company if such later
1.
<PAGE>
repurchase is deemed necessary by the Company for treatment of its stock as
Qualified Small Business Stock under Section 1202 of the Internal Revenue Code
of 1986, as amended and regulations promulgated thereunder, to exercise its
option to repurchase from the Purchaser or his personal representative, as the
case may be, at the total price per share indicated above as paid by the
Purchaser for such Stock ("Option Price"), up to but not exceeding the number of
shares of stock which have not vested under the provisions of paragraph (b)
below. As used herein, employment with the Corporation shall include (i) serving
as an officer or director of the Corporation, (ii) performing services as a
consultant to the Corporation and (iii) employment with a "parent" or
"subsidiary" of the Corporation as those terms are defined in Sections 424(e)
and (f) of the Internal Revenue Code of 1986, as amended.
(B) The Corporation may exercise its Purchase Option only as to the
maximum portion of the stock specified by the percentage given by this formula:
(48-Number of full months since the Employment Start Date) divided by 48.
Your Employment Start Date is March 11, 1996.
(C) In addition, if at any time during the term of the Purchase
Option set forth in paragraph 2(a) above there occurs: (a) a merger or
consolidation involving the Corporation, in which the Corporation is not the
surviving corporation, except a merger intended solely to reincorporate the
Corporation under a new jurisdiction, (b) a reverse merger in which the
Corporation is the surviving corporation but the shares of the Corporation's
Common Stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of other
securities, cash or otherwise, or (c) any other capital reorganization in which
more than fifty percent (50%) of the shares of the Corporation entitled to vote
are exchanged, then, in such event, the Purchase Option may be assigned to any
successor of the Corporation, and the Purchase Option shall apply if the
Purchaser shall cease for any reason to be an employee of such successor or a
parent or subsidiary (as defined above) on the same basis as set forth above. In
that case, references herein to the "Corporation" shall be deemed to refer to
such successor, its parents and subsidiaries.
(D) The Corporation shall be entitled to pay for any shares
purchased pursuant to its Purchase Option at the Corporation's option in cash or
by offset against any indebtedness owing to the Corporation by Purchaser
(including without limitation any Note given in payment for the Stock).
(E) Nothing in this Agreement shall affect in any manner whatsoever
the right or power of the Corporation (or a parent or subsidiary of the
Corporation) to terminate Purchaser's employment for any reason, with or without
cause.
2.
<PAGE>
3. The Purchase Option shall be exercised by written notice signed by an
officer of the Corporation or by any assignee or assignees of the Corporation
and delivered or mailed as provided in paragraph 13. Such notice shall identify
the number of shares to be purchased and shall notify the Purchaser of the time,
place and date for settlement of such purchase, which shall be scheduled by the
Corporation within one hundred twenty (120) days from the date of cessation of
employment.
4. If, from time to time during the term of the Purchase Option:
(I) There is any stock dividend or other distribution of cash and/or
property, stock split or other change in the character or amount of any of
the outstanding securities of the Corporation; or
(II) There is any consolidation, merger or sale of all, or
substantially all of the assets of the Corporation;
then, in such event, any and all new, substituted or additional securities or
other property to which the Purchaser is entitled by reason of its ownership of
Stock shall be immediately subject to the Purchase Option and be included in the
word "Stock" for all purposes of the Purchase Option with the same force and
effect as the shares of the Stock presently subject to the Purchase Option.
While the total Option Price shall remain the same after each such event, the
Option Price per share of Stock upon exercise of the Purchase Option shall be
appropriately adjusted.
5. All certificates representing any shares of Stock of the Corporation
subject to the provisions of this Agreement shall have endorsed thereon legends
in substantially the following forms (in addition to any other legend which may
be required by other agreements between the parties hereto):
(I) "The shares represented by this certificate are subject to an
option set forth in an agreement between the Corporation and the registered
holder, or his predecessor in interest, a copy of which is on file at the
principal office of this Corporation. Any transfer or attempted transfer of any
shares subject to such option is void without the prior express written consent
of the issuer of these shares."
(II) "The securities represented by this Certificate have been
acquired for investment and have not been registered under the Securities Act of
1933. Such shares may not be sold or transferred in the absence of such
registration or unless the Company receives at its option either an opinion of
counsel or other evidence reasonably acceptable to it to the effect that such
sale or transfer is exempt from the registration and prospectus delivery
requirements of said Act. Copies of the Agreement covering the purchase of these
shares and restricting their transfer may be obtained upon written request made
by
3.
<PAGE>
the holder of record of this certificate to the Secretary of the Corporation at
its principal offices."
(III) "The shares represented by this Certificate are subject to a
right of first refusal option in favor of the Corporation and/or its Assignee(s)
as provided in the Bylaws of the Corporation."
(IV) Any legend required by the California Commissioner of
Corporations or other state securities laws.
6. Purchaser acknowledges that he is aware that the Stock to be issued to
him by the Corporation pursuant to this Agreement has not been registered under
the Act, and that the Stock is deemed to constitute "restricted securities"
under Rule 701 and Rule 144 promulgated under the Act. In this connection,
Purchaser warrants and represents to the Corporation that Purchaser is
purchasing the Stock for Purchaser's own account and Purchaser has no present
intention of distributing or selling said stock except as permitted under the
Act and Section 25102(f) of the California Corporations Code. Purchaser further
warrants and represents that Purchaser has either (i) preexisting personal or
business relationships with the Corporation or any of its officers, directors or
controlling persons, or (ii) the capacity to protect his own interests in
connection with the purchase of the Stock by virtue of the business or financial
expertise of himself or of professional advisors to the Purchaser who are
unaffiliated with and who are not compensated by the Corporation or any of its
affiliates, directly or indirectly. Purchaser further acknowledges that the
exemption from registration under Rule 144 will not be available for at least
three years from the date of sale of the Stock unless at least two years from
the date of sale (i) a public trading market then exists for the Common Stock of
the Corporation, (ii) adequate information concerning the Corporation is then
available to the public, and (iii) other terms and conditions of Rule 144 are
complied with; and that any sale of the Stock may be made only in limited
amounts in accordance with such terms and conditions and that exemption from
registration under Rule 701 will not be available until ninety days after the
Corporation becomes subject to the reporting requirements of Section 13 or 15(d)
of the Securities Exchange Act of 1934 and that after such date the Stock may be
resold by persons other than affiliates in reliance on Rule 144 without
compliance with paragraphs (c),(d),(e) and (h) thereof, and by affiliates
without compliance with paragraph (d) thereof.
7. The Purchaser agrees that during the one hundred eighty (180) day
period following the effective date of a registration statement of the
Corporation filed under the Act the Purchaser shall not, to the extent requested
by the Corporation and any underwriter, sell or otherwise transfer or dispose of
(other than to donees who agree to be similarly bound), or enter into any
hedging or similar transaction with the same economic effect as a sale, any
Common Stock of the Corporation held by the Purchaser at any time
4.
<PAGE>
during such period (the "Purchaser's Registrable Securities") except Common
Stock included in such registration; provided, however, that:
(A) such agreement shall be applicable only to the first such
registration statement of the Corporation which covers Common Stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and
(B) all officers and directors of the Corporation enter into similar
agreements. In order to enforce the foregoing covenant, the Corporation may
impose stop-transfer instructions with respect to the Purchaser's Registrable
Securities (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
8. The Purchaser shall not transfer by sale, assignment, hypothecation,
donation or otherwise any of the Stock or any interest therein subject to the
Purchase Option without the prior express written consent of the issuer of the
shares. As security for his faithful performance of the terms of this Agreement
and to insure the availability for delivery of Purchaser's Stock upon exercise
of the Purchase Option herein provided for, the Purchaser agrees, at the closing
hereunder, to deliver to and deposit with the Secretary of the Corporation
("Escrow Agent"), as Escrow Agent in this transaction, three stock assignments
duly endorsed (with date and number of shares blank) in the form attached hereto
as Exhibit B, together with a certificate or certificates evidencing all of the
Stock subject to the Purchase Option; said documents are to be held by the
Escrow Agent and delivered by said Escrow Agent pursuant to the Joint Escrow
Instructions of the Corporation and the Purchaser set forth in Exhibit A
attached hereto and incorporated by this reference, which instructions shall
also be delivered to the Escrow Agent at the closing hereunder.
9. The Corporation shall not be required (i) to transfer on its books any
shares of Stock of the Corporation which shall have been transferred in
violation of any of the provisions set forth in this Agreement or (ii) to treat
as owner of such shares or to accord the right to vote as such owner or to pay
dividends to any transferee to whom such shares shall have been so transferred.
10. Subject to the provisions of paragraphs 7, 8 and 9 above, the
Purchaser (but not any unapproved transferee) shall exercise all rights and
privileges of a shareholder of the Corporation with respect to the Stock.
11. Paragraphs 2, 3 and 4 of this Agreement shall terminate upon the
exercise in full or expiration of the Purchase Option, whichever first occurs.
12. The parties agree to execute such further instruments and to take such
further action as may reasonably be necessary to carry out the intent of this
Agreement.
5.
<PAGE>
13. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to the other party hereto at his address hereinafter
shown below its signature or at such other address as such party may designate
by ten (10) days advance written notice to the other party hereto.
14. This Agreement shall inure to the benefit of the successors and
assigns of the Corporation and, subject to the restrictions on transfer herein
set forth, be binding upon the Purchaser, its successors, and assigns. The
Purchase Option of the Corporation hereunder shall be assignable by the
Corporation at any time or from time to time, in whole or in part.
15. The Purchaser shall reimburse the Corporation for all costs incurred
by the Corporation in enforcing the performance of, or protecting its rights
under, any part of this Agreement, including reasonable costs of investigation
and attorneys' fees. It is the intention of the parties that the Corporation,
upon exercise of the Purchase Option and payment of the Option Price, pursuant
to the terms of this Agreement, shall be entitled to receive the Stock, in
specie, in order to have such Stock available for future issuance without
dilution of the holdings of other shareholders. Furthermore, it is expressly
agreed between the parties that money damages are inadequate to compensate the
Corporation for the Stock and that the Corporation shall, upon proper exercise
of the Purchase Option, be entitled to specific enforcement of its rights to
purchase and receive said Stock.
16. This Agreement shall be governed by and construed in accordance with
the laws of the State of California. The parties agree that any action brought
by either party to interpret or enforce any provision of this Agreement shall be
brought in, and each party agrees to, and does hereby, submit to the
jurisdiction and venue of, the appropriate state or federal court for the
district encompassing the Corporation's principal place of business.
17. The parties agree to take all such further action(s) as may reasonably
be necessary to carry out and consummate this Agreement as soon as practicable,
and to take whatever steps may be necessary to obtain any governmental approval
in connection with or otherwise qualify the issuance of the securities that are
the subject of this Agreement. The closing hereunder, including payment for and
delivery of the Stock, shall occur at the offices of the Corporation on March
11, 1996 or at such other time and place as the parties may mutually agree.
18. This Agreement is not an employment contract and nothing in this
Agreement shall be deemed to create in any way whatsoever any obligations on the
part
6.
<PAGE>
of the Purchaser to continue in the employ of the Corporation or of the
Corporation to continue the Purchaser in the employ of the Corporation.
19. Purchaser acknowledges that this Agreement has been prepared on behalf
of the Company by Cooley Godward Castro Huddleson & Tatum, counsel to the
Company and that Cooley Godward does not represent, and is not acting on behalf
of, Purchaser. Purchaser has been provided with an opportunity to consult with
its own counsel with respect to this Agreement.
20. This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof. This Agreement may not be amended,
modified or revoked, in whole or in part, except by an agreement in writing
signed by each of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
COPPER MOUNTAIN COMMUNICATIONS, INC.
/s/ JOSEPH D. MARKEE
_____________________________________________
Joseph D. Markee
President
Address: 455 Rancho La Mirada
Escondido, California 92025
PURCHASER:
/s/ MARK J. HANDZEL
_____________________________________________
Mark J. Handzel
Address: 5449 Panoramic Lane
San Diego, California 92121
ATTACHMENTS:
Exhibit A -- Joint Escrow Instructions
Exhibit B -- Stock Assignment Separate from Certificate
Exhibit C -- Promissory Note
Exhibit D -- Pledge Agreement
7.
<PAGE>
EXHIBIT A
JOINT ESCROW INSTRUCTIONS
Secretary
Copper Mountain Communications, Inc.
455 Rancho La Mirada
Escondido, California 92025
Dear Sir or Madam:
As Escrow Agent for both COPPER MOUNTAIN COMMUNICATIONS, INC., a California
corporation ("Corporation"), and the undersigned purchaser of stock of the
Corporation ("Purchaser"), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Founder Stock
Purchase Agreement ("Agreement"), dated March 11, 1996, to which a copy of these
Joint Escrow Instructions is attached as Exhibit A, in accordance with the
following instructions:
1. In the event the Corporation or an assignee shall elect to exercise
the Purchase Option set forth in the Agreement, the Corporation or its assignee
will give to Purchaser and you a written notice specifying the number of shares
of stock to be purchased, the purchase price, and the time for a closing
hereunder at the principal office of the Corporation. Purchaser and the
Corporation hereby irrevocably authorize and direct you to close the transaction
contemplated by such notice in accordance with the terms of said notice.
2. At the closing you are directed (a) to date any stock assignments
necessary for the transfer in question, (b) to fill in the number of shares
being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Corporation against the
simultaneous delivery to you of the purchase price of the number of shares of
stock being purchased pursuant to the exercise of the Purchase Option.
3. Purchaser irrevocably authorizes the Corporation to deposit with you
any certificates evidencing shares of stock to be held by you hereunder and any
additions and substitutions to said shares as specified in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as his attorney-in-
fact and agent for the term of this escrow to execute with respect to such
securities and other property all documents of assignment and/or transfer and
all stock certificates necessary or appropriate to make all securities
negotiable and complete any transaction herein contemplated.
4. This escrow shall terminate upon expiration or exercise in full of the
Purchase Option, whichever occurs first.
5. If at the time of termination of this escrow you should have in your
possession any documents, securities, or other property belonging to Purchaser,
you shall deliver all of
1.
<PAGE>
same to any pledgee entitled thereto or, if none, to Purchaser and shall be
discharged of all further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties or
their assignees. You shall not be personally liable for any act you may do or
omit to do hereunder as Escrow Agent or as attorney-in-fact for Purchaser while
acting in good faith and any act done or omitted by you pursuant to the advice
of your own attorneys shall be conclusive evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or corporation,
excepting only orders or process of courts of law, and are hereby expressly
authorized to comply with and obey orders, judgments or decrees of any court. In
case you obey or comply with any such order, judgment or decree of any court,
you shall not be liable to any of the parties hereto or to any other person,
firm or corporation by reason of such compliance, notwithstanding any such
order, judgment or decree being subsequently reversed, modified, annulled, set
aside, vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the identity,
authority or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
10. You shall not be liable for the outlawing of any rights under any
statute of limitations with respect to these Joint Escrow Instructions or any
documents deposited with you.
11. You shall be entitled to employ such legal counsel (including without
limitation the firm of Cooley Godward Castro Huddleson & Tatum) and other
experts as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be Secretary of the Corporation or if you shall resign by written
notice to each party. In the event of any such termination, the Corporation may
appoint any officer or assistant officer of the Corporation as successor Escrow
Agent and Purchaser hereby confirms the appointment of such successor or
successors as his attorney-in-fact and agent to the full extent of your
appointment.
13. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
2.
<PAGE>
14. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities, you
may (but are not obligated to) retain in your possession without liability to
anyone all or any part of said securities until such dispute shall have been
sealed either by mutual written agreement of the parties concerned or by a final
order, decree or judgment of a court of competent jurisdiction after the time
for appeal has expired and no appeal has been perfected, but you shall be under
no duty whatsoever to institute or defend any such proceedings.
15. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
any United States Post Box, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties hereunto entitled at the
following addresses, or at such other addresses as a party may designate by ten
days' written notice to each of the other parties hereto:
CORPORATION: Copper Mountain Communications, Inc.
455 Rancho La Mirada
Escondido, California 92025
PURCHASER: Mark J. Handzel
5449 Panoramic Lane
San Diego, California 92121
ESCROW AGENT: Secretary
Copper Mountain Communications, Inc.
455 Rancho La Mirada
Escondido, California 92025
16. By signing these Joint Escrow Instructions you become a party hereto
only for the purpose of said Joint Escrow Instructions; you do not become a
party to the Agreement.
17. This instrument shall be binding upon and inure to the benefit of the
parties hereto, and their respective successors and permitted assigns. It is
understood and agreed that references to "you" or "your" herein refer to the
original Escrow agent and to any and all successor Escrow Agents. It is
understood and agreed that the Corporation may at any time or
3.
<PAGE>
from time to time assign its rights under the Agreement and these Joint Escrow
Instructions in whole or in part.
VERY TRULY YOURS,
COPPER MOUNTAIN COMMUNICATIONS, INC.
____________________________________________
Joseph D. Markee
President
PURCHASER:
____________________________________________
Mark J. Handzel
ESCROW AGENT:
_____________________________
Joseph D. Markee
Secretary
4.
<PAGE>
EXHIBIT B
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, Mark J. Handzel hereby sells, assigns and transfers
unto Copper Mountain Communications, Inc., a California corporation (the
"Company"), pursuant to that certain Founder Stock Purchase Agreement, dated
March 11, 1996 by and between the undersigned and the Company (the "Agreement"),
_________________________________________ shares of Common Stock of the Company
standing in the undersigned's name on the books of the Company represented by
Certificate No(s). ____________ and does hereby irrevocably constitute and
appoint the Company's Secretary attorney to transfer said stock on the books of
the Company with full power of substitution in the premises. This Assignment may
only be used in connection with the repurchase of shares of Common Stock issued
to the undersigned pursuant to the Agreement that remain subject to the
Company's right of repurchase in accordance with and subject to the terms and
conditions of the Agreement.
Dated: ______________
_____________________________________________
Mark J. Handzel
<PAGE>
EXHIBIT C
PROMISSORY NOTE
$20,754.72 San Diego, California
March 11, 1996
FOR VALUE RECEIVED, the undersigned hereby unconditionally promises to pay
to the order of COPPER MOUNTAIN COMMUNICATIONS, INC., a California corporation
(the "Company"), at 455 Rancho La Mirada, Escondido, California, or at such
other place as the holder hereof may designate in writing, in lawful money of
the United States of America and in immediately available funds, the principal
sum of twenty thousand seven hundred fifty-four Dollars and seventy-two Cents
($20,754.72) together with interest accrued from the date hereof on the unpaid
principal at the rate of 5.5% per annum, or the maximum rate permissible by law
(which under the laws of the State of California shall be deemed to be the laws
relating to permissible rates of interest on commercial loans), whichever is
less, as follows:
All outstanding principal and accrued interest under this Note shall become
due and payable on March 11, 2000, provided, however, that in the event that the
undersigned's employment by or association with the Company is terminated for
any reason prior to payment in full of this Note, this Note shall be accelerated
and all remaining unpaid principal and interest shall become due and payable
immediately after such termination.
If the undersigned fails to pay any of the principal and accrued interest
when due, the Company, at its sole option, shall have the right to accelerate
this Note, in which event the entire principal balance and all accrued interest
shall become immediately due and payable, and immediately collectible by the
Company pursuant to applicable law.
This Note may be prepaid at any time without penalty. All money paid
toward the satisfaction of this Note shall be applied first to the payment of
interest as required hereunder and then to the retirement of the principal.
The full amount of this Note is secured by a pledge of shares of Common
Stock of the Company, and is subject to all of the terms and provisions of the
Founder Stock Purchase Agreement and the Pledge Agreement, each of even date
herewith, between the undersigned and the Company.
The undersigned hereby represents and agrees that the amounts due under
this Note are not consumer debt, and are not incurred primarily for personal,
family or household purposes, but are for business and commercial purposes only.
1.
<PAGE>
The undersigned hereby waives presentment, protest and notice of protest,
demand for payment, notice of dishonor and all other notices or demands in
connection with the delivery, acceptance, performance, default or endorsement of
this Note.
The holder hereof shall be entitled to recover, and the undersigned agrees
to pay when incurred, all costs and expenses of collection of this Note,
including without limitation, reasonable attorneys' fees.
This Note shall be governed by, and construed, enforced and interpreted in
accordance with, the laws of the State of California, excluding conflict of laws
principles that would cause the application of laws of any other jurisdiction.
Signed: _____________________________________
Mark J. Handzel
2.
<PAGE>
EXHIBIT D
PLEDGE AGREEMENT
1. As collateral security for the payment of that certain $20,754.72
promissory note issued this date to MARK J. HANDZEL ("Pledgee") by the
undersigned (hereinafter called "indebtedness"), the undersigned hereby assigns,
transfers to and pledges with the Pledgee the securities listed on Schedule 1
hereto which were this day delivered to be deposited with Pledgee, together with
any stock rights, rights to subscribe, dividends paid in cash or other property
in connection with the complete or partial liquidation of Pledgee, stock
dividends, dividends paid in stock, new securities or other property except cash
dividends other than liquidating dividends to which the undersigned is or may
hereafter become entitled to receive on account of such property, and in the
event that the undersigned receives any such, the undersigned will immediately
deliver it to Pledgee to be held by Pledgee hereunder in the same manner as the
property originally pledged hereunder. All property assigned, transferred to and
pledged with Pledgee under this paragraph is hereinafter called "collateral."
2. At any time, without notice, and at the expense of the
undersigned, Pledgee in its name or in the name of its nominee or of the
undersigned may, but shall not be obligated to: (1) collect by legal proceedings
or otherwise all dividends (except cash dividends other than liquidating
dividends), interest, principal payments and other sums now or hereafter payable
upon or on account of said collateral; (2) enter into any extension,
reorganization, deposit, merger, or consolidation agreement, or any agreement in
any way relating to or affecting the collateral, and in connection therewith may
deposit or surrender control of such collateral thereunder, accept other
property in exchange for such collateral and do and perform such acts and things
as it may deem proper, and any money or property received in exchange for such
collateral shall be applied to the indebtedness or thereafter held by it
pursuant to the provisions hereof; (3) insure, process and preserve the
collateral; (4) cause the collateral to be transferred to its name or to the
name of its nominee; (5) exercise as to such collateral all the rights, powers,
and remedies of an owner, except that so long as the indebtedness is not in
default the undersigned shall retain all voting rights as to the collateral.
3. The undersigned agrees to pay prior to delinquency all taxes,
charges, liens and assessments against the collateral, and upon the failure of
the undersigned to do so Pledgee at its option may pay any of them and shall be
the sole judge of the legality or validity thereof and the amount necessary to
discharge the same.
4. All advances, charges, costs and expenses, including reasonable
attorneys' fees, incurred or paid by Pledgee in exercising any right, power or
remedy conferred by this agreement, or in the enforcement thereof, shall become
a part of the indebtedness
1.
<PAGE>
secured hereunder and shall be paid to Pledgee by the undersigned immediately
and without demand.
5. At the option of Pledgee and without necessity of demand or
notice, all or any part of the indebtedness of the undersigned shall immediately
become due and payable irrespective of any agreed maturity, upon the happening
of any of the following events: (1) failure to keep or perform any of the terms
or provisions of this agreement; (2) default in the payment of principal or
interest when due; (3) the levy of any attachment, execution or other process
against the collateral; or (4) the insolvency, commission of an act of
bankruptcy, general assignment for the benefit of creditors, filing of any
petition in bankruptcy or for relief under the provisions of Title 11, United
States Code, Bankruptcy, of, by, or against the undersigned.
6. In the event of the nonpayment of any indebtedness when due,
whether by acceleration or otherwise, or upon the happening of any of the events
specified in the last preceding paragraph, Pledgee may then, or at any time
thereafter, at its election, apply, set off, collect or sell in one or more
sales, or take such steps as may be necessary to liquidate and reduce to cash in
the hands of Pledgee in whole or in part, with or without any previous demands
or demand of performance or notice or advertisement, the whole or any part of
the collateral in such order as Pledgee may elect, and any such sale may be made
either at public or private sale at its place of business or elsewhere, or at
any broker's board or securities exchange, either for cash or upon credit or for
future delivery; provided, however, that if such disposition is at private sale,
then the purchase price of the collateral shall be equal to the public market
price then in effect, or, if at the time of sale no public market for the
collateral exists, then, in recognition of the fact that the sale of the
collateral would have to be registered under the Securities Act of 1933 and that
the expenses of such registration are commercially unreasonable for the type and
amount of collateral pledged hereunder, Pledgee and the undersigned hereby agree
that such private sale shall be at a purchase price mutually agreed to by
Pledgee and the undersigned or, if the parties cannot agree upon a purchase
price, then at a purchase price established by a majority of three independent
appraisers knowledgeable of the value of such collateral, one named by the
undersigned within 10 days after written request by the Pledgee to do so, one
named by Pledgee within such 10 day period, and the third named by the two
appraisers so selected, with the appraisal to be rendered by such body within 30
days of the appointment of the third appraiser. The cost of such appraisal,
including all appraiser's fees, shall be charged against the proceeds of sale as
an expense of such sale. Pledgee may be the purchaser of any or all collateral
so sold and hold the same thereafter in its own right free from any claim of the
undersigned or right of redemption. Demands of performance, notices of sale,
advertisements and presence of property at sale are hereby waived, and Pledgee
is hereby authorized to sell hereunder any evidence of debt pledged to it. Any
sale hereunder may be conducted by any officer or agent of Pledgee.
2.
<PAGE>
7. The proceeds of the sale of any of the collateral and all sums
received or collected by Pledgee from or on account of such collateral shall be
applied by Pledgee to the payment of expenses incurred or paid by Pledgee in
connection with any sale, transfer or delivery of the collateral, to the payment
of any other costs, charges, attorneys' fees or expenses mentioned herein, and
to the payment of the indebtedness or any part hereof, all in such order and
manner as Pledgee in its discretion may determine. Pledgee shall pay any
balance to the undersigned.
8. Pledgee shall be under no duty or obligation whatsoever to make or
give any presentments, demands for performance, notices of non-performance,
protests, notices of protest or notices of dishonor in connection with any
obligations or evidences of indebtedness held by Pledgee as collateral, or in
connection with any obligations or evidences of indebtedness which constitute in
whole or in part the indebtedness secured hereunder.
9. Pledgee may at any time deliver the collateral or any part thereof
to the undersigned and the receipt of the undersigned shall be a complete and
full acquittance for the collateral so delivered, and Pledgee shall thereafter
be discharged from any liability or responsibility therefor.
10. Upon the transfer of all or any part of the indebtedness Pledgee
may transfer all or any part of the collateral and shall be fully discharged
thereafter from all liability and responsibility with respect to such collateral
so transferred, and the transferee shall be vested with all the rights and
powers of Pledgee hereunder with respect to such collateral so transferred; but
with respect to any collateral not so transferred Pledgee shall retain all
rights and powers hereby given.
11. Until all indebtedness shall have been paid in full the power of
sale and all other rights, powers and remedies granted to Pledgee hereunder
shall continue to exist and may be exercised by Pledgee at any time and from
time to time irrespective of the fact that the indebtedness or any part thereof
may have become barred by any statute of limitations, or that the personal
liability of the undersigned may have ceased.
12. Pledgee agrees that so long as the indebtedness is not in
default, shares of Common Stock held hereunder as collateral for the
indebtedness shall be released from pledge as the indebtedness is paid. Such
releases shall be at the rate of one share for each $0.04 of principal amount of
indebtedness paid. Release from pledge, however, shall not result in release
from the provisions of those certain Joint Escrow Instructions, if any, of even
date herewith among the parties to this Pledge Agreement and the Escrow Agent
named therein or from the Purchase Option of Copper Mountain Communications,
Inc., if any, set forth in the Founder Stock Purchase Agreement dated March 11,
1996 between the parties to this Pledge Agreement.
3.
<PAGE>
13. The rights, powers and remedies given to Pledgee by this
agreement shall be in addition to all rights, powers and remedies given to
Pledgee by virtue of any statute or rule of law. Pledgee may exercise its
Pledgee's lien or right of setoff with respect to the indebtedness in the same
manner as if the indebtedness were unsecured. Any forbearance or failure or
delay by Pledgee in exercising any right, power or remedy hereunder shall not be
deemed to be a waiver of such right, power or remedy, and any single or partial
exercise of any right, power or remedy hereunder shall not preclude the further
exercise thereof; and every right, power and remedy of Pledgee shall continue in
full force and effect until such right, power or remedy is specifically waived
by an instrument in writing executed by Pledgee.
Dated: March 11, 1996
________________________________________
Mark J. Handzel
ATTACHMENT:
Schedule 1
4.
<PAGE>
SCHEDULE 1
TO
PLEDGE AGREEMENT
Common Stock 518,868 shares
5.
<PAGE>
EXHIBIT 10.24
COPPER MOUNTAIN NETWORKS, INC.
FIRST AMENDMENT TO
FOUNDER STOCK PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO FOUNDER STOCK PURCHASE AGREEMENT, dated as of the
27th day of January 1999 (the "Agreement"), is an amendment to the previously
executed Founder Stock Purchase Agreement dated as of the 11th day of March
1996, by and between COPPER MOUNTAIN NETWORKS, INC., a California corporation
(the "Corporation"), and Mark J. Handzel (the "Purchaser").
RECITALS
WHEREAS, as of March 11, 1996, the Corporation issued, and the Purchaser
acquired, stock of the Corporation on the terms and conditions set forth in the
Founder Stock Purchase Agreement attached hereto as Exhibit A; and
WHEREAS, the Corporation and the Purchaser desires to amend section 2(b)
regarding the release of shares from the Corporation's Purchase Option (the
"Purchase Option").
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants set forth herein, the parties hereto agree as follows:
1. Amendment of Section 2(b) of Founder Stock Purchase Agreement. Section
2(b) of the Agreement is hereby amended and restated to read as follows:
(b) "One hundred percent (100%) of the Stock shall initially be
subject to the Purchase Option. The Stock shall vest and be released from
the Purchase Option on a monthly basis over four years measured from the
Employment Start Date (as set forth below), until all the Stock is released
from the Purchase Option. In the event Purchaser's service with the Company
is involuntarily terminated at any time without Cause (as defined below)
either at the time of or within twelve (12) months following the occurrence
of an event specified in subsection 14(b) of the Company's 1996 Equity
Incentive Plan (a "Change in Control"), other than a reincorporation
merger, then upon such termination vesting of the Stock shall immediately
be accelerated as to one-half of the unvested portion of the Stock and such
shares shall be released from the Purchase Option. "Cause" means
misconduct, including but not limited to: (i) conviction of any felony or
any crime involving moral turpitude or dishonesty, (ii) participation in a
fraud or act of dishonesty against the Company, (iii) conduct by Purchaser
which, based upon a good faith and reasonable factual investigation and
determination by the Board of Directors of the Company, demonstrates gross
unfitness to serve, or (iv) the
1.
<PAGE>
material violation of any contract between Purchaser and the Company or any
statutory duty to the Company that is not corrected within thirty (30) days
after written notice to Purchaser thereof. Purchaser's physical or mental
disability shall not constitute "Cause."
In the event Purchaser voluntarily terminates his service with the Company
for Good Reason (as defined below) either at the time of or within twelve
(12) months following the occurrence of a Change in Control, then upon such
termination vesting of the Stock shall immediately be accelerated as to
one-half of the unvested portion of the Stock and such shares shall be
released from the Purchase Option. "Good Reason" means (i) reduction of
Purchaser's rate of compensation as in effect immediately prior to the
occurrence of a Change in Control, (ii) failure to provide a package of
welfare benefit plans which, taken as a whole, provides substantially
similar benefits to those in which Purchaser is entitled to participate
immediately prior to the occurrence of the Change in Control (except that
employee contributions may be raised to the extent of any cost increases
imposed by third parties) or any action by the Company which would
adversely affect Purchaser's participation or reduce Purchaser's benefits
under any of such plans, (iii) change in Purchaser's responsibilities,
authority, title or office resulting in diminution of position, excluding
for this purpose an isolated, insubstantial and inadvertent action not
taken in bad faith which is remedied by the Company promptly after notice
thereof is given by Purchaser, (iv) request that Purchaser relocate to a
worksite that is more than thirty-five (35) miles from Purchaser's prior
worksite, unless Purchaser accepts such relocation opportunity, (v) failure
or refusal of a successor to the Company to assume the Company's
obligations under this Agreement, or (vi) material breach by the Company or
any successor to the Company of any of the material provisions of this
Agreement.
Notwithstanding, the foregoing, in the event all of the following occurs:
(i) a Change in Control occurs prior to January 31, 2001; (ii) such
potential acceleration of vesting and exercisability, describe above, would
by themselves result in a contemplated Change in Control transaction that
would otherwise be eligible to be accounted for as a "pooling of interests"
accounting transaction to become ineligible for such account treatment; and
(iii) the potential acquiror of the Company desires to account for such
contemplated Change in Control as a "pooling of interests" transaction,
then such acceleration shall not occur. Additionally, in the event that
the restrictions upon acceleration provided for in the immediately
preceding sentence by themselves would result in a contemplated transaction
to become ineligible to be account for as a "pooling of interests"
accounting transaction, then such restrictions shall be deemed inoperative.
Accounting issues shall be determined by the Company's independent public
accountants applying generally accepted accounting principles.
2.
<PAGE>
Your Employment Start Date is March 11, 1996."
2. Counterparts. This First Amendment to Founder Stock Purchase
Agreement may be executed in counterparts, each of which shall be deemed an
original and together shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this First Amendment
to Founder Stock Purchase Agreement as of the day and year first above written.
COPPER MOUNTAIN NETWORKS, INC.
/s/ RICHARD GILBERT
--------------------------------------------
Richard Gilbert
President and Chief Executive Officer
Address: 3931 Sorrento Valley Boulevard
San Diego, California 92121
PURCHASER
/s/ MARK J. HANDZEL
--------------------------------------------
Mark J. Handzel
Address:
-------------------
-------------------
ATTACHMENTS:
Exhibit A -- Founder Stock Purchase Agreement
3.
<PAGE>
EXHIBIT A
FOUNDER STOCK PURCHASE AGREEMENT
4.
<PAGE>
EXHIBIT 10.25
GENERAL AGREEMENT
FOR THE PROCUREMENT OF
PRODUCTS AND SERVICES
AND THE LICENSING OF SOFTWARE
BY AND BETWEEN
LUCENT TECHNOLOGIES INC.
AND
COPPER MOUNTAIN NETWORKS
CONTRACT NO. WR71980061
NOVEMBER 17, 1998
Confidential treatment has been requested for portions of this exhibit. The copy
filed herewith omits the information subject to the confidentiality request.
