<PAGE>
As filed with the Securities and Exchange Commission on April 16, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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RAMP NETWORKS, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
California (prior to reincorporation)
Delaware (after reincorporation) 3968 77-0366874
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
(Address, Including Zip Code, and Telephone Number, Including Area
Code, of Registrant's Principal Executive Offices)
----------------
Mahesh Veerina
President and Chief Executive Officer
Ramp Networks, Inc.
3100 De La Cruz Boulevard
Santa Clara, CA 95054
(408) 988-5353
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
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COPIES TO:
<TABLE>
<S> <C>
Tae Hea Nahm
David C. Lee Neil Wolff
Mark W. Seneca Yoichiro Taku
Matthew Oshinsky Shelly Dolev
VENTURE LAW GROUP WILSON SONSINI GOODRICH & ROSATI
A Professional Corporation Professional Corporation
2800 Sand Hill Road 650 Page Mill Road
Menlo Park, CA 94025 Palo Alto, CA 94304
(650) 854-4488 (650) 493-9300
</TABLE>
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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 (the "Securities Act"), check the following box. [_]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement 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 this form is a post-effective amendment filed pursuant to Rule 462(d)
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>
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<CAPTION>
Title of Each Proposed Maximum Amount of
Class of Securities Aggregate Registration
to be Registered Offering Price (1) Fee
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<S> <C> <C>
Common stock, par value $0.001............... $57,500,000 $15,985
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</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(o) under the Securities Act.
The 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 of 1933 or until this registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<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 securities, and we are not soliciting offers to buy these +
+securities, in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED APRIL 16, 1999
[LOGO OF RAMP NETWORKS APPEARS HERE]
Shares
Common Stock
Ramp Networks, Inc. is offering shares of its common stock. This is our
initial public offering. We have applied for approval for quotation on the
Nasdaq National Market under the symbol "RAMP" for the shares we are offering.
We anticipate that the initial public offering price will be between $ and
$ per share.
---------------
Investing in the common stock involves risks.
See "Risk Factors" beginning on page 6.
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<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public Offering Price........................................... $ $
Underwriting Discounts and Commissions.......................... $ $
Total Proceeds to Ramp Networks................................. $ $
</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.
Ramp Networks has granted the underwriters a 30-day option to purchase up to
an additional shares of our common stock to cover over-allotments.
BancBoston Robertson Stephens Inc. expects to deliver the shares of common
stock to purchasers on , 1999.
---------------
BancBoston Robertson Stephens
Dain Rauscher Wessels
a division of Dain Rauscher Incorporated
Hambrecht & Quist
The date of this prospectus is , 1999
<PAGE>
[INSIDE FRONT COVER]
[Inside Cover Graphics: The Inside Cover lists the following products and
illustrates each product adjacent to the product name]:
Ramp Networks Product Offerings
WebRamp 200i; WebRamp 300c; WebRamp 310e; WebRamp 310i; WebRamp 300FX; WebRamp
410i; WebRamp 500; and WebRamp 700s.
<PAGE>
[GRAPHIC]
[GateFold Graphics: The gateFold depicts topical views of various Local Area
Networks and how they interconnect with the public network. Each Local Area
Network will show where a Ramp Networks product is placed on the network and
to what device(s) it is connected. In addition, the capabilities of the
product will be written out in a box next to the particular Local Area
Network.]
<PAGE>
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 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 of any sale of our common stock.
Until , 1999, 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 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.
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TABLE OF CONTENTS
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Page
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<S> <C>
Prospectus Summary....................................................... 4
Risk Factors............................................................. 6
Use of Proceeds.......................................................... 21
Dividend Policy.......................................................... 21
Capitalization........................................................... 22
Dilution................................................................. 23
Selected Consolidated Financial Data..................................... 24
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 25
Business................................................................. 34
Management............................................................... 49
Certain Transactions..................................................... 58
Principal Stockholders................................................... 60
Description of Capital Stock............................................. 62
Shares Eligible for Future Sale.......................................... 65
Underwriting............................................................. 67
Legal Matters............................................................ 69
Experts.................................................................. 69
Where You Can Find More Information...................................... 69
Index to Condolidated Financial Statements............................... F-1
</TABLE>
----------------
We own or have rights to trademarks or tradenames that we use in conjunction
with the sale of our products and services. WebRamp and the WebRamp logo are
registered trademarks owned by us. Ramp Networks and the Ramp Networks logo
are also trademarks owned by us. This prospectus also makes reference to
trademarks of other companies which are the property of their respective
owners.
We were incorporated in California in February 1994 and we expect to
reincorporate in Delaware prior to completing this offering. Our principal
executive officers are located at 3100 De La Cruz Boulevard, Santa Clara,
California 95054 and our telephone number is (408) 988-5353. Our Web site
address is "www.rampnet.com." Information contained on our Web site does not
constitute part of this prospectus.
3
<PAGE>
PROSPECTUS SUMMARY
You should read this summary together with the more detailed information and
our consolidated financial statements and notes thereto appearing elsewhere in
this prospectus. Unless otherwise indicated, this prospectus assumes that the
underwriters have not exercised their option to purchase additional shares, all
shares of preferred stock have been automatically converted into shares of
common stock, and Ramp Networks has consummated its reincorporation in Delaware
and a three for five reverse split of its shares of common stock outstanding
immediately prior to this offering.
The Company
Ramp Networks is a leading provider of shared Internet access solutions for
the small office market. Our WebRamp product family allows multiple users in a
small office to share the same Internet connection simultaneously while
optimizing each user's access speed. Our WebRamp product family is a flexible
and scalable platform that provides software-based routing and bridging
functionality to deliver Internet-enabled applications and services. Our
products support existing analog phone lines, as well as integrated services
digital networks (ISDN) and emerging access technologies such as digital
subscriber lines (DSL) and cable modems. Our Connection Optimized Link
Technology (COLT) software enables multiple users to access the Internet
simultaneously through regular phone lines and analog modems at up to three
times the access speed of a single analog connection.
Participation in the emerging global Internet-based economy and realization
of the benefits and efficiencies facilitated by new Internet-enabled business
applications is becoming increasingly important for the small office market.
The small office market includes small businesses, remote and branch offices of
large corporations, and home offices. Access Media International (AMI)
estimates that in 1998 there were approximately 85 million small businesses
worldwide with fewer than 100 employees, including approximately 7.2 million
small businesses in the United States alone. In addition AMI estimates that the
number of small businesses using shared Internet access will grow from
approximately 400,000 in 1998 to approximately 1.3 million by the year 2000.
Further, we believe that emerging broadband access technologies such as DSL and
cable modems will enable a variety of new data intensive, multimedia and
graphical applications that increase the value of shared Internet access for
these small offices. To more fully participate in the evolving uses of the
Internet, the small office market requires easy-to-use, affordable and scalable
products that enable shared Internet access by multiple users and provide a
platform to deliver Internet-enabled applications and services.
Our objective is to be the leading provider of shared Internet access
solutions to the small office market. The following are key elements of our
business strategy:
. continue our small office market focus;
. support existing and emerging access technologies;
. leverage platform to deliver new Internet applications and services;
. build our network of value added resellers;
. expand our distribution channels; and
. leverage our WebRamp brand name.
We primarily market and sell our products through North American, European
and Asian based distributors who sell our products to a network of resellers,
including value added resellers (VARs), selected retail outlets, mail order
catalogs and Internet service providers (ISPs). As of March 31, 1999, we had
relationships with over 4,500 resellers in North America alone. We also sell
our products to original equipment manufacturers (OEMs).
4
<PAGE>
The Offering
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<S> <C>
Common stock offered by Ramp
Networks..................... shares
Common stock to be outstanding
after the offering........... shares (1)
Use of proceeds............... Working capital and general corporate purposes.
Proposed Nasdaq National
Market symbol................ RAMP
</TABLE>
Summary Consolidated Financial Data
(in thousands, except per share data)
The as adjusted consolidated balance sheet data summarized below reflects
the conversion of our preferred stock into 11,711,727 shares of common stock
upon the completion of this offering and the application of the net proceeds
from the sale of the shares of common stock offered hereby at an initial
public offering price of $ per share and after deducting the underwriting
discounts and commissions and our estimated offering expenses. Please see Note
2 of Notes to Consolidated Financial Statements for an explanation of the
determination of the number of shares used in computing per share data.
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------
1996 1997 1998
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<S> <C> <C> <C>
Consolidated Statements of Operations Data:
Revenue.......................................... $ 517 $ 5,587 $ 9,858
Cost of revenue.................................. 465 4,872 7,019
------- -------- --------
Gross margin..................................... 52 715 2,839
------- -------- --------
Operating expenses:
Research and development....................... 2,556 4,196 6,556
Sales and marketing............................ 3,078 6,902 8,699
General and administrative..................... 1,043 1,260 1,421
Amortization of deferred compensation.......... -- -- 7
------- -------- --------
Total operating expenses..................... 6,677 12,358 16,683
------- -------- --------
Loss from operations............................. (6,625) (11,643) (13,844)
Other income..................................... 303 109 426
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Net loss......................................... $(6,322) $(11,534) $(13,418)
======= ======== ========
Pro forma basic net loss per share .............. $ (0.86)
Shares used in computing pro forma basic net loss
per share ...................................... 15,524
========
</TABLE>
<TABLE>
<CAPTION>
December 31, 1998
--------------------
Actual As Adjusted
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<S> <C> <C>
Consolidated Balance Sheet Data:
Cash, cash equivalents and short-term investments......... $ 3,764 $
Working capital........................................... 3,092
Total assets.............................................. 8,878
Long-term portion of debt and capital lease obligations... 586
Reedemable convertible preferred stock.................... 37,346
Total stockholders' equity (deficit)...................... (33,364)
</TABLE>
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(1) Based on the number of shares outstanding as of December 31, 1998.
Excludes:
. 1,767,715 shares issuable upon exercise of outstanding options at a
weighted average exercise price of $1.22 per share;
. 27,634 shares issuable upon exercise of outstanding warrants at a weighted
average exercise price of $5.43 per share; and
. 714,173 shares available for future issuance under our stock plan. See
"Management--Stock Plans" and Note 6 to Consolidated Financial Statements.
5
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before making an
investment decision. The risks and uncertainties described below are not the
only ones we face. If any of the following risks actually occur, our business,
financial condition or results of operations could be materially and adversely
affected. In such case, the trading price of our common stock could decline,
and you may lose all or part of your investment.
This prospectus also contains forward-looking statements that involve risks
and uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors,
including the risks faced by us described below and elsewhere in this
prospectus.
We Have a Limited Operating History and May Not be Able to Implement Our Growth
Strategy
We were incorporated in February 1994 and began shipping our products
commercially in April 1996. We have only been shipping products in volume since
the second quarter of 1997. Because of our limited operating history and the
uncertain nature of the rapidly changing markets which we serve, we believe the
prediction of future results of operations is difficult or impossible.
Furthermore, our prospects must be evaluated in light of the risks,
uncertainties, expenses and difficulties frequently encountered by companies in
the early stage of their development. Successful implementation of our growth
strategy depends upon our ability to:
. develop new products equal or superior to those of our competitors;
. develop and maintain strong relationships with key distributors, value
added resellers (VARs) and original equipment manufacturers (OEMs);
. execute our sales and marketing strategy;
. expand our domestic and international operations;
. reduce our manufacturing costs;
. increase our gross margins;
. respond to competitive pressures;
. expand our manufacturing and customer support operations; and
. continue to attract, retain and motivate qualified personnel,
particularly in the areas of sales, marketing and engineering.
We may not be successful in implementing our growth strategy.
We Have a History of Losses, We Expect Future Losses and We Cannot Assure You
That We Will Achieve or Maintain Profitability
We have incurred losses since we commenced operations in February 1994. We
incurred net losses of $6.3 million in 1996, $11.5 million in 1997 and $13.4
million in 1998. As of December 31, 1998, we had an accumulated deficit of
$33.9 million. We have not achieved profitability and although our revenue has
grown in recent quarters, we cannot be certain that we will realize sufficient
revenue to achieve profitability. Even if we do achieve profitability, we
cannot assure you that we can sustain or increase profitability on a quarterly
or annual basis in the future. Furthermore, we currently expect that our
operating expenditures will continue to increase significantly and we
6
<PAGE>
may not generate a sufficient level of revenue to offset these expenditures or
be able to adjust spending in a timely manner to respond to any unanticipated
decline in revenue. If revenue grows slower than we anticipate, if gross
margins do not improve or if operating expenditures exceed our expectations or
cannot be adjusted accordingly, we may continue to experience significant
losses on a quarterly and annual basis.
Our Financial Results from Period to Period May Fluctuate as a Result of
Several Factors, Any of Which Could Adversely Affect Our Stock Price
We believe that period to period comparisons of our operating results are not
a good indication of our future performance. It is possible that in some future
periods our operating results may be below the expectations of public market
analysts and investors. In this event, the price of our common stock may fall.
Our revenue and operating results may vary significantly from period to period
due to a number of factors, many of which are not in our control. These factors
include:
. continued market acceptance of our products;
. fluctuations in demand for our products and services;
. variations in the timing of orders and shipments of our products;
. the timing of new product and service introductions by us or our
competitors;
. the mix of products sold and the mix of distribution channels through
which they are sold;
. our ability to obtain sufficient supplies of sole or limited sourced
components for our products;
. unfavorable changes in the prices of the components we purchase;
. our ability to achieve required cost reductions;
. our ability to attain and maintain production volumes and quality levels
for our products; and
. our ability to integrate new technologies we develop or acquire into our
products.
The amount and timing of our operating expenses generally will vary from
quarter to quarter depending on the level of actual and anticipated business
activities. Research and development expenses will vary as we develop new
products. General and administrative expense fluctuations in past periods have
been due primarily to the level of sales and marketing expenses associated with
new product introductions. In the past, we have experienced fluctuations in
operating results. We have experienced sharply increased revenue in periods
that involved new product introductions and significant sales to OEMs, with
equally sharp decreases in revenue in subsequent periods as distributors and
OEMs complete their inventory build-up process. Revenue increased from
$1.5 million in the third quarter of 1997 to $2.9 million in the fourth quarter
of 1997 and decreased to $1.9 million in the second quarter of 1998. This
fluctuation in revenue was primarily due to fluctuations in sales to Compaq,
which peaked at 45% of revenue in the fourth quarter of 1997 and declined to 2%
of revenue in the second quarter of 1998. Research and development expense was
$2.2 million in the first quarter of 1998 primarily due to $969,000 in costs
related to the acquisition of technology for sending faxes over the Internet.
Furthermore, we have a limited backlog of orders, and revenue for any future
quarter is difficult to predict. Supply, manufacturing or testing constraints
could result in delays in the delivery of our products. Any delay in the
product deployment schedule of one or more of our new products would likely
adversely affect our operating results for a particular period.
7
<PAGE>
We cannot assure you that we will be able to sustain or improve our gross
margins in the future, or that we will be able to offset future price declines
with cost reductions. As a result, we may experience substantial period to
period fluctuations in future operating results and declines in gross margins.
A variety of factors affect our gross margins, including the following:
. the type of distribution channel through which we sell our products;
. the volume of products manufactured;
. our product sales mix;
. the average selling prices of our products; and
. the effectiveness of our cost reduction efforts.
We also anticipate that orders for our products may vary significantly from
period to period. As a result, operating expenditures and inventory levels in
any given period could be disproportionately high. In some circumstances,
customers may delay purchasing our current products in favor of next-generation
products, which could affect our operating results in any given period. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for detailed information on our period to period operating results.
The Timing of Our Revenue is Difficult to Predict Because of Our Indirect Sales
Channels and the Variability of Our Sales Cycles
The timing of our revenue is difficult to predict because of our reliance on
indirect sales channels and the length and variability of our sales cycle. The
length of our sales cycle may vary substantially from customer to customer
depending upon the size of the order and the distribution channel through which
our products are sold. Sales from our distributors to our VARs typically take
one month to complete. Sales to our larger end-user accounts, who buy larger
quantities of our products for distribution to their multiple offices,
typically take two to three months to complete and it typically takes nine
months or more to establish volume sales contracts with our OEMs. Furthermore,
the purchase of our products by end-users often represents a significant and
strategic decision regarding their communications infrastructures and typically
involves significant internal procedures associated with the evaluation,
testing, implementation and acceptance of new technologies. This evaluation
process frequently results in a lengthy sales process which is often subject to
significant delays as a result of our customers' budgetary constraints and
internal acceptance reviews. If orders forecasted for a specific customer in a
particular quarter do not occur in that quarter, our operating results for that
quarter could be adversely affected.
While we defer revenue on sales to certain distributors if we determine that
their inventory exceeds normal stocking levels, we are dependent on timely and
accurate inventory information from our distributors to make such
determination. If such information is not timely or accurate, we could
experience increased levels of sales returns or unforecasted fluctuations in
future revenue.
If a Distributor or OEM Cancels or Delays a Large Purchase, Our Revenue May
Decline and the Price of Our Stock May Fall
To date, a limited number of distributors and OEMs have accounted for a
significant portion of our revenue. If any of our major distributors or OEMs
stops or delays its purchase of our products, our revenue and profitability
would be adversely affected. We anticipate that sales of our products to
relatively few customers will continue to account for a significant portion of
our revenue. In 1998,
8
<PAGE>
sales to Ingram Micro accounted for 26% of our revenue and sales to Tech Data
accounted for 24% of our revenue. We cannot assure you that our current
customers will continue to place orders with us, that orders by existing
customers will continue at the levels of previous periods or that we will be
able to obtain orders from new customers.
Because our expense levels are based on our expectations as to future revenue
and to a large extent are fixed in the short term, a substantial reduction or
delay in sales of our products, unexpected returns from resellers or the loss
of any significant distributor, reseller or OEM could adversely affect our
operating results and financial condition. Although our financial performance
depends on large orders from a few key distributors, resellers and OEMs, we do
not have binding commitments from any of them. For example:
. our distributors, resellers and OEMs can stop purchasing or marketing our
products at any time;
. our reseller agreements generally are not exclusive and are for one year
terms, with no obligation of the resellers to renew their agreements with
us;
. our reseller agreements provide for discounts based on expected or actual
volumes of products purchased or resold in a given period;
. our reseller and OEM agreements generally do not require minimum
purchases; and
. our customers may, under certain circumstances, return products to us.
We Must Develop and Expand Our Indirect Distribution Channels to Increase
Revenue and Improve Our Operating Results
Our product distribution strategy focuses primarily on continuing to develop
and expand our indirect distribution channels through distributors, resellers
and OEMs, as well as expanding our field sales organization. If we fail to
develop and cultivate relationships with significant resellers, or if these
resellers are not successful in their sales efforts, our product sales may
decrease and our operating results may suffer. Many of our resellers also sell
products that compete with our products. In addition, our operating results
will likely fluctuate significantly depending on the timing and amount of
orders from our resellers. We cannot assure you that our resellers will market
our products effectively or continue to devote the resources necessary to
provide us with effective sales, marketing and technical support.
In order to support and develop leads for our indirect distribution channels,
we plan to significantly expand our field sales and support staff. We cannot
assure you that this internal expansion will be successfully completed, that
the cost of this expansion will not exceed the revenue generated or that our
expanded sales and support staff will be able to compete successfully against
the significantly more extensive and well-funded sales and marketing operations
of many of our current or potential competitors. Our inability to effectively
establish our distribution channels or manage the expansion of our sales and
support staff would adversely affect our ability to grow and increase revenue.
Average Selling Prices of Our Products May Decrease, Which May Affect Our Gross
Margins
The average selling prices for our products may be lower than expected as a
result of competitive pricing pressures, promotional programs and customers who
negotiate price reductions in exchange for longer term purchase commitments.
The pricing of products sold to our OEMs depends on the specific features and
functions of the product, the degree of integration with the OEM's
9
<PAGE>
products, purchase volumes and the level of sales and service support.
Currently, the market for ISDN-based products is more price competitive than
the market for analog products, and we expect such price competition to
increase in the future. We expect to experience pricing pressure in the future
and anticipate that the average selling prices and gross margins for our
products will decrease over product life cycles. We cannot assure you that we
will be successful in developing and introducing on a timely basis new products
with enhanced features that can be sold at higher gross margins.
We Must Achieve Product Cost Reductions
Certain of our competitors currently offer Internet access products at prices
lower than ours. Market acceptance of our products will depend in part on
reductions in the unit cost of our products. Our cost reduction efforts may not
allow us to keep pace with competitive pricing pressures or lead to improved
gross margins. Many of our competitors are larger and manufacture products in
significantly greater quantities than we intend to for the foreseeable future.
Consequently, these competitors have more leverage in obtaining favorable
pricing from suppliers and manufacturers. In order to remain competitive, we
must reduce the cost of manufacturing our products through design and
engineering changes. We may not be successful in redesigning our products. Even
if we are successful, our redesign may be delayed or may contain significant
errors and product defects. In addition, any redesign may not result in
sufficient cost reductions to allow us to significantly reduce the list price
of our products or improve our gross margins. Reductions in our manufacturing
costs will require us to use more highly integrated components in future
products and may require us to enter into high volume or long-term purchase or
manufacturing agreements. Volume purchase or manufacturing agreements may not
be available on acceptable terms. We could incur expenses without related
revenue if we enter into a high volume or long-term purchase or manufacturing
agreement and then decide that we cannot use the products or services offered
by such agreement.
Our Products Have Not Achieved Widespread Market Acceptance
Our success will depend upon the widespread commercial acceptance of shared
Internet access products by small offices. Small offices have only recently
begun to deploy shared Internet access products, and the market for these
products is not fully developed. If the single Internet access devices, such as
analog modems or ISDN, DSL and cable modems, currently utilized by many small
offices are deemed sufficient even though they do not enable shared access,
then the market acceptance of our products may be slower than expected.
Potential users of our products may have concerns regarding the security,
reliability, cost, ease of use and capability of our products. We cannot
accurately predict the future growth rate or the ultimate size of the small
office market for shared Internet access solutions.
We Depend on Contract Manufacturers for Substantially All of Our Manufacturing
Requirements and We May Be Unable to Successfully Expand Our Manufacturing
Operations as We Grow
We have developed a highly outsourced contract manufacturing capability for
the production of our products. Therefore, we rely on third party contract
manufacturers to procure components, assemble, test and package our products.
Our primary turnkey manufacturing partners are Micron Custom Manufacturing
Services, Inc., Discopy Labs Corporation and SMT Unlimited, Inc. Any
interruption in the operations of one or more of these contract manufacturers
or delays in their shipment of products would adversely affect our ability to
meet scheduled product deliveries to our customers.
10
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We intend to regularly introduce new products and product enhancements that
will require that we rapidly achieve volume production by coordinating our
efforts with those of our suppliers and contract manufacturers. The inability
of our contract manufacturers to provide us with adequate supplies of high
quality products or the loss of any of our contract manufacturers would cause a
delay in our ability to fulfill orders while we obtain a replacement
manufacturer. In addition, our inability to accurately forecast the actual
demand for our products could result in supply, manufacturing or testing
capacity constraints. These constraints could result in delays in the delivery
of our products or the loss of existing or potential customers.
Although we perform random spot testing on manufactured products, we rely on
our contract manufacturers for assembly and primary testing of our products.
Any product shortages or quality assurance problems could increase the costs of
manufacturing, assembling or testing our products.
We Purchase Several Key Components of Our Products from Sole or Limited Sources
and Could Lose Sales If These Sources Fail to Satisfy our Supply Requirements
We currently purchase several key components used in the manufacture of our
products from sole or limited sources and are dependent upon supply from these
sources to meet our needs. We are likely to encounter shortages and delays in
obtaining components in the future which could adversely affect our ability to
meet customer orders. Our principal sole sourced components include
microprocessors, line interface integrated circuits, modem integrated circuits,
DRAMs, transformers, selected other integrated circuits, and plastic tooled
enclosures.
We use a rolling six-month forecast based on anticipated product orders to
determine our material requirements. Lead times for materials and components we
order vary significantly, and depend on factors such as specific supplier,
contract terms and demand for a component at a given time. Our components that
have long lead times include power converters, ISDN integrated circuits, DSL
integrated circuits, flash memories, DRAMs and SRAMs. If orders do not match
forecasts, we may have excess or inadequate inventory of certain materials and
components, which could harm our business.
Although we enter, either directly or through our contract manufacturers,
into purchase orders with our suppliers for components based on our forecasts,
we do not have any guaranteed supply arrangements with these suppliers. Any
extended interruption in the supply of any of the key components currently
obtained from a sole or limited source could affect our ability to meet
scheduled product deliveries to customers. We cannot assure you that, as our
demand for these components increases, we will be able to obtain these
components in a timely manner in the future. In addition, financial or other
difficulties facing our suppliers or significant worldwide demand for the
components they provide could adversely affect the availability of these
components. If we are unable to obtain, either directly or through our contract
manufacturers, a sufficient supply of components from our current sources, we
could experience difficulties in obtaining alternative sources or in altering
product designs to use alternative components. Resulting delays or reductions
in product shipments could damage customer relationships. Further, we may also
be subject to increases in component costs.
11
<PAGE>
The Market in Which We Sell Our Products is Intensely Competitive and Our
Business Would Be Adversely Affected If We Lose Market Share or Otherwise Fail
to Successfully Compete in This Market
We compete in a new, rapidly evolving and highly competitive market. We
expect competition to persist and intensify in the future. Our current and
potential competitors offer a variety of competitive products, including shared
Internet access devices such as the products offered by 3Com, thin servers, and
high-end networking equipment such as routers and switches offered by companies
such as Ascend, Cisco, Intel and Netopia.
Many or our competitors are substantially larger than we are and have
significantly greater financial, sales and marketing, technical, manufacturing
and other resources and more established distribution channels. These
competitors may be able to respond more rapidly to new or emerging technologies
and changes in customer requirements or devote greater resources to the
development, promotion and sale of their products than we can. Furthermore,
some of our competitors may make strategic acquisitions or establish
cooperative relationships among themselves or with third parties to increase
their ability to rapidly gain market share by addressing the needs of our
prospective customers. These competitors may enter our existing or future
markets with solutions that may be less expensive, provide higher performance
or additional features or be introduced earlier than our solutions. Given the
market opportunity in the shared Internet access market, we also expect that
other companies may enter our market with better products and technologies. If
any technology that is competing with ours is more reliable, faster, less
expensive or has other advantages over our technology, then the demand for our
products and services would decrease, which would seriously harm our business.
We expect our competitors to continue to improve the performance of their
current products and introduce new products or new technologies as industry
standards and customer requirements evolve that may supplant or provide lower
cost alternatives to our products. Successful new product introductions or
enhancements by our competitors could reduce the sales or market acceptance of
our products and services, perpetuate intense price competition or make our
products obsolete. To be competitive, we must continue to invest significant
resources in research and development, sales and marketing and customer
support. We cannot be sure that we will have sufficient resources to make such
investments or that we will be able to make the technological advances
necessary to be competitive. As a result, we may not be able to compete
effectively against our competitors. Our failure to maintain and enhance our
competitive position within the market may seriously harm our business.
Increased competition is likely to result in price reductions, reduced gross
margins, longer sales cycles and loss of market share, any of which would
seriously harm our business and results of operations. We cannot be certain
that we will be able to compete successfully against current or future
competitors or that competitive pressures will not seriously harm our business.
12
<PAGE>
Our Future Success Will Depend Upon Our Ability to Enhance Our Existing
Products and Develop and Introduce New Products and Features that Meet Changing
Customer Requirements and Emerging Industry Standards
The market for shared Internet access solutions is characterized by rapidly
changing technologies and short product life cycles. Our future success will
depend in large part upon our ability to:
. identify and respond to emerging technological trends in the market;
. develop and maintain competitive products;
. enhance our products by adding innovative features that differentiate our
products from those of our competitors;
. bring products to market on a timely basis at competitive prices;
. respond effectively to new technological changes or new product
announcements by others; and
. respond to emerging broadband access technologies such as DSL and cable
modems.
We will not be competitive unless we continually introduce new products and
product enhancements that meet these emerging standards. In the future we may
not be able to effectively address the compatibility and interoperability
issues that arise as a result of technological changes and evolving industry
standards.
The technical innovations required for us to remain competitive are
inherently complex, require long development cycles and are dependent in some
cases on sole source suppliers. We will be required to continue to invest in
research and development in order to attempt to maintain and enhance our
existing technologies and products, but we may not have the funds available to
do so. Even if we have sufficient funds, these investments may not serve the
needs of customers or be compatible with changing technological requirements or
standards. Most development expenses must be incurred before the technical
feasibility or commercial viability of new or enhanced products can be
ascertained. Revenue from future products or product enhancements may not be
sufficient to recover the associated development costs.
We Have Experienced Significant Growth in our Business in Recent Periods and
Our Failure to Effectively Manage This Growth Will Adversely Affect Our
Business
We have rapidly and significantly expanded our operations in recent periods
and anticipate that further significant expansion will be required to address
potential growth in our customer base and market opportunities. This expansion
has placed, and is expected to continue to place, significant strain on our
engineering, managerial, administrative, operational, financial and marketing
resources, and increased demands on our systems and controls. To exploit the
market for our products, we must develop new and enhanced products while
managing anticipated growth in sales by implementing effective planning and
operating processes. To manage the anticipated growth of our operations, we
will need to:
. improve existing and implement new operational, financial and management
information controls, reporting systems and procedures;
. hire, train and manage additional qualified personnel;
. continue to expand and upgrade our core technologies; and
. effectively manage multiple relationships with our customers, suppliers,
distributors and other third parties.
13
<PAGE>
In addition, several members of our executive management team, including
Terry Gibson, Vice President of Finance and Chief Financial Officer, and Elie
Habib, Vice President of Engineering, have recently joined us. These
individuals have not previously worked together for substantial lengths of time
and are in the process of integrating as a management team. We cannot assure
you that we will be able to effectively manage the expansion of our operations,
that our systems, procedures or controls will be adequate to support our
operations or that the executive management team will be able to achieve the
rapid execution necessary to fully exploit the market opportunity for our
products and services. We also intend to hire a Vice President of
Manufacturing. Any failure to effectively manage our growth could harm our
business.
We Depend on Our Key Personnel Who May Not Continue to Work For Us
Our future success depends in large part upon the continued services of our
key technical, sales and senior management personnel, none of whom is bound by
an employment agreement. The loss of any of our senior management or other key
research, development, sales and marketing personnel, particularly if lost to
competitors, could harm our business. In particular, the services of Mahesh
Veerina, President and Chief Executive Officer, would be difficult to replace.
We do not maintain "key person" life insurance for any of our personnel. See
"Management" for detailed information on our key personnel.
We expect that we will need to hire additional personnel in all areas. The
competition for qualified personnel in our industry is intense, particularly in
the San Francisco Bay Area where our corporate headquarters are located and in
Hyderabad, India where we conduct a significant portion of our research and
development operations. At times, we have experienced difficulty in hiring and
retaining personnel with appropriate qualifications, particularly in technical
areas. If we do not succeed in attracting new personnel, or retaining and
motivating existing personnel, our business will be adversely affected.
If We Do Not Provide Adequate Product Support and Training to Our Resellers Our
Sales Could Be Adversely Affected
Our ability to achieve our planned sales growth, retain current and future
customers and expand our network of resellers will depend in part upon the
quality of our customer service and product support operations. We rely
primarily on our resellers to provide the product support and training required
by our customers particularly during the initial deployment and implementation
of our products. We may not have adequate personnel to provide the levels of
support and product training our resellers may require during initial product
deployment or on an ongoing basis to adequately support our customers. We also
provide direct customer service and support to the end-users of our products.
Our inability to provide sufficient support to our customers and resellers
could delay or prevent the successful deployment of our products and could
reduce our overall sales volumes. In addition, our failure to provide adequate
support could adversely impact our reputation and our relationships with
customers and resellers and could prevent us from gaining new customers or
expanding our reseller network.
If Our Products Contain Undetected Defects and Errors We Could Incur
Significant Unexpected Expenses, Experience Product Returns and Lost Sales, and
Be Subject to Product Liability Claims
Our products are complex and may contain undetected defects, errors or
failures, particularly when first introduced or as new enhancements and
versions are released. We cannot assure you that,
14
<PAGE>
despite our testing procedures, defects and errors will not be found in new
products or in new versions or enhancements of existing products after
commencement of commercial shipments. Any defects or errors in our products
discovered in the future could result in adverse customer reactions, negative
publicity regarding us and our products, delays in market acceptance of our
products, product returns, lost sales and unexpected expenses.
Sales and support of our products generally involve the risk of product
liability claims. Although our customer license agreements typically contain
provisions designed to limit our exposure to these claims, it is possible that
these limitation of liability provisions may not be effective as a result of
federal, state or local laws or ordinances or unfavorable judicial decisions. A
successful product liability claim brought against us could harm our business.
Our Expansion Into International Markets May Expose Us to Additional Risks
As part of our strategy to address the global needs of our customers and
partners, we have committed significant resources to opening international
offices and expanding our international sales and support channels in advance
of revenue. We cannot assure you that our efforts to develop international
sales and support channels will be successful. Moreover, international sales
are subject to a number of risks, including changes in foreign government
regulations and communications standards, export license requirements, tariffs
and taxes, other trade barriers, difficulty in collecting accounts receivable,
difficulty in managing foreign operations, and political and economic
instability. To the extent our customers may be impacted by currency
devaluations or general economic crises, the ability of these customers to
purchase our products could be adversely affected. Payment cycles for
international customers are typically longer than those for customers in the
United States. We cannot assure you that foreign markets for our products will
not develop more slowly than currently anticipated. In addition, if the
relative value of the U.S. dollar in comparison to the currency of our foreign
customers should increase, the resulting effective price increase of our
products to these foreign customers could result in decreased sales.
We anticipate that our foreign sales will generally be invoiced in U.S.
dollars and, accordingly, we do not currently plan to engage in foreign
currency hedging transactions. However, as we expand our international
operations, we may allow payment in foreign currencies and exposure to losses
in foreign currency transactions may increase. We may choose to limit any
currency exposure through the purchase of forward foreign exchange contracts or
other hedging strategies. We cannot assure you that any currency hedging
strategy we may adopt would be successful in avoiding exchange related losses.
We Face Risks Associated With Our Research and Development Operations in India
Our wholly-owned subsidiary, Ramp Networks Private Limited, is incorporated
in India and a substantial number of our research and development personnel are
located in India. Consequently, our business may be affected by changes in
exchange rates and controls, interest rates, government of India policies,
including taxation policy, as well as political, social and economic
developments affecting India.
In the past, the government of India has adopted policies that have resulted
in the nationalization of some industries. We cannot assure you that economic
policies adopted by the government of India will not result in the
expropriation of our business activities in India or otherwise impair or
prohibit our current research and development operations in India. Furthermore,
there is increasing
15
<PAGE>
competition for experienced engineers in India and we cannot assure you that we
will be successful in attracting and retaining sufficient engineering personnel
to support our research and development operations in India which we expect to
expand in the future.
Our Products Must Comply With Complex Government Regulations Which May Prevent
Us From Sustaining Our Revenue or Achieving Profitability
In the United States, our products must comply with various regulations and
standards defined by the Federal Communications Commission and Underwriters
Laboratories. Internationally, products that we develop may be required to
comply with standards established by telecommunications authorities in various
countries as well as with recommendations of the International
Telecommunications Union. If we fail to obtain timely domestic or foreign
regulatory approvals or certificates, we would not be able to sell our products
where these regulations apply, which may prevent us from sustaining our revenue
or achieving profitability.
Our Success is Dependent on the Internet and the Development of the Internet
Infrastructure
The Internet has recently begun to develop and is rapidly evolving. As a
result, the commercial market for products designed to enable high-speed access
to the Internet has only recently begun to develop. Our success will depend in
large part on increased use of the Internet and other networks based on
Internet protocol by corporate telecommuters and small offices. Critical issues
concerning the commercial use of the Internet remain unresolved and are likely
to affect the development of the market for our products. These issues include
security, reliability, cost, ease of access, government regulation and quality
of service. The adoption of the Internet for commerce and communications,
particularly by enterprises that have historically relied upon alternative
means of commerce and communications, generally requires the acceptance of a
new method of conducting business and exchanging information. The recent growth
in the use of the Internet has caused frequent periods of performance
degradation that have prompted efforts to upgrade the Internet infrastructure.
Any perceived degradation in the performance of the Internet as a whole could
undermine the benefits of our products. Potentially increased performance and
other benefits provided by our products and the products of others are
ultimately limited by, and are reliant upon, the speed and reliability of the
Internet backbone itself. Consequently, the emergence and growth of the market
for our products will depend on improvements being made to the entire Internet
infrastructure to alleviate overloading and congestion.
Our Intellectual Property Rights are Difficult and Costly to Protect
We rely on a combination of patent, copyright, trademark and trade secret
laws and restrictions on disclosure to protect our intellectual property
rights. We have filed two U.S. patent applications relating to the architecture
of our products. We cannot assure you that these applications will be approved,
that any issued patents will protect our intellectual property or that they
will not be challenged by third parties. Furthermore, there can be no assurance
that others will not independently develop similar or competing technology or
design around any patents that may be issued. We also have one pending U.S.
trademark application.
We also enter into confidentiality or license agreements with our employees,
consultants and corporate partners, and control access to and distribution of
our software, documentation and other proprietary information. In addition, we
provide our products to end-users primarily under "shrink-wrap" license
agreements included in the packaging. These agreements are not negotiated with
or
16
<PAGE>
signed by the licensee, and thus these agreements may not be enforceable in
some jurisdictions. Despite our efforts to protect our proprietary rights,
unauthorized parties may attempt to copy or otherwise obtain and use our
products or technology. We cannot assure you that these precautions will
prevent misappropriation or infringement of our intellectual property.
Monitoring unauthorized use of our products is difficult, and we cannot assure
you that the steps we have taken will prevent misappropriation of our
technology, particularly in foreign countries where the laws may not protect
our proprietary rights as fully as in the United States.
Some of our OEM agreements also provide manufacturing rights and access to
our intellectual property and source code upon the occurrence of specified
conditions of default. If we were to default on these agreements, our OEMs
could use our intellectual property and source code to develop and manufacture
competing products, which would adversely affect our performance and ability to
compete.
We May Be Subject to Intellectual Property Infringement Claims That are Costly
to Defend and Could Limit our Ability to Use Certain Technologies in the Future
Our industry is characterized by the existence of a large number of patents
and frequent claims and related litigation regarding patent and other
intellectual property rights. In particular, leading companies in the data
communications and networking markets have extensive patent portfolios with
respect to modem and networking technology. From time to time, third parties,
including these leading companies, have asserted and may assert exclusive
patent, copyright, trademark and other intellectual property rights to
technologies and related standards that are important to us. We expect that we
may increasingly be subject to infringement claims as the numbers of products
and competitors in the small office market for shared Internet access solutions
grow and the functionality of products overlaps.
In March 1999, we received a letter from a third party alleging that certain
of our products may infringe one of such party's patents pertaining to
intelligent modem bonding technology. We are reviewing this patent carefully
and the relevant aspects of our products affected by this patent. The failure
to agree or settle on reasonable terms between the parties may lead to
litigation, in which case our business or operating results may be adversely
affected. We do not know whether a license would be available on reasonable
terms, nor do we know whether we would be able to redesign our products so as
to eliminate such potential infringement.
Although we have not been a party to any litigation asserting claims that
allege infringement of intellectual property rights, we cannot assure you that
we will not be a party to litigation in the future. In addition, we cannot
assure you that third parties will not assert additional claims or initiate
litigation against us or our manufacturers, suppliers or customers alleging
infringement of their proprietary rights with respect to our existing or future
products.
We may in the future initiate claims or litigation against third parties for
infringement of our proprietary rights to determine the scope and validity of
our proprietary rights. Any such claims, with or without merit, could be time-
consuming, result in costly litigation and diversion of technical and
management personnel, or require us to develop non-infringing technology or
enter into royalty or licensing agreements. Such royalty or licensing
agreements, if required, may not be available on acceptable terms, if at all.
In the event of a successful claim of infringement and our failure or inability
to develop non-infringing technology or license the proprietary rights on a
timely basis, our business would be harmed.
17
<PAGE>
We Face a Number of Unknown Risks Associated With Trying to Become Year 2000
Compliant
Some 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. As a
result, computer systems and software used by many companies and governmental
agencies may need to be upgraded to comply with year 2000 requirements or risk
system failure or miscalculations causing disruptions of normal business
activities. 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." We have just begun to identify measures to address the issues
arising from the year 2000 problem and therefore the risks associated with
being year 2000 compliant are unknown. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Year 2000 Readiness
Disclosure."
There Has Been No Prior Market For Our Common Stock and an Active Trading
Market May Not Develop Following This Offering
Prior to this offering, there has not been a public market for our common
stock. We cannot predict the extent to which a market will develop or how
liquid that market might become. The initial public offering price for the
shares of our common stock will be determined by negotiations between us and
the representatives of the underwriters and may not be indicative of the prices
that will prevail in the market following this offering. See "Underwriting."
Our Stock Price Could be Volatile and Could Decline Following This Offering
Equity markets, particularly the market for technology companies, have
recently experienced significant price and volume fluctuations that are
unrelated to the operating performance of individual companies. These broad
market fluctuations may adversely affect the market price of our common stock.
In addition, the market price of our common stock is likely to be highly
volatile. In the past, securities class action litigation has often been
instituted against companies following periods of volatility in the market
price of their securities. Such litigation could result in substantial costs
and a diversion of management's attention and resources.
We Have Broad Discretion on How We Use the Proceeds From This Offering
Our management can spend the proceeds from this offering in ways with which
our stockholders may not agree. See "Use of Proceeds."
Insiders Will Continue to Have Substantial Control Over Ramp Networks After the
Offering That Could Delay or Prevent a Change in Our Corporate Control
Upon completion of this offering, our executive officers, and directors and
their affiliates will, in the aggregate, own approximately % of our
outstanding common stock. As a result, our officers, directors and their
affiliates will have the ability to influence the election of our Board of
Directors and the outcome of corporate actions requiring stockholder approval.
This concentration of ownership may have the effect of delaying or preventing a
change in our corporate control. See "Principal Stockholders."
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<PAGE>
Certain Provisions of Our Charter Documents May Have Anti-Takeover Effects That
Could Prevent a Change in Our Control
Certain provisions of our Amended and Restated Certificate of Incorporation
and bylaws could make it more difficult for a third party to acquire us even if
a change of control would be beneficial to our stockholders. For more
information, see "Description of Capital Stock."
Future Sales of Our Common Stock May Cause Our Stock Price to Decline
Sales of a substantial number of shares of common stock after this offering
could adversely affect the market price of our common stock and could impair
our ability to raise capital through the sale of additional equity securities.
Upon completion of this offering, we will have shares of common stock
outstanding or subject to currently exercisable options and warrants, with
shares outstanding if the underwriters' option to purchase additional shares is
exercised in full. The shares of common stock sold in this offering, which
would be shares if the underwriters' option to purchase additional shares
is exercised in full, will be freely tradable without restriction or further
registration under the Federal securities laws unless purchased by our
"affiliates" as that term is defined in Rule 144. The remaining 16,203,815
shares of common stock outstanding upon completion of this offering will be
"restricted securities" as that term is defined in Rule 144.
All of our stockholders, option holders and warrant holders are subject to
agreements that limit their ability to sell their shares of common stock. These
securityholders cannot sell or otherwise dispose of any shares of common stock
for a period of at least 180 days after the date of this prospectus without the
prior written approval of BancBoston Robertson Stephens or us in certain cases.
When these agreements expire, these shares and the shares underlying the
options will become eligible for sale, in some cases only pursuant to the
volume, manner of sale and notice requirements of Rule 144. See "Management--
Stock Plans," "Shares Eligible for Future Sale" and "Underwriting."
New Investors Will Incur Substantial and Immediate Dilution
Purchasers of the shares of common stock offered hereby will suffer an
immediate and substantial dilution of $ per share in the net tangible book
value of our common stock from the initial public offering price of $ per
share. To the extent outstanding options are exercised, there will be further
dilution. See "Dilution."
We May Need Additional Capital in the Future and May Not be Able to Obtain
Adequate Funds on Terms Acceptable to Us
We currently anticipate that the proceeds of this offering, together with our
existing cash balances and available lines of credit, will be sufficient to
meet our liquidity needs for at least the next twelve months. However, we may
need to raise additional funds if our estimates of revenue, working capital
and/or capital expenditure requirements change or prove inaccurate or in order
for us to respond to unforeseen technological or marketing hurdles or to take
advantage of unanticipated opportunities.
In addition, we expect to review potential acquisitions that would complement
our existing product offerings or enhance our technical capabilities. While we
have no current agreements or negotiations underway with respect to any
potential acquisition, any future transaction of this nature
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<PAGE>
could require potentially significant amounts of capital. Funds may not be
available at the time or times needed, or available on terms acceptable to us.