Omissions are designated as [***]. A complete version of this exhibit has been
filed separately with the Securities and Exchange Commission.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. General Terms And Conditions................................ 1
1.1 Scope................................................. 1
1.2 Definitions........................................... 1
1.3 Term Of Agreement..................................... 2
1.4 Option To Extend...................................... 2
1.5 Market Rights......................................... 3
1.6 Continuing Availability And Discontinuance............ 3
1.7 Manufacturing Rights.................................. 4
1.8 [***]................................................. 5
2. Product Specific Terms And Conditions....................... 5
2.1 Price And Discounts................................... 5
2.2 Specifications........................................ 6
2.3 Product Documentation................................. 6
2.4 Packing............................................... 6
2.5 Technical Support..................................... 7
2.6 Training.............................................. 8
2.7 Insignia.............................................. 8
2.8 Marking............................................... 9
2.9 Installation And Cutover Assistance................... 9
2.10 Product Line Evolution................................ 10
2.11 Product Acceptance.................................... 10
2.12 Interfaces............................................ 11
2.13 Marketing Support..................................... 11
3. Orders And Payment.......................................... 12
3.1 Payment Terms......................................... 12
3.2 FOB................................................... 12
3.3 Purchase Orders....................................... 12
3.4 Forecasts............................................. 13
3.5 Changes To Purchase Orders............................ 13
3.6 Demand Pull Forecast and Ordering Procedures.......... 13
</TABLE>
i
[***] = Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portion.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
3.7 Delivery Process & Shipping Interval................... 13
3.8 Variation In Quantity.................................. 14
3.9 Shipping............................................... 14
3.10 Invoicing.............................................. 14
3.11 Invoicing For Stock.................................... 14
3.12 Storage Of Paid-For-Stock.............................. 15
3.13 Monthly Shipment Reports............................... 15
3.14 Electronic Data Interchange (EDI)...................... 15
3.15 Bar Code Shipping And Receiving Labels................. 15
3.16 Title And Risk Of Loss................................. 15
3.17 Point of Sale Information.............................. 15
4. Quality And ISO 9000........................................ 16
4.1 Quality................................................ 16
4.2 Engineering Changes.................................... 16
4.3 Field Retrofit Orders (FRO)............................ 18
4.4 Epidemic Failures...................................... 18
5. Limited Warranty And Repairs................................ 18
5.1 Limited Warranty....................................... 18
5.2 Repairs Not Covered Under Warranty..................... 20
5.3 Repair Procedures...................................... 21
5.4 Warranty Tracking...................................... 21
5.5 Year 2000 Functionality................................ 21
6. Intellectual Property....................................... 22
6.1 Intellectual Property Rights........................... 22
6.2 Product Software License Grant......................... 22
6.3 Supplier's And Lucent's Information.................... 22
7. Other Terms And Conditions.................................. 22
7.1 Notices................................................ 22
7.2 Indemnity.............................................. 23
7.3 Identification......................................... 24
</TABLE>
ii
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C>
7.4 Compliance With Laws................................... 25
7.5 Force Majeure.......................................... 25
7.6 Assignment............................................. 25
7.7 Taxes.................................................. 25
7.8 Government Contract Provisions......................... 26
7.9 Impleader.............................................. 26
7.10 Registration And Radiation Standards................... 26
7.11 Toxic Substances And Product Hazards................... 26
7.12 Ozone Depleting Substances............................. 27
7.13 Heavy Metals And/Or CFC In Packaging................... 27
7.14 Chlorofluorocarbons.................................... 27
7.15 Insurance.............................................. 27
7.16 Choice Of Law.......................................... 28
7.17 Severability........................................... 28
7.18 Section Headings....................................... 29
7.19 Waiver................................................. 29
7.20 Dispute Resolution..................................... 29
7.21 Export Control......................................... 31
7.22 Records................................................ 31
7.23 Termination............................................ 31
7.24 Publicity.............................................. 32
7.25 Survival Of Obligations................................ 32
7.26 Limitation of Liability................................ 32
7.27 Steering Committee..................................... 32
7.28 Relationship of the Parties............................ 33
7.29 Counterparts........................................... 33
7.30 Entire Agreement....................................... 33
</TABLE>
iii
<PAGE>
LIST OF APPENDICES
Appendix 1 Pricing Terms
Appendix 2 Specifications
Appendix 3 Quality Requirements
Appendix 4 Change Control Process
Appendix 5 Demand Pull Procedures
Appendix 6 Non-Disclosure Agreement
Appendix 7 Warranty Eligibility System
1
<PAGE>
THIS AGREEMENT between LUCENT TECHNOLOGIES INC., with its principal offices
at 600 Mountain Avenue, Murray Hill, New Jersey 07974-0636 ("Lucent") and COPPER
MOUNTAIN NETWORKS, INC., with offices at 2470 Embarcadero Way, Palo Alto,
California 94303 ("Supplier") (hereinafter collectively the "Parties") is for
the anticipated future procurement of certain products and the license of
certain associated software, in accordance with the terms and conditions stated
in this Agreement and any attachments to this Agreement.
WHEREAS, Supplier desires to supply products, software and maintenance
services to Lucent;
WHEREAS, Lucent desires to procure products, software and maintenance
services from Supplier; and
WHEREAS, the Parties desire to combine Lucent's AnyMedia(TM) FAST solution
and Supplier's CopperEdge(TM) DSL Concentrator into an offer for the CLEC market
in the United States as well as for Multi-Tenant Units in the United States;
NOW, THEREFORE, in consideration of the promises and mutual covenants set
forth in this Agreement, the Parties agree to the terms and conditions set forth
herein below:
1. GENERAL TERMS AND CONDITIONS
1.1 SCOPE
Except as mutually agreed by the Parties in writing, this Agreement shall
apply only to transactions between Supplier and Lucent for the purchase and sale
of Product in the United States for the CLEC market and the Multi-Tenant Unit
market, each as hereinafter defined. Product shall be furnished by Supplier on
an as-ordered basis.
1.2 DEFINITIONS
1.2.1 "CLEC" means competitive local exchange carrier.
1.2.2 "COLLATERAL MATERIAL" means data sheets, application briefs,
presentation brochures and other advertising or promotional materials that are
distributed in the normal course of business to market the Product and that are
not designated as confidential by the Parties.
1.2.3 "DSLAM" means Digital Subscriber Line Access Multiplexer, an
acronym that is in general use in the telecommunications industry and which has
the meaning ascribed by that general use.
1.2.4 "FIRST SERVICE APPLICATION" (FSA) means a set of managed
activities administered by Lucent that validate the first deployment of new
Products. The FSA process is intended to assure that the first service
deployment is timely and meets or exceeds customers' expectations with respect
to quality, delivery, installation, testing, operations, maintenance and
acceptance.
1.
<PAGE>
1.2.5 "FIT" means the suitability or readiness of a product for a
particular application, including environmental extremes, marginal parameters,
physical and signal compatibility with interfacing systems and surroundings,
level of performance, safety margins, reliability, maintainability and
installability.
1.2.6 "FORM" means the weight, density, chemical or product
composition, size, shape, structure, appearance, protocol, pattern, composition,
configuration and marking/identification of product and software.
1.2.7 "FUNCTION" means the set tasks or purposes for which a product
is used by the customer, including all the tasks generally accepted for the
product and those specifically designated by the customer.
1.2.8 "INITIAL CUSTOMER APPLICATION" (ICA) means a controlled
process, administered by Lucent, intended to assure that new Products meet or
exceed Lucent's customers' expectations with respect to quality, delivery,
installation, testing, operations, maintenance, and acceptance.
1.2.9 "MULTI-TENANT UNIT" means a commercial building, residential
building, or hotel that requires a DSLAM within the structure to provide high
speed data services over the existing copper wiring.
1.2.10 "PRODUCT" as used in this Agreement shall mean Supplier's
CopperEdge DSL Concentrator hardware and software and other Supplier-proprietary
hardware and software listed and described in Appendix 2.
1.2.11 "SOURCE MATERIAL" means business and technical information and
other relevant materials which are not confidential and which Supplier will make
available to Lucent to support the development of Collateral Material.
1.2.12 "TECHNICAL INFORMATION" means written user manuals,
installation manuals, technical reference manuals, release notes and other
relevant technical materials.
1.3 TERM OF AGREEMENT
This Agreement shall be effective on the last date of signature below
(hereinafter the "Effective Date") and shall continue in effect for a term of
three (3) years (hereinafter the "Term"). Absent mutual written consent to the
contrary, the modification or termination of this Agreement shall not affect the
rights or obligations of either Party under any purchase order accepted by
Supplier before the effective date of such modification or termination.
1.4 OPTION TO EXTEND
Lucent shall have the right to extend the period specified in Section 1.3
for up to twelve (12) months by giving Supplier at least thirty (30) days prior
written notice. Within ten (10) days of the date of Lucent's notice to extend
the period, Supplier shall notify Lucent in writing whether Supplier proposes to
revise the price(s) under this Agreement. If the Parties fail to agree on the
revised price(s) within twenty (20) days after the date of Supplier's notice,
Lucent's notice
2.
<PAGE>
of extension shall be considered withdrawn and prices for outstanding orders or
orders placed during the term of this Agreement shall not be revised. Any
subsequent renewal will be upon mutual written agreement of the Parties.
1.5 MARKET RIGHTS
1.5.1 It is expressly understood and agreed that this Agreement
neither grants to Supplier an exclusive right or privilege to sell to Lucent any
or all products of the type described in the "Product" definition which Lucent
may require, nor requires the purchase of Product or any other products from
Supplier by Lucent. It is, therefore, understood that Lucent may contract with
other manufacturers and suppliers for the procurement of comparable products. In
addition, Lucent shall, at its sole discretion, decide the extent to which
Lucent will market, advertise, promote, support or otherwise assist in further
offerings of the Product.
1.5.2 Supplier agrees that purchases by Lucent under this Agreement
shall neither restrict the right of Lucent to cease purchasing nor require
Lucent to continue any level of such purchases.
1.6 CONTINUING AVAILABILITY AND DISCONTINUANCE
1.6.1 Supplier agrees to offer for sale to Lucent, during the term of
this Agreement, Product conforming to the Specifications (as defined in Section
2.2 below). Subject to Section 1.6.2 and Section 7.23.1, Supplier further agrees
to offer for sale to Lucent, during the term of this Agreement and until five
(5) years after the expiration of this Agreement unless otherwise mutually
agreed by the Parties, repair parts ("Parts") which are functionally equivalent
in Form and Fit to the Product covered by this Agreement. The price and terms
for the Parts shall be the price and terms set forth in Supplier's then current
agreement with Lucent for said Parts or, if no such agreement exists, the price
and terms shall be agreed upon by Lucent and Supplier. In the absence of any
such Agreement following good faith negotiations, Supplier shall not continue to
be obligated to sell Parts.
1.6.2 In the event that Supplier should discontinue manufacturing any
Product or Part, Supplier will provide Lucent:
(A) At least twelve (12) months prior notice of
discontinuance, and
(B) The opportunity to place an end of life purchase order,
which Supplier will accept during the notice period as set forth in (a); and
(C) Supplier will accept reasonable delivery schedules for
such Product or Part for delivery up to nine (9) months after the discontinuance
notice described in subsection (a) above. The Parties will agree on a mutually
acceptable delivery schedule, taking into account Lucent's needs to fulfill its
customers' requirements and Supplier's needs not to overburden its manufacturing
capacity.
3.
<PAGE>
1.7 MANUFACTURING RIGHTS
1.7.1 Supplier agrees to grant Lucent a non-exclusive manufacturing
license pursuant to a separate manufacturing license agreement between the
Parties as contemplated in Section 1.7.2 below in the event that:
(A) Supplier has materially defaulted in performance or
otherwise has failed to perform its obligations under:
(I) this Agreement and such default or failure to perform
has continued beyond the cure period provided in the Agreement (absent agreement
by the Parties to extend such cure period for a particular default or failure to
perform) following written notice thereof to Supplier from Lucent, or
(II) any agreement between Supplier and Lucent or its
customers for the maintenance or correction of the Products, and [***];
(B) Supplier has made an assignment for the benefit of
creditors, has admitted in writing its inability to pay debts as they mature or
has ceased operating in the normal course of business;
(C) A trustee or receiver of Supplier of any substantial part
of Supplier's assets has been appointed by any court;
(D) A proceeding has been commenced by any party against
Supplier under any one of the provisions of a bankruptcy code and:
(I) the proceeding has been pending for at least sixty
(60) days, or
(II) Supplier has consented, either expressly or by
operation of law, to be adjudged or decreed a bankrupt, or
(III) Supplier has been decreed or adjudged a bankrupt;
(E) A voluntary petition has been filed by Supplier under any
of the provisions of a bankruptcy code;
(F) Supplier is acquired by or merges with another
corporation, and such corporation (1) refuses to continue to sell Product to
Lucent at the prices in and under the terms and conditions of the then current
agreements between Supplier and Lucent and under the terms and conditions of any
general agreement between Supplier and Lucent; or (2) fails to enter into a
formal Assignment of Obligations document (so long as such document does not
contain terms different from the terms set forth in this Agreement) with Lucent
to assume all the rights and obligations of Supplier under the agreement then in
place between Supplier and Lucent; and
4.
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(G) Upon the conditions and for the purposes set forth in
Section 5.5.
1.7.2 The Parties shall enter into a manufacturing license agreement
within ninety (90) days after the Effective Date that is intended to grant
Lucent certain rights in Supplier's technology to enable Lucent to manufacture
Products or Parts in the event that the circumstances listed in Section 1.7.1
occur. The manufacturing license would be limited to (i) fulfilling the
requirements of Lucent's customers for Product and Parts where such customers
are Lucent's customers as of the time of exercise of the manufacturing license
rights, and (ii) making error corrections to the Products to meet the
Specifications. Lucent will inform Supplier of any error corrections it desires
to make and the Parties will discuss in good faith whether Supplier should make
such error corrections and whether Supplier will support the corrected Product
following correction; provided, however, that this sentence will not prohibit
Lucent from making the error corrections itself. The license grant would be
royalty-bearing at a rate to be agreed upon, subject to a royalty-fee waiver for
either an agreed upon time or amount to enable Lucent to recover its reasonable
costs incurred to exercise its manufacturing rights. Such manufacturing license
agreement shall also provide to Lucent the necessary Product documentation and
information, originated or developed by Supplier, that is required for Lucent to
exercise its manufacturing license.
1.8
[***]
2. PRODUCT SPECIFIC TERMS AND CONDITIONS
2.1 PRICE AND DISCOUNTS
2.1.1 Lucent's purchase price for Products is determined by
multiplying Supplier's list price times the applicable discount set forth in
Appendix 1, which is incorporated herein by reference. Supplier's current list
prices are set forth in Appendix 1, together with Lucent's discounts from list
prices. Supplier may revise its list prices at any time in its sole discretion;
provided, however, that it agrees to give Lucent thirty (30) days prior written
notice of such list price changes. Either Party may request a review of Lucent's
discounts at any time and the Parties will enter into good faith discussions to
review the discounts and make any mutually agreeable modifications. It is the
intent of the Parties that all prices support earning an acceptable return for
each Party and that such return will be at least as good as the return generated
by the initial prices.
2.1.2 Other miscellaneous pricing information is also included in
Appendix 1.
5.
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2.2 SPECIFICATIONS
2.2.1 Product to be supplied hereunder shall conform to the
descriptions, shape, performance and functions set forth in Appendix 2
("Specifications") or such other specifications as the Parties may agree to in
writing. Modifications to the Product or Specifications shall be made with the
mutual written consent of the Parties and in accordance with the Change Control
Process set forth in Appendix 4.
2.3 PRODUCT DOCUMENTATION
2.3.1 Subject to the terms and conditions of this Agreement, Supplier
will provide electronic master copies, [***], of the Source Materials,
Collateral Material and Technical Documentation as mutually agreed upon and in a
mutually agreed to format. These Source Materials, Collateral Material and
Technical Documentation may be reproduced, reformatted, modified and distributed
by Lucent, subject in each instance to Supplier's prior review and written
approval and, where applicable, subject to the confidentiality provisions set
forth in Section 6.3.
2.3.2 Within sixty (60) days after the Effective Date, Supplier will
develop a documentation plan, that will include, but not be limited to,
document/material description, scope/intent, availability date, and format to be
used to transmit to Lucent. In addition, the documentation plan will provide a
process for the Supplier to provide update(s) to Lucent.
2.3.3 Lucent agrees to reproduce Supplier's copyright notice
contained in any documentation reproduced without change by Lucent. For
documentation that is reformatted or modified by Lucent, Lucent shall have the
right to place only Lucent's own copyright notice on the reformatted or modified
documentation. It is the intent of the Parties that Lucent's copyright notice
shall be interpreted to protect the underlying copyright rights of Supplier to
the documentation to the extent such underlying rights are owned by Supplier. To
the extent that use of Lucent's notice without referencing Supplier's copyright
notice or other proprietary rights notice would adversely affect Supplier's
intellectual property rights, the Parties will agree upon mutually acceptable
proprietary rights notices. Supplier will correct promptly, by providing
replacement or updates, any defects in documentation which Supplier becomes
aware of and/or about which Lucent notifies Supplier, that may result in a
product service loss or could result in a safety hazard.
2.4 PACKING
2.4.1 Product shall be duly packaged and marked in accordance with
industry standards and requirements under applicable laws and government
regulations including, but not limited to any such laws and regulations relating
to safety, health and the environment; provided, however, that if Supplier
packages Product as specified by Lucent, including without limitation Section
2.4.3 hereof, such packaging shall be deemed to comply with the foregoing
requirements.
2.4.2 Supplier will package Product individually or as integrated
assemblies (except for small parts, such as screws) with appropriate protective
material to guarantee safe arrival (e.g., plug-in boards should be in static
controlled packaging and/or padded cartons). Bulk
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packaging of Product and Parts is acceptable if agreed to by both Parties. Each
box will contain Product or Parts ordered under a single purchase order, but
multiple boxes may be placed in a larger container. Supplier will, when so
requested by Lucent and without additional charge, provide and affix to each
Product packaging, bar code labels as Lucent will specify.
2.4.3 Product will be packed by Supplier in accordance with Lucent
Specification PKG-91NJ1045, April 1, 1998, a copy of which Supplier has in its
possession.
2.5 TECHNICAL SUPPORT
2.5.1 Lucent will be the primary interface to all customers and will
provide Tier 1 and Tier 2 technical customer support. A Tier 1 support person
has a working knowledge of the Product and technology as well as an
understanding of the network in order to resolve common and or known problems.
"Tier 2" means the second level of technical customer support to which Tier 1
escalates issues that cannot be resolved at Tier 1.
2.5.2 Supplier will provide Lucent Tier 3 technical support. "Tier 3"
means technical support that addresses issues escalated from Tier 2 when either
the source of the issue cannot be identified or the issue is identified and must
be addressed by the manufacturer of the Product. Tier 3 technical support will
be provided twenty-four (24) hours a day, seven (7) days a week via telephone to
Lucent's Tier 2 support personnel [***]. Supplier's response time shall be
within [***] on Monday through Friday, 9 am - 6 pm (Pacific Time), and within
[***] at all other times. Supplier will provide emergency on-site twenty-four
(24) hour technical assistance at Lucent's request and at rates to be mutually
agreed upon by the Parties. Six (6) months after the Effective Date and every
six (6) months thereafter, Supplier may request a review of Lucent's Tier 3
support requests that Supplier believes (i) do not fit into Tier 3 or (ii) are
otherwise excessive given the volume of Product purchases made by Lucent. Upon
such a request for review, the Parties will discuss in good faith appropriate
resolution of Supplier's concerns, such as, by way of example only, compensation
to Supplier and/or changes to the Parties' support processes.
2.5.3 Within sixty (60) days after the Effective Date, Lucent's and
Supplier's technical support groups shall establish a technical support plan in
support of the implementation of this Section, which shall include, but is not
limited to, the following items:
(A) Roles and responsibilities of Tier 1, Tier 2 and Tier 3
support persons;
(B) Procedure for seamless Tier 3 escalation including the
mechanics of how Tier 2 will contact Tier 3;
(C) Procedure for developing and implementing corrective
action plans with the goal to minimize customer impact from Lucent customer
network outages due to Product-related problems; such plans should address
short-term workarounds and long-term solutions in accordance with the terms and
conditions of this Agreement;
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(D) Procedure for Tier 2 to enter product change requests as
contemplated in Section 4.2 hereof; and
(E) A clear definition of terms.
2.5.4 Lucent may request ongoing technical support, including field
service and assistance and technical support in the development of specific
customer proposals, provided, however, that the availability or performance of
this technical support service shall not be construed as altering or affecting
Supplier's obligations as set forth in Section 5 (Limited Warranty) or elsewhere
provided for in this Agreement.
2.6 TRAINING
2.6.1 Supplier will provide an electronic master copy of
instructional Source Material, [***], that can be used by Lucent to
generate customer-training materials. Supplier will also provide two (2) train-
the-trainer courses, on terms and at a location and schedule to be agreed, for
Lucent's personnel at a level mutually agreed upon with the mutual objective of
the Parties that Lucent will be able to effectively market and support
Supplier's Product. Additional courses will be made available to Lucent at
Supplier's then current rates. The training will include, but not be limited to,
the Product's features, target markets and selling strategies, as well as
technical aspects of the Product to enable Lucent to properly configure
Supplier's Product to operate with Lucent's products and provide technical
support.
2.6.2 After the Effective Date and before Supplier delivers the
train-the-trainer courses to Lucent, Supplier acknowledges that Lucent may not
be prepared to provide any requested training to Lucent's customers. Therefore,
Supplier will assist Lucent in providing customer training until the delivery of
the first train-the-trainer course referenced in Section 2.6.1 above. The
Parties agree that if Supplier considers the amount of training support it
provides pursuant to this Section 2.6.2 to be excessive, the Parties will review
the training schedule and mutually agree to terms and conditions under which
further training support will be provided to satisfy any remaining obligations
of this Section 2.6.2.
2.6.3 Within sixty (60) days after the Effective Date, Supplier will
develop a training plan that will include, but not be limited to, course
descriptions, a course development process requiring Lucent's approval of
courses, a course schedule and a process for providing course updates outside
the standard schedule.
2.7 INSIGNIA
2.7.1 Upon Lucent's written request, "Insignia," including certain
trademarks, trade names, insignia, symbols, decorative designs, or packaging
designs of Lucent will be properly affixed by Supplier to the Product furnished
or its packaging. Such Insignia will not be affixed, used, or otherwise
displayed on the Product furnished or in connection with the Product without
written approval of Lucent. The manner in which such Insignia will be affixed
must be approved in writing by Lucent in accordance with standards established
by Lucent as applicable. Lucent shall retain all right, title and interest in
any and all packaging designs, finished artwork, and separations Lucent
furnishes to Supplier. This Section does not reduce or modify Supplier's
obligations under Sections 6.3 and 7.3.
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2.8 MARKING
2.8.1 The Parties currently intend for the Product to be co-branded.
Within forty-five (45) days after the Effective Date, Supplier will provide
Lucent with a proposal on co-branding. This proposal will be subject to Lucent's
written approval and needs to incorporate the applicable provisions of this
Agreement.
2.8.2 All Product furnished under this Agreement shall be marked for
identification purposes in accordance with the Specifications and as follows:
(A) with Supplier vendor code, model/serial number;
(B) with month and year of manufacture;
(C) markings in accordance with the requirements outlined in
Lucent Specifications KS-23490 and KS-22002, as amended from time to time, which
Supplier has in its possession;
(D) Common Language Equipment Identification (CLEI) Note:
Common Language and CLEI are trademarks of Bell Communications Research; Lucent
Apparatus code, serial, or model numbers;
(E) Warranty Eligibility System (WES) tracking information;
and
(F) Underwriters Laboratories and Federal Communications
Commission markings as appropriate.
(G) In addition, Supplier agrees to add any other
identification that might be requested in writing by Lucent. Charges, if any for
such additional identification marking shall be as agreed upon by Supplier and
Lucent prior to the implementation of any change. This Section does not reduce
or modify Supplier's obligations under Section 2.7, Insignia.
2.9 INSTALLATION AND CUTOVER ASSISTANCE
2.9.1 In the event Supplier is not installing the Product, and if
requested by Lucent and agreed by Supplier, Supplier agrees to make available at
the installation site, on rates and terms to be agreed, a field engineer(s) to
render installation and cut-over assistance as requested by Lucent and as
defined below.
2.9.2 Supplier will provide reasonable assistance, [***], to
support [***] Lucent-designated FSAs, annually, for each new release of
Product as determined by mutual agreement of the Parties. Such support shall not
exceed [***] person days per FSA, unless mutually agreed to by the Parties.
2.9.3 Supplier will provide reasonable assistance, [***], to
support [***] ICAs per year. Such support shall not exceed [***] person
days per ICA, unless mutually
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agreed to by the Parties. The Parties understand and acknowledge that they will
try to limit the number of ICA's to fewer than five per year and to limit
Supplier's involvement in such ICA's.
2.9.4 Additional Supplier FSA/ICA support will be mutually agreed to
and be at a cost as defined in Appendix 1 unless otherwise mutually agreed to in
writing.
2.10 PRODUCT LINE EVOLUTION
2.10.1 As set forth in Section 7.27, Supplier and Lucent shall have
periodic meetings (once per quarter or as often as mutually agreed to) to
discuss plans for product line evolution.
2.10.2 The Parties agree to keep abreast of major developments in the
telecommunications industry and to meet, from time to time in accordance with
Section 7.27, and to discuss any developments that might substantially affect
the production of Product under this Agreement.
2.11 PRODUCT ACCEPTANCE
2.11.1 The Product and any other new product offering by Supplier to
Lucent hereunder shall be subject to initial prototype acceptance testing by
Lucent in accordance with mutually acceptable criteria and procedures to be
proposed by Lucent promptly and agreed upon by Supplier. For the initial Product
covered by this Agreement, such agreement shall occur within sixty (60) days
following the Effective Date. If not otherwise set forth elsewhere, such
acceptance criteria and procedures will also include the Parties' agreement
regarding acceptable failure rates and reliability specifications (such failure
rates and reliability specifications to be initially proposed by Supplier) for
purposes of Section 4.4. For all new product offerings by Supplier or for
changes to the Product, such agreement shall be reached within a mutually
agreeable time frame consistent with the planned introduction date. If no
proposal is made within the applicable period by Lucent, the Product will be
deemed accepted upon delivery. After acceptance of the prototype for the Product
and for any new product that Lucent may choose to purchase from Supplier, all
subsequent deliveries of Products or new product offerings shall be deemed
accepted upon delivery. If, however, the Product has been modified pursuant to
Section 4.2, the modified Product will also be subject to the initial acceptance
testing procedures set forth in this Section 2.11 prior to manufacturing and
supply for Lucent in production quantities.
2.11.2 Supplier shall submit to a location designated by Lucent for
examination a mutually agreed to sample or prototype configuration of production
samples of the Product, modified Product, or new product offering (referred to
herein collectively as a "Sample") produced in a continuous run on permanent
production tooling.
2.11.3 Lucent shall evaluate Samples in accordance with the
Specifications and issue a written acceptance or rejection to Supplier within
forty-five (45) days after receipt of Samples. The failure by Lucent to reject
with cause within such time shall constitute acceptance. Any rejection shall
identify the failure to meet Specifications in reasonable detail sufficient to
allow Supplier to correct the deficiency.
10.
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2.11.4 If a Sample evaluated pursuant to this Section is rejected,
Supplier agrees to correct, at its expense, the failure to meet the
Specifications (referred to herein as "Defect") leading to such rejection and
resubmit a corrected Sample to Lucent within thirty (30) days after receipt of
notice from Lucent of such Defect or such longer period that the Parties
mutually agree in writing is necessary to rectify the Defect (referred to herein
as the "Corrective Period"). Lucent shall have thirty (30) days after Supplier
resubmits the corrected Sample to accept or reject in writing such Sample in
accordance with Section 2.11.1.
2.11.5 If the Defect in a rejected Sample is not corrected within the
Corrective Period or if a resubmitted Sample that is re-tested or re-evaluated
by Lucent during the thirty (30) day re-evaluation period is again rejected,
Lucent may at its option: (a) accept the sample as is; (b) afford Supplier one
or more correction extensions; or (c) terminate this Agreement without any cost
or charge to Lucent whatsoever if for the initial Product (but cannot terminate
the Agreement if for modifications to the Product or for follow-on products),
including costs or charges incurred by Supplier in procuring equipment, material
and special tooling to perform any part of this Agreement, loss of profits or
labor, and materials expended in the production of Samples.
2.11.6 If the Parties opt to perform the testing at Supplier's
facility, Supplier shall allow Lucent to send representative(s) to observe and
participate in the testing.
2.11.7 Except as set forth in this Section 2.11, or as mutually
agreed by the Parties, Supplier shall not make any shipments under this
Agreement prior to acceptance pursuant to this Section 2.11.
2.11.8 Lucent will return Samples to Supplier unless otherwise
mutually agreed to.
2.12 INTERFACES
2.12.1 Supplier agrees to provide Lucent with any publicly available
interface specification documentation and reasonable amounts of support to
resolve any questions Lucent's Tier 2 support personnel or Lucent's customers
may have regarding these interface specifications.
2.12.2 For a period of five (5) years after providing any Product
pursuant to this Agreement, Supplier shall, upon request, provide to Lucent upon
Lucent's reasonable request any applicable, publicly-available interface
specification documentation.
2.13 MARKETING SUPPORT
2.13.1 Upon Lucent's reasonable request, Supplier shall provide
Lucent, [***], marketing support in a manner and upon terms mutually
acceptable to the Parties. Examples of support may include consultation services
regarding marketing and systems support, marketing opportunity assessment,
solution design reviews and product availability and delivery assistance. In
addition, during the initial months of this Agreement, Supplier agrees to
provide appropriate sales support to Lucent's sales and marketing efforts in a
manner and upon terms mutually acceptable to the Parties.
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2.13.2 Based on information provided by Supplier under Section 2.3,
Product Documentation, Lucent will develop its own Collateral Material, customer
training manuals, price lists and sales presentations necessary for marketing
the Product, subject to the procedures set forth in Section 2.3.
3. ORDERS AND PAYMENT
3.1 PAYMENT TERMS
Invoices shall be paid net [***] from the date of delivery of the Product
to Lucent or receipt of the applicable invoice by Lucent, whichever occurs
later.
3.2 FOB
The Product shall be shipped F.O.B. Supplier's facility, 5744 Pacific
Center Boulevard, San Diego, California 92121, freight charges payable by Lucent
upon delivery.
3.3 PURCHASE ORDERS
3.3.1 Lucent will issue written purchase orders on a monthly basis
reflecting its orders and any changes to existing orders in accordance with the
change to purchase order provisions set forth in Section 3.5 below. Purchase
orders issued under this Agreement shall be sent to the following address:
TO SUPPLIER: 5744 Pacific Center Boulevard
San Diego, California 92121
Attention: Sales Administration
Phone: (619) 453-8799
Facsimile: (619) 452-0199
3.3.2 Supplier may change its address upon thirty (30) days
written notice to Lucent.
3.3.3 [***], at Lucent's option, subject to the reschedule and
forecast change schedule set forth in Section 3.5 below. Such purchase orders
shall specify: (a) a description of Product, inclusive of any
numerical/alphabetical identification referenced in Appendix 1, (b) the quantity
of Product ordered; (c) a preferred delivery date, (d) the applicable price, (e)
the location to which Product is to be shipped, and (f) the location to which
invoices should be sent for payment, if different from the address set forth in
this Agreement. Lucent's commitment to Supplier shall in no case exceed the
quantities specified on each spot purchase order. Purchase orders shall be
governed by the terms and conditions of this Agreement; any additional or
inconsistent terms contained in a purchase order or a Supplier sales
acknowledgment are hereby rejected.
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3.4 FORECASTS
Lucent will issue to Supplier an initial written estimate of annual (twelve (12)
calendar months) purchases. Additionally, Lucent will provide Supplier with a
written rolling estimate of purchases ("Forecast"). During the first six (6)
months after the Effective Date, such rolling estimate shall be provided to
Supplier monthly. Thereafter, the rolling estimate shall be provided weekly.
Such Forecast shall be issued solely for material planning purposes and shall
not be deemed a commitment by Lucent. Consistent with the foregoing, Supplier
will not be required to fulfill such Forecast. Supplier will, however, fulfill
Lucent purchase orders as set forth below.
3.5 CHANGES TO PURCHASE ORDERS
3.5.1 Lucent shall have the right to reschedule shipment of some
or all of the quantity of such spot purchase order or to reduce the spot
purchase order quantity in accordance with the schedule below:
<TABLE>
<CAPTION>
Number of Days Prior to Reschedule Allowable Reschedule or
or Forecast Change Forecast Change
<S> <C>
0-30 [***]
31-60 [***]
61-90 [***]
91 days or more [***]
</TABLE>
3.5.2 Any change requested by Lucent beyond the allowable decrease
shall be handled by Supplier on a commercially reasonable efforts basis.
3.6 DEMAND PULL FORECAST AND ORDERING PROCEDURES.
Within forty-five (45) days after the Effective Date, the Parties will
agree on "Demand Pull" delivery arrangements for the Product consistent with the
preliminary draft of such agreement currently attached hereto as Appendix 5.
When completed, the written agreement regarding "Demand Pull" delivery
arrangements will be attached hereto and incorporated herein as the revised
Appendix 5. Upon mutual written agreement between Lucent and Supplier, Lucent
shall have the right to implement such delivery arrangements by providing an
estimated purchase order for Products. The terms and conditions of demand pull
delivery, as stated in this Agreement, shall apply to any such delivery
arrangements as may be implemented after the demand pull arrangements become
effective. After such time, the spot purchase order procedures set forth above
shall no longer apply and the demand pull procedures to be set forth in Appendix
5 will govern the estimated purchase order.
3.7 DELIVERY PROCESS & SHIPPING INTERVAL
3.7.1 Delivery time means the interval from order receipt by
Supplier to Product shipment. During the period when Lucent is ordering Product
by means of the spot purchase order procedure set forth in Sections 3.3, 3.4 and
3.5 above, the Parties anticipate a [***]
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[***] delivery time. Supplier will use commercially reasonable efforts to reduce
the delivery time. For orders above the Company's forecast, Supplier will use
commercially reasonable efforts to deliver within the delivery time, as defined
in this Section, or as soon as possible, thereafter.
3.7.2 In the event that Supplier exceeds the above maximum
delivery time for reasons other than those provided for in Section 7.5 (Force
Majeure) then in addition to all other rights and remedies at law or equity or
otherwise, and without any liability or obligation of Lucent, Lucent shall have
the right to: (a) cancel such purchase order, or (b) extend such delivery date
to a later date, subject, however, to the right to cancel as in (a) preceding if
delivery is not made or performance is not completed on or before such extended
delivery date. If Lucent elects to extend such delivery date, Supplier may agree
to absorb the difference between the charges to ship normal transportation and
the charges to ship premium overnight.
3.8 VARIATION IN QUANTITY
Lucent assumes no liability for Product produced, processed or shipped in
excess of the amount specified in this Agreement or in an order issued pursuant
to this Agreement.
3.9 SHIPPING
Supplier shall: (1) ship the Product complete unless instructed otherwise;
(2) ship to the destination designated in the Agreement or purchase order; (3)
ship according to routing instructions given by Lucent; (4) place the Agreement
and order number on all subordinate documents; (5) enclose a packing list with
each shipment and, when more than one package is shipped, identify the package
containing the packing list; and (6) mark the Agreement and order number on all
packages and shipping papers. Adequate protective packing shall be furnished at
no additional charge. Shipping and routing instructions may be furnished or
altered by Lucent in writing.
3.10 INVOICING
Supplier shall (1) render invoices in duplicate, or as otherwise specified
in this Agreement, showing Agreement number, through routing and weight, (2)
render separate invoices for each shipment within three (3) days after shipment
and (3) mail invoices with copies of bills of lading and shipping notices to the
address shown on this Agreement or purchase order. If prepayment of
transportation charges is authorized, Supplier shall include the transportation
charges from the F.O.B. point to the destination as a separate item on the
invoice stating the name of the carrier used. No minimum billing charges are
permitted unless expressly authorized in the Agreement.
3.11 INVOICING FOR STOCK
If Lucent requests, for reasons other than covered by the Force Majeure
Section, that shipment be postponed beyond the date shown on a purchase order,
Supplier may invoice Lucent as of the original scheduled delivery date for
Product manufactured under this Agreement, if it has been inspected and approved
by Lucent's Product Management Organization or its authorized agent, within five
(5) working days after notification of postponement, (provided
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inspection has been specified in this Agreement or in a purchase order issued
under this Agreement). If inspection is not completed within five (5) working
days, Supplier may invoice Lucent in accordance with Section 3.10.
3.12 STORAGE OF PAID-FOR-STOCK
3.12.1 All Product invoiced to Lucent in accordance with Section
3.11 (Invoicing for Stock) shall be marked conspicuously as Lucent's property,
and safely stored by Supplier separately from any other material stocks, and
shall be shipped out as ordered by Lucent. Supplier assumes responsibility for
any loss or damage to such Product while stored by Supplier. Supplier agrees
upon request by Lucent, to execute and deliver to Lucent a bill of sale
evidencing conveyance of such Product, free from liens and encumbrances,
together with any other document such as a bailment agreement, warehouse
receipt, lease (on storage space), mortgage, deed of trust, or surety bond as
Lucent may deem necessary to secure title in such Product as against third
parties, all of which documents shall be in a form acceptable to Lucent.
3.12.2 Supplier agrees to store the Product without charge for
thirty (30) days. Subsequent storage charges shall be mutually agreed to by
Supplier and Lucent.
3.13 MONTHLY SHIPMENT REPORTS
Supplier agrees to render monthly shipment reports on or before the tenth
working day of the succeeding month containing the following information:
customer, shipment date, quantity and model number of units shipped.
3.14 ELECTRONIC DATA INTERCHANGE (EDI)
If requested by Lucent, Supplier shall use commercially reasonable efforts
to implement EDI at its sole expense.
3.15 BAR CODE SHIPPING AND RECEIVING LABELS
Supplier shall at its sole expense place Lucent's specified bar code labels
on all shipping packages and containers for the Product shipped under this
Agreement. Such bar code labels and the placement thereof shall meet the
requirements shown in the document "Bar Code Shipping Label - Profile Program
#801-001-107, May 30, 1997" which Supplier has in its possession. Lucent may
change such specification upon written notice to Supplier and Supplier shall
comply with such changes in a commercially reasonable time.
3.16 TITLE AND RISK OF LOSS
Title and risk of loss and damage to Product purchased by Lucent under this
Agreement shall vest in Lucent when the Product has been delivered at the FOB
point.
3.17 POINT OF SALE INFORMATION. Subject to Section 6.3, Lucent agrees to
provide Supplier written point of sales reports for purposes of Supplier
compensating Supplier's sales personnel. The Parties will agree within sixty
(60) days following the Effective Date on the format and frequency of such
reports.
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4. QUALITY AND ISO 9000
4.1 QUALITY
Commitment to quality is a primary requirement of this Agreement. Supplier
agrees to ensure continued quality improvement in the Product covered under in
this Agreement. Supplier will use commercially reasonable efforts to demonstrate
commitment to a quality improvement process by implementing and documenting a
quality system that meets the requirements under ISO 9001 and 9002 no later than
eighteen (18) months from the Effective Date. Upon Lucent's reasonable advance
written request, Supplier agrees to allow Lucent or Lucent's agent reasonably
acceptable to Supplier to conduct on-site reviews at the Supplier's hardware
manufacturing and software development facility(s) to verify compliance with
requirements outlined in Appendix 3 prior to ISO certification and no more than
once annually after certification (unless an epidemic failure has occurred under
Section 4.4, in which case Lucent may conduct on-site reviews as Lucent deems
reasonably necessary for one year after any such epidemic failure, unless
otherwise mutually agreed to). Supplier agrees to provide Lucent mutually-
acceptable quality data from time to time as the Parties deem appropriate.
Supplier also agrees to develop corrective action plans for any quality system
deficiencies that may be detected during these periodic on-site reviews, and
submit these to Lucent within thirty (30) days after receiving written notice of
the deficiency from Lucent. Further, Supplier agrees to implement any corrective
action plan within three (3) months after agreement upon a corrective action
plan, unless otherwise agreed by the Parties.
4.2 ENGINEERING CHANGES
4.2.1 Any change that Supplier proposes to the Product furnished
hereunder, or any firmware or software incorporated or embedded therein (except
for immaterial changes to software code), and the documentation related thereto
that would impact upon (a) reliability, (b) the Specifications, or (c) Form,
Fit, or Function requires the approval of Lucent, as outlined in the Engineering
Change Control Procedures, Appendix 4. Such approval shall not be unreasonably
withheld or delayed. Supplier shall forward such proposed change to Lucent at
the address in Section 7.1, at least thirty (30) calendar days prior to the
proposed effective date except for those cases where an extremely unsatisfactory
condition requires immediate action, in which case Supplier shall promptly
advise Lucent. Supplier shall at the time of notification, provide Lucent with
(a) a product change number, (b) a description of such change, (c) the reason
for such change, (d) a classification of such change in accordance with the
change classifications below, (e) a description of the impact of such change
upon (1) reliability, (2) the Specifications, and (3) Form, Fit or Function; (f)
the proposed price impact, if any, and (g) the proposed effective date for such
change and recommended implementation schedule therefor.
4.2.2 Any change in Product shall be classified into one of the
following two (2) classes:
"A" - Changes which are needed to correct inoperative electrical or
mechanical conditions, or extremely unsatisfactory operating maintenance
conditions, or conditions which result in safety hazards, and which are judged
severe enough to have to be made to all Product in
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process, stock or installed. Any conditional application criteria is to be
specified in the change notification document.
"B" - Changes which are sufficiently important to justify their
application to Product being manufactured (as soon as reasonably possible) or to
be implemented for Products going forward, and which may be recommended for
application to existing installations in the field. Examples of this class of
change may include, but are not limited to:
(A) Providing new features that directly affect subscriber
service;
(B) Providing design improvements which result in better
service capabilities, longer life or improved transmission margins;
(C) Providing changes in design which result in important cost
savings to Supplier or Lucent; and
(D) Conditions of a mandatory nature, for example, the
fulfillment of federal registration or future compatibility requirements, or for
conditions of sufficient importance to be intended for universal application.
Supplier shall propose the classification of all changes. The final
classification of any Product change proposed by Supplier will be by mutual
agreement between Supplier and Lucent. In the event Supplier and Lucent fail to
reach mutual agreement, either Party may move to Dispute Resolution as set forth
in Section 7.20.
4.2.3 For Class A changes, Supplier shall, pursuant to the
provisions of this Agreement governing repair or replacement of Product under
warranty, replace or modify, at no charge, all affected Product furnished
hereunder and documentation related thereto. Supplier shall supply relevant
documentation to Lucent for all Class A changes. Supplier shall propose a
schedule for the application of these changes at all equipment locations which
shall not exceed one (1) year from date of the change notice. This schedule
shall be mutually agreed upon by Lucent and Supplier.
4.2.4 For Class B changes, Supplier shall first notify Lucent of
the exact nature of the change. Details on the proposed implementation procedure
for Product which is being or will be manufactured shall be discussed with
Lucent. Lucent shall, at its option, determine if Product previously shipped
will be replaced or modified. Should such replacements or modifications be
deemed necessary, Supplier shall, pursuant to the provision of this Agreement
governing repair of Product not covered under warranty, make arrangements for
the necessary Product replacement or modification at prices and schedules to be
mutually agreed upon by Lucent and the Supplier prior to implementation.
Documentation related thereto shall be provided by Supplier as specified for
Class A above.
4.2.5 Lucent shall provide Supplier sixty (60) calendar days prior
written notice of all Engineering Changes that Lucent requests for incorporation
into the Product. Supplier shall have thirty (30) calendar days to reply to the
feasibility of the requested Engineering Changes. If not commercially feasible,
Supplier will inform Lucent of the reason(s). If commercially
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feasible, Supplier shall provide a quote on price to be paid by Lucent and
development schedule should Lucent request Supplier to implement such change(s).
4.3 FIELD RETROFIT ORDERS (FRO).
FROs are modifications to installed Product required to: meet safety
requirements, assure proper operation, and/or assure that the Product meets
Specifications. Supplier will, [***], provide Lucent with any parts and
instructions necessary to implement any FRO issued by Supplier during the term
of this Agreement, and thereafter as long as parts are made available under this
Agreement. Supplier will reimburse Lucent for Lucent's labor for each FRO
installed by Lucent, at a rate mutually agreed to in advance of action taken by
Lucent and Supplier.
4.4 EPIDEMIC FAILURES.
If the Products as delivered do not meet or exceed the failure rate and/or
reliability requirements set forth in the Specifications or such other written
document as the Parties may agree to regarding failure rates or reliability
requirements (such written document to be incorporated herein by reference),
Supplier shall (a) identify the cause and propose an engineering change and/or
field retrofit in accordance with the provisions of this Section 4, and (b)
within the warranty term, repair or replace the defective Product with
conforming Product in accordance with the repair and replacement provisions of
Section 5. The existence of any such epidemic failure shall be established from
Lucent's service records for the Product and by showing that the average failure
rate for the specified period of the monitored Product is not in conformance
with the applicable Specifications.
5. LIMITED WARRANTY AND REPAIRS
5.1 LIMITED WARRANTY
5.1.1 Supplier warrants to Lucent that Product furnished will be
new, free from material defects in design (except to the extent designed by
Lucent), material and workmanship, and will conform to and perform in accordance
with the Specifications, for [***] from the date of delivery to Lucent. [***].
Both Lucent and Supplier acknowledge that - due to, but not limited to, customer
requirements and competitive pressures - this standard warranty period may need
to be increased. On a case by case basis, the Parties will mutually agree to any
changes to the standard warranty period. The Parties agree to work together to
ensure rapid resolution to all proposed changes to the standard warranty period.
5.1.2 Supplier warrants that at the time of delivery to Lucent
such Product shall be free of any security interest or any other lien or any
other encumbrance whatsoever. All warranties shall survive inspection,
acceptance and payment in accordance with their terms.
5.1.3 Supplier warrants that during the warranty term set forth in
Section 5.1.1 any software that Supplier incorporates with or embeds in the
Product or that Supplier otherwise supplies for use in conjunction with the
Product shall be free from significant errors, will conform to and function in
accordance with the applicable Specifications, and the media conveying the
software shall be free from defects.
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5.1.4 Defective or non-conforming Product or software will, at
Supplier's option, either (i) be returned to Supplier for repair or replacement
in accordance with the RMA procedures defined and described in Section 5.3, or
(ii) be repaired or replaced by Supplier on customer's site. If software media
is defective, Supplier will promptly replace the defective media. Cost of
shipping with risk of in-transit loss and damage will be borne by the shipping
Party. Unless otherwise agreed upon by Supplier and Lucent, Supplier shall
complete repairs or error correction and ship the repaired Product or software
[***] of receipt of defective or non-conforming Product or software, or at
Supplier's option, ship replacement Product or software within [***] after
written notification is given Supplier by Lucent. If Product returned to
Supplier on customer's site for repair as provided for in this Section is
determined to be beyond repair, Supplier shall promptly so notify Lucent and,
unless otherwise agreed to in writing by Supplier and Lucent, ship replacement
Product without charge within [***] of such notification. If returned Product is
determined to be beyond repair due to improper handling, use, installation or
maintenance, Lucent will be notified and given the option to either scrap the
unit in place or purchase a replacement unit.
5.1.5 Replacement Product or software shall be warranted for the
balance of the warranty period as set forth in Section 5.1.1 or [***] after the
Product or software is returned to customer, whichever is later. Any Product or
software which is repaired, modified, or otherwise serviced by Supplier shall be
warranted as provided in this Section 5 [***] or [***] after the Product or
software is returned to customer, whichever is later (based upon the date
repair, modification or other service is completed and accepted by Lucent).
5.1.6 Supplier will notify Lucent as soon as possible after it
becomes aware of any actual or potential defects in the Product or software and
its ability to provide any of the services that may adversely affect: (I) the
operation or use of the Product or software by Lucent's customers, or (II) the
Supplier's ability to maintain/support the Product or software.
5.1.7 In addition, should Product which is subject to Part 15 of
the FCC Rules (as defined in Section 7.10), during use generate harmful
interference to radio communications, Supplier shall provide to Lucent
information relating to methods of suppressing such interference and pay the
cost of suppressing such interference or, at the option of Lucent, accept the
return of the Product and refund to Lucent the price paid for the Product less a
reasonable amount for depreciation, if applicable.
5.1.8 To the extent that Product furnished under this Agreement is
also subject to FCC Rules or similar rules or regulations of the country in
which the Product will be installed governing the use of the Product as a
component in a system, Lucent shall be responsible for compliance with the
applicable FCC Rules governing the system. Supplier shall fully cooperate with
Lucent by providing technical support and information, and, upon written request
from Lucent, shall modify Product to enable Lucent to ensure ongoing compliance
with the FCC
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Rules or similar rules or regulations of the country in which the Product will
be installed. Lucent agrees to pay any increase in Supplier's costs and/or
expenses resulting from Lucent's request to modify Product to enable Lucent to
comply with the FCC Rules or similar rules or regulations of the country in
which the Product will be installed.
5.1.9 EXCEPT FOR THE WARRANTIES EXPRESSLY SET FORTH IN THIS
AGREEMENT, SUPPLIER MAKES NO OTHER WARRANTIES REGARDING THE PRODUCT, ANY
SOFTWARE INCORPORATED THEREIN OR ANY SERVICES PROVIDED THEREWITH AND HEREBY
DISCLAIMS ANY AND ALL SUCH OTHER WARRANTIES, EXPRESS, IMPLIED OR STATUTORY,
INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR
PARTICULAR PURPOSE, WHICH ARE ALL HEREBY EXCLUDED. The remedies set forth in
this Section 5 are Lucent's sole and exclusive remedies for breach of the
warranties set forth in this Section 5 and Supplier's sole and exclusive
obligation regarding any breach of such warranties.
5.2 REPAIRS NOT COVERED UNDER WARRANTY
5.2.1 In addition to repairs provided for in Section 5.1 and
subject to Section 5.3 hereof, Supplier agrees to provide repair service on all
Product ordered under this Agreement during the term of this Agreement. Product
to be repaired under this Section will be returned to a location designated by
Supplier, and unless otherwise agreed upon by Supplier and Lucent, Supplier
shall ship the repaired Product, or a replacement Product pursuant to Section
5.2.2, within [***] following return of the defective or non-conforming Product.
With the concurrence and scheduling of Lucent, repair may be made by Supplier on
site.
5.2.2 If Product is returned to Supplier for repair as provided
for in this Section and is determined to be beyond repair, Supplier shall so
notify Lucent. If requested by Lucent, Supplier will sell to Lucent a
replacement at the price set forth in Supplier's then current agreement with
Lucent for said Product or, if no such agreement exists, at a price agreed upon
by Supplier and Lucent. Further, if requested by Lucent, Supplier shall take the
necessary steps to dispose of the irreparable Product and pay to Lucent the
salvage value, if any, less all reasonable costs to the Supplier for the
disposal.
5.2.3 All transportation costs of in transit risk of loss and
damage to Product returned to Supplier for repair under this Section will be
borne by Lucent and all transportation costs of and in transit risk of loss and
damage to such repaired or replacement Product returned to Lucent will be borne
by Supplier.
5.2.4 Price schedules for repairs under this Section are listed in
Appendix 1.
5.2.5 Within sixty (60) days after the Effective Date, Lucent's
and Supplier's repair groups shall establish a repair plan in support of the
implementation of this Section, which shall include, but is not limited to, the
following items:
(A) the respective roles and responsibilities of the
Parties; and
(B) the Product flow to ensure timely return of repaired
Product or replacement of defective Product to a customer.
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5.3 REPAIR PROCEDURES
5.3.1 Lucent shall call Supplier for a Return Material
Authorization (RMA) number prior to the return of any Product. Lucent shall
furnish the following information with Product returned to Supplier for repair:
(a) Lucent's name and complete address; (b) name(s) and telephone number(s) of
Lucent's employee(s) to contact in case of questions about the Product to be
repaired; (c) ship-to address for return of repaired Product if different from
(a); (d) a complete list of Product returned including serial numbers; (e) the
nature of the defect or failure, if known; and (f) whether or not returned
Product is in warranty. The name and telephone number of the initial individual
to be contacted concerning any questions that may arise concerning repair is
Mark Handzel, Vice President of Customer Support and Quality, (619) 453-8799,
ext. 103. In returning any Product to Supplier, Lucent and customer shall use
functionally equivalent packaging to the original packaging provided by
Supplier.
5.3.2 Product repaired by Supplier shall have the repair
completion date identified in a permanent manner at a readily visible location
on the Product and the repaired Product shall be returned with a tag or other
papers describing the repairs which have been made.
5.3.3 All invoices originated by Supplier for repair services must
be clearly identified as such, and must contain or have attached: (1) a
reference to Lucent's RMA for these repair services, (2) a detailed description
of repairs made by Supplier and the need therefor, and (3) an itemized listing
of parts and labor charges, if any. Further, the provisions of Section 3.9 and
Section 3.10, other than provisions relating to transportation charges with
respect to Product repaired under warranty, shall apply to Supplier's return to
Lucent of repaired Product.
5.3.4 The Parties agree that No Trouble Found (NTF) conditions
test and evaluation time shall be the hourly rate for Repairs listed in Appendix
1. Supplier shall inform Lucent within forty eight (48) hours of the findings of
each NTF condition so that appropriate investigatory measures may be taken to
determine the root cause.
5.4 WARRANTY TRACKING
Supplier agrees to provide the necessary information via electronic file to
Lucent on a timely basis for input to Lucent's Warranty Eligibility System
(WES). See Appendix 7 for WES requirements.
5.5 YEAR 2000 FUNCTIONALITY
Supplier warrants that the Product will record, store, process and present
calendar dates falling on or after January 1, 2000, to the extent that the
Product actually does record, store, process or present calendar dates, in the
same manner and with the same functionality as it performed before January 1,
2000. The warranty under this Section 5.5 shall not apply to output, results,
errors, or abnormal terminations caused in whole or in part by (i) any use of
the Product in combination with any other product not created by Supplier, (ii)
errors not attributable to date-specific data, (iii) any modifications of the
Product made by a party other than Supplier, and (iv) any data provided to the
Product which does not specify the century or is incorrect or ambiguous.
Lucent's sole and exclusive remedy and Supplier's sole and exclusive obligation
for breach of the foregoing warranty shall be (i) Supplier's use of commercially
reasonable efforts to promptly
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correct or replace (in no more than sixty (60) days from receipt of notice) the
Product at no additional charge or fee to Lucent so that it complies with the
terms of the warranty contained in this Section 5.5, and (ii) should Supplier
fail to cure the breach of this warranty within such sixty (60) day period,
Lucent will be entitled to exercise its manufacturing license under Section 1.7
for the sole purpose of modifying the Product so that it does comply with this
warranty. This warranty shall be deemed to be a warranty for future performance
that shall continue through and including the year 2002, regardless of any
earlier termination of this Agreement.
6. INTELLECTUAL PROPERTY
6.1 INTELLECTUAL PROPERTY RIGHTS
The Parties acknowledge that, except as expressly set forth in this
Agreement, this Agreement shall not be deemed to have granted: (i) Supplier any
rights in or to Lucent's intellectual property, nor (ii) Lucent any rights in or
to Supplier's intellectual property. All rights not expressly granted herein are
reserved.
6.2 PRODUCT SOFTWARE LICENSE GRANT
Subject to the terms and conditions of this Agreement, Lucent shall have a
non-exclusive, [***], non-transferable license to distribute Supplier's
firmware and network management software used solely with or embedded in the
Product, in executable form only, in the United States solely as used with or
embedded in Product furnished to Lucent by Supplier under this Agreement in
order to enable Lucent's customers to use Supplier's firmware and network
management software used solely with or embedded in the Product. Lucent will not
itself, nor permit any of its licensees to, reverse compile or disassemble the
software, nor will Lucent reproduce the software for the purpose of furnishing
it to others or for any other purpose not expressly permitted by this Agreement.
6.3 SUPPLIER'S AND LUCENT'S INFORMATION
Confidentiality of information shall be governed by the Nondisclosure
Agreement between Lucent and Supplier effective August 24, 1998 and contained in
Appendix 6 of this Agreement, which is incorporated herein by reference and
which shall be coterminous with this Agreement, notwithstanding any provision
regarding term set forth therein.
7. OTHER TERMS AND CONDITIONS
7.1 NOTICES
Any notice, demand or other communication required, or which may be given
unless otherwise specifically provided for in this Agreement, shall be in
writing and shall be effective: five (5) days after mailed, if sent by
certified, postage prepaid U.S. mail; upon receipt of confirmation, if delivered
by confirmed facsimile; upon delivery, if delivered in person; or the day after
dispatch, if sent by an overnight courier service that provides the sender with
written record of delivery, and shall be addressed to the respective Parties as
follows:
To Lucent: Lucent Technologies Inc.
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67 Whippany Road, Room 1C-330
Whippany, New Jersey USA 07981-0903
Attention: Mynoon Doro
Director - Access Solutions Global Partnership
and Business Management
Voice: 973-386-6188
Facsimile: 973-386-5072
Fax Copies to: Lucent Technologies Inc.
283 King George Road, Building C
Warren, New Jersey, USA 07059
Attention: Corporate Counsel, Switching
and Access Solutions
Voice: 908-559-3279
Fax: 908-559-2176
To Supplier: Copper Mountain Networks, Inc.
2470 Embarcadero Way
Palo Alto, California 94303
Attention: Vice-President, Business Development
Voice: 650-858-8500, ext. 260
Fax: 650-858-8085
Fax Copies to: Copper Mountain Networks, Inc.
3931 Sorrento Valley Boulevard
San Diego, California 92121
Attention: Chief Financial Officer
Fax: 650- 453-9244
Cooley Godward LLP
3000 El Camino Real
Palo Alto, California 94306
Attention: Anthony Klein
Fax: 650-849-7400
The above addresses may be changed at any time by giving prior written notice as
above provided.
7.2 INDEMNITY
7.2.1 Supplier agrees to indemnify, defend and hold harmless Lucent,
its affiliates, customers, employees, successors and assigns (all referred to in
this Section 7.2 as "Lucent") from and against any losses, expenses, damages,
claims, fines, penalties and expenses (including reasonable attorney's fees)
that arise out of or result from any and all third party claims that the Product
infringes any U.S. patent, copyright, trademark or misappropriates any trade
secret right. The foregoing indemnity shall not apply to the extent that the
claim is based upon or arises out of the use of the Product: (i) in any manner
not specified in the applicable
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documentation or the Specifications; (ii) outside the scope of the license
grant; (iii) if the Product has been modified by Lucent or any third party; or
(iv) if an alleged patent infringement or trade secret violation arises from
Lucent combining (or allowing the combination of) the Product with any
equipment, devices or software not supplied or specified by Supplier, and such
equipment, devices, or software or the combination with the Product infringes
the patent rights or misappropriates the trade secrets of a third party or
causes injury to a third party, if but for such combining or allowing
combination of such equipment, devices or software with the Product, the
infringement or injury would not exist. THE FOREGOING INDEMNITY STATES THE SOLE
AND EXCLUSIVE REMEDY OF LUCENT AND THE ENTIRE LIABILITY AND OBLIGATION OF
SUPPLIER WITH RESPECT TO ANY CLAIMS OF INFRINGEMENT OR MISAPPROPRIATION OF ANY
INTELLECTUAL PROPERTY RIGHTS BY THE PRODUCT OR ANY PART THEREOF.
7.2.2 Supplier shall indemnify, defend and hold Lucent harmless from
and against any losses, expenses, damages, claims, fines, penalties and expenses
(including reasonable attorneys' fees) that arise out of or result from: (1)
injuries or death to persons or damage to property, including theft, in any way
arising out of or caused or alleged to have been caused by the work or services
performed by, or Product and software provided by, Supplier or Supplier's
subcontractors, consultants or other persons furnished by Supplier; (2)
assertions of Workers' Compensation or similar acts by persons furnished by
Supplier; or (3) violation of any law, ordinance, rule, regulation or order
caused by Supplier's work or services under this Agreement or by the Product or
software provided by Supplier.
7.2.3 Lucent shall indemnify, defend and hold Supplier harmless from
and against any losses, expenses, damages, claims, fines, penalties and expenses
(including reasonable attorneys' fees) that arise out of or result from: (1)
injuries or death to persons or damage to property, including theft, in any way
arising out of or caused or alleged to have been caused by the work or services
performed by, or any equipment or software provided by, Lucent or Lucent's
subcontractors, consultants or other persons furnished by Lucent; (2) assertions
of Workers' Compensation or similar acts by persons furnished by Lucent; or (3)
violation of any law, ordinance, rule, regulation or order caused by Lucent's
work or services under this Agreement or by the equipment or software provided
by Lucent.
7.2.4 A Party's obligations to indemnify, defend and hold harmless
under this Section 7.2 are contingent upon the indemnified Party providing the
indemnifying Party: (1) prompt written notice of the existence of a claim; (2)
sole control of the defense and settlement of such claim; and (3) assistance in
the defense or settlement of such claim at the indemnifying Party's reasonable
request and expense.
7.3 IDENTIFICATION
Supplier shall not, without Lucent's prior written consent, engage in
publicity related to this Agreement, or make public use of any Identification in
any circumstances related to this Agreement. "Identification" means any
semblance of any trade name, trademark, service mark, insignia, symbol, logo, or
any other designation or drawing of Lucent or its affiliates. Supplier shall
remove or obliterate any Identification prior to any use or disposition of any
Product rejected or not purchased by Lucent.
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7.4 COMPLIANCE WITH LAWS
Each Party shall comply at its own expense with all applicable laws,
ordinances, regulations and codes, (including any pertaining to the environment,
safety or health) including the identification and procurement of required
permits, certificates, licenses, insurance, approvals and inspections in
performance of this Agreement.
7.5 FORCE MAJEURE
Neither Party shall be held responsible for any delay or failure in
performance of any part of this Agreement to the extent such delay or failure is
caused by fire, flood, strike, civil, governmental or military authority, act of
God, or other similar causes beyond its control and without the fault or
negligence of the delayed or non-performing party or its subcontractors ("force
majeure conditions"). Supplier's liability for loss or damage to Lucent's
Product in Supplier's possession or control shall not be modified by this
Section. When a Party's delay or nonperformance continues for a period of at
least one hundred and eighty (180) days, the other Party may terminate, at no
charge, this Agreement or an order under the Agreement.
7.6 ASSIGNMENT
Neither Party shall assign any right or interest under this Agreement
(excepting solely for moneys due or to become due) without the prior written
consent of the other Party, such consent not to be reasonably withheld or
delayed. Notwithstanding the foregoing, either Party may assign this Agreement
to a successor in interest without obtaining such consent in the event of a
merger, acquisition, change of control, reorganization, or sale of all or
substantially all of the assets of the assignor. In such event, an assigning
Party will make a good faith effort, consistent with its business needs under
the circumstances, but is not required to, provide the non-assigning Party prior
notice of a proposed assignment. In the event that a Party enters into
discussions with a third party concerning a merger, acquisition, change of
control, reorganization or sale of assets as described above, such Party shall
ensure that confidential information disclosed to it by the other Party hereto
pursuant to Section 6.3 above is not disclosed to the third party; and
furthermore, upon closing of any such merger, acquisition, change of control,
reorganization or sale of assets, the assigning Party will notify the non-
assigning Party in writing of such assignment and the non-assigning Party will
be entitled to request and receive a prompt return of its confidential
information that has been disclosed pursuant to Section 6.3. Any attempted
assignment in violation of this Section 7.6 shall be null and void. Each Party
shall be responsible to the other Party for all performance or other activities
by any subcontractor or agent of such Party.
7.7 TAXES
Lucent shall reimburse Supplier only for the following tax payments with
respect to transactions under this Agreement unless Lucent advises Supplier that
an exemption applies: state and local sales and use taxes, as applicable. Taxes
payable by Lucent shall be billed as separate items on Supplier's invoices and
shall not be included in Supplier's prices. At Lucent's expense and subject to
Lucent's direction and control, Lucent shall have the right to have Supplier
contest any such taxes that Lucent deems improperly levied.
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7.8 GOVERNMENT CONTRACT PROVISIONS
The following provisions regarding equal opportunity, and all applicable
laws, rules, regulations and executive orders specifically related thereto,
including applicable provisions and clauses from the Federal Acquisition
Regulation and all supplements thereto, are incorporated in this Agreement as
they apply to services performed under specific U.S. Government contracts: 41
CFR 60-1.4, Equal Opportunity; 41 CFR 60-1.7, Reports and Other Required
Information; 41 CFR 60-1.8, Segregated Facilities; 41 CFR 60-250.4, Affirmative
Action for Disabled Veterans and Veterans of the Vietnam Era (if in excess of
$10,000); and 41 CFR 60-741.4, Affirmative Action for Disabled Workers (if in
excess of $2,500), wherein "contractor" and "subcontractor" mean "Supplier." The
Product is a "commercial item," as that term is defined at 48 C.F.R. 2.101 (Oct
1995), containing "commercial computer software" and "commercial computer
software documentation," as such terms are used in 48 C.F.R. 12.212 (Sep 1995)
and will be provided to the U.S. Government only as a commercial end item.
Consistent with 48 C.F.R. 12.212 and 48 C.F.R. 227.7202-1 through 227.7202-4
(Jun 1995), all U.S. Government end users acquire the software incorporated in
the Product with only those rights set forth herein.
7.9 IMPLEADER
Supplier shall not implead or bring an action against Lucent based on any
claim by any person for personal injury or death to an employee of Lucent for
which Lucent has previously paid or is obligated to pay worker's compensation
benefits to such employee or claimant and for which such employee or claimant
could not otherwise bring legal action against Lucent.
7.10 REGISTRATION AND RADIATION STANDARDS
When Product furnished under this Agreement is subject to Part 68, Part 15
or any other part of the Federal Communication Commission's Rules and
Regulations, as may be amended from time to time (hereinafter "FCC Rules"),
Supplier warrants that such Product complies with the registration,
certification, type-acceptance and/or verification standards of the FCC Rules
including, but not limited to, all labeling, customer instruction requirements,
and the suppression of radiation to specified levels. Supplier shall also
establish periodic on-going compliance re-testing and follow a Quality Control
Program, submitted to Lucent, to assure that Product shipped complies with the
applicable FCC Rules. Supplier agrees to indemnify and save Lucent harmless from
any liability, claims or demands (including the costs, expenses and reasonable
attorney's fees on account thereof) that may be made because of Supplier's
noncompliance with the applicable FCC Rules. Supplier agrees to defend Lucent,
at Lucent's request, against such liability, claim or demand; provided that
Lucent provides Supplier (i) prompt written notice of the existence of such
claim, (ii) sole control of the defense and settlement of such claim, and (iii)
assistance in the defense or settlement of such claim at Supplier's reasonable
request and at Supplier's reasonable expense.
7.11 TOXIC SUBSTANCES AND PRODUCT HAZARDS
Supplier hereby warrants to Lucent that, except as expressly stated
elsewhere in this Agreement, all Product furnished by Supplier as described in
this Agreement is not defined as a
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hazardous or toxic substance or material under applicable federal, state or
local law, ordinance, rule, regulation or order, and presents no abnormal
hazards to persons or the environment.
7.12 OZONE DEPLETING SUBSTANCES
Supplier warrants and certifies that all products, including packaging and
packaging components, provided to Lucent under this Agreement have been
accurately labeled in accordance with the requirements of 40 CFR Part 82 -
entitled "Protection of Stratospheric Ozone, Subpart E - The Labeling of
Products Using Ozone Depleting Substances." Supplier agrees to indemnify, defend
and save harmless Lucent, its officers, directors and employees from and against
any losses, damages, claims, demands, suits, liabilities, fines, penalties, and
expenses (including reasonable attorneys' fees) that may be sustained by reason
of Supplier's non-compliance with such applicable law or the terms of this
warranty and certification; provided that Lucent provides Supplier (i) prompt
written notice of the existence of such claim, (ii) sole control of the defense
and settlement of such claim, and (iii) assistance in the defense or settlement
of such claim at Supplier's reasonable request and at Supplier's reasonable
expense.