If adequate funds are not available, or are not available on acceptable terms,
we may not be able to take advantage of market opportunities, develop new
products or otherwise respond to competitive pressures. This inability could
harm our business. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
YOU SHOULD NOT RELY ON FORWARD-LOOKING STATEMENTS
BECAUSE THEY ARE INHERENTLY UNCERTAIN
This prospectus contains forward-looking statements that involve risks and
uncertainties. We use words such as "anticipates," "believes," "plans,"
"expects," "future," "intends" and similar expressions to identify forward-
looking statements. This prospectus also contains forward-looking statements
attributed to third parties relating to their estimates regarding the growth of
Internet use by small businesses. You should not place undue reliance on these
forward-looking statements, which apply only as of the date of this prospectus.
Our actual results could differ materially from those anticipated in these
forward-looking statements for many reasons, including the risks faced by us
and described in the preceding pages and elsewhere in this prospectus.
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<PAGE>
USE OF PROCEEDS
Our net proceeds from the sale of the shares of common stock we are
offering are estimated to be $ million, or $ million if the
underwriters' option to purchase additional shares is exercised in full,
assuming an offering price of $ per share and after deducting the
underwriting discounts and commissions and estimated offering expenses. We
currently expect to use the net proceeds primarily for working capital and
general corporate purposes, including increased sales and marketing
expenditures, increased research and development expenditures and capital
expenditures made in the ordinary course of business. In addition, we may use a
portion of the net proceeds for further development of our product lines
through acquisitions of products, technologies and businesses. However, we have
no present commitments or agreements with respect to any such acquisitions.
Pending such uses, we will invest the net proceeds in short-term, investment
grade, interest-bearing securities.
DIVIDEND POLICY
We have never declared or paid cash dividends on our capital stock. We
currently intend to retain any future earnings to fund the development and
growth of our business and do not currently anticipate paying any cash
dividends in the foreseeable future. Future dividends, if any, will be
determined by our Board of Directors.
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<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 of all outstanding shares
of preferred stock into 11,711,727 shares of common stock; and
. on a pro forma as adjusted basis to reflect our reincorporation in
Delaware and the sale of the common stock in this offering at an assumed
initial public offering price of $ per share and the application of
the net proceeds, after deducting estimated underwriting discounts and
commissions and our estimated offering expenses.
The pro forma and pro forma as adjusted information set forth below is
unaudited and should be read in conjunction with our consolidated financial
statements and notes and "Management's Discussion and Analysis of Financial
Condition and Results of Operations" included elsewhere in this prospectus.
<TABLE>
<CAPTION>
As of December 31, 1998
--------------------------------
Pro Forma
Actual Pro Forma As Adjusted
-------- --------- -----------
(in thousands, except share
and per share data)
<S> <C> <C> <C>
Long-term portion of debt and capital lease
obligations................................. $ 586 $ 586 $
-------- -------- ----
Redeemable convertible preferred stock, no
par value, 11,826,505 shares authorized,
11,711,727 issued and outstanding, actual;
no shares authorized, issued or outstanding,
pro forma and pro forma as adjusted......... 37,346 --
-------- -------- ----
Stockholders' equity (deficit):
Preferred stock, $.001 par value, no shares
authorized, issued or outstanding, actual;
5,000,000 shares authorized, no shares
issued or outstanding, pro forma and pro
forma as adjusted.........................
Common stock, $.001 par value, 24,000,000
shares authorized, 4,387,686 shares issued
and outstanding, actual; 100,000,000
shares authorized, 16,099,413 shares
issued and outstanding, pro forma; and
issued and outstanding, pro forma as
adjusted.................................. 628 37,974
Additional paid-in capital................... -- --
Deferred compensation........................ (104) (104)
Accumulated deficit.......................... (33,888) (33,888)
-------- -------- ----
Total stockholders' equity (deficit)....... (33,364) 3,982
-------- -------- ----
Total capitalization..................... $ 4,568 $ 4,568 $
======== ======== ====
</TABLE>
The outstanding share information in the table above is as of December 31,
1998 and excludes:
. 1,767,715 shares issuable upon exercise of outstanding options at a
weighted average exercise price of $1.22 per share;
. 27,634 shares issuable upon exercise of outstanding warrants at a
weighted average exercise price of $5.43 per share; and
. 714,173 shares available for future issuance under our stock plan.
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<PAGE>
DILUTION
As of December 31, 1998, our pro forma net tangible book value was
approximately $4.0 million, or $0.25 per share of common stock. Pro forma net
tangible book value per share represents the amount of our total tangible
assets less total liabilities divided by the pro forma number of shares of
common stock outstanding. Without taking into account any other changes in net
tangible book value after December 31, 1998, other than to give effect to the
receipt by us of the net proceeds from the sale of the shares of common
stock offered by us at an assumed initial public offering price of $ per
share, our pro forma net tangible book value at 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
purchasing shares of common stock in this offering. 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 as of December 31,
1998.............................................................. $0.25
Increase per share attributable to new investors...................
-----
Pro forma net tangible book value per share after the offering.......
---
Dilution per share to new investors.................................. $
===
</TABLE>
The following table summarizes on a pro forma basis, as of December 31, 1998,
the number of shares of common stock purchased from us, the total consideration
paid to us and the average price per share paid to us by existing stockholders
and by new investors purchasing shares of common stock in this offering. The
information presented is based upon an assumed initial public offering price of
$ per share, before deducting estimated underwriting discounts and
commissions and estimated offering expenses of this offering.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration
------------------ ------------------- Average Price
Number Percent Amount Percent Per Share
---------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders...... 16,099,413 % $37,870,000 % $2.35
New investors..............
---------- -----------
Total.................... 100.0% 100.0%
========== ===== =========== =====
</TABLE>
The information presented above with respect to existing stockholders
includes 11,711,727 shares of preferred stock which will be automatically
converted into 11,711,727 shares of common stock upon the closing of this
offering. This information is as of December 31, 1998 and excludes:
. 1,767,715 shares issuable upon exercise of options outstanding at a
weighted average exercise price of $1.22 per share;
. 27,634 shares issuable upon exercise of warrants outstanding at a
weighted average exercise issue of $5.43 per share; and
. 714,173 shares available for future issuance under our stock plan.
The issuance of common stock in connection with the exercise of these options
and warrants will result in further dilution to new investors. See
"Management--Stock Plans" and Note 6 to Consolidated Financial Statements.
23
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected consolidated financial data should be read in
conjunction with our financial statements and related notes, "Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
other financial information appearing elsewhere in this prospectus. The
statement of operations data set forth below for each of the years ended
December 31, 1996, 1997 and 1998 and the balance sheet data at December 31,
1997 and 1998 presented below are derived from, and qualified by reference to,
our financial statements which have been audited by Arthur Andersen LLP,
independent public accountants, and together with their report thereon, are
included elsewhere in this prospectus. The statements of operations data set
forth below for the periods ended December 31, 1994 and 1995 and the balance
sheet data at December 31, 1994, 1995 and 1996 presented below are derived from
our audited financial statements not included herein.
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------
1994 1995 1996 1997 1998
------- ------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Consolidated Statements of
Operations Data:
Revenue....................... $ 21 $ 352 $ 517 $ 5,587 $ 9,858
Cost of revenue............... 16 179 465 4,872 7,019
------- ------- -------- -------- --------
Gross margin.................. 5 173 52 715 2,839
------- ------- -------- -------- --------
Operating expenses:
Research and development.... 221 634 2,556 4,196 6,556
Sales and marketing......... 28 335 3,078 6,902 8,699
General and administrative.. 29 117 1,043 1,260 1,421
Amortization of deferred
compensation............... -- -- -- -- 7
------- ------- -------- -------- --------
Total operating expenses.. 278 1,086 6,677 12,358 16,683
------- ------- -------- -------- --------
Loss from operations.......... (273) (913) (6,625) (11,643) (13,844)
Other income (expense)........ (4) (26) 303 109 426
------- ------- -------- -------- --------
Net loss...................... $ (277) $ (939) $ (6,322) $(11,534) $(13,418)
======= ======= ======== ======== ========
Basic net loss per share...... $ -- $ (1.29) $ (2.50) $ (3.92) $ (3.50)
======= ======= ======== ======== ========
Shares used in computing basic
net loss per share........... -- 726 2,528 2,945 3,839
======= ======= ======== ======== ========
Pro forma basic net loss per
share........................ $ (0.86)
========
Shares used in computing pro
forma basic net loss per
share........................ 15,524
========
<CAPTION>
December 31,
----------------------------------------------
1994 1995 1996 1997 1998
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Consolidated Balance Sheet
Data:
Cash, cash equivalents and
short-term investments....... $ 32 $ 900 $ 4,799 $ 15,112 $ 3,764
Working capital............... (94) 696 4,147 16,028 3,092
Total assets.................. 89 1,211 6,093 18,854 8,878
Long-term portion of debt and
capital lease obligations.... 13 42 77 240 586
Redeemable convertible
preferred stock.............. -- 1,949 11,949 36,644 37,346
Total stockholders' deficit... (277) (1,077) (7,338) (20,219) (33,364)
</TABLE>
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The following discussion should be read in conjunction with the consolidated
financial statements and the related notes included elsewhere in this
prospectus.
Overview
Ramp Networks is a leading provider of easy-to-use, reliable and affordable
shared Internet access solutions for the small office market, which includes
small businesses, remote and branch offices of large corporations, and home
offices. Our WebRamp product family allows multiple users in a small office to
share the same Internet connection simultaneously while optimizing each user's
access speed. Our WebRamp product family is a flexible and scalable platform
that provides software-based routing and bridging functionality to deliver
Internet-enabled applications and services. Our products support existing
analog phone lines, as well as ISDN and emerging access technologies such as
DSL and cable modems. Our COLT software enables multiple users to access the
Internet simultaneously through regular phone lines and analog modems at up to
three times the access speed of a single analog connection.
We were incorporated in February 1994 and expect to reincorporate in Delaware
prior to the completion of this offering. Our wholly-owned subsidiary, Ramp
Networks Private Limited, is incorporated in India and performs research and
development for us. From our inception in February 1994 through early 1995, we
were focused on developing products for the asynchronous transfer mode market.
We subsequently licensed this technology to a related party and focused on the
small office market for shared Internet access solutions. From early 1995
through May 1996, our operating activities were related primarily to
developing, prototyping and testing our first WebRamp product, staffing our
administrative, sales and marketing and operations organizations, and
establishing relationships with resellers, ISPs and mail order catalogs for the
distribution of our products. In June 1996, we commenced shipments of our first
ISDN based WebRamp product. Since February 1997, we have introduced new
products on a regular basis.
Our revenue is derived primarily from the sale of our WebRamp family of
products. We market and sell our products in a two-tier distribution system
primarily to distributors, such as Ingram Micro and Tech Data, who then resell
our products to VARs, selected retail outlets, mail order catalogs and ISPs.
These resellers then sell our products to end-users. In 1998, sales to Ingram
Micro accounted for 26% of our revenue and sales to Tech Data accounted for 24%
of our revenue. The level of sales to any customer may vary from quarter to
quarter. However, we expect that sales to Ingram Micro and Tech Data will
continue to represent a significant portion of our revenue. We also sell our
products to OEMs, and have recently begun to sell our products directly through
our Web site. Our OEMs include Asante, IBM and Compaq, and we have recently
entered into an OEM agreement with Nortel-Netgear.
Revenue is recognized upon transfer of title and risks of ownership, which
generally occurs upon product shipment. Certain agreements with distributors
and retailers provide for rights of return, co-op advertising, price protection
and stock rotation rights. We provide an allowance for returns and price
adjustments and provide a warranty reserve at the point of revenue recognition.
Reserves are adjusted periodically based upon historical experience and
anticipated future returns, price adjustments and warranty costs.
25
<PAGE>
We expect to experience price pressure due to the impact of competition. In
addition, OEM unit pricing is generally lower than distribution pricing.
Pricing in the OEM market depends on the specific features and functional
content of the products sold, the degree of integration with the OEM's
products, purchase volumes and the level of sales and service support.
Our cost of revenue has declined as a percentage of revenue since we first
began shipping products. The initial higher cost of revenue included higher
component and manufacturing costs associated with lower initial production
volumes, as well as overhead costs which were applied to a lower number of
units produced. As volumes have increased, our cost of revenue has declined as
a percentage of revenue as a result of lower costs in components,
manufacturing and overhead. Our gross margins are affected by fluctuations in
manufacturing volumes and component costs, the mix of products sold and the
mix of distribution channels through which our products are sold. Unless we
manage each of these factors effectively, our gross margins will decrease.
Historically, our gross margins have improved year over year, but we cannot
assure you that we will maintain or increase our gross margins.
Research and development expenses consist primarily of salaries and related
personnel expenses, fees paid to consultants and outside service providers,
and prototyping expenses related to the design, development and testing of our
products. Sales and marketing expenses consist primarily of salaries,
commissions and related expenses for personnel engaged in marketing, sales and
support functions, as well as costs associated with promotional and other
sales activities. General and administrative expenses consist primarily of
salaries and related expenses for executive, finance and human resources
personnel, professional fees, and other corporate expenses. We expect expenses
relating to research and development, sales and marketing, general and
administrative and operations to increase in absolute dollars. However, the
percentage of revenue that each of these categories represents will vary
depending on the rate of our revenue growth and investments that may be
required to support the development of new products and our penetration of new
markets.
In connection with the grant of certain stock options to employees during
1998, we recorded deferred compensation of $111,000. Deferred compensation is
presented as a reduction of stockholders' equity and amortized ratably over
the vesting period of the applicable options. We will expense the balance
ratably over the remainder of the vesting period of the options. During 1998,
we recognized $7,000 of the deferred compensation amount as compensation
expense. During 1998, we also had a non-cash compensation expense of $162,000
related to stock options granted to consultants. During the first quarter of
1999, we recorded additional deferred compensation of approximately $2.4
million related to stock options granted in that period. This amount will be
expensed ratably over the vesting period of the options. See Note 6 of Notes
to Consolidated Financial Statements.
Since our inception we have incurred significant losses and, as of December
31, 1998, we had an accumulated deficit of $33.9 million. These losses have
resulted primarily from our activities to develop our products, establish
brand recognition and to develop our distribution channels.
As of December 31, 1998, we had operating loss carry-forwards of $29.2
million for federal purposes and $11.3 million for state purposes. The federal
and state net operating loss carry-forwards expire on various dates through
2018. We have provided a full valuation allowance against our deferred tax
assets, consisting primarily of net operating loss carry-forwards, because of
the uncertainty regarding their realization. Further, these net operating loss
carry-forwards could be subject to limitations due to changes in our ownership
resulting from equity financings.
26
<PAGE>
Results of Operations
The following table sets forth certain financial data for the periods
indicated as a percentage of revenue.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1996 1997 1998
--------- -------- --------
<S> <C> <C> <C>
Revenue........................................ 100.0 % 100.0 % 100.0 %
Cost of revenue................................ 90.0 87.2 71.2
--------- ------- --------
Gross margin................................... 10.0 12.8 28.8
--------- ------- --------
Operating expenses:
Research and development..................... 494.4 75.1 66.5
Sales and marketing.......................... 595.6 123.5 88.2
General and administrative................... 201.7 22.6 14.4
Amortization of deferred compensation........ -- -- --
--------- ------- --------
Total operating expenses................... 1,291.7 221.2 169.1
Loss from operations........................... (1,281.7) (208.4) (140.3)
Other income (expense)......................... 58.6 2.0 4.3
--------- ------- --------
Net loss....................................... (1,223.1)% (206.4)% (136.0)%
========= ======= ========
</TABLE>
Years Ended December 31, 1998, 1997 and 1996
Revenue. Revenue in 1998 was $9.9 million, an increase of 76% over $5.6
million in 1997. This increase was attributable to new product introductions
such as the WebRamp M3t, M3i, M3i+ and the WebRamp 300 family of products, our
European product launch, and increased sales in the North American channel due
to our recruitment of resellers and our promotional programs to establish brand
recognition. These factors were partially offset by a decrease in OEM sales to
Compaq as compared to 1997. In 1998, sales in North America, excluding sales to
OEMs that comprised 14% of revenue, were 65% of revenue, sales in Asia were 11%
of revenue and sales in Europe were 10% of revenue. Revenue in 1997 was $5.6
million, as compared to $517,000 in 1996. Revenue increased to $5.6 million in
1997 as a result of a full year of shipping products in 1997 versus two
quarters of shipping products in 1996, as well as higher sales in North
America, including growth in our OEM business with Compaq and sales in Asia. In
1997, sales in North America, excluding sales to OEMs that comprised 39% of
revenue, were 42% of revenue and sales in Asia were 19% of revenue. There were
no sales in Europe in 1997 as that channel had not yet been established.
Gross margin. Gross margin was $2.8 million in 1998, representing 29% of
revenue. In 1998, cost of revenue as a percentage of revenue was reduced as a
result of price negotiations with our vendors. In 1997, gross margin was
$715,000 or 13% of revenue, an increase from a gross margin of $52,000 in 1996,
or 10% of revenue. In 1996 and 1997, cost of revenue included higher component
and manufacturing costs associated with lower initial production volumes, as
well as manufacturing start-up and overhead costs which were applied to a
relatively low number of units produced.
Research and development expenses. Research and development expenses were
$6.6 million in 1998, an increase from $4.2 million in 1997 and $2.6 million in
1996. These increases were primarily due to increases in personnel in the U.S.
and India as well as project related expenses. In addition, in the first
quarter of 1998, we acquired technology for sending faxes over the Internet.
27
<PAGE>
Related expenses of $969,000 were charged to research and development because
the technology acquired and related products were in the early stages of
development and had not yet achieved technological feasability.
Sales and marketing expenses. Sales and marketing expenses were $8.7 million
in 1998, an increase from $6.9 million in 1997 and $3.1 million in 1996. These
increases were primarily due to the hiring of additional sales and marketing
personnel, as well as increases in advertising and promotional activities.
General and administrative expenses. General and administrative expenses were
$1.4 million in 1998, an increase from $1.3 million in 1997 and $1.0 million in
1996. These increases were primarily due to increases in the number of
administrative personnel, professional services fees and facility expenses to
support the growth of our operations.
Amortization of deferred compensation. During 1998, we recorded total
deferred compensation of $111,000 in connection with stock options grants. We
are amortizing this amount over the vesting periods of the applicable options,
resulting in amortization expense of $7,000 in 1998.
28
<PAGE>
Quarterly Results of Operations
The following tables set forth certain unaudited statements of operations
data for each of the eight quarters ended December 31, 1998, as well as such
data expressed as a percentage of our revenue for the quarters presented. This
unaudited quarterly information has been prepared on the same basis as our
audited financial statements and, in the opinion of our management, reflects
all normal recurring adjustments that we consider necessary for a fair
presentation of the information for the periods presented. Operating results
for any quarter are not necessarily indicative of results for any future
period.
<TABLE>
<CAPTION>
Quarters Ended
--------------------------------------------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31,
1997 1997 1997 1997 1998 1998 1998 1998
--------- -------- --------- -------- --------- -------- --------- --------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. $ 225 $ 1,005 $ 1,503 $ 2,854 $ 2,644 $ 1,860 $ 2,380 $ 2,974
Cost of revenue......... 239 971 1,449 2,213 2,026 1,339 1,649 2,005
-------- ------- ------- ------- ------- ------- ------- -------
Gross margin............ (14) 34 54 641 618 521 731 969
-------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and
development.......... 976 964 1,090 1,166 2,172 1,538 1,302 1,544
Sales and marketing... 1,543 1,951 1,697 1,711 2,086 2,110 2,287 2,216
General and
administrative....... 294 321 245 400 327 364 326 404
Amortization of
deferred
compensation......... -- -- -- -- -- -- -- 7
-------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses............... 2,813 3,236 3,032 3,277 4,585 4,012 3,915 4,171
-------- ------- ------- ------- ------- ------- ------- -------
Loss from operations.... (2,827) (3,202) (2,978) (2,636) (3,967) (3,491) (3,184) (3,202)
Other income (expense).. (3) 53 (97) 156 196 176 119 (65)
-------- ------- ------- ------- ------- ------- ------- -------
Net loss................ $(2,830) $(3,149) $(3,075) $(2,480) $(3,771) $(3,315) $(3,065) $(3,267)
======== ======= ======= ======= ======= ======= ======= =======
<CAPTION>
As a Percentage of Revenue
--------------------------------------------------------------------------------------
March 31, June 30, Sept. 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31,
1997 1997 1997 1997 1998 1998 1998 1998
--------- -------- --------- -------- --------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue................. 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenue......... 106.2 96.6 96.4 77.5 76.6 72.0 69.3 67.4
-------- ------- ------- ------- ------- ------- ------- -------
Gross margin............ (6.2) 3.4 3.6 22.5 23.4 28.0 30.7 32.6
-------- ------- ------- ------- ------- ------- ------- -------
Operating expenses:
Research and
development.......... 433.8 95.9 72.5 40.9 82.1 82.7 54.7 51.9
Sales and marketing... 685.8 194.1 112.9 60.0 78.9 113.4 96.1 74.5
General and
administrative....... 130.6 31.9 16.3 14.0 12.4 19.6 13.7 13.8
Amortization of
deferred
compensation......... -- -- -- -- -- -- -- --
-------- ------- ------- ------- ------- ------- ------- -------
Total operating
expenses............... 1,250.2 321.9 201.7 114.9 173.4 215.7 164.5 140.2
-------- ------- ------- ------- ------- ------- ------- -------
Loss from operations.... (1,256.4) (318.5) (198.1) (92.4) (150.0) (187.7) (133.8) (107.6)
Other income (expense).. (1.3) 5.3 (6.5) 5.5 7.4 9.5 5.0 (2.3)
-------- ------- ------- ------- ------- ------- ------- -------
Net loss................ (1,257.7)% (313.2)% (204.6)% (86.9)% (142.6)% (178.2)% (128.8)% (109.9)%
======== ======= ======= ======= ======= ======= ======= =======
</TABLE>
Our quarterly revenue increased throughout 1997 reaching $2.9 million in the
fourth quarter. The increase in revenue during this period primarily resulted
from the introduction of the WebRamp M3 analog router, the introduction of an
ISDN product designed for Compaq, and growth in the North American channel.
Sales to Compaq peaked at 45% of revenue in the three months ended December 31,
1997 and declined to 2% of revenue in the three months ended June 30, 1998. The
decrease in sales to Compaq resulted in two consecutive
29
<PAGE>
quarters of revenue declines. Revenue decreased from $2.9 million in the three
months ended December 31, 1997 to $2.6 million in the three months ended March
31, 1998 and to $1.9 million in the three months ended June 30, 1998. Continued
growth in sales of WebRamp products in non-OEM channels was not sufficient to
offset the decline in sales to Compaq. Revenue in the second half of 1998 grew
as we increased our spending in advertising and promotion, continued to build
our distribution channels and VAR network, and expanded our geographic
presence.
Gross margin has generally increased each quarter since the three months
ended March 31, 1997. Gross margin increased from (6)% in the three months
ended March 31, 1997 to 33% in the three months ended December 31, 1998. These
increases have been due to reduced production costs on a per unit basis as
manufacturing volumes increased, a reduction in materials costs due to
negotiation of component prices, improved absorption of manufacturing
infrastructure and the introduction of new products with increased
functionality, higher average selling prices and higher gross margins.
Operating expenses increased from $2.8 million in the three months ending
March 31, 1997 to $3.3 million in the three months ended December 31, 1997.
Increases over this period were primarily related to product promotions and the
development of new products. Sales and marketing expense fluctuations have been
due primarily to the level of expenses associated with new product
introductions. From the three months ended December 31, 1997 to the three
months ended March 31, 1998, quarterly operating expenses increased from $3.3
million to $4.6 million. This increase was due to an increase in sales
personnel, as well as $969,000 in costs related to the acquisition of
technology for sending faxes over the Internet that is currently being
incorporated into our products. Excluding the impact of this change, operating
expenses increased from $3.6 million in the three months ended March 31, 1998
to $4.2 million in the three months ended December 31, 1998 primarily due to
increased personnel.
Liquidity and Capital Resources
Our principal sources of liquidity as of December 31, 1998 consisted of $3.8
million in cash and cash equivalents, and our $2.0 million fixed asset lease
line. As of December 31, 1998, we had utilized $54,000 under the fixed asset
lease line. Borrowings under the line bear interest at 7%, are payable ratably
over a 36 month term, are subject to a 15% termination payment and are secured
by the fixed assets that we lease under the line. In addition, subsequent to
December 31, 1998, we secured a working capital credit facility with a lender
of up to the lower of $5.0 million or 100% of eligible accounts receivable and
50% of inventory. These borrowings, which bear interest at 8.4%, are payable
ratably over a 36 month term, are subject to a termination payment of 12.5% and
are secured by our receivables and inventory. As of March 31, 1999, we had
borrowed $1.0 million under this facility. In addition, we obtained a $3.0
million unsecured bridge loan facility with the same lender in March 1999 and
borrowed $3.0 million under this facility. Borrowings under this facility bear
interest at 14.6%, and are payable ratably over a 36 month term. Certain of
these debt agreements contain provisions that limit the payment of cash
dividends.
Since inception, we have financed our operations primarily through the sale
of redeemable convertible preferred stock, for aggregate proceeds of
approximately $35.9 million, capital equipment lease lines and working capital
lines of credit.
Cash utilized by operating activities was $10.8 million in 1998, $12.8
million in 1997 and $5.7 million in 1996. The cash utilized in each of these
years was due to net losses, as well as working capital required to fund our
growth in operations, including accounts receivable and
30
<PAGE>
inventory. Cash used in investing activities primarily consisted of capital
expenditures of $1.1 million in 1998, $428,000 in 1997 and $355,000 in 1996 for
computer equipment and furniture.
We believe the net proceeds of this offering, together with our existing cash
balances and available lines of credit, will be sufficient to meet our cash
requirements at least through the next twelve months. However, we may be
required, or could elect, to seek additional funding prior to that time. Our
future capital requirements will depend on many factors, including the rate of
revenue growth, the timing and extent of spending to support product
development efforts and expansion of sales and marketing, the timing of
introductions of new products and enhancements to existing products, and market
acceptance of our products. We cannot assure you that additional equity or debt
financing, if required, will be available on acceptable terms or at all.
Year 2000 Readiness Disclosure
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."
Assessment. The year 2000 problem affects the computers, software and other
equipment that we use, operate or maintain for our operations. Accordingly, we
have organized a program team responsible for monitoring the assessment and
remediation status of our year 2000 projects and reporting such status to 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.
Internal infrastructure. We believe that we have identified approximately 120
personal computers and servers, 10 software applications, and our enterprise
resource planning system 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. Upon completion of such evaluation, which we expect
to occur by June 30, 1999, we expect to commence the process of modifying,
upgrading, and replacing major systems that have been assessed as adversely
affected, and 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,
of which there are approximately 10, 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 Santa Clara,
California and Hyderabad, India.
Products. We have tested and intend to continue to test all of our products
for year 2000 problems. To date, we have been able to correct any problems with
our products relating to the year 2000 problem prior to releasing them to our
customers. We currently do not expect any significant year 2000 problems to
arise with our products. However, we have represented to our resellers and OEMs
that our products are year 2000 compliant, and if that turns out to be untrue,
these parties may make claims against us which may result in litigation or
contract terminations.
31
<PAGE>
We estimate the total cost to us of completing any required modifications,
upgrades or replacements of our internal systems will not exceed $100,000,
almost all of which we believe will be incurred during calendar 1999. 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 as
a result of our year 2000 problem activities.
Suppliers. We are checking the Web sites of third-party suppliers of
components used in the manufacture of our products to determine if these
suppliers are certifying that the components they provide us are year 2000
compliant. To date, we believe all critical components that we obtain from
third party suppliers are year 2000 compliant. We expect that we will be able
to resolve any significant year 2000 problems with third-party suppliers of
components; however, we cannot assure you 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 harm our business.
Most likely consequences of year 2000 problems. We expect to identify and
resolve all year 2000 problems that could 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 that could be affected and the
interactions among these devices are simply too numerous. In addition, no one
can accurately predict how many year 2000 problem-related failures will occur
or the severity, duration or financial consequences of these perhaps inevitable
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;
. business disputes and claims for pricing adjustments or penalties due to
year 2000 problems by our customers, resellers and OEMs; and
. a number of 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 September 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;
. increased work hours for our personnel; and
. use of contract personnel to correct on an accelerated schedule any year
2000 problems that arise or to provide manual workarounds for information
systems.
Our implementation of any of these contingency plans could adversely affect
our business.
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,
32
<PAGE>
availability and cost of programming and testing resources, third party
suppliers' ability to modify proprietary software, and unanticipated problems
identified in the ongoing compliance review.
Recently Issued Accounting Standards
In December 1998, the AICPA issued SOP 98-9, "Modification of SOP 97-2,
Software Revenue Recognition, With Respect to Certain Transactions." SOP 98-9
amends SOP 97-2, "Software Revenue Recognition," and SOP 98-4, "Deferral of the
Effective Date of a Provision of SOP 97-2, 'Software Revenue Recognition," by
extending the deferral of the application of certain provisions of SOP 97-2
amended by SOP 98-4 through fiscal years beginning on or before March 15, 1999.
All other provisions of SOP 98-9 are effective for transactions entered into in
fiscal years beginning after March 15, 1999. We do not anticipate that these
statements will have a material adverse impact on our consolidated financial
statements.
Qualitative and Quantitative Disclosure about Market Risk
Our interest income is sensitive to changes in the general level of U.S.
interest rates, particularly since the majority of our investments are in
short-term instruments. Due to the nature of our short-term investments, we
have concluded that there is no material interest rate risk exposure.
Therefore, no quantitative tabular disclosures are required.
33
<PAGE>
BUSINESS
Overview
Ramp Networks is a leading provider of easy-to-use, reliable and affordable
shared Internet access solutions for the small office market, which includes
small businesses, remote and branch offices of large corporations, and home
offices. Our WebRamp product family allows multiple users in a small office to
share the same Internet connection simultaneously while optimizing each user's
access speed. Our WebRamp product family is a flexible and scalable platform
that provides software-based routing and bridging functionality to deliver
Internet-enabled applications and services. Our products support existing
analog phone lines, as well as ISDN and emerging access technologies such as
DSL and cable modems. Our COLT software enables multiple users to access the
Internet simultaneously through regular phone lines and analog modems at up to
three times the access speed of a single analog connection. We primarily market
and sell our products through North American, European and Asian based
distributors who sell our products to a network of resellers, including value
added resellers, selected retail outlets, mail order catalogs and ISPs. As of
March 31, 1999, we had relationships with over 4,500 resellers in North America
alone.
Industry Background
Importance of Internet Access to Small Offices
The Internet has experienced rapid growth in recent years as evidenced by the
volume of Internet traffic and the numbers of Internet users, Web sites and
Internet-based applications. This rapid growth is expected to continue as
businesses increasingly use the Internet to access and share information and to
interact with a large number of geographically dispersed consumers and business
partners. Furthermore, an Internet-based economy is emerging as businesses
continue to use the Internet to sell products and services, implement
electronic commerce initiatives and utilize new generations of Internet-enabled
business applications.
Participation in this emerging Internet-based economy and realization of the
benefits and efficiencies facilitated by new Internet-enabled business
applications is becoming increasingly important for the small office market.
The small office market includes small businesses, remote and branch offices of
large corporations, and home offices. The Internet allows small businesses to
communicate more effectively with their suppliers and customers and to access
and share critical business information both internally and with their business
partners. Remote and branch offices of larger corporations that are linked to
each other and to their main offices via the Internet are also realizing
improved communications and more efficient business interactions. The Internet
also presents an opportunity for many small businesses to sell their products
and deliver their services directly to customers without using traditional
wholesale and retail channels. In addition, Internet-enabled business
applications allow small offices to perform a variety of business functions
online, such as purchasing, inventory management, marketing, recruiting and
customer service. Overall, the Internet and the business applications enabled
by the Internet present tremendous opportunities for small offices to improve
business communications, collaborate with partners and suppliers, perform
important business processes online and realize cost and operational
efficiencies that will position them to compete more effectively with larger
organizations that have greater resources and market presence.
Internet Access Technologies Facilitate New Applications
Analog dial-up modems currently represent the most widely utilized method of
accessing the Internet. While many markets worldwide will continue to depend on
analog Internet access
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technologies, new high-speed and high-bandwidth Internet access technologies
such as DSL and cable modems have emerged in recent years. According to
TeleChoice, DSL connections, which utilize the same copper wire infrastructure
that provides telephone service to most residential and business locations, are
projected to grow from approximately 250,000 in 1999 to more than 2.3 million
in 2002. Likewise, cable modem service providers and equipment manufacturers
have experienced significant growth in the number of subscribers and
deployments over the past several years.
Because these emerging access technologies offer greater bandwidth and
provide much higher access speeds, they enable a variety of new data intensive,
multimedia and graphical applications, as well as new integrated voice and
high-speed data connectivity services. As DSL and cable modem access
technologies become more affordable and widely available, they will present
increasingly attractive alternatives for satisfying the Internet access
requirements of small offices. In addition, small offices will experience an
even greater need to access the Internet via these emerging technologies as new
generations of business applications emerge that larger competitors can already
access through relatively expensive dedicated high-speed leased lines.
Furthermore, the higher cost of DSL and cable modem access technologies
relative to analog technologies will increase the need of small offices for
shared Internet access solutions that enable total implementation costs to be
allocated across a greater number of users.
Today's Small Office Internet Access Environment
Access Media International estimates that in 1998 there were approximately 85
million small businesses worldwide with fewer than 100 employees that could
afford and benefit from information technology solutions, including
approximately 7.2 million small businesses in the United States alone.
International Data Corporation estimates that the percentage of the number of
small businesses with access to the Internet increased from approximately 26%
in 1997 to approximately 50% in 1998 and is projected to increase to
approximately 65% by 2001. Despite the large size of the small office market
and increasing demand for viable Internet access solutions, most networking and
personal computing vendors have tailored their product offerings and Internet
access solutions for either the large corporate market or the consumer market.
As a result, there are limited shared Internet access solutions designed to
accommodate the specific needs of the small office market. Small office
Internet access requirements include the following:
. Shared Access. Many small offices have addressed the Internet access
problem by installing a single dedicated computer that is connected to
the Internet via a modem, an analog phone line and a single Internet
service account shared by all users in the office. This approach is
inefficient in that it requires users to wait in line until the Internet
terminal becomes available. In addition, productivity is often reduced
since many users fail to utilize the Internet because it is not
conveniently accessible from their individual workplaces. As an
alternative, some small offices have added additional modems, analog
phone lines and Internet service accounts for each employee requiring
Internet access. However, maintaining separate Internet connections for
each user is costly and difficult to manage. Moreover, neither of these
solutions enable shared Internet access among multiple users, which is
critical to achieving cost efficiencies and benefiting from the
information sharing, communications and operational advantages offered by
the Internet and Internet-enabled business applications.
. Ease of Installation and Use. Most small offices lack in-house
information technology personnel as well as sufficient resources to hire
outside system integration consultants to implement and maintain complex
Internet access solutions. Therefore, small offices require Internet
access solutions that are easy to install, use, maintain and upgrade.
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. Affordability. Small offices are often subject to tight budgetary
constraints. Therefore, the server-based and router-based local area
networking solutions that have been widely adopted by larger
organizations to accommodate shared access often are prohibitively
expensive for small offices.
. Scalability and Compatibility. Small offices need Internet access
solutions that accommodate their current requirements and can be scaled
to accommodate additional users as their businesses grow. In addition,
small offices seek solutions that meet these needs without having to
replace existing systems, invest significant capital in upgrades or
employ in-house information technology personnel. Further, most small
offices have already made significant investments in computer hardware,
modems and software, and in many cases utilize widely available analog
access technologies. As a result, small offices require Internet access
solutions that are compatible with existing hardware and software and
flexible enough to support analog access technologies, as well as ISDN
and emerging high-speed access technologies such as DSL and cable modems.
. Platform for New Applications and Services. Small offices also seek
Internet access solutions that serve as a platform for the deployment of
new applications and services enabled by the Internet and the emergence
of high-speed access technologies.
The Small Office Market Opportunity for Shared Internet Access Solutions
AMI projects that the number of small businesses using shared Internet access
will grow from 400,000 in 1998 to 1.3 million by the year 2000, representing a
three year annual compound growth rate of 80%. However, affordable shared
Internet access products currently offered by networking equipment and software
vendors typically lack the flexibility and features required by most small
offices. As a result, a significant portion of the small office market has been
unable to realize by the business benefits of the Internet and fully
participate in the emerging Internet-based economy. As the Internet grows,
electronic commerce initiatives are adopted and new applications facilitated by
emerging high-speed access technologies are introduced, the inability of small
offices to effectively access the Internet will become an increasingly
significant competitive disadvantage. To more fully participate in the evolving
uses of the Internet, the small office market requires easy-to-use, affordable
and scalable products that enable shared Internet access by multiple users and
support a full range of existing and emerging Internet-enable applications and
services.
The WebRamp Solution
Our WebRamp solution is a software-based, multi-user platform that provides
an easy-to-use, reliable and affordable shared Internet access solution for the
small office market. Our solution allows multiple users in a small office to
share the same Internet connection simultaneously while optimizing each user's
access speed. Further, our solution is designed to overcome the limitations of
existing Internet access solutions by offering a flexible and scalable platform
for software-based routing and bridging functionality to develop Internet-
enabled applications and services. The WebRamp product family supports existing
analog phone lines, as well as ISDN and emerging high-speed access technologies
such as DSL and cable modems. In addition, our COLT software extends the
benefits of analog technology by enabling multiple users to access the Internet
simultaneously through regular phone lines and analog modems at up to three
times the access speed of a single analog connection. The WebRamp product
family offers small offices the following key benefits:
Efficient Shared Internet Access. The WebRamp product family enables the
entire office to share information, use e-mail and access the Internet
independent of the access technology utilized.
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Multiple users in an office can share a single Internet connection and ISP
account. In addition, users are able to connect simultaneously to a remote
office LAN and the Internet.
Ease of Installation and Use. The WebRamp product family delivers a plug-and-
play shared Internet access solution. To facilitate easy installation, the
WebRamp package contains a QuickStart poster with step-by-step installation
instructions and easy-to-follow diagrams and illustrations for a variety of
network environments. Using our EasyStart software, users can determine whether
their Windows computers are appropriately configured to connect to the WebRamp
product. Our Express Internet software provides a single screen configuration
to connect the entire office to the Internet. Our WebRamp products work within
most existing environments and operating systems, such as Windows, Macintosh or
UNIX, and are compatible with most network architectures and all major Internet
access technologies.
High-Speed Access. The WebRamp product family supports all major Internet
access technologies used by small offices, including analog, ISDN, DSL and
cable modems. Our routing software allows multiple users to connect
simultaneously to the Internet and allocates bandwidth among active users to
optimize each user's access speed. In addition, our COLT software aggregates
the bandwidth of multiple analog or ISDN lines to create access speeds that are
up to three times the access speed of a single analog or ISDN connection.
Low Cost of Ownership. The WebRamp product family is designed to minimize
installation, maintenance and Internet access expenditures by enabling users in
small offices to share a single Internet connection and ISP account. In
addition, the ease of installation and use of the WebRamp product family
enables small offices to avoid hiring in-house information technology personnel
that would be otherwise required to implement and maintain an effective
Internet access solution.
Scalability and Compatibility. The WebRamp family of products is designed to
accommodate additional users easily and to be compatible with most widely-used
computers, software, modems and terminal adapters. This broad compatibility
enables most small offices to leverage prior technology investments by
utilizing WebRamp products with hardware and software that has already been
installed.
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Platform for New Applications and Services. We have designed the WebRamp
product family to facilitate effective delivery of value-added Internet-enabled
applications and services such as fax and voice over Internet, virtual private
networking, remote dial-in and advanced security features. Our WebRamp
architecture allows software-based applications to be easily downloaded and
implemented and also provides us a platform to deliver new Internet-enabled
applications and services to our customers.
[Graphic: The inserted artwork depicts a before/after scenario. In the form of
four squares within one large square, the two boxes on the left side depict
topologies of 2 networks without Ramp Networking products. The box on the upper
left is titled "Internet PC" and is described as "Sharing one Internet
connection for the entire office." The box on the lower right is titled "Modem
Mangled" and is described as "Adding modems, phone lines and ISP accounts for
each user." The two boxes to the right of those boxes depict the same network
with the Ramp Network with the Ramp Network product incorporated into the
network.]
Strategy
Our objective is to be the leading provider of shared Internet access
solutions to the small office market. The following are key elements of our
business strategy:
Continue Our Small Office Market Focus. Our fundamental strategy is to
provide affordable and flexible shared Internet access solutions that enable
the small office to participate in the emerging Internet-based economy and
benefit from existing and emerging technologies and Internet-enabled business
applications and services. We believe that in order to remain competitive,
small offices will experience an increasing need to access the Internet. We
also believe that the Internet access solutions currently offered by most
personal computing and networking vendors continue to be relatively expensive,
technically complex and generally unable to satisfy the unique requirements of
the small office market. Therefore, we believe the opportunity in the small
office market is significant and we intend to continue to focus our product
development efforts, distribution strategies and support services to satisfy
the specific requirements of the small office market.
Support Existing and Emerging Access Technologies. Our products are designed
to support all major Internet access technologies used by small offices,
including analog, ISDN, DSL and cable modems. We believe our strategy of
developing products that are access technology independent will
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enable our installed and future customer base to benefit from the deployment of
emerging broadband technologies. Further, we believe emerging broadband
technologies will increase the demand in small offices for shared Internet
access solutions. Therefore, we intend to support the commercialization of new
broadband technologies in the design of our product offerings and by pursuing
partnering relationships with broadband technology providers while continuing
to penetrate the existing market for our analog-based products.
Leverage Platform to Deliver New Internet Applications and Services. Our
products are based on a common technology platform designed to enable the
delivery of new Internet-enabled applications and services to the small office
market. As emerging broadband access technologies such as DSL and cable modems
become more affordable and readily available, the small office market will be
able to utilize new data intensive, multimedia and graphical applications
supported by these access technologies. Therefore, we intend to continue to
develop the architecture of our WebRamp products to serve as a platform to
deliver new Internet-enabled applications and services to the small office
market. We are also further enhancing the ease-of-use of our products through
emerging technologies such as Java/Jini, and we are adding new features to our
products using encryption and virtual private networking technologies. In
addition, we are developing new Internet applications and services that address
the trend toward voice and data integration.
Build Our Network of Value Added Resellers. We have invested significant
resources to develop a network of over 4,500 value added resellers in North
America. We believe the size of our distribution channel and the nature of our
distribution relationships differentiates us from other companies addressing
the needs of the small office market. We believe our relationships with value
added resellers enable us to reach the small office market effectively with our
product solutions and to launch new products quickly. In addition, we believe
that the distribution channels we have developed will make it attractive for
third parties, such as emerging service providers, to enter into co-marketing
or other partnership arrangements with us in order to utilize our distribution
network. We intend to further expand and develop our relationships with value
added resellers through increased technical training and support and through
marketing programs and materials.
Expand Our Distribution Channels. We believe developing and maintaining
strong distribution channels is a key element in our current and continued
success in reaching the broad small office market. We currently sell our
products through our OEM relationships with industry leaders such as Compaq and
IBM, and have recently entered into an OEM agreement with Nortel-Netgear. We
intend to leverage the brand recognition and established worldwide channels of
these and other OEMs to reach the multi-PC home market and to further penetrate
the small office market. We also intend to expand our international
distribution channels, focusing on markets with high analog penetration and
Internet access growth. We believe that our broad range of analog products will
be particularly attractive in emerging international markets that do not have
digital access infrastructures and will continue to depend on analog access
technologies. We currently market our products through distribution partners in
Australia, France, India, Ireland, Italy, Korea, Malaysia, People's Republic of
China (including Hong Kong), Singapore, Spain, Taiwan, and the United Kingdom.
We intend to expand our geographical reach with local resellers in these
regions and to expand distribution into new regions such as South America.
Leverage Our WebRamp Brand Name. We believe that we have established a
leading brand name in the small office market. Our brand name is identified
with easy-to-use, affordable, scalable, reliable and innovative shared Internet
access solutions. We believe that strong brand recognition contributes to
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our resellers' initial WebRamp sales efforts as well as follow-on sales of
software options and additional products and services to our installed customer
base. We have taken advantage of our established brand by co-marketing with
industry leaders such as Compaq and IBM. We intend to continue to build and
market our WebRamp brand through on-going public relations, advertising and co-
marketing activities.
Products
The WebRamp product line provides shared Internet access solutions for the
small office market. Individual WebRamp products have been designed to satisfy
the particular requirements of our customers in each of the segments within the
small office market. The models within the WebRamp family of products vary with
respect to the number of built-in ports, compatibility with different access
technologies and the types of software-based functions that are included. All
of our WebRamp products enable multiple users to access the Internet
simultaneously over a single Internet connection and all of our analog products
support our COLT technology, which is designed to optimize access speeds. In
addition, our WebRamp products have built-in security control to protect the
user's network from intrusion. Each of our products is easily configured using
a graphical user interface and is designed for ease of use, reliability,
affordability and scalability.