7.13 HEAVY METALS AND/OR CFC IN PACKAGING
Supplier warrants to Lucent that no lead, cadmium, mercury or hexavalent
chromium has been intentionally added to any packaging or packaging component
(as defined under applicable laws) to be provided to Lucent under this Agreement
and that packaging materials were not manufactured using and do not contain
chlorofluorocarbons. Supplier further warrants to Lucent that the sum of the
concentration levels of lead, cadmium, mercury and hexavalent chromium in the
packaging or packaging components provided to Lucent under this Agreement do not
exceed 100 parts per million. Upon request, Supplier shall provide to Lucent
Certificates of Compliance certifying that the packaging and/or packaging
components provided under this Agreement are in compliance with the requirements
set forth above in this Section.
7.14 CHLOROFLUOROCARBONS
Supplier hereby warrants that it is aware of international agreements and
legislation in several nations, including the United States, which limit or ban
importation of any product containing or produced using chlorofluorocarbons
("CFCs") and certain chlorinated solvents. Supplier hereby warrants that the
Product will conform to all current and future requirements established pursuant
to such agreements, legislation and regulations and that the Product will be
able to be imported and used lawfully under all such agreements, legislation and
requirements. Supplier also warrants that it is currently reducing or, if
Supplier is not the manufacturer of the Product, is currently causing its
manufacturing vendor to reduce and will, in an expeditious manner, eliminate,
or, as applicable, have its manufacturing vendor eliminate the use of ODC's in
the manufacture of the Product.
7.15 INSURANCE
7.15.1 Supplier shall maintain during the term of this Agreement:
(1) Workers' Compensation insurance as prescribed by
the law of the state or nation in which the services are performed;
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(2) employer's liability insurance with limits of at
least [***] for each occurrence;
(3) automobile liability insurance if the use of motor
vehicles is required, with limits of at least [***] combined single limit for
bodily injury and property damage per occurrence;
(4) Commercial General Liability ("CGL") insurance,
ISO 1988 or later occurrence form of insurance, including Blanket Contractual
Liability and Broad Form Property Damage, with limits of at least [***] combined
single limit for bodily injury and property damage per occurrence; and
(5) if the furnishing to Lucent (by sale or otherwise)
of material or construction services is involved CGL insurance endorsed to
include products liability and completed operations coverage in the amount of
[***] per occurrence.
7.15.2 All CGL and automobile liability insurance shall designate
Lucent Technologies Inc., its affiliates, and its directors, officers and
employees as additional insureds. All such insurance must be primary and non-
contributory and required to respond and pay prior to any other insurance or
self-insurance available. Any other coverage available to Lucent shall apply on
an excess basis. Supplier agrees that Supplier, Supplier's insurer(s) and anyone
claiming by, through, under or in Supplier's behalf shall have no claim, right
of action or right of subrogation against Lucent and its customers based on any
loss or liability insured against under the foregoing insurance. Supplier shall
furnish prior to the start of work certificates or adequate proof of the
foregoing insurance, including, if specifically requested by Lucent,
endorsements and policies. Lucent shall be notified in writing at least thirty
(30) days prior to cancellation of or any change in the policy. Insurance
companies providing coverage under this Agreement must be rated by A-M Best with
at least an A-rating.
7.15.3 To the extent practicable under the circumstances, Supplier
will endeavor in good faith to require its subcontractors working on Lucent
projects to maintain the types of insurance in the amounts set forth in Section
7.15.1. Also, to the extent practicable under the circumstances, Supplier will
endeavor in good faith to obtain from such subcontractors certificates of the
insurance actually maintained by such subcontractors so that Lucent may review
such certificates if Lucent so requests.
7.16 CHOICE OF LAW
This Agreement and all transactions under it shall be governed by the laws
of the State of New Jersey excluding its choice of laws rules and excluding the
Convention for the International Sale of Goods.
7.17 SEVERABILITY
If any of the provisions of this Agreement shall be invalid or
unenforceable, such invalidity or unenforceability shall not invalidate or
render unenforceable the entire Agreement, but rather the entire Agreement shall
be construed as if not containing the particular invalid or
28.
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with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
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unenforceable provision or provisions, and the rights and obligations of
Supplier and Lucent shall be construed and enforced accordingly.
7.18 SECTION HEADINGS
The headings of the Sections in this Agreement are inserted for convenience
only and are not intended to affect the meaning or interpretation of this
Agreement.
7.19 WAIVER
The failure of either Party at any time to enforce any right or remedy
available to it under this Agreement or otherwise with respect to any breach or
failure by the other Party shall not be construed to be a waiver of such right
or remedy with respect to any other breach or failure by the other Party.
7.20 DISPUTE RESOLUTION
(A) The following procedures shall apply to any dispute or
disagreement between the Parties or any of their Related Parties (i.e., such
Party's wholly owned subsidiaries, and the respective divisions, heirs,
successors and assigns of such Party and its wholly owned subsidiaries) arising
out of this Agreement.
(B) First:
(I) either Party may give written notification of such
dispute or disagreement to the other Party and
(II) the Parties shall communicate with each other promptly
with a view to resolving such dispute or disagreement within twenty-one (21)
days (or such extended period as the Parties agree is appropriate in any case)
after such written notification is given.
(C) The giving of any notice regarding any dispute or
disagreement under this Section 7.20 shall toll the running of all applicable
statutes of limitation until the later of (i) ninety (90) days following the
giving of such notice or (ii) thirty (30) days following the termination of
discussions between the Parties concerning such dispute or disagreement.
(D) Second, if at the end of the twenty-one (21) day period
referenced in Section 7.20(b) (as it may be extended) such dispute or
disagreement has not been resolved to the satisfaction of both Parties, either
Party may request in writing that such dispute or disagreement be the subject of
non-binding mediation. Following such request, the Parties shall endeavor in
good faith promptly to identify a single person (who shall be a person with
experience and good reputation) who shall assist the Parties in discussing such
dispute or disagreement and in attempting to reach a mutually acceptable
business resolution. Such mediation process shall terminate not later than
thirty (30) days following the request therefor (or such extended or shorter
period as the Parties agree is appropriate). All applicable statutes of
limitation shall be tolled during the period of mediation.
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(E) Third, if at the end of the thirty (30) day period
referenced in Section 7.20(d) (as it may be extended or shortened) such dispute
or disagreement has not been resolved to the satisfaction of both Parties,
either Party (the "complainant") may commence binding arbitration by giving the
other Party (the "respondent") notice in writing (the "initiating notice")
setting forth in reasonable detail the nature of its claim and the relief
requested stating that the complainant is invoking the procedures set forth in
this Section 7.20 (e) and (f) and naming the complainant's representative on the
Arbitration Panel (as defined below). Within twenty-one (21) days of receipt of
an initiating notice, the respondent shall give the complainant notice in
writing (the "response") setting forth in reasonable detail: (i) the basis of
its response to the claim; (ii) the nature of any counterclaim it has against
the complainant arising from the same set of facts and circumstances that gave
rise to the original claim; (iii) any other counterclaim that Party wishes to
bring at that time (although the Party has no obligation to bring such
counterclaims at that time); (iv) the relief requested; and (v) naming the
respondent's representative on the Arbitration Panel. The two representatives
shall select a third person who is mutually acceptable to them. If the
representatives fail to make such selection within twenty-one (21) days, the
complainant and the respondent shall each replace its representative with a new
representative and the new representatives shall be subject to the preceding
sentence and this sentence. Once a third person is selected, such person
together with the representatives of the complainant and the respondent shall
form the Arbitration Panel. The date upon which the Arbitration Panel is formed
shall be the "Commencement Date."
(F) The Arbitration Panel shall conduct proceedings to determine
the merits under applicable law of the claims set forth in the initiating notice
and the response. The proceedings shall be administered by JAMS/Endispute in
accordance with its Comprehensive Arbitration Rules and Procedures in effect as
of the Effective Date, subject to the following additional rules:
(I) the proceedings shall take place in New York City;
(II) the Arbitration Panel (including, if necessary, any
replacement(s) to the Arbitration Panel) shall be selected as set forth in
Section 7.20(e);
(III) the available relief shall include damages,
injunctive relief and equitable relief to the extent allowed under the
applicable law, this Agreement and any other agreement between the Parties;
(IV) the Parties shall attempt in good faith promptly to
agree on the nature and extent of any discovery in connection with the
arbitration, provided that, in the absence of such agreement, discovery shall be
governed by JAMS/Endispute's Comprehensive Arbitration Rules and Procedures. In
addition, the applicable law with respect to privilege and other protections
from disclosure, including the work product doctrine shall apply;
(V) the final decision of the Arbitration Panel (the
"Award") shall be issued within six months of the Commencement Date (the date of
issuance of the Award being the "Award Date") and must be joined by at least two
members of the Arbitration Panel;
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(VI) each Party to the proceedings shall pay its own costs
in connection with the proceedings, including the costs and expenses of its
representative on the Arbitration Panel, and the Parties shall share equally the
other costs of the proceedings, including the fees of the third member of the
Arbitration Panel, except that the prevailing Party shall be entitled to recover
its attorneys' fees incurred in prosecution thereof.
(G) In accordance with the Federal Arbitration Act, 9 U.S.C.
(S)1 et seq., the Award shall be final and binding and judgment thereon may be
entered by any state or federal court having jurisdiction thereof.
(H) Nothing in this Section 7.20 shall be construed to preclude
either Party from seeking injunctive relief in a court of competent jurisdiction
to prevent imminent irreparable harm. The dispute resolution procedures set
forth herein shall be stayed pending disposition of any application for such
relief. The Parties agree that a court of competent jurisdiction may consider
the merits of any claim that is subject to the dispute resolution procedures set
forth herein to the extent necessary to resolve any permissible application for
injunctive relief.
7.21 EXPORT CONTROL
Neither Party shall use, distribute, transfer or transmit any Products,
software or Technical Information (even if incorporated into other products)
provided under this Agreement except in compliance with U.S. export laws and
regulations (the "Export Laws"). Neither Party shall directly or indirectly,
export or re-export the following items to any country which is in the then
current list of prohibited countries specified in the applicable Export Laws:
(a) software or technical data disclosed or provided to one Party by the other
or its subsidiaries or affiliates; or (b) the direct product of such software or
technical data. Each Party agrees to promptly inform Lucent in writing of any
written authorization issued by the U.S. Department of Commerce office of export
licensing to export or re-export any such items referenced in (a) or (b).
Supplier also will not, without the prior written consent of Lucent, export or
re-export, directly or indirectly, any technical data or software furnished
hereunder from the country in which Lucent first provided the technical data or
software to Supplier hereunder, except to the United States. The obligations
stated above in this clause will survive the expiration, cancellation, or
termination of this Agreement or any other related agreement.
7.22 RECORDS
Supplier shall maintain complete and accurate records of all amounts
billable to and payments made by Lucent hereunder, in accordance with generally
accepted accounting practices. Supplier shall retain such records for a period
of three (3) years from the date of invoice for the final shipment of Products
covered by this Agreement. Supplier agrees to provide supporting documentation
concerning any disputed amount or invoice to Lucent within thirty (30) days
after Lucent provides written notice of the dispute to Supplier.
7.23 TERMINATION
7.23.1 Lucent may terminate this Agreement for convenience by giving
Supplier [***] prior written notice. In such event, notwithstanding any other
provision herein
31.
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with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
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to the contrary, any supply or support obligations stated to survive expiration
or termination of the Agreement shall also terminate, except that the following
obligations shall survive termination for convenience as follows: (i) Supplier
shall fulfill existing purchase orders accepted by Supplier prior to the
effective date of termination, as set forth in Section 1.3; and (ii) Supplier
shall fulfill its warranty obligations to Lucent for delivered Product under
Section 5 in existence as of the effective date of termination.
7.23.2 Either Party may terminate this Agreement upon [***] prior
written notice if the other Party shall be in material default of any of the
terms, conditions or covenants of this Agreement unless the defaulting Party
cures the breach during the notice period.
7.24 PUBLICITY
Promptly following the Effective Date, Lucent shall issue a mutually-
acceptable press release announcing this transaction. The Parties' goal is to
make such press release within two (2) weeks following the Effective Date.
Supplier may also make a similar, mutually-acceptable press release announcing
this transaction. Supplier and Lucent may not make press or other public
announcements or releases relating to this Agreement without the prior written
approval of the other Party. Such approval will not be unreasonably withheld or
delayed.
7.25 SURVIVAL OF OBLIGATIONS
Sections [***] shall survive any termination or expiration of this
Agreement for the earlier of a period of [***] or such time as all outstanding
Lucent obligations regarding the Product to its existing customer base for
Products are met. In addition, [***] shall survive any expiration or termination
of the Agreement indefinitely.
7.26 LIMITATION OF LIABILITY.
IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY LOST
PROFITS, CONSEQUENTIAL DAMAGES, INCIDENTAL DAMAGES OR SPECIAL DAMAGES,
REGARDLESS OF CAUSE OF ACTION, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. EACH PARTY ACKNOWLEDGES THAT THIS LIMITATION OF
LIABILITY IS AN ESSENTIAL ELEMENT OF THE BARGAIN OF THE PARTIES AND THAT IN ITS
ABSENCE THE ECONOMIC TERMS OF THIS AGREEMENT WOULD BE SUBSTANTIALLY DIFFERENT.
7.27 STEERING COMMITTEE. The Parties agree to establish a steering
committee comprised of at least two (2) representatives from each Party, but in
all events an equal number from each Party. The steering committee's activities
are contemplated to include, but are not limited to, the following: issue
resolution, Agreement management, customer bid issues, sales tracking reports,
risk manufacturing builds, Product support strategies, pricing, training,
marketing strategies, implementation and tracking of support plans and other
customer or business issues that the steering committee deems reasonably
appropriate. These activities are
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with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
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not limited exclusively to the steering committee and may be discussed by other
representatives of the Parties as appropriate. The steering committee will meet
quarterly unless the Parties otherwise mutually agree.
7.28 RELATIONSHIP OF THE PARTIES.
The relationship of the Parties under this Agreement shall be and at all
times remain one of independent contractors and not principal and agent,
employer and employee, franchisor and franchisee, partners or joint venturers.
Neither Party shall have the authority to assume or create obligations on behalf
of the other Party. Each Party shall employ its own personnel and contractors
and shall be solely responsible for their acts and be responsible for payment
of all unemployment, Social Security, and other payroll taxes, including
contributions required by law.
7.29 COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
instrument.
7.30 ENTIRE AGREEMENT
This Agreement, including all appendices attached hereto, shall constitute
the entire agreement between the Parties with respect to the subject matter of
this Agreement and shall not be modified or rescinded, except by a writing
signed by Supplier and Lucent. Printed provisions on the reverse side of
Lucent's purchase orders (except as specified otherwise in this Agreement) and
all contradictory or additional provisions on Supplier's forms shall be deemed
deleted and of no force or effect. Estimates or forecasts furnished by Lucent
shall not constitute commitments. The provisions of this Agreement supersede all
contemporaneous oral agreements and all prior oral and written communications
and understandings of the Parties with respect to the subject matter of this
Agreement.
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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed by its duly authorized representatives on the respective dates entered
below
COPPER MOUNTAIN NETWORKS, INC. LUCENT TECHNOLOGIES INC.
By: /s/ MICHAEL O. STAIGER By: /s/ HERBERT J. IMBORNONI
------------------------------ ---------------------------
Name: Michael O. Staiger Name: Herbert J. Imbornoni
---------------------------- -------------------------
Title: Vice President Title: Purchasing Manager
--------------------------- ------------------------
Date: 11/17/98 Date: November 17, 1998
---------------------------- -------------------------
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APPENDIX 1
PRICING TERMS
Standard Systems Current Standard Systems are described in Schedule A.
Additional Standard Systems will be created in response to
customer needs.
Standard System and
Line Module Pricing First [***] [***] discount off Supplier list price
Next [***] [***] discount off Supplier list price
Thereafter [***] discount off Supplier list price
Parts Pricing First [***] [***] discount off Supplier list price
Next [***] [***] discount off Supplier list price
Thereafter [***] discount off Supplier list price
All of the above volume break points refer to Lucent's
cumulative net purchasing volume since contract inception.
Supplier List Prices Current Supplier list prices appear in Schedule B.
A-1.
[***] = Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
<PAGE>
SCHEDULE A
STANDARD SYSTEM CONFIGURATIONS
STANDARD SYSTEM 1
1 CE200 Chassis
1 System Control Module
1 Buffer Card
1 DS3 Frame Relay Module
2 Power Supplies
2 LC4 24-port SDS Line Modules
STANDARD SYSTEM 2
1 CE200 Chassis
1 System Control Module
1 Buffer Card
1 DS3 Frame Relay Module
2 Power Supplies
8 LC4 24-port SDSL Line Modules
STANDARD SYSTEM 3
1 CE200 Chassis
1 System Control Module
1 Buffer Card
1 DS3 Frame Relay Module
2 Power Supplies
2 LC4 24-port SDSL Line Modules
1 LC5 24-port IDSL Line Module
STANDARD SYSTEM 4
1 CE200 Chassis
1 System Control Module
1 Buffer Card
1 DS3 Frame Relay Module
2 Power Supplies
6 LC4 24-port SDSL Line Modules
2 LC5 24-port IDSL Line Modules
SCHEDULE A-1.
<PAGE>
SCHEDULE B
SUPPLIER LIST PRICES
OCTOBER 1, 1998
Standard Systems
Standard System 1 [***]
Standard System 2 [***]
Standard System 3 [***]
Standard System 4 [***]
LINE MODULES
LC4 24-port SDSL Line Module [***]
LC5 24-port IDSL Line Module [***]
PARTS
Chassis
CE200 Chassis (including 1 Buffer Card, [***]
1 System Control Module and 1 Power
Supply)
Chassis Components
Buffer Card [***]
System Control Module [***]
Power Supply [***]
WAN Interfaces
V.35 WAN Module (2 port) [***]
HSSI WAN Module [***]
DS-3 Frame Module [***]
Modems
CR201 SDSL Modem [***]
CR201 IDSL Modem [***]
Additional FSA/ICA Support [***]
Repairs Not Covered by Warranty [***]
1
[***] = Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
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No Trouble Found [***]
If repairs are conducted at a location other than a Supplier facility, then
reasonable travel time and expenses will be included. The minimum service
charge will be for [***] of work, regardless of time actually worked.
2
[***] = Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
<PAGE>
APPENDIX 2
1. CopperEdge 200 Fast Packet DSL Concentrators shall conform to the
description, shape, performance and functions set forth in the Supplier's
CopperEdge 200 Installation and Operation Guide, a copy of which has been
provided to Lucent.
2. CopperView EMS Element Management Systems shall conform to the description,
shape, performance and functions set forth in the Supplier's CopperView EMS
Installation and Operation Guide, a copy of which has been provided to
Lucent.
3. Copper Rocket Model 201 SDSLs shall conform to the description, shape,
performance and functions set forth in the Supplier's CopperRocket 201 SDSL
Installation and Operating Guide, a copy of which has been provided to
Lucent.
4. Copper Rocket Model 201 IDSLs shall conform to the description, shape,
performance and functions set forth in the Supplier's CopperRocket 201 IDSL
Installation and Operating Guide, a copy of which has been provided to
Lucent.
<PAGE>
Agreement No. ___________
Page 1 of 5
Appendix 3
Appendix 3 Quality
QUALITY
(A) Supplier commits to ensure that all manufacturing, and design operations,
including any key sub-contractor, or contract manufacturing suppliers,
which contribute to the design, development, production, delivery and
service of material are ISO 9000 registered by an accredited Registrar
pursuant to Section _____ QUALITY.
(B) Supplier commits to having a continuous improvement program in place which
will allow it to attain and maintain "acceptable" ratings (or equivalent)
on all quality system elements per Supplier Capability Assessment (SCA), or
other type of Company assessment, as periodically performed by Company. An
"acceptable" element is defined as one where the quality system meets the
"general intent" of the quality system element and is fully implemented to
maintain the quality system and product quality. No significant
deficiencies encountered that would jeopardize the quality system, and
product quality and/or reliability.
(C) Supplier commits to establish quality control (qc) verification points
throughout the manufacturing process. These verification points should be
located in-process as well as after PRODUCT has completed all manufacturing
operations. The scope of these qc verification points shall be to validate,
through visual and mechanical inspections and tests, and with the use of
statistically valid sampling plans, that PRODUCT conforms to Supplier's
manufacturing, product and process specifications, standards of acceptable
workmanship, as well as other specification's which may be provided by
Company. Company reserves the right to review these qc points and make
suggestions for improvement. Supplier commits to address these suggestions
through the implementation of appropriate corrective actions.
(D) Supplier commits to establish an end of the line Quality Assurance product
audit. The focus of this audit shall be to replicate user application of
PRODUCT as specified by Company's customer. Test and examination of PRODUCT
under the quality audit shall be at a system level, and shall include but
is not limited to:
a) A system for continuous monitoring of all primary and ancillary
product functions and fault detection of the PRODUCT while under
this test.
Supplier shall continuously review customer return data to ensure that the
scope of the product quality assurance audit function includes the
requirement(s)/condition(s) under which the return failed.
Supplier shall perform a detailed failure mode analysis of all PRODUCT
found defective through the quality assurance audit in line with the
requirements and process outlined in paragraph F.
Supplier agrees to provide to Company on a monthly basis, results of the
quality assurance product audit in a format specified by Company.
(E) Supplier commits to establishing a program of tracking return rates. The
following is the suggested method for tracking, calculating, and tracking
customer returns. Company and supplier may mutually agree to modify this
method as appropriate. PRODUCT which has been in operation for any period
of time up to, and including one full year shall be considered part of this
tracking program. For the purpose of this section, the term "product" shall
be used to define the lowest replaceable unit (lru) of PRODUCT supplied to
Company.
For the purpose of calculating the return rate, the following definitions
apply:
Lucent Technologies Proprietary
<PAGE>
Agreement No. ___________
Page 2 of 5
Appendix 3
RTM(x) = The quantity of lru's which were manufactured in the Target
Month;(x) that have been returned during the period beginning the 4th month
after the Target Month and ending the 15th month from the Target Month.
PTM(x) = The total number of lru's in the Target Month;(x). All returns
will be included in the calculation of the return rate including, but not
limited to, failures, no trouble founds, and recalls. Failed safety devices
are excluded. A Target Quarter Return Rate (TQRR) is to be calculated using
the following equation:
TQRR = 10,000 x [[RTM(1)+RTM(2)+RTM(3)]/[PTM(1)+PTM(2)+PTM(3)]]
Where:
"(1)" refers to the first month of the Target Quarter
"(2)" refers to the second month of the Target Quarter
"(3)" refers to the third month of the Target Quarter
This calculation shall be made on a quarterly basis for the product
manufactured under this contract.
The Supplier agrees to update and report TQRR's on a quarterly basis to
Company, and to comply with the Annual Return Rate (ARR) requirement in
accordance with the following schedule:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Manufacture Year ARR Requirement Annual Measurement Due
- --------------------------------------------------------------------------------------
<S> <C> <C>
Jan xxxx- Dec xxxx 360 in 10,000 April, xxxx
- --------------------------------------------------------------------------------------
Jan xxxx Dec xxxx 240 in 10,000 April, xxxx
- --------------------------------------------------------------------------------------
</TABLE>
The ARR is 10,000 times the summation of the number of returns received for
the Target Months of the Manufacture Year divided by the summation of the
manufacturing populations for the Target Months of the Manufacture Year.
Supplier commits to provide to company on a monthly basis, the cumulative
year to date results of the ARR until the annual measurement requirement is
due.
(F) Supplier commits to establishing a system for tracking and analysis all
PRODUCT returned by Company to it, as well as any PRODUCT failures which
occur through the company's end of the line quality assurance audit. For
all PRODUCT in the above two categories, supplier shall perform a failure
mode analysis, which at a minimum will be down to the component level.
Component level failure modes will be recorded, and failed components found
defective will be accumulated for the purpose of determining repetitive
occurrences.
PRODUCT shall be considered defective if it fails to meet the warranty
specifications under this Agreement (including performance and appearance
Specifications) or if during customer testing, installation, or use, the
PRODUCT fails to operate as expected or specified.
If the analysis of a Company return is found to be within the
specifications of this agreement (i.e., a no trouble found condition), then
Supplier shall track these no trouble found conditions and notify Company
of said findings at a minimum of a monthly interval, so that appropriate
investigative measures may be taken to determine the root cause.
(G) If a Target Quarter Return Rate (TQRR) is found to exceed the applicable
ARR requirements specified in paragraph E, or repetitive occurrences are
observed with regard to
Lucent Technologies Proprietary
<PAGE>
Agreement No. ___________
Page 3 of 5
Appendix 3
component level failures then the supplier shall provide a written
Corrective Action Report to the Company, explaining in detail the nature of
the problem detected, and the step(s) Supplier proposes to correct the
problem. As part of the plan to correct the problem, it is agreed that the
Supplier shall:
a) Incorporate the remedy in affected PRODUCT.
b) Ship all subsequent PRODUCT incorporating the required modification
correcting the problem at no additional charge to Company; and
c) Repair and/or replace previously shipped PRODUCT that may contain
the same problem trend. In the event that Company incurs costs due
to such repair and/or replacement, including but not limited to
labor and shipping costs, Supplier shall reimburse Company for such
costs. Supplier shall bear shipping costs and risk of in transit
loss and damage for such repaired and/or replaced PRODUCT when
shipped from supplier to Company or customer..
Supplier and Company shall mutually agree in writing as to the
implementation schedule of the corrective action plan. Supplier agrees to
use its best efforts to implement the plan in accordance with the agreed
upon schedule. It is also agreed that the Company shall be entitled to
postpone at no charge to Company, further deliveries of orders until such
time as the remedy is implemented consistent with this Section.
(H) As part of a program of continuous improvement, Supplier agrees to
establish annually, improvement goals for a series of key quality
objectives. These goals should include, but are not limited to a) customer
return rates as specified in Section E, b) Quality Assurance product
quality audit defect rates, c) final system test yields. Supplier agrees to
track these goals on a monthly basis, and to commit the resources necessary
for the attainment of these goals.
Lucent Technologies Proprietary
<PAGE>
Agreement No. ___________
Page 4 of 5
Appendix 3
(I) The following paragraph summarizes the requirements for providing data
and information to Company as per paragraphs A through H.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
Ref. Data Required Frequency Company's
Par. # Recipient
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
A Corrective Action As dictated by Assessment Lead Assessor
Response to Assessment
- -----------------------------------------------------------------------------------------------
B ISO Registration copies When requested by Company To be specified by
Company
- -----------------------------------------------------------------------------------------------
C Corrective Action As dictated by the audit To be specified by
response to company's Company
audit of QC practices
- -----------------------------------------------------------------------------------------------
D Quality Assurance Results Monthly Company's quality QA
contact
- -----------------------------------------------------------------------------------------------
E Monthly Return Rate data Quarterly Company's quality QA
contact
- -----------------------------------------------------------------------------------------------
E Annual Return Rate Monthly Company's quality QA
Summary Results contact
- -----------------------------------------------------------------------------------------------
F "No trouble founds" Monthly Company's quality QA
summary data on customer contact
returns
- -----------------------------------------------------------------------------------------------
G Corrective Action Report As dictated by Supplier's Company's quality QA
data on repetitive contact
component level failure
mode analysis (FMA) on
customer returns
- -----------------------------------------------------------------------------------------------
G Corrective Action Report If return rates exceed Company's quality QA
pre-established thresholds contact
per paragraph E
- -----------------------------------------------------------------------------------------------
H Quality Improvement Goals Annually Company's quality QA
contact
- -----------------------------------------------------------------------------------------------
</TABLE>
(J) In the event that the Supplier 1) exceeds the Annual Return Rate
------------------------------
established in Section E by more than 50% during any period of three months or
---
more, then Company may 1a) develop and implement such remedy for already
purchased PRODUCT defined under the Corrective Action Plan, the cost of which
will be borne by the Supplier; and/or 2a) cancel or postpone other orders and/or
terminate this Agreement subject to the provisions of the TERMINATION Section.
Supplier reserves the right, as a substitution for 1a) to 2a) above, to instruct
Company to return all PRODUCT that is affected by the problem for full refund,
payable by Supplier to Company within thirty (30) days after receipt of returned
PRODUCT (with risk of loss or in-transit damage to be borne by Supplier).
In the event that Supplier fails to complete and issue Corrective Action Reports
as required in Section G, Company may put Supplier on notice that continued non-
compliance for more than 30
Lucent Technologies Proprietary
<PAGE>
Agreement No. ___________
Page 5 of 5
Appendix 3
days could result in cancellation or postponement of orders and/or terminate
this Agreement subject to the provisions of the TERMINATION Section.
Lucent Technologies Proprietary
<PAGE>
Agreement No. GA10097
Page 1 of 2
Appendix 4
APPENDIX 4
ENGINEERING CHANGE CONTROL PROCEDURES
Supplier agrees to perform and administer all "Product Changes" in accordance
with Bell Communications Research document GR 209 CORE, Issue 2, January 1996,
titled "Generic Requirements for Product Change Notices", which is incorporated
herein by reference.
Supplier may make changes to PRODUCT, modify drawings, or make changes to
manufacturing specifications, provided the changes, modifications, or
substitutions DO NOT have an impact on the performance, reliability, form, fit,
or function of the PRODUCT without prior notification to Company. Supplier
shall maintain written records of all such changes, and make these records
available for Company's review upon request.
For such changes or modifications which DO have an impact on performance,
reliability, form, fit, or function, Supplier shall identify each such change or
modification in accordance with the classifications contained in the above Bell
Communications Research document via a Product Change Notification (PCN) form.
The Company shall immediately acknowledge receipt of the PCN to the
address/contact as stated on the PCN form and shall have thirty (30) calendar
days to advise Supplier if the proposed change or modification is unacceptable.
If Company notifies Supplier as required herein, that the proposed change or
modification is unacceptable, Supplier shall not implement such change or
modification. Company may reject any PRODUCT offered by Supplier which has been
changed or modified in a manner unacceptable to Company.
If Company has not notified Supplier that the change or modification is
unacceptable within thirty (30) calendar days following issuance of the Change
Notification, Supplier shall implement the change or modification as described
in the Change Notification.
If during the review of a proposed Product Change Notification, which has a
classification of either A or AC, issued by Supplier during the Warranty period
of the affected PRODUCT, the Company determines that implementation of the
PRODUCT CHANGE will cause the Company to incur "unreasonable expenses" such as,
but not limited to, expenses resulting from escorting Supplier's personnel to
numerous Company locations containing affected PRODUCT or repeated product
changes to the same item of PRODUCT within a one (1) year time period, the
Company shall so notify Supplier, in writing, prior to the implementation of
such PRODUCT CHANGE.
Upon such notification, the Company and Supplier shall jointly determine the
implementation procedure which will utilize the Supplier's and/or Company's
personnel in the most cost effective manner.
<PAGE>
Agreement No. GA10097
Page 2 of 2
Appendix 4
If Supplier and the Company conclude the agreed to implementation procedure will
probably cause the Company to incur "unreasonable expenses", the Company and
Supplier shall jointly determine the likely extent of such expenses and agree,
in writing, to a "not to exceed" estimate for such expenses. In no event shall
such estimate exceed the Company's purchase price for the PRODUCT to be changed.
The Company shall track and record all such expenses associated with the PRODUCT
CHANGE. Upon completion of its efforts, the Company shall submit to Supplier,
for reimbursement by Supplier, an invoice of the Company's "unreasonable
expenses" within forty-five (45) calendar days after the Company's receipt of
such invoice.
Issuing a Class A or AC product Change Notification shall not constitute an
agreement to provide such a change, but shall be construed as a recommendation
by the Supplier that the change is absolutely necessary.
<PAGE>
Appendix 5
DEMAND PULL PROCEDURES [DRAFT]
(A) For Product items mutually agreed upon by Lucent and Supplier, Lucent shall
issue an annual order during the term of this Agreement which will state
Lucent's estimated annual purchases for such Product (the "EAU order"). Each
week Lucent shall provide Supplier with a fifty-two (52) week forecast for each
such Product (the "Forecast"). Supplier shall reference the EAU order number on
its shipping and invoicing documents. Said EAU order and Forecast shall be for
planning purposes only and, except to the extent set forth in paragraph D below,
shall not be deemed a commitment to purchase or supply the amount set forth in
the EAU order or Forecast.
(B) Supplier shall maintain (1) an inventory of Supplier-inspected finished
Product equivalent to weeks _______________ of the then current Forecast and (2)
Product work in process and raw materials in the aggregate sufficient to
manufacture such Product equivalent to weeks ______________ or the appropriate
number as determined by Supplier and Lucent by the then current Forecast.
(C) Supplier shall review the weekly Forecast and make adjustments to Supplier's
inspected inventory, work in process and raw materials and components based upon
increases/decreases in the Forecast.
(D) Lucent's commitment for the Product shall be limited to: (1) the quantities
set forth in the "Supplier Action" column of the Forecast and (2) the inspected
inventory, work in process and raw materials as set forth in paragraph B above.
Lucent's liability for the items in this paragraph D(2) shall be limited to:
(a) For inspected inventory (not useable in Supplier's other operations or
salable to Supplier's other customers within ____ weeks following receipt of
notice from Lucent): the unit prices set forth in this Agreement;
(b) For raw materials: Supplier's purchase price of such raw materials (that
cannot be returned or are not usable in Supplier's other operations or salable
to Supplier's other customers within ____ weeks following receipt of notice from
Lucent); note: Lucent and Supplier should identify these raw materials and
associated costs as much as is possible upfront.
(c) For work in process: the actual costs incurred by Supplier in procuring
and manufacturing Product (not usable in Supplier's other operations or salable
to Supplier's other customers within ____ weeks following receipt of notice from
Lucent); less
(d) Any salvage value thereof.
If requested, Supplier agrees to substantiate such costs with proof reasonably
satisfactory to Lucent.
1
<PAGE>
(E) Termination - Lucent may at any time, and without cause, terminate any or
all EAU orders, in whole or in part, upon written notification to Supplier. Upon
receipt of such notice, Supplier shall immediately stop work as specified in the
notice to Supplier.
Lucent's liability to Supplier with respect to such termination shall be limited
to the commitments set forth in paragraph D above. Upon such termination, the
parties shall meet promptly to determine the inspected, finished Product, work
in process and raw material for which Lucent is responsible as set forth above.
Supplier shall ship the inspected finished Product (to the extent not already in
transit) and raw materials to Lucent pursuant to shipping schedules agreed upon
by the Parties. As to the work in process, Supplier shall, at Lucent's option,
ship it to Lucent pursuant to shipping schedules agreed upon by the Parties or
scrap it.
2
<PAGE>
Appendix 6: Non-Disclosure Agreement
<PAGE>
NON-DISCLOSURE AGREEMENT
THIS AGREEMENT, effective as of August 24, 1998 is by and between LUCENT
TECHNOLOGIES INC., a Delaware corporation, with principal offices located at 600
Mountain Avenue, Murray Hill, New Jersey 07974, on behalf of itself and its
affiliates ("Lucent"), and COPPER MOUNTAIN NETWORKS, INC., a California
corporation, with offices located at 2470 Embarcadero Way, Palo Alto, CA 94303
("Copper Mountain") (hereinafter collectively the "Parties").
WHEREAS, the Parties, for their mutual benefit, desire to disclose to one
another certain specifications, designs, plans, drawings, software, data,
prototypes or other business, technical, and/or marketing plans and strategies,
pricing information, customer information or other business and technical
information pertaining to Lucent's purchase of devices and associated services
from Copper Mountain (hereinafter "INFORMATION"), which INFORMATION is
proprietary to the disclosing Party.
NOW, THEREFORE, the Parties agree as follows:
1. INFORMATION disclosed pursuant to this Agreement shall be used only for
the purpose of exploring, evaluating and implementing a potential OEM
relationship between the Parties, which relationship shall be
formalized in separate written agreements.
2. This Agreement is effective from the date first written above
("Effective Date") and shall continue in effect for a period of three
(3) year (the "Term") unless terminated earlier in writing by either
Party. This period may be extended or terminated earlier upon mutual
written agreement of the Parties. This Agreement applies to INFORMATION
disclosed by the Parties during the Term of the Agreement and such
INFORMATION shall be subject to the confidentiality obligations set
forth in this Agreement for three (3) years commencing on the date of
disclosure.
3. The receiving Party shall hold the INFORMATION in confidence, shall use
the INFORMATION only for the purpose set forth in Section 1 above,
shall reproduce the INFORMATION only to the extent necessary for the
above purpose and shall not disclose the INFORMATION to any third party
without the prior written approval of the other Party. The receiving
Party may, however, disclose the INFORMATION to its employees,
consultants and contractors (including, without limitation, its legal
counsel and accountants) with a need to know; provided, that the
receiving Party binds those employees, consultants and contractors to
terms at least as
<PAGE>
- 2 -
restrictive as those stated herein, advises those employees,
consultants and contractors of their confidentiality obligations, and
indemnifies the disclosing Party for any breach of those obligations.
4. INFORMATION shall be subject to the restrictions of paragraphs 1 and
3, if it is in writing or other tangible form, only if clearly marked
as "confidential," "proprietary" or "restricted" when disclosed to the
receiving Party or, if not in tangible form, its proprietary nature
must first be announced; and it must be summarized in writing, with a
copy of the writing being furnished to the receiving Party within
thirty (30) days of the disclosure of intangible information.
5. These restrictions on the use or disclosure of INFORMATION shall not
apply to any INFORMATION:
a. which is independently developed by or for the receiving
Party or its affiliated company; or
b. which is lawfully received free of restriction from
another source; or
c. after it has become generally available to the public
without breach of this Agreement by the receiving Party or
its affiliated company; or
d. which at the time of disclosure to the receiving Party can
be demonstrated to have been known to that Party or its
affiliated company free of restriction;
e. which the disclosing Party agrees in writing is free of
such restrictions; or
f. which the receiving Party is required to disclose under
applicable laws, rules and regulations, provided that the
receiving Party shall first notify the disclosing Party of
such required disclosure and afford the disclosing Party
the opportunity to seek a protective order relating to
such disclosure.
6. Each Party shall protect the INFORMATION disclosed to it by the other
Party with at least the same degree of care as it normally exercises
to protect its own proprietary information of a similar nature.
7. Information, other than confidential INFORMATION identified and
furnished as provided above, shall not be subject to any restriction
<PAGE>
- 3 -
by the disclosing Party as to the receiving Party's disclosure or use
thereof.
8. No license to a Party, under any trademark, patent, copyright, mask
work protection right or any other intellectual property right, is
either granted or implied by the conveying of INFORMATION to that
Party. None of the INFORMATION which may be disclosed or exchanged by
the Parties shall constitute any representation, warranty, assurance,
guarantee or inducement by either Party to the other of any kind, and,
in particular, with respect to the non-infringement of trademarks,
patents, copyrights, mask work protection rights or any other
intellectual property rights, or other rights of third persons or of
either Party.
9. Neither this Agreement nor the disclosure or receipt of INFORMATION
shall constitute or imply any promise or intention to make any purchase
of products or services or to make any equity investment by either
Party or its affiliated companies or any commitment by either Party or
its affiliated companies with respect to the present or future
marketing of any product or service.
10. All INFORMATION shall remain the property of the disclosing Party and
shall be returned upon written request or upon the receiving Party's
determination that it no longer has a need for such INFORMATION. The
receiving Party may, however, retain one copy of all written materials
returned to provide an archive record of the disclosure; provided that
such archival copy may not be used for any other purpose and shall
remain subject to the terms and conditions of this Agreement.
11. All INFORMATION in written form shall be furnished only to the
following representatives, or successor representatives that have been
designated in writing:
Lucent Technologies Inc.
Name: Linda Manchester
------------------------------------
Title: Director
------------------------------------
Address: 67 Whippany Road
------------------------------------
Whippany
------------------------------------
New Jersey 07981
------------------------------------
<PAGE>
- 4 -
Telephone: (973) 386
------------------------------------
Copper Mountain Networks, Inc.
Name: Michael Staiger
------------------------------------
Title: Vice President, Business Development
------------------------------------
Address: 2470 Embarcadero Way
------------------------------------
Palo Alto, CA 94303
------------------------------------
Telephone: (650) 858-8500
------------------------------------
12. This Agreement shall be governed by the laws of the State of New York,
USA, applicable to contracts entered into and to be wholly performed
within said state, without reference to choice or conflict of law rules
otherwise applicable.
13. If any provision of the Agreement is held by a court or other
adjudicatory body to be unenforceable, such provision will be severed
from this Agreement, and the balance of the Agreement will remain in
full force and effect.
14. If a dispute arises with respect to this Agreement, the Parties agree
to make a good faith effort to resolve the dispute through negotiations
between themselves. If not thus resolved, either Party may refer the
dispute to a sole arbitrator selected jointly by the Parties or to the
American Arbitration Association ("AAA") for arbitration. The
arbitration shall be governed by the United States Arbitration Act and
judgment on the award may be entered by any court having jurisdiction.
The arbitrator shall not limit, expand or modify the terms of the
Agreement nor award damages in excess of compensatory damages, and each
Party waives any claim to such excess damages. A request by a Party to
a court for interim protection shall not affect either Party's
obligation hereunder to arbitrate. Each party shall bear its own
expenses and an equal share of all cost and fees of the arbitration.
Any arbitrator selected shall be competent in the legal and technical
aspects of the subject matter of this Agreement. The content and result
of arbitration shall be held in confidence by all participants, each of
whom will be bound by an appropriate confidentiality agreement.
15. This Agreement constitutes the entire understanding between the Parties
hereto regarding the INFORMATION and merges all prior discussions
between them relating thereto. No amendment or modification of this
Agreement shall
<PAGE>
- 5 -
be valid or binding on the Parties unless made in writing and signed on behalf
of each of the Parties by their respective duly authorized officers or
representatives.
IN WITNESS WHEREOF, the parties have executed the Agreement on the
respective dates entered below.
LUCENT TECHNOLOGIES INC. COPPER MOUNTAIN
NETWORKS, INC.
By: /s/ LINDA C. MANCHESTER By: /s/ MICHAEL STAIGER
----------------------- ------------------------
(Signature) (Signature)
Linda Manchester Michael Staiger
----------------------- ------------------------
(Typed Name) (Typed Name)
Director Vice President, Business
Development
----------------------- ------------------------
(Title) (Title)
11/12/98 11/12/98
----------------------- ------------------------
(Date Signed) (Date Signed)
<PAGE>
Agreement No. GA10097
Page 1 of 8
Appendix 7
Warranty Eligibility System (WES)
Transaction
The Warranty Eligibility System (WES) tracks a serialized product from
manufacturing to the customer and provides up-to-date information about the
product's warranty status. In order to accomplish this, WES receives data from
entities whose functions affect an item's warrantability.
At the end of the manufacturing, shipping, or repair processes, information
about an item will be sent to WES for inclusion on the Warranty Database. This
file can be sent to WES using
1) UNIX file transfer at,
/usr/spool/uucppublic/receive/wes/origsystem/WESXXNNNN
where origsystem is the UNIX machine originating the file XX is a location
code entry in the location table and NNNN is the sequence number on the
header record.
2) or by placing the formatted file on a floppy disk and mailing the disk
directly to the WES group at:
Lucent Technologies
Westwood of Lisle
Attn.: L. Fitzgerald
2443 Warrenville Rd.
Lisle, IL 60532
Batch files received for processing by WES must be processed by a Header Record
as attached. Following the Data Records must be a Trailer Record also attached.
The Header and Trailer Records are interrogated by WES and messages are returned
to the sending location indicating the status of each file transmitted to WES.
These files should be sent at least once a week, depending on volume, in order
to keep the database current. That data needs to be formatted as shown on the
following page.
HEADER RECORD
<TABLE>
<CAPTION>
COLUMN FIELD SIZE FIELD CONTENT COMMENTS
- ------ ----------- ------------- --------
<S> <C> <C> <C>
1-5 (05) Transaction Code &&HDR
6 (01) Blank
7-14 (08) Source of Input Job Name of Feeder
15 (01) Blank
16-19 (04) Transmission Sequence Zero Filled
Number Right Justified
20 (01) Blank
21-26 (06) Time HHMMSS
27 (01) Blank
</TABLE>
Lucent Technologies Proprietary
<PAGE>
Agreement No. GA10097
Page 2 of 8
Appendix 7
<TABLE>
<S> <C> <C> <C>
28-33 (06) Date MMDDYY
34-123 (90) Blank
124-125 (02) Originating Location Location that
Originates this
Transaction
</TABLE>
ALL ALPHA REPRESENTATION SHOULD BE CAPITALIZED
TRAILER RECORD
<TABLE>
<CAPTION>
COLUMN FIELD SIZE FIELD CONTENT COMMENTS
- ------ ----------- ------------- --------
<S> <C> <C> <C>
1-5 (05) Transaction Code &&TLR
6 (01) Blank
7-12 (06) Record Count
13-125 (113) Blank
</TABLE>
ALL ALPHA REPRESENTATION SHOULD BE CAPITALIZED
ADD TRANSACTION FORMAT
<TABLE>
<CAPTION>
COLUMN FIELD SIZE FIELD CONTENT COMMENTS
- ------ ---------- ------------- --------
<S> <C> <C> <C>
1) 1 (01) Transaction Code A
2) 2-13 (12) Item Serial Number
3) 14-23 (10) Order Number AT&T Order
Number
24-38 (15) Blank
4) 39-44 (06) Manufacture Ship Date MMDDYY
5) 45-56 (12) Blank
6) 57-61 (05) Product Line Left Justified
7) 62-86 (25) Product Identification
Number
87-123 (37) Blank
</TABLE>
Lucent Technologies Proprietary
<PAGE>
Agreement No. GA10097
Page 3 of 8
Appendix 7
<TABLE>
<S> <C> <C> <C>
8) 124-125 (02) Originating Location Location that
Originated
Transaction
</TABLE>
ALL ALPHA REPRESENTATION SHOULD BE CAPITALIZED
1) One digit code representing the transaction to be performed by WES, i.e. A
= Add, R = Repair, etc.
2) The twleve (12) digit number assigned to each unique product manufactured.
Includes a two or three digit manufacturing number (vendor code) as described in
KS-23490.
Example - 12 Digit Serial Number with a two (2) digit manufacturing id
number 9T
2 Characters last two digits of the year
2 Characters manufacturing identification number (vendor code)
2 Characters month (01 to 12) or fiscal week (21 to 72)
6 Characters sequential serial number
i.e. First Product Manufactured in March of 1997 = 979T03000001
Example - 12 Digit Serial Number with a three (3) digit manufacturing id
number of A0J
2 Characters last two digits of the year
2 Characters manufacturing identification number (vendor code)
2 Characters month (01 to 12) or fiscal week (21 to 72)
1 Character last digit of the manufacturing id number (vendor code)
5 Characters sequential serial number
ie. First Product Manufactured in March of 1997 = 97A003J00001.
3) The identifier of an order placed by a customer.
4) The date an item was shipped from manufacturing. The format is MMDDYY.
5) The item serial number of the equipment that the current item is embedded
in.
6) A five character identifier used to distinguish product for determining
warranty, which is assigned by the product manager in agreement with WES.
7) The product identification number assigned by the product manager which
consists of the comcode. Left justified.
8) Location which originates the transaction.
SES TRANSACTION FORMAT
<TABLE>
<CAPTION>
COLUMN FIELD SIZE FIELD CONTENT COMMENTS
- ------ ---------- ------------- --------
<S> <C> <C> <C>
1) 1 (01) Transaction Code C
2) 2-13 (12) Item Serial Number
3) 14-23 (10) Order Number SES Order
Number
24-38 (15) Blank
4) 39-44 (06) Ship Date MMDDYY
45 (01) Blank
</TABLE>
<PAGE>
Agreement No. GA10097
Page 4 of 8
Appendix 7
<TABLE>
<S> <C> <C> <C>
5) 46-51 (06) RMA Number (B-Spec)
6) 52-55 (04) Item Number (Main Item) Right Justified
w/leading zeros
56 (01) Blank
7) 57-61 (05) Product Line Left Justified
8) 62-86 (25) Product Identification
Number
87-123 (37) Blank
9) 124-125 (02) Originating Location Location that
Originated this
Transaction
</TABLE>
ALL ALPHA REPRESENTATION SHOULD BE CAPITALIZED
1) One digit code representing the transaction to be performed by WES, i.e. C
= SES Ship, A = Add, etc.
2) The number assigned to each unique product produced by factory. Includes a
two digit manufacturing identification number (assigned by the product manager
in agreement with WES) used in positions 3 and 4 of the 12 character serial
number as described in KS-23490.
3) The identifier of an order placed by a customer.
4) The date an item was shipped. The format is MMDDYY.
5) The returned material authorization item number.
6) Item number on the returned material authorization.
7) A five character identifier used to distinguish product for determining
warranty, which is assigned by the product manager in agreement with WES.
8) The product identification number assigned by the product manager which
consists of the comcode. Left justified.
9) Location which originates the transaction.
Lucent Technologies Proprietary
<PAGE>
Agreement No. GA10097
Page 5 of 8
Appendix 7
RGM TRANSACTION FORMAT
<TABLE>
<CAPTION>
COLUMN FIELD SIZE FIELD CONTENT COMMENTS
- ------ ---------- ------------- --------
<S> <C> <C> <C>
1) 1 (01) Transaction Code G
2) 2-13 (12) Item Serial Number
3) 14-23 (10) Order Number AT&T
Order Number
24-38 (15) Blank
4) 39-44 (06) Returned Date MMDDYY
45-123 (79) Blank
5) 124-125 (02) Originating Location Location that
Originated
Transaction
</TABLE>
ALL ALPHA REPRESENTATION SHOULD BE CAPITALIZED
1) One digit code representing the transaction to be performed by WES, i.e. A
= Add, G = RGM, etc.
2) The number assigned to each unique product produced by factory. Includes a
two digit manufacturing identification number (assigned by the product manager
in agreement with WES) used in positions 3 and 4 of the 12 character serial
number as described in KS-23490.
3) The identifier of an order placed by a customer.
4) The date an item was returned accompanied by a returned good memorandum or
an SES exchange.
5) Location which originates the transaction.
Lucent Technologies Proprietary
<PAGE>
Agreement No. GA10097
Page 6 of 8
Appendix 7
MMC SHIP TRANSACTION FORMAT
<TABLE>
<CAPTION>
COLUMN FIELD SIZE FIELD CONTENT COMMENTS
- ------ ---------- ------------- --------
<S> <C> <C> <C>
1) 1 (01) Transaction Code M
2) 2-13 (12) Item Serial Number
3) 14-23 (10) Order Number Number
24-38 (15) Blank
4) 39-44 (06) MMC Ship Date MMDDYY
45-61 (17) Blank
5) 62-86 (25) Product Identification Left Justified
Number
6) 87-91 (05) Product Line
92-123 (32) Blank
7) 124-125 (02) Originating Location Location that
Originated
Transaction
</TABLE>
ALL ALPHA REPRESENTATION SHOULD BE CAPITALIZED
1) One digit code representing the transaction to be performed by WES, i.e. A
= Add, R = Repair, M = MMC Ship, etc.
2) The number assigned to each unique product produced by factory. Includes a
two digit manufacturing identification number (assigned by the product manager
in agreement with WES) used in positions 3 and 4 of the 12 character serial
number as described in KS-23490.
3) The identifier of an order placed by a customer.
4) The date an item was shipped from the MDC or Service center.
5) The product identification number assigned by product manager which consists
of the comcode. Left justified.
6) Up to five character code used to distinguish product for determining
warranty, which is assigned by the product manager in agreement with WES.
7) Location which originates the transaction.
REPAIR TRANSACTION FORMAT
<TABLE>
<CAPTION>
COLUMN FIELD SIZE FIELD CONTENT COMMENTS
- ------ ---------- ------------- --------
<S> <C> <C> <C>
1) 1 (01) Transaction Code R
2) 2-13 (12) Item Serial Number
3) 14-23 (10) Repair Order Number
4) 24-38 (15) Customer Repair Order
Number
5) 39-44 (06) Repair Date MMDDYY
</TABLE>
Lucent Technologies Proprietary
<PAGE>
Agreement No. GA10097
Page 7 of 8
Appendix 7
<TABLE>
<CAPTION>
<S> <C> <C> <C>
45-56 (12) Cust. Order Number
(overflow)
57-61 (05) Product Line Left Justified
7) 62-86 (25) Product Identification
Number
8) 87-101 (15) Circuit Pack Code
or Microcode
9) 102-113 (12) Circuit Pack Series
or Issue of Microcode
114-116 (03) Blank
10) 117 (01) Repair Code
11) 118-119 (02) Manufacturing Location *
12) 120-123 (04) Manufacturing Date
13) 124-125 (02) Originating Location
</TABLE>
ALL ALPHA REPRESENTATION SHOULD BE CAPITALIZED
* Location of manufacture required for 00LL00SSSSSS Item Serial Numbers.
LL is the location code for the site affixing the label
SSSSSS is the next serial number to be assigned by the location.
This format is only valid when the item was not previously bar-coded.
1) One digit code representing the transaction to be performed by WES, i.e. A
= Add, R = Repair, etc.
2) The number assigned to each unique product produced by factory. Includes a
two digit manufacturing identification number (assigned by the product manager
in agreement with WES) used in positions 3 and 4 of the 12 character serial
number as described in KS-23490.
3) This is the order number the item was repair under, not the one it was
initially order under.
4) The customer's identifier for their repair order.
5) Date the item was repaired.
6) A five character used to distinguish product for determining warranty, which
is assigned by the product manager in agreement with WES.
7) The product identification number assigned by product manager which consists
of the comcode. Left justified.
8) Apparatus code assigned for identification of product at cpcode level.
9) Production level of the cpcode.
10) The code that indicates what type of action was taken by repair
organization to satisfy the customer's repair order. The possible values are:
A = not repairable
K = no trouble found
R = trouble found (repairable)
11) Two digit code indicating place of manufacture.
12) Date of manufacture. MMYY
Lucent Technologies Proprietary
<PAGE>
Agreement No. GS10097
Page 8 of 8
Appendix 7
13) Location which originates the transaction.
SUBSTITUTE TRANSACTION FORMAT
<TABLE>
<CAPTION>
COLUMN FIELD SIZE FIELD CONTENT COMMENTS
- ------ ---------- ------------- --------
<S> <C> <C> <C>
1) 1 (01) Transaction Code S
2) 2-13 (12) Replaced Item Serial No.
3) 14-23 (10) Repair Order No.
4) 24-38 (15) Customer Order No.
5) 39-44 (06) Substitute Date MMDDYY
6) 45-56 (12) Replacing Item Serial No.
7) 57-61 (05) Product Line Product Line
Left Justified
8) 62-86 (25) Product Identification
87-98 (12) Cust. Order No. (overflow)
99-123 (25) Blank
9) 124-125 (02) Originating Location Location that Originated Transaction
</TABLE>
ALL ALPHA REPRESENTATION SHOULD BE CAPITALIZED
1) One digit code representing the transaction to be performed by WES, i.e. A
= Add, R = Repair, S = Substitute, etc.
2) Serial number of product returned by customer or installer. Format same as
item serial number.
3) Required if item is to be added to database.
4) The customer's identifier for their repair order.
5) Data substitution was made.
6) Item serial number of product the repair organization returned to a
customer, product withdrawn from an installation pool and added to an order,
item sent in by customer on a spares exchange. Format same as item serial
number.
7) A five character used to distinguish product for determining warranty, which
is assigned by the product manager in agreement with WES.
8) Replacing serial number's product identification number assigned by product
manager which consists of the comcode. Left justified.
9) Location which originates the transaction.
Lucent Technologies Proprietary
<PAGE>
EXHIBIT 10.26
OEM PURCHASE AND DEVELOPMENT AGREEMENT
BETWEEN
3COM CORPORATION
AND
COPPER MOUNTAIN NETWORKS, INC.
THIS OEM PURCHASE AND DEVELOPMENT AGREEMENT ("Agreement") is entered
into effective as of November 24, 1998 ("Effective Date") between 3COM
CORPORATION ("3Com"), a Delaware corporation located at 5400 Bayfront Plaza,
Santa Clara, CA 95052-8145, and COPPER MOUNTAIN NETWORKS, INC. ("Seller"), a
California corporation located at 2470 Embarcadero Way, Palo Alto, CA 94303
RECITALS
WHEREAS, Seller has developed certain proprietary symmetric digital
subscriber line ("SDSL") technology and products and ISDN digital subscriber
line ("ISDL") technology and products;
WHEREAS, [***]
WHEREAS, [***]
WHEREAS, [***]
WHEREAS, the parties desire to engage in certain joint marketing
efforts to achieve commercial success for the Device; and
WHEREAS, 3Com also desires to purchase and resell on a value-added,
private-label basis, Seller's Copper Rocket/TM/ Model 201 SDSL and IDSL customer
premises equipment product(s) (the "CR201").
NOW, THEREFORE, in consideration of the mutual promises contained
herein the parties agree as follows:
1.
Confidential treatment has been requested for portions of this exhibit. The copy
filed herewith omits the information subject to the confidentiality request.
Omissions are designated as [***]. A complete version of this exhibit has been
filed separately with the Securities and Exchange Commission.
<PAGE>
TERMS AND CONDITIONS
1. DEFINITIONS.
1.1 "3COM BRANDED CR201" means CR201 units that have been rebranded by
or for 3Com.
1.2 "3COM KNOW-HOW" means the proprietary techniques, inventions,
practices, methods, knowledge, designs, skill and experience relating to
customer premises equipment ("CPE") and networking systems which 3Com discloses
to Seller under this Agreement.
1.3 "3COM PATENTS" means patents related to the subject matter of this
Agreement issued as of the Effective Date and the patents to issue after the
Effective Date on patent applications entitled to a filing date on or before the
Effective Date related to the subject matter of this Agreement, including
without limitation all foreign counterparts, all substitutions, extensions,
reissues, renewals, divisions, continuations and continuations in part relating
to such patents and their foreign counterparts, and which are owned or
controlled by 3Com (where "controlled" means licensed by 3Com with a royalty-
free right to grant sublicenses).
1.4 "3COM TECHNOLOGY" means (i) the inventions, designs, discoveries
and processes claimed in the 3Com Patents and (ii) the 3Com Know-How.
1.5 "DEVICE SOFTWARE" means certain Seller DSL software, including but
not limited to Seller's pre-activation signaling software and internal control
protocol software, configured to run in the Device in a polled (i.e., non-
interrupt driven) mode on a Motorola 68LC302 processor.
1.6 "IMPROVEMENTS" means any improvements, discoveries, developments,
modifications or derivative works, whether or not patentable.
1.7 "INTELLECTUAL PROPERTY RIGHTS" means all current and future trade
secrets, copyrights, patents and other patent rights, trademark rights, service
mark rights, mask work rights and any and all other intellectual property or
proprietary rights now known or hereafter recognized in any jurisdiction.
1.8 "PRODUCTS" means the CR201 or the 3Com Branded CR201, as
applicable, including such updates or enhancements to the CR201 or the 3Com
Branded CR201 that the parties may agree upon and implement pursuant to Section
14.
1.9 "PRODUCT SOFTWARE" means certain Seller DSL firmware that is
embedded in the Products.
1.10 "SELLER KNOW-HOW" means the proprietary techniques, inventions,
practices, methods, knowledge, designs, skill and experience relating to the
modification of CPE to comply with the DSL Specifications or the operation of
Seller's proprietary DSL networking systems which Seller discloses to 3Com under
this Agreement.
1.11 "SELLER PATENTS" means patents issued as of the Effective Date
related to the subject matter of this Agreement and the patents to issue after
the Effective Date on patent
2.
<PAGE>
applications entitled to a filing date on or before the Effective Date related
to the subject matter of this Agreement, including without limitation all
foreign counterparts, all substitutions, extensions, reissues, renewals,
divisions, continuations and continuations in part relating to such patents and
their foreign counterparts, and which are owned or controlled by Seller (where
"controlled" means licensed by Seller with a royalty-free right to grant
sublicenses).
1.12 "SELLER SOFTWARE" means the Device Software and the Product
Software.
1.13 "SELLER TECHNOLOGY" means (i) the inventions, designs, discoveries
and processes claimed in the Seller Patents and (ii) the Seller Know-How.
1.14 "SPECIFICATIONS" means specifications for the Products to be agreed
upon by the parties and to be attached hereto as Exhibit B (Product
Specifications).
1.15 "TESTING CRITERIA" means the test criteria and procedures mutually
agreed upon by the parties to ensure the Device's compatibility with the DSL
Specifications. The Testing Criteria will be set forth in Schedule A to Exhibit
D attached hereto.
2. [***]
3. PURCHASE OF PRODUCTS; SUPPORT SERVICES.
3.1 PURCHASE OF PRODUCTS. Seller agrees to sell the Products to 3Com
and to accept purchase orders for the Products from 3Com under the terms and
conditions of this Agreement. It is expressly understood that 3Com has no
obligation to purchase any, or any minimum number of, Products hereunder.
Further, nothing in this Agreement shall prevent 3Com from manufacturing or
procuring from other sources like or comparable products.
3.2 DOCUMENTATION LICENSE. Subject to the terms and conditions of this
Agreement, Seller hereby grants 3Com, a nonexclusive, nontransferable,
worldwide, fully-paid and royalty-free license to use, reproduce, modify, create
derivative works based on, support, demonstrate and distribute through single or
multiple tiers of distribution all end user documentation, including all
subsequent updates or enhancements thereto or replacements therefor, delivered
as part of or together with the Products or otherwise provided under this
Agreement. Any modifications or derivative works are subject to Seller's
technical approval prior to demonstration or distribution.
3.3 SUPPORT SERVICES. Training and support services for the Products
shall be provided as set forth in Exhibit C attached hereto.
3.4 TRADEMARK RIGHTS. 3Com requests and Seller agrees to provide
certain markings and identification, which includes the trademark(s) and/or
trade name of 3Com, on the Products ordered and delivered to 3Com. 3Com
acknowledges that initial Product production runs may not have 3Com branding,
but the parties anticipate that the Product units sold to 3Com will display 3Com
trademarks by approximately January 2, 1999. Such markings and identification
3.
[***] = Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
<PAGE>
shall be strictly in accordance with the requirements of 3Com as set forth in
3Com's Trademark Guidelines, as provided to Seller and as may be updated from
time to time by 3Com. Seller is not authorized to use the trademark(s) and trade
names of 3Com on any products, other than Products ordered by and delivered to
3Com, or for any other purpose. Seller is hereby granted a limited trademark
license with respect to the 3Com trademarks set out in the above-mentioned
markings and identification, solely for the above-mentioned use. All other use
is prohibited. This license shall terminate on the earlier of termination of
this Agreement or failure of Seller to maintain the quality requirements set out
in this Agreement. Seller shall obtain no rights to or interest of any kind in
any 3Com trademarks or trade names other than the limited right to use set out
above.
3.5 INDEMNIFICATION. 3Com shall indemnify and hold Seller harmless from
and against any and all damages, costs and expenses (including without
limitation reasonable attorneys' and expert witness fees) incurred by Seller in
connection with any action, suit, proceeding, demand, assessment or judgment
arising out of or related to any claims by third parties based on any
infringement by the 3Com trademarks, logos or trade names of any trademark, logo
or trade name of any other person or entity; provided that (i) Seller promptly
notifies 3Com of such action, claim or proceeding; (ii) 3Com shall have the sole
right to compromise, settle or defend any such action, claim or proceeding;
provided, however, that 3Com shall not compromise or settle any such action,
claim, or proceeding in a manner that does not unconditionally release Seller
without Seller's prior written consent; and (iii) Seller provides 3Com
reasonable assistance at 3Com's request and expense in the defense of such
action, claim or proceeding.
4. ORDER FORECAST.
3Com shall provide Seller with a nine (9) month non-binding, forward-
looking rolling forecast and update such forecast on a monthly basis. Seller
shall use such forecast for internal material planning requirements only. Such
forecast does not represent any commitment by 3Com to purchase Products.
Further, Seller shall view all forecasts as Confidential Information in
accordance with Section 21 below.
5. PURCHASE ORDERS.
5.1 LEADTIME. Seller agrees to supply Products to 3Com within fifty-six
(56) calendar days leadtime. Seller will make good faith, commercially
reasonable efforts to reduce this leadtime. Seller will notify 3Com immediately
upon any changes in leadtime.
5.2 PURCHASE ORDERS. Purchases shall be initiated by 3Com's written or
electronically dispatched purchase orders referencing the quantity, the Product,
applicable price, shipping instructions and requested in house delivery dates.
All purchase orders for Products placed by 3Com hereunder shall be governed by
the terms and conditions of this Agreement. In the event of a conflict between
the provisions of this Agreement and the terms and conditions of 3Com's purchase
order or Seller's acknowledgment or other written communications, the provisions
of this Agreement shall prevail and any such conflicting terms or conditions are
hereby rejected.
4.
<PAGE>
5.3 ISSUANCE AND ACCEPTANCE. Seller shall notify 3Com of acceptance of
purchase order by telephone or facsimile (and promptly confirm in writing)
within five (5) business days after receipt of 3Com's purchase order. Failure of
Seller to confirm or respond to 3Com's purchase order within five (5) business
days shall constitute acceptance. The parties anticipate approximately a six (6)
to eight (8) week delivery cycle from purchase order to fulfillment. All orders
are subject to acceptance in writing by Seller and shall not be binding until
acceptance. If orders for the Product units exceed Seller's inventory, Seller
shall allocate available inventory on a basis Seller, in its reasonable
discretion, deems equitable. In such event, Seller will use good faith efforts
to allocate supply of Products to 3Com on a pro-rata basis, taking into account
3Com's current and historical purchase history for the Product compared against
Seller's total current and historical sales of Products. If Seller cannot
allocate to 3Com such pro-rata share in such circumstances, the parties shall
discuss in good faith a mutually acceptable course of action. Seller shall use
reasonable efforts to fill orders promptly, but shall not be liable for any
damage to 3Com or any third party for failure to fill any orders, or for any
delay in delivery or error in filling any orders. Notwithstanding any prior
acceptance by Seller of a purchase order for Product units, Seller shall not be
obligated to ship Product units if 3Com is in breach of this Agreement at the
time of scheduled shipment.
5.4 CHANGE ORDERS. Change orders shall be provided by written or
electronically dispatched notice from 3Com. Seller shall notify 3Com of
acceptance of change order by telephone or facsimile (and promptly confirm in
writing) within two (2) business days after receipt of 3Com's change order or
change order request. Failure of Seller to confirm or respond to 3Com's change
order within two (2) business days shall constitute acceptance.
5.4.1 CANCELLATION. 3Com may cancel without liability any
purchase order upon written notice to Seller within forty-five (45) days from
the date such purchase order was accepted by Seller. Notwithstanding the
foregoing, if Seller incurs substantial liability (as determined by Seller in
its reasonable, good faith judgment) as a result of such cancellation or a
series of cancellations because of the materials and work in process costs
incurred by Seller to meet such purchase order(s), and Seller and 3Com cannot
reasonably use such materials and work in process within a reasonable time
frame, the parties agree to discuss in good faith a mutually acceptable plan to
limit such liability in future and to compensate Seller for the materials and
work in process costs it has incurred as a result of such cancellation or
cancellations.
5.4.2 RESCHEDULING. 3Com shall be entitled to reschedule
delivery of Products or quantities of Product scheduled for a particular
delivery at any time for a particular purchase order; provided, however, that
3Com cannot reschedule a delivery of Products beyond ninety (90) days from the
original delivery date. Seller shall accommodate a request to expedite the ship
date, if reasonably able to do so.
6. DELIVERY TERMS.
6.1 DELIVERY POINT. All shipments shall be F.C.A. origin (Seller's U.S.
shipping dock). Title and risk of loss shall pass to 3Com upon Seller's tender
of delivery to the common carrier or 3Com's designee.
5.
<PAGE>
6.2 SHIPPING. All shipments are freight collect. Seller may ship
partial orders provided Seller notifies 3Com and 3Com agrees prior to shipment.
3Com's purchase order shall specify the carrier or means of transportation or
routing, and Seller will comply with 3Com's instructions. If 3Com fails to
provide shipping instructions, Seller shall select the best available carrier,
on a commercially reasonable basis.
6.3 PACKING INSTRUCTIONS. All Products shall be packaged and prepared
for shipment in a manner which (i) follows 3Com's packaging and routing
guidelines, a copy of which will be provided to Seller, (ii) follows good
commercial practice, (iii) is acceptable to common carriers for shipment and
(iv) is adequate to ensure safe arrival. Seller shall mark the outside of each
shrink wrapped pallet with the applicable 3Com part numbers and any necessary
lifting and handling information. Each shipment shall be accompanied by a
packing slip which will include 3Com's part numbers, purchase order number,
Seller's part number and the quantity shipped.
6.4 RESPONSIBILITY FOR EXPORT LICENSING. Subject to all the rules and
regulations stated in Section 17, Seller agrees, upon 3Com's request, to deliver
Products to 3Com's freight forwarder for export from the country of origin.
Subject to the terms of this Agreement, 3Com will be responsible for obtaining
the appropriate licenses or permits necessary to export Products from the
country of origin. Seller shall furnish 3Com or 3Com's designee with the
information necessary for 3Com to timely obtain all required export and import
documentation.