Our current WebRamp product line is our second generation of products. Our
original product line was introduced in 1996 and our current product line,
which incorporates enhancements to existing products, was introduced in 1998.
The following table identifies the various models offered in our current
WebRamp product line and summarizes the functions included in each model:
<TABLE>
<CAPTION>
WebRamp Model 200i 300e 310e 310i 300Fx 410i 500i* 700s
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Built-in 4-port hub X X X X X X X X
- ----------------------------------------------------------------------------------------
1 2 2 1 1
Internal Modems 56 Kbps 56 Kbps 56 Kbps ISDN SDSL
- ----------------------------------------------------------------------------------------
External Analog or ISDN Modem Ports 1 3 3 1 1 1
- ----------------------------------------------------------------------------------------
External Cable or DSL 2 1
- ----------------------------------------------------------------------------------------
Connect to Internet X X X X X X X X
- ----------------------------------------------------------------------------------------
Internet Faxing X
- ----------------------------------------------------------------------------------------
Connect to Remote LAN X X X X X X
- ----------------------------------------------------------------------------------------
VPN + X X X X
- ----------------------------------------------------------------------------------------
Remote Dial-In + X X
- ----------------------------------------------------------------------------------------
Access Controls X + X X X X
- ----------------------------------------------------------------------------------------
Firewall X
- ----------------------------------------------------------------------------------------
</TABLE>
- --------
+ The feature is available through an optional software upgrade.
* Scheduled to ship during the second quarter of 1999.
WebRamp 200i. The WebRamp 200i is designed for basic Internet access for the
small office or home environment and includes one internal 56 Kbps modem and a
serial port to accommodate the addition of one external ISDN or analog modem.
The WebRamp 200i uses our COLT technology to aggregate the bandwidth of two
modems.
WebRamp 300e. The WebRamp 300e is designed for cost-sensitive users that
currently have basic Internet access needs but anticipate the need for expanded
functionality in the future. The WebRamp 300e has three external modem ports
that allow users to utilize our COLT technology to
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leverage their prior investments in modems of all types and speeds. The WebRamp
300e can be upgraded as the customer's needs evolve to allow telecommuters to
dial into the customer's LAN from remote locations and to support a virtual
private network that provides users secure access from remote locations. The
WebRamp 300e can also be upgraded to enable customers to control and specify
the types of Internet access that will be made available to each of their
users.
WebRamp 310e. The WebRamp 310e is designed for users who want to leverage
their prior modem investments using our COLT technology but also have an
immediate need for more advanced communications features. The WebRamp 310e is
pre-configured to include support for telecommuters, remote LAN communications,
virtual private networking and access controls.
WebRamp 310i. The WebRamp 310i is designed for users who need an all-in-one
solution with advanced Internet access features and the flexibility to add more
bandwidth. The WebRamp 310i includes two internal 56 Kbps modems, supports one
external ISDN or analog modem and includes all of the features of the WebRamp
310e.
WebRamp 300Fx. The WebRamp 300Fx is designed to enable users with frequent
faxing requirements to use the Internet as a cost effective alternative to
faxing over the public telephone network. The WebRamp 300Fx provides the base
level of WebRamp functionality and is designed to connect to a regular fax
machine to send fax documents over the Internet. The WebRamp 300Fx includes two
internal 56 Kbps modems and supports one external modem.
WebRamp 410i. The WebRamp 410i is designed for users who require all of the
functionality provided by the WebRamp 310i but who also have access to ISDN
services and want to use their ISDN bandwidth for phone or fax purposes. The
WebRamp 410i includes an integrated ISDN terminal adapter and two analog ports
for phone or fax in addition to virtual private networking and access controls.
WebRamp 500i. In April 1999, we announced the introduction of the WebRamp
500i. The WebRamp 500i is designed for small to medium-sized businesses who
want to utilize the "always on" connectivity provided by DSL. The WebRamp 500i
offers symmetric bandwidth at selectable speeds ranging from 128 Kbps to 1.5
Mbps over ordinary twisted pair copper wiring, offering users a choice of
bandwidth and budget options. Copper Mountain, a leading DSL equipment
provider, has certified that the WebRamp 500i is compatible with its family of
DSL concentrators and its CopperView network management software suite.
WebRamp 700s. The WebRamp 700s is an Internet security device that works with
cable or DSL modems, other WebRamp products and other routers to provide a
security firewall between the user's local area network and the Internet. The
WebRamp 700s also includes content control features to restrict access to
certain Web sites, filter Web content, monitor user access and protect the
user's network from unauthorized access. In addition, the WebRamp 700s provides
an optional VPN IPSec upgrade for secure communication. The WebRamp 700s is
available with 5, 25 and 100 user licenses.
Sales, Marketing and Customer Support
Sales
We primarily market and sell our products through a two-tier distribution
structure which employs several national distributors who sell our products to
a network of resellers, including VARs, selected retail outlets, mail order
catalogs and ISPs, who then sell our products to end-users.
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Our distributors provide inventory warehouse and credit services to our
resellers. Although we do not certify our resellers, we provide them with a
broad range of support services such as technical training and access to
marketing materials and require them to purchase an initial WebRamp unit for
resale. Our reseller network is comprised of over 4,500 VARs that are diverse
in size and expertise. Some of our VARs are sole-proprietor PC and application-
oriented resellers that serve local small businesses, and others are large,
multi-site networking resellers that manage nationwide office roll-outs for
large corporations.
The following are representative lists of our distributors and resellers.
<TABLE>
<CAPTION>
Distributors Resellers
------------ ----------------------
<S> <C>
Ingram Micro Beijing SanJia Network
J-Tek Corp Ideal Technology
Logitek Solunet
Merisel
Tech Data
</TABLE>
We also sell our products to OEMs, and have recently begun to sell our
products directly through our Web site. Our sales and marketing programs focus
on markets with high PC penetration and rapid Internet growth. Our key markets
include North America, Asia Pacific and Western Europe. As of March 31, 1999,
we employed 36 people in sales and marketing.
North and South America. In North America we market and sell our products
through our two-tier distribution structure and have developed relationships
with several national distributors, including Ingram Micro and Tech Data. In
1998, our sales to Ingram Micro accounted for 26% of revenue and our sales to
Tech Data accounted for 24% of revenue.
We have divided our North America sales effort into four sales territories:
East, Central, West and Canada. We use an internal telesales group to introduce
our products to targeted resellers and end-user customers. For certain major
accounts and branch office customers, we also use regionally based field sales
representatives. We address sales opportunities in South America through our
national distribution partners.
Asia Pacific. We have developed key distribution partnerships in Australia,
Japan and the People's Republic of China and implemented direct marketing
programs to generate demand for our products in each of these countries. We
also sell our products through additional distribution partnerships in other
countries in the Asia Pacific region where we do not currently engage in direct
marketing programs. These countries include India, Korea, Malaysia, Singapore
and Taiwan.
Western Europe. We have recently begun to market our products in Western
Europe. To date, we have focused our sales efforts on the United Kingdom and
Ireland. In addition, we have also begun to sell our products in other Western
Europe regions, including Benelux, France, Italy, the Nordic Region and Spain.
OEM Sales. We are expanding our market presence and brand recognition by
selling our products and technologies through our OEM partnerships with
industry leaders such as Asante, Compaq and IBM, and have recently entered into
an OEM agreement with Nortel-Netgear.
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Marketing
We believe that establishing and maintaining the WebRamp brand with both our
resellers and end-users in the small office market is critical to our sales and
marketing efforts. We market our products with the brand attributes of ease-of-
use, affordability, scalability, reliability and innovation. We believe we have
developed a leading brand name for shared Internet access solutions among the
resellers who service the small office market. We employ a variety of marketing
programs including on-going public relations, advertising, direct mail,
seminars, interactive marketing, trade show participation and co-marketing with
industry partners with complementary channels and customers. We have also taken
advantage of our established brand by co-marketing with industry leaders such
as Copper Mountain, IBM and Lexis-Nexis. In addition, we support our resellers
through our comprehensive Ramp eXpert program which offers sales tools, leads,
technical and sales support, marketing materials and marketing development
funds to our resellers to enable them to better serve the small office market.
Customer Support
As of March 31, 1999, we had a team of 10 customer service engineers to
support our resellers and customers. Our internal support systems are highly
automated using automatic call distribution and database tracking technologies
and our customer service engineers respond to customer inquiries by telephone,
e-mail or fax. Our support services include free installation support and a
range of premium, fee-based support services, including annual service
contracts and extended warranty coverage.
Customers
WebRamp users range from global companies with many small or remote offices
to single location small businesses with several users. The following case
studies illustrate how certain of our customers have used our products.
National Nonprofit Organization. Easter Seals is a nationwide nonprofit
organization with over 13,000 employees and volunteers in small regional
offices that need Internet access to expand their research, outreach and fund-
raising efforts and to facilitate inter-office information sharing. Before
utilizing WebRamp, many Easter Seals offices relied on a single direct connect
modem line for Internet access, which proved inefficient and costly. A
significant number of other offices did not access the Internet at all and
relied on telephone, fax and mail for communications. Because of Easter Seals'
limited financial resources, cost was an important consideration in choosing an
Internet access solution. Further, its numerous small regional offices lacked
in-house information technology personnel, and thus required a solution that
could be easily implemented and managed. Using the WebRamp's VPN capabilities,
Easter Seals has created a secured site for affiliates to share information on
public policy, medical rehabilitation issues and confidential client
information. The broad range of WebRamp solutions is also important to Easter
Seals since affiliates range from large rehabilitation centers to small two to
three person volunteer offices.
Large U.S. Heating and Air Conditioning Company. This global manufacturer has
more than 150 locations worldwide and has installed approximately 40 WebRamp
310e and 310i units domestically with plans to install more in its Asian and
European offices. This manufacturer uses the WebRamp product family because it
offers a range of products, using either internal or external analog or ISDN
modems, suited to the access preferences of its individual offices, and can be
quickly and easily installed by non-technical branch office personnel with
minimal telephone support. The
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WebRamp is used to connect its offices to the corporate intranet for project
collaboration among employees and branch offices as well as the dissemination
of corporate marketing materials and sales and service information. WebRamp is
also used to provide connectivity between offices for order status, improving
the company's customer responsiveness. While this company's main manufacturing
facilities are connected via a Frame Relay wide area network, Frame Relay was
too expensive to install in its smaller branch offices. WebRamp was the ideal
solution, providing an easy-to-use, low-cost option for Intranet access, e-mail
and other Internet applications.
U.S. Insurance Company. A major insurance carrier uses the WebRamp solution
to enable its independent insurance agents in local remote offices to access
its corporate intranet. The company is using the WebRamp's VPN capability to
provide secure access to the policy information, price quotes, payment data and
approval procedures that independent agents use on a daily basis. The WebRamp
allows Internet access and secure intranet access from a single phone call. The
centralized information technology help desk at the company's headquarters has
the capability to dial in the WebRamp to remotely manage software training and
technical support issues. In addition to extranet access, the independent
agents and their staffs are able to use the WebRamp for Web-browsing, e-mail,
e-commerce and other typical small office applications. More than 500 WebRamp
products have been installed by this customer.
Small Law Firm. Orr Law firm is a small firm that depends on the Internet for
legal research, client communication and marketing purposes. Ed Orr and his
associate attorney and staff paralegal use the Internet extensively to access
dozens of legal sites daily, monitor court decisions as they are posted, access
government databases for legislative and statutory research and communicate
with clients via e-mail. Mr. Orr is also developing his own Web page to provide
information on his firm and its services. Prior to adopting the WebRamp
solution, Orr Law utilized a direct Internet connection that did not allow
simultaneous multi-user access. Installing additional phone lines or utilizing
alternative Internet access methodologies such as ISDN or dedicated lines was
prohibitively expensive. Orr Law now utilizes a WebRamp shared Internet access
solution that delivers Internet access to the entire office over a single
modem, ISP account and phone line.
Testing and Research Organization. Beverage Testing Institute is a testing
and research organization that publishes its results in several food and
beverage magazines and Internet sites including www.tastings.com. The Internet
provides Beverage Testing Institute with a fast and cost-effective means of
communicating its data to potential consumers, retailers and restaurateurs, as
well as the opportunity to generate potential advertising revenue. The
Institute's employees also use the Internet for e-mail, file transfer and
faxing. The Institute's prior solution was comprised of 14 Macintosh systems
and one PC, each connected to the Internet by a 28 Kbps modem. This solution,
however, proved cumbersome and slow, and required numerous telephone lines. The
Institute chose WebRamp due to its scalability, its ability to enable
simultaneous Internet access, its ability to support additional ISDN or analog
modems, and its remote Internet and LAN access capabilities. The Institute also
plans to implement the WebRamp's remote access capabilities so that its tasters
and field representatives will be able to access the LAN remotely. The
Institute reports that once its ISDN line was installed, the WebRamp
installation was accomplished in a few hours and employees were successfully
using the Internet the same day.
Research and Development
Our research and development efforts are focused on addressing the needs of
small offices through new products and product enhancements. Our primary
research and development objective is to enable small businesses to effectively
participate in the Internet economy by designing easy-to-use
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products that provide access innovations and features normally available only
to large enterprises. We are also focused on developing new add-on software
components to our platform architecture that expand the basic capabilities of
the WebRamp to enable the delivery of Internet-based applications and services.
Specifically, we invest in extensive software development activities to bring
innovations and enterprise class features to the small office. Such innovations
include our COLT software, LAN to LAN internetworking, remote access, virtual
private networking, firewall, security, directory services, and fax over
Internet.
Our current development activities include the following areas:
. hardware cost reduction;
. product line extensions through adding new functionality and interfaces;
. adding new high speed broadband interfaces such as SDSL, ADSL and cable;
and
. designing and developing new protocol software to deliver emerging
Internet-enabled applications and services to our customers.
We are a member of industry standards forums, such as the Internet
Engineering Task Force and the ADSL Forum, and we design our products around
current industry standards and intend to continue to support emerging standards
that are consistent with our product strategy.
As of March 31, 1999, we had engineering staff of 37 located in two sites.
Our main development activities are based in our headquarters in Santa Clara,
California, with a staff of 21 responsible for hardware design and development,
key architecture and software development, documentation and quality assurance.
We also have a software development facility in Hyderabad, India, with
approximately 16 software engineers responsible for software research and
development as well as quality assurance. We believe that our engineering staff
is one of our key assets. Through our India facility, we are able to access a
large pool of qualified engineering personnel with significantly less turnover
and at a lower cost as compared to the Silicon Valley.
Manufacturing
We have developed a fully outsourced manufacturing capability for the
production of our products. This approach enables us to reduce fixed costs and
to provide flexibility in meeting market demand. Our primary turnkey
manufacturing partners are Micron Custom Manufacturing Services, Inc. (MCMS),
Discopy Labs Corporation and SMT Unlimited, Inc. (SMTU). MCMS is a ISO-9002
certified, BABT compliant and Bell-core qualified manufacturer specializing in
telecommunications hardware and systems. MCMS is our primary contract
manufacturer and provides us with full turnkey manufacturing, which includes
procurement of materials, printed circuit board assembly, final enclosure
assembly, manufacturing and systems testing. Our relationship with MCMS allows
us to be flexible, highly responsive to upside demand and limits inventory
obsolescence. The assembled products are completed and packaged in Fremont,
California at Discopy Labs Corporation, an ISO-9001 qualified manufacturer.
Finally, we build early prototypes and product limited quantities of products
production in Fremont, California, at SMTU, an ISO-9001, BABT compliant
supplier.
Competition
The market in which we operate is new, rapidly evolving and highly
competitive. We compete on the basis of certain factors, including product
features, time-to-market, ease of use, product performance, product quality,
user scalability, customer support and price. We believe that our
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competitive strengths include our focus on the needs of the small business
customer, the value added reseller channel we have established, our workforce
of highly experienced hardware and software engineers, including our engineers
in India, our well established brand, and the proprietary features of our
products. However, our market is still evolving and we cannot assure you that
we will be able to compete successfully against current and future competitors,
and the failure to do so could harm our business.
Our current and potential competitors offer a variety of competitive
products, including shared Internet access devices such as the products offered
by 3Com, thin servers, and networking equipment such as routers and switches
offered by companies such as Ascend, Cisco, Intel and Netopia.
Many or our competitors are substantially larger than we are and have
significantly greater financial, sales and marketing, technical, manufacturing
and other resources and more established distribution channels. These
competitors may be able to respond more rapidly to new or emerging technologies
and changes in customer requirements or devote greater resources to the
development, promotion and sale of their products than we can. Furthermore,
some of our competitors may make strategic acquisitions or establish
cooperative relationships among themselves or with third parties to increase
their ability to rapidly gain market share by addressing the needs of our
prospective customers. These competitors may enter our existing or future
markets with solutions that may be less expensive, provide higher performance
or additional features or be introduced earlier than our solutions. Given the
market opportunity in the shared Internet access market, we also expect that
other companies may enter our market with better products and technologies. If
any technology that is competing with ours is more reliable, faster, less
expensive or has other advantages over our technology, then the demand for our
products and services would decrease, which would seriously harm our business.
We expect our competitors to continue to improve the performance of their
current products and introduce new products or new technologies as industry
standards and customer requirements evolve that may supplant or provide lower
cost alternatives to our products. Successful new product introductions or
enhancements by our competitors could reduce the sales or market acceptance of
our products and services, perpetuate intense price competition or make our
products obsolete. To be competitive, we must continue to invest significant
resources in research and development, sales and marketing, and customer
support. We cannot be sure that we will have sufficient resources to make such
investments or that we will be able to make the technological advances
necessary to be competitive. As a result, we may not be able to compete
effectively against our competitors. Our failure to maintain and enhance our
competitive position within the market may seriously harm our business.
Increased competition is likely to result in price reductions, reduced gross
margins, longer sales cycles and loss of market share, any of which would
seriously harm our business. We cannot be certain that we will be able to
compete successfully against current or future competitors or that competitive
pressures will not seriously harm our business.
Intellectual Property
We rely on a combination of patent, copyright, trademark and trade secret
laws and restrictions on disclosure to protect our intellectual property
rights. We have filed two U.S. patent applications relating to the architecture
of our products. We cannot assure you that these applications will be
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approved, that any issued patents will protect our intellectual property or
that they will not be challenged by third parties. Furthermore, there can be no
assurance that others will not independently develop similar or competing
technology or design around any patents that may be issued to us. We also have
one pending U.S. trademark application.
We also enter into confidentiality or license agreements with our employees,
consultants and corporate partners, and control access to and distribution of
our software, documentation and other proprietary information. In addition, we
provide our products to end-users primarily under "shrink-wrap" license
agreements included in the packaging. These agreements are not negotiated with
or signed by the licensee, and thus these agreements may not be enforceable in
some jurisdictions. Despite our efforts to protect our proprietary rights,
unauthorized parties may attempt to copy or otherwise obtain and use our
products or technology. We cannot assure you that these precautions will
prevent misappropriation or infringement of our intellectual property.
Monitoring unauthorized use of our products is difficult, and we cannot assure
you that the steps we have taken will prevent misappropriation of our
technology, particularly in foreign countries where the laws may not protect
our proprietary rights as fully as in the United States.
Some of our OEM agreements also provide manufacturing rights and access to
our intellectual property and source code upon the occurrence of specified
conditions of default. If we were to default on these agreements, our OEMs
could use our intellectual property and source code to develop and manufacture
competing products, which would adversely affect our performance and ability to
compete.
Our industry is characterized by the existence of a large number of patents
and frequent claims and related litigation regarding patent and other
intellectual property rights. In particular, leading companies in the data
communications and networking markets have extensive patent portfolios with
respect to modem and networking technology. From time to time, third parties,
including these leading companies, have asserted and may assert exclusive
patent, copyright, trademark and other intellectual property rights to
technologies and related standards that are important to us. We expect that we
may increasingly be subject to infringement claims as the numbers of products
and competitors in the small office market for shared Internet access solutions
grow and the functionality of products overlaps.
In March 1999, we received a letter from a third party alleging that certain
of our products may infringe one of such party's patents pertaining to
intelligent modem bonding technology. We are reviewing this patent carefully
and the relevant aspects of our products affected by this patent. The failure
to agree or settle on reasonable terms between the parties may lead to
litigation, in which case our business or operating results may be adversely
affected. We do not know whether a license would be available on reasonable
terms, nor do we know whether we would be able to redesign our products so as
to eliminate such potential infringement.
Although we have not been a party to any litigation asserting claims that
allege infringement of intellectual property rights, we cannot assure you that
we will not be a party to litigation in the future. In addition, we cannot
assure you that third parties will not assert additional claims or initiate
litigation against us or our manufacturers, suppliers or customers alleging
infringement of their proprietary rights with respect to our existing or future
products.
We may in the future initiate claims or litigation against third parties for
infringement of our proprietary rights to determine the scope and validity of
our proprietary rights. Any such claims, with or without merit, could be time-
consuming, result in costly litigation and diversion of technical and
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management personnel, or require us to develop non-infringing technology or
enter into royalty or licensing agreements. Such royalty or licensing
agreements, if required, may not be available on acceptable terms, if at all.
In the event of a successful claim of infringement and our failure or inability
to develop non-infringing technology or license the proprietary rights on a
timely basis, our business, operating results and financial condition could be
materially adversely affected.
Employees
As of March 31, 1999, we employed 103 persons, including 6 in operations, 9
in marketing, 35 sales and customer support, 37 in engineering, research and
development and 16 in finance and administration. We also employ a number of
contract employees, especially for software engineering and systems
verification. None of our employees is represented by a labor union and we have
experienced no work stoppages to date. We believe our employee relations are
good.
Facilities
Our principal administrative and engineering facilities are located in one
leased building which totals approximately 42,500 square feet in Santa Clara,
California. The current lease for the Santa Clara space expires in August 2000,
with an option to renew for up to an additional five years. Our software
development site in Hyderabad, India totals approximately 13,200 square feet.
We believe that our facilities will be adequate to meet our requirements for at
least the next twelve months and that suitable additional or substitute space
will be available as needed.
Legal Proceedings
We are not aware of any pending legal proceedings against us that,
individually or in the aggregate, would have a material adverse effect on our
business, operating results or financial condition. We may in the future be
party to litigation arising in the course of our business, including claims
that we allegedly infringe third-party patents, trademarks and other
intellectual property rights. Such claims, even if not meritorious, could
result in the expenditure of significant financial and managerial resources.
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MANAGEMENT
Executive Officers and Directors
Our executive officers and directors and their ages as of March 31, 1999 are
as follows:
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Mahesh Veerina................ 37 President, Chief Executive Officer, and Director
Terry Gibson.................. 45 Vice President of Finance, Chief Financial Officer and Secretary
Patricia R. Burke............. 45 Vice President of Marketing
Elie Habib.................... 39 Vice President of Engineering
Timothy J. McElwee............ 32 Vice President of Worldwide Sales
Anthony Sun(2)................ 46 Chairman of the Board of Directors
Philip T. Gianos(1)(2)........ 49 Director
L. William Krause(1).......... 56 Director
</TABLE>
- --------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
Mahesh Veerina has served as our President, Chief Executive Officer and
director since October 1993. Prior to founding the company, Mr. Veerina managed
the development of high performance ATM multi-protocol routers at SynOptics
Communications, Inc., a manufacturer of networking routers and switches (now
Bay Networks, Inc.). Prior to SynOptics, Mr. Veerina led software protocols
development projects at Amdahl Corporation, a provider of computer systems,
storage subsystems and related hardware services. Mr. Veerina holds a B.S. in
Physics from Nagarjuna University, a M.S. in Physics and Electronics from
Andhra University, and an M.S. in Computer Engineering from Purdue University.
Terry R. Gibson has served as our Vice President of Finance, Chief Financial
Officer and Secretary since March 1999. From May 1996 to March 1999, he served
as Vice President of Finance and Chief Financial Officer at GaSonics
International Corporation, a semiconductor equipment manufacturer. From
February 1991 to May 1996, Mr. Gibson was Vice President and Corporate
Controller at Lam Research, a manufacturer of semiconductor processing
equipment. Mr. Gibson previously held positions with National Semiconductor
Corporation, a designer and manufacturer of integrated circuits and Deloitte,
Haskins and Sells, an accounting firm. He holds a B.S. in Science and Commerce
from Santa Clara University.
Patricia Burke has served as our Vice President of Marketing since October
1996. From May 1993 to October 1996, Ms. Burke was Vice President of Marketing
at Madge Networks NV, a manufacturer of network switching systems. From 1991 to
1993, Ms. Burke was Vice President of Marketing at Symantec Corporation, a
software developer. From 1983 to 1991, Ms. Burke was Partner-In-Charge of the
Networking Industry Practice group at Regis McKenna, Inc., a marketing
consulting company. Prior to Regis McKenna, Ms. Burke was the Director of
Public Relations with the Texas Rangers Baseball Club, a professional baseball
team. Ms. Burke holds a B.A. in English and German from the University of Texas
at Austin.
Elie Habib has served as our Vice President of Engineering since March 1999.
From January 1996 to January 1999, Mr. Habib was Vice President of Engineering
with Bay Networks, Inc. From April 1989 to December 1995, Mr. Habib was Senior
Engineering Manager at Sun Microsystems, Inc., a manufacturer of computer
desktop and servers equipment. Prior to his position with Sun, Mr. Habib was a
Software Engineer with Amdahl Corporation. Mr. Habib holds a B.S. in Computer
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Science and Mathematics from Universite de Rouen in Rouen, France, a M.S. in
Computer Science from Universite Paul Sabatier in Toulouse, France, and an M.S.
in Computer Science from Case Western Reserve University.
Timothy McElwee has served as our Vice President of Worldwide Sales since
October 1997. From August 1996 to October 1997, Mr. McElwee was Director of
Worldwide Networking Product Sales at Adaptec, Inc., a supplier of bandwidth
management solutions. From August 1994 to August 1996, he served as Vice
President of Sales at Cogent Data Technologies, Inc., a manufacturer of high-
end Ethernet adapters. From January 1994 to August 1994, Mr. McElwee was Vice
President of Sales and Marketing at EFA Corporation, a manufacturer of computer
components. Prior to EFA, Mr. McElwee held sales positions at Ansel
Communications, Inc., a manufacturer of networking Ethernet adapters, hubs and
switches, and Softworks Development Corporation, a regional distribution
company and systems assembler. Mr. McElwee attended the University of Wisconsin
in Milwaukee.
Anthony Sun has served as our Chairman of the Board of Directors since
September 1995. Mr. Sun has been a General Partner of Venrock Associates, a
venture capital firm, since 1979. Prior to joining Venrock, Mr. Sun held a
number of positions with Hewlett-Packard Company, TRW Inc. and Caere
Corporation. Mr. Sun also serves on the boards of Cognex Corporation, Komag,
Inc., Phoenix Technologies Ltd., 3Dfx Interactive, Inc., and Worldtalk
Communications Corp. Mr. Sun holds an S.B. in Electrical Engineering, an S.M.
in Electrical Engineering, and an Engineer's degree from the Massachusetts
Institute of Technology, as well as an M.B.A. from the Harvard University
Graduate School of Business.
Philip Gianos has served as a director of Ramp Networks since March 1996. Mr.
Gianos has been a General Partner at InterWest Partners, a venture capital
firm, since 1982. Prior to joining InterWest, Mr. Gianos was with IBM
Corporation for eight years, managing both chip design and systems integration
for several IBM office automation products. Mr. Gianos serves as a director of
Xilinx, Inc. and as a director of the Western Association of Venture
Capitalists. Mr. Gianos holds a B.S and an M.S. in Electrical Engineering from
Stanford University and an M.B.A. from Harvard University Graduate School of
Business.
L. William Krause has served as a director of Ramp Networks, Inc. since March
1999. Since November 1998, Mr. Krause has been President of LWK Ventures, a
private investment company. From October 1991 to November 1998, Mr. Krause
served as President, Chief Executive Officer and as a director of Storm
Technology, Inc. a provider of computer peripherals and software for digital
imaging. Prior to that, Mr. Krause spent ten years at 3Com Corporation, a
manufacturer of networking systems, where he served as President and Chief
Executive Officer until he retired in September 1990. Mr. Krause continued as
Chairman of the Board for 3Com Corporation until 1993. Previously, Mr. Krause
served in various marketing and general management positions at Hewlett-Packard
Company. Mr. Krause currently serves as a director of Aureal Semiconductor,
Inc., Infoseek Corporation, and Sybase, Inc. Mr. Krause holds a B.S.E.E. from
The Citadel.
There are no family relationships among any of our directors or executive
officers. Storm Technology, Inc. filed for Chapter 7 bankruptcy protection in
November 1998 when Mr. Krause was Storm Technology's President and Chief
Executive Officer.
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Board Composition
We currently have authorized four directors. In accordance with the terms of
our Certificate of Incorporation, effective upon the closing of this offering,
the terms of office of the directors will be divided into two classes: Class I,
whose term will expire at the annual meeting of stockholders to be held in 2000
or special meeting held in lieu thereof, and Class II, whose term will expire
at the annual meeting of stockholders to be held in 2001 or special meeting
held in lieu thereof. The Class I directors are William Krause and Philip
Gianos and the Class II directors are Anthony Sun and Mahesh Veerina. At each
annual meeting of stockholders after the initial classification or special
meeting in lieu thereof, the successors to directors whose terms will then
expire will be elected to serve from the time of election and qualification
until the second annual meeting following election or special meeting held in
lieu thereof. In addition, our Certificate of Incorporation provides that the
authorized number of directors may be changed only by resolution of the Board
of Directors. Any additional directorships resulting from an increase in the
number of directors will be distributed among the two classes so that, as
nearly as possible, each class will consist of one-half of the directors. This
classification of the Board of Directors may have the effect of delaying or
preventing changes in control or management of the company, although directors
of the company may be removed for cause by the affirmative vote of the holders
of a majority of the common stock.
Board Compensation
We do not currently compensate our directors, but they are reimbursed for
out-of-pocket expenses incurred in connection with attendance at meetings of
the Board of Directors or its committees. Our directors are generally eligible
to participate in our 1995 Stock Option Plan and our 1999 Stock Incentive Plan
and, to the extent that a director is an employee of the company, to
participate in our 1999 Employee Stock Purchase Plan. See "--Stock Plans."
Board Committees
The Compensation Committee currently consists of Anthony Sun and Philip
Gianos. The Compensation Committee:
. reviews and approves the compensation and benefits for our executive
officers and grants stock options under our stock option plans; and
. makes recommendations to the Board of Directors regarding such matters.
The Audit Committee consists of William Krause and Philip Gianos. The Audit
Committee:
. makes recommendations to the Board of Directors regarding the selection
of independent auditors;
. reviews the results and scope of the audit and other services provided by
our independent auditors; and
. reviews and evaluates our audit and control functions.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee of Ramp Networks' Board of
Directors are currently Anthony Sun and Philip Gianos. Neither of them has at
any time been an officer or employee of the company.
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Executive Compensation
The following table sets forth all compensation awarded to, earned by, or
paid to our Chief Executive Officer and our only other executive officers whose
total cash compensation exceeded $100,000 during the year ended December 31,
1998 (collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
-------------------- ------------
Securities
Underlying All Other
Name and Principal Position Salary Bonus Options (#) Compensation
- --------------------------- ---------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Mahesh Veerina.................. $ 140,000 $ 30,000 -- --
President and Chief Executive
Officer
Patricia R. Burke............... 149,500 25,000 12,000 --
Vice President of Marketing
Timothy J. McElwee.............. 150,000 56,000 -- --
Vice President of Worldwide
Sales
</TABLE>
The following table shows certain information regarding stock options granted
to the Named Executive Officers during the year ended December 31, 1998. No
stock appreciation rights were granted to the Named Executive Officers during
the year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Realizable
Value at
Assumed Annual
Rates Of Stock
Price
Number of Appreciation
Shares Percentage of For Option
Underlying Total Options Exercise Term(3)
Options Granted to Price per Expiration ---------------
Name Granted (1) Employees (2) Share Date 5% 10%
---- ----------- ------------- --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Mahesh Veerina.......... -- -- -- -- -- --
Patricia R. Burke....... 12,000 1.6% $1.67 7/14/08 $12,603 $31,939
Timothy J. McElwee...... -- -- -- -- -- --
</TABLE>
- --------
(1) These stock options, which were granted under the 1995 Stock Option Plan,
become exercisable at a rate of 1/4 of the total number of shares of common
stock subject to the option on the first anniversary of the date of grant,
and 1/48 of the total number of shares monthly thereafter, as long as the
optionee remains an employee with, consultant to, or director of the
company.
(2) Based on an aggregate of 774,134 options to purchase common stock of the
company granted by the company under the 1995 Stock Option Plan in fiscal
year 1998.
(3) Potential realizable values are net of exercise price, but before taxes
associated with exercise. The 5% and 10% assumed annual rates of compounded
stock price appreciation are mandated by the Securities and Exchange
Commission. There is no assurance provided to any executive officer or any
other holder of our securities that the actual stock price appreciation
over the 10-year option term will be at the assumed 5% and 10% levels or at
any other defined level. Unless the market price of the common stock
appreciates over the option term, no value will be realized from the option
grants made to the executive officers.
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Option Exercises and Holdings
The following table sets forth the number of shares of common stock acquired
upon the exercise of stock options by the Named Executive Officers during our
last fiscal year, and the number and value of securities underlying unexercised
options held by the Named Executive Officers as of December 31, 1998:
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Number of Underlying Unexercised In-the-Money Options
Shares Options at December 31, 1998 At December 31, 1998 (1)
Acquired Value -------------------------------- -------------------------
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ------------- --------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Mahesh Veerina........ -- -- 36,249 108,750 -- --
Patricia R. Burke....... -- -- 98,750 125,050 $121,875 $103,125
Timothy J. McElwee...... -- -- 43,750 226,250 $ 36,750 $ 89,250
</TABLE>
- --------
(1) Based on the fair market value as of December 31, 1998 ($1.67 per share),
as determined by the Board of Directors, minus the exercise price,
multiplied by the number of shares underlying the option.
Stock Plans
1999 Stock Incentive Plan. Our 1999 Stock Incentive Plan was adopted by the
Board of Directors in March 1999 and we will be submitting it for approval by
our stockholders prior to the closing of this offering. A total of 2,400,000
shares of common stock have been reserved for issuance under the 1999 Stock
Incentive Plan as of the date of this offering. On the first day of each of our
fiscal years in 2000, 2001, 2002, 2003 and 2004 the number of shares reserved
for issuance under the 1999 Stock Incentive Plan will be increased by the
lesser of (1) 140,000 shares, (2) 3.5% of our outstanding common stock on the
last day of the immediately preceding fiscal year, or (3) a lesser number of
shares as the Board of Directors determines.
The 1999 Stock Incentive Plan provides for the granting of incentive stock
options to employees, including officers and directors, within the meaning of
Section 422 of the Internal Revenue Code of 1986, as amended, and for the
granting of nonstatutory stock options and stock purchase rights to employees
and consultants, including non-employee directors. If an employee would have
the rights in any calendar year to exercise for the first time incentive stock
options for shares having an aggregate fair market value, under all of our
plans and determined for each share as of the date the option to purchase
shares was granted, in excess of $100,000, any such excess options shall be
treated as nonstatutory stock options.
The 1999 Stock Incentive Plan may be administered by the Board of Directors
or a committee of the Board, each known as the "administrator." The Board of
Directors currently administers the 1999 Stock Incentive Plan. The
administrator determines the terms of options and stock purchase rights granted
under the 1999 Stock Incentive Plan, including the number of shares subject to
an option or stock purchase right, the exercise price or purchase price, and
the term and exercisability of options or conditions for stock purchased
pursuant to stock purchase rights. The administrator may grant an individual
employee options or stock purchase rights under the 1999 Stock Incentive Plan
during any one fiscal year with respect to a maximum of 1,300,000 shares. The
exercise price of all
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incentive stock options granted under the 1999 Stock Incentive Plan must be at
least equal to the fair market value of our common stock on the date of grant.
The administrator has the authority to grant nonstatutory stock options and
stock purchase rights at prices below fair market value, although the exercise
price of such awards granted to our Chief Executive Officer and our four other
most highly compensated officers will generally equal at least 100% of the fair
market value of the common stock on the date of grant. In addition, for any
grants made prior to the date of this offering, the exercise price must be at
least 85% of the fair market value of the common stock on the date of grant and
grants to employees who are not officers must vest at least 20% per year.
Payment of the exercise price of options and the purchase price of stock
purchase rights may be made in cash or other consideration as determined by the
administrator. Generally, options granted under the 1999 Stock Incentive Plan
have a term of ten years and are nontransferable, although the administrator
may grant nonstatutory stock options with limited transferability rights in
certain circumstances.
In the event we are acquired by another company, or in the event of a sale of
all or substantially all of our assets, we expect that awards outstanding under
the 1999 Stock Incentive Plan will be assumed or equivalent awards substituted
by our acquirer or the purchaser of such assets. If an acquirer or purchaser
does not agree to assume or substitute awards, then restrictions on restricted
stock shall lapse and the administrator may provide notice that options will
terminate on a specified date if not exercised or terminate each option in
exchange for a payment equal to the excess of the fair market value of vested
option shares over the exercise price of the shares.
The Board of Directors may amend, modify or terminate the 1999 Stock
Incentive Plan at any time as long as such amendment, modification or
termination does not impair vesting rights of plan participants and provided
that stockholder approval shall be required for an amendment to the extent
required by applicable law, regulations or rules. Unless terminated earlier by
the Board of Directors, the 1999 Stock Incentive Plan will terminate in April
2009.
1995 Stock Option Plan. Our 1995 Stock Option Plan was originally adopted by
the Board of Directors and approved by our shareholders in September 1995. A
total of 3,218,286 shares of common stock have been reserved for issuance under
the 1995 Stock Option Plan. The 1995 Stock Option Plan provides for the
granting of incentive stock options (within the meaning of Section 422 of the
Internal Revenue Code) to employees, and nonstatutory stock options to
employees and consultants. As of December 31,1998, options to purchase
1,767,715 shares of common stock were outstanding at a weighted average
exercise price of $1.22, 736,390 shares had been issued upon exercise of
options, and 714,173 shares of common stock remained available for future
grants under the 1995 Stock Option Plan. Options granted under the 1995 Stock
Option Plan will remain outstanding in accordance with their terms, but the
Board of Directors has determined that no further options will be granted under
the 1995 Stock Option Plan. Unless terminated earlier by the Board, the 1995
Stock Option Plan will terminate in September 2005.
The 1995 Stock Option Plan may be administered by the Board of Directors or a
committee of the Board, each known as the "administrator" with the authority to
grant options and to determine the terms of such grants. Stock options granted
under the 1995 Stock Option Plan may not have a term of more than ten years and
generally remain exercisable for a period of three months following termination
of the optionee's relationship with the Company. Longer periods apply in the
event such termination occurs as a result of death or disability. The exercise
price of all incentive stock options must be at least equal to the fair market
value of the common stock at the time of grant, and the exercise price of
nonstatutory stock options must be at least 85% of the fair market value of the
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common stock at the time of grant, however, the exercise price of stock options
granted to employees owning stock that represents more than 10% of the total
combined voting power of all classes of outstanding capital stock of the
Company must in all cases be at least 110% of the fair market value of common
stock at the time of grant. In addition, grants to employees who are not
officers must vest at least 20% per year. In the event of a proposed sale of
all or substantially all of the assets of the company or the merger or
consolidation of the company with or into another corporation, each option may
be assumed or an equivalent option substituted by the successor corporation.
However, if the successor corporation does not agree to such assumption or
substitution of an option, the option will terminate. The administrator has the
authority to amend the 1995 Stock Option Plan provided that no action that
impairs the rights of any holder of an outstanding option may be taken without
the holder's consent and provided that stockholder approval for any amendments
to the 1995 Stock Option Plan shall be obtained to the extent required by
applicable law.
1999 Employee Stock Purchase Plan. Our 1999 Employee Stock Purchase Plan was
adopted by the Board of Directors in April 1999 and is expected to be approved
by the stockholders prior to the closing of this offering. A total of 600,000
shares of common stock have been reserved for issuance under the Purchase Plan,
none of which have been issued as of the date of this offering. The number of
shares reserved for issuance under the Purchase Plan will be subject to an
annual increase on the first day of each of our fiscal years beginning in 2000,
2001, 2002, 2003 and 2004 equal to the lesser of (1) 186,000 shares, (2) 1% of
our outstanding common stock on the last day of the immediately preceding
fiscal year, or (3) a lesser number of shares as the Board of Directors
determines. The Purchase Plan becomes effective upon the date of this
prospectus. Unless terminated earlier by the Board of Directors, the Purchase
Plan shall terminate in April 2019.
The Purchase Plan, which is intended to qualify under Section 423 of the
Internal Revenue Code of 1986, will be implemented by a series of overlapping
offering periods of 24 months' duration, with new offering periods (other than
the first offering period) commencing on May 1 and November 1 of each year.
Each offering period will consist of four consecutive purchase periods of six
months' duration, at the end of each such six month period (a "purchase date")
an automatic purchase will be made for participants. The initial offering
period is expected to commence on the date of this offering and end on April
30, 2001; the initial purchase period is expected to commence on the date of
this offering and end on October 31, 1999. The Purchase Plan will be
administered by the Board of Directors or by a committee appointed by the
Board. Employees (including officers and employee directors) of the company, or
of any majority-owned subsidiary designated by the Board, are eligible to
participate in the Purchase Plan if they are employed by the company or any
such subsidiary for at least 20 hours per week and more than five months per
year. The Purchase Plan permits eligible employees to purchase common stock
through payroll deductions of up to 15% of an employee's compensation, at a
price equal to the lower of 85% of the fair market value of our common stock at
the beginning of each offering period or at the end of each purchase period.
The Board of Directors shall have the discretion to increase, prior to the
beginning of an offering period, the percentage of participants' compensation
that may be withheld through the Purchase Plan, up to a maximum of 20% of
compensation. Employees may end their participation in the Purchase Plan at any
time during an offering period, and participation automatically ends on
termination of employment. The Board may also implement provisions of the
Purchase Plan that permit stock purchases through cash or stock contributions.
No employee shall be permitted to purchase shares under the Purchase Plan if
immediately after the purchase such employee would own stock and/or hold
outstanding options to purchase stock
55
<PAGE>
equaling 5% or more of the total voting power or value of all classes of stock
of the company or its subsidiaries, or if such purchase would permit an
employee to purchase stock, under all of the company's, and our subsidiaries',
employee stock purchase plans, to accrue at a rate that exceeds $25,000 of fair
market value of such stock for each calendar year in which the option is
outstanding at any time. In addition, no employee may purchase more than 1,000
shares of common stock under the Purchase Plan in any one purchase period. If
the fair market value of the common stock on a purchase date is less than the
fair market value at the beginning of the offering period, each participant in
the Purchase Plan shall automatically be withdrawn from the offering period as
of the end of the purchase date and re-enrolled in the new 24 month offering
period beginning on the first business day following the purchase date.
In the event we are acquired by another company or in the event of a sale of
all or substantially all of our assets, we expect that each right to purchase
stock under the Purchase Plan will be assumed or an equivalent right
substituted by the successor corporation unless the Board of Directors shortens
any ongoing offering period so that employees' rights to purchase stock under
the Purchase Plan are exercised prior to the transaction. The Board of
Directors has the power to amend or terminate the Purchase Plan and to change
or terminate offering periods as long as such action does not adversely affect
any outstanding rights to purchase stock thereunder, provided however, that the
Board may amend or terminate the Purchase Plan or an offering period even if it
would adversely affect outstanding options in order to avoid our incurring
adverse accounting charges.
Limitation of Liability and Indemnification Matters
Our Certificate of Incorporation limits the liability of directors to the
maximum extent permitted by Delaware law. Delaware law provides that a director
of a corporation will not be personally liable for monetary damages for breach
of such individual's fiduciary duties as a director except for liability (i)
for any breach of such director's duty of loyalty to the company or to its
stockholders, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the Delaware General Corporation Law or (iv) for any
transaction from which a director derives an improper personal benefit.
Our Bylaws provide that we indemnify our directors and executive officers and
may indemnify our officers, employees and other agents to the full extent
permitted by law. We believe that indemnification under our Bylaws covers at
least negligence on the part of an indemnified party. Our Bylaws also permit us
to advance expenses incurred by an indemnified party in connection with the
defense of any action or proceeding arising out of his or her status or service
as a director, officer, employee or other agent of the company upon an
undertaking by him or her to repay such advances if it is ultimately determined
that he or she is not entitled to indemnification.
We have entered into separate indemnification agreements with each of our
directors and officers. These agreements require us to, among other things,
indemnify such director or officer against expenses, including attorney's fees,
judgments, fines and settlements paid by such individual in connection with any
action, suit or proceeding arising out of such individual's status or service
as a director or officer of the company, other than liabilities arising from
willful misconduct or conduct that is knowingly fraudulent or deliberately
dishonest, and to advance expenses incurred by such individual in connection
with any proceeding against such individual with respect to which such
individual may be entitled to indemnification by us. We believe that our
Certificate of Incorporation
56
<PAGE>
and Bylaw provisions and indemnification agreements are necessary to attract
and retain qualified persons as directors and executive officers. We also
maintain directors' and officers' liability insurance.
At present we are not aware of any pending litigation or proceeding involving
any director, officer, employee or agent of the company where indemnification
will be required or permitted. Furthermore, we are not aware of any threatened
litigation or proceeding that might result in a claim for such indemnification.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, executive officers or persons controlling the
company, we have been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is therefore unenforceable.
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<PAGE>
CERTAIN TRANSACTIONS
Certain stock option grants to our directors and executive officers are
described in this prospectus under the caption "Management--Executive
Compensation."
Private Placement Transactions
Since our inception, we have issued, in private placement transactions,
shares of preferred stock, warrants for the purchase of shares of preferred
stock, and notes convertible into shares of preferred stock as follows:
. an aggregate of 4,797,773 shares of Series A Preferred Stock at $0.61 per
share in September and December 1995 and February 1996 to 10 investors;
. an aggregate of 2,614,999 shares of Series B Preferred Stock at $3.44 per
share in March 1996 to 16 investors;
. an aggregate of 1,773,645 shares of Series C Preferred Stock at $4.93 per
share in March and April 1997 to 11 investors;
. warrants to purchase 15,498 shares of Series C Preferred Stock in
December 1996;
. an aggregate of 2,418,890 shares of Series D Preferred Stock at $6.59 per
share in October, November and December 1997 to 13 investors;
. an aggregate of 193,420 shares of Series D Preferred Stock with an
aggregate value of approximately $1,274,637 in connection with the
acquisition of Prodigies, a sole proprietorship, in March 1998, of which
87,000 shares of Series D Preferred Stock are held in escrow; and
The following table summarizes the shares of preferred stock purchased by
Named Executive Officers, directors and 5% stockholders of Ramp Networks, and
persons and entities associated with them, in private placement transactions:
<TABLE>
<CAPTION>
Series A Series B Series C Series D
Preferred Preferred Preferred Preferred
Investor Stock Stock Stock Stock
- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Ravindrath N. Bathina.................. 715,782 -- -- --
1325 Sycamore Hills Parkway
Fort Wayne, IN 46804
Venrock Associates(1).................. 3,242,396 435,836 235,730 73,521
2494 Sand Hill Road
Menlo Park, CA 94025
Draper International................... 650,712 116,222 49,003 15,283
50 Fremont Street
San Francisco, CA 94105
InterWest Partners(2).................. -- 1,016,948 64,977 103,490
3000 Sand Hill Road, Building 3
Menlo Park, CA 94025
Vertex Management...................... -- 871,668 55,695 17,370
3 Lagoon Drive, Suite 220
Redwood City, CA 94065
London Pacific Life & Annuity Company.. -- -- -- 1,517,020
3109 Poplarwood Court
Raleigh, NC 27604
</TABLE>
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<PAGE>
- --------
(1) Anthony Sun, one of our directors, is a general partner of Venrock
Associates. See the Principal Stockholders table for more information.
(2) Philip Gianos, one of our directors, is a general partner of InterWest
Partners. See the Principal Stockholders table for more information.
Indemnification Agreements
We have entered into indemnification agreements with certain of our officers
and directors containing provisions which may require us to, among other
things, indemnify our officers and directors against certain liabilities that
may arise by reason of their status or service as officers or directors (other
than liabilities arising from willful misconduct of a culpable nature) and to
advance their expenses incurred as a result of any proceeding against them as
to which they could be indemnified. For a description of limitations of
liability and certain indemnification arrangements with respect to our
directors and officers, see "Management--Limitation of Liability and
Indemnification Matters."
Registration Rights Agreements
Certain holders of common stock and preferred stock have certain registration
rights with respect to their shares of common stock (including common stock
issuable upon conversion of their preferred stock). See "Description of Capital
Stock--Registration Rights of Certain Holders."
Other Transactions
In 1996, we sold our ATM adapter card technology, related development tools
and work stations to a company, which was owned by our primary shareholders,
for $83,000.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to beneficial
ownership of our common stock as of December 31, 1998, and as adjusted to
reflect the sale of common stock offered hereby, as to (i) each person (or
group of affiliated persons) known by us to own beneficially more than 5% of
our outstanding common stock, (ii) each of our directors, (iii) each of the
Named Executive Officers, and (iv) all directors and executive officers of the
company as a group.
<TABLE>
<CAPTION>
Percent Beneficially
Owned(2)
--------------------
Number of Before After
Shares(2) Offering Offering(3)
--------- -------- -----------
<S> <C> <C> <C>
Anthony Sun(4)................................. 3,987,483 24.8%
2494 Sand Hill Road
Menlo Park, CA 94025
Mahesh Veerina(1)(5)........................... 1,273,491 7.9
Philip T. Gianos(6)............................ 1,185,415 7.4
3000 Sand Hill Road, Building 3
Menlo Park, CA 94025
Timothy J. McElwee(1)(5)....................... 49,999 *
Patricia R. Burke(1)(5)........................ 106,749 *
Venrock Associates(7).......................... 3,987,483 24.8
2494 Sand Hill Road
Menlo Park, CA 94025
London Pacific Life & Annuity Company.......... 1,517,020 9.4
3109 Poplarwood Court
Raleigh, NC 27604
InterWest Partners(8).......................... 1,185,415 7.4
3000 Sand Hill Road, Building 3
Menlo Park, CA 94025
Ravindrath N. Bathina.......................... 1,016,736 6.3
1325 Sycamore Hills Parkway
Fort Wayne, IN 46804
Vertex Management(9)........................... 944,733 5.9
3 Lagoon Drive, Suite 220
Redwood City, CA 94065
Draper International(10)....................... 831,220 5.2
50 Fremont Street
San Francisco, CA 94105
All directors and officers as a group (8 6,603,137 41.0
persons)(4)(6)................................
</TABLE>
- --------
* Less than 1%.
(1) Except as otherwise noted, the address of each person listed in the table
is c/o Ramp Networks, Inc., 3100 De La Cruz Boulevard, Santa Clara, CA
95054, and the persons named in the table have sole voting and investment
power with respect to all shares of common stock shown as beneficially
owned by them, subject to community property laws where applicable.
(2) Applicable percentage of beneficial ownership is based on 16,099,413
shares of common stock outstanding as of December 31, 1998, together with
applicable options exercisable within 60 days of December 31, 1998 and
warrants for such stockholder. Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange Commission. The
number of shares beneficially
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<PAGE>
owned by a person includes shares of common stock subject to options held by
that person that are currently exercisable or exercisable within 60 days of
December 31, 1998. Shares issuable pursuant to such options are deemed
outstanding for computing the percentage ownership of the person holding
such options but are not deemed outstanding for the purposes of computing
the percentage ownership of each other person.
(3) Assumes underwriters do not exercise their over-allotment option.
(4) Mr. Sun is a general partner of Venrock Associates, L.P. which holds
2,632,351 shares, and Venrock Associates II, L.P. which holds 1,355,132
shares. Mr. Sun disclaims beneficial ownership of the shares held by these
entities except to the extent of his pecuniary interest therein. See Note
7.
(5) Includes the following shares issuable upon the exercise of outstanding
options exercisable within 60 days of December 31, 1998; Mr. Veerina,
42,291; Ms. Burke, 106,749; and Mr. McElwee, 49,999.
(6) Mr. Gianos is a general partner of InterWest Management Partners V, L.P.,
which is the general partner of InterWest Partners V, L.P. which holds
1,178,007 shares. Mr. Gianos disclaims beneficial ownership in the shares
held by this entity, except to the extent of his pecuniary interest
therein. Shares attributable to Mr. Gianos do not include any shares owned
by InterWest Investors V, L.P., which holds 7,408 shares. See Note 8.
(7) Includes 2,632,351 shares held by Venrock Associates, L.P. and 1,355,132
shares held by Venrock Associates II, L.P.
(8) Includes 1,178,007 shares owned by InterWest Partners V, L.P. and 7,408
shares held by InterWest Investors V, L.P.
(9) Includes 759,262 shares owned by Vertex Investment (II) Ltd. and 185,471
shares held by HWH Investment Pte., Ltd.
(10) Includes 650,712 shares owned by Draper International Holdings, L.P. and
180,508 shares held by Draper International India, L.P.
61
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Following the closing of the sale of the shares offered hereby, our
authorized capital stock will consist of 100,000,000 shares of common stock,
$0.001 par value, and 5,000,000 shares of undesignated preferred stock, $0.001
par value.
Common Stock
As of December 31, 1998, there were 16,099,413 shares of common stock
outstanding that were held of record by approximately 90 stockholders after
giving effect to the conversion of our preferred stock into common stock at a
one-to-one ratio, and assuming no exercise or conversion of outstanding
convertible securities after December 31, 1998. There will be shares of
common stock outstanding (assuming no exercise of the underwriters' over-
allotment option and no exercise or conversion of outstanding convertible
securities after December 31, 1998) after giving effect to the sale of the
shares of common stock offered hereby.
The holders of common stock are entitled to one vote per share on all matters
to be voted upon by the stockholders. Subject to preferences that may be
applicable to any outstanding preferred stock, the holders of common stock are
entitled to receive ratably such dividends, if any, as may be declared from
time to time by the Board of Directors out of funds legally available therefor.
See "Dividend Policy." In the event of a liquidation, dissolution or winding up
of the company, the holders of common stock are entitled to share ratably in
all assets remaining after payment of liabilities, subject to prior rights of
preferred stock, if any, then outstanding. The common stock has no preemptive
or conversion rights or other subscription rights. There are no redemption or
sinking fund provisions available to the common stock. All outstanding shares
of common stock are fully paid and non-assessable.
Preferred Stock
Effective upon the closing of this offering, we will be authorized to issue
5,000,000 shares of undesignated preferred stock. The Board of Directors will
have the authority to issue the undesignated preferred stock in one or more
series and to determine the powers, preferences and rights and the
qualifications, limitations or restrictions granted to or imposed upon any
wholly unissued series of undesignated preferred stock and to fix the number of
shares constituting any series and the designation of such series, without any
further vote or action by the stockholders. The issuance of preferred stock may
have the effect of delaying, deferring or preventing a change in control of the
company without further action by the stockholders and may adversely affect the
voting and other rights of the holders of common stock. At present, we have no
plans to issue any shares of preferred stock.
Registration Rights of Certain Holders
The holders of 14,866,529 shares of common stock, and the holders of 150,446
shares issuable upon exercise of warrants (together, the "Registrable
Securities"), or their transferees are entitled to certain rights with respect
to the registration of such shares under the Securities Act. These rights are
provided under the terms of an agreement among Ramp Networks and the holders of
Registrable Securities dated October 30, 1997. Subject to certain limitations
in this agreement, the holders of forty percent of the Registrable Securities
may require, on two occasions at any time after six months from the effective
date of this offering, that we use our best efforts to register the Registrable
Securities for public resale, provided that the proposed aggregate offering
price is at least $7,500,000.
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<PAGE>
If we register any of our common stock either for our own account or for the
account of other security holders, the holders of Registrable Securities are
entitled to include their shares of common stock in the registration. A
holder's right to include shares in an underwritten registration is subject to
the ability of the underwriters to limit the number of shares included in that
offering.
Additionally, in the event that we have failed to qualify for use of Form S-3
or similar short-form registration within twelve months after the effective
date of this offering, then we shall be obligated to effect one additional
registration at the demand of the holders of Registrable Securities, subject to
the limitations noted above.
All fees, costs and expenses of such registrations must be borne by Ramp
Networks and all selling expenses (including underwriting discounts and selling
commissions) relating to Registrable Securities must be borne by the holders of
the securities being registered.
Anti-Takeover Provisions of Delaware Law
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. In general, the statute prohibits a publicly held Delaware
corporation from engaging in a "business combination" with an "interested
stockholder" for a period of three years after the date that the person became
an interested stockholder unless (with certain exceptions) the business
combination or the transaction in which the person became an interested
stockholder is approved in a prescribed manner. Generally, a "business
combination" includes a merger, asset or stock sale or other transaction
resulting in a financial benefit to the stockholder, and an "interested
stockholder" is a person who, together with affiliates and associates, owns (or
within three years prior, did own) 15% or more of the corporation's outstanding
voting stock. This provision may have the effect of delaying, deferring or
preventing a change in control of Ramp Networks without further action by the
stockholders. In addition, upon completion of this offering, certain provisions
of our charter documents, including a provision eliminating the ability of
stockholders to take actions by written consent, may have the effect of
delaying or preventing changes in control or management of Ramp Networks, which
could have an adverse effect on the market price of our common stock. Our
Option Plans and Purchase Plan generally provide for assumption of such plans
or substitution of an equivalent option of a successor corporation or,
alternatively, at the discretion of the Board of Directors, exercise of some or
all of the options stock, including non-vested shares, or acceleration of
vesting of shares issued pursuant to stock grants, upon a change of control or
similar event. The Board of Directors has authority to issue up to 5,000,000
shares of preferred stock and to fix the rights, preferences, privileges and
restrictions, including voting rights, of these shares without any further vote
or action by the stockholders. The rights of the holders of the common stock
will be subject to, and may be adversely affected by, the rights of the holders
of any preferred stock that may be issued in the future. The issuance of
preferred stock, while providing desirable flexibility in connection with
possible acquisitions and other corporate purposes, could have the effect of
making it more difficult for a third party to acquire a majority of our
outstanding voting stock, thereby delaying, deferring or preventing a change in
control of Ramp Networks. Furthermore, such preferred stock may have other
rights, including economic rights senior to the common stock, and, as a result,
the issuance of such preferred stock could have a material adverse effect on
the market value of the common stock. We have no present plan to issue shares
of preferred stock.
Warrants
As of December 31, 1998, warrants were outstanding to purchase an aggregate
of 27,634 shares of common stock at a weighted average exercise price of $5.43
per share. Warrants to purchase
63
<PAGE>
15,498 shares at $4.52 per share will expire three years from the effective
date of this offering. Warrants to purchase 12,136 shares at $6.59 per share
will expire five years from the effective date of this offering.
Transfer Agent and Registrar
We are in the process of selecting a transfer agent and registrar for our
common stock.
Listing
We have applied to list our common stock on the Nasdaq National Market of the
Nasdaq Stock Market, Inc. under the trading symbol "RAMP."
64
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our common stock.
We cannot provide any assurances that a significant public market for our
common stock will develop or be sustained after this offering. Future sales of
substantial amounts of common stock in the public market, or the possibility of
such sales occurring, could adversely affect prevailing market prices for the
common stock or our future ability to raise capital through an offering of
equity securities.
After this offering, we will have outstanding shares of common stock. Of
these shares, the shares to be sold in this offering ( shares if the
underwriters' over-allotment option is exercised in full) will be freely
tradable in the public market without restriction under the Securities Act,
unless such shares are held by "Affiliates" of the company, as that term is
defined in Rule 144 under the Securities Act.
The remaining 16,203,815 shares outstanding upon completion of this offering
will be "restricted securities" as that term is defined under Rule 144 (the
"Restricted Shares"). We issued and sold the Restricted Shares in private
transactions in reliance on exemptions from registration under the Securities
Act. Restricted Shares may be sold in the public market only if they are
registered or if they qualify for an exemption from registration under Rule 144
or Rule 701 under the Securities Act, as summarized below.
Pursuant to certain "lock-up" agreements, all the executive officers,
directors and certain stockholders of the company, who collectively hold an
aggregate of 16,203,815 Restricted Shares, have agreed not to offer, sell,
contract to sell, grant any option to purchase or otherwise dispose of any such
shares for a period of 180 days from the date of this prospectus. At the
request of the underwriters, we have agreed to attempt to secure an agreement
from each stockholder to not offer, sell or otherwise dispose of common stock
for a period of 180 days from the date of this prospectus.
Assuming that this offering is effective on June 14, 1999, on the date of the
expiration of the lock-up agreements, 16,203,815 Restricted Shares that will
not then be subject to any repurchase option will be eligible for immediate
sale. Following the completion of this offering, warrants to purchase 150,446
shares will be outstanding, which, if exercised pursuant to net-exercise
provisions, would be immediately saleable without restriction upon the
expiration of the 180 day lock-up period. If such warrants were to be otherwise
exercised, they would be saleable upon the expiration of various one-year
holding periods, subject to certain volume, manner of sale, and other
limitations under Rule 144. In general, under Rule 144 as in effect at the
closing of this offering, beginning 90 days after the date of this prospectus,
a person (or persons whose shares of the company are aggregated) who has
beneficially owned Restricted Shares for at least one year (including the
holding period of any prior owner who is not an Affiliate of the company) would
be entitled to sell, within any three-month period, a number of shares that
does not exceed the greater of (1) 1% of the then-outstanding shares of common
stock or (2) the average weekly trading volume of the common stock during the
four calendar weeks preceding the filing of a Form 144 with respect to such
sale. Sales under Rule 144 are also subject to certain manner of sale and
notice requirements and to the availability of current public information about
the company. Under Rule 144(k), a person who is not deemed to have been an
Affiliate of the company at any time during the three months 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 who is not an Affiliate
of the company) is entitled to sell such shares without complying with the
manner of sale, public information, volume limitation or notice provisions of
Rule 144.
65
<PAGE>
Of the 1,767,715 options to purchase shares of common stock outstanding as of
December 31, 1998, on the date 180 days following the assumed effective date of
this offering, options to purchase 467,081 shares of common stock will be fully
exercisable and saleable pursuant to Rule 701 or registration on Form S-8.
We intend to file, no later than the effective date of this offering, a
Registration Statement on Form S-8 to register approximately 4,767,715 shares
of common stock reserved for issuance under the 1995 Stock Option Plan, the
1999 Stock Incentive Plan and the Purchase Plan. The Registration Statement
will become effective automatically upon filing. Shares issued under the
foregoing plans, after the filing of a Registration Statement on Form S-8, may
be sold in the open market, subject, in the case of certain holders, to the
Rule 144 limitations applicable to Affiliates, the above-referenced lock-up
agreements and vesting restrictions imposed by us.
In addition, following this offering, the holders of 14,866,529 shares of
outstanding common stock and the holders of 150,446 shares issuable upon
exercise of warrants, or their transferees, will, under certain circumstances,
have rights to require us to register their shares for future sale. See
"Description of Capital Stock--Registration Rights."
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<PAGE>
UNDERWRITING
The underwriters named below, acting through their representatives,
BancBoston Robertson Stephens Inc., Dain Rauscher Wessels, a division of Dain
Rauscher Incorporated and Hambrecht & Quist LLC (the "Representatives"), have
severally agreed with us, subject to the terms and conditions set forth in the
underwriting agreement, to purchase from us the number of shares of common
stock set forth opposite their names below. The underwriters are committed to
purchase and pay for all such shares if any are purchased.
<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
BancBoston Robertson Stephens Inc...............................
Dain Rauscher Wessels...........................................
Hambrecht & Quist LLC...........................................
----
Total.........................................................
====
</TABLE>
We have been advised by the Representatives that the underwriters propose to
offer the shares of common stock to the public at the initial public offering
price set forth on the cover page of this prospectus and to certain dealers at
such price less a concession of not in excess of $ per share, of which $
may be reallowed to other dealers. After the initial public offering, the
public offering price, concession and reallowance to dealers may be reduced by
the Representatives. No such reduction shall change the amount of proceeds to
be received by us as set forth on the cover page of this prospectus. The common
stock is offered by the underwriters as stated herein, subject to receipt and
acceptance by them and subject to their right to reject any order in whole or
in part.
The underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.
Over-allotment Option. We have granted to the underwriters an option,
exercisable during the 30-day period after the date of this prospectus, to
purchase up to additional shares of common stock at the same price per share
as we will receive for the shares that the underwriters have agreed to
purchase. To the extent that the underwriters exercise this option, each of the
underwriters will have a firm commitment to purchase approximately the same
percentage of such additional shares that the number of shares of common stock
to be purchased by it shown in the above table represents as a percentage of
the shares offered hereby. If purchased, such additional shares will be sold
by the underwriters on the same terms as those on which the shares are being
sold. We will be obligated, pursuant to the option, to sell shares to the
extent the option is exercised. The underwriters may exercise such option only
to cover over-allotments made in connection with the sale of the shares of
common stock offered hereby. If such option is exercised in full, the total
public offering price, underwriting discounts and commissions and proceeds to
us will be $ , $ and $ , respectively.
Indemnity. The underwriting agreement contains covenants of indemnity among
the underwriters and us against certain civil liabilities, including
liabilities under the Securities Act and liabilities arising from breaches of
representations and warranties contained in the underwriting agreement.
Lock-up Agreements. Each of our executive officers, directors, and most of
our shareholders of record, optionholders, and warrantholders has agreed with
the Representatives, for a period of 180 days after the date of this
prospectus, subject to certain exceptions, not to offer to sell, contract to
sell, or otherwise sell, dispose of, loan, pledge or grant any rights with
respect to any shares of common
67
<PAGE>
stock, any options or warrants to purchase any shares of common stock, or any
securities convertible into or exchangeable for shares of common stock owned as
of the date of this prospectus or, with certain exceptions, thereafter acquired
directly by such holders or with respect to which they have or hereafter
acquire the power of disposition, without the prior written consent of
BancBoston Robertson Stephens. However, BancBoston Robertson Stephens may, in
its sole discretion and at any time without notice, release all or any portion
of the securities subject to the lock-up agreements. There are no agreements
between the Representatives and any of our shareholders providing consent by
the Representatives to the sale of shares prior to the expiration of the period
of 180 days after this prospectus.
Future Sales. In addition, we have agreed that during the period of 180 days
after this prospectus, we will not, subject to certain exceptions, without the
prior written consent of BancBoston Robertson Stephens:
. Consent to the disposition of any shares held by shareholders prior to
the expiration of the period of 180 days after this prospectus; or
. Issue, sell, contract to sell or otherwise dispose of, any shares of
common stock, any options or warrants to purchase any shares of common
stock or any securities convertible into, exercisable for or exchangeable
for shares of common stock, other than (1) the sale of shares in this
offering, (2) the issuance of common stock upon the exercise or
conversion of outstanding options, warrants or convertible securities,
(3) our issuance of stock options under existing stock option plans and
(4) our issuance of common stock under the Employee Stock Purchase Plan.
See "Shares Eligible for Future Sale."
Listing. We have filed an application to have the common stock approved for
quotation on the Nasdaq National Market under the symbol "RAMP."
No Prior Public Market. Prior to this offering, there has been no public
market for our common stock. Consequently, the initial public offering price
for the common stock offered hereby will be determined through negotiations
between us and the Representatives. Among the factors to be considered in such
negotiations are prevailing market conditions, certain of our financial
information, market valuations of other companies that we and the
Representatives believe to be comparable to us, estimates of our business
potential, the present state of our development and other factors deemed
relevant.
Stabilization. The Representatives have advised us that, pursuant to
Regulation M under the Securities Act, certain persons participating in this
offering may engage in transactions, including stabilizing bids, syndicate
covering transactions or the imposition of penalty bids, that may have the
effect of stabilizing or maintaining the market price of the common stock at a
level above that which might otherwise prevail in the open market. A
"stabilizing bid" is a bid for or the purchase of the common stock on behalf of
the underwriters for the purpose of fixing or maintaining the price of the
common stock. A "syndicate covering transaction" is the bid for or the purchase
of the common stock on behalf of the underwriters to reduce a short position
incurred by the underwriters in connection with this offering. A "penalty bid"
is an arrangement permitting the Representatives to reclaim the selling
concession otherwise accruing to an underwriter or syndicate member in
connection with this offering if the common stock originally sold by such
underwriter or syndicate member is purchased by the Representatives in a
syndicate covering transaction and has therefore not been effectively placed by
such underwriter or syndicate member. The Representatives have advised us that
such transactions may be effected on the Nasdaq National Market or otherwise
and, if commenced, may be discontinued at any time.
68
<PAGE>
LEGAL MATTERS
The validity of the common stock offered hereby will be passed upon for Ramp
Networks by Venture Law Group, A Professional Corporation, Menlo Park,
California. Tae Hea Nahm, a director of Venture Law Group, is an Assistant
Secretary of Ramp Networks. VLG Investments 1995 and VLG Investments 1996,
entities affiliated with Venture Law Group, hold, respectively, 16,268 and
3,632 shares of our common stock. Mr. Nahm holds an aggregate of 4,792 shares
of our common stock and has a pecuniary interest in the shares owned by VLG
Investments 1995 and VLG Investments 1996. Certain legal matters in connection
with this offering will be passed upon for the underwriters by Wilson Sonsini
Goodrich & Rosati, Professional Corporation, Palo Alto, California.
EXPERTS
The financial statements and schedule included in this prospectus and
elsewhere in the registration statement have been audited by Arthur Andersen
LLP, independent public accountants, as indicated in their reports with respect
thereto, and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a Registration
Statement (which term shall include any amendments thereto) on Form S-1 under
the Securities Act with respect to the common stock offered hereby. This
prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, certain
items of which are contained in exhibits to the Registration Statement as
permitted by the rules and regulations of the Commission. For further
information with respect to Ramp Networks and the common stock offered hereby,
reference is made to the Registration Statement, including the exhibits
thereto, and the financial statements and notes filed as a part of the
Registration Statement. Statements made in this prospectus concerning the
contents of any document referred to herein are not necessarily complete. With
respect to each such document filed with the Commission as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved. The Registration Statement, including
exhibits thereto and the financial statements and notes filed as a part of the
Registration Statement, as well as such reports and other information filed
with the Commission, may be inspected without charge at the public reference
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the regional offices of the Commission located at Seven
World Trade Center, 13th Floor, New York, NY 10048, and the Northwestern Atrium
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
all or any part thereof may be obtained from the Commission upon payment of
certain fees prescribed by the Commission. Such reports and other information
may also be inspected without charge at a Web site maintained by the
Commission. The address of this Web site is http://www.sec.gov.
69
<PAGE>
RAMP NETWORKS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Public Accountants.................................. F-2
Consolidated Balance Sheets............................................... F-3
Consolidated Statements of Operations and Comprehensive Income (Loss)..... F-4
Consolidated Statements of Redeemable Convertible Preferred Stock and
Shareholders' Equity (Deficit)........................................... F-5
Consolidated Statement of Cash Flows...................................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
After the reverse stock split discussed in Note 9 to Ramp Networks, Inc.'s
consolidated financial statements, we expect to be in a position to render the
following audit report:
ARTHUR ANDERSEN LLP
San Jose, California April 9, 1999
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Shareholders
of Ramp Networks, Inc.:
We have audited the accompanying consolidated balance sheets of Ramp
Networks, Inc. (a California corporation) and subsidiary as of December 31,
1998 and 1997, and the related consolidated statements of operations and
comprehensive income (loss), redeemable convertible preferred stock and
shareholders' equity (deficit) and cash flows for each of the three years in
the period ended December 31, 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 Ramp Networks, Inc. and
subsidiary as of December 31, 1998 and 1997 and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1998 in conformity with generally accepted accounting principles.
San Jose, California
April 9, 1999
(except with respect to the matters
discussed in Note 9, as to which the
date is , 1999)
F-2
<PAGE>
RAMP NETWORKS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
Pro Forma
Shareholders'
December 31, Equity at
------------------ December 31,
1997 1998 1998 (Note 5)
-------- -------- -------------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents................. $ 15,112 $ 3,764
Accounts receivable, net of allowance of
$107 and $123 respectively............... 2,113 767
Inventory................................. 816 2,151
Prepaid expenses and other current
assets................................... 176 720
-------- --------
Total current assets.................... 18,217 7,402
Property and equipment, net................. 637 1,299
Other assets................................ -- 177
-------- --------
Total assets............................ $ 18,854 $ 8,878
======== ========
LIABILITIES AND SHAREHOLDERS'
EQUITY (DEFICIT)
Current Liabilities:
Current portion of capital lease
obligation............................... $ 68 $ 50
Current portion of long-term debt......... 77 262
Accounts payable.......................... 1,340 2,307
Accrued liabilities....................... 704 1,691
-------- --------
Total current liabilities............... 2,189 4,310
Capital lease obligations, less current
portion.................................... 21 40
Long-term debt, less current portion........ 219 546
-------- --------
Total liabilities....................... 2,429 4,896
-------- --------
Commitments and Contingencies (note 4)
Redeemable convertible preferred stock, no
par value, aggregate liquidation preference
and redemption value of $37,346:
Authorized--11,827 shares at December 31,
1998 and pro forma
Issued and outstanding (Series A, B, C,
and D)--11,606 shares at December 31,
1997; 11,712 shares at December 31, 1998;
no shares issued and outstanding pro
forma.................................... 36,644 37,346
-------- --------
Shareholders' Equity (deficit):
Common stock--no par value:
Authorized--24,000 shares at December 31,
1998 and pro forma
Issued and outstanding--4,135 shares at
December 31, 1997, 4,388 shares at
December 31, 1998; and 16,099 shares pro
forma ................................... 251 628 $ 37,974
Deferred stock compensation............... -- (104) (104)
Accumulated deficit....................... (20,470) (33,888) (33,888)
-------- -------- --------
Total shareholders' equity (deficit).... (20,219) (33,364) $ 3,982
-------- -------- ========
Total liabilities and shareholders'
equity (deficit)....................... $ 18,854 $ 8,878
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-3
<PAGE>
RAMP NETWORKS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1996 1997 1998
------- -------- --------
<S> <C> <C> <C>
Revenue.......................................... $ 517 $ 5,587 $ 9,858
Cost of revenue.................................. 465 4,872 7,019
------- -------- --------
Gross margin..................................... 52 715 2,839
------- -------- --------
Operating expenses:
Research and development....................... 2,556 4,196 6,556
Sales and marketing............................ 3,078 6,902 8,699
General and administrative..................... 1,043 1,260 1,421
Amortization of deferred stock compensation.... -- -- 7
------- -------- --------
Total operating expenses..................... 6,677 12,358 16,683
------- -------- --------
Loss from operations............................. (6,625) (11,643) (13,844)
Other income..................................... 303 109 426
------- -------- --------
Net loss and comprehensive loss.................. $(6,322) $(11,534) $(13,418)
======= ======== ========
Basic net loss per share......................... $ (2.50) $ (3.92) $ (3.50)
======= ======== ========
Shares used in computing basic net loss per
share........................................... 2,528 2,945 3,839
======= ======== ========
Pro forma basic net loss per share (unaudited)... $ (0.86)
========
Shares used in computing pro forma basic net loss
per share (unaudited)........................... 15,524
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
RAMP NETWORKS, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE
CONVERTIBLE PREFERRED STOCK AND SHAREHOLDERS' EQUITY (DEFICIT)
(in thousands)
<TABLE>
<CAPTION>
Redeemable Convertible
Preferred Stock Common Stock
---------------------- ------------ Deferred Stock Accumulated
Shares Value Shares Value Compensation Deficit
---------------------- ------ ----- -------------- -----------
Total
Shareholders'
Equity (Deficit)
----------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1995.............. 3,171 $ 1,949 3,651 $138 $ -- $ (1,215)
BALANCE AT DECEMBER 31, 1995.............. $ (1,077)
Exercise of stock options................. -- -- 9 1 -- --
Issuance of Series A stock................ 1,627 1,000 -- -- -- --
Issuance of Series B stock................ 2,615 9,000 -- -- -- --
Gain on sale of technology to a related
party.................................... -- -- -- 60 -- --
Net loss.................................. -- -- -- -- -- (6,322)
---------- ----------- ----- ---- ----- --------
BALANCE AT DECEMBER 31, 1996.............. 7,413 11,949 3,660 199 -- (7,537)
Exercise of stock options................. 1
Issuance of Series A stock................ --
Issuance of Series B stock................ --
Gain on sale of technology to a related
party.................................... 60
Net loss.................................. (6,322)
----------------
BALANCE AT DECEMBER 31, 1996.............. (7,338)
Exercise of stock options................. -- -- 475 52 -- --
Issuance of Series C stock................ 1,774 8,750 -- -- -- --
Issuance costs of Series C stock.......... -- -- -- -- -- (23)
Issuance of Series D stock................ 2,419 15,945 -- -- -- --
Issuance costs of Series D stock.......... -- -- -- -- -- (1,376)
Net loss.................................. -- -- -- -- -- (11,534)
---------- ----------- ----- ---- ----- --------
BALANCE AT DECEMBER 31, 1997.............. 11,606 36,644 4,135 251 -- (20,470)
Exercise of stock options................. 52
Issuance of Series C stock................ --
Issuance costs of Series C stock.......... (23)
Issuance of Series D stock................ --
Issuance costs of Series D stock.......... (1,376)
Net loss.................................. (11,534)
----------------
BALANCE AT DECEMBER 31, 1997.............. (20,219)
Issuance of Series D stock related to
acquisition of technology................ 106 702 -- -- -- --
Exercise of stock options................. -- -- 253 104 -- --
Deferred stock compensation related to
stock options............................ -- -- -- 111 (111) --
Amortization of deferred stock
compensation............................. -- -- -- -- 7 --
Stock compensation........................ -- -- -- 162 -- --
Net loss.................................. -- -- -- -- -- (13,418)
---------- ----------- ----- ---- ----- --------
BALANCE AT DECEMBER 31, 1998.............. 11,712 $ 37,346 4,388 $628 $(104) $(33,888)
========== =========== ===== ==== ===== ========
Issuance of Series D stock related to
acquisition of technology................ --
Exercise of stock options................. 104
Deferred stock compensation related to
stock options............................ --
Amortization of deferred stock
compensation............................. 7
Stock compensation........................ 162
Net loss.................................. (13,418)
----------------
BALANCE AT DECEMBER 31, 1998.............. $(33,364)
================
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-5
<PAGE>
RAMP NETWORKS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1996 1997 1998
------- -------- --------
<S> <C> <C> <C>
Operating activities:
Net loss........................................ $(6,322) $(11,534) $(13,418)
Adjustments to reconcile net loss to net cash
used in
operating activities:
Depreciation.................................. 204 349 502
Loss on disposal of fixed assets.............. -- -- 39
Noncash compensation expense.................. -- -- 169
Noncash technology acquisition................ -- -- 702
Changes in operating assets and liabilities:
Accounts receivable......................... (165) (1,928) 1,346
Inventory................................... (470) (326) (1,335)
Prepaid expenses and other assets........... (25) (97) (721)
Accounts payable............................ 415 695 967
Accrued liabilities......................... 662 42 987
------- -------- --------
Net cash used in operating activities..... (5,701) (12,799) (10,762)
------- -------- --------
Investing activities
Purchase of property and equipment.............. (355) (428) (1,130)
Proceeds from sale of technology to a related
party.......................................... 83 -- --
------- -------- --------
Net cash used in investing activities..... (272) (428) (1,130)
------- -------- --------
Financing activities:
Borrowings under bank lines of credit........... -- 650 --
Repayment of bank line of credit................ -- (650) --
Principal payments on capital lease
obligations.................................... (109) (103) (73)
Borrowings under long-term debt agreement....... -- 324 676
Repayments of long-term debt.................... -- (29) (163)
Repayment of notes payable to related parties... (20) -- --
Net proceeds from issuance of common stock...... 1 52 104
Proceeds from issuance of redeemable convertible
preferred stock................................ 10,000 23,296 --
------- -------- --------
Net cash provided by financing
activities............................... 9,872 23,540 544
------- -------- --------
Net increase (decrease) in cash and cash equiva-
lents............................................ 3,899 10,313 (11,348)
Cash and cash equivalents, beginning of year...... 900 4,799 15,112
------- -------- --------
Cash and cash equivalents, end of year............ $ 4,799 $ 15,112 $ 3,764
======= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-6
<PAGE>
RAMP NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION AND OPERATIONS OF RAMP NETWORKS:
Ramp Networks, Inc. (the "Company" or "Ramp"), formerly Trancell Systems,
Inc., a California corporation, was incorporated on February 17, 1994. Ramp
develops, designs, manufactures and markets multi-user Internet access device
designed for small business and home use. The Company sells its products
through distributors and to original equipment manufacturers located in the
United States and abroad.
The Company has incurred net operating losses each year since its inception
and, as of December 31, 1998, had an accumulated deficit of $33.9 million. The
Company is subject to various risks associated with companies in a comparable
stage of development, including having a limited operating history; competition
from substitute products and larger competitors; dependence on indirect
distribution channels; dependence on a small number of contract manufacturers
for substantially all manufacturing; dependence on key individuals; and the
ability to obtain adequate financing to support its growth.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its subsidiary located in India. All significant intercompany accounts and
transactions are eliminated in consolidation. The functional currency of the
Company's subsidiary is the U.S. dollar.
Use of Estimates in Preparation of Consolidated Financial Statements
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements, and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Statement of Cash Flows
For purposes of the consolidated statements of cash flows, cash and cash
equivalents consist of cash in the bank and investments in U.S. Treasury Bills
with original maturities of less than three months.
The Company acquired $198,000, $15,000 and $74,000 of property and equipment
under capital leases in 1996, 1997 and 1998, respectively. The Company paid
$51,000 and $60,000 in cash for interest in 1997 and 1998, respectively.
Concentrations of Credit Risk
The Company provides credit to its customers in the normal course of
business, performs ongoing credit evaluations of its customers and maintains
allowances for potential credit losses which, to date, have not been material.
As of December 31, 1998, the Company's four largest customers accounted for
approximately 92% of the Company's accounts receivable.
F-7
<PAGE>
RAMP NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Substantially all of the Company's cash and cash equivalents are held by two
financial institutions in money market funds and on-demand deposit accounts.
Supplier Risk
The Company currently buys selected long-lead internal components for its
products from one supplier. Although there are a limited number of suppliers
that sell these components, management believes that the other suppliers could
provide similar components on comparable terms. A change in suppliers, however,
could cause assembly delays and a possible loss of sales, which could adversely
impact operating results.
Inventories
Inventory includes the costs of materials, labor, and manufacturing overhead
and is stated at the lower of cost (first-in, first-out method) or market.
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
-------------
1997 1998
-------------
<S> <C> <C>
Raw materials.................................................. $ 166 $ 221
Work-in-process................................................ 37 37
Finished goods................................................. 613 1,893
----- -------
$ 816 $ 2,151
===== =======
</TABLE>
Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization for
all property and equipment is computed using the straight-line method over the
estimated useful lives of the assets, generally one to three years. Leasehold
improvements and other leased assets are amortized over the shorter of their
useful lives or the term of the lease. Property and equipment consist of the
following (in thousands):
<TABLE>
<CAPTION>
December 31,
---------------
1997 1998
------ -------
<S> <C> <C>
Equipment................................................... $ 258 $ 361
Computers and purchased software............................ 841 1,522
Leasehold improvements...................................... -- 110
Furniture and fixtures...................................... 140 393
------ -------
1,239 2,386
Less: Accumulated depreciation and amortization............. (602) (1,087)
------ -------
$ 637 $ 1,299
====== =======
</TABLE>
Included in property and equipment are assets acquired under capital leases
with original costs of approximately $330,000 and $408,000 as of December 31,
1997 and 1998, respectively. Accumulated amortization on the leased assets is
approximately $246,000 and $321,000 as of December 31, 1997 and 1998,
respectively.
F-8
<PAGE>
RAMP NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Also included in property and equipment are assets pledged as collateral for
loans used to purchase fixed assets, with original costs of approximately
$457,000 and $994,000 as of December 31, 1997 and 1998, respectively.
Accumulated depreciation on these assets is approximately $121,000 and $391,000
as of December 31, 1997 and 1998, respectively.
Software Development Costs
In accordance with Statement of Financial Accounting Standards (SFAS) No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise
Marketed," the Company capitalizes eligible computer software development costs
upon the establishment of technological feasibility, which it has defined as
completion of designing, coding, and testing activities. For each of the three
years ended December 31, 1998, the amount of costs eligible for capitalization,
after consideration of factors such as realizable value, were not material,
and, accordingly, all software development costs have been charged to research
and development expense in the accompanying statements of operations.
In February 1998, the Company acquired certain software technology relating
to faxing over the Internet. Pursuant to this agreement, the Company paid a
total of $927,000, consisting of $225,000 in cash and 106,420 shares of Series
D Redeemable Convertible Preferred Stock valued at $6.59187 per share, or
approximately $702,000. The acquired software had not achieved technological
feasibility as of the acquisition date and had no alternative future use,
accordingly, the value of the acquired technology was recorded as research and
development expense in the accompanying statement of operations and
comprehensive income (loss).
The agreement also provided for additional consideration to be paid for
contract development work associated with ongoing development of the
technology. The consideration consisted of 87,000 shares of preferred stock
which was to be issued upon the achievement of specified development
milestones. The value of this additional consideration has been expensed
ratably over the period during which the related services were being performed.
As of December 31, 1998, the Company has accrued approximately $502,000 related
to this additional consideration. Subsequent to year end, all milestones were
met, and the Company will issue 87,000 shares of preferred stock in settlement
of this accrued liability.
Accrued Liabilities
Accrued liabilities consisted of the following (in thousands):
<TABLE>
<CAPTION>
December 31,
-------------
1997 1998
-------------
<S> <C> <C>
Accrued warranty............................................. $ 133 $ 50
Accrued compensation......................................... 489 680
Accrued liability related to purchased technology (see
above)...................................................... -- 502
Other........................................................ 82 459
----- -------
$ 704 $ 1,691
===== =======
</TABLE>
F-9
<PAGE>
RAMP NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Stock-Based Compensation
The Financial Accounting Standards Board issued SFAS No. 123, "Accounting for
Stock-Based Compensation," in October 1995. This accounting standard permits
the use of either a fair value based method or the method defined in Accounting
Principles Board Opinion 25, "Accounting for Stock Issued to Employees" ("APB
25") to account for stock-based compensation arrangements. Companies that elect
to employ the method proscribed by APB 25 are required to disclose the pro
forma net income (loss) that would have resulted from the use of the fair value
based method. The Company has elected to continue to determine the value of
stock-based compensation arrangements under the provisions of APB 25, and
accordingly, it has included in Note 6 the pro forma disclosures required under
SFAS No. 123.
Revenue Recognition
The Company's revenue consists principally of amounts earned from the sale of
manufactured products. Revenue is recognized upon transfer of title and risks
of ownership, which generally occurs upon product shipment. Certain agreements
with distributors and retailers provide for rights of return, co-op
advertising, price protection, and stock rotation rights. The Company provides
an allowance for returns and price adjustments and provides a warranty reserve
at the point of revenue recognition. Reserves are adjusted periodically based
upon historical experience and anticipated future returns, price adjustments,
and warranty costs.
The percentage of sales to significant customers is as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------
1996 1997 1998
-------- -------- --------
<S> <C> <C> <C>
Customer A.................................. --% 37% 12%
Customer B.................................. 33% 12% 24%
Customer C.................................. --% 12% 26%
</TABLE>
Comprehensive Income (Loss)
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income," which the Company adopted beginning on
January 1, 1998. SFAS No. 130 establishes standards for reporting and display
of comprehensive income and its components in a full set of general purpose
financial statements. The objective of SFAS No. 130 is to report a measure of
all changes in equity of an enterprise that result from transactions and other
economic events of the period other than transactions with shareholders
("comprehensive income"). Comprehensive income is the total of net income and
all other non-owner changes in equity. For each of the three years ended
December 31, 1998, the Company's comprehensive loss was equal to net loss.
Computation of Basic Net Loss Per Share and Pro Forma Basic Net Loss Per Share
Basic net loss per common share and diluted net loss per common share are
presented in conformity with SFAS No. 128, "Earnings Per Share," for all
periods presented. Pursuant to Securities and Exchange Commission Staff
Accounting Bulletin No. 98, common stock and
F-10
<PAGE>
RAMP NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
convertible preferred stock issued or granted for nominal consideration prior
to the anticipated effective date of the initial public offering must be
included in the calculation of basic and diluted net loss per common share as
if such stock had been outstanding for all periods presented. To date, the
Company has not had any issuances or grants for nominal consideration.