6.5 DELIVERY SCHEDULE. Delivery shall be pursuant to the schedule set
forth in 3Com's purchase order or as otherwise agreed upon by the parties.
Seller shall immediately notify 3Com in writing of any anticipated delay in
meeting the delivery schedule, stating the reasons for the delay. If Seller's
delivery fails to meet the committed delivery schedule, then Seller, upon 3Com's
request, shall expedite the routing at Seller's expense, however, if Seller's
delivery fails to meet the schedule by in excess of twenty (20) days, then 3Com,
at its sole option and without penalty or any additional expense, may (i)
require Seller to expedite the routing by the fastest available commercial
carrier; (ii) reschedule the delivery; or (iii) cancel the delivery in whole or
in part.
6.6 EARLY DELIVERY. Seller shall not deliver any Products prior to the
scheduled delivery date, without 3Com's written consent, and 3Com may return
early or excess shipments to Seller at Seller's sole risk and expense.
6.7 IN-STOCK MINIMUM. Seller agrees to use commercially reasonable
efforts to carry in "safety stock" a minimum of two weeks supply (as set forth
on the latest monthly forecast) of completed units of each of the Products to
accommodate any unforeseen or expedited demand on the part of 3Com.
6.8 COUNTRY OF MANUFACTURER. Seller represents and warrants that the
Product is manufactured in the United States. Seller shall promptly advise 3Com
at least ninety (90) days prior to a change in or addition to any such
manufacturing locations.
6.9 COMMODITY CLASSIFICATION. Seller shall provide 3Com with a copy of
the Commodity Classification for the Products or, if this is not available,
Seller shall provide 3Com with the ECCN that was used by Seller for self-
certification. A copy of the Commodity
6.
<PAGE>
Classification is required for any Product containing security or encryption
technology. In addition, Seller shall advise 3Com as to the License Exception,
if applicable, pursuant to which the Product may be exported.
7. PRICING; TAXES.
7.1 PRICES. The prices charged by Seller for the Products shall be
those set forth as Exhibit A, less the applicable discount, if any, stated in
Exhibit A. All prices are F.C.A. origin (Seller's shipping dock). Prices are
exclusive of costs of transportation, insurance, taxes, customs, duties,
landing, storage and handling fees, and/or documents or certificates required
for exportation or importation, which will be separately itemized and billed to
3Com in accordance with the billing and payment provisions of this Agreement.
7.2 QUARTERLY PRICE REVIEWS. Seller and 3Com agree to meet each 3Com
fiscal quarter (3Com's fiscal year is June through May) and review prices of
each Product. [***]
7.3 [***]
7.4 TAXES AND DUTIES. The prices for the Products are exclusive of all
taxes. 3Com shall pay all import duties, customs fees, sales (unless an
exemption certificate is furnished by 3Com to Seller), use, and value added
taxes (except for taxes imposed on Seller's net income) with respect to any
products sold or licensed and any services rendered to 3Com in respect of this
Agreement. Such taxes, when applicable, will appear as separate items on
Seller's invoice. If applicable law requires 3Com to withhold any taxes levied
by the United States on payments to be made pursuant to this Agreement
("Withholding Tax"), 3Com shall be entitled to deduct such Withholding Tax from
the payments due Seller hereunder. If Seller is eligible to take advantage of
the reduced Withholding Tax provided for by an applicable United States tax
treaty then in force, Seller shall furnish 3Com with all appropriate forms,
documents and paperwork required under the treaty to obtain such reduced
Withholding Tax, including a completed US Internal Revenue Service (IRS) Form
1001, Certificate of Reduced Withholding, otherwise 3Com will apply the non-
treaty withholding tax rate on applicable payments.
7.5 [***]
7.
[***] = Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
<PAGE>
7.6 [***]
7.7 LATE PAYMENT. Any payment not made within fifteen (15) days after
it is due shall bear interest at a rate equal to one and one half percent (1
1/2%) per month or the highest rate permitted by applicable law, whichever is
less, on the unpaid amounts from time to time outstanding from the date on which
portions of such amounts became due and owing until payment thereof in full.
7.8 NO SET-OFF. Except as set forth in Section 7.6 above, no part of
any amount payable to Seller hereunder may be reduced due to any counterclaim,
set-off, adjustment or other right which 3Com may have against Seller.
7.9 [***]
8. AUDIT.
8.1 RECORDS. 3Com shall keep complete and accurate records pertaining
to the sale of the Devices. Such records will be maintained for a three (3) year
period following the year in which any such payments were made hereunder.
8.2 AUDIT REQUEST. Seller will have the right to engage, at its own
expense, an independent auditor reasonably acceptable to 3Com, to examine 3Com's
records from time to time as may be necessary, but no more than once every six
(6) calendar months, to determine, with respect to any calendar year, the
correctness of any report or payment made under this Agreement. Such audit shall
be conducted upon at least five (5) days advance written notice and shall be
conducted during 3Com's normal business hours. If any such audit reveals an
underpayment of more than five percent (5%) of the correct amount of royalties
due hereunder, such audit will be at the expense of 3Com. If any audit conducted
on behalf of Seller shall show that 3Com underpaid the royalties due to Seller
under the licenses herein as to the period subject to the audit, then 3Com shall
immediately pay to Seller any such deficiency with interest thereon at a rate
equal to the lower of one and a half percent per month or the highest rate
allowed by law from the date due until paid or at such lower rate as shall be
the maximum rate permitted by law.
9. INVOICING AND PAYMENT.
Subject to acceptance of Products as provided in Section 10, invoices shall
be due and payable forty-five (45) days after the date of actual receipt of the
Products or Seller's invoice, whichever is later.
10. ACCEPTANCE; QUALITY ASSURANCE.
8.
[***] = Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
<PAGE>
10.1 ACCEPTANCE. The Product and any change to the Product pursuant to
Section 14 are subject to an initial acceptance test procedure by 3Com at 3Com's
facility before final acceptance as set forth in this Section 10.1. If the
Product delivered hereunder fails to conform to the Specifications or with the
parties' agreed-upon testing and acceptance criteria, 3Com shall notify Seller
of such failure, the parties will promptly discuss means to resolve any such
failure, and Seller shall have up to thirty (30) days (or such longer period as
the parties may agree) to deliver to 3Com conforming Products. If Seller fails
to deliver conforming Products within such thirty (30) day period, absent
separate agreement, 3Com shall have the right, without liability, to either
cancel purchase orders for that Product and any other Products, the acceptance
of which is impractical in 3Com's reasonable opinion as a result of Seller's
failure to meet the Specifications, or require expedited shipping of the
conforming Products at Seller's sole cost. After initial acceptance of a Product
or a modified Product, further deliveries of such Product shall be deemed
accepted upon delivery.
10.2 3COM TESTING. Seller acknowledges that 3Com will conduct period
testing of Product deliveries, likely by testing sample units within a lot
delivery. Should such sample testing reveal a likelihood of more than a minimal
number of failures of the Products delivered to comply with the limited warranty
set forth in Section 18.1, 3Com may return the entire Product lot delivered to
3Com pursuant to the RMA procedures set forth in this Agreement for further
testing by Seller.
10.3 INSPECTION RIGHTS. 3Com shall have the right to perform vendor
qualifications and/or on-site source inspections at Seller's manufacturing
facilities and Seller shall reasonably cooperate with 3Com in that regard. If an
inspection or test is made on Seller's premises, Seller shall provide 3Com's
inspectors with reasonable facilities and assistance at no additional charge.
3Com may conduct such inspections no more frequently than once a calendar
quarter unless an epidemic failure as described in Section 10.5 has occurred.
3Com must provide advance written notice of a desire to conduct an inspection of
at least five (5) days prior to the beginning of such inspection. Such
inspection shall be conducted only during normal business hours and in
compliance with all Seller's safety and security requirements.
10.4 ISO 9002 COMPLIANT SUPPLIER. Seller represents that Seller will
obtain ISO 9002 compliance within eighteen (18) months after the Effective Date.
Should Seller lose the ISO 9002 registration thereafter, Seller will notify 3Com
immediately. Seller will then use commercially reasonable measures to obtain
reregistration within sixty (60) days. The parties acknowledge that Seller may
subcontract manufacture of Products to a subcontractor and that such
subcontractor is likely to be ISO 9002 registered.
10.5 EPIDEMIC FAILURE. "Epidemic Failure" shall mean (i) a failure of
more than five percent (5%) of three (3) consecutive deliveries to conform to
the warranty in Section 18.1 or a failure of four (4) out of six (6) deliveries
to conform to the warranty in Section 18.1, or (ii) a failure of more than three
and a half percent (3.5%) of total deployed 3Com Branded CR201s in any six (6)
month rolling period. In the case of an Epidemic Failure, Seller's obligations
shall be, within ten (10) business days, to propose an action plan to fix the
failure of any affected Products and to implement this action plan upon 3Com's
acceptance thereof. If the action plan is not acceptable to 3Com in its
reasonable, good faith judgment, 3Com can require Seller to repair or replace,
at Seller's option, the affected Products. The repair or replacement shall be
done at
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mutually agreed-upon location(s); provided, however, that costs of repair or
replacement together with the shipping, transportation and other costs of
gathering and redistributing the Products shall be borne by Seller. In addition
to bearing the costs associated therewith, if requested by 3Com, Seller shall
support and provide at Seller's expense a sufficient number of Products to
permit the field exchange or "hot swap" of Products at customer sites. The
parties agree to make all reasonable efforts to complete the repair or
replacement of all of the affected Products within twenty (20) business days
after written notice of Epidemic Failure by 3Com to Seller. Seller also agrees
that 3Com will be supported with accelerated shipments of replacement Product to
cover 3Com's supply requirements.
11. COMPLIANCE WITH SPECIFICATIONS.
All Products delivered hereunder shall comply in all material respects with
the Specifications to be agreed upon by the parties and attached hereto as
Exhibit B.
12. REGULATORY AGENCY COMPLIANCE.
All Products delivered hereunder, shall comply in all material respects
with the regulatory agency requirements to be agreed upon by the parties and
listed in Exhibit B, Product Specifications (e.g., Product Safety,
Electromagnetic Compatibility and Telecommunications). Seller, at its sole
expense, will obtain all required agency certifications and approvals for the
Products. Seller will further ensure that the Product remain compliant with
those regulatory agency requirements. 3Com agrees to work with Seller in
obtaining these certifications and approvals, and will supply 3Com Model numbers
to Seller whenever appropriate. Prior to shipment of production units, Seller
will submit to 3Com sufficient proof of the certifications and approvals.
13. COMPLIANCE WITH ENVIRONMENTAL LAWS.
Seller represents and warrants to 3Com that upon and after the Effective
Date of this Agreement, Seller will not provide any Product to 3Com which has
come into physical contact with: (i) a Class I substance, as defined in Section
611 of the Federal Clean Air Act (the "Act"), during any portion of the
manufacturing process; or (ii) a Class II substance, as defined in the Act and
Title 40, Code of Federal Regulations, Section 82 (the "Code"), during any
portion of the manufacturing process, where there has been a determination by
the U.S. Environmental Protection Agency that there is a substitute product or
manufacturing process for such Product which does not rely on the use of such
Class II substance, that reduces overall risk to human health and the
environment, and that is currently or potentially available, in accordance with
the Code.
Seller further represents and warrants that 3Com shall not be subjected to
any warning or labeling requirements regarding a Class I substance or a Class II
substance pursuant to the Act or any regulation promulgated under the Act, as a
result of any Product provided by Seller to 3Com under this Agreement.
Without limitation to the foregoing, Seller represents and warrants that in
all respects, the manufacture and sale of the Products comply and will
throughout the term of this Agreement comply with all applicable environmental
laws, regulations and other regulatory requirements.
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If Seller discovers a breach of any of the representations and warranties
in this Section 12, it shall immediately notify 3Com of such breach in writing,
explaining the circumstances constituting the breach and identifying the
Product(s) involved. Further, Seller shall defend, indemnify and hold harmless
3Com and its officers, directors, employees, agents, representatives, successors
and assigns from any liabilities, losses, demands, claims or judgments arising
from and third party claims regarding the breach of any of Seller's
representations set forth in this Section 13; provided that 3Com provides Seller
(i) prompt written notice of the existence of such claims; (ii) sole control
over the defense and settlement of any such claim; and (iii) assistance in the
defense or settlement of any such claim upon seller's reasonable request and at
Seller's reasonable expense.
14. PRODUCT CHANGES.
14.1 UPDATES AND PRODUCT ENHANCEMENTS. The parties acknowledge that they
intend that the 3Com Branded CR201 will be kept current with the CR201, and that
modifications, enhancements or improvements that Seller makes to the CR201 will
also be made available to the 3Com Branded CR201 pursuant to the procedures set
forth in this Section 14.
14.2 ENGINEERING CHANGE. In the event that 3Com finds or becomes aware
of a situation which in its opinion necessitates or would benefit from an
engineering change in any of the Products, 3Com shall suggest such proposed
engineering change to Seller and Seller and 3Com agree to work with each other
in good faith to determine whether such change will be made and if so will work
with each other on the implementation of such change. Seller agrees to work with
3Com in good faith to upgrade or alter the Product to changing market
requirements.
14.3 ENGINEERING CHANGE ORDERS. Should Seller materially change,
improve, or add any enhancements or updates to the Products at any time, Seller
shall provide reasonable prior written notice to 3Com of any such material
change, improvement, enhancement or update that affects the form, fit or
function of any Product or related product or any changes to Seller's part
number for the Product prior to its implementation. 3Com shall respond to the
requested changes within twenty-one (21) days or the change will be deemed
accepted. 3Com's response time may be reduced by mutual agreement if the change
improves safety or reliability.
14.4 REJECTION OF CHANGE ORDERS. 3Com shall not unreasonably withhold
acceptance of a proposed change; it may however reject a proposed change for
good cause. If 3Com does reject a proposed change, the parties will discuss in
good faith alternatives to such rejection. Upon rejection of any proposed
change, 3Com shall be entitled to (i) terminate in whole or in part, any
affected Product remaining undelivered under accepted Releases or require
delivery by Seller of some or all of such unchanged Product and (ii) place a
last-time purchase for the unchanged Product for delivery in amounts requested
by 3Com over a six-month period following such implementation.
14.5 UNAUTHORIZED CHANGES. If an ECO is implemented without the written
approval of 3Com, Seller shall be liable for repair and/or rework of all product
affected, including to, but not limited to, product in transit, product in
FGI/Finished Good Inventory, and any product located with a reseller or at an
end user location.
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15. JOINT MARKETING AND SALES.
15.1 JOINT MARKETING. Seller and 3Com will jointly announce and promote
the Product and Device through joint marketing activities. These activities may
include joint press releases, trade shows, appendices, dissemination of product
brochures through each party's channels, and such other activities that the
parties agree to conduct. The parties will conduct appropriate training to
ensure quality marketing and will meet periodically to update and improve their
joint marketing efforts.
15.2 JOINT SALES ACTIVITIES. Where appropriate, the parties will work
together on sales efforts to potential Product and Device customers, regardless
of which party was the originating party. The parties will conduct appropriate
training to ensure quality sales efforts and will meet periodically to improve
joint sales efforts.
15.3 MARKETING COMMITMENTS. The parties agree to undertake the marketing
activities described in Exhibit I attached hereto.
16. LICENSE GRANTS; OWNERSHIP OF INTELLECTUAL PROPERTY RIGHTS.
16.1 DSL SPECIFICATIONS. Subject to the terms and conditions of this
Agreement, 3Com shall use the DSL Specifications solely for the purposes
specified in this Agreement, including without limitation Exhibit D attached
hereto. 3Com shall not use the DSL Specifications for any purpose not specified
in this Agreement, including, without limitation, using the DSL Specifications
(a) to add features to CPE in order to operate with the central office device of
any third party DSL networking system, or (b) to send Seller's Internal Control
Protocol messages to the central office device of any third party DSL networking
system. 3Com shall not distribute, disclose or publicly display the DSL
Specifications. This Section 16.1 does not prevent 3Com from designing the
Device so that the Device also operates with third party DSL networking systems.
16.2 SELLER LICENSE GRANT. Subject to the terms and conditions of this
Agreement, Seller grants to 3Com a non-exclusive, non-transferable, royalty-
bearing license, without the right of sublicense, to make, have made, use,
import, offer to sell and sell the Device through one or more tiers of
distribution.
16.3 DEVICE SOFTWARE LICENSE GRANT. Subject to the terms and conditions
of this Agreement, Seller grants to 3Com a non-exclusive, royalty-free, non-
transferable license, without right of sublicense except to Device manufacturers
for 3Com and 3Com OEMs, to reproduce the Device Software to incorporate the
Device Software into the Device and to distribute the Device Software in a
machine-executable form only and only as incorporated in the Device. Should 3Com
desire to port the Device Software for use on a different processor, 3Com shall
notify Seller and the parties will discuss in good faith the terms upon which
the Device Software will be ported. To the extent permissible by applicable law,
3Com shall not itself, or permit others to, reverse compile, reverse engineer or
otherwise disassemble the Device Software. To the extent permissible by
applicable law, no rights to copy, prepare derivative works or to publicly
perform or display any Device Software are granted to 3Com or end users
hereunder.
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16.4 PRODUCT SOFTWARE LICENSE. Subject to the terms and conditions of
this Agreement, Seller grants to 3Com during the term of this Agreement a
nonexclusive, nontransferable, royalty-free license to distribute through 3Com's
sales channels any Product Software incorporated or embedded in the Products
solely as incorporated in firmware format therein, and to permit end users of
the Products to use the Product Software solely as incorporated in the Products,
subject in each instance to an enforceable end user license with terms and
conditions no less protective of Seller's proprietary interests in such Product
Software as set forth in this Agreement. To the extent permissible by applicable
law, 3Com shall not itself, or permit others to, reverse compile, reverse
engineer or otherwise disassemble the Product Software. To the extent
permissible by applicable law, no rights to copy, prepare derivative works or to
publicly perform or display any Product Software are granted to 3Com or end
users hereunder.
16.5 LICENSE RESTRICTIONS. In addition to the license restrictions set
forth above, 3Com shall not use the Seller Technology or the Seller Software to
develop CPE or to add features to CPE in order to allow such CPE (i) to operate
with any third party DSLAM (as defined in Exhibit D) or third party networking
system or (ii) to send Seller's Internal Control Protocol messages via any third
party DSL networking system. Any rights to or under Seller's Intellectual
Property Rights, Seller Technology or Seller Software not expressly granted in
this Agreement are expressly reserved. This Section 16.5 does not prevent 3Com
from designing the Device so that the Device also operates with third party DSL
networking systems.
16.6 3COM LICENSE GRANT. Subject to the terms and conditions of this
Agreement, 3Com grants to Seller a non-exclusive, non-transferable, royalty-free
license, without the right of sublicense, to assist in the development effort
regarding the Device as set forth in Exhibit D and to provide the support
described in Exhibit C. All other rights not expressly granted in this Agreement
are reserved.
16.7 INTEROPERABILITY MARKING. Upon successful completion of
interoperability testing in accordance with Exhibit D, Seller (a) will provide
to 3Com an interoperability logo for use in 3Com's marketing materials in
accordance with Seller's then-current trademark use guidelines, and (b) will
include 3Com's name and the name of the Device on a list of interoperable CPE
which will be provided to Seller's customers and posted on Seller's web site.
3Com will display the interoperability logo on each Device and Product and the
packaging of each Device and Product and on all associated printed and marketing
materials, including but not limited to product brochures and on 3Com's world
wide web site in all web pages that pertain to the Device.
16.8 INTELLECTUAL PROPERTY MARKINGS. In addition, 3Com will comply with
Seller's reasonable instructions regarding the marking of the Device and
accompanying packaging and documentation with a notice reflecting Seller's
ownership of the Seller Technology.
16.9 TRADEMARKS. Subject to the terms and conditions set forth in the
Agreement and solely for the purposes hereof, 3Com will have a non-transferable,
non-exclusive license, without right of sublicense, to place the Seller
trademarks and logos ("Marks") on the Devices and in documentation and packaging
as required in Sections 16.7 and 16.8. Such Marks shall be prominent and the
placement and sizing shall be subject to mutual agreement of the parties. In no
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event may 3Com alter or remove any Marks unless such removal is approved in
advance in writing by Seller. Except for the right to use the Marks as set forth
in this Section 16.9, nothing contained in this Agreement shall be construed to
grant 3Com any right, title or interest in or to the Marks. 3Com acknowledges
Seller's exclusive ownership of the Marks. 3Com agrees not to take any action
inconsistent with such ownership and further agrees to take, at Seller's
reasonable expense, any action which Seller reasonably requests to establish and
preserve Seller's exclusive rights in and to its Marks. 3Com shall not adopt,
use or attempt to register any trademarks or trade names that are confusingly
similar to the Marks or in such a way as to create combination marks with the
Marks. 3Com will maintain a high quality standard in producing and marketing
Devices. 3Com shall promptly provide Seller with samples of all materials,
including the Devices, that use the Marks for Seller's quality control purposes.
If, in Seller's reasonable discretion 3Com's use of the Marks does not meet
Seller's then-current trademark usage policy, Seller may, at its option, require
3Com to revise such material and re-submit it under this Section 16.9 prior to
shipment, display, or release of further Devices or materials bearing or
containing such Mark.
16.10 INTELLECTUAL PROPERTY RIGHTS OWNERSHIP. For any joint conception,
invention and development of technology, the parties agree that all Intellectual
Property Rights conceived, created, made, or first fixed in a tangible medium of
expression during the term of this Agreement shall be as follows: (i) Seller's
Intellectual Property Rights when accomplished by Seller personnel, unless such
invention is an Improvement to the 3Com Technology, which Improvement and any
Intellectual Property Rights therein Seller agrees to assign to 3Com except as
set forth in subsection (iii) below; (ii) 3Com Intellectual Property Rights when
accomplished by 3Com personnel pursuant to this Agreement, unless such invention
is an Improvement to the Seller Technology, the Product or the Seller Software,
which Improvement and any Intellectual Property Rights therein 3Com agrees to
assign to Seller except as set forth in subsection (iii) below; and (iii) owned
jointly by the parties (if not an Improvement to the 3Com Technology or the
Seller Technology, the Product or the Seller Software, or if an indivisible
Improvement to both the 3Com Technology and the Seller Technology), without
right of accounting, when accomplished jointly by 3Com and Seller personnel
("Joint Intellectual Property"). Seller and 3Com agree that throughout the term
of this Agreement they shall cooperate reasonably and in good faith to decide
jointly the manner in which their respective interests in Joint Intellectual
Property shall be perfected and enforced. Specifically, Seller and 3Com shall
jointly decide: (i) the subject matter for which patent applications and
applications for copyright registrations will be prepared; (ii) the resources to
be utilized in the preparation and prosecution of such applications; (iii) the
parties' rights to review and/or approve such applications and other papers
prior to filling in, or submission to, the patent, copyright and trademark
offices in the United States; (iv) the allocation of expenses incurred in the
preparation, prosecution and maintenance of patent applications, patents, and
copyright registrations and the like; (v) matters regarding the enforcement,
through litigation, licensing or otherwise of the Joint Intellectual Property
against third parties; and (vi) the manner in which revenue resulting from
enforcement of Joint Intellectual Property will be shared between Seller and
3Com. Should a party choose not to participate in securing or protecting an
element of Joint Intellectual Property (by notifying the other party in writing
to such effect), the other party may secure or protect its claims to such Joint
Intellectual Property and shall be entitled to reap the benefit of its efforts
without accounting to the other party, including without limitation retaining
the full amount of any settlement or damage award from a third party.
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16.11 INFRINGEMENT BY THIRD PARTIES. If either party learns of any
possible infringement or misappropriation of the other party's Intellectual
Property Rights related to the Products and Devices, it shall immediately give
notice thereof to the other party. Each party agrees to cooperate with the
infringed party's reasonable efforts to seek legal remedies for such
infringements and misappropriations.
16.12 ALTERATION OF THE PRODUCT. All modifications to the Product shall
be done through Seller or with Seller's prior written consent. All modifications
requested by 3Com will be related to the enabling of the 3Com Branded CR201 and
will be addressed in accordance with Section 14 above. No modifications will be
made that would result in a violation of the license restrictions set forth in
Section 16.5.
17. EXPORT LAW COMPLIANCE; COMMODITY CLASSIFICATION.
17.1 Neither party will export or reexport, directly or indirectly, the
Devices, Products or technical data acquired under this Agreement or the "direct
product" of software programs or such technical data to any country for which
the United States Government or any agency thereof, at the time of export,
requires an export license or other governmental approval, without first
obtaining such license or approval. The term "direct product" as used herein
means the immediate product (including processes and services) produced directly
by the use of the technical data or software programs. Both parties will
cooperate, to effect compliance with all applicable import and/or export
regulations. In addition, the parties agree to comply with all applicable local
country import and/or export laws or regulations in the country(ies) of
procurement, production and/or end destination of the Product. Both parties
understand that the foregoing obligations are legal requirements and agree that
they shall survive any term or termination of this Agreement.
18. WARRANTY.
18.1 LIMITED PRODUCT WARRANTY.
18.1.1 LIMITED WARRANTY. Seller warrants that all Products
(including associated firmware) sold by Seller to 3Com under the terms of this
Agreement will be materially free from defects in workmanship and materials and
substantially conform to the Specifications under normal use and service for a
period of twenty-seven (27) months after delivery to 3Com. If any Product or
part thereof contains a material defect in materials or workmanship, or
otherwise fails to conform to the Specifications, during the warranty period,
Seller shall at its expense correct any such defect by repairing such defective
Product or part or, at Seller's option, by delivering to 3Com an equivalent
Product or part replacing such defective Product or part. Seller shall waive any
expedite charges to 3Com in order to effect earliest reasonable replacement of
such defective Product(s).
18.1.2 RETURN OF PRODUCTS. 3Com will promptly notify Seller in
writing of any nonconforming Product. Such notification shall include serial
numbers and reason for nonconformance. Nonconforming Products will be repaired
or replaced as specified in Exhibit C.
18.2 WARRANTIES EXCLUSIVE. THE FOREGOING WARRANTIES, TERMS OR CONDITIONS
ARE EXCLUSIVE AND ARE IN LIEU OF ALL OTHER WARRANTIES,
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TERMS OR CONDITIONS, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW,
STATUTORY OR OTHERWISE, INCLUDING WARRANTIES, TERMS OR CONDITIONS OF
MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
18.3 WARRANTY EXCLUSIONS. SELLER SHALL NOT BE LIABLE UNDER ANY WARRANTY
IF ITS TESTING AND EXAMINATION DISCLOSES THAT THE ALLEGED DEFECT IN THE PRODUCT
DOES NOT EXIST OR WAS CAUSED BY 3COM'S OR ITS END USER'S MISUSE, NEGLECT,
IMPROPER INSTALLATION OR TESTING, UNAUTHORIZED ATTEMPTS TO REPAIR, OR BY
ACCIDENT, FIRE, LIGHTNING OR OTHER HAZARD.
18.4 "AS IS." The DSL Specifications, the Device Software and the Seller
Technology are provided to 3Com "AS IS," without any warranty of any kind.
WITHOUT LIMITING THE FOREGOING, SELLER MAKE NO WARRANTIES, EXPRESS OR IMPLIED,
BY OPERATION OF LAW OR OTHERWISE, INCLUDING WITHOUT LIMITATION ANY IMPLIED
WARRANTIES OF TITLE, NONINFRINGEMENT, MERCHANTABILITY OR FITNESS FOR INTENDED
USE OR ANY IMPLIED WARRANTIES ARISING OUT OF COURSE OF PERFORMANCE, COURSE OF
DEALING, USAGE OR TRADE. NO REPRESENTATION OR OTHER AFFIRMATION OF FACT,
INCLUDING WITHOUT LIMITATION STATEMENTS REGARDING THE SUITABILITY FOR USE, OR
PERFORMANCE OF EQUIPMENT OR DEVICES THAT COMPLY WITH THE DSL SPECIFICATIONS,
WHETHER MADE BY SELLER OR OTHERWISE, SHALL BE DEEMED TO BE A WARRANTY FOR ANY
PURPOSE OR GIVE RISE TO ANY LIABILITY OF SELLER.
18.5 NO WARRANTY PASS THROUGH. 3Com will not pass through to its
customers or any other third party any warranties made by Seller hereunder and
will expressly indicate to its customers that they must look solely to 3Com in
connection with any problems, warranty claims or other matters concerning the
Product and the Device.
19. INDEMNIFICATION; INSURANCE.
19.1 INFRINGEMENT INDEMNITY.
(A) Seller shall indemnify, defend and hold 3Com harmless from
and against any and all liabilities, losses, damages, fees, costs and expenses,
including without limitation reasonable attorneys' fees, incurred by 3Com
resulting from a third party claim, suit, action or proceeding (a "Claim")
alleging that the DSL Specifications, the Seller Technology, the Seller Software
or the Product infringes a third party U.S. patent or copyright or
misappropriates any third party's trade secrets; provided that 3Com (i) promptly
notifies Seller in writing of such Claim; (ii) provides Seller sole control of
the defense or settlement of such Claim; and (iii) provides Seller assistance at
Seller's request and reasonable expense. 3Com may participate in the defense or
settlement of the Claim at its own expense. If a final injunction is obtained
against 3Com for use of the Seller Software, the Product, the Seller Know-how or
the DSL Specifications, or if Seller reasonably believes that such injunction is
likely, Seller will, at its option and its expense, either (i) procure for 3Com
the right to continue using such Seller
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Software, the Product, the Seller Know-How, the DSL Specifications or the
infringing portions of the Seller Technology, or (ii) modify the Seller
Software, the Product, the Seller Know-how or the DSL Specifications or the
infringing portions thereof so that they become non-infringing. If in Seller's
opinion either of the above is not commercially feasible, 3Com shall promptly
cease selling Devices or Products, as applicable, and Seller shall refund to
3Com an amount equal to the royalties paid by 3Com for the infringing Seller
Technology or amounts paid for the infringing Product units, depreciated on a
five-year straight line basis, calculated backwards from the date of infringing
event (i.e., payments made on the day of the infringing event would be refunded
fully, and payments made five (5) years prior to the event would not be refunded
at all, with a linear decrease in-between). Seller will have no liability or
obligation to indemnify for any claim arising from (i) the combination of Seller
Technology, the Seller Software, the Device or the Product with 3Com or third
party materials or intellectual property, unless it is determined by a court of
competent jurisdiction that the Seller Technology is the infringing element of
such Claim; (ii) the modification or translation of Seller Technology, the
Seller Software, the Device or the Product or any portion of the Seller
Technology; (iii) any use by 3Com of the Seller Technology after 3Com becomes
aware that the Seller Technology, the Seller Software, the Device or the Product
may be infringing; or (iv) any Improvements created by a party other than
Seller.
(B) 3Com shall indemnify, defend and hold Seller harmless from
and against any and all liabilities, losses, damages, fees, costs and expenses,
including without limitation reasonable attorneys' fees, incurred by Seller
resulting from a Claim that the manufacture, use or sale of the Device infringes
any patent, copyright or other proprietary rights of any third party or
misappropriates any trade secret of any third party; provided that such Claim is
not a Claim based solely on the DSL Specifications, the Seller Software, the
Product or the Seller Technology for which Seller indemnifies 3Com pursuant to
Section 19.1(a); and provided further that Seller (i) promptly notifies 3Com in
writing of such Claim; (ii) provides 3Com sole control of the defense or
settlement of such claim; and (iii) provides Seller assistance at Seller'
request and reasonable expense.
19.2 LIABILITY INDEMNITY. 3Com agrees to indemnify and hold Seller
harmless from and against any and all liabilities, losses, damages, costs, fees
and expenses, including without limitation reasonable attorneys' fees, and to
defend Seller against, any and all Claims resulting from or arising out of
3Com's acts or omissions to act arising from or related to the subject matter of
this Agreement, including but not limited to any liabilities, damages, or losses
whatsoever with respect to death or injury to any person and damage to any
property arising from the possession, manufacture, use, sale or administration
of the Devices or the Product by 3Com; provided that Seller (i) promptly
notifies 3Com in writing of such Claim; (ii) provides 3Com sole control of the
defense or settlement of such claim; and (iii) provides 3Com assistance at
3Com's request and reasonable expense.
19.3 ENTIRE LIABILITY. The foregoing provisions of this Section 19 state
the entire liability and obligations of each party and the exclusive remedy of
each party with respect to any alleged Intellectual Property Rights infringement
or misappropriation by the Device, the DSL Specifications, the Seller Software,
the Product, or the parties' respective know-how incorporated in the Device.
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19.4 INSURANCE. Seller shall carry and maintain liability insurance
coverage to satisfactorily cover its obligations under this Agreement. Upon
3Com's request, Seller shall provide 3Com with a Certificate of Insurance
evidencing such coverage.
20. LIMITATION OF LIABILITY.
EXCEPT FOR BREACHES OF SECTIONS 16 OR 21, IN NO EVENT, WHETHER BASED IN
CONTRACT OR TORT (INCLUDING WITHOUT LIMITATION NEGLIGENCE), SHALL EITHER PARTY
BE LIABLE FOR INCIDENTAL, CONSEQUENTIAL, INDIRECT OR SPECIAL DAMAGES OF ANY KIND
OR FOR LOSS OF PROFITS OR REVENUE OR LOSS OF BUSINESS ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE BREACH THEREOF, WHETHER OR NOT THE PARTY WAS ADVISED OF
THE POSSIBILITY OF SUCH DAMAGE. NOTHING HEREIN SHALL HAVE THE EFFECT OF LIMITING
OR EXCLUDING EITHER PARTY'S LIABILITY FOR DEATH OR PERSONAL INJURY CAUSED BY
NEGLIGENCE. EXCEPT FOR BREACHES OF SECTIONS 16 OR 21, IN NO EVENT SHALL EITHER
PARTY'S LIABILITY TO THE OTHER HEREUNDER EXCEED THE GREATER OF TWO MILLION
DOLLARS ($2,000,000) OR THE AMOUNTS PAID BY 3COM TO SELLER HEREUNDER. Each party
acknowledges and agrees that the foregoing limitations on liability are
essential elements of the basis of the bargain between the parties and that in
the absence of such limitations the material and economic terms of this
Agreement would be substantially different.