In accordance with SFAS No. 128, basic net loss per common share has been
computed using the weighted-average number of shares of common stock
outstanding during the period, less shares subject to repurchase. Basic pro
forma net loss per common share, as presented in the statements of operations,
has been computed as described above and also gives effect to the conversion of
the convertible preferred stock (using the if-converted method) from the
original date of issuance.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1996 1997 1998
------- -------- --------
<S> <C> <C> <C>
Net loss: $(6,322) $(11,534) $(13,418)
Basic and diluted:
Weighted average shares of common stock
outstanding.................................... 3,660 3,719 4,256
Less: Weighted average shares subject to repur-
chase............................................ (1,132) (774) (417)
------- -------- --------
Weighted average shares used in computing basic
and diluted net loss per common share............ 2,528 2,945 3,839
======= ======== ========
Basic and diluted net loss per common share..... $ (2.50) $ (3.92) $ (3.50)
======= ======== ========
Pro forma:
Net loss........................................ $(13,418)
========
Shares used above............................... 3,839
Pro forma adjustment to reflect weighted effect
of assumed conversion of convertible preferred
stock (unaudited).............................. 11,685
--------
Shares used in computing pro forma basic and
diluted net loss per common share (unaudited).. 15,524
========
Pro forma basic and diluted net loss per common
share (unaudited).............................. $ (0.86)
========
</TABLE>
The Company has excluded all convertible preferred stock, warrants for
convertible preferred stock, outstanding stock options and shares subject to
repurchase from the calculation of diluted net loss per common share because
all such securities are antidilutive for all periods presented. The total
number of shares excluded from the calculations of diluted net loss per common
share were approximately 10,106,000, 13,970,000 and 13,718,000 for the years
ended December 31, 1996, 1997, and 1998, respectively. See Notes 5 and 6 for
further information on these securities.
Segment Reporting
During 1998, the Company adopted SFAS No. 131, "Disclosures About Segments of
an Enterprise and Related Information." SFAS No. 131 requires a new basis of
determining reportable business segments, i.e., the management approach. This
approach requires that business segment information used by management to
assess performance and manage company resources be the source for information
disclosure. On this basis, the Company is organized and operates as one
F-11
<PAGE>
RAMP NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
business segment, the design, development, manufacture, and marketing of multi-
user routers designed for small business and home use.
International revenue by country were as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
1996 1997 1998
--------------- --------
<S> <C> <C> <C>
United States....................................... $ 395 $ 4,525 $ 7,788
Hong Kong........................................... -- 558 429
United Kingdom...................................... -- -- 833
Other............................................... 122 504 808
------ -------- --------
$ 517 $ 5,587 $ 9,858
====== ======== ========
</TABLE>
The Company's long-term assets are located in the United States with the
exception of approximately $200,000 as of December 31, 1998 which are located
in India.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," which requires
companies to record derivative financial instruments on the balance sheet as
assets or liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for depending on
the use of the derivative and whether it qualifies for hedging accounting. The
key criterion for hedge accounting is that the hedging relationship must be
highly effective in achieving offsetting changes in fair value or cash flows.
SFAS No. 133 is effective for all fiscal quarters of all fiscal years beginning
after June 15, 1999. This Statement will not have a material impact on the
financial condition or results of the operations of the Company.
In December 1998, the AICPA issued SOP 98-9, "Modification of SOP 97-2,
Software Revenue Recognition, With Respect to Certain Transactions," ("SOP 98-
9"). SOP 98-9 amends SOP 97-2 and SOP 98-4 by extending the deferral of the
application of certain provisions of SOP 97-2 amended by SOP 98-4 through
fiscal years beginning on or before March 15,1999. All other provisions of SOP
98-9 are effective for transactions entered into in fiscal years beginning
after March 15, 1999. The Company does not anticipate that these statements
will have a material adverse impact on its statement of operations.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current
year presentation.
3. DEBT:
As of December 31, 1998, the Company had borrowed $1,000,000 under an
equipment loan agreement. The equipment loan agreement provides for borrowings
of up to $1,000,000. Borrowings are secured by the related capital equipment,
bear interest at 7.5% with a balloon payment equal to 8.0% of the original
principal due at the end of the term and are payable through July 2002. As of
December 31, 1998, principal payments of approximately $262,000, $286,000,
$232,000 and $28,000, respectively, are due in fiscal years ending December 31,
1999, 2000, 2001 and 2002.
F-12
<PAGE>
RAMP NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. COMMITMENTS AND CONTINGENCIES:
The Company leases its facilities under an operating lease agreement that
expires October 2004. Rent expense under all operating leases for the years
ended December 31, 1996, 1997 and 1998 was $160,207, $207,744 and $322,240,
respectively.
The Company also leases computers, office equipment, and furniture under
long-term lease agreements that are classified as capital leases. The leases
expire through July 2001 and require a final buyout payment at the end of the
lease term.
Future minimum lease payments at December 31, 1998 were as follows (in
thousands):
<TABLE>
<CAPTION>
Operating Capital
Year Ended December 31, Leases Leases
----------------------- --------- -------
<S> <C> <C>
1999....................................................... $1,238 $ 59
2000....................................................... 1,238 26
2001....................................................... 1,238 20
2002....................................................... 1,238 --
2003 and thereafter........................................ 2,271 --
------ ----
Total minimum lease payments............................... $7,223 $105
======
Less: imputed interest (10%--19%).......................... (15)
----
Present value of payments under capital leases............. 90
Less: current portion...................................... (50)
----
Long-term capital lease obligations........................ $ 40
====
</TABLE>
The Company is subject to various claims which arise in the normal course of
business. In the opinion of management, the ultimate disposition of these
claims will not have a material adverse effect on the financial position of the
Company.
5. PREFERRED STOCK:
Redeemable Convertible Preferred Stock
In 1995 and 1996, the Company issued 3,171,000 and 1,626,773 shares,
respectively, of its Series A Redeemable Convertible Preferred Stock (Series
A). In 1996, the Company issued 2,614,999 shares of its Series B Redeemable
Convertible Preferred Stock (Series B). In 1997, the Company issued 1,773,645
shares of its Series C Redeemable Convertible Preferred Stock (Series C). In
1997 and 1998, the Company issued 2,418,890 shares and 106,420 shares,
respectively, of its Series D Redeemable Convertible Preferred Stock (Series
D). Series A, Series B, Series C and Series D were issued at prices of $0.6147,
$3.442, $4.93 and $6.59187 per share, respectively (the "Original Issue
Price"). The rights with respect to Series A, Series B, Series C, and Series D
are as follows:
Dividends
Holders of Series A, Series B, Series C, and Series D are entitled to receive
noncumulative dividends when and as declared by the Board of Directors at a
rate of $0.0462, $0.2582, $0.37 and $0.493 per share, respectively, per annum.
To date, no dividends have been declared.
F-13
<PAGE>
RAMP NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Liquidation
In the event of any liquidation, dissolution, or winding up of the Company,
including a merger or sale of all or substantially all of the assets, the
holders of Series A, Series B, Series C, and Series D are entitled to a
distribution equal to the Original Issue Price, plus any declared but unpaid
dividends, prior to and in preference to any distribution to the holders of
common stock. The remaining assets, if any, shall be distributed ratably among
the holders of the common stock pro rata based on the number of shares held.
Conversion
The Series A, B, C, and D may be converted by the holder into common stock at
any time at an initial conversion rate of one to one. The conversion rate is
subject to adjustment for certain events, including stock splits, stock
dividends and subsequent issuances of stock.
Conversion occurs automatically upon the closing of an underwritten public
offering with a minimum price per share of $8.33 and aggregate proceeds to the
Company of at least $10.0 million. Automatic conversion will also occur by
series when a majority of each series of preferred shareholders give their
written consent.
Voting
Each share of Series A, Series B, Series C, and Series D has voting rights
equal to an equivalent number of shares of common stock into which it is
convertible.
Redemption
At the written request of the holders of the majority of voting power of the
then outstanding preferred stock any time after April 30, 2002, the Company
shall, to the extent funds are legally available, redeem the preferred stock in
increments over a three-year period. In such event, the Company shall pay the
Original Issue Price for each series, plus any declared but unpaid dividends
adjusted for certain events, including stock splits, stock dividends, and
subsequent issuances of stock. On or prior to each redemption payment date, the
Company is required to deposit the redemption amount with a bank or trust
corporation in the form of an irrevocable trust fund.
Warrants
Since inception, the Company has issued warrants to purchase an aggregate of
15,498 and 12,136 shares of Series C and Series D, respectively, at exercise
prices of $4.52 and $6.59, respectively. These warrants were issued in
connection with equipment lease agreements and debt agreements. The warrants
are excisable immediately and expire on the earlier of 10 years from the date
of issuance or 3 years from the effective date of the closing of an initial
public offering. The fair value of the warrants on the date of grant were
estimated using the Black-Scholes model and the value was determined to be
immaterial.
F-14
<PAGE>
RAMP NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Pro Forma Shareholders' Deficit (Unaudited)
In March 1999, the Board of Directors authorized the filing of a registration
statement with the Securities and Exchange Commission to register shares of its
common stock in connection with a proposed initial public offering ("IPO"). If
the IPO is consummated under the terms presently anticipated, all of the
currently outstanding preferred stock will be converted into 11,711,727 shares
of common stock upon the closing of the IPO. The effect of the conversion has
been reflected as unaudited pro forma shareholders' equity in the accompanying
balance sheet as of December 31, 1998.
6. COMMON STOCK:
At December 31, 1998, the Company had reserved the following shares of
authorized but unissued shares of common stock for future issuance (in
thousands):
<TABLE>
<S> <C>
Conversion of outstanding Series A.................................... 4,798
Conversion of outstanding Series B.................................... 2,615
Conversion of outstanding Series C.................................... 1,774
Conversion of outstanding Series D.................................... 2,525
Conversion of warrants outstanding.................................... 28
1995 Stock option plan................................................ 2,482
------
14,222
======
</TABLE>
Deferred Compensation
In connection with the grant of certain stock options to employees during the
year ended December 31, 1998, the Company recorded deferred compensation of
approximately $111,000 representing the difference between the deemed value of
the common stock for accounting purposes and the option exercise price of such
options at the date of grant. Such amount is presented as a reduction of
shareholders' equity and amortized ratably over the vesting period of the
applicable options. Approximately $7,000 was expensed during the year ended
December 31, 1998, and the balance will be expensed ratably over the period the
options vest. Compensation expense is decreased in the period of forfeiture for
any accrued but unvested compensation arising from the early termination of an
option holder's services. No compensation expense related to any other periods
presented has been recorded. During the first three months of fiscal 1999, the
Company recorded additional deferred compensation of approximately $2.4 million
related to the stock options granted in that period.
Stock Options
During November 1995, the shareholders approved the adoption of the 1995
Stock Option Plan ("the Plan"). Under the terms of the Plan, incentive stock
options may be granted to employees and nonstatutory stock options may be
granted to employees and consultants at the discretion of the Board of
Directors. Options granted under the Plan are exercisable at such times and
under such conditions as determined by the Board of Directors, but the term of
the option and the right of exercise may not exceed ten years from the date of
grant. Generally, the options vest 25% on the first anniversary of the date of
grant and monthly thereafter for 36 months.
F-15
<PAGE>
RAMP NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The exercise price of an option is determined by the Board of Directors based
on the fair market value of the Company's stock at the date the option is
granted. For incentive stock options, the exercise price must not be less than
100% of the fair market value per share as determined by the Board of Directors
on the date of grant. For nonstatutory stock options, the exercise price per
share must not be less than 85% of the fair market value per share as
determined by the Board of Directors on the date of grant.
At December 31, 1998, an aggregate of 714,173 shares were available for
future option grants under the plan.
The Company accounts for the Plan under APB 25 whereby the difference between
the exercise price and the fair value at the date of grant is recognized as
compensation expense. Had compensation expense for the stock option plans been
determined consistent with SFAS No. 123, net losses would have increased to the
following pro forma amounts (in thousands, except per share data):
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------
1996 1997 1998
------- -------- --------
<S> <C> <C> <C>
Net loss as reported........................... $(6,322) $(11,534) $(13,418)
Net loss pro forma............................. $(6,336) $(11,567) $(13,531)
Net loss per share as reported................. $ (2.50) $ (3.92) $ (3.50)
Net loss per share pro forma................... $ (2.51) $ (3.93) $ (3.53)
</TABLE>
The fair value of each option grant was estimated on the date of grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for grants in 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Risk-free interest rate........................ 7% 7% 5.5%
Expected life of the option.................... 4.3 years 4.3 years 4.3 years
Dividend yield................................. 0% 0% 0%
Volatility..................................... 0% 0% 77%
</TABLE>
The following table summarizes stock option plan activity under the Plan:
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1998 December 31, 1997 December 31, 1996
-------------------- -------------------- --------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
---------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year................ 1,769,511 $0.67 1,740,330 $0.23 590,240 $0.08
Granted............... 774,134 $1.67 862,959 $1.23 1,223,890 $0.30
Exercised............. (252,742) $0.42 (474,905) $0.10 (8,750) $0.08
Canceled.............. (523,188) $0.62 (358,873) $0.10 (65,050) $0.15
---------- ---------- ----------
Outstanding at end of
year................... 1,767,715 $1.22 1,769,511 $0.67 1,740,330 $0.23
========== ========== ==========
Exercisable at end of
period................. 464,398 $0.83 299,100 $0.43 203,788 $0.10
========== ========== ==========
Weighted fair value per
share.................. $ 1.03 $ 0.22 $ 0.10
========== ========== ==========
</TABLE>
F-16
<PAGE>
RAMP NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------- ------------------------
Weighted Weighted Weighted
December 31, 1998 Average Average Average
Range of Remaining Exercise Exercise
Exercise Prices Number Years Price Number Price
- ----------------- --------- --------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$0.08--0.42 456,636 7.52 $0.08 246,086 $ 0.17
$0.83--1.67 1,311,079 9.45 $1.13 218,312 $ 0.68
--------- ----------
$0.08--1.67 1,767,715 8.95 $1.22 464,398 $ 0.83
========= ==========
</TABLE>
Restricted Stock Purchase Agreements
The Company has sold an aggregate of 3,651,299 shares of common stock to
certain employees in connection with their employment arrangements. All of
these shares were sold at the fair market value as of the date of purchase as
determined by the Board of Directors. These shares are subject to stock
repurchase agreements whereby the Company has the right to repurchase unvested
shares at the original price paid for the shares upon termination of employment
engagements. The repurchase right generally lapses ratably over 48 months from
the purchase date; however, 2,221,640 shares vested immediately on the date of
sale. As of December 31, 1998, no shares of common stock have been repurchased
under the stock repurchase agreements and 240,703 shares, at a weighted average
price of $0.04, were subject to repurchase.
7. INCOME TAXES:
The Company accounts for income taxes pursuant to Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes" ("SFAS No.
109"). A valuation allowance has been recorded for the total deferred tax
assets as a result of uncertainties regarding realization of the assets based
upon the limited operating history of the Company, the lack of profitability to
date and the uncertainty of future profitability. The components of net
deferred tax assets are as follows, (in thousands):
<TABLE>
<CAPTION>
December 31,
-----------------
1997 1998
------- --------
<S> <C> <C>
Net operating loss carryforwards.......................... $ 6,654 $ 10,878
Reserves and accruals..................................... 498 1,017
Capitalized research and development...................... -- 508
Research and development credits.......................... 113 690
------- --------
Total deferred tax assets................................. 7,265 13,093
Valuation allowance....................................... (7,265) (13,093)
------- --------
Net deferred tax assets................................... $ -- $ --
======= ========
</TABLE>
As of December 31, 1998, the Company had federal net operating loss
carryforwards of approximately $29 million and state net operating loss
carryforwards of approximately $11 million. The federal net operating loss and
other tax credit carryforwards expire on various dates beginning on 2010
through 2018. The state net operating loss carryforwards will expire beginning
in 2003.
F-17
<PAGE>
RAMP NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Under current tax law, net operating loss and credit carryforwards available
to offset future income in any given year may be limited upon the occurrence of
certain events, including significant changes in ownership interests.
8. RELATED PARTY TRANSACTIONS:
In 1996, the Company sold its ATM adapter card technology, related
development tools and work stations to a company, which was owned by the
primary shareholders of the Company, for $83,000, resulting in a net gain of
$60,495. Due to the related party nature of this transaction, the gain was
recorded as a contribution to capital in the accompanying statement of
shareholders' equity.
9. SUBSEQUENT EVENTS:
Reverse Stock Split
In April 1999, the Company's Board of Directors approved a three for five
reverse stock split of the Company's outstanding shares which will become
effective immediately prior to the Company's initial public offering. All share
and per share information included in these consolidated financial statements
have been retroactively adjusted to reflect this reverse stock split.
Reincorporation, Amendment to the Articles of Incorporation
In April 1999, the Company's Board of Directors authorized the
reincorporation of the Company in the State of Delaware. This reincorporation
is to be effective prior to the Company's initial public offering. Upon
reincorporation, the Company will be authorized to issue 100,000,000 shares of
common stock, $.001 par value and 5,000,000 shares of undesignated preferred
stock, $.001 par value.
1999 Stock Incentive Plan
In March 1999, the Board of Directors approved the Company's 1999 Stock
Incentive Plan (the "1999 Plan"). The 1999 Plan provides for the grant of
incentive stock options to employees. A total of 2,400,000 shares of common
stock have been reserved for issuance under the 1999 Plan.
1999 Employee Stock Purchase Plan
In April 1999, the Board of Directors approved the adoption of the Company's
1999 Employee Stock Purchase Plan (the "Purchase Plan"). A total of 600,000
shares of common stock have been reserved for issuance under the Purchase Plan.
The Purchase Plan permits eligible employees to purchase shares of common stock
through payroll deductions at 85% of the fair market value of the common stock,
as defined in the Purchase Plan.
Subsequent Financing
Subsequent to December 31, 1998, the Company secured a working capital credit
facility with a lender of up to the lower of $5.0 million or 100% of eligible
accounts receivable and 50% of inventory. These borrowings which bear interest
at 8.4%, are payable ratably over a 36 month term,
F-18
<PAGE>
RAMP NETWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
are subject to a termination payment of 12.5% and are secured by receivables
and inventory. As of March 31, 1999, the Company had borrowed $1.0 million
under this facility. In connection with this facility, the Company issued
warrants to the lender for Series D preferred stock at an aggregate purchase
price of $625,000. The share price and number of shares will be determined
based on the average of the Series D preferred stock price and the Company's
initial public offering price. The warrants are exercisable immediately and
expire in 2005. The fair value of the warrants on the date of grant were
estimated using the Black-Scholes model and the value was determined to be
$203,783. This amount will be recognized as additional interest expense over
the term of this arrangement with the lender.
In addition, in March 1999, the Company obtained a $3.0 million unsecured
bridge loan facility with the same lender and borrowed $3.0 million under the
facility. Borrowings under this facility bears interest at 14.6% and are
payable ratably over a 36 month term. In connection with this facility, the
Company issued warrants to the lender for 27,999 shares of Series D preferred
stock at an exercise price of $7.50 per share. The warrants are exercisable
immediately and expire in 2004. The fair value of the warrants on the date of
grant were estimated using the Black-Scholes model and the value was determined
to be $81,733. This amount will be recognized as additional interest expense
over the term of this arrangement with the lender.
F-19
<PAGE>
[LOGO OF RAMP NETWORKS APPEARS HERE]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by us in connection with the
sale of our common stock being registered. All amounts are estimates except the
SEC registration fee and the NASD filing fee and the Nasdaq Stock Market
listing fee.
<TABLE>
<CAPTION>
Amount
to be Paid
----------
<S> <C>
SEC registration fee.............................................. $ 15,985
NASD filing fee................................................... 6,250
Nasdaq Stock Market listing fee................................... 1,000
Printing and engraving expenses................................... 160,000
Legal fees and expenses........................................... 300,000
Accounting fees and expenses...................................... 200,000
Blue Sky qualification fees and expenses.......................... 5,000
Transfer Agent and Registrar fees................................. 5,000
Miscellaneous fees and expenses................................... 81,765
--------
Total........................................................... $775,000
========
</TABLE>
Item 14. Indemnification of Directors and Officers
Section 145 of the Delaware General Corporation Law authorizes a court to
award, or a corporation's Board of Directors to grant, indemnity to directors
and officers in terms sufficiently broad to permit such indemnification under
certain circumstances for liabilities (including reimbursement for expenses
incurred) arising under the Securities Act. Article XIV of Ramp Networks'
Amended and Restated Certificate of Incorporation (Exhibit 3.4) provides for
indemnification of its directors and officers to the maximum extent permitted
by the Delaware General Corporation Law and Section 6.1 of Article VI of Ramp
Networks' Bylaws (Exhibit 3.3) provides for indemnification of its directors,
officers, employees and other agents to the maximum extent permitted by the
Delaware General Corporation Law. In addition, Ramp Networks has entered into
Indemnification Agreements (Exhibit 10.1) with its directors and officers
containing provisions which are in some respects broader than the specific
indemnification provisions contained in the Delaware General Corporation Law.
The indemnification agreements may require us, among other things, to indemnify
our directors against certain liabilities that may arise by reason of their
status or service as directors (other than liabilities arising from willful
misconduct of culpable nature), to advance their expenses incurred as a result
of any proceeding against them as to which they could be indemnified, and to
obtain directors' insurance if available on reasonable terms. Reference is also
made to Section of the Underwriting Agreement contained in Exhibit 1.1,
indemnifying our officers and directors against certain liabilities.
Item 15. Recent Sales of Unregistered Securities
(a) Since January 1, 1995 through December 31, 1998, Ramp Networks has issued
and sold (without payment of any selling commission to any person) the
following unregistered securities:
. an aggregate of 3,651,296 shares of common stock at $0.07 per share in
August 1995 to 10 investors, including our founders;
II-1
<PAGE>
. an aggregate of 4,797,773 shares of Series A Preferred Stock at $0.61 per
share in September and December 1995 and February 1996 to 10 investors;
. an aggregate of 2,614,999 shares of Series B Preferred Stock at $3.45 per
share in March 1996 to 16 investors;
. an aggregate of 1,773,645 shares of Series C Preferred Stock at $4.93 per
share in March and April 1997 to 11 investors;
. an aggregate of 2,418,890 shares of Series D Preferred Stock at $6.59 per
share in October, November and December 1997 to 13 investors;
. an aggregate of 193,420 shares of Series D Preferred Stock with an
aggregate value of approximately $1,274,637 in connection with the
acquisition of Prodigies, a sole proprietorship, in March 1998, of which
87,000 shares of Series D Preferred Stock are held in escrow; and
. an aggregate of 3,451,219 options to purchase shares of common stock at
an average exercise price of $0.96 per share to our employees and
consultants.
. warrants to purchase 27,634 shares of Preferred Stock to one equipment
lessor.
(b) There were no underwritten offerings employed in connection with any of
the transactions set forth in Item 15(a).
The issuances described in Items 15(a) were deemed to be exempt from
registration under the Securities Act in reliance upon Section 4(2) thereof as
transactions by an issuer not involving any public offering and in the case of
issuances to our founders, executions, employees and consultants are also
exempt from registration pursuant to Rule 701 promulgated under the Securities
Act. The recipients of securities in each such transaction represented their
intentions to acquire the securities for investment only and not with a view to
or for sale in connection with any distribution thereof and appropriate legends
where affixed to the securities issued in such transactions. All recipients had
adequate access, through their relationships with us, to information about us.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Articles of Incorporation of Ramp Networks, a
California Corporation.
3.2 Certificate of Amendment of Articles of Incorporation of Ramp Networks,
a California Corporation.
3.3 Form of Certificate of Incorporation of Ramp Networks, to be filed for
the Company's reincorporation into Delaware.
3.4 Form of Amended and Restated Certificate of Incorporation of Ramp
Networks, to be filed and effective upon completion of this offering.
3.5 Bylaws of Ramp Networks, formerly Trancell Systems, Inc.
3.6 Form of Amended and Restated Bylaws of Ramp Networks, to be adopted and
effective upon completion of this offering.
4.1* Form of Ramp Networks' common stock certificate.
4.2 Fourth Amended and Restated Rights Agreement dated October 30, 1997.
5.1* Opinion of Venture Law Group, a Professional Corporation.
10.1 Form of Indemnification Agreement.
10.2 1995 Stock Option Plan, as amended, and form of stock option agreement.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
10.3 1999 Stock Incentive Plan, and form of stock option agreement and
restricted stock purchase agreement.
10.4 1999 Employee Stock Purchase Plan and form of subscription agreement.
10.5 Lease of Office Space between Oxford Park Associates and Ramp Networks,
dated March 3, 1998.
10.6 Sublease and Consent to Sublease Agreement Second Floor Office Space
3100 De La Cruz Boulevard Santa Clara, CA 95054 between Analog
Microelectronics, Inc. and Ramp Networks, dated February 22, 1999.
10.7 Sublease and Consent to Sublease Agreement First Floor 3100 De La Cruz
Boulevard Santa Clara, CA 95054 between XaQti Corporation and Ramp
Networks, dated August 4, 1998.
10.8+ OEM Purchase Agreement between Sonic Systems, Inc. and Ramp Networks,
dated January 5, 1999.
10.9+ Distribution Agreement between Tech Data Corporation and Trancell
Systems dated December 16, 1996.
10.10+ Distribution Agreement between Ingram Micro Inc. and Ramp Networks,
dated May 15, 1997.
10.11+ License Agreement between Compaq Computer Corporation and Ramp
Networks, dated March 24, 1997.
10.12+ Goods Agreement Statement of Work between IBM Corporation and Ramp
Networks, dated January 5, 1999.
10.13 Master Lease Agreement between Comdisco and Ramp Networks, dated
December 2, 1998.
10.14 Loan and Security Agreement between Venture Lending & Leasing II, Inc.
and Ramp Networks, dated January 4, 1999.
11.1 Statement Regarding Computation of Per Share Earnings (contained in
Note 2 of Notes to Financial Statements).
23.1 Consent of Independent Accountants (see page II-6).
23.2* Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-5).
27.1 Financial Data Schedule.
</TABLE>
- --------
*To be supplied by amendment.
+ Confidential Treatment Requested
(b) Financial Statement Schedules
<TABLE>
<S> <C>
Schedule II -- Valuation and Qualifying Accounts........................ S-2
</TABLE>
Schedules not listed above have been omitted because the information required
to be set forth therein is not applicable or is shown in the consolidated
financial statements or notes thereto.
Item 17. Undertakings
Ramp Networks hereby undertakes to provide to the underwriters at the closing
specified in the Underwriting Agreement, certificates in such denominations and
registered in such names as required by the Underwriters to permit prompt
delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to our directors, officers and controlling persons pursuant to
the foregoing provisions, or otherwise, we have been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by us of expenses incurred or paid by a
director, officer or controlling person of Ramp Networks 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, we will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the
II-3
<PAGE>
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
Ramp Networks hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of Prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1), or (4),
or 497(h) under the Securities Act shall be deemed to be a part of this
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, 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 this offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the undersigned
Registrant has duly caused this Registration Statement on Form S-1 to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Santa Clara, State of California, on April 16, 1999.
Ramp Networks, Inc.
/s/ Mahesh Veerina
By: _________________________________
Mahesh Veerina,
President and Chief Executive
Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Mahesh Veerina and Terry Gibson, and each one of
them, his or her attorneys-in-fact, each with the power of substitution, for
him in any and all capacities, to sign any and all amendments to this
Registration Statement (including post-effective amendments), and any and all
registration statements filed pursuant to Rule 462 under the Securities Act of
1933, as amended, in connection with or related to the offering contemplated by
this registration statement and its amendments, if any, and to file the same,
with exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue hereof. This Power of Attorney may be signed in
several counterparts.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement on Form S-1 has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Mahesh Veerina President, Chief Executive April 16, 1999
______________________________________ Officer and Director
(Mahesh Veerina) (Principal Executive
Officer)
/s/ Terry Gibson Vice President of Finance, April 16, 1999
______________________________________ Chief Financial Officer
(Terry Gibson) and Secretary (Principal
Financial and Accounting
Officer)
/s/ Anthony Sun Director April 16, 1999
______________________________________
(Anthony Sun)
/s/ Philip T. Ganos Director April 16, 1999
______________________________________
(Philip T. Gianos)
/s/ L. William Krause Director April 16, 1999
______________________________________
(L. William Krause)
</TABLE>
II-5
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
San Jose, California
April 15, 1999
II-6
<PAGE>
After the the reverse stock split discussed in Note 9 to Ramp Networks, Inc.'s
consolidated financial statements, we expect to be in a position to render the
following audit report:
ARTHUR ANDERSEN LLP
San Jose, California
April 9, 1999
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE
To the Board of Directors and Shareholders
of Ramp Networks, Inc.:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements of Ramp Networks, Inc. included in this
Registration Statement and have issued our report thereon dated April 9, 1999.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying schedule is the
responsibility of the Company's management and is presented for the purpose of
complying with the Securities and Exchange Commissions's rules and is not part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our option, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
San Jose, California
April 9, 1999
S-1
<PAGE>
RAMP NETWORKS, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E
-------- ---------- ---------- ---------- ----------
Balance at Charged to Balance at
Beginning Costs and End of
Description of Period Expenses Deductions Period
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Year Ended December 31, 1996:
Allowance for doubtful accounts.... $ -- $ 31,956 $ -- $ 31,956
Year Ended December 31, 1997:
Allowance for doubtful accounts.... $ 31,956 $132,191 $(57,089) $107,058
Year Ended December 31, 1998:
Allowance for doubtful accounts.... $102,058 $ 39,016 $(22,849) $123,225
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement.
3.1 Amended and Restated Articles of Incorporation of Ramp Networks, a
California Corporation.
3.2 Certificate of Amendment of Articles of Incorporation of Ramp Networks,
a California Corporation.
3.3 Form of Certificate of Incorporation of Ramp Networks, to be filed for
the Company's reincorporation into Delaware.
3.4 Form of Amended and Restated Certificate of Incorporation of Ramp
Networks, to be filed and effective upon completion of this offering.
3.5 Bylaws of Ramp Networks, formerly Trancell Systems, Inc..
3.6 Form of Amended and Restated Bylaws of Ramp Networks, to be adopted and
effective upon completion of this offering.
4.1* Form of Ramp Networks' common stock certificate.
4.2 Fourth Amended and Restated Rights Agreement dated October 30, 1997.
5.1* Opinion of Venture Law Group, a Professional Corporation.
10.1 Form of Indemnification Agreement.
10.2 1995 Stock Option Plan, as amended, and form of stock option agreement.
10.3 1999 Stock Option Plan, and form of stock option agreement and
restricted stock purchase agreement.
10.4 1999 Employee Stock Purchase Plan and form of subscription agreement.
10.5 Lease of Office Space between Oxford Park Associates and Ramp Networks,
Inc. dated March 3, 1998.
10.6 Sublease and Consent to Sublease Agreement Second Floor Office Space
3100 De La Cruz Boulevard Santa Clara, CA 95054 between Analog
Microelectronics, Inc. and Ramp Networks, Inc. dated February 22, 1999.
10.7 Sublease and Consent to Sublease Agreement First Floor 3100 De La Cruz
Boulevard Santa Clara, CA 95054 between XaQti Corporation and Ramp
Networks, Inc. dated August 4, 1998.
10.8+ OEM Purchase Agreement between Sonic Systems, Inc. and Ramp Networks,
Inc. dated January 5, 1999.
10.9+ Distribution Agreement between Tech Data Corporation and Trancell
Systems dated December 16, 1996.
10.10+ Distribution Agreement between Ingram Micro Inc. and Ramp Networks,
Inc. dated May 15, 1997.
10.11+ License Agreement between Compaq Computer Corporation and Ramp
Networks, Inc. dated March 24, 1997.
10.12+ Goods Agreement Statement of Work between IBM Corporation and Ramp
Networks, Inc. dated January 5, 1999.
10.13 Master Lease Agreement between Comdisco and Ramp Networks, Inc. dated
December 2, 1998.
10.14 Loan and Security Agreement between Venture Lending & Leasing II, Inc.
and Ramp Networks, Inc. dated January 4, 1999.
11.1 Statement Regarding Computation of Per Share Earnings (contained in
Note 2 of Notes to Financial Statements).
23.1 Consent of Independent Public Accountants (see page II-6).
23.2* Consent of Counsel (included in Exhibit 5.1).
24.1 Power of Attorney (see page II-5).
27.1 Financial Data Schedule.
</TABLE>
- --------
*To be supplied by amendment.
+ Confidential Treatment Requested
<PAGE>
EXHIBIT 1.1
Ramp Networks, Inc.
Underwriting Agreement
April __, 1999
BancBoston Robertson Stephens Inc.
Dain Rauscher Wessels,
a division of Dain Rauscher Incorporated
Hambrecht & Quist LLC
As Representatives of the several Underwriters
c/o BancBoston Robertson Stephens Inc.
555 California Street, Suite 2600
San Francisco, CA 94104
Ladies and Gentlemen:
Introductory. Ramp Networks, Inc., a Delaware corporation (the "Company),
proposes to issue and sell to the several underwriters named in Schedule A (the
----------
"Underwriters") an aggregate of [___] shares (the "Firm Shares") of its Common
Stock, par value $[___] per share (the "Common Shares"). In addition, the
Company has granted to the Underwriters an option to purchase up to an
additional [___] Common Shares (the "Option Shares") as provided in Section 2.
The Firm Shares and, if and to the extent such option is exercised, the Option
Shares are collectively called the "Shares". BancBoston Robertson Stephens Inc.,
Hambrecht & Quist LLC and Dain Rauscher Wessels, a division of Dain Rauscher
Incorporated, have agreed to act as representatives of the several Underwriters
(in such capacity, the "Representatives") in connection with the offering and
sale of the Shares.
The Company has prepared and filed with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-1 (File No. 333-[___]),
which contains a form of prospectus to be used in connection with the public
offering and sale of the Shares. Such registration statement, as amended,
including the financial statements, exhibits and schedules thereto, in the form
in which it was declared effective by the Commission under the Securities Act of
1933 and the rules and regulations promulgated thereunder (collectively, the
"Securities Act"), including any information deemed to be a part thereof at the
time of effectiveness pursuant to Rule 430A or Rule 434 under the Securities
Act, is called the "Registration Statement".
<PAGE>
Any registration statement filed by the Company pursuant to Rule 462(b) under
the Securities Act is called the "Rule 462(b) Registration Statement", and from
and after the date and time of filing of the Rule 462(b) Registration Statement
the term "Registration Statement" shall include the Rule 462(b) Registration
Statement. Such prospectus, in the form first used by the Underwriters to
confirm sales of the Shares, is called the "Prospectus"; provided, however, if
the Company has, with the consent of BancBoston Robertson Stephens Inc., elected
to rely upon Rule 434 under the Securities Act, the term "Prospectus" shall mean
the Company's prospectus subject to completion (each, a "preliminary
prospectus") dated [___] such preliminary prospectus is called the "Rule 434
preliminary prospectus"), together with the applicable term sheet (the "Term
Sheet") prepared and filed by the Company with the Commission under Rules 434
and 424(b) under the Securities Act and all references in this Agreement to the
date of the Prospectus shall mean the date of the Term Sheet. All references in
this Agreement to (i) the Registration Statement, the Rule 462(b) Registration
Statement, a preliminary prospectus, the Prospectus or the Term Sheet, or any
amendments or supplements to any of the foregoing, shall include any copy
thereof filed with the Commission pursuant to its Electronic Data Gathering,
Analysis and Retrieval System ("EDGAR").
The Company hereby confirms its respective agreements with the Underwriters as
follows:
Section 1. Representations and Warranties of the Company.
Representations and Warranties of the Company. The Company hereby represents,
warrants and covenants to each Underwriter as follows:
(a) Compliance with Registration Requirements. The Registration Statement
and any Rule 462(b) Registration Statement have been declared effective by the
Commission under the Securities Act. The Company has complied to the
Commission's satisfaction with all requests of the Commission for additional or
supplemental information. No stop order suspending the effectiveness of the
Registration Statement or any Rule 462(b) Registration Statement is in effect
and no proceedings for such purpose have been instituted or are pending or, to
the best knowledge of the Company, are contemplated or threatened by the
Commission.
Each preliminary prospectus and the Prospectus when filed complied in
all material respects with the Securities Act and, if filed by electronic
transmission pursuant to EDGAR (except as may be permitted by Regulation S-T
under the Securities Act), was identical to the copy thereof delivered to the
Underwriters for use in connection with the offer and sale of the Shares. Each
of the Registration Statement, any Rule 462(b) Registration Statement and any
post-effective amendment thereto, at the time it became effective and at all
subsequent times, complied and will comply in all material respects with the
Securities Act and did not and 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
2
<PAGE>
statements therein not misleading. The Prospectus, as amended or supplemented,
as of its date and at all subsequent times, did not and will not contain any
untrue statement of a material fact or omit 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. The representations and warranties set
forth in the two immediately preceding sentences do not apply to statements in
or omissions from the Registration Statement, any Rule 462(b) Registration
Statement, or any post-effective amendment thereto, or the Prospectus, or any
amendments or supplements thereto, made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in writing by
the Representatives expressly for use therein. There are no contracts or other
documents required to be described in the Prospectus or to be filed as exhibits
to the Registration Statement which have not been described or filed as
required.
(b) Offering Materials Furnished to Underwriters. The Company has delivered
to the Representatives three complete conformed copies of the Registration
Statement and of each consent and certificate of experts filed as a part
thereof, and conformed copies of the Registration Statement (without exhibits)
and preliminary prospectuses and the Prospectus, as amended or supplemented, in
such quantities and at such places as the Representatives have reasonably
requested for each of the Underwriters.
(c) Distribution of Offering Material By the Company. The Company has not
distributed and will not distribute, prior to the later of the Second Closing
Date (as defined below) and the completion of the Underwriters' distribution of
the Shares, any offering material in connection with the offering and sale of
the Shares other than a preliminary prospectus, the Prospectus or the
Registration Statement.
(d) The Underwriting Agreement. This Agreement has been duly authorized,
executed and delivered by, and is a valid and binding agreement of, the Company,
enforceable in accordance with its terms, except as rights to indemnification
hereunder may be limited by applicable law and except as the enforcement hereof
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting the rights and remedies of creditors or by
general equitable principles.
(e) Authorization of the Shares To Be Sold by the Company. The Shares to be
purchased by the Underwriters from the Company have been duly authorized for
issuance and sale pursuant to this Agreement and, when issued and delivered by
the Company pursuant to this Agreement, will be validly issued, fully paid and
nonassessable.
(f) No Applicable Registration or Other Similar Rights. There are no
persons with registration or other similar rights to have any equity or debt
securities registered for sale under the Registration Statement or included in
the offering contemplated by this Agreement, except for such rights as have been
duly waived.
3
<PAGE>
(g) No Material Adverse Change. Subsequent to the respective dates as of
which information is given in the Prospectus: (i) there has been no material
adverse change, or any development that could reasonably be expected to result
in a material adverse change, in the condition, financial or otherwise, or in
the earnings, business, operations or prospects, whether or not arising from
transactions in the ordinary course of business, of the Company and its
subsidiaries, considered as one entity (any such change or effect, where the
context so requires, is called a "Material Adverse Change" or a "Material
Adverse Effect"); (ii) the Company and its subsidiaries, considered as one
entity, have not incurred any material liability or obligation, indirect, direct
or contingent, not in the ordinary course of business nor entered into any
material transaction or agreement not in the ordinary course of business; and
(iii) there has been no dividend or distribution of any kind declared, paid or
made by the Company or, except for dividends paid to the Company or other
subsidiaries, any of its subsidiaries on any class of capital stock or
repurchase or redemption by the Company or any of its subsidiaries of any class
of capital stock.
(h) Independent Accountants. Arthur Andersen LLP, who have expressed their
opinion with respect to the financial statements (which term as used in this
Agreement includes the related notes thereto) and supporting schedules filed
with the Commission as a part of the Registration Statement and included in the
Prospectus, are independent public or certified public accountants as required
by the Securities Act.
(i) Preparation of the Financial Statements. The financial statements filed
with the Commission as a part of the Registration Statement and included in the
Prospectus present fairly the consolidated financial position of the Company and
its subsidiaries as of and at the dates indicated and the results of their
operations and cash flows for the periods specified. The supporting schedules
included in the Registration Statement present fairly the information required
to be stated therein. Such financial statements and supporting schedules have
been prepared in conformity with generally accepted accounting principles as
applied in the United States applied on a consistent basis throughout the
periods involved, except as may be expressly stated in the related notes
thereto. No other financial statements or supporting schedules are required to
be included in the Registration Statement. The financial data set forth in the
Prospectus under the captions "Prospectus Summary--Summary Selected Financial
Data", "Selected Financial Data" and "Capitalization" fairly present the
information set forth therein on a basis consistent with that of the audited
financial statements contained in the Registration Statement.
(j) Company's Accounting System. The Company and each of its subsidiaries
maintain a system of accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles as applied in the United States and to maintain
accountability for assets; (iii) access to assets is permitted only in
accordance with management's general or specific authorization; and
4
<PAGE>
(iv) the recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(k) Subsidiaries of the Company. The Company does not own or control,
directly or indirectly, any corporation, association or other entity other than
the subsidiaries listed in Exhibit 21 to the Registration Statement.
(l) Incorporation and Good Standing of the Company and its Subsidiaries.
Each of the Company and its subsidiaries has been duly organized and is validly
existing as a corporation or limited liability company, as the case may be, in
good standing under the laws of the jurisdiction in which it is organized with
full corporate power and authority to own its properties and conduct its
business as described in the prospectus, and is duly qualified to do business as
a foreign corporation and is in good standing under the laws of each
jurisdiction which requires such qualification.
(m) Capitalization of the Subsidiaries. All the outstanding shares of
capital stock of each subsidiary have been duly and validly authorized and
issued and are fully paid and nonassessable, and, except as otherwise set forth
in the Prospectus, all outstanding shares of capital stock of the subsidiaries
are owned by the Company either directly or through wholly owned subsidiaries
free and clear of any security interests, claims, liens or encumbrances.
(n) No Prohibition on Subsidiaries from Paying Dividends or Making Other
Distributions. No subsidiary of the Company is currently prohibited, directly or
indirectly, from paying any dividends to the Company, from making any other
distribution on such subsidiary's capital stock, from repaying to the Company
any loans or advances to such subsidiary from the Company or from transferring
any of such subsidiary's property or assets to the Company or any other
subsidiary of the Company, except as described in or contemplated by the
Prospectus.
(o) Capitalization and Other Capital Stock Matters. The authorized, issued
and outstanding capital stock of the Company is as set forth in the Prospectus
under the caption "Capitalization" (other than for subsequent issuances, if any,
pursuant to employee benefit plans described in the Prospectus or upon exercise
of outstanding options or warrants described in the Prospectus). The Common
Shares (including the Shares) conform in all material respects to the
description thereof contained in the Prospectus. All of the issued and
outstanding Common Shares have been duly authorized and validly issued, are
fully paid and nonassessable and have been issued in compliance with federal and
state securities laws. None of the outstanding Common Shares were issued in
violation of any preemptive rights, rights of first refusal or other similar
rights to subscribe for or purchase securities of the Company. There are no
authorized or outstanding options, warrants, preemptive rights, rights of first
refusal or other rights to purchase, or equity or debt securities convertible
into or exchangeable or exercisable for, any capital stock of the Company or any
of its subsidiaries other than those accurately described in the Prospectus. The
description of the Company's stock option, stock bonus
5
<PAGE>
and other stock plans or arrangements, and the options or other rights granted
thereunder, set forth in the Prospectus accurately and fairly presents the
information required to be shown with respect to such plans, arrangements,
options and rights.
(p) Stock Exchange Listing. The Shares have been approved for listing on
the Nasdaq National Market, subject only to official notice of issuance.
(q) No Consents, Approvals or Authorizations Required. No consent,
approval, authorization, filing with or order of any court or governmental
agency or regulatory body is required in connection with the transactions
contemplated herein, except such as have been obtained or made under the
Securities Act and such as may be required (i) under the blue sky laws of any
jurisdiction in connection with the purchase and distribution of the Shares by
the Underwriters in the manner contemplated here and in the Prospectus, (ii) by
the National Association of Securities Dealers, LLC and (iii) by the federal and
provincial laws of Canada.
(r) Non-Contravention of Existing Instruments Agreements. Neither the issue
and sale of the Shares nor the consummation of any other of the transactions
herein contemplated nor the fulfillment of the terms hereof will conflict with,
result in a breach or violation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or any of its subsidiaries pursuant
to, (i) the charter or by-laws of the Company or any of its subsidiaries, (ii)
the terms of any indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement, obligation, condition, covenant or
instrument to which the Company or any of its subsidiaries is a party or bound
or to which its or their property is subject or (iii) any statute, law, rule,
regulation, judgment, order or decree applicable to the Company or any of its
subsidiaries of any court, regulatory body, administrative agency, governmental
body, arbitrator or other authority having jurisdiction over the Company or any
of its subsidiaries or any of its or their properties.
(s) No Defaults or Violations. Neither the Company nor any subsidiary is in
violation or default of (i) any provision of its charter or by-laws, (ii) the
terms of any indenture, contract, lease, mortgage, deed of trust, note
agreement, loan agreement or other agreement, obligation, condition, covenant or
instrument to which it is a party or bound or to which its property is subject
or (iii) any statute, law, rule, regulation, judgment, order or decree of any
court, regulatory body, administrative agency, governmental body, arbitrator or
other authority having jurisdiction over the Company or such subsidiary or any
of its properties, as applicable, except any such violation or default which
would not, singly or in the aggregate, result in a Material Adverse Change
except as otherwise disclosed in the Prospectus.