21. CONFIDENTIALITY.
21.1 CONFIDENTIAL INFORMATION. Information that is transmitted by one
party to the other in connection with the performance or implementation of this
Agreement and, if in written form, is marked "confidential" or with a similar
legend by the disclosing party before being furnished to the other, or if
disclosed orally or visually is identified as such prior to disclosure and
summarized, in writing, by the disclosing party to the receiving party within
thirty (30) days shall be deemed to be confidential information of the
disclosing party. Each party agrees that it shall use the same degree of care
and means that it utilizes to protect its own information of a similar nature,
but in any event not less than reasonable care and means, to prevent the
unauthorized use or the disclosure of such confidential information to third
parties. The confidential information may be disclosed only to employees or
contractors of a recipient with a "need to know" who are instructed and agree
not to disclose the confidential information and not to use the confidential
information for any purpose, except as set forth herein. Recipient shall have
appropriate written agreements with any such employees or contractors sufficient
to allow the recipient to comply with the provisions of this Agreement. Each of
the parties further agrees to make no use of such confidential information
except as expressly permitted by this Agreement.
Each party agrees that it shall use the same degree of care and means that
it utilizes to protect its own information of a similar nature, but in any event
not less than reasonable care and means, to prevent the unauthorized use or the
disclosure of such confidential information to third parties. The confidential
information may be disclosed only to employees or contractors of a recipient
with a "need to know" who are instructed and agree not to disclose the
confidential information and not to use the confidential information for any
purpose, except as set forth
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herein. Recipient shall have appropriate written agreements with any such
employees or contractors sufficient to allow recipient to comply with the
provisions of this Agreement.
21.2 EXCEPTIONS. The confidential information of a party shall not
include and the foregoing obligation shall not apply to data or information
which: (i) was in the public domain at the time it was disclosed or falls within
the public domain, except through the fault of the receiving party; (ii) was
known to the receiving party at the time of disclosure without an obligation of
confidentiality; (iii) was disclosed after written approval of the disclosing
party; (iv) becomes known to the receiving party from a source other than the
disclosing party without breach of this Agreement by the receiving party; (v) is
furnished to a third party by the disclosing party without an obligation of
confidentiality; or (vi) was independently developed by the receiving party
without the benefit of confidential information received from the disclosing
party. Nothing in this Agreement shall prevent the receiving party from
disclosing confidential information to the extent the receiving party is legally
compelled to do so by any governmental investigative or judicial agency pursuant
to proceedings over which such agency has jurisdiction; provided, however, that
prior to any such disclosure, the receiving party shall (a) assert the
confidential nature of the confidential information to the agency; (b)
immediately notify the disclosing party in writing of the agency's order or
request to disclose; and (c) cooperate fully with the disclosing party in
protecting against any such disclosure and/or obtaining a protective order
narrowing the scope of the compelled disclosure and protecting its
confidentiality.
22. PUBLICITY.
Seller shall not disclose, advertise, or publish the existence or the terms
or conditions of this Agreement, financial or otherwise, without the prior
written consent of 3Com.
23. FEDERAL ACQUISITION REGULATIONS.
In furnishing the Products hereunder, Seller agrees to comply with all
applicable Federal Acquisition Regulations (FARs) and related laws, rules,
regulations and executive orders in connection with its activities under this
Agreement, including, without limitation, the following FAR clauses: 52.222-26 -
Equal Opportunity, 52.222-35 - Affirmative Action for Special Disabled and
Vietnam Era Veterans and 52.222-36 - Affirmative Action for Handicapped Workers.
The Product is a "commercial item," as that term is defined at 48 C.F.R. 2.101
(Oct 1995), containing "commercial computer software" and "commercial computer
software documentation," as such terms are used in 48 C.F.R. 12.212 (Sep 1995)
and will be provided to the U.S. Government only as a commercial end item.
Consistent with 48 C.F.R. 12.212 and 48 C.F.R. 227.7202-1 through 227.7202-4
(Jun 1995), all U.S. Government end users acquire the Product Software
incorporated in the Product with only those rights set forth herein. Similar
restrictions will also be imposed on any licenses of Device Software to U.S.
Government End Users.
24. TERM AND TERMINATION.
24.1 TERM. This Agreement shall commence on the Effective Date and shall
continue for three (3) years thereafter, unless otherwise specified herein or
unless terminated sooner under the provisions set forth herein. Thereafter, this
Agreement shall automatically be renewed for
19.
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successive one (1) year terms, unless one party requests in writing at least
ninety (90) days prior to the expiration of the then current term, that this
Agreement not be so renewed.
24.2 TERMINATION FOR CAUSE. With the exception of the continuing
obligations, as set forth in Section 24.3, herein, either party shall have the
right to terminate this Agreement for cause as a result of:
24.2.1 The failure of the other party to perform any material
term or condition of this Agreement and to remedy such failure within sixty (60)
days after written notice of such failure given by the non-defaulting party; or
24.2.2 The filing by or against the other party of a petition
for liquidation under the U.S. Bankruptcy Code or corresponding laws or
procedures of any applicable jurisdiction; or
24.2.3 The filing by or against the other party of any other
proceeding concerning bankruptcy, insolvency, dissolution, cessation of
operations, or the like by the other party. If such proceeding is involuntary
and is contested in good faith, this Agreement shall terminate only after the
passage of one hundred twenty (120) days without the dismissal of such
proceedings; or
24.2.4 The voluntary or involuntary execution upon; the
assignment or conveyance to a liquidating agent, trustee, mortgages or assignee
of whatever description; or the making of any judicial levy against a
substantial percentage of the other party's assets, for the benefit of its
creditors; or
24.2.5 The appointment of a receiver, keeper, liquidator or
custodian of whatever sort of description, for all or a substantial portion of
the other party's assets; or
24.2.6 The termination, dissolution, insolvency or failure in
business of the other party, the distribution of a substantial portion of its
assets, or its cessation to continue all or substantially all of its business
affairs.
24.3 RIGHTS AND OBLIGATIONS UPON TERMINATION OR EXPIRATION.
(A) PAYMENT. The termination or expiration of this Agreement
shall in no way relieve either party from its obligations to pay the other any
sums accrued hereunder prior to such termination or expiration.
(B) RETURN OF DOCUMENTATION AND CONFIDENTIAL INFORMATION. Upon
any termination of this Agreement, each party shall immediately return to the
other party all documentation, confidential information and any other tangible
items in its possession or under its control evidencing the know-how of the
other party.
(C) LICENSE TERMINATION. Except as set forth in this Section
24.3, upon any termination of this Agreement, all licenses granted by either
party under this Agreement shall terminate.
20.
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(D) INVENTORY. Upon termination of this Agreement resulting from
a breach by Seller, 3Com shall be entitled to sell Devices manufactured prior to
the termination date hereof for a period of ninety (90) days following such
termination.
(E) ONGOING SUPPORT. Upon termination of this Agreement, 3Com
shall be entitled to provide reasonable support to customers; provided, however,
that such support shall not include any updates or upgrades to the Devices other
than minor error corrections or repairs.
(F) SURVIVAL. Except as set forth in the applicable section,
Sections 1, 3.3 (solely as set forth in Exhibit C), 7 (except Section 7.9), 8,
9, 16.10, 18.3, 18.4, 18.5, 20, 21, 24 and 26 shall survive any termination or
expiration of the Agreement for a period of five (5) years, notwithstanding the
foregoing, Section 21 shall survive for a period of fifteen (15) years following
termination or expiration of the Agreement for purposes of protecting the
confidentiality of the source code of the Seller Software and for any design
documents related to the Product or the Device.
25. MANUFACTURING RIGHTS.
25.1 MANUFACTURING LICENSE OPTION. 3Com may request to manufacture the
3Com Branded Product units instead of purchasing such units from Seller. In such
event, the parties agree to discuss in good faith the terms of such
manufacturing license. The failure to reach such agreement shall not constitute
a breach of the Agreement.
26. GENERAL.
26.1 RELATIONSHIP OF THE PARTIES. Each of the parties shall at all times
during the term of this Agreement act as, and shall represent itself to be, an
independent contractor, and not an agent or employee of the other.
26.2 ENTIRE AGREEMENT. This Agreement and Exhibits hereto are intended
as the complete, final and exclusive statement of the terms of the agreement
between the parties regarding the subject matter hereof and supersedes any and
all other prior or contemporaneous agreements or understandings, whether written
or oral, between them relating to the subject matter hereof. This Agreement may
not be modified except in writing executed by both parties. The terms and
conditions of this Agreement shall prevail notwithstanding any conflict with the
terms and conditions of any purchase order, acknowledgment or other instrument
submitted by 3Com or Seller.
26.3 FORCE MAJEURE. Neither party shall be liable to the other for any
alleged loss or damages resulting from failure to perform due to acts of God,
natural disasters, acts of civil or military authority, government priorities,
fire, floods, epidemics, quarantine, energy crises, war or riots. Each party
shall promptly notify the other party of such event. If Seller is unable to
deliver in accordance with agreed delivery schedule, 3Com may either (i) extend
the time of performance, or (ii) cancel the uncompleted portion of the purchase
order at no cost to 3Com.
26.4 NOTICES. Except for purchase orders and acknowledgments which may
be sent by normal carrier, all notices and communications hereunder are required
to be sent to the address
21.
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or facsimile number stated below (or such other address or facsimile number as
subsequently notified in writing to the other party): (i) by facsimile with
confirmation of transmission, (ii) personal same or next day delivery or (iii)
sent by commercial overnight courier with written verification of delivery. All
notices so given shall be deemed given upon the earlier of receipt or three (3)
days after dispatch.
Any notices sent to 3Com hereunder should be sent to:
3Com Corporation
4 Technology Drive
Westborough, MA 01581
Attn.: Al Brisard
Fax No. (508) 366-2214
with a copy to:
3Com Corporation
Legal Department
3800 Golf Road
Rolling Meadows, IL 60008
Attn.: Director of xDSL Legal Services
Fax No. (847) 262-0186
Any notices sent to Seller hereunder should be sent to:
Copper Mountain Networks, Inc.
2470 Embarcadero Way
Palo Alto, California 94303
Attention: Vice-President, Business Development
Voice: 650-858-8500, ext. 260
Fax: 650-858-8085
Fax Copies to: Copper Mountain Networks, Inc.
3931 Sorrento Valley Boulevard
San Diego, California 92121
Attention: Chief Financial Officer
Fax: 650- 453-9244
Cooley Godward LLP
3000 El Camino Real
Palo Alto, California 94306
Attention: Anthony Klein
Fax: 650-849-7400
26.5 WAIVER. A waiver of any default hereunder or of any of the terms
and conditions of this Agreement shall not be deemed to be a continuing waiver
or a waiver of any other default or of any other term or condition, but shall
apply solely to the instance to which such waiver is directed. The exercise of
any right or remedy provided in this Agreement shall be without
22.
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prejudice to the right to exercise any other right or remedy provided by law or
equity, except as expressly limited by this Agreement.
26.6 SEVERABILITY. In the event any provision of this Agreement is found
to be invalid, illegal or unenforceable, the validity, legality and
enforceability of any of the remaining provisions shall not in any way be
affected or impaired.
26.7 PRESS RELEASE. Promptly following, but in no event later than two
(2) weeks from, the Effective Date, the parties shall issue a mutually
acceptable joint press release announcing this transaction.
26.8 ASSIGNMENT. Neither party may assign or transfer this Agreement,
whether in whole or part, or any of its rights or obligations under this
Agreement without the prior written consent of the other, except that either
party may transfer all its rights and obligations to a successor in interest
upon a merger, reorganization, change of control, acquisition or sale of all or
substantially all its assets. Any attempted assignment without such written
consent shall be null and void.
26.9 PHOTOCOPY OF ORIGINAL. Neither party shall object to the use of a
photocopy of the original of this Agreement for the purpose of making any
required or allowed public filings.
26.10 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH, AND ALL DISPUTES HEREUNDER SHALL BE GOVERNED BY, THE LAWS OF THE STATE OF
CALIFORNIA, EXCEPT ITS CONFLICT OF LAW RULES. THE PARTIES HEREBY AGREE THAT THE
SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR SANTA CLARA COUNTY AND/OR THE
UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA SHALL HAVE
JURISDICTION AND VENUE OVER ANY CONTROVERSIES, PROCEEDINGS, OR DISPUTES IN
CONNECTION WITH THIS AGREEMENT. THE PARTIES EXCLUDE IN ITS ENTIRETY THE
APPLICATION TO THIS AGREEMENT OF THE UNITED NATIONS CONVENTION ON CONTRACTS FOR
THE INTERNATIONAL SALE OF GOODS.
26.11 ATTORNEY'S FEES. In any action to enforce this Agreement, the
prevailing party shall be awarded all arbitration costs or courts costs and
reasonable attorneys' fees incurred, including such costs and attorneys' fees
incurred in enforcing and collecting any judgment.
26.12 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
26.13 CHOICE OF LANGUAGE. The original of this Agreement has been written
in English and the governing language of this Agreement shall be English.
26.14 LIST OF EXHIBITS:
Exhibit A Product List and Prices
Exhibit B Product Specifications
Exhibit C Support Services
23.
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Exhibit D [***]
Exhibit E Marketing Commitments
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives effective as of the date first
above written.
3COM CORPORATION COPPER MOUNTAIN NETWORKS, INC.
By: /s/ BRIAN GALLAHER By: /s/ MICHAEL STAIGER
----------------------------- ---------------------------------
Printed Name: Brian Gallaher Printed Name: Michael O. Staiger
------------------- -----------------------
Title: VP & GM DSL Division Title: Vice President
-------------------------- ------------------------------
Date: 11/24/98 Date: 11/24/98
--------------------------- -------------------------------
24.
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with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
<PAGE>
EXHIBIT A
PRODUCT LIST AND PRICES
DESCRIPTION OF PRODUCTS
CR201
3Com Branded CR201
PRODUCT PRICE*
CR201 [***]
3Com Branded CR201 [***]
*This applies for both SDSL and IDSL versions of the Product.
The parties will endeavor in good faith to drive down the transfer pricing to
3Com to approximately [***] per unit by February 1, 1999. The parties will meet
frequently in the interim to discuss means by which the transfer price may be
reduced.
25.
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with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
<PAGE>
EXHIBIT B
PRODUCT SPECIFICATIONS
[To be agreed upon by the mutual consent of the parties within thirty (30) days
following the Effective Date.]
26.
<PAGE>
EXHIBIT C
SUPPORT SERVICES
1. [***]
2. DEFINITIONS.
AUTHORIZED CALLER. "Authorized Caller" means a person or persons designated
by 3Com as the technical/engineering support interface for the Products.
DESIGNATED SUPPORT ENGINEER. "Designated Support Engineer" means a person
or persons designated by Seller as the technical/engineering support interface
for the Products.
END USER. "End User" means a company or organization that uses 3Com
products in the operation of their business.
ERROR. "Error" means a defect in the Product which is reproducible and
which causes such Product not to function substantially in conformance with the
Specifications, end user documentation, or other related documentation,
including without limitation any functional specifications or other engineering
documentation for the Product, or commonly accepted operating principles as
defined by industry standards. Errors are classified according to the Problem
severity.
INCIDENT. "Incident" means a situation which necessitates an End User to
contact 3Com for assistance.
PROBLEM. "Problem" means any error, or any actual or perceived failure or
functional impairment that causes reduced functionality to the Product. Problems
are assigned a classification at the time of 3Com's initial contact with Seller.
Problem classifications may be changed based upon new information or customer
situation. Problems are classified by 3Com according to Severity level, based
upon Technical and/or Customer Sensitivity as follows:
SEVERITY 1: TECHNICAL: Production network failure which results in a
critical impact to business operations. No viable workaround is known. Customer
Sensitivity: Customer account is in jeopardy, and there is risk of losing
business.
27.
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with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
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SEVERITY 2: TECHNICAL: Critical production network service
interruption or degradation creating difficulty in the execution of a network
function which results in a critical impact to business operations. Customer
acceptable workaround is available. Customer Sensitivity: There is potential
risk of losing actual or future business.
SEVERITY 3: TECHNICAL: Significant system problems which prevent some
network functions from meeting the production specifications or cause particular
features or functionality to be inoperative. Some business operations are
impaired, but the network continues to function. Customer acceptable workaround
is available. Customer Sensitivity: The problem is impacting the customer's day
to day business; there is no risk of losing business.
SEVERITY 4: TECHNICAL: Enhancement requests for hardware, software,
manuals or electronic services. Customer Sensitivity: The problem is not
currently impacting the customer's day to day business, but may in the future;
there is no risk of losing business.
REPAIR. "Repair" means the repair or replacement of a Product or part.
SOFTWARE PATCH. "Software Patch" refers to executable software created and
made available to correct an Error or malfunction identified in a specific
version of software.
SOFTWARE UPDATE. "Software Update" means a formal software release (i)
which provides functionality enhancements, reliability enhancements, and other
modifications to the Product software or (ii) that is a maintenance release that
corrects deficiencies and/or bugs affecting performance to the published
specifications.
TECHNICAL SUPPORT LEVELS. "Level" means a certain class of service provided
to authorized resellers and end users. Definitions are as follows:
LEVEL ONE: First call support on all customer calls; technical support
staff answers technical inquiries regarding Products, and provides problem
diagnostics services for identifying Problems and generic application faults,
analysis, and where possible, Problem resolution.
LEVEL TWO: Specialist level technical support; technical
support/escalation staff performs Problem isolation and replication, lab
simulations and interoperability testing, provides remote diagnostics
capabilities and on-site troubleshooting, if required, and implements a solution
for a Problem that is not the result of a Product Error. In the case of a
Product Error, the technical staff is able to identify the source of the Error,
create a reproducible test case, and document the details of the Error for
escalation to Seller.
LEVEL THREE: Backup engineering and technical support; staff isolates
a Problem/ Error and implements a solution, including, but not limited to, a
Product change.
WORKAROUND. A "Workaround" is a feasible change in operating procedures
whereby an end user can avoid any deleterious effects of an Error.
28.
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3.
3.1 [***]
[***]
[***]
3.2 [***]
3.3 [***]
29.
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with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
<PAGE>
[***]
[***]
[***]
[***]
[***]
3.4 [***]
3.5 [***]
[***]
3.6 [***]
30.
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with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
<PAGE>
4.
4.1 [***]
4.2 [***]
4.3 [***]
4.4 [***]
4.5 [***]
4.6 [***]
31.
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with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
<PAGE>
(I) [***]
(II) [***]
(III) [***]
(IV) [***]
(V) [***]
4.7 [***]
4.8 [***]
5.
5.1 [***]
[***]
32.
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with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
<PAGE>
[***]
[***]
[***]
5.2 [***]
6.
[***]
33.
[***] = Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
<PAGE>
EXHIBIT D
[***]
1.
1.1 [***]
1.2 [***]The parties' respective project managers shall
participate in project review meetings as mutually agreed. Either party may
change its project manager from time to time upon notice to the other party.
2. TESTING.
2.1 [***], the parties will conduct product quality and DSL
Specification conformance testing in accordance with the Testing Criteria.
2.2 OTHER TESTING. 3Com will be responsible for obtaining or performing
all necessary government regulatory compliance testing and other testing and
certification necessary for the Device.
2.3 SELLER EQUIPMENT FOR TESTING. In addition to performing DSL
Specification conformance testing and such other testing responsibilities as the
parties may decide to allocate to Seller, Seller will provide 3Com with a DSL
access multiplexer ("DSLAM") with both SDSL and ISDL capability in a mutually
acceptable configuration at no charge to be utilized for the sole purpose of
testing [***] and for ongoing interoperability testing thereafter. This unit
will be kept current with the latest software and hardware as released by Seller
for beta and general availability. 3Com shall make no modifications to the DSLAM
or use it for any other purpose than the testing contemplated in this Section
2.3 for the Device or any other device or equipment upon which the parties
mutually agree. Upon expiration or termination of this Agreement for any reason,
3Com shall return the DSLAM to Seller.
3. MODIFICATIONS AND FUTURE DEVELOPMENTS.
3.1 CHANGES TO THE DSL SPECIFICATIONS. During the term hereof, changes
in telecommunications regulations or in DSL technology may require changes to
the DSL Specifications and therefore the Device. Should regulatory or other
changes affect the DSL Specifications, Seller shall notify 3Com of such changes,
or 3Com may propose such changes to
34.
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with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
<PAGE>
Seller. Any modification to the Device that could affect Seller-compatibility is
subject to approval by both parties. Seller and 3Com shall work together in
accordance with the procedures set forth in this Agreement to develop updated
Devices that conform to the modified DSL Specifications. 3Com agrees not to make
any modifications to the Devices that will affect the ability of the Devices to
operate in accordance with the DSL Specifications without Seller's prior written
consent.
3.2 [***]
35.
[***] = Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
<PAGE>
SCHEDULE A TO EXHIBIT D
[***]
DSL SPECIFICATIONS
to be attached as Attachment A-1
TESTING CRITERIA
to be attached as Attachment A-2
SELLER RESPONSIBILITIES:
1. [***]
2. [***]
3. [***]
4. [***]
5. [***]
3COM RESPONSIBILITIES.
1. [***]
2. [***]
3. [***]
4. [***]
5. [***]
[***]
36.
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with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
<PAGE>
EXHIBIT E
MARKETING COMMITMENTS
JOINT PR ACTIVITIES
1. In addition to the joint press release provided for in Section 26.7
of the Agreement, 3Com will issue a press release announcing the general
availability of the Device and 3Com will make available one or more marketing
personnel to take part with Seller marketing personnel in joint briefings of
industry analysts and editors.
2. During the term of the Agreement, all Press Release announcements
regarding the CR201 or the Device will include the following sentence in the
main body of the press release prior to the general "About 3Com" section:
"Copper Mountain Networks, Inc., has verified that the [3Com
product name] provides "CopperCompatible/TM/" interoperability
with Copper Mountain DSL equipment."
VAR CHANNEL ACTIVITIES
1. [***]
2. [***]
WWW ACTIVITIES
1. 3Com will create WWW pages to describe the Product and the Device.
On the 3Com WWW home page, 3Com will add an xDSL entry to the "Select a Product
Category" pull-down menu directing users to the pages which describe the Product
and the Device.
2. [***]
37.
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with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
<PAGE>
TRADE SHOW/DEMO ACTIVITIES
1. 3Com will provide Seller with samples of the 3Com Branded CR201 and
Devices and permission to display or demo each in Seller trade show booths, demo
suites, and at the Seller corporate demo room housed in Seller's offices. Seller
will not discuss or show 3Com in a negative manner when undertaking such
activities.
2. [***] At 3Com's option, Seller will make available personnel to
help staff this demo on a part-time basis. Seller acknowledges that the Seller
DSLAM does not have to be displayed or in public view at any such booth.
MISCELLANEOUS
1. 3Com will permit Seller to display 3Com Branded CR201 and Device
product descriptions and images in Seller promotional literature and on the
Seller WWW site, identified as 3Com products compatible with Seller DSLAMs.
38.
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with the Commission. Confidential treatment has been requested with
respect to the omitted portions.
<PAGE>
EXHIBIT 10.27
DEVELOPMENT, MANUFACTURING
AND SUPPLY AGREEMENT
THIS DEVELOPMENT, MANUFACTURING AND SUPPLY AGREEMENT, dated this 19th
day of May, 1998 (the "Effective Date"), is made by and between NETOPIA, INC, a
Delaware corporation ("Netopia"), and COPPER MOUNTAIN NETWORKS, INC., a
California corporation ("CMN").
RECITALS
1. Netopia and CMN wish to have Netopia develop a Digital Subscriber Line
("SDSL") Router to be sold under different product names by both Netopia
and CMN; and
2. CMN desires to sell to Netopia, and Netopia desires to purchase from CMN
and resell under Netopia's name, CMN's CopperRocket 201, an SDSL access
device on the terms and subject to the conditions set forth herein.
ACCORDINGLY, CMN and Netopia hereby agree as follows:
ARTICLE 1
DEFINITIONS; APPOINTMENT OF NETOPIA AND CMN;
DEVELOPMENT OBLIGATIONS
1.1 DEFINITIONS. The following definitions shall apply to this Agreement:
(A) "CARRIER" shall mean any Regional Bell Operating Company,
incumbent local exchange carrier or competitive local exchange carrier.
(B) "CONFIDENTIAL INFORMATION" means any confidential or
proprietary information of either party, including information related to the
Intellectual Property of either party, and any other information relating to any
composite, research project, work in process, future development, scientific,
engineering, manufacturing, marketing, business plan, financial or personnel
matter relating to either party, its present or future products, sales,
suppliers, Customers, employees, investors or business, whether in oral,
written, graphic or electronic form. Confidential Information shall not include
any information which the receiving party can prove by competent evidence:
(I) is now, or hereafter becomes, through no act or
failure to act on the part of the receiving party, generally known or available;
(II) is known by the receiving party at the time of
receiving such information, as evidenced by its records;
(III) is hereafter furnished to the receiving party by a
Third Party, as a matter of right and without restriction on disclosure;
1.
Confidential treatment has been requested for portions of this exhibit. The copy
filed herewith omits the information subject to the confidentiality request.
Omissions are designated as [***]. A complete version of this exhibit has been
filed separately with the Securities and Exchange Commission.
<PAGE>
(IV) is independently developed by the receiving party
without the aid, application or use of information of the other party; or
(V) is the subject of a written permission to disclose
provided by the disclosing party.
(C) "COPPERROCKET 201" shall mean the customized CMN SDSL access
device which CMN manufactures and markets under the "Copper Mountain
CopperRocket 201" product name, consistent with the specifications set forth in
Exhibit A, and which Netopia shall market under the "SDSL LAN Modem" product
name. The CMN part number for this product is 700-030-20.
(D) "CUSTOMERS" of (i) Netopia shall include Carriers, Resellers and
End Users, and (ii) CMN shall include Carriers and Resellers.
(E) "END USERS" shall mean final retail purchasers or licensees who
have acquired Products for their own use and not for resale, remarketing or
redistribution.
(F) "INTELLECTUAL PROPERTY" shall mean means all copyrights,
trademarks, service marks, trade secrets, patents, patent applications, moral
rights, contract rights, technology, know-how and other proprietary rights now
known or hereafter recognized.
(G) "PRODUCTS" shall mean the "SDSL Router" and "CopperRocket 201."
(H) "RESELLER" shall mean any value added reseller, distributor,
dealer or Internet Service Provider ("ISP") which, in the regular course of
business, resells or redistributes Products pursuant to an agreement with
Netopia or CMN.
(I) "SDSL NETWORK EQUIPMENT" shall refer collectively to SDSL access
devices (such as the CopperRocket 201) used in conjunction with central office
SDSL Multiplexor equipment developed by CMN and purchased by Carriers.
(J) "SDSL ROUTER" shall mean the product which Netopia develops and
manufactures pursuant to this Agreement, consistent with the specifications set
forth in Exhibit B, and which Netopia will market under the "Netopia SDSL
Router" product name and CMN will market under the "Copper Mountain CopperRocket
301" product name.
(K) "UPGRADE TO UNLIMITED VERSION" shall mean firmware and software
supplied by Netopia to End Users to upgrade from the 12-user version of the SDSL
Router to the unlimited user version of the SDSL Router. This upgrade can only
be installed by End Users on a post-sales basis.
1.2 APPOINTMENT OF NETOPIA AND CMN; SALE AND DISTRIBUTION.
(A) Netopia hereby grants to CMN the non-exclusive right to sell and
distribute worldwide the SDSL Router to its Customers during the term of this
2.
<PAGE>
Agreement. CMN hereby grants to Netopia the non-exclusive right to sell and
distribute worldwide the CopperRocket 201 to its Customers during the term of
this Agreement.
(B) Any Customer of either party may not reproduce or modify any of
the Products and shall abide by all the terms and conditions set forth herein
relating to the Products. Each party will take reasonable steps necessary to
insure that its Customers abide by such terms and conditions.
1.3 DEVELOPMENT AND MANUFACTURING OBLIGATIONS.
(A) In connection with the development of the SDSL Router, CMN will
provide Netopia all technical and product marketing documents required to allow
Netopia to develop, design, and manufacture the SDSL Router. In developing the
SDSL Router, Netopia will have access to CMN's Intellectual Property which may
be incorporated in the SDSL Router. CMN and Netopia will work cooperatively on
the development of the SDSL Router, and Netopia will consult with CMN on future
product development and enhancements. It is the intent of the parties that each
of Netopia and CMN will continue to own exclusively and maintain their
respective Intellectual Property, and that no transfer of ownership of any
Intellectual Property is intended by virtue of this Agreement. In the case of
software transferred by Netopia back to CMN for maintenance, in its core
CopperRocket 201 software code base, CMN shall retain full rights to these
modifications to its core software code base. During the course of
manufacturing, both companies will notify the other of any changes in the form,
fit, or function of the SDSL Router hardware or firmware or CopperRocket 201
hardware or firmware.
(B) In consideration of CMN granting Netopia access to and the right
to use certain CMN Intellectual Property in connection with development of the
SDSL Router, Netopia agrees that it will pay CMN royalties, as set forth in
Exhibit C, for all sales of the SDSL Router made by Netopia, excluding sales to
CMN of the version of the SDSL Router to be marketed by CMN under the
CopperRocket 301 product name. The obligation of Netopia to pay royalties to CMN
shall expire at such time as the parties agree in writing that CMN's SDSL
Network Equipment has become an industry standard. For example, CMN's SDSL
Network Equipment shall be considered an industry standard if a mutually
recognized standards body adopts CMN's SDSL Network Equipment as an industry
standard. If CMN provides substantially the same Intellectual Property to a
third party that CMN provides to Netopia pursuant to the terms of this Agreement
on more favorable pricing terms or free of charge, then Netopia's obligation to
pay royalties to CMN hereunder shall expire upon such transfer of Intellectual
Property to such third party.
(C) Netopia will be the sole manufacturer of the SDSL Router. CMN
will be the sole manufacturer of the CopperRocket 201. CMN agrees that it will
reimburse Netopia for all non-recurring manufacturing expenditures associated
with CMN's unique manufacturing requirements for the SDSL Router, including, but
not limited to, producing the user's guide and packaging materials, as well as
any additional system or manufacturing testing that CMN requires. Netopia agrees
that it will reimburse CMN for all non-recurring manufacturing expenditures
associated with Netopia's unique manufacturing requirements for the CopperRocket
201, including, but not limited to, producing the user's guide and packaging
materials, as well as any additional system or
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manufacturing testing that Netopia requires. It is the intent of the parties
that the SDSL Router as marketed and sold by Netopia and CMN shall be
functionally identical, and that the CopperRocket 201 as sold by Netopia and CMN
shall be functionally identical.
ARTICLE 2
PURCHASE ORDERS
2.1 ISSUANCE AND ACCEPTANCE OF PURCHASE ORDERS. The parties may purchase
Products as described below:
(A) CMN shall place orders for the SDSL Router, and Netopia shall
place orders for the CopperRocket 201, pursuant to written purchase orders
("Purchase Order(s)"). Each Purchase Order shall specify: (i) Product model and
part number; (ii) price; (iii) quantity requested; (iv) requested shipment
dates; and (v) exact "ship-to" and "invoice-to" addresses. To the extent that
any such Purchase Order contains terms or conditions inconsistent with the terms
of this Agreement, such inconsistent terms and conditions are hereby deemed
rejected without further action by the selling party. Purchase orders may be
placed by fax or electronically transferred provided that it is followed by a
written confirmation within five (5) working days. Such written confirmation
shall be clearly marked "Confirmation of Prior Order". It is the intent of the
parties that a Purchase Order will be placed by each party at least once every
ninety (90) days to reflect such party's expected purchases during the
succeeding ninety (90) day period.
(B) All Purchase Orders are subject to written acceptance by the
selling party at its principal place of business.
(C) Minimum Purchase Order amount is three hundred (300) units of a
Product. Each Purchase Order may request delivery over a six month period;
provided, however, that the minimum shipment quantity is fifty (50) units of a
Product. The Purchase Order can mix and match any product defined in Exhibit C
so long as the total order is equal to or greater than 300 units.
(D) CMN acknowledges that Netopia's current standard lead time to
fulfill a Purchase Order for SDSL Routers is twelve (12) weeks, and Netopia
acknowledges that CMN's current standard lead time to fulfill a Purchase Order
for CopperRocket 201s is ten (10) weeks. Notwithstanding the foregoing, the
parties will exercise their best efforts to fulfill Purchase Orders in an
expeditious manner.
2.2 PARTIAL SHIPMENTS. Unless the purchasing party clearly advises the
selling party to the contrary in writing, and subject to the provisions of
Section 2.1(c), the selling party may make partial shipments on account of the
purchasing party's Purchase Orders, which shipments shall be separately invoiced
and paid for when due, without regard to subsequent deliveries. Delay in
delivery of any partial installment shall not relieve the purchasing party of
its obligation to accept the remaining installments. Accepted Purchase Orders
for any Product not shipped during the month for which delivery was
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scheduled will remain in effect, unless canceled in whole or in part by either
party upon written notice to the other party.
ARTICLE 3
DELIVERY AND ACCEPTANCE OF PRODUCTS
3.1 DEFECTIVE PRODUCTS. In the event any Products are rejected because
they have been received in a defective condition, the purchasing party may
return the Products for full credit or exchange, at the selling party's option,
consistent with the selling party's standard return procedures.
3.2 TRANSPORTATION OF PRODUCTS. The selling party shall deliver the
Products to the purchasing party at the location shown and on the delivery date
set forth in the applicable Purchase Order or as otherwise agreed upon by the
parties. Charges for transportation of the Products shall be paid by the
purchasing party. The selling party shall use only those common carriers pre-
approved by the purchasing party or listed in the purchasing party's published
routing instructions, unless prior written approval of the purchasing party is
received. In the absence of specific instructions, the selling party will select
the common carrier, but such common carrier shall not be the agent of the
selling party, nor shall the selling party assume any liability with regard to
any shipment. The selling party shall not be liable for any damages or penalty
for delay in delivery by the common carrier.
3.3 TITLE AND RISK OF LOSS. Title (subject to Section 9.3) and risk of
loss or damage to Products shall pass to the purchasing party at the time that
the Products are delivered to a common carrier for delivery to the purchasing
party.
ARTICLE 4
REPRESENTATIONS, WARRANTIES,
INDEMNITIES AND LIABILITIES
4.1 USE OF INTELLECTUAL PROPERTY. Each party hereby represents and
warrants that it shall use the other party's Intellectual Property only to the
extent required to accomplish the purposes of this Agreement, and not for any
other purpose whatsoever.