(t) No Actions, Suits or Proceedings. Except as otherwise disclosed in the
Prospectus, no action, suit or proceeding by or before any court or governmental
agency, authority or body or any arbitrator involving the Company or any of its
subsidiaries or its or their property is pending or, to the best knowledge of
the Company, threatened that (i)
6
<PAGE>
could reasonably be expected to have a Material Adverse Effect on the
performance of this Agreement or the consummation of any of the transactions
contemplated hereby or (ii) could reasonably be expected to result in a Material
Adverse Effect.
(u) All Necessary Permits, Etc. The Company and each subsidiary possess
such valid and current certificates, authorizations or permits issued by the
appropriate state, federal or foreign regulatory agencies or bodies necessary to
conduct their respective businesses, and neither the Company nor any subsidiary
has received any notice of proceedings relating to the revocation or
modification of, or non-compliance with, any such certificate, authorization or
permit which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, could result in a Material Adverse Change.
(v) Title to Properties. The Company and each of its subsidiaries has good
and marketable title to all the properties and assets reflected as owned in the
financial statements referred to in Section 1(A)(i) above (or elsewhere in the
Prospectus), in each case free and clear of any security interests, mortgages,
liens, encumbrances, equities, claims and other defects, except such as do not
materially and adversely affect the value of such property and do not materially
interfere with the use made or proposed to be made of such property by the
Company or such subsidiary. The real property, improvements, equipment and
personal property held under lease by the Company or any subsidiary are held
under valid and enforceable leases, with such exceptions as are not material and
do not materially interfere with the use made or proposed to be made of such
real property, improvements, equipment or personal property by the Company or
such subsidiary.
(w) Tax Law Compliance. The Company and its subsidiaries have filed all
necessary federal, state and foreign income and franchise tax returns and have
paid all taxes required to be paid by any of them and, if due and payable, any
related or similar assessment, fine or penalty levied against any of them except
as may be being contested in good faith and by appropriate proceedings. The
Company has made adequate charges, accruals and reserves in the applicable
financial statements referred to in Section 1(A)(i) above in respect of all
federal, state and foreign income and franchise taxes for all periods as to
which the tax liability of the Company or any of its subsidiaries has not been
finally determined. The Company is not aware of any tax deficiency that has been
or might be asserted or threatened against the Company that could result in a
Material Adverse Change.
(x) Intellectual Property Rights. Each of the Company and its subsidiaries
owns or possesses adequate rights to use all patents, patent rights or licenses,
inventions, collaborative research agreements, trade secrets, know-how,
trademarks, service marks, trade names and copyrights which are necessary to
conduct its businesses as described in the Registration Statement and
Prospectus; the expiration of any patents, patent rights, trade secrets,
trademarks, service marks, trade names or copyrights would not result in a
Material Adverse Change that is not otherwise disclosed in the Prospectus; the
Company
7
<PAGE>
has not received any notice of, and has no knowledge of, any infringement of or
conflict with asserted rights of the Company by others with respect to any
patent, patent rights, inventions, trade secrets, know-how, trademarks, service
marks, trade names or copyrights; and the Company has not received any notice
of, and has no knowledge of, any infringement of or conflict with asserted
rights of others with respect to any patent, patent rights, inventions, trade
secrets, know-how, trademarks, service marks, trade names or copyrights which,
singly or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, might have a Material Adverse Change. There is no claim being made
against the Company regarding patents, patent rights or licenses, inventions,
collaborative research, trade secrets, know-how, trademarks, service marks,
trade names or copyrights. The Company and its subsidiaries do not in the
conduct of their business as now or proposed to be conducted as described in the
Prospectus infringe or conflict with any right or patent of any third party, or
any discovery, invention, product or process which is the subject of a patent
application filed by any third party, known to the Company or any of its
subsidiaries, which such infringement or conflict is reasonably likely to result
in a Material Adverse Change.
(y) Year 2000 Preparedness. There are no issues related to the Company's,
or any of its subsidiaries', preparedness for the Year 2000 that (i) are of a
character required to be described or referred to in the Registration Statement
or Prospectus by the Securities Act which have not been accurately described in
the Registration Statement or Prospectus or (ii) might reasonably be expected to
result in any Material Adverse Change or that might materially affect their
properties, assets or rights. All internal computer systems and each Constituent
Component (as defined below) of those systems and all computer-related products
and each Constituent Component (as defined below) of those products of the
Company and each of its subsidiaries fully comply with Year 2000 Qualification
Requirements. "Year 2000 Qualifications Requirements" means that the internal
computer systems and each Constituent Component (as defined below) of those
systems and all computer-related products and each Constituent Component (as
defined below) of those products of the Company and each of its Subsidiaries (i)
have been reviewed to confirm that they store, process (including sorting and
performing mathematical operations, calculations and computations), input and
output data containing date and information correctly regardless of whether the
date contains dates and times before, on or after January 1, 2000, (ii) have
been designated to ensure date and time entry recognition and calculations, and
date data interface values that reflect the century, (iii) accurately manage and
manipulate data involving dates and times, including single century formulas and
multi-century formulas, and will not cause an abnormal ending scenario within
the application or generate incorrect values or invalid results involving such
dates, (iv) accurately process any date rollover, and (v) accept and respond to
two-digit year date input in a manner that resolves any ambiguities as to the
century. "Constituent Component" means all software (including operating
systems, programs, packages and utilities), firmware, hardware, networking
components, and peripherals provided as part of the configuration. The Company
has inquired of material vendors as to their preparedness for the Year 2000 and
has disclosed in the Registration Statement or
8
<PAGE>
Prospectus any issues that might reasonably be expected to result in any
Material Adverse Change.
(aa) No Transfer Taxes or Other Fees. There are no transfer taxes or other
similar fees or charges under Federal law or the laws of any state, or any
political subdivision thereof, required to be paid in connection with the
execution and delivery of this Agreement or the issuance and sale by the Company
of the shares.
(bb) Company Not an "Investment Company". The Company has been advised of
the rules and requirements under the Investment Company Act of 1940, as amended
(the "Investment Company Act"). The Company is not, and after receipt of payment
for the Shares will not be, an "investment company" or an entity "controlled" by
an "investment company" within the meaning of the Investment Company Act and
will conduct its business in a manner so that it will not become subject to the
Investment Company Act.
(cc) Insurance. Each of the Company and its subsidiaries are insured by
recognized, financially sound and reputable institutions with policies in such
amounts and with such deductibles and covering such risks as are generally
deemed adequate and customary for their businesses including, but not limited
to, policies covering real and personal property owned or leased by the Company
and its subsidiaries against theft, damage, destruction, acts of vandalism and
earthquakes, general liability and Directors and Officers liability. The Company
has no reason to believe that it or any subsidiary will not be able (i) to renew
its existing insurance coverage as and when such policies expire or (ii) to
obtain comparable coverage from similar institutions as may be necessary or
appropriate to conduct its business as now conducted and at a cost that would
not result in a Material Adverse Change. Neither of the Company nor any
subsidiary has been denied any insurance coverage which it has sought or for
which it has applied.
(dd) Labor Matters. To the best of Company's knowledge, no labor
disturbance by the employees of the Company or any of its subsidiaries exists or
is imminent; and the Company is not aware of any existing or imminent labor
disturbance by the employees of any of its principal suppliers, subassemblers,
value added resellers, subcontractors, original equipment manufacturers,
authorized dealers or international distributors that might be expected to
result in a Material Adverse Change.
(ee) No Price Stabilization or Manipulation. The Company has not taken and
will not take, directly or indirectly, any action designed to or that might be
reasonably expected to cause or result in stabilization or manipulation of the
price of the Common Stock to facilitate the sale or resale of the Shares.
(ff) Lock-Up Agreements. Each officer and director of the company and
each beneficial owner of the outstanding issued share capital of the Company has
agreed to sign an agreement substantially in the form attached hereto as Exhibit
-------
A (the "Lock-up Agreements"). The Company has provided to counsel for the
- -
Underwriters a complete
9
<PAGE>
and accurate list of all securityholders of the Company and the number and type
of securities held by each securityholder. The Company has provided to counsel
for the Underwriters true, accurate and complete copies of all of the Lock-up
Agreements presently in effect or effected hereby. The Company hereby represents
and warrants that it will not release any of its officers, directors or other
stockholders from any Lock-up Agreements currently existing or hereafter
effected without the prior written consent of BancBoston Robertson Stephens Inc.
(gg) Related Party Transactions. There are no business relationships or
related-party transactions involving the Company or any subsidiary or any other
person required to be described in the Prospectus which have not been described
as required.
(hh) No Unlawful Contributions or Other Payments. Neither the Company nor
any of its subsidiaries nor, to the best of the Company's knowledge, any
employee or agent of the Company or any subsidiary, has made any contribution or
other payment to any official of, or candidate for, any federal, state or
foreign office in violation of any law or of the character required to be
disclosed in the Prospectus.
(ii) Environmental Laws. (i) the Company is in compliance with all rules,
laws and regulations relating to the use, treatment, storage and disposal of
toxic substances and protection of health or the environment ("Environmental
Laws") which are applicable to its business, except where the failure to comply
would not result in a Material Adverse Change, (ii) the Company has received no
notice from any governmental authority or third party of an asserted claim under
Environmental Laws, which claim is required to be disclosed in the Registration
Statement and the Prospectus, (iii) the Company will not be required to make
future material capital expenditures to comply with Environmental Laws and (iv)
no property which is owned, leased or occupied by the Company has been
designated as a Superfund site pursuant to the Comprehensive Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. (S) 9601, et
--
seq.), or otherwise designated as a contaminated site under applicable state
- ---
or local law.
(jj) Periodic Review of Costs of Environmental Compliance. In the ordinary
course of its business, the Company conducts a periodic review of the effect of
Environmental Laws on the business, operations and properties of the Company and
its subsidiaries, in the course of which it identifies and evaluates associated
costs and liabilities (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). On the
basis of such review and the amount of its established reserves, the Company has
reasonably concluded that such associated costs and liabilities would not,
individually or in the aggregate, result in a Material Adverse Change.
(kk) ERISA Compliance. The Company and its subsidiaries and any
"employee benefit plan" (as defined under the Employee Retirement Income
Security Act of 1974, as
10
<PAGE>
amended, and the regulations and published interpretations thereunder
(collectively, "ERISA")) established or maintained by the Company, its
subsidiaries or their "ERISA Affiliates" (as defined below) are in compliance in
all material respects with ERISA. "ERISA Affiliate" means, with respect to the
Company or a subsidiary, any member of any group of organizations described in
Sections 414(b),(c),(m) or (o) of the Internal Revenue Code of 1986, as amended,
and the regulations and published interpretations thereunder (the "Code") of
which the Company or such subsidiary is a member. No "reportable event" (as
defined under ERISA) has occurred or is reasonably expected to occur with
respect to any "employee benefit plan" established or maintained by the Company,
its subsidiaries or any of their ERISA Affiliates. No "employee benefit plan"
established or maintained by the Company, its subsidiaries or any of their ERISA
Affiliates, if such "employee benefit plan" were terminated, would have any
"amount of unfounded benefit liabilities" (as defined under ERISA). Neither the
Company, its subsidiaries nor any of their ERISA Affiliates has incurred or
reasonably expects to incur any liability under (i) Title IV of ERISA with
respect to termination of, or withdrawal from, any "employee benefit plan" or
(ii) Sections 412, 4971, 4975 or 4980B of the Code. Each "employee benefit plan"
established or maintained by the Company, its subsidiaries or any of their ERISA
Affiliates that is intended to be qualified under Section 401(a) of the Code is
so qualified and nothing has occurred, whether by action or failure to act,
which would cause the loss of such qualification.
(ll) Reincorporation. Neither the Agreement and Plan of Exchange dated as
of __________ between the Company and Ramp Networks, Inc., a California
corporation nor the exchange of shares consummated in connection therewith
contravened, conflicted with or resulted in a material violation or breach of,
or resulted in a default under, any provisions of any agreement or contract of
the Company or its predecessor California corporation, except for (i) any
contravention, conflict, violation, breach or default which could not reasonably
be expected to result in a material adverse effect on the Company; (ii) gave any
person the right to (a) declare a default or exercise any remedy under any such
agreement or contract, except where any such default or exercise of a remedy
could not reasonably be expected to result in a material adverse effect on the
Company, (b) accelerate the maturity or performance of any such agreement or
contract, except where such acceleration could not reasonably be expected to
result in a material adverse effect on the Company, or (c) cancel, terminate or
modify any such contract, except where any such cancellation, termination or
modification could not reasonably be expected to result in a material adverse
effect on the Company; or (iii) result in the imposition or creation of any
encumbrance upon or with respect to any of the shares of capital stock or the
assets of the Company, except where such encumbrance would not result in a
material adverse effect on the Company.
Any certificate signed by an officer of the Company and delivered to the
Representatives or to counsel for the Underwriters shall be deemed to be a
representation and warranty by the Company to each Underwriter as to the matters
set forth therein.
11
<PAGE>
Section 2. Purchase, Sale and Delivery of the Shares.
(a) The Firm Shares. The Company agrees to issue and sell to the
several Underwriters the Firm Shares upon the terms herein set forth. On the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to the conditions herein set forth, the Underwriters
agree, severally and not jointly, to purchase from the Company the respective
number of Firm Shares set forth opposite their names on Schedule A. The
----------
purchase price per Firm Share to be paid by the several Underwriters to the
Company shall be $[___] per share.
(b) The First Closing Date. Delivery of the Firm Shares to be purchased
by the Underwriters and payment therefor shall be made by the Company and the
Representatives at 6:00 a.m. San Francisco time, at the offices of Venture Law
Group, 2800 Sand Hill Road, Menlo Park, CA 94025 (or at such other place as may
be agreed upon among the Representatives and the Company), (i) on the third
(3rd) full business day following the first day that Shares are traded, (ii) if
this Agreement is executed and delivered after 1:30 P.M., San Francisco time,
the fourth (4th) full business day following the day that this Agreement is
executed and delivered or (iii) at such other time and date not later that seven
(7) full business days following the first day that Shares are traded as the
Representatives and the Company may determine (or at such time and date to which
payment and delivery shall have been postponed pursuant to Section 8 hereof),
such time and date of payment and delivery being herein called the "Closing
Date;" provided, however, that if the Company has not made available to the
Representatives copies of the Prospectus within the time provided in Section
4(d) hereof, the Representatives may, in its sole discretion, postpone the
Closing Date until no later that two (2) full business days following delivery
of copies of the Prospectus to the Representatives.
(c) The Option Shares; the Second Closing Date. In addition, on the
basis of the representations, warranties and agreements herein contained, and
upon the terms but subject to the conditions herein set forth, the Company
hereby grants an option to the several Underwriters to purchase, severally and
not jointly, up to an aggregate of [___] Option Shares from the Company at the
purchase price per share to be paid by the Underwriters for the Firm Shares.
The option granted hereunder is for use by the Underwriters solely in covering
any over-allotments in connection with the sale and distribution of the Firm
Shares. The option granted hereunder may be exercised at any time upon notice
by the Representatives to the Company, which notice may be given at any time
within 30 days from the date of this Agreement. The time and date of delivery
of the Option Shares, if subsequent to the First Closing Date, is called the
"Second Closing Date" and shall be determined by the Representatives and shall
not be earlier than three nor later than five full business days after delivery
of such notice of exercise. If any Option Shares are to be purchased, each
Underwriter agrees, severally and not jointly, to purchase the number of Option
Shares (subject to such adjustments to eliminate fractional shares as the
Representatives may determine) that bears the same proportion to the total
number of Option Shares to be purchased as the number of Firm Shares set forth
on Schedule A opposite the name of such Underwriter bears to the total
----------
12
<PAGE>
number of Firm Shares. The Representatives may cancel the option at any time
prior to its expiration by giving written notice of such cancellation to the
Company.
(d) Public Offering of the Shares. The Representatives hereby advise
the Company that the Underwriters intend to offer for sale to the public, as
described in the Prospectus, their respective portions of the Shares as soon
after this Agreement has been executed and the Registration Statement has been
declared effective as the Representatives, in its sole judgment, has determined
is advisable and practicable.
(e) Payment for the Shares. Payment for the Shares shall be made at the
First Closing Date (and, if applicable, at the Second Closing Date) by wire
transfer in immediately available-funds to the order of the Company.
It is understood that the Representatives have been authorized, for its own
account and the accounts of the several Underwriters, to accept delivery of and
receipt for, and make payment of the purchase price for, the Firm Shares and any
Option Shares the Underwriters have agreed to purchase. BancBoston Robertson
Stephens Inc., individually and not as the Representatives of the Underwriters,
may (but shall not be obligated to) make payment for any Shares to be purchased
by any Underwriter whose funds shall not have been received by the
Representatives by the First Closing Date or the Second Closing Date, as the
case may be, for the account of such Underwriter, but any such payment shall not
relieve such Underwriter from any of its obligations under this Agreement.
(f) Delivery of the Shares. The Company shall deliver, or cause to be
delivered, a credit representing the Firm Shares to an account or accounts at
The Depository Trust Company, as designated by the Representatives for the
accounts of the Representatives and the several Underwriters at the First
Closing Date, against the irrevocable release of a wire transfer of immediately
available funds for the amount of the purchase price therefor. The Company
shall also deliver, or cause to be delivered a credit representing the Option
Shares the Underwriters have agreed to purchase at the First Closing Date (or
the Second Closing Date, as the case may be), to an account or accounts at The
Depository Trust Company as designated by the Representatives for the accounts
of the Representatives and the several Underwriters, against the irrevocable
release of a wire transfer of immediately available funds for the amount of the
purchase price therefor. Time shall be of the essence, and delivery at the time
and place specified in this Agreement is a further condition to the obligations
of the Underwriters.
(g) Delivery of Prospectus to the Underwriters. Not later than 12:00
noon on the second business day following the date the Shares are released by
the Underwriters for sale to the public, the Company shall deliver or cause to
be delivered copies of the Prospectus in such quantities and at such places as
the Representatives shall request.
13
<PAGE>
Section 3. Covenants of the Company.
The Company further covenants and agrees with each Underwriter as follows:
(a) Registration Statement Matters. The Company will (i) use its best
efforts to cause a registration statement on Form 8-A (the "Form 8-A
Registration Statement") as required by the Securities Exchange Act of 1934 (the
"Exchange Act") to become effective simultaneously with the Registration
Statement, (ii) use its best efforts to cause the Registration Statement to
become effective or, if the procedure in Rule 430A of the Securities Act is
followed, to prepare and timely file with the Commission under Rule 424(b) under
the Securities Act a Prospectus in a form approved by the Representatives
containing information previously omitted at the time of effectiveness of the
Registration Statement in reliance on Rule 430A of the Securities Act and (iii)
not file any amendment to the Registration Statement or supplement to the
Prospectus of which the Representatives shall not previously have been advised
and furnished with a copy or to which the Representatives shall have reasonably
objected in writing or which is not in compliance with the Securities Act. If
the Company elects to rely on Rule 462(b) under the Securities Act, the Company
shall file a Rule 462(b) Registration Statement with the Commission in
compliance with Rule 462(b) under the Securities Act prior to the time
confirmations are sent or given, as specified by Rule 462(b)(2) under the
Securities Act, and shall pay the applicable fees in accordance with Rule 111
under the Securities Act.
(b) Securities Act Compliance. The Company will advise the
Representatives promptly (i) when the Registration Statement or any post-
effective amendment thereto shall have become effective, (ii) of receipt of any
comments from the Commission, (iii) of any request of the Commission for
amendment of the Registration Statement or for supplement to the Prospectus or
for any additional information and (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or the use
of the Prospectus or of the institution of any proceedings for that purpose.
The Company will use its best efforts to prevent the issuance of any such stop
order preventing or suspending the use of the Prospectus and to obtain as soon
as possible the lifting thereof, if issued.
(c) Blue Sky Compliance. The Company will cooperate with the
Representatives and counsel for the Underwriters in endeavoring to qualify the
Shares for sale under the securities laws of such jurisdictions (both national
and foreign) as the Representatives may reasonably have designated in writing
and will make such applications, file such documents, and furnish such
information as may be reasonably required for that purpose, provided the Company
shall not be required to qualify as a foreign corporation or to file a general
consent to service of process in any jurisdiction where it is not now so
qualified or required to file such a consent. The Company will, from time to
time, prepare and file such statements, reports and other documents, as are or
may be required to continue such qualifications in effect for so long a period
as the Representatives may reasonably request for distribution of the Shares.
14
<PAGE>
(d) Amendments and Supplements to the Prospectus and Other Securities Act
Matters. The Company will comply with the Securities Act and the Exchange
Act, and the rules and regulations of the Commission thereunder, so as to permit
the completion of the distribution of the Shares as contemplated in this
Agreement and the Prospectus. If during the period in which a prospectus is
required by law to be delivered by an Underwriter or dealer, any event shall
occur as a result of which, in the judgment of the Company or in the reasonable
opinion of the Representatives or counsel for the Underwriters, it becomes
necessary to amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances existing at the time the Prospectus
is delivered to a purchaser, not misleading, or, if it is necessary at any time
to amend or supplement the Prospectus to comply with any law, the Company
promptly will prepare and file with the Commission, and furnish at its own
expense to the Underwriters and to dealers, an appropriate amendment to the
Registration Statement or supplement to the Prospectus so that the Prospectus as
so amended or supplemented will not, in the light of the circumstances when it
is so delivered, be misleading, or so that the Prospectus will comply with the
law.
(e) Copies of any Amendments and Supplements to the Prospectus. The
Company agrees to furnish the Representatives, without charge, during the period
beginning on the date hereof and ending on the later of the First Closing Date
or such date, as in the opinion of counsel for the Underwriters, the Prospectus
is no longer required by law to be delivered in connection with sales by an
Underwriter or dealer (the "Prospectus Delivery Period"), as many copies of the
Prospectus and any amendments and supplements thereto as the Representatives may
request.
(f) Insurance. The Company shall (i) obtain Directors and Officers
liability insurance in the minimum amount of $10 million which shall apply to
the offering contemplated hereby and (ii) shall cause BancBoston Robertson
Stephens Inc. to be added as an additional insured to such policy in respect of
the offering contemplated hereby.
(g) Notice of Subsequent Events. If at any time during the ninety (90)
day period after the Registration Statement becomes effective, any rumor,
publication or event relating to or affecting the Company shall occur as a
result of which in your opinion the market price of the Company Shares has been
or is likely to be materially affected (regardless of whether such rumor,
publication or event necessitates a supplement to or amendment of the
Prospectus), the Company will, after written notice from you advising the
Company to the effect set forth above, forthwith prepare, consult with you
concerning the substance of and disseminate a press release or other public
statement, reasonably satisfactory to you, responding to or commenting on such
rumor, publication or event.
(h) Use of Proceeds. The Company shall apply the net proceeds from the
sale of the Shares sold by it in the manner described under the caption "Use of
Proceeds" in the Prospectus.
15
<PAGE>
(i) Transfer Agent. The Company shall engage and maintain, at its
expense, a registrar and transfer agent for the Company Shares.
(j) Earnings Statement. As soon as practicable, the Company will make
generally available to its security holders and to the Representatives an
earnings statement (which need not be audited) covering the twelve-month period
ending [___]that satisfies the provisions of Section 11(a) of the Securities
Act.
(k) Periodic Reporting Obligations. During the Prospectus Delivery
Period the Company shall file, on a timely basis, with the Commission and the
Nasdaq National Market all reports and documents required to be filed under the
Exchange Act.
(l) Agreement Not to Offer or Sell Additional Securities. The Company
will not, without the prior written consent of BancBoston Robertson Stephens
Inc., for a period of 180 days following the date of the Prospectus, offer, sell
or contract to sell, or otherwise dispose of or enter into any transaction which
is designed to, or could be expected to, result in the disposition (whether by
actual disposition or effective economic disposition due to cash settlement or
otherwise by the Company or any affiliate of the Company or any person in
privity with the Company or any affiliate of the Company) directly or
indirectly, or announce the offering of, any other Common Shares or any
securities convertible into, or exchangeable for, Common Shares; provided,
however, that the Company may (i) issue and sell Common Shares pursuant to any
director or employee stock option plan, stock ownership plan or dividend
reinvestment plan of the Company in effect at the date of the Prospectus and
described in the Prospectus so long as none of those shares may be transferred
on during the period of 180 days from the date that the Registration Statement
is declared effective (the "Lock-Up Period") and the Company shall enter stop
transfer instructions with its transfer agent and registrar against the transfer
of any such Common Shares and (ii) the Company may issue Common Shares issuable
upon the conversion of securities or the exercise of warrants outstanding at the
date of the Prospectus and described in the Prospectus.
(m) Future Reports to the Representatives. During the period of five
years hereafter the Company will furnish to the Representatives (i) as soon as
practicable after the end of each fiscal year, copies of the Annual Report of
the Company containing the balance sheet of the Company as of the close of such
fiscal year and statements of income, stockholders' equity and cash flows for
the year then ended and the opinion thereon of the Company's independent public
or certified public accountants; (ii) as soon as practicable after the filing
thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly
Report on Form 10-Q, Current Report on Form 8-K or other report filed by the
Company with the Commission, the National Association of Securities Dealers, LLC
or any securities exchange; and (iii) as soon as available, copies of any report
or communication of the Company mailed generally to holders of its capital
stock.
16
<PAGE>
Section 4. Conditions of the Obligations of the Underwriters. The
obligations of the several Underwriters to purchase and pay for the Shares as
provided herein on the First Closing Date and, with respect to the Option
Shares, the Second Closing Date, shall be subject to the accuracy of the
representations and warranties on the part of the Company set forth in Section 1
hereof as of the date hereof and as of the First Closing Date as though then
made and, with respect to the Option Shares, as of the Second Closing Date as
though then made, to the timely performance by the Company of its covenants and
other obligations hereunder, and to each of the following additional conditions:
(a) Compliance with Registration Requirements; No Stop Order; No Objection
from the National Association of Securities Dealers, Inc. The Registration
Statement shall have become effective prior to the execution of this Agreement,
or at such later date as shall be consented to in writing by you; and no stop
order suspending the effectiveness thereof shall have been issued and no
proceedings for that purpose shall have been initiated or, to the knowledge of
the Company or any Underwriter, threatened by the Commission, and any request of
the Commission for additional information (to be included in the Registration
Statement or the Prospectus or otherwise) shall have been complied with to the
satisfaction of Underwriters' Counsel; and the National Association of
Securities Dealers, Inc. shall have raised no objection to the fairness and
reasonableness of the underwriting terms and arrangements.
(b) Corporate Proceedings. All corporate proceedings and other legal
matters in connection with this Agreement, the form of Registration Statement
and the Prospectus, and the registration, authorization, issue, sale and
delivery of the Shares, shall have been reasonably satisfactory to Underwriters'
Counsel, and such counsel shall have been furnished with such papers and
information as they may reasonably have requested to enable them to pass upon
the matters referred to in this Section.
(c) No Material Adverse Change. Subsequent to the execution and delivery
of this Agreement and prior to the First Closing Date, or the Second Closing
Date, as the case may be,
(i) there shall not have been any Material Adverse Change in the condition
(financial or otherwise), earnings, operations, business or business
prospects of the Company and its subsidiaries considered as one enterprise
from that set forth in the Registration Statement or Prospectus, which, in
your sole judgment, is material and adverse and that makes it, in your sole
judgment, impracticable or inadvisable to proceed with the public offering
of the Shares as contemplated by the Prospectus; and
(d) Opinion of Counsel for the Company. You shall have received on the
First Closing Date, or the Second Closing Date, as the case may be, an opinion
of Venture Law Group, counsel for the Company ("Company Counsel") substantially
in the form of Exhibit B attached hereto, and an opinion of S.N. Bathina,
---------
counsel for Ramp Networks Private Limited, the Company's subsidiary in India,
(the "Indian Subsidiary") substantially in the
17
<PAGE>
form of Exhibit B1, dated the First Closing Date, or the Second Closing Date,
----------
addressed to the Underwriters and with reproduced copies or signed counterparts
thereof for each of the Underwriters.
Counsel rendering the opinion contained in Exhibit B may rely as to
---------
questions of law not involving the laws of the United States or the State of
California and the State of Delaware upon opinions of local counsel, and as to
questions of fact upon representations or certificates of officers of the
Company, and of government officials, in which case their opinion is to state
that they are so relying and that they have no knowledge of any material
misstatement or inaccuracy in any such opinion, representation or certificate.
Copies of any opinion, representation or certificate so relied upon shall be
delivered to you, as Representatives of the Underwriters, and to Underwriters'
Counsel.
(e) Opinion of Patent Counsel for the Company. You shall have received on
the First Closing Date, or the Second Closing Date, as the case may be, an
opinion of Townsend and Townsend and Crew LLP and/or Dennis Fernandez, LLP,
patent counsel for the Company ("Patent Counsel") substantially in the form of
Exhibit C attached hereto.
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(f) Opinion of Counsel for the Underwriters. You shall have received on
the First Closing Date or the Second Closing Date, as the case may be, an
opinion of Wilson, Sonsini, Goodrich & Rosati, substantially in the form of
Exhibit D hereto. The Company shall have furnished to such counsel such
- ---------
documents as they may have requested for the purpose of enabling them to pass
upon such matters.
(g) Accountants' Comfort Letter. You shall have received on the First
Closing Date and on the Second Closing Date, as the case may be, a letter from
Arthur Andersen LLP addressed to the Underwriters, dated the First Closing Date
or the Second Closing Date, as the case may be, confirming that they are
independent certified public accountants with respect to the Company within the
meaning of the Act and the applicable published Rules and Regulations and based
upon the procedures described in such letter delivered to you concurrently with
the execution of this Agreement (herein called the "Original Letter"), but
carried out to a date not more than four (4) business days prior to the First
Closing Date or the Second Closing Date, as the case may be, (i) confirming, to
the extent true, that the statements and conclusions set forth in the Original
Letter are accurate as of the First Closing Date or the Second Closing Date, as
the case may be, and (ii) setting forth any revisions and additions to the
statements and conclusions set forth in the Original Letter which are necessary
to reflect any changes in the facts described in the Original Letter since the
date of such letter, or to reflect the availability of more recent financial
statements, data or information. The letter shall not disclose any change in
the condition (financial or otherwise), earnings, operations, business or
business prospects of the Company and its subsidiaries considered as one
enterprise from that set forth in the Registration Statement or Prospectus,
which, in your sole judgment, is material and adverse and that makes it, in your
sole judgment, impracticable or inadvisable to proceed with the public offering
of the Shares as contemplated by the Prospectus. The Original Letter from
Arthur Andersen LLP shall be addressed to or for the use of the Underwriters in
form and
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substance satisfactory to the Underwriters and shall (i) represent, to the
extent true, that they are independent certified public accountants with respect
to the Company within the meaning of the Act and the applicable published Rules
and Regulations, (ii) set forth their opinion with respect to their examination
of the consolidated balance sheet of the Company as of December 31, 1998 and
related consolidated statements of operations, shareholders' equity, and cash
flows for the twelve (12) months ended December 31, 1998, (iii) state that
Arthur Andersen has performed the procedures set out in Statement on Auditing
Standards No. 71 ("SAS 71") for a review of interim financial information and
providing the report of Arthur Andersen as described in SAS 71 on the financial
statements for each of the quarters in the nine-quarter period ended March 31,
1999 (the "Quarterly Financial Statements"), (iv) state that in the course of
such review, nothing came to their attention that leads them to believe that any
material modifications need to be made to any of the Quarterly Financial
Statements in order for them to be in compliance with generally accepted
accounting principles consistently applied across the periods presented, and
address other matters agreed upon by Arthur Andersen and you. In addition, you
shall have received from Arthur Andersen a letter addressed to the Company and
made available to you for the use of the Underwriters stating that their review
of the Company's system of internal accounting controls, to the extent they
deemed necessary in establishing the scope of their examination of the Company's
consolidated financial statements as of December 31, 1998, did not disclose any
weaknesses in internal controls that they considered to be material weaknesses.
(h) Officers' Certificate. You shall have received on the First Closing
Date and the Second Closing Date, as the case may be, a certificate of the
Company, dated the First Closing Date or the Second Closing Date, as the case
may be, signed by the Chief Executive Officer and Chief Financial Officer of the
Company, to the effect that, and you shall be satisfied that:
(i) The representations and warranties of the Company in this Agreement are
true and correct, as if made on and as of the First Closing Date or the
Second Closing Date, as the case may be, and the Company has complied with
all the agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the First Closing Date or the Second
Closing Date, as the case may be;
(ii) No stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or threatened under the Act;
(iii) When the Registration Statement became effective and at all times
subsequent thereto up to the delivery of such certificate, the Registration
Statement and the Prospectus, and any amendments or supplements thereto,
contained all material information required to be included therein by the
Securities Act, and in all material respects conformed to the requirements
of the Securities Act, the Registration Statement and the Prospectus, and
any amendments or supplements thereto, did not and does not include 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
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misleading; and, since the effective date of the Registration Statement,
there has occurred no event required to be set forth in an amended or
supplemented Prospectus which has not been so set forth; and
(iv) Subsequent to the respective dates as of which information is given in
the Registration Statement and Prospectus, there has not been (a) any
material adverse change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company and its
subsidiaries considered as one enterprise, (b) any transaction that is
material to the Company and its subsidiaries considered as one enterprise,
except transactions entered into in the ordinary course of business, (c) any
obligation, direct or contingent, that is material to the Company and its
subsidiaries considered as one enterprise, incurred by the Company or its
subsidiaries, except obligations incurred in the ordinary course of
business, (d) any change in the capital stock or outstanding indebtedness of
the Company or any of its subsidiaries that is material to the Company and
its subsidiaries considered as one enterprise, (e) any dividend or
distribution of any kind declared, paid or made on the capital stock of the
Company or any of its subsidiaries, or (f) any loss or damage (whether or
not insured) to the property of the Company or any of its subsidiaries which
has been sustained or will have been sustained which has a material adverse
effect on the condition (financial or otherwise), earnings, operations,
business or business prospects of the Company and its subsidiaries
considered as one enterprise.
(i) Lock-up Agreement from Certain Stockholders of the Company. The
Company shall have obtained and delivered to you an agreement substantially in
the form of Exhibit A attached hereto from each officer and director of the
---------
Company, and each beneficial owner of the outstanding issued share capital of
the Company.
(m) Stock Exchange Listing. The Shares shall have been approved for
listing on the Nasdaq National Market, subject only to official notice of
issuance.
(n) Compliance with Prospectus Delivery Requirements. The Company shall
have complied with the provisions of Sections 2(g) and 3(e) hereof with respect
to the furnishing of Prospectuses.
(o) Additional Documents. On or before each of the First Closing Date
and the Second Closing Date, as the case may be, the Representatives and counsel
for the Underwriters shall have received such information, documents and
opinions as they may reasonably require for the purposes of enabling them to
pass upon the issuance and sale of the Shares as contemplated herein, or in
order to evidence the accuracy of any of the representations and warranties, or
the satisfaction of any of the conditions or agreements, herein contained.
If any condition specified in this Section 4 is not satisfied when and as
required to be satisfied, this Agreement may be terminated by the
Representatives by notice to the Company at any time on or prior to the First
Closing Date and, with respect to the Option
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Shares, at any time prior to the Second Closing Date, which termination shall be
without liability on the part of any party to any other party, except that
Section 5 (Payment of Expenses), Section 6 (Reimbursement of Underwriters'
Expenses), Section 7 (Indemnification and Contribution) and Section 10
(Representations and Indemnities to Survive Delivery) shall at all times be
effective and shall survive such termination.
Section 5. Payment of Expenses. The Company agrees to pay all costs, fees
and expenses incurred in connection with the performance of its obligations
hereunder and in connection with the transactions contemplated hereby, including
without limitation (i) all expenses incident to the issuance and delivery of the
Common Shares (including all printing and engraving costs), (ii) all fees and
expenses of the registrar and transfer agent of the Common Stock, (iii) all
necessary issue, transfer and other stamp taxes in connection with the issuance
and sale of the Shares to the Underwriters, (iv) all fees and expenses of the
Company's counsel, independent public or certified public accountants and other
advisors, (v) all costs and expenses incurred in connection with the
preparation, printing, filing, shipping and distribution of the Registration
Statement (including financial statements, exhibits, schedules, consents and
certificates of experts), each preliminary prospectus and the Prospectus, and
all amendments and supplements thereto, and this Agreement, (vi) all filing
fees, attorneys' fees and expenses incurred by the Company or the Underwriters
in connection with qualifying or registering (or obtaining exemptions from the
qualification or registration of) all or any part of the Shares for offer and
sale under the state securities or blue sky laws or the provincial securities
laws of Canada or any other country, and, if requested by the Representatives,
preparing and printing a "Blue Sky Survey", an "International Blue Sky Survey"
or other memorandum, and any supplements thereto, advising the Underwriters of
such qualifications, registrations and exemptions, (vii) the filing fees
incident to, and the reasonable fees and expenses of counsel for the
Underwriters in connection with, the National Association of Securities Dealers,
Inc. review and approval of the Underwriters' participation in the offering and
distribution of the Common Shares, (viii) the fees and expenses associated with
listing the Common Shares on the Nasdaq National Market, (ix) all costs and
expenses incident to the preparation and undertaking of "road show" preparations
to be made to prospective investors, and (x) all other fees, costs and expenses
referred to in Item 13 of Part II of the Registration Statement. Except as
provided in this Section 5, Section 6, and Section 7 hereof, the Underwriters
shall pay their own expenses, including the fees and disbursements of their
counsel.
Section 6. Reimbursement of Underwriters' Expenses'. If this Agreement is
terminated by the Representatives pursuant to Section 4, Section 7, Section 8,
Section 9, or if the sale to the Underwriters of the Shares on the First Closing
Date is not consummated because of any refusal, inability or failure on the part
of the Company to perform any agreement herein or to comply with any provision
hereof, the Company agrees to reimburse the Representatives and the other
Underwriters (or such Underwriters as have terminated this Agreement with
respect to themselves), severally, upon demand for all out-of-pocket expenses
that shall have been reasonably incurred by the Representatives and the
Underwriters in connection with the proposed purchase and the
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offering and sale of the Shares, including but not limited to fees and
disbursements of counsel, printing expenses, travel expenses, postage, facsimile
and telephone charges.
Section 7. Indemnification and Contribution.
(a) Indemnification of the Underwriters.
(1) The Company agrees to indemnify and hold harmless each
Underwriter, its officers and employees, and each person, if any, who controls
any Underwriter within the meaning of the Securities Act and the Exchange Act
against any loss, claim, damage, liability or expense, as incurred, to which
such Underwriter or such controlling person may become subject, under the
Securities Act, the Exchange Act or other federal or state statutory law or
regulation, or at common law or otherwise (including in settlement of any
litigation, if such settlement is effected with the written consent of the
Company, which consent shall not be unreasonably withheld), insofar as such
loss, claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based (i) upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, or any amendment thereto, including any information deemed to be a
part thereof pursuant to Rule 430A or Rule 434 under the Securities Act, or the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading; or (ii) upon
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; or (iii) in whole or
in part upon any inaccuracy in the representations and warranties of the Company
contained herein; or (iv) in whole or in part upon any failure of the Company to
perform its obligations hereunder or under law; or (v) any act or failure to act
or any alleged act or failure to act by any Underwriter in connection with, or
relating in any manner to, the Shares or the offering contemplated hereby, and
which is included as part of or referred to in any loss, claim, damage,
liability or action arising out of or based upon any matter covered by clause
(i), (ii), (iii) or (iv) above, provided that the Company shall not be liable
under this clause (v) to the extent that a court of competent jurisdiction shall
have determined by a final judgment that such loss, claim, damage, liability or
action resulted directly from any such acts or failures to act undertaken or
omitted to be taken by such Underwriter through its bad faith or willful
misconduct; and to reimburse each Underwriter and each such controlling person
for any and all expenses (including the fees and disbursements of counsel chosen
by BancBoston Robertson Stephens Inc.) as such expenses are reasonably incurred
by such Underwriter or such controlling person in connection with investigating,
defending, settling, compromising or paying any such loss, claim, damage,
liability, expense or action; provided, however, that the foregoing indemnity
agreement shall not apply to any loss, claim, damage, liability or expense to
the extent, but only to the extent, arising out of or based upon any untrue
statement or alleged untrue statement or omission or alleged omission made in
reliance upon and in
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conformity with written information furnished to the Company by the
Representatives expressly for use in the Registration Statement, any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto); and
provided, further, that with respect to any preliminary prospectus, the
foregoing indemnity agreement shall not inure to the benefit of any Underwriter
from whom the person asserting any loss, claim, damage, liability or expense
purchased Shares, or any person controlling such Underwriter, if copies of the
Prospectus were timely delivered to the Underwriter pursuant to Section 2 and a
copy of the Prospectus (as then amended or supplemented if the Company shall
have furnished any amendments or supplements thereto) was not sent or given by
or on behalf of such Underwriter to such person, if required by law so to have
been delivered, at or prior to the written confirmation of the sale of the
Shares to such person, and if the Prospectus (as so amended or supplemented)
would have cured the defect giving rise to such loss, claim, damage, liability
or expense. The indemnity agreement set forth in this Section 7(a) shall be in
addition to any liabilities that the Company may otherwise have.
(b) Indemnification of the Company, its Directors and Officers. Each
Underwriter agrees, severally and not jointly, to indemnify and hold harmless
the Company, each of its directors, each of its officers who signed the
Registration Statement and each person, if any, who controls the Company within
the meaning of the Securities Act or the Exchange Act, against any loss, claim,
damage, liability or expense, as incurred, to which the Company, or any such
director, officer or controlling person may become subject, under the Securities
Act, the Exchange Act, or other federal or state statutory law or regulation, or
at common law or otherwise (including in settlement of any litigation, if such
settlement is effected with the written consent of such Underwriter), insofar as
such loss, claim, damage, liability or expense (or actions in respect thereof as
contemplated below) arises out of or is based upon any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
preliminary prospectus or the Prospectus (or any amendment or supplement
thereto), or arises out of or is based upon 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, in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or omission
or alleged omission was made in the Registration Statement, any preliminary
prospectus, the Prospectus (or any amendment or supplement thereto), in reliance
upon and in conformity with written information furnished to the Company by the
Representatives expressly for use therein; and to reimburse the Company, or any
such director, officer, or controlling person for any legal and other expense
reasonably incurred by the Company, or any such director, officer or controlling
person in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action. The indemnity
agreement set forth in this Section 7(b) shall be in addition to any liabilities
that each Underwriter may otherwise have.
(c) Information Provided by the Underwriters. The Company hereby
acknowledges that the only information that the Underwriters have furnished to
the
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<PAGE>
Company expressly for use in the Registration Statement, any preliminary
prospectus or the Prospectus (or any amendment or supplement thereto) are the
statements set forth in the table in the first paragraph and the second
paragraph under the caption "Underwriting" in the Prospectus; and the
Underwriters confirm that such statements are correct.
(d) Notifications and Other Indemnification Procedures. Promptly after
receipt by an indemnified party under this Section 7 of notice of the
commencement of any action, such indemnified party will, if a claim in respect
thereof is to be made against an indemnifying party under this Section 7, notify
the indemnifying party in writing of the commencement thereof, but the omission
so to notify the indemnifying party will not relieve it from any liability which
it may have to any indemnified party for contribution or otherwise than under
the indemnity agreement contained in this Section 7 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action is
brought against any indemnified party and such indemnified party seeks or
intends to seek indemnity from an indemnifying party, the indemnifying party
will be entitled to participate in, and, to the extent that it shall elect,
jointly with all other indemnifying parties similarly notified, by written
notice delivered to the indemnified party promptly after receiving the aforesaid
notice from such indemnified party, to assume the defense thereof with counsel
reasonably satisfactory to such indemnified party; provided, however, if the
defendants in any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that a conflict may arise between the positions of the indemnifying party and
the indemnified party in conducting the defense of any such action or that there
may be legal defenses available to it and/or other indemnified parties which are
different from or additional to those available to the indemnifying party, the
indemnified party or parties shall have the right to select separate counsel to
assume such legal defenses and to otherwise participate in the defense of such
action on behalf of such indemnified party or parties. Upon receipt of notice
from the indemnifying party to such indemnified party of such indemnifying
party's election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 7 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party shall not be liable for the expenses of
more than one separate counsel (together with local counsel), approved by the
indemnifying party (BancBoston Robertson Stephens Inc. in the case of Section
7(b) and Section 8), representing the indemnified parties who are parties to
such action), (ii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of commencement of the action, or (iii) the
indemnifying party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party, in each of which cases the fees
and expenses of counsel shall be at the expense of the indemnifying party.
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(e) Settlements. The indemnifying party under this Section 7 shall not
be liable for any settlement of any proceeding effected without its written
consent, which consent shall not be unreasonably withheld, 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 against any loss, claim, damage,
liability or expense 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 Section 7(d) hereof, 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, compromise or consent to the entry of judgment in any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity was or could have been sought
hereunder by such indemnified party, unless such settlement, compromise or
consent includes (i) an unconditional release of such indemnified party from all
liability on claims that are the subject matter of such action, suit or
proceeding and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party.