4.2 WARRANTY.
(A) For a period of one (1) year after delivery, Netopia warrants
to CMN that the SDSL Routers shall be free from material defects in workmanship
and materials under normal use and service and shall operate substantially in
accordance with the specifications set forth in Exhibit B and in the
documentation provided to CMN. This warranty does not apply to any SDSL Router
that (a) has been altered, modified, or improperly repaired by anyone other than
Netopia, (b) has been the subject of misuse, negligence, accident, or improper
storage or installation, or (c) has been used or maintained in any manner other
than in accordance with documentation provided by Netopia. Netopia shall repair
or replace any defective SDSL Router returned by CMN during such one (1) year
period.
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(B) For a period of one (1) year after delivery, CMN warrants to
Netopia that the CopperRocket 201s shall be free from material defects in
workmanship and materials under normal use and service and shall operate
substantially in accordance with the specifications set forth in Exhibit A and
in the documentation provided to Netopia. This warranty does not apply to any
CopperRocket 201 that (a) has been altered, modified, or improperly repaired by
anyone other than CMN, (b) has been the subject of misuse, negligence, accident,
or improper storage or installation, or (c) has been used or maintained in any
manner other than in accordance with documentation provided by CMN. CMN will
repair or replace any defective CopperRocket 201 returned by Netopia during such
one (1) year period.
(C) Each party's sole obligation under the warranties set forth
herein shall be to repair or replace defective Products, or, at the selling
party's sole option, to refund the applicable purchase price paid for a
defective Product.
(D) THE WARRANTIES DESCRIBED OR REFERRED TO HEREIN ARE THE FULL
AND COMPLETE STATEMENTS OF WARRANTY ASSOCIATED WITH THE SDSL ROUTER AND NETOPIA
HEREBY SPECIFICALLY DISCLAIMS ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED, WITH
REGARD TO THE SDSL ROUTER. NETOPIA SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES
OF NONINFRINGEMENT, MERCHANTABILITY OR FITNESS OF THE SDSL ROUTER FOR A
PARTICULAR PURPOSE OR USE BY CMN OR CUSTOMERS OF CMN. THE LIABILITY OF NETOPIA,
ITS AGENTS, REPRESENTATIVES AND EMPLOYEES TO CMN FOR DAMAGES OR ALLEGED DAMAGES
WHETHER IN CONTRACT (INCLUDING BREACH OF WARRANTY) OR TORT (INCLUDING STRICT
LIABILITY AND NEGLIGENCE) WITH RESPECT TO THE SDSL ROUTER IS LIMITED TO AND
SHALL NOT EXCEED THE AMOUNT PAID BY CMN FOR THE PARTICULAR PRODUCT GIVING RISE
TO THE DAMAGES.
(E) THE WARRANTIES DESCRIBED OR REFERRED TO HEREIN ARE THE FULL
AND COMPLETE STATEMENTS OF WARRANTY ASSOCIATED WITH THE COPPERROCKET 201 AND CMN
HEREBY SPECIFICALLY DISCLAIMS ALL OTHER WARRANTIES, EXPRESSED OR IMPLIED, WITH
REGARD TO THE COPPERROCKET 201. CMN SPECIFICALLY DISCLAIMS ANY IMPLIED
WARRANTIES OF NONINFRINGEMENT, MERCHANTABILITY OR FITNESS OF THE COPPERROCKET
201 FOR A PARTICULAR PURPOSE OR USE BY CMN OR CUSTOMERS OF NETOPIA. THE
LIABILITY OF CMN, ITS AGENTS, REPRESENTATIVES AND EMPLOYEES TO CMN FOR DAMAGES
OR ALLEGED DAMAGES WHETHER IN CONTRACT (INCLUDING BREACH OF WARRANTY) OR TORT
(INCLUDING STRICT LIABILITY AND NEGLIGENCE) WITH RESPECT TO THE COPPERROCKET 201
IS LIMITED TO AND SHALL NOT EXCEED THE AMOUNT PAID BY NETOPIA FOR THE PARTICULAR
PRODUCT GIVING RISE TO THE DAMAGES.
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4.3 PROPRIETARY RIGHTS INDEMNIFICATION.
(A) Subject to CMN's compliance with Section 4.3(b), Netopia
hereby represents and warrants that the SDSL Router and its sale and use
hereunder do not infringe upon any copyright or trade secret of any third party.
Netopia shall defend, indemnify and hold CMN and its directors, officers,
employees and agents harmless from and against any suit, claim, action, demand,
liability, loss, cost or expense (including reasonable legal expenses and
attorney's fees) finally awarded by a court or tribunal of competent
jurisdiction resulting from or arising directly or indirectly out of any breach
of the foregoing warranties; provided that Netopia is promptly informed and
furnished a copy of each communication, notice or other action relating to the
alleged breach and is given authority, information and assistance necessary to
defend or settle said suit or proceeding.
(B) CMN hereby represents and warrants that the CopperRocket 201
and its sale and use hereunder do not infringe upon any copyright or trade
secret of any third party. CMN further represents and warrants that CMN has all
rights necessary to provide the Intellectual Property made available to Netopia
in connection with the development of the SDSL Router. CMN shall defend,
indemnify and hold Netopia and its directors, officers, employees and agents
harmless from and against any suit, claim, action, demand, liability, loss, cost
or expense (including legal expenses and reasonable attorney's fees) finally
awarded by a court or tribunal of competent jurisdiction resulting from or
arising directly or indirectly out of any breach of the foregoing warranties;
provided that CMN is promptly informed and furnished a copy of each
communication, notice or other action relating to the alleged breach and is
given authority, information and assistance necessary to defend or settle said
suit or proceeding.
(C) Netopia shall have the right, at its sole option and at its
expense, to either (i) procure for CMN the right to continue to use the
infringing SDSL Router as set forth in this Agreement, or (ii) replace or modify
the infringing SDSL Router to make its use non-infringing while being capable of
performing the same function without degradation of performance. Netopia shall
have no liability under this Section 4.3 for any infringement based on the use
of the SDSL Router with any other products not provided by Netopia; if the SDSL
Router is not used in a manner for which it was not designed; if the SDSL Router
is used in an infringing process; or if the claimed infringement arises out of
information or materials delivered by CMN to Netopia in connection with
development of the SDSL Router, or from a modification of the SDSL Router after
delivery by Netopia. Netopia's obligations hereunder shall not apply to any
infringement occurring after Netopia has received notice alleging the
infringement unless Netopia has given CMN written permission for such continuing
infringement.
(D) CMN shall have the right, at its sole option and at its
expense, to either (i) procure for Netopia the right to continue to use the
infringing CopperRocket 201 as set forth in this Agreement, or (ii) replace or
modify the infringing CopperRocket 201 to make its use non-infringing while
being capable of performing the same function without degradation of
performance. Netopia shall have no liability under this Section for any
infringement based on the use of the CopperRocket 201 with any other products
not
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provided by CMN; if the CopperRocket 201 is not used in a manner for which it
was not designed; if the CopperRocket 201 is used in an infringing process; or
if the claimed infringement arises from a modification of the CopperRocket 201
after delivery by CMN. CMN's obligations hereunder shall not apply to any
infringement occurring after CMN has received notice alleging the infringement
unless CMN has given Netopia written permission for such continuing
infringement.
(E) The foregoing states each party's entire liability with regard
to infringement of either party's Intellectual Property.
4.4 LIMITATION OF LIABILITY. NOTWITHSTANDING ANYTHING TO THE CONTRARY
HEREIN, NEITHER PARTY NOR ITS AGENTS, REPRESENTATIVES OR EMPLOYEES SHALL BE
LIABLE TO THE OTHER PURSUANT TO THIS AGREEMENT FOR AMOUNTS REPRESENTING LOSS OF
REVENUES, LOSS OF PROFITS, LOSS OF BUSINESS, LOSS OF USE OR INDIRECT,
CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES OF THE OTHER PARTY, EVEN IF THE OTHER
PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
ARTICLE 5
PRICES AND PAYMENT
5.1 PRICES FOR PRODUCTS.
(A) Prices for Products shall be determined as set forth in
Exhibit C. With respect to sales to Customers, neither party shall be bound by
any of the other party's suggested list prices. The terms and conditions of
payment set forth in this Agreement shall apply to all purchases of the SDSL
Router by CMN from Netopia and all purchases of the CopperRocket 201 by Netopia
from CMN, irrespective of any provisions in either party's Purchase Orders or
other business forms.
(B) Subject to any other written agreement of the parties, each
party has the right at any time to change Customer list prices for the Products
and to issue new applicable price lists or bulletins. Each party will honor all
orders accepted prior to the effectiveness of any price increase; provided and
to the extent that such orders call for delivery within thirty days from the
placement of the order. All Products for delivery later than thirty (30) days
will be at the new price. In the event that prices decrease, the purchasing
party shall pay the new lower price for all Product shipments after the
effective date of the price decrease.
5.2 PAYMENT.
(A) Terms of payment are net 30 days from date of invoice.
Invoices not paid within 30 days from date of invoice shall be subject to a one
and one half percent (1.5%) per month late payment charge (or in the event such
late payment charge is deemed to be interest, the maximum interest rate
permitted by law, whichever is lower) on the overdue amount from date of invoice
to the date of payment.
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(B) In addition to any other right or remedy, either party at its
option may require payment upon delivery on any Purchase Order placed by the
other party if, in the opinion of the selling party, the purchasing party's
credit has become impaired. The selling party also may cancel any accepted
Purchase Orders or refuse or delay shipment of any accepted Purchase Orders if
the purchasing party continues to be delinquent in payment of its obligations
ten (10) days after the purchasing party's receipt of written notice from the
selling party regarding such delinquency. The cancellation of any such Purchase
Orders or the withholding of shipments shall not be construed as a termination
(unless the selling party so advises the purchasing party) or breach of this
Agreement by the purchasing party.
(C) With respect to the royalty payments to be paid by Netopia to
CMN for sales of the SDSL Router by Netopia, as described in Exhibit C, Netopia
shall make all royalty payments on a quarterly basis, within thirty (30) days
after the end of each calendar quarter. The parties expressly agree that Netopia
shall make royalty payments only with respect to sales of the SDSL Router
marketed under the Netopia SDSL Router product name, and that no royalties shall
be owed or payable with respect to sales of the SDSL Router marketed under the
Copper Mountain CopperRocket 301 product name. As provided in Exhibit C, Netopia
shall pay royalties at a different and higher rate with respect to sales by
Netopia of the SDSL Router to Carriers that have been referred to Netopia by
CMN. Such higher rate royalties shall only be payable by Netopia to CMN for
sales to Carriers that purchase more than two hundred fifty (250) units of the
SDSL Router in any and all ninety (90) day periods beginning with the initial
Purchase Order placed by such Carrier and the first such purchase is made within
six months after CMN notifies Netopia in writing that it has referred the
Carrier as a prospective Customer to Netopia. Notwithstanding the foregoing, as
provided in Section 1.3(b), the obligation of Netopia to pay royalties to CMN
shall expire at such time as the parties agree in writing that CMN's
implementation of the SDSL technology has become an industry standard.
5.3 RECORDS AND AUDITS. During the term of this Agreement and for a period
of two years thereafter, Netopia shall keep complete and accurate records in
sufficient detail to permit CMN to confirm the accuracy of all payments due
hereunder. CMN shall have the right to cause an independent, certified public
accountant reasonably acceptable to Netopia to audit such records to confirm
royalty payments for the preceding year. Such audits may be exercised during
normal business hours no more than once in any 12-month period upon at least 30
days' prior written notice to Netopia. CMN shall bear the full cost of such
audit unless such audit discloses an underpayment by more than five percent (5%)
of the amount due under this Agreement. In such case, Netopia shall bear the
full cost of such audit.
5.4 TAXES. Prices in Exhibit C do not include sales taxes which shall be
the sole and exclusive responsibility of the purchasing party. Concurrently with
the execution hereof, the purchasing party shall provide the selling party with
valid reseller certifications. However, any taxes which may arise from the sale
of Products will be retroactively added to prices in the event the selling party
becomes liable to pay or bear the burden thereof, other than taxes relating to
the selling party's income. Should the selling party not bill taxes at the time
of sale, the purchasing party shall be deemed to
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have agreed to pay promptly such taxes whenever billed, irrespective of the
reason for late billing.
5.5 REPORTS. Each party will provide ninety (90) day rolling forecasts by
Product to the other party by the 1st day of each month. In addition, each
party will provide quarterly inventory-on-hand reports and quarterly sales-out
reports by Customer to the other party within forty-five (45) days after the end
of each calendar quarter. All such information shall be deemed Confidential
Information of CMN and Netopia, as applicable, as provided in Section 9.1
hereof.
ARTICLE 6
TERM AND TERMINATION
6.1 TERM OF AGREEMENT. The term of this Agreement shall commence on the
Effective Date and, unless terminated earlier by either party as set forth in
this Agreement, shall remain in full force and effect for a term of three (3)
years, and may be amended in writing for successive one (1) year terms.
6.2 TERMINATION. Either party may terminate this Agreement if any of the
following events of default occur: (a) if either party materially fails to
perform or comply with this Agreement or any provision hereof; (b) if either
party becomes insolvent or admits in writing its inability to pay its debts as
they mature, or makes an assignment for the benefit of creditors; (c) if a
petition under any foreign, state, or United States bankruptcy act, receivership
statute, or the like, as they now exist, or as they may be amended, is filed by
each party; or (d) if such a petition is filed by any third party, or an
application for a receiver of either party is made by anyone and such petition
or application is not resolved favorably to such party within sixty (60) days.
6.3 MANNER OF TERMINATION. Termination due to a breach of Sections 1.1(a),
8.1, 8.2 (a), 9.1, or an assignment in violation of 9.4 shall be effective upon
notice. In all other cases termination shall be effective thirty (30) days after
notice of termination to the defaulting party if the defaults have not been
cured within such thirty (30) day period. The rights and remedies of the parties
provided herein shall not be exclusive and are in addition to any other rights
and remedies provided by law or this Agreement.
6.4 RIGHTS UPON TERMINATION. Upon termination of this Agreement, the due
date of all invoices for Products shall automatically be accelerated so that
they shall become due and payable on the effective date of termination, even if
longer terms had been provided previously. Upon termination or natural
expiration of this Agreement, (a) CMN shall discontinue holding itself out as a
distributor or seller of the SDSL Router, (b) CMN shall discontinue all use of
Netopia trademark(s) and, upon request, deliver to Netopia or destroy all
material upon which such name(s) and the associated trademarks appear, and (c)
CMN shall promptly return to Netopia all Netopia Software, documentation and
Confidential Information supplied hereunder. Upon termination or natural
expiration of this Agreement, (a) Netopia shall discontinue holding itself out
as a distributor or seller of the CopperRocket 201, (b) Netopia shall
discontinue all use of CMN trademark(s) and, upon request, deliver to CMN or
destroy all material upon which
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such name(s) and the associated trademarks appear, and (c) Netopia shall
promptly return to CMN all software, documentation and Confidential Information
supplied by CMN to Netopia hereunder.
6.5 EFFECT OF TERMINATION. Expiration or termination of this Agreement
shall not relieve the parties of any obligation accruing prior to such
expiration or termination.
ARTICLE 7
OBLIGATIONS OF THE PARTIES
In addition to the other obligations of the parties set forth in this
Agreement:
7.1 CMN shall:
(A) use commercially reasonable efforts to promote sales of the
SDSL Router and to provide referrals to Netopia of prospective Carrier
customers;
(B) comply with all applicable local and federal laws and
regulations;
(C) employ and train a sufficient number of people (i) market and
support the SDSL Router, and (ii) to carry out all other obligations and
responsibilities of CMN under this Agreement;
(D) employ and train sales personnel with extensive technical
knowledge of computer products in general, and reasonably extensive knowledge of
the SDSL Router, in particular, and shall direct its employees to take part in
educational programs which may be established by Netopia;
(E) furnish Netopia, at its reasonable request, specification
sheets, literature and other advertising materials and technical data for CMN's
entire product line as appropriate;
(F) meet with Netopia no less than every 90 days to conduct a
sales, marketing, R&D, and operations review; and
(G) use its best efforts to ensure continued interoperability
between the Products, and other CMN DSLAM equipment, regardless of whether this
Agreement has terminated or expired.
7.2 Netopia shall:
(A) use commercially reasonable efforts to promote sales of the
CopperRocket 201;
(B) comply with all applicable local and federal laws and
regulations;
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(C) employ and train a sufficient number of people (i) to service
market and support the CopperRocket 201, and (ii) to carry out the obligations
and responsibilities of Netopia under this Agreement;
(D) employ and train sales personnel with extensive technical
knowledge of computer products, in general, and reasonably extensive knowledge
of the CopperRocket 201 in particular, and shall direct its employees to take
part in educational programs which may be established by CMN;
(E) furnish CMN, at its reasonable request, specification sheets,
literature and other advertising materials and technical data for Netopia's
entire product line as appropriate;
(F) meet with CMN no less than every 90 days to conduct a sales,
marketing, R&D, and operations review; and
(G) use its best efforts to ensure continued interoperability
between the Products, and other CMN DSLAM equipment, regardless of whether this
Agreement has terminated or expired.
7.3 MARKETING ACTIVITIES. In addition to the obligations set forth above,
the parties will work cooperatively with respect to marketing activities for the
Products. Specifically, CMN will assist Netopia in its marketing to its
Customers, and Netopia will assist CMN in its marketing to its Customers. The
parties will confer on a regular basis regarding their respective marketing
assistance activities in order to maximize each party's sales of the Products.
7.4 CUSTOMER SUPPORT. Each party will provide free training to the other
party's customer support personnel. The escalation procedure for
transmission-related problems relating to the CopperRocket 201 or the SDSL
Router will be to the Carrier and then to CMN. Escalation procedure for all
routing-related problems relating to all SDSL Router Products covered hereunder
will be to the Carrier and then to Netopia.
ARTICLE 8
LABELING , TRADEMARKS AND TRADENAMES
8.1 TRADEMARK USAGE.
(A) CMN shall market the SDSL Router under the product name
"Copper Mountain CopperRocket 301." CMN will include Netopia's trademark on the
packaging of the SDSL Router as agreed between the parties. CMN's use of any
Netopia trademark or tradename on or in connection with the SDSL Router shall be
as agreed in writing between the parties. CMN agrees to use the appropriate
trademark symbol (either "" or "(R)" in a superscript) and clearly indicate
Netopia's ownership of its trademark(s) whenever the SDSL Router is first
mentioned in any advertisement, brochure or in any other manner in connection
with the SDSL Router. CMN shall not, at any time, use any name or trademark
confusingly similar to a Netopia trademark, trade name and/or product name and
agrees that its use of such Netopia trademark(s), trade name(s) and/or product
name(s) shall not directly or indirectly create in or for CMN any right, title
or interest therein. CMN shall not use or imitate the trade dress of Netopia
products. CMN
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shall undertake no action that will interfere with or diminish Netopia's right,
title and/or interest in Netopia's trademark(s) or trade name(s). Netopia
shall have the right to control all aspects of the manner in which its
trademarks are used and CMN will comply with all published guidelines, now or
hereafter, relating to Netopia trademark usage.
(B) CMN shall submit the SDSL Router in proposed finished goods
form, consistent with the specifications set forth in Exhibit B, to Netopia for
approval prior to distribution, which approval shall not be unreasonably
withheld. CMN shall, upon request, provide Netopia samples of all CMN literature
which uses a Netopia trademark or tradename. Upon request, from time to time,
CMN shall provide Netopia with a copy of the SDSL Router in finished goods form.
To the extent that the CMN materials contain any Confidential Information, such
information shall be fully subject to the confidentiality provisions hereof.
(C) Netopia shall market the CopperRocket 201 under the product
name "Netopia SDSL LAN Modem." Netopia will include CMN's trademark on the
packaging of the CopperRocket 201 as agreed between the parties. Netopia's use
of any CMN trademark or tradename on or in connection with the CopperRocket 201
shall be as agreed in writing between the parties. Netopia agrees to use the
appropriate trademark symbol (either "" or "(R)" in a superscript) and clearly
indicate CMN's ownership of its trademark(s) whenever the CopperRocket 201 is
first mentioned in any advertisement, brochure or in any other manner in
connection with the CopperRocket 201. Netopia shall not, at any time, use any
name or trademark confusingly similar to a CMN trademark, trade name and/or
product name and agrees that its use of such CMN trademark(s), trade name(s)
and/or product name(s) shall not directly or indirectly create in or for Netopia
any right, title or interest therein. Netopia shall not use or imitate the trade
dress of CMN products. Netopia shall undertake no action that will interfere
with or diminish CMN's right, title and/or interest in CMN's trademark(s) or
trade name(s). CMN shall have the right to control all aspects of the manner in
which its trademarks are used and Netopia will comply with all published
guidelines, now or hereafter, relating to CMN trademark usage.
(D) Netopia shall submit the CopperRocket 201 in proposed finished
goods form to CMN for approval prior to distribution, which approval shall not
be unreasonably withheld. Netopia shall, upon request, provide CMN samples of
all Netopia literature which uses a CMN trademark or tradename. Upon request,
from time to time, Netopia shall provide CMN with a copy of the CopperRocket 201
in finished goods form. To the extent that the Netopia materials contain any
Confidential Information, such information shall be fully subject to the
confidentiality provisions hereof.
ARTICLE 9
MISCELLANEOUS
9.1 CONFIDENTIAL INFORMATION. Each party acknowledges that in the course
of performance of its obligations pursuant to this Agreement, it may obtain
certain Confidential Information of the other party. During the term of this
Agreement and for a
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period of five (5) years thereafter, each party hereby agrees that it shall hold
all such Confidential Information disclosed to it by the other party, its
subsidiaries, or Customers, whether before or after the Effective Date, in
strict confidence and shall use such Confidential Information solely for the
purposes specified in this Agreement. Neither party shall duplicate or disclose
to any third party any Confidential Information of the other party without the
other party's prior written consent. Upon termination of this Agreement, each
party shall upon request return to the other party all Confidential Information
(including all copies thereof) then in each party's possession, custody or
control. The obligations of confidentiality contained in this Agreement shall
not apply with respect to any information to the extent the receiving party can
demonstrate by competent evidence that (a) the receiving party is required to
disclose such information by law or by order of a court of competent
jurisdiction, (b) the disclosed information has become part of the public domain
other than as a result of actions of the receiving party or its affiliates in
violation hereof, (c) that the disclosed information is already in the
possession of the receiving party without obligation of confidence, (d) the
disclosed information has been independently developed by the receiving party,
or (e) the disclosed information is rightfully received from a third party
without obligation of confidence. The provisions of this Section 9.1 shall
survive the term of termination of this Agreement for any reason.
9.2 BUSINESS CONDUCT. The parties each agree to (a) conduct business in a
manner which reflects favorably at all times on the products, goodwill and
reputation of the other party; (b) avoid deceptive, misleading or unethical
practices which are or might be detrimental to the other party or its products;
(c) make no false or misleading representations with regard to the other party
or its products, and (d) make no representations or warranties to End Users or
the computer industry with respect to the specifications, features or
capabilities of Products that are inconsistent with literature distributed by
the selling party or without the prior written approval of the selling party.
In addition, Netopia will use its best efforts to impose professional standards
on its Resellers consistent with the foregoing standards.
9.3 ASSIGNMENT. Neither the rights nor obligations arising under this
Agreement are assignable or delegable by either party without the prior written
consent of the other party (which shall not be unreasonably withheld), and any
such attempted assignment or delegation shall be void and without effect.
Notwithstanding the foregoing, this Agreement may be assigned by either party
without the other party's consent by operation of law or in connection with a
merger or reorganization or to any third party acquiring substantially all of
the assets of either party, provided that the successor entity agrees in writing
to perform all obligations of the assigning party. Subject to the foregoing,
this Agreement shall be binding upon and inure to the benefit of the parties
hereto, their permitted successors and assigns.
9.4 COUNTERPARTS. This Agreement may be executed in several counterparts,
all of which taken together shall constitute one single agreement between the
parties.
9.5 HEADINGS. The Article and Section headings used in this Agreement are
for reference and convenience only and shall not enter into the interpretation
hereof.
14.
<PAGE>
9.6 RELATIONSHIP OF PARTIES. It is expressly agreed that CMN and Netopia
shall be independent contractors and that the relationship between the two
parties shall not constitute a partnership, joint venture or agency of any kind.
Neither party shall have the authority to make any statements, representations
or commitments of any kind, or to take any action, which shall be binding on the
other, without the prior written consent of the other party.
9.7 ARBITRATION. Any dispute, controversy, claim or question arising out
of or relating to this Agreement, or the breach thereof, but specifically
excluding disputes about money owed, shall be settled by arbitration in Santa
Clara County, California, in accordance with the rules then in effect of the
American Arbitration Association. The decision of the arbitrator(s) shall be
final and binding and judgment upon the award rendered may be entered by any
court having jurisdiction thereof. Neither CMN nor Netopia will cease its
obligations under this Agreement during any arbitration proceedings, except by
mutual agreement.
9.8 JURISDICTION AND VENUE. The federal and state courts sitting in Santa
Clara County, California shall have exclusive jurisdiction over any disputes
arising out of this Agreement, and each party hereby expressly consents to the
exercise of personal jurisdiction over it by such courts.
9.9 NOTICES. Any notices or communications provided for in this Agreement
to be made by either of the parties to the other shall be in writing and
delivered personally or sent by registered or certified mail, postage paid, by
overnight delivery service such as FedEx or UPS or by facsimile, with
confirmation of receipt, addressed as follows:
In the case of Netopia: In the Case of CMN:
Netopia, Inc. Copper Mountain Networks, Inc.
2470 Mariner Square Loop 3931 Sorrento Valley Boulevard
Alameda, CA 94608 San Diego, CA 92121-1402
Attn: Chief Financial Officer Attn: Chief Financial Officer
Either party may from time to time change its address for notification
purposes by giving the other party written notice of the new address and the
date upon which it will become effective. Notices sent by facsimile shall be
effective upon confirmation of receipt, notices sent by mail or overnight
delivery service shall be effective upon receipt, and notices given personally
shall be effective when delivered.
9.10 FORCE MAJEURE. Nonperformance of either party (other than nonpayment)
shall be excused to the extent that performance is rendered impossible by act of
God, war, strike, fire, flood, earthquake, natural disasters, labor disruptions,
materials shortages, governmental acts or orders or restrictions, or any other
event is beyond the reasonable control and not caused by the negligence of the
non-performing party.
9.11 SEVERABILITY. If, but only to the extent that, any provision of this
Agreement is declared or found to be illegal, unenforceable or void, then both
parties shall be relieved of all obligations arising under such provision, it
being the intent and
15.
<PAGE>
agreement of the parties that this Agreement shall be deemed amended by
modifying such provision, to the extent necessary to make it legal and
enforceable while preserving its intent.
9.12 WAIVER. A waiver by either of the parties of any covenants, conditions
or agreements to be performed by the other or any breach thereof shall not be
construed to be a waiver of any succeeding breach thereof or of any other
covenant, condition or agreement herein contained.
9.13 REMEDIES. All remedies set forth in this Agreement shall be cumulative
and in addition to and not in lieu of any other remedies available to either
party at law, in equity or otherwise, and may be enforced concurrently or from
time to time.
9.14 SURVIVAL OF TERMS. Termination or expiration of this Agreement for any
reason shall not release either party from any liabilities or obligations set
forth in this Agreement which (i) the parties have expressly agreed shall
survive any such termination or expiration, or (ii) remain to be performed or by
their nature would be intended to be applicable following any such termination
or expiration.
9.15 ENTIRE AGREEMENT; AMENDMENT. This Agreement, including the Exhibits
attached hereto, constitutes the entire Agreement between the parties with
respect to the subject matter hereof, and there are no oral or written
representations, understandings or agreements relating to this Agreement which
are not fully expressed herein. No subsequent amendment, change or addition to
this Agreement shall be binding upon the parties hereto unless reduced to
writing and signed by the respective authorized officers of the parties.
9.16 FAILURE TO ENFORCE. The failure of either party to enforce at any time
or for any period of time any of the provisions hereof shall not be construed to
be a waiver of such provisions or of the right of such party to enforce each and
every such provision.
9.17 GOVERNING LAW. This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of California, without regard
to its choice of laws provisions, and any applicable laws of the United States.
9.18 ATTORNEY'S FEES. In any litigation or arbitration between the parties,
the prevailing party shall be entitled to reasonable attorney fees and all costs
of proceedings incurred in enforcing this Agreement, whether in an original
action or on appeal.
9.19 INJUNCTIVE RELIEF. Netopia agrees that Netopia's unauthorized
duplication, distribution or disclosure of any Intellectual Property received by
Netopia from CMN will actually and materially damage CMN and such damages are
difficult to calculate. In addition, notwithstanding any of the provisions of
this Agreement, CMN shall have the unequivocal right to obtain timely injunctive
relief to protect its rights under its Intellectual Property.
9.20 GOVERNMENT SALES. With respect to any sales of Products incorporating
software by either party to the U.S. Government, the selling party shall be
solely
16.
<PAGE>
responsible for the insertion into any government contract or G.S.A. Schedules
of the appropriate federally mandated clause relating to "restricted rights" in
computer software.
17.
<PAGE>
IN WITNESS WHEREOF, the parties have each caused this Agreement to be
signed and delivered by its duly authorized officer as of the Effective Date.
NETOPIA, INC. COPPER MOUNTAIN NETWORKS, INC.
By: /s/ MICHAEL TRUPIANO By: /s/ JOHN A. CREELMAN
--------------------------------- -----------------------------------
Name: Michael Trupiano Name: John A. Creelman
------------------------------- ---------------------------------
Title: VP & GM Netopia Products Title: VP Finance/C.F.O.
----------------------------- -------------------------------
18.
<PAGE>
EXHIBIT A
COPPERROCKET 201 SPECIFICATIONS
19.
<PAGE>
28 May 1998 Indented Bill of Materials Page 1
Procedure: PDC-R-08
Effectivity Date : 05-28-98
700-030-22 - RED ROCKET 201 (NETOPIA)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
X [***] [***] [***] [***] [***]
P [***] [***] [***] [***] [***]
P [***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
0070 05-06-98 05-08-98 05-29-98
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
[***] [***] [***] [***] [***]
</TABLE>
20.
[***] = Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portion.
<PAGE>
EXHIBIT B
SDSL ROUTER SPECIFICATIONS
21.
<PAGE>
[***]
[***] = Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portion.
<PAGE>
[***]
[***] = Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portion.
<PAGE>
EXHIBIT C
PRODUCT PRICES AND ROYALTIES
1. NETOPIA PURCHASES OF COPPERROCKET 201
Netopia shall pay CMN [***] for each CopperRocket 201 for the first [***]
units ordered or during the first [***] months after the Effective Date.
Thereafter, Netopia shall pay CMN [***] of CMN's list price. As of the Effective
Date, the list price for the CopperRocket 201 is [***] per unit.
2. CMN PURCHASES OF SDSL ROUTER
CMN shall pay Netopia (i) [***] of Netopia's list price for a 12 user
version or an unlimited user version of the SDSL Router, and (ii) [***] of
Netopia's list price for an upgrade to an unlimited user version of the SDSL
Router. As of the Effective Date, the list price for the SDSL Router is as
follows:
12 user version [***]
Unlimited user version [***]
Upgrade to unlimited user version [***]
3. CMN ROYALTY FOR NETOPIA SALES OF SDSL ROUTER
Subject to Section 4, Netopia shall pay CMN a royalty for all sales of the
SDSL Router made by Netopia, excluding sales to CMN of the version of the SDSL
Router to be marketed by CMN under the CopperRocket 301 product name. The
royalty payable to CMN shall equal: (i) the lesser of [***] or [***] of
Netopia's list price for the 12 user version of the SDSL Router, (ii) the lesser
of [***] or [***] of Netopia's list price for the unlimited user version of the
SDSL Router, and (iii) the lesser of [***] or [***] of Netopia's list price for
an upgrade to an unlimited user version of the SDSL Router.
4. CMN ROYALTY FOR NETOPIA SALES OF SDSL ROUTER TO CARRIERS REFERRED BY CMN
Notwithstanding the royalty set forth in Section 3, Netopia shall pay CMN a
higher royalty for all sales of the SDSL Router made by Netopia to Carriers that
purchase more than [***] units in any and all ninety (90) day periods beginning
with the initial Purchase Order placed within six months after a referral by
CMN. The royalty payable to CMN shall equal: (i) the lesser of [***] or [***] of
Netopia's list price for the 12 user version of the SDSL Router, (ii) the lesser
of [***] or [***] of Netopia's list price for the unlimited user version of the
SDSL Router, and (iii) the lesser of [***] or [***] of Netopia's list price for
an upgrade to an unlimited user version of the SDSL router.
[***]
[***] = Certain information on this page has been omitted and filed separately
with the Commission. Confidential treatment has been requested with
respect to the omitted portion.
<PAGE>
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Selected
Financial Data" and "Experts" and to the use of our report dated February 25,
1999, except for Note 10, as to which the date is , 1999, in the
Registration Statement on Form S-1 and related Prospectus of Copper Mountain
Networks, Inc. expected to be filed on or about , 1999.
Our audits also included the financial statement schedule of Copper Mountain
Networks, Inc. for the period March 11, 1996 (inception) to December 31, 1996
and for the years ended December 31, 1997 and 1998 listed in Item 16(b). This
schedule is the responsibility of the Company's management. Our responsibility
is to express an opinion based on our audits. In our opinion, the financial
statement schedule referred to above, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
, 1999
San Diego, California
- -------------------------------------------------------------------------------
The foregoing consent is in the form that will be signed upon completion of
certain events as described in Note 10 to the financial statements.
San Diego, California
February 26, 1999
Ernst & Young LLP
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 7,631
<SECURITIES> 10,898
<RECEIVABLES> 8,026
<ALLOWANCES> 0
<INVENTORY> 4,668
<CURRENT-ASSETS> 31,699
<PP&E> 4,990
<DEPRECIATION> (1,776)
<TOTAL-ASSETS> 36,209
<CURRENT-LIABILITIES> 7,373
<BONDS> 0
0
44,502
<COMMON> 3
<OTHER-SE> (17,662)
<TOTAL-LIABILITY-AND-EQUITY> 36,209
<SALES> 21,821
<TOTAL-REVENUES> 21,821
<CGS> 12,400
<TOTAL-COSTS> 12,400
<OTHER-EXPENSES> 16,065
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 213
<INCOME-PRETAX> (6,451)
<INCOME-TAX> 0
<INCOME-CONTINUING> (6,451)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,451)
<EPS-PRIMARY> (4.84)
<EPS-DILUTED> (4.84)
</TABLE>