(f) Contribution. If the indemnification provided for in this Section 7
is unavailable to or insufficient to hold harmless an indemnified party under
Section 7(a) or (b) above in respect of any losses, claims, damages or
liabilities (or actions or proceedings in respect thereof) then each
indemnifying party shall contribute to the aggregate amount paid or payable by
such indemnified party 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 from the offering of the Shares. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law then each indemnifying party shall contribute to such amount paid or payable
by such indemnified party in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of the Company on the
one hand and the Underwriters on the other in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, (or
actions or proceedings in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriter on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bears to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault 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 on the one hand or the
Underwriters on the other and the parties' relative intent,
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<PAGE>
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company and Underwriters agree that it would not be just and equitable
if contributions pursuant to this Section 7(f) 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 which does not take account of the
equitable considerations referred to above in this Section 7(f). The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions or proceedings in respect thereof) referred
to above in this Section 7(f) shall be deemed to include 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 subsection (f), (i) no Underwriter shall be required to
contribute any amount in excess of the underwriting discounts and commissions
applicable to the Shares purchased by such Underwriter and (ii) 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 Underwriters' obligations in
this Section 7(f) to contribute are several in proportion to their respective
underwriting obligations and not joint.
(g) Timing of Any Payments of Indemnification. Any losses, claims,
damages, liabilities or expenses for which an indemnified party is entitled to
indemnification or contribution under this Section 7 shall be paid by the
indemnifying party to the indemnified party as such losses, claims, damages,
liabilities or expenses are incurred, but in all cases, no later than thirty
(30) days of invoice to the indemnifying party.
(h) Survival. The indemnity and contribution agreements contained in
this Section 7 and the representation and warranties of the Company set forth in
this Agreement shall remain operative and in full force and effect, regardless
of (i) any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Company, its directors or officers or any
persons controlling the Company, (ii) acceptance of any Shares and payment
therefor hereunder, and (iii) any termination of this Agreement. A successor to
any Underwriter, or to the Company, its directors or officers, or any person
controlling the Company, shall be entitled to the benefits of the indemnity,
contribution and reimbursement agreements contained in this Section 7.
(i) Acknowledgements of Parties. The parties to this Agreement hereby
acknowledge that they are sophisticated business persons who were represented by
counsel during the negotiations regarding the provisions hereof including,
without limitation, the provisions of this Section 7, and are fully informed
regarding said provisions. They further acknowledge that the provisions of this
Section 7 fairly allocate the risks in light of the ability of the parties to
investigate the Company and its business in order to assure that adequate
disclosure is made in the Registration Statement and Prospectus as required by
the Securities Act and the Exchange Act.
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Section 8. Default of One or More of the Several Underwriters. If, on the
First Closing Date or the Second Closing Date, as the case may be, any one or
more of the several Underwriters shall fail or refuse to purchase Shares that it
or they have agreed to purchase hereunder on such date, and the aggregate number
of Common Shares which such defaulting Underwriter or Underwriters agreed but
failed or refused to purchase does not exceed 10% 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 Common Shares set forth
opposite their respective names on Schedule A 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 may be specified by the
Representatives with the consent of the non-defaulting Underwriters, to purchase
the Shares which such defaulting Underwriter or Underwriters agreed but failed
or refused to purchase on such date. If, on the First Closing Date or the Second
Closing Date, as the case may be, any one or more of the Underwriters shall fail
or refuse to purchase Shares and the aggregate number of Shares with respect to
which such default occurs exceeds 10% of the aggregate number of Shares to be
purchased on such date, and arrangements satisfactory to the Representatives and
the Company for the purchase of such Shares are not made within 48 hours after
such default, this Agreement shall terminate without liability of any party to
any other party except that the provisions of Section 4, and Section 7 shall at
all times be effective and shall survive such termination. In any such case
either the Representatives or the Company shall have the right to postpone the
First Closing Date or the Second Closing Date, as the case may be, but in no
event for longer than seven days in order that the required changes, if any, to
the Registration Statement and the Prospectus or any other documents or
arrangements may be effected.
As used in this Agreement, the term "Underwriter" shall be deemed to
include any person substituted for a defaulting Underwriter under this Section
8. Any action taken under this Section 8 shall not relieve any defaulting
Underwriter from liability in respect of any default of such Underwriter under
this Agreement.
Section 9. Termination of this Agreement. Prior to the First Closing Date,
this Agreement may be terminated by the Representatives by notice given to the
Company if at any time (i) trading or quotation in any of the Company's
securities shall have been suspended or limited by the Commission or by the
Nasdaq Stock Market, or trading in securities generally on either the Nasdaq
Stock Market shall have been suspended or limited, or minimum or maximum prices
shall have been generally established on any of such stock exchanges by the
Commission or the National Association of Securities Dealers, Inc.; (ii) a
general banking moratorium shall have been declared by any of federal, New York,
Delaware or California authorities; (iii) there shall have occurred any outbreak
or escalation of national or international hostilities or any crisis or
calamity, or any change in the United States or international financial markets,
or any substantial change or development involving a prospective change in
United States' or international political, financial or economic conditions, as
in the judgment of the Representatives is material and adverse and makes it
impracticable or inadvisable to market the Common
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<PAGE>
Shares in the manner and on the terms described in the Prospectus or to enforce
contracts for the sale of securities; (iv) in the judgment of the
Representatives there shall have occurred any Material Adverse Change; or (v)
the Company shall have sustained a loss by strike, fire, flood, earthquake,
accident or other calamity of such character as in the judgment of the
Representatives may interfere materially with the conduct of the business and
operations of the Company regardless of whether or not such loss shall have been
insured. Any termination pursuant to this Section 9 shall be without liability
on the part of (a) the Company to any Underwriter, except that the Company shall
be obligated to reimburse the expenses of the Representatives and the
Underwriters pursuant to Sections 5 and 6 hereof, (b) any Underwriter to the
Company, or (c) of any party hereto to any other party except that the
provisions of Section 7 shall at all times be effective and shall survive such
termination.
Section 10. Representations and Indemnities to Survive Delivery. The
respective indemnities, agreements, representations, warranties and other
statements of the Company, of its officers and of the several Underwriters set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of any Underwriter
or the Company or any of its or their partners, officers or directors or any
controlling person, as the case may be, and will survive delivery of and payment
for the Shares sold hereunder and any termination of this Agreement.
Section 11. Notices. All communications hereunder shall be in writing and
shall be mailed, hand delivered or telecopied and confirmed to the parties
hereto as follows:
If to the Representatives:
BANCBOSTON ROBERTSON STEPHENS INC.
555 California Street
San Francisco, California 94104
Facsimile: (415) 676-2696
Attention: General Counsel
If to the Company or its subsidiaries:
Ramp Networks, Inc.
3100 De La Cruz Blvd.
Santa Clara, California 95054
Facsimile: (408) 988-6363
Attention: Mahesh Veerina
Any party hereto may change the address for receipt of communications by giving
written notice to the others.
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Section 12. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto, including any substitute Underwriters pursuant
to Section 9 hereof, and to the benefit of the employees, officers and directors
and controlling persons referred to in Section 7, and to their respective
successors, and no other person will have any right or obligation hereunder.
The term "successors" shall not include any purchaser of the Shares as such from
any of the Underwriters merely by reason of such purchase.
Section 13. Partial Unenforceability. The invalidity or unenforceability
of any Section, paragraph or provision of this Agreement shall not affect the
validity or enforceability of any other Section, paragraph or provision hereof.
If any Section, paragraph or provision of this Agreement is for any reason
determined to be invalid or unenforceable, there shall be deemed to be made such
minor changes (and only such minor changes) as are necessary to make it valid
and enforceable.
Section 14. Governing Law Provisions.
(a) Governing Law. This agreement shall be governed by and construed in
accordance with the internal laws of the state of New York applicable to
agreements made and to be performed in such state.
(b) Consent to Jurisdiction. Any legal suit, action or proceeding
arising out of or based upon this Agreement or the transactions contemplated
hereby ("Related Proceedings") may be instituted in the federal courts of the
United States of America located in the City and County of San Francisco or the
courts of the State of California in each case located in the City and County of
San Francisco (collectively, the "Specified Courts"), and each party irrevocably
submits to the exclusive jurisdiction (except for proceedings instituted in
regard to the enforcement of a judgment of any such court (a "Related
Judgment"), as to which such jurisdiction is non-exclusive) of such courts in
any such suit, action or proceeding. Service of any process, summons, notice or
document by mail to such party's address set forth above shall be effective
service of process for any suit, action or other proceeding brought in any such
court. The parties irrevocably and unconditionally waive any objection to the
laying of venue of any suit, action or other proceeding in the Specified Courts
and irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such suit, action or other proceeding brought in any such
court has been brought in an inconvenient forum. Each party not located in the
United States irrevocably appoints CT Corporation System, which currently
maintains a San Francisco office at 49 Stevenson Street, San Francisco,
California 94105, United States of America, as its agent to receive service of
process or other legal summons for purposes of any such suit, action or
proceeding that may be instituted in any state or federal court in the City and
County of San Francisco.
(c) Waiver of Immunity. With respect to any Related Proceeding, each
party irrevocably waives, to the fullest extent permitted by applicable law, all
immunity (whether on the basis of sovereignty or otherwise) from jurisdiction,
service of process,
29
<PAGE>
attachment (both before and after judgment) and execution to which it might
otherwise be entitled in the Specified Courts, and with respect to any Related
Judgment, each party waives any such immunity in the Specified Courts or any
other court of competent jurisdiction, and will not raise or claim or cause to
be pleaded any such immunity at or in respect of any such Related Proceeding or
Related Judgment, including, without limitation, any immunity pursuant to the
United States Foreign Sovereign Immunities Act of 1976, as amended.
Section 15. General Provisions. This Agreement constitutes the entire
agreement of the parties to this Agreement and supersedes all prior written or
oral and all contemporaneous oral agreements, understandings and negotiations
with respect to the subject matter hereof. This Agreement may be executed in
two or more counterparts, each one of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement may not be amended or modified unless in writing by all of the
parties hereto, and no condition herein (express or implied) may be waived
unless waived in writing by each party whom the condition is meant to benefit.
The Table of Contents and the Section headings herein are for the convenience of
the parties only and shall not affect the construction or interpretation of this
Agreement.
[The remainder of this page has been intentionally left blank.]
30
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company the enclosed copies hereof, whereupon this
instrument, along with all counterparts hereof, shall become a binding agreement
in accordance with its terms.
Very truly yours,
Ramp Networks, Inc.
By:__________________________
President and CEO
The foregoing Underwriting Agreement is hereby confirmed and accepted by the
Representatives as of the date first above written.
BANCBOSTON ROBERTSON STEPHENS INC.
DAIN RAUSCHER WESSELS,
A DIVISION OF DAIN RAUSCHER INCORPORATED
HAMBRECHT & QUIST LLC
On their behalf and on behalf of each of the several underwriters named in
Schedule A hereto.
- ----------
By BANCBOSTON ROBERTSON STEPHENS INC.
BY:__________________________________
AUTHORIZED SIGNATORY
31
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Firm Common Shares
Underwriters To be Purchased
<S> <C>
BANCBOSTON ROBERTSON STEPHENS INC....................... [___]
DAIN RAUSCHER WESSELS,
A DIVISION OF DAIN RAUSCHER INCORPORATED............
HAMBRECHT & QUIST LLC................................... [___]
[___]................................................... [___]
[___]................................................... [___]
[___]................................................... [___]
Total.............................................. [___]
</TABLE>
S-A
<PAGE>
Exhibit A
Lock-Up Agreement
BancBoston Robertson Stephens Inc.
Dain Rauscher Wessels,
a division of Dain Rauscher Incorporated
Hambrecht & Quist LLC
As Representatives of the Several Underwriters
c/o BancBoston Robertson Stephens Inc.
555 California Street, Suite 2600
San Francisco, California 94104
RE: Ramp Networks, Inc. (the "Company")
Ladies & Gentlemen:
The undersigned is an owner of record or beneficially of certain shares of
Common Stock of the Company ("Common Stock") or securities convertible into or
exchangeable or exercisable for Common Stock. The Company proposes to carry out
a public offering of Common Stock (the "Offering") for which you will act as the
representatives (the "Representatives") of the underwriters. The undersigned
recognizes that the Offering will be of benefit to the undersigned and will
benefit the Company by, among other things, raising additional capital for its
operations. The undersigned acknowledges that you and the other underwriters
are relying on the representations and agreements of the undersigned contained
in this letter in carrying out the Offering and in entering into underwriting
arrangements with the Company with respect to the Offering.
In consideration of the foregoing, the undersigned hereby agrees that the
undersigned will not offer to sell, contract to sell, or otherwise sell, dispose
of, loan, pledge or grant any rights with respect to (collectively, a
"Disposition") any shares of Common Stock, any options or warrants to purchase
any shares of Common Stock or any securities convertible into or exchangeable
for shares of Common Stock (collectively, "Securities") now owned or hereafter
acquired directly by such person or with respect to which such person has or
hereafter acquires the power of disposition, otherwise than (i) as a bona fide
gift or gifts, provided the donee or donees thereof agree in writing to be bound
by this restriction, (ii) as a distribution to partners or shareholders of such
person, provided that the distributees thereof agree in writing to be bound by
the terms of this restriction, (iii) with respect to dispositions of Common
Shares acquired on the open market, (iv) with respect to sales or purchases of
Common Stock acquired on the open market or (v) with the prior written consent
of BancBoston Robertson Stephens Inc., for a period commencing on the date
hereof and continuing to a date 180 days after the
A-1
<PAGE>
Registration Statement is declared effective by the Securities and Exchange
Commission (the "Lock-up Period"). The foregoing restriction has been expressly
agreed to preclude the holder of the Securities from engaging in any hedging or
other transaction which is designed to or reasonably expected to lead to or
result in a Disposition of Securities during the Lock-up Period, even if such
Securities would be disposed of by someone other than such holder. Such
prohibited hedging or other transactions would include, without limitation, any
short sale (whether or not against the box) or any purchase, sale or grant of
any right (including, without limitation, any put or call option) with respect
to any Securities or with respect to any security (other than a broad-based
market basket or index) that included, relates to or derives any significant
part of its value from Securities. The undersigned also agrees and consents to
the entry of stop transfer instructions with the Company's transfer agent and
registrar against the transfer of shares of Common Stock or Securities held by
the undersigned except in compliance with the foregoing restrictions.
This agreement is irrevocable and will be binding on the undersigned and
the respective successors, heirs, personal representatives, and assigns of the
undersigned.
Dated:______________________________
------------------------------------
Printed Name of Holder
By:_________________________________
Signature
------------------------------------
Printed Name of Person Signing (and
indicate capacity of person signing
if signing as custodian, trustee, or
on behalf of an entity)
A-2
<PAGE>
Exhibit B
Matters to be Covered in the Opinion of Company Counsel
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation;
(ii) The Agreement and Plan of Merger dated ______ (the "Plan of Merger") by
and between the Company and Ramp Networks, Inc., a California corporation
("Ramp Networks, Inc. "), has been duly authorized by all necessary board of
directors and stockholder action on the part of the Company and Ramp
Networks, Inc. and has been duly executed and delivered by each of the
parties thereto. The execution and delivery of the Plan of Merger and the
consummation of the merger contemplated thereby (the "Merger") did not
contravene any provision of applicable law of the certificate of
incorporation or bylaws of the Company or the articles of incorporation or
bylaws of Ramp Networks, Inc. or any agreement or other instrument binding
upon the Company that is material to the Company and that is set forth as an
exhibit to the Registration Statement or any judgment or decree of any
governmental body, agency or court having jurisdiction over the Company or
Ramp Networks, Inc. that is known to such counsel, except for any such
contravention that would not have a material adverse effect on the condition
(financial or otherwise), business, results of operations or prospects of
the Company, and no consent, approval, authorization or order of
qualification with any governmental body or agency was required for the
performance by the Company and Ramp Networks, Inc. of its obligations under
the Plan of Merger except such as were obtained and except such consent,
approval, authorization, order or qualification, which if not obtained,
would not have a material adverse effect on the condition (financial or
otherwise), business, results of operations or prospects of the Company.
The Merger is effective under the laws of the State of California and the
State of Delaware. The Company succeeded to all rights, privileges and
obligations of Ramp Networks, Inc., and the offer and sale of the securities
issued in connection with the Merger were in compliance with the applicable
federal and state securities laws. Neither the Agreement and Plan of
Exchange dated as of _____ between the Company and Ramp Networks, Inc., a
California corporation nor the exchange of shares consummated in connection
therewith contravened, conflicted with or resulted in a material violation
or breach of, or resulted in a default under, any provisions of any
agreement or contract of the Company or its predecessor California
corporation, except for (i) any contravention, conflict, violation, breach
or default which could not reasonably be expected to result in a material
adverse effect on the Company; (ii) gave any person the right to (a) declare
a default or exercise any remedy under any such agreement or contract,
except where any such default or exercise of a remedy could not
B-1
<PAGE>
reasonably be expected to result in a material adverse effect on the
Company, (b) accelerate the maturity or performance of any such agreement or
contract, except where such acceleration could not reasonably be expected to
result in a material adverse effect on the Company, or (c) cancel, terminate
or modify any such contract, except where any such cancellation, termination
or modification could not reasonably be expected to result in a material
adverse effect on the Company; or (iii) result in the imposition or creation
of any encumbrance upon or with respect to any of the shares of capital
stock or the assets of the Company, except where such encumbrance would not
result in a material adverse effect on the Company.
(iii) The Company has the corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus;
(iv) The Company is duly qualified to do business as a foreign corporation
and is in good standing in each jurisdiction, if any, in which the ownership
or leasing of its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified or be in good
standing would not have a Material Adverse Effect. To such counsel's
knowledge, the Company does not own or control, directly or indirectly, any
corporation, association or other entity other than Ramp Networks Private
Limited;
(v) The authorized, issued and outstanding capital stock of the Company is
as set forth in the Prospectus under the caption "Capitalization" as of the
dates stated therein, the issued and outstanding shares of capital stock of
the Company have been duly and validly issued and are fully paid and
nonassessable, and, to such counsel's knowledge, will not have been issued
in violation of or subject to any preemptive right, co-sale right,
registration right, right of first refusal or other similar right;
(vi) The Firm Shares or the Option Shares, as the case may be, to be issued
by the Company pursuant to the terms of this Agreement have been duly
authorized and, upon issuance and delivery against payment therefor in
accordance with the terms hereof, will be duly and validly issued and fully
paid and nonassessable, and will not have been issued in violation of or
subject to any preemptive right, co-sale right, registration right, right of
first refusal or other similar right.
(vii) The Company has the corporate power and authority to enter into this
Agreement and to issue, sell and deliver to the Underwriters the Shares to
be issued and sold by it hereunder;
(viii) This Agreement has been duly authorized by all necessary corporate
action on the part of the Company and has been duly executed and delivered
by the Company and, assuming due authorization, execution and delivery by
you, is a valid
B-2
<PAGE>
and binding agreement of the Company, enforceable in accordance with its
terms, except as rights to indemnification hereunder may be limited by
applicable law and except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or
affecting creditors' rights generally or by general equitable principles;
(ix) The Registration Statement has become effective under the Act and, to
such counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose
have been instituted or are pending or threatened under the Securities Act;
(x) The 8-A Registration Statement complied as to form in all material
respects with the requirements of the Exchange Act; the 8-A Registration
Statement has become effective under the Exchange Act; and the Firm Shares
or the Option Shares have been validly registered under the Securities Act
and the Rules and Regulations of the Exchange Act and the applicable rules
and regulations of the Commission thereunder;
(xi) The Registration Statement and the Prospectus, and each amendment or
supplement thereto (other than the financial statements (including
supporting schedules) and financial data derived therefrom as to which such
counsel need express no opinion), as of the effective date of the
Registration Statement, complied as to form in all material respects with
the requirements of the Act and the applicable Rules and Regulations;
(xii) The information in the Prospectus under the caption "Description of
Capital Stock," to the extent that it constitutes matters of law or legal
conclusions, has been reviewed by such counsel and is a fair summary of such
matters and conclusions; and the forms of certificates evidencing the Common
Stock and filed as exhibits to the Registration Statement comply with
Delaware law;
(xiii) The description in the Registration Statement and the Prospectus of
the charter and bylaws of the Company and of statutes are accurate and
fairly present the information required to be presented by the Securities
Act;
(xiv) To such counsel's knowledge, there are no agreements, contracts,
leases or documents to which the Company or its subsidiary is a party of a
character required to be described or referred to in the Registration
Statement or Prospectus or to be filed as an exhibit to the Registration
Statement which are not described or referred to therein or filed as
required;
B-3
<PAGE>
(xv) The performance of this Agreement and the consummation of the
transactions herein contemplated (other than performance of the Company's
indemnification obligations hereunder, concerning which no opinion need be
expressed) will not (a) result in any violation of the Company's charter or
bylaws or (b) to such counsel's knowledge, result in a material breach or
violation of any of the terms and provisions of, or constitute a default
under, any bond, debenture, note or other evidence of indebtedness, or any
lease, contract, indenture, mortgage, deed of trust, loan agreement, joint
venture or other agreement or instrument known to such counsel to which the
Company is a party or by which its properties are bound, or any applicable
statute, rule or regulation known to such counsel or, to such counsel's
knowledge, any order, writ or decree of any court, government or
governmental agency or body having jurisdiction over the Company or any of
its subsidiaries, or over any of their properties or operations;
(xvi) No consent, approval, authorization or order of or qualification with
any court, government or governmental agency or body having jurisdiction
over the Company or any of its subsidiaries, or over any of their properties
or operations is necessary in connection with the consummation by the
Company of the transactions herein contemplated, except (i) such as have
been obtained under the Securities Act, (ii) such as may be required under
state or other securities or Blue Sky laws in connection with the purchase
and the distribution of the Shares by the Underwriters, (iii) such as may be
required by the National Association of Securities Dealers, Inc. and (iv)
such as may be required under the federal or provincial laws of Canada;
(xvii) To such counsel's knowledge, there are no legal or governmental
proceedings pending or threatened against the Company or any of its
subsidiaries of a character required to be disclosed in the Registration
Statement or the Prospectus by the Securities Act, other than those
described therein;
(xiii) To such counsel's knowledge, neither the Company nor any of its
subsidiaries is presently (a) in material violation of its respective
charter or bylaws, or (b) in material breach of any applicable statute, rule
or regulation known to such counsel or, to such counsel's knowledge, any
order, writ or decree of any court or governmental agency or body having
jurisdiction over the Company or any of its subsidiaries, or over any of
their properties or operations; and
(xix) To such counsel's knowledge, except as set forth in the Registration
Statement and Prospectus, no holders of Company Shares or other securities
of the Company have registration rights with respect to securities of the
Company and, except as set forth in the Registration Statement and
Prospectus, all holders of securities of the Company having rights known to
such counsel to registration of such shares of Company Shares or other
securities, because of the filing of the Registration
B-4
<PAGE>
Statement by the Company have, with respect to the offering contemplated
thereby, waived such rights or such rights have expired by reason of lapse
of time following notification of the Company's intent to file the
Registration Statement or have included securities in the Registration
Statement pursuant to the exercise of and in full satisfaction of such
rights.
(xx) The Company is not and, after giving effect to the offering and the
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.
(xxi) The statements under the captions "Management Limitation on
Directors' and Officers' Liability, " "Management Employment Benefit
Plans", "Certain Transactions", "Description of Capital Stock" and "Shares
Eligible for Future Sale" in the Prospectus, insofar as such statements
constitute a summary of documents referred to therein or matters of law,
fairly summarize in all material respects the information called for with
respect to such documents and matters.
In addition, such counsel shall state that such counsel has participated in
conferences with officials and other representatives of the Company, the
Representatives, Underwriters' Counsel and the independent certified public
accountants of the Company, at which such conferences the contents of the
Registration Statement and Prospectus and related matters were discussed, and
although they have not verified the accuracy or completeness of the statements
contained in the Registration Statement or the Prospectus, nothing has come to
the attention of such counsel which leads them to believe that, at the time the
Registration Statement became effective and at all times subsequent thereto up
to and on the First Closing Date or Second Closing Date, as the case may be, the
Registration Statement and any amendment or supplement thereto (other than the
financial statements including supporting schedules and other financial and
statistical information derived therefrom, as to which such counsel need express
no comment) 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, or at the First Closing Date or the Second
Closing Date, as the case may be, the Registration Statement, the Prospectus and
any amendment or supplement thereto (except as aforesaid) contained any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
B-5
<PAGE>
Exhibit B1
Matters to be Covered in the Opinion of
Counsel for the Indian Subsidiary
(i) The Indian Subsidiary has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the jurisdiction of its
incorporation;
(ii) The Indian Subsidiary has the corporate power and authority to own,
lease and operate its properties and to conduct its business as described in
the Prospectus;
(iii) The Indian Subsidiary is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction, if any, in which
the ownership or leasing of its properties or the conduct of its business
requires such qualification, except where the failure to be so qualified or
be in good standing would not have a Material Adverse Effect. To such
counsel's knowledge, the Indian Subsidiary does not own or control, directly
or indirectly, any corporation, association or other entity;
(iv) All issued and outstanding shares of capital stock of the Indian
Subsidiary have been duly authorized and validly issued and are fully paid
and nonassessable, and, to such counsel's knowledge, have not been issued in
violation of or subject to any preemptive right, co-sale right, registration
right, right of first refusal or other similar right and are owned by the
Company free and clear of any pledge, lien, security interest, encumbrance,
claim or equitable interest;
(v) The performance of this Agreement and the consummation of the
transactions herein contemplated (other than performance of the Company's
indemnification obligations hereunder, concerning which no opinion need be
expressed) will not (a) result in any violation of the Indian Subsidiary's
charter or bylaws or (b) to such counsel's knowledge, result in a material
breach or violation of any of the terms and provisions of, or constitute a
default under, any bond, debenture, note or other evidence of indebtedness,
or any lease, contract, indenture, mortgage, deed of trust, loan agreement,
joint venture or other agreement or instrument known to such counsel to
which the Indian Subsidiary is a party or by which its properties are bound,
or any applicable statute, rule or regulation known to such counsel or, to
such counsel's knowledge, any order, writ or decree of any court, government
or governmental agency or body having jurisdiction over the Indian
Subsidiary or any of its subsidiaries, or over any of their properties or
operations;
(vi) To such counsel's knowledge, there are no legal or governmental
proceedings pending or threatened against the Indian Subsidiary or any of
its subsidiaries of a
B-6
<PAGE>
character required to be disclosed in the Registration Statement or the
Prospectus by the Securities Act, other than those described therein;
(vii) To such counsel's knowledge, the Indian Subsidiary is not presently
(a) in material violation of its respective charter or bylaws, or (b) in
material breach of any applicable statute, rule or regulation known to such
counsel or, to such counsel's knowledge, any order, writ or decree of any
court or governmental agency or body having jurisdiction over the Indian
Subsidiary, or over any of their properties or operations;
(viii) The issuances of shares of capital stock of the Company including
options to purchase shares of capital stock of the Company to residents of
India were completed in compliance with the laws of India, including but not
limited to the Foreign Exchange Regulation Act of 1973.
(ix) The transfer of shares of capital stock of the Indian Subsidiary by
Shri B.P.S. Shekar and Smt. Pushparani to the Company were completed in
compliance with the laws of India, including but not limited to the Foreign
Exchange Regulation Act of 1973.
B-7
<PAGE>
Exhibit C
Matters to be Covered in the Opinion of
Patent Counsel for the Company
Such counsel are familiar with the technology used by the Company in
its business and the manner of its use thereof and have read the Registration
Statement and the Prospectus, including particularly the portions of the
Registration Statement and the Prospectus referring to patents, trade secrets,
trademarks, service marks or other proprietary information or materials and:
(i) The Company is listed in the records of the United States Patent and
Trademark Office as the holder of record of the patents listed on a
schedule to such opinion (the "Patents") and each of the applications
listed on a schedule to such opinion (the "Applications"). To the
knowledge of such counsel, there are no claims of third parties to any
ownership interest or lien with respect to any of the Patents or
Applications. Such counsel is not aware of any material defect in form in
the preparation or filing of the Applications on behalf of the Company. To
the knowledge of such counsel, the Applications are being pursued by the
Company. To the knowledge of such counsel, the Company owns as its sole
property the Patents and pending Applications;
(ii) The Company is listed in the records of the appropriate foreign
offices as the sole holder of record of the foreign patents listed on a
schedule to such opinion (the "Foreign Patents") and each of the
applications listed on a schedule to such opinion (the "Foreign
Applications"). Such counsel knows of no claims of third parties to any
ownership interest or lien with respect to the Foreign Patents or Foreign
Applications. Such counsel is not aware of any material defect of form in
the preparation or filing of the Foreign Applications on behalf of the
Company. To the knowledge of such counsel, the Foreign Applications are
being pursued by the Company. To the knowledge of such counsel, the
Company owns as its sole property the Foreign Patents and pending Foreign
Applications;
(iii) Such counsel knows of no reason why the Patents or Foreign Patents
are not valid as issued. Such counsel has no knowledge of any reason why
any patent to be issued as a result of any Application or Foreign
Application would not be valid or would not afford the Company useful
patent protection with respect thereto;
(iv) As to the statements under the captions "Risk Factors -- Dependence on
Patents and Proprietary Rights" and "Business -- Patents and Proprietary
Rights," nothing has come to the attention of such counsel which caused
them to believe
C-1
<PAGE>
that the above-mentioned sections of the Registration Statement, at the
time the Registration Statement became effective and at all times
subsequent thereto up to and on the Closing Date and on any later date on
which Option Shares are to be purchased the Registration Statement and any
amendment or supplement thereto made available and reviewed by such counsel
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, or at the Closing Date or any later date
on which the Option Shares are to be purchased, as the case may be, the
above-mentioned sections of the Registration Statement, Prospectus and any
amendment or supplement thereto made available and reviewed by such counsel
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, in light of the circumstances under which they were
made, not misleading; and
(v) Such counsel knows of no material action, suit, claim or proceeding
relating to patents, patent rights or licenses, trademarks or trademark
rights, copyrights, collaborative research, licenses or royalty
arrangements or agreements or trade secrets, know-how or proprietary
techniques, including processes and substances, owned by or affecting the
business or operations of the Company which are pending or threatened
against the Company or any of its officers or directors.
C-2
<PAGE>
Exhibit D
Matters to be Covered in the Opinion of Underwriters' Counsel
(i) The Firm Shares, or the Option Shares, as the case may be, have been
duly authorized and, upon issuance and delivery and payment therefor in
accordance with the terms of the Underwriting Agreement, will be validly
issued, fully paid and non-assessable.
(ii) The Registration Statement complied as to form in all material
respects with the requirements of the Act; the Registration Statement has
become effective under the Act and, to such counsel's knowledge, no stop
order proceedings with respect thereto have been instituted or threatened or
are pending under the Act.
(iii) The 8-A Registration Statement complied as to form in all material
respects with the requirements of the Exchange Act; the 8-A Registration
Statement has become effective under the Exchange Act; and the Firm Shares
or the Option Shares have been validly registered under the Securities Act
and the Rules and Regulations of the Exchange Act and the applicable rules
and regulations of the Commission thereunder;
(iv) The Underwriting Agreement has been duly authorized, executed and
delivered by the Company.
Such counsel shall state that such counsel has reviewed the opinions and
letters addressed to the Representatives from Company Counsel, counsel for the
Indian Subsidiary, Patent Counsel and Arthur Andersen LLP, each dated the date
hereof, and furnished to you in accordance with the provisions of the
Underwriting Agreement. Such opinions appear on their face to be appropriately
responsive to the requirements of the Underwriting Agreement.
In addition, such counsel shall state that such counsel has participated in
conferences with officials and other representatives of the Company, the
Representatives, Underwriters' Counsel and the independent certified public
accountants of the Company, at which such conferences the contents of the
Registration Statement and Prospectus and related matters were discussed, and
although they have not verified the accuracy or completeness of the statements
contained in the Registration Statement or the Prospectus, nothing has come to
the attention of such counsel which leads them to believe that, at the time the
Registration Statement became effective and at all times subsequent thereto up
to and on the First Closing Date or Second Closing Date, as the case may be, the
Registration Statement and any amendment or supplement thereto (other than the
financial statements including supporting schedules and other financial and
statistical information derived therefrom, as to
D-1
<PAGE>
which such counsel need express no comment) 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, or at the First
Closing Date or the Second Closing Date, as the case may be, the Registration
Statement, the Prospectus and any amendment or supplement thereto (except as
aforesaid) contained any untrue statement of a material fact or omitted to state
a material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
D-2
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF RAMP NETWORKS, INC.
The undersigned, Mahesh Veerina and Raghu Bathina, hereby certify that:
ONE: They are the duly elected and acting President and Secretary,
respectively, of this corporation.
TWO: The Articles of Incorporation of this corporation shall be amended
and restated to read in full as follows:
ARTICLE I
The name of this corporation is Ramp Networks, Inc.
ARTICLE 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.
ARTICLE III
A. Authorized Stock. The 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 Sixty
Million (60,000,000) shares. The number of shares of Preferred Stock authorized
to be issued is Nineteen Million One Hundred Three Thousand Three Hundred Two
(19,103,302) shares, having no par value, of which Seven Million Nine Hundred
Ninety-Six Thousand Three Hundred Twelve (7,996,312) shares shall be designated
as Series A Preferred Stock , Four Million Three Hundred Fifty-Eight Thousand
Three Hundred Fifty-Six (4,358,356) shares shall be designated as Series B
Preferred Stock, Two Million Nine Hundred Fifty Six Thousand Eighty-Two
(2,956,082) shares shall be designated as Series C Preferred Stock, and Three
Million Seven Hundred Ninety Two Thousand Five Hundred Fifty-Two (3,792,552)
shares shall be designated as Series D Preferred Stock. The number of shares of
Common Stock authorized to be issued is Forty Million (40,000,000) shares,
having no par value.
B. Preferred Stock. The rights, preferences, privileges and restrictions
---------------
granted to and imposed on the Preferred Stock are as follows:
<PAGE>
1. Dividend Provisions. The holders of shares of Series A Preferred
-------------------
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock shall be entitled to receive dividends at the annual rate of $0.0277,
$0.1549, $0.222 and $0.296 per share, respectively (adjusted to reflect stock
splits, stock dividends and recapitalizations), payable out of funds legally
available therefor. All such dividends shall be payable only when, as, and if
declared by the Board of Directors and shall not be cumulative. No dividends
(other than those payable solely in Common Stock or other securities and rights
convertible into or entitling the holder thereof to receive, directly or
indirectly, additional shares of Common Stock of the corporation) shall be
payable on any Common Stock of the corporation during any fiscal year of the
corporation until dividends in the amount of $0.0277, $0.1549, $0.222 and $0.296
per share (adjusted to reflects stock splits, stock dividends, and
recapitalizations) on the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock, respectively, shall have
been paid or declared and set apart during that fiscal year.
2. Liquidation Preference.
----------------------
(a) In the event of any liquidation, dissolution or winding up of
the corporation, either voluntary or involuntary, the holders of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of the assets or surplus funds of the corporation to the holders of
Common Stock by reason of their ownership thereof, the amount of $0.37 per share
for each share of Series A Preferred Stock then held by them and the amount of
$2.065 per share for each share of Series B Preferred Stock then held by them
and the amount of $2.96 per share for each share of Series C Preferred Stock
then held by them and the amount of $3.95512 per share for each share of Series
D Preferred Stock then held by them (adjusted to reflect stock splits, stock
dividends and recapitalizations), plus all declared but unpaid dividends on
their respective shares of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock then held by them and no
more. The Series A, B, C and D Preferred Stock shall rank on a parity as to the
receipt of the respective preferential amounts for each such Series upon the
occurrence of such event. If, upon the occurrence of such an event, the assets
and funds thus distributed among the holders of the Series A Preferred Stock,
Series B Preferred Stock, Series C Preferred Stock and Series D Preferred Stock
shall be insufficient to permit the payment to such holders of the full
aforesaid preferential amounts, then the entire assets and funds of the
corporation legally available for distribution shall be distributed ratably
among the holders of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock in proportion to the
preferential amount each such holder is entitled to receive.
(b) Upon the completion of the distribution required by Section
2(a) above, the remaining assets of the Corporation available for distribution
to shareholders shall be distributed among the holders of the Common Stock of
the corporation pro rata based on the number of shares of Common Stock held by
each such shareholder.
(c) For purposes of this Section 2, any acquisition of the
corporation by means of merger or other form of corporate reorganization in
which the outstanding shares of
-2-
<PAGE>
the corporation are exchanged for securities or other consideration issued, or
caused to be issued, by the acquiring corporation or its subsidiary (other than
a reincorporation transaction), a sale of all or substantially all of the assets
of the corporation or a transaction (or series of related transactions) in which
more than fifty percent (50%) of the voting power of the corporation is disposed
of to a single person or entity or group of affiliated persons or entities shall
be treated as a liquidation, dissolution or winding up of the corporation and
shall entitle the holders of Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock, Series D Preferred Stock and Common Stock to receive
at the closing in cash, securities or other property amounts as specified in
Sections 2(a) and 2(b) above.
(d) Any securities to be delivered to the holders of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and/or Common Stock pursuant to Section 2(c) above shall be
valued as follows:
(i) Securities not subject to investment letter or other
similar restrictions on free marketability:
(A) If traded on a securities exchange or the NASDAQ
National Market System, the value shall be deemed to be the average of the
closing prices of the securities on such exchange over the thirty (30) day
period ending three (3) days prior to the distribution;
(B) If actively traded over-the-counter, the value shall
be deemed to be the average of the closing bid prices over the thirty (30) day
period ending three (3) days prior to the distribution; and
(C) If there is no active public market, the value shall
be the fair market value thereof, as determined in good faith by the Board of
Directors of the corporation.
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free marketability shall be to make
an appropriate discount from the market value determined as above in (i) (A),
(B) or (C) to reflect the approximate fair market value thereof, as determined
in good faith by the Board of Directors of the corporation.
3. Conversion. The holders of the Preferred Stock shall have
----------
conversion rights as follows (the "Conversion Rights"):
-----------------
(a) Right to Convert.
----------------
(i) Subject to subsection (c), each share of Preferred Stock
shall be convertible, at the option of the holder thereof, at any time after the
date of issuance of such share, at the office of the corporation or any transfer
agent for the Preferred Stock, into such number of fully paid and nonassessable
shares of Common Stock as is determined by dividing (i) in the case of the
Series A Preferred Stock, $0.37 for each share of Series A Preferred Stock or
(ii) in the case of the Series B Preferred Stock, $2.065 for each share of
Series B Preferred Stock,
-3-
<PAGE>
or (iii) in the case of the Series C Preferred Stock, $2.96 for each share of
Series C Preferred Stock, or (iv) in the case of the Series D Preferred Stock,
$3.95512 for each share of Series D Preferred Stock, in each case by the
applicable Conversion Price at the time in effect for such share. The initial
Conversion Price for shares of Series A Preferred Stock shall be $0.37 per
share, the initial Conversion Price for shares of Series B Preferred Stock shall
be $2.065 per share, the initial Conversion Price for shares of Series C
Preferred Stock shall be $2.96 per share and the initial Conversion Price for
shares of Series D Preferred Stock shall be $3.95512 per share; provided,
however, that the Conversion Price for each Series of Preferred Stock shall be
subject to adjustment as set forth in subsection 3(c).
(ii) Each share of Preferred Stock shall automatically be
converted into shares of Common Stock at the Conversion Price at the time in
effect for such shares of Preferred Stock upon the earlier, as to each series,
of (A) the date specified by vote or written consent or agreement of holders of
a majority of the shares of such Series then outstanding or of (B) the
consummation of the corporation's sale of its Common Stock in a bona fide, firm
commitment underwriting pursuant to a registration statement on Form S-1 (or any
successor such form) under the Securities Act of 1933, as amended (the
"Securities Act"), which results in aggregate gross cash proceeds to the
corporation in excess of Ten Million ($10,000,000) Dollars and the public
offering price of which is not less than Five ($5.00) Dollars per share
(adjusted to reflect subsequent stock dividends, stock splits or
recapitalizations).
(b) Mechanics of Conversion. Before any holder of Preferred Stock
-----------------------
shall be entitled to convert the same into shares of Common Stock, he 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 by mail, postage prepaid, to the corporation at its
principal corporate office, of the election to convert the same and shall state
therein the name or names in which the certificate or certificates for shares of
Common Stock are to be issued. The corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Preferred Stock,
or to the nominee or nominees of such holder, a certificate or certificates for
the number of shares of Common Stock to which such holder shall be entitled as
aforesaid. 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, 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 as
of such date. If the conversion is in connection with an underwritten offer of
securities registered pursuant to the Securities Act, the conversion will be
conditioned upon the closing with the underwriter of the sale of securities
pursuant to such offering, unless otherwise designated in writing by the holders
of such Preferred Stock, in which event the person(s) entitled to receive the
Common Stock issuable upon such conversion of the Preferred Stock shall not be
deemed to have converted such Preferred Stock until immediately prior to the
closing of such sale of securities.
(c) Conversion Price Adjustments of Preferred Stock. The
-----------------------------------------------
Conversion Price of each Series of Preferred Stock shall be subject to
adjustment from time to time as follows:
-4-
<PAGE>
(i) (A) If the corporation, at any time or from time to time
after the date of the first issuance of shares of Series D Preferred Stock (the
"Purchase Date"), shall issue any Additional Stock (as defined below) without
consideration or for a consideration per share less than the Conversion Price
for the Series A, Series B, Series C or Series D Preferred Stock in effect
immediately prior to the issuance of such Additional Stock, the Conversion Price
for such Series of Preferred Stock in effect immediately prior to each such
issuance shall forthwith be adjusted to a price determined by multiplying such
Conversion Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issuance plus the
number of shares of Common Stock which the aggregate consideration received by
the corporation for the total number of shares of Additional Stock so issued
would purchase at such Conversion Price, and the denominator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issuance plus the number of such shares of Additional Stock so issued. For the
purposes of this subsection, the number of shares of Common Stock outstanding
immediately prior to such issue shall be calculated on a fully diluted basis, as
if all shares of Preferred Stock and all convertible securities had been fully
converted into shares of Common Stock immediately prior to such issuance and any
outstanding warrants, options or other rights for the purchase of shares of
stock or convertible securities had been fully exercised immediately prior to
such issuance (and the resulting securities fully converted into shares of
Common Stock, if so convertible) as of such date, but not including in such
calculation any additional shares of Common Stock issuable with respect to
shares of Preferred Stock, convertible securities, or outstanding options,
warrants or other rights for the purchase of shares of stock or convertible
securities, solely as a result of the adjustment of the respective Conversion
Prices (or other conversion ratios) resulting from the issuance of the
Additional Stock causing the adjustment in question. Immediately after any
Additional Stock is deemed issued, such Additional Stock shall be deemed to be
outstanding.
(B) No adjustment of the Conversion Price for a Series of
Preferred Stock shall be made in an amount less than one cent per share,
provided that any adjustments which are not required to be made by reason of
this sentence shall be carried forward and shall be either taken into account in
any subsequent adjustment made prior to three (3) years from the date of the
event giving rise to the adjustment being carried forward, or shall be made at
the end of three (3) years from the date of the event giving rise to the
adjustment being carried forward. Except to the limited extent provided for in
subsections (E)(3) and (E)(4), no adjustment of the Conversion Price for any
Series of Preferred Stock pursuant to this subsection 3(c)(i) shall have the
effect of increasing such Conversion Price above the Conversion Price for such
Series of Preferred Stock in effect immediately prior to such adjustment.
(C) In the case of the issuance of Common Stock for cash,
the consideration shall be deemed to be the amount of cash paid therefor before
deducting any reasonable discounts, commissions or other expenses allowed, paid
or incurred by the corporation for any underwriting or otherwise in connection
with the issuance and sale thereof.
(D) In the case of the issuance of the Common Stock for a
consideration in whole or in part other than cash, the consideration other than
cash shall be
-5-
<PAGE>
deemed to be the fair value thereof as determined by the Board of Directors
irrespective of any accounting treatment.
(E) In the case of the issuance, whether before, on or
after the Purchase Date, of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities (which are not excluded from the definition of
Additional Stock), the following provisions shall apply:
1. The aggregate maximum number of shares of Common
Stock deliverable upon exercise of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the time such
options or rights were issued and for a consideration equal to the consideration
(determined in the manner provided in subsections 3(c)(i)(C) and 3(c) (i)(D)),
if any, received by the corporation upon the issuance of such options or rights
plus the minimum purchase price provided in such options or rights for the
Common Stock covered thereby.
2. The aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange for any such convertible or
exchangeable securities or upon the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable securities and subsequent
conversion or exchange thereof shall be deemed to have been issued at the time
such securities were issued or such options or rights were issued and for a
consideration equal to the consideration, if any, received by the corporation
for any such securities and related options or rights (excluding any cash
received on account of accrued interest or accrued dividends), plus the
additional consideration, if any, to be received by the corporation upon the
conversion or exchange of such securities or the exercise of any related options
or rights (the consideration in each case to be determined in the manner
provided in subsections 3(c)(i)(C) and 3(c)(i)(D)).
3. In the event of any change in the number of
shares of Common Stock deliverable or any increase in the consideration payable
to the corporation upon exercise of such options or rights or upon conversion of
or in exchange for such convertible or exchangeable securities, including, but
not limited to, a change resulting from the antidilution provisions thereof, the
Conversion Price of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock obtained with respect to
the adjustment which was made upon the issuance of such options, rights or
securities, and any subsequent adjustments based thereon, shall be recomputed to
reflect such change, but no further adjustment shall be made for the actual
issuance of Common Stock or any payment of such consideration upon the exercise
of any such options or rights or the conversion or exchange of such securities.
4. Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or exchangeable
securities, the Conversion Price of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D
-6-
<PAGE>
Preferred Stock obtained with respect to the adjustment which was made upon the
issuance of such options, rights or securities or options or rights related to
such securities, and any subsequent adjustments based thereon, shall be
recomputed to reflect the issuance of only the number of shares of Common Stock
actually issued upon the exercise of such options or rights, upon the conversion
or exchange of such securities or upon the exercise of the options or rights
related to such securities. Upon the expiration of any such options or rights,
the termination of any such rights to convert or exchange or the expiration of
any options or rights related to such convertible or exchangeable securities,
only the number of shares of Common Stock actually issued upon the exercise of
such options or rights, upon the conversion or exchange of such securities or
upon the exercise of the options or rights related to such securities shall
continue to be deemed to be issued.
5. All Common Stock deemed issued pursuant to this
subsection 3(c)(i)(E) shall be considered issued only at the time of its deemed
issuance and any actual issuance of such stock shall not be an actual issuance
or a deemed issuance of the corporation's Common Stock under the provisions of
this Section 3; provided however, that in the case of any options to purchase or
rights to subscribe for Common Stock which expire by their terms not more than
thirty (30) days after the date of issue thereof, no adjustment of the
Conversion Price for any Series of Preferred Stock shall be made until the
expiration or exercise of all such options or rights, whereupon such adjustment
shall be made in the same manner provided in subsection (E)(4) above.
(ii) "Additional Stock" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to subsection 3(c)(i)(E)) by the
corporation on or after the Purchase Date other than shares of Common Stock
issued or issuable:
(A) pursuant to a transaction described in subsection
3(c)(iii) hereof;
(B) to officers, directors, employees and consultants of
the corporation directly or pursuant to a stock option plan or restricted stock
plan approved by the shareholders and directors of the corporation;
(C) for which adjustment of the Conversion Price is
made pursuant to this Section 3; or
(D) upon conversion of the Series A, Series B, Series C
or Series D Preferred Stock.
(iii) In the event the corporation should at any time or from
time to time after the Purchase Date fix a record date for the effectuation of a
split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
------------------------
for the additional shares of
-7-
<PAGE>
Common Stock or the Common Stock Equivalents (including the additional shares of
Common Stock issuable upon conversion or exercise thereof), then, as of such
record date (or the date of such dividend distribution, split or subdivision if
no record date is fixed), the Conversion Prices of the Series A Preferred Stock,
the Series B Preferred Stock, the Series C Preferred Stock and the Series D
Preferred Stock shall be appropriately decreased so that the number of shares of
Common Stock issuable on conversion of each share of such Series shall be
increased in proportion to such increase of the aggregate shares of Common Stock
outstanding and those issuable with respect to such Common Stock Equivalents.
(iv) If the number of shares of Common Stock outstanding at
any time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for the Series A Preferred Stock and Series B
Preferred Stock and Series C Preferred Stock and Series D Preferred Stock shall
be appropriately increased so that the number of shares of Common Stock issuable
on conversion of each share of such Series shall be decreased in proportion to
such decrease in outstanding shares.
(d) Other Distributions. In the event the corporation shall
-------------------
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by the corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 3(c)(iii), then,
in each such case for the purpose of this subsection 3(d), the holders of the
Series A Preferred Stock and Series B Preferred Stock and Series C Preferred
Stock and Series D Preferred Stock shall be entitled to a proportionate share of
any such distribution as though they were the holders of the number of shares of
Common Stock of the corporation into which their shares of Series A and Series B
and Series C and Series D 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.
(e) Recapitalizations. If at any time or from time to time there
-----------------
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
Sections 2 or 3) provision shall be made so that each holder of Preferred Stock
shall thereafter be entitled to receive upon conversion of the Preferred Stock
the number of shares of stock or other securities or property of the corporation
or otherwise, to which a holder of the number of shares of Common Stock
deliverable upon conversion of such Preferred Stock would have been entitled on
such recapitalization. In any such case, appropriate adjustment shall be made
in the application of the provisions of this Section 3 with respect to the
rights of the holders of Preferred Stock after the recapitalization to the end
that the provisions of this Section 3 (including adjustment of the Conversion
Price then in effect and the number of shares purchasable upon conversion of the
Series A, Series B, Series C and Series D Preferred Stock) shall be applicable
after that event as nearly equivalent as may be practicable.
(f) No Impairment. Without the consent of the holders of
-------------
Preferred Stock in accordance with Article III(B)(5) below, the corporation will
not, by amendment of its Articles of Incorporation or through any
reorganization, recapitalization, transfer of assets,
-8-
<PAGE>
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 the
Preferred Stock against impairment.
(g) No Fractional Shares and Certificate as to Adjustments.
-------------------------------------------------------
(i) No fractional shares shall be issued upon conversion of
the Preferred Stock, and the number of shares of Common Stock to be issued upon
conversion shall be rounded to the nearest whole share. Whether or not
fractional shares are issuable upon such conversion shall be determined on the
basis of the total number of shares of Preferred Stock the holder is at the time
converting into Common Stock and the number of shares of Common Stock issuable
upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment of
any Conversion Price of Series A, Series B, Series C or Series D 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 Series A, Series B, Series C and Series D
Preferred Stock a certificate setting forth such adjustment or readjustment and
showing in detail the facts upon which such adjustment or readjustment is based.
The corporation shall, upon the written request at any time of any holder of
Series A, Series B, Series C or Series D Preferred Stock, furnish or cause to be
furnished to such holder a like certificate setting forth (A) such adjustment
and readjustment, (B) the Conversion Price at the time in effect, and (C) 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 a share of Series A, Series
B, Series C or Series D Preferred Stock.
(h) 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 twenty (20) days prior to
the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the amount and character of such dividend, distribution or right.
(i) Reservation of Stock Issuable Upon Conversion. 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 the 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 the 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
-9-
<PAGE>
of all then outstanding shares of Preferred Stock, in addition to such other
remedies as shall be available to the holder of such 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 purposes.
(j) Notices. Any notice required by the provisions of this
-------
Section 3 to be given to the holders 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 its address appearing on the books of the
corporation.
4. Voting Rights.
-------------
(a) The holder of each share of Preferred Stock shall have the right
to one vote for each share of Common Stock into which such Preferred Stock could
then be converted (with any fractional share determined on an aggregate
conversion basis being rounded to the nearest whole share), and with respect to
such vote, such holder shall have full voting rights and powers equal to the
voting rights and powers of the holders of Common Stock, and shall be entitled,
notwithstanding any provision hereof, to notice of any shareholders' meeting in
accordance with the by-laws of the corporation, and shall be entitled to vote,
together with holders of Common Stock, with respect to any question upon which
holders of Common Stock have the right to vote. Notwithstanding the foregoing,
the holders of Series C Preferred Stock, voting as a single class, shall be
entitled to elect one (1) member of the corporation's board of directors; the
holders of Series B Preferred Stock, voting as a single class, shall be entitled
to elect two (2) members of the corporation's board of directors; the holders of
Series A Preferred Stock, voting as a single class, shall be entitled to elect
one (1) member of the corporation's board of directors; and the holders of the
Common Stock (excluding the Preferred Stock on an as-converted basis), voting as
a single class, shall be entitled to elect the remaining members of the
corporation's board of directors.
(b) In the case of any vacancy in the office of a director occurring
among the directors elected by the holders of a Series of Preferred Stock or
Common Stock pursuant to Section 4(a) hereof, the remaining director or
directors so elected by the holders of such Series of Preferred Stock or Common
Stock may, by affirmative vote of a majority thereof (or the remaining director
so elected if there is but one, or if there is no such director remaining, by
the affirmative vote of the holders of a majority of the shares of that class)
elect a successor or successors to hold the office for the unexpired term of the
director or directors whose place or places shall be vacant. Any director who
shall have been elected by the holders of the Series A, Series B or Series C
Preferred Stock or Common Stock or any director so elected as provided in the
preceding sentence hereof, may be removed during the aforesaid term of office,
whether with or without cause, only by the affirmative vote of the holders of a
majority of the Series A, Series B or Series C Preferred Stock, or Common Stock,
as the case may be.
5. Protective Provisions. So long as shares of Preferred Stock are
---------------------
outstanding, the corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of (i) the holders of at least a
majority of the then outstanding
-10-
<PAGE>
shares of Preferred Stock, voting together as a class, and (ii) the holders of
at least a majority of the then outstanding shares of Series C Preferred Stock,
voting as a separate class, except where otherwise required by law:
(a) sell, convey, or otherwise dispose of all or substantially all
of its property or business or merge into or consolidate with any other
corporation (other than a wholly owned subsidiary corporation in a merger not
involving a third party) or effect any transaction or Series of related
transactions in which more than fifty percent (50%) of the voting power of the
corporation is disposed of;
(b) liquidate, dissolve, recapitalize or reorganize the
corporation;
(c) create or issue any new class or Series of stock or any other
securities convertible into equity securities of the corporation (i) having a
preference over, or being on a parity with, the Series A, Series B, Series C or
Series D Preferred Stock with respect to voting, dividends, conversion or upon
liquidation, or (ii) having rights similar to any of the rights of the Series A,
Series B, Series C and Series D Preferred Stock under this Section 5;
(d) adversely alter or change the rights, preferences or
privileges of any of the Preferred Stock; or
(e) reclassify any of the Company's outstanding capital stock.
6. Status of Converted Stock. In the event any shares of Preferred
-------------------------
Stock shall be converted pursuant to Section 3 hereof, the shares so converted
shall be canceled and shall not be issuable by the corporation, and the Articles
of Incorporation of the corporation shall be appropriately amended to effect the
corresponding reduction in the corporation's authorized capital stock.
7. Repurchase of Shares. In connection with repurchases by the
--------------------
corporation of its Common Stock pursuant to its agreements with certain of the
holders thereof providing for such repurchases in the event of the termination
of the status of such holder as an employee, director or consultant to the
Company, each holder of Preferred Stock shall be deemed to have consented, for
purposes of Sections 502, 503 and 506 of the California General Corporation Law,
to distributions made by the corporation with respect to such repurchases.
8. Redemption.
----------
(a) Subject to the limitations of Section 500 et seq. of the
California Corporations Code, at any time after April 30, 2002, upon the written
request from the holders of not less than a majority of the then outstanding
shares of a Series of Preferred Stock, voting as one class, that such Series of
Preferred Stock be redeemed, this corporation shall, within thirty (30) days
(the "Initial Redemption Date") after the receipt by this corporation of such
-----------------------
written request, from any source of funds legally available therefor, redeem all
of the then outstanding shares of such Series of Preferred Stock in three annual
installments beginning on the Initial Redemption Date (the Initial Redemption
Date, together with the first and second anniversary of
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<PAGE>
such date shall each be referred to herein as a "Redemption Date"). The
---------------
corporation shall effect such redemptions by paying in cash therefor, $0.37 per
share of Series A Preferred Stock, $2.065 per share of Series B Preferred Stock,
$2.96 per share of Series C Preferred Stock and $3.95512 per share of Series D
Preferred Stock (as adjusted for any stock dividends, combinations or splits
with respect to such shares) plus all declared but unpaid dividends on such
shares to be redeemed (the "Redemption Price"), in exchange for the shares of
----------------
Series A, Series B, Series C and Series D Preferred Stock to be redeemed (as
adjusted for any stock dividends, combinations or splits with respect to such
shares), respectively. The number of shares of Preferred Stock that the
corporation shall be required under this subsection 8(a) to redeem on any
Redemption Date shall be equal to the one-third (1/3) of the total number of
shares of a Series of Preferred Stock outstanding immediately prior to the
Initial Redemption Date. Any redemption effected pursuant to this subsection
8(a) shall be made on a pro rata basis among the holders of a Series of
Preferred Stock in proportion to the number of shares of such Series of
Preferred Stock then held by such holders.
(b) At least fifteen (15) but no more than thirty (30) days prior
to each Redemption Date, written notice shall be mailed, first class postage
prepaid, to each holder of record (at the close of business on the business day
next preceding the day on which notice is given) of the Preferred Stock to be
redeemed, at the address last shown on the records of this corporation for such
holder, notifying such holder of the redemption to be effected, specifying the
number of shares to be redeemed from such holder, the Redemption Date, the
Redemption Price, the place at which payment may be obtained and calling upon
such holder to surrender to this corporation, in the manner and at the place
designated, his, her or its certificate or certificates representing the shares
to be redeemed (the "Redemption Notice"). Except as provided in subsection 8(c)
-----------------
below, on or after the Redemption Date, each holder of Preferred Stock to be
redeemed shall surrender to this corporation the certificate or certificates
representing such shares, in the manner and at the place designated in the
Redemption Notice, and thereupon the Redemption Price of such shares shall be
payable to the order of the person whose name appears on such certificate or
certificates as the owner thereof and each surrendered certificate shall be
canceled. In the event less than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares.
(c) From and after the applicable Redemption Date, unless there
shall have been a default in payment of the Redemption Price, all rights of the
holders of shares of Preferred Stock designated for redemption in the Redemption
Notice for redemption as of the applicable Redemption Date as holders of
Preferred Stock (except the right to receive the Redemption Price without
interest upon surrender of their certificate or certificates) shall cease with
respect to such shares, and such shares shall not thereafter be transferred on
the books of this corporation or be deemed to be outstanding for any purpose
whatsoever. Subject to the rights of any Series of Preferred Stock which may
from time to time come into existence, if the funds of the corporation legally
available for redemption of shares of Preferred Stock on any Redemption Date are
insufficient to redeem the total number of shares of Preferred Stock to be
redeemed on such date, those funds which are legally available will be used to
redeem the maximum possible number of such shares ratably among the holders of
such shares to be redeemed based upon their holdings of Preferred Stock. The
shares of Preferred Stock not
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<PAGE>
redeemed shall remain outstanding and entitled to all the rights and preferences
provided herein. Subject to the rights of a Series of Preferred Stock which may
from time to time come into existence, at any time thereafter when additional
funds of the corporation are legally available for the redemption of shares of
Preferred Stock, such funds will immediately be used to redeem the balance of
the shares which the corporation has become obliged to redeem on any Redemption
Date but which it has not redeemed.
(d) On or prior to each Redemption Date, this corporation shall
deposit the Redemption Price of all shares of a Series of Preferred Stock
designated for redemption in the Redemption Notice, and not yet redeemed or
converted, with a bank or trust corporation having aggregate capital and surplus
in excess of One Hundred Million Dollars ($100,000,000) as a trust fund for the
benefit of the respective holders of the shares designated for redemption and
not yet redeemed, with irrevocable instructions and authority to the bank or
trust corporation to publish the notice of redemption thereof and pay the
Redemption Price for such shares to their respective holders on or after the
Redemption Date, upon receipt of notification from the corporation that such
holder has surrendered his, her or its share certificate to the corporation
pursuant to subsection 8(b) above. As of the date of such deposit (even if
prior to the Redemption Date), the deposit shall constitute full payment of the
shares to their holders, and from and after the date of the deposit the shares
so called for redemption shall be redeemed and shall be deemed to be no longer
outstanding, and the holders thereof shall cease to be shareholders with respect
to such shares and shall have no rights with respect thereto except the right to
receive from the bank or trust corporation payment of the Redemption Price of
the shares, without interest, upon surrender of their certificates therefor.
Such instructions shall also provide that any moneys deposited by the
corporation pursuant to this subsection 8(d) for the redemption of shares
thereafter converted into shares of the corporation's Common Stock pursuant to
Article III(B)(3) hereof prior to the Redemption Date shall be returned to the
corporation forthwith upon such conversion. The balance of any moneys deposited
by this corporation pursuant to this subsection 8(d) remaining unclaimed at the
expiration of two (2) years following the Redemption Date shall thereafter be
returned to this corporation upon its request expressed in a resolution of its
Board of Directors.
C. Common Stock.
------------
1. Dividend Rights. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding
------------------
up of the corporation, the assets of the corporation shall be distributed as
provided in Section B.2. of this Article III.
3. Redemption. The Common Stock is not redeemable.
----------
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<PAGE>
4. Voting Rights. The holder of each share of Common Stock shall
-------------
have the right to one vote, and shall be entitled to notice of any shareholders
meeting in accordance with the By-laws of the corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE IV
(A) Limitation of Directors, Liability. The liability of the directors of
----------------------------------
the corporation for monetary damages shall be eliminated to the fullest extent
permissible under California law.
(B) Indemnification of Corporate Agents. The corporation is authorized to
-----------------------------------
provide indemnification of agents (as defined in Section 317 of the California
Corporations Code) to the fullest extent permissible under California law.
(C) Repeal or Modification. Any amendment, repeal or modification of any
----------------------
provision of this Article IV shall not adversely affect any right or protection
of an agent of this corporation existing at the time of such amendment, repeal
or modification."
* * *
THREE: The foregoing amendment and restatement has been approved by the
Board of Directors of the Corporation.
FOUR: The foregoing amendment and restatement was approved by the holders
of the requisite number of shares of the Corporation in accordance with Sections
902 and 903 of the California General Corporation Law. The total number of
outstanding shares entitled to vote with respect to the foregoing amendment and
restatement was Six Million Four Hundred Thirty-Two Thousand Nine Hundred
Eighty-Seven (6,432,987) shares of Common Stock, Seven Million Nine Hundred
Ninety-Six Thousand Three Hundred Twelve (7,966,312) shares of Series A
Preferred Stock, Four Million Three Hundred Fifty-Eight Thousand Three Hundred
Fifty-Six (4,358,356) shares of Series B Preferred Stock and Two Million Nine
Hundred Fifty Six Thousand Eighty-Two (2,956,082) shares of Series C Preferred
Stock. The number of shares voting in favor of the foregoing amendment and
restatement equaled or exceed the vote required, such required vote being a
majority of the outstanding shares of Common Stock and Preferred Stock, each
voting separately as a class, and holders of a majority of the Series C
Preferred Stock, voting separately.
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<PAGE>
We further declare under penalty of perjury under the laws of the State of
California that we have read the foregoing Amended and Restated Articles of
Incorporation and know the contents thereof and that the same are true of our
own knowledge.
Dated: October 27, 1997
/s/ Mahesh Veerina
____________________________________
Mahesh Veerina, President
/s/ Raghu Bathina
____________________________________
Raghu Bathina, Secretary
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<PAGE>
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT OF
ARTICLES OF INCORPORATION
OF RAMP NETWORKS, INC.
The undersigned, Mahesh Veerina and Tae Hea Nahm, hereby certify that:
ONE: They are the duly elected and acting President and Assistant
Secretary, respectively, of this corporation.
TWO: Article III(A) of the Articles of Incorporation of the corporation is
amended in its entirety as follows:
"A. Authorized Stock. The 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
Fifty-Nine Million Seven Hundred Ten Thousand Eight Hundred Forty-One
(59,710,841) shares. The number of shares of Preferred Stock authorized to be
issued is Nineteen Million Seven Hundred Ten Thousand Eight Hundred Forty-one
(19,710,841) shares, having no par value, of which Seven Million Nine Hundred
Ninety-Six Thousand Three Hundred Twelve (7,996,312) shares shall be designated
as Series A Preferred Stock, Four Million Three Hundred Fifty-Eight Thousand
Three Hundred Fifty-Six (4,358,356) shares shall be designated as Series B
Preferred Stock, Two Million Nine Hundred Eighty-One Thousand Nine Hundred
Twelve (2,981,912) shares shall be designated as Series C Preferred Stock, and
Four Million Three Hundred Seventy-Four Thousand Two Hundred Sixty-One
(4,374,261) shares shall be designated as Series D Preferred Stock. The number
of shares of Common Stock authorized to be issued is Forty Million (40,000,000)
shares, having no par value."
THREE: The foregoing amendment has been approved by the Board of Directors
of the Corporation.
FOUR: The foregoing amendment was approved by the holders of the requisite
number of shares of this corporation in accordance with paragraphs 902 and 903
of the California General Corporation Law. The total number of outstanding
shares entitled to vote with respect to the foregoing amendment was 7,289,411
Common Shares, 7,996,312 shares of Series A Preferred Stock, 4,358,356 shares of
Series B Preferred Stock, 2,956,082 shares of Series C Preferred Stock and
4,208,863 shares of Series D Preferred Stock. The number of shares voting in
favor of the foregoing amendment equaled or exceed the vote required, such
required vote being a majority of the outstanding shares of Common Stock and
Preferred Stock, each voting separately as a class, and holders of a majority of
the Series C Preferred Stock, voting separately.
<PAGE>
We further declare under penalty of perjury under the laws of the State of
California that we have read the foregoing Amendment of Articles of
Incorporation and know the contents thereof and that the same are true of our
own knowledge.
Dated: November 17, 1998
/s/ Mahesh Veerina
____________________________________
Mahesh Veerina, President
/s/ Tae Hea Nahm
____________________________________
Tae Hea Nahm, Assistant Secretary
-2-
<PAGE>
EXHIBIT 3.3
CERTIFICATE OF INCORPORATION
OF
RAMP NETWORKS, INC.
ARTICLE I
The name of the corporation is Ramp Networks, Inc. (the "Corporation").
ARTICLE II
The address of the Corporation's registered office in the State of Delaware is
1013 Centre Road, City of Wilmington, County of New Castle, Delaware 19805. The
name of its registered agent at such address is Corporation Service Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity for
which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
A. Authorized Stock. The 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
Thirty Five Million Eight Hundred Twenty Six Thousand Five Hundred Five
(35,826,505) shares. The number of shares of Preferred Stock authorized to be
issued is Eleven Million Eight Hundred Twenty Six Thousand Five Hundred Five
(11,826,504) shares, having no par value, of which Four Million Seven Hundred
Ninety Seven Thousand Seven Hundred Eighty Seven (4,797,787) shares shall be
designated as Series A Preferred Stock, Two Million Fifteen Thousand Fourteen
(2,615,014) shares shall be designated as Series B Preferred Stock, One Million
Seven Hundred Eighty Nine Thousand One Hundred Forty Seven (1,789,147) shares
shall be designated as Series C Preferred Stock, and Two Million Six Hundred
Twenty Four Thousand Five Hundred Fifty Seven (2,624,557) shares shall be
designated as Series D Preferred Stock. The number of shares of Common Stock
authorized to be issued is Forty Million (24,000,000) shares, having no par
value.
B. Preferred Stock. The rights, preferences, privileges and restrictions
---------------
granted to and imposed on the Preferred Stock are as follows:
1. Dividend Provisions. The holders of shares of Series A Preferred
-------------------
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock shall be entitled to receive dividends at the annual rate of $0.05,
$0.26, $0.37 and $0.49 per share, respectively (adjusted to reflect stock
splits, stock dividends and recapitalizations), payable out of funds legally
available therefor. All such dividends shall be payable only when, as, and if
declared by the Board of Directors and shall not be cumulative. No dividends
(other than those payable solely in Common Stock or other securities and rights
convertible into or entitling the holder thereof to receive, directly or
indirectly, additional shares of Common Stock of the
<PAGE>
corporation) shall be payable on any Common Stock of the corporation during any
fiscal year of the corporation until dividends in the amount of $0.046, $0.258,
$0.37 and $0.987 per share (adjusted to reflects stock splits, stock dividends,
and recapitalizations) on the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock, respectively,
shall have been paid or declared and set apart during that fiscal year.
2. Liquidation Preference.
----------------------
(a) In the event of any liquidation, dissolution or winding up of
the corporation, either voluntary or involuntary, the holders of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Series D
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of the assets or surplus funds of the corporation to the holders of
Common Stock by reason of their ownership thereof, the amount of $0.62 per
share for each share of Series A Preferred Stock then held by them and the
amount of $3.44 per share for each share of Series B Preferred Stock then held
by them and the amount of $4.93 per share for each share of Series C Preferred
Stock then held by them and the amount of $6.59 per share for each share of
Series D Preferred Stock then held by them (adjusted to reflect stock splits,
stock dividends and recapitalizations), plus all declared but unpaid dividends
on their respective shares of Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock and Series D Preferred Stock then held by them
and no more. The Series A, B, C and D Preferred Stock shall rank on a parity as
to the receipt of the respective preferential amounts for each such Series upon
the occurrence of such event. If, upon the occurrence of such an event, the
assets and funds thus distributed among the holders of the Series A Preferred
Stock, Series B Preferred Stock, Series C Preferred Stock and Series D Preferred
Stock shall be insufficient to permit the payment to such holders of the full
aforesaid preferential amounts, then the entire assets and funds of the
corporation legally available for distribution shall be distributed ratably
among the holders of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock in proportion to the
preferential amount each such holder is entitled to receive.
(b) Upon the completion of the distribution required by Section
2(a) above, the remaining assets of the Corporation available for distribution
to shareholders shall be distributed among the holders of the Common Stock of
the corporation pro rata based on the number of shares of Common Stock held by
each such shareholder.
(c) For purposes of this Section 2, any acquisition of the
corporation by means of merger or other form of corporate reorganization in
which the outstanding shares of the corporation are exchanged for securities or
other consideration issued, or caused to be issued, by the acquiring corporation
or its subsidiary (other than a reincorporation transaction), a sale of all or
substantially all of the assets of the corporation or a transaction (or series
of related transactions) in which more than fifty percent (50%) of the voting
power of the corporation is disposed of to a single person or entity or group of
affiliated persons or entities shall be treated as a liquidation, dissolution or
winding up of the corporation and shall entitle the holders of Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and Common Stock to receive at the closing in cash, securities
or other property amounts as specified in Sections 2(a) and 2(b) above.
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<PAGE>
(d) Any securities to be delivered to the holders of the Series A
Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D
Preferred Stock and/or Common Stock pursuant to Section 2(c) above shall be
valued as follows:
(i) Securities not subject to investment letter or other
similar restrictions on free marketability:
(A) If traded on a securities exchange or the NASDAQ
National Market System, the value shall be deemed to be the average of the
closing prices of the securities on such exchange over the thirty (30) day
period ending three (3) days prior to the distribution;
(B) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid prices over the thirty (30)
day period ending three (3) days prior to the distribution; and
(C) If there is no active public market, the value
shall be the fair market value thereof, as determined in good faith by the Board
of Directors of the corporation.
(ii) The method of valuation of securities subject to
investment letter or other restrictions on free marketability shall be to make
an appropriate discount from the market value determined as above in (i) (A),
(B) or (C) to reflect the approximate fair market value thereof, as determined
in good faith by the Board of Directors of the corporation.
3. Conversion. The holders of the Preferred Stock shall have
----------
conversion rights as follows (the "Conversion Rights"):
-----------------
(a) Right to Convert.
----------------
(i) Subject to subsection (c), each share of Preferred Stock
shall be convertible, at the option of the holder thereof, at any time after the
date of issuance of such share, at the office of the corporation or any transfer
agent for the Preferred Stock, into such number of fully paid and nonassessable
shares of Common Stock as is determined by dividing (i) in the case of the
Series A Preferred Stock, $0.62 for each share of Series A Preferred Stock or
(ii) in the case of the Series B Preferred Stock, $3.44 for each share of
Series B Preferred Stock, or (iii) in the case of the Series C Preferred Stock,
$4.93 for each share of Series C Preferred Stock, or (iv) in the case of the
Series D Preferred Stock, $6.59 for each share of Series D Preferred Stock, in
each case by the applicable Conversion Price at the time in effect for such
share. The initial Conversion Price for shares of Series A Preferred Stock shall
be $0.62 per share, the initial Conversion Price for shares of Series B
Preferred Stock shall be $3.44 per share, the initial Conversion Price for
shares of Series C Preferred Stock shall be $4.93 per share and the initial
Conversion Price for shares of Series D Preferred Stock shall be $6.59 per
share; provided, however, that the Conversion Price for each Series of Preferred
Stock shall be subject to adjustment as set forth in subsection 3(c).
(ii) Each share of Preferred Stock shall automatically be
converted into shares of Common Stock at the Conversion Price at the time in
effect for such
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<PAGE>
shares of Preferred Stock upon the earlier, as to each series, of (A) the date
specified by vote or written consent or agreement of holders of a majority of
the shares of such Series then outstanding or of (B) the consummation of the
corporation's sale of its Common Stock in a bona fide, firm commitment
underwriting pursuant to a registration statement on Form S-1 (or any successor
such form) under the Securities Act of 1933, as amended (the "Securities Act"),
which results in aggregate gross cash proceeds to the corporation in excess of
Ten Million ($10,000,000) Dollars and the public offering price of which is not
less than Eight Dollars and Thirty Three Cents ($8.33) per share (adjusted to
reflect subsequent stock dividends, stock splits or recapitalizations).
(b) Mechanics of Conversion. Before any holder of Preferred Stock
-----------------------
shall be entitled to convert the same into shares of Common Stock, he 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 by mail, postage prepaid, to the corporation at its
principal corporate office, of the election to convert the same and shall state
therein the name or names in which the certificate or certificates for shares of
Common Stock are to be issued. The corporation shall, as soon as practicable
thereafter, issue and deliver at such office to such holder of Preferred Stock,
or to the nominee or nominees of such holder, a certificate or certificates for
the number of shares of Common Stock to which such holder shall be entitled as
aforesaid. 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, 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 as
of such date. If the conversion is in connection with an underwritten offer of
securities registered pursuant to the Securities Act, the conversion will be
conditioned upon the closing with the underwriter of the sale of securities
pursuant to such offering, unless otherwise designated in writing by the holders
of such Preferred Stock, in which event the person(s) entitled to receive the
Common Stock issuable upon such conversion of the Preferred Stock shall not be
deemed to have converted such Preferred Stock until immediately prior to the
closing of such sale of securities.
(c) Conversion Price Adjustments of Preferred Stock. The
-----------------------------------------------
Conversion Price of each Series of Preferred Stock shall be subject to
adjustment from time to time as follows:
(i) (A) If the corporation, at any time or from time to time
after the date of the first issuance of shares of Series D Preferred Stock (the
"Purchase Date"), shall issue any Additional Stock (as defined below) without
consideration or for a consideration per share less than the Conversion Price
for the Series A, Series B, Series C or Series D Preferred Stock in effect
immediately prior to the issuance of such Additional Stock, the Conversion Price
for such Series of Preferred Stock in effect immediately prior to each such
issuance shall forthwith be adjusted to a price determined by multiplying such
Conversion Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issuance plus the
number of shares of Common Stock which the aggregate consideration received by
the corporation for the total number of shares of Additional Stock so issued
would purchase at such Conversion Price, and the denominator of which shall be
the number of shares of Common Stock outstanding immediately prior to such
issuance plus the
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<PAGE>
number of such shares of Additional Stock so issued. For the purposes of this
subsection, the number of shares of Common Stock outstanding immediately prior
to such issue shall be calculated on a fully diluted basis, as if all shares of
Preferred Stock and all convertible securities had been fully converted into
shares of Common Stock immediately prior to such issuance and any outstanding
warrants, options or other rights for the purchase of shares of stock or
convertible securities had been fully exercised immediately prior to such
issuance (and the resulting securities fully converted into shares of Common
Stock, if so convertible) as of such date, but not including in such calculation
any additional shares of Common Stock issuable with respect to shares of
Preferred Stock, convertible securities, or outstanding options, warrants or
other rights for the purchase of shares of stock or convertible securities,
solely as a result of the adjustment of the respective Conversion Prices (or
other conversion ratios) resulting from the issuance of the Additional Stock
causing the adjustment in question. Immediately after any Additional Stock is
deemed issued, such Additional Stock shall be deemed to be outstanding.
(B) No adjustment of the Conversion Price for a Series
of Preferred Stock shall be made in an amount less than one cent per share,
provided that any adjustments which are not required to be made by reason of
this sentence shall be carried forward and shall be either taken into account in
any subsequent adjustment made prior to three (3) years from the date of the
event giving rise to the adjustment being carried forward, or shall be made at
the end of three (3) years from the date of the event giving rise to the
adjustment being carried forward. Except to the limited extent provided for in
subsections (E)(3) and (E)(4), no adjustment of the Conversion Price for any
Series of Preferred Stock pursuant to this subsection 3(c)(i) shall have the
effect of increasing such Conversion Price above the Conversion Price for such
Series of Preferred Stock in effect immediately prior to such adjustment.
(C) In the case of the issuance of Common Stock for
cash, the consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, commissions or other expenses
allowed, paid or incurred by the corporation for any underwriting or otherwise
in connection with the issuance and sale thereof.
(D) In the case of the issuance of the Common Stock for
a consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair value thereof as determined by the
Board of Directors irrespective of any accounting treatment.
(E) In the case of the issuance, whether before, on or
after the Purchase Date, of options to purchase or rights to subscribe for
Common Stock, securities by their terms convertible into or exchangeable for
Common Stock or options to purchase or rights to subscribe for such convertible
or exchangeable securities (which are not excluded from the definition of
Additional Stock), the following provisions shall apply:
1. The aggregate maximum number of shares of
Common Stock deliverable upon exercise of such options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the time such
options or rights were issued and for a consideration equal to the consideration
(determined in the manner provided in subsections 3(c)(i)(C) and 3(c) (i)(D)),
if any, received by the corporation upon the issuance of
-5-
<PAGE>
such options or rights plus the minimum purchase price provided in such options
or rights for the Common Stock covered thereby.
2. The aggregate maximum number of shares of
Common Stock deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities or upon the exercise of options to
purchase or rights to subscribe for such convertible or exchangeable securities
and subsequent conversion or exchange thereof shall be deemed to have been
issued at the time such securities were issued or such options or rights were
issued and for a consideration equal to the consideration, if any, received by
the corporation for any such securities and related options or rights (excluding
any cash received on account of accrued interest or accrued dividends), plus the
additional consideration, if any, to be received by the corporation upon the
conversion or exchange of such securities or the exercise of any related options
or rights (the consideration in each case to be determined in the manner
provided in subsections 3(c)(i)(C) and 3(c)(i)(D)).
3. In the event of any change in the number of
shares of Common Stock deliverable or any increase in the consideration payable
to the corporation upon exercise of such options or rights or upon conversion of
or in exchange for such convertible or exchangeable securities, including, but
not limited to, a change resulting from the antidilution provisions thereof, the
Conversion Price of the Series A Preferred Stock, Series B Preferred Stock,
Series C Preferred Stock and Series D Preferred Stock obtained with respect to
the adjustment which was made upon the issuance of such options, rights or
securities, and any subsequent adjustments based thereon, shall be recomputed to
reflect such change, but no further adjustment shall be made for the actual
issuance of Common Stock or any payment of such consideration upon the exercise
of any such options or rights or the conversion or exchange of such securities.
4. Upon the expiration of any such options or
rights, the termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or exchangeable
securities, the Conversion Price of the Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock and Series D Preferred Stock obtained
with respect to the adjustment which was made upon the issuance of such options,
rights or securities or options or rights related to such securities, and any
subsequent adjustments based thereon, shall be recomputed to reflect the
issuance of only the number of shares of Common Stock actually issued upon the
exercise of such options or rights, upon the conversion or exchange of such
securities or upon the exercise of the options or rights related to such
securities. Upon the expiration of any such options or rights, the termination
of any such rights to convert or exchange or the expiration of any options or
rights related to such convertible or exchangeable securities, only the number
of shares of Common Stock actually issued upon the exercise of such options or
rights, upon the conversion or exchange of such securities or upon the exercise
of the options or rights related to such securities shall continue to be deemed
to be issued.
5. All Common Stock deemed issued pursuant to this
subsection 3(c)(i)(E) shall be considered issued only at the time of its deemed
issuance and any actual issuance of such stock shall not be an actual issuance
or a deemed issuance of the corporation's Common Stock under the provisions of
this Section 3; provided however, that in
-6-
<PAGE>
the case of any options to purchase or rights to subscribe for Common Stock
which expire by their terms not more than thirty (30) days after the date of
issue thereof, no adjustment of the Conversion Price for any Series of Preferred
Stock shall be made until the expiration or exercise of all such options or
rights, whereupon such adjustment shall be made in the same manner provided in
subsection (E)(4) above.
(ii) "Additional Stock" shall mean any shares of Common
Stock issued (or deemed to have been issued pursuant to subsection 3(c)(i)(E))
by the corporation on or after the Purchase Date other than shares of Common
Stock issued or issuable:
(A) pursuant to a transaction described in subsection
3(c)(iii) hereof;
(B) to officers, directors, employees and consultants
of the corporation directly or pursuant to a stock option plan or restricted
stock plan approved by the shareholders and directors of the corporation;
(C) for which adjustment of the Conversion Price is
made pursuant to this Section 3; or
(D) upon conversion of the Series A, Series B, Series C
or Series D Preferred Stock.
(iii) In the event the corporation should at any time or
from time to time after the Purchase Date fix a record date for the effectuation
of a split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"Common Stock Equivalents") without payment of any consideration by such holder
- -------------------------
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Prices of the Series A Preferred Stock, the Series B Preferred Stock, the
Series C Preferred Stock and the Series D Preferred Stock shall be appropriately
decreased so that the number of shares of Common Stock issuable on conversion of
each share of such Series shall be increased in proportion to such increase of
the aggregate shares of Common Stock outstanding and those issuable with respect
to such Common Stock Equivalents.
(iv) If the number of shares of Common Stock outstanding at
any time after the Purchase Date is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date of such
combination, the Conversion Price for the Series A Preferred Stock and Series B
Preferred Stock and Series C Preferred Stock and Series D Preferred Stock shall
be appropriately increased so that the number of shares of Common Stock issuable
on conversion of each share of such Series shall be decreased in proportion to
such decrease in outstanding shares.
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<PAGE>
(d) Other Distributions. In the event the corporation shall
-------------------
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by the corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 3(c)(iii), then,
in each such case for the purpose of this subsection 3(d), the holders of the
Series A Preferred Stock and Series B Preferred Stock and Series C Preferred
Stock and Series D Preferred Stock shall be entitled to a proportionate share of
any such distribution as though they were the holders of the number of shares of
Common Stock of the corporation into which their shares of Series A and Series B
and Series C and Series D 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.
(e) Recapitalizations. If at any time or from time to time there
-----------------
shall be a recapitalization of the Common Stock (other than a subdivision,
combination or merger or sale of assets transaction provided for elsewhere in
Sections 2 or 3) provision shall be made so that each holder of Preferred Stock
shall thereafter be entitled to receive upon conversion of the Preferred Stock
the number of shares of stock or other securities or property of the corporation
or otherwise, to which a holder of the number of shares of Common Stock
deliverable upon conversion of such Preferred Stock would have been entitled on
such recapitalization. In any such case, appropriate adjustment shall be made
in the application of the provisions of this Section 3 with respect to the
rights of the holders of Preferred Stock after the recapitalization to the end
that the provisions of this Section 3 (including adjustment of the Conversion
Price then in effect and the number of shares purchasable upon conversion of the
Series A, Series B, Series C and Series D Preferred Stock) shall be applicable
after that event as nearly equivalent as may be practicable.
(f) No Impairment. Without the consent of the holders of
-------------
Preferred Stock in accordance with Article III(B)(5) below, the corporation will
not, by amendment of its Articles of Incorporation or through any
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 the Preferred Stock against impairment .
(g) No Fractional Shares and Certificate as to Adjustments.
-------------------------------------------------------
(i) No fractional shares shall be issued upon conversion of
the Preferred Stock, and the number of shares of Common Stock to be issued upon
conversion shall be rounded to the nearest whole share. Whether or not
fractional shares are issuable upon such conversion shall be determined on the
basis of the total number of shares of Preferred Stock the holder is at the time
converting into Common Stock and the number of shares of Common Stock issuable
upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or readjustment
of any Conversion Price of Series A, Series B, Series C or Series D Preferred
Stock pursuant to this Section 3, the corporation, at its expense, shall
promptly compute such adjustment or
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<PAGE>
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Series A, Series B, Series C and Series D Preferred Stock a
certificate setting forth such adjustment or readjustment and showing in detail
the facts upon which such adjustment or readjustment is based. The corporation
shall, upon the written request at any time of any holder of Series A, Series B,
Series C or Series D Preferred Stock, furnish or cause to be furnished to such
holder a like certificate setting forth (A) such adjustment and readjustment,
(B) the Conversion Price at the time in effect, and (C) 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 a share of Series A, Series B, Series C or
Series D Preferred Stock.
(h) 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 twenty (20) days prior to
the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the amount and character of such dividend, distribution or right.
(i) Reservation of Stock Issuable Upon Conversion. 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 the 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 the 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, in
addition to such other remedies as shall be available to the holder of such
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
purposes.
(j) Notices. Any notice required by the provisions of this
-------
Section 3 to be given to the holders 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 its address appearing on the books of the
corporation.
4. Voting Rights.
-------------
(a) The holder of each share of Preferred Stock shall have the
right to one vote for each share of Common Stock into which such Preferred Stock
could then be converted (with any fractional share determined on an aggregate
conversion basis being rounded to the nearest whole share), and with respect to
such vote, such holder shall have full voting rights and powers equal to the
voting rights and powers of the holders of Common Stock, and shall be entitled,
notwithstanding any provision hereof, to notice of any shareholders' meeting in
accordance with the by-laws of the corporation, and shall be entitled to vote,
together with holders of Common Stock, with respect to any question upon which
holders of Common Stock have the right to vote. Notwithstanding the foregoing,
the holders of Series C Preferred Stock,
-9-
<PAGE>
voting as a single class, shall be entitled to elect one (1) member of the
corporation's board of directors; the holders of Series B Preferred Stock,
voting as a single class, shall be entitled to elect two (2) members of the
corporation's board of directors; the holders of Series A Preferred Stock,
voting as a single class, shall be entitled to elect one (1) member of the
corporation's board of directors; and the holders of the Common Stock (excluding
the Preferred Stock on an as-converted basis), voting as a single class, shall
be entitled to elect the remaining members of the corporation's board of
directors.
(b) In the case of any vacancy in the office of a director
occurring among the directors elected by the holders of a Series of Preferred
Stock or Common Stock pursuant to Section 4(a) hereof, the remaining director or
directors so elected by the holders of such Series of Preferred Stock or Common
Stock may, by affirmative vote of a majority thereof (or the remaining director
so elected if there is but one, or if there is no such director remaining, by
the affirmative vote of the holders of a majority of the shares of that class)
elect a successor or successors to hold the office for the unexpired term of the
director or directors whose place or places shall be vacant. Any director who
shall have been elected by the holders of the Series A, Series B or Series C
Preferred Stock or Common Stock or any director so elected as provided in the
preceding sentence hereof, may be removed during the aforesaid term of office,
whether with or without cause, only by the affirmative vote of the holders of a
majority of the Series A, Series B or Series C Preferred Stock, or Common Stock,
as the case may be.
5. Protective Provisions. So long as shares of Preferred Stock are
---------------------
outstanding, the corporation shall not without first obtaining the approval (by
vote or written consent, as provided by law) of (i) the holders of at least a
majority of the then outstanding shares of Preferred Stock, voting together as a
class, and (ii) the holders of at least a majority of the then outstanding
shares of Series C Preferred Stock, voting as a separate class, except where
otherwise required by law:
(a) sell, convey, or otherwise dispose of all or substantially
all of its property or business or merge into or consolidate with any other
corporation (other than a wholly owned subsidiary corporation in a merger not
involving a third party) or effect any transaction or Series of related
transactions in which more than fifty percent (50%) of the voting power of the
corporation is disposed of;
(b) liquidate, dissolve, recapitalize or reorganize the
corporation;
(c) create or issue any new class or Series of stock or any other
securities convertible into equity securities of the corporation (i) having a
preference over, or being on a parity with, the Series A, Series B, Series C or
Series D Preferred Stock with respect to voting, dividends, conversion or upon
liquidation, or (ii) having rights similar to any of the rights of the Series A,
Series B, Series C and Series D Preferred Stock under this Section 5;
(d) adversely alter or change the rights, preferences or
privileges of any of the Preferred Stock; or
(e) reclassify any of the Company's outstanding capital stock.
-10-
<PAGE>
6. Status of Converted Stock. In the event any shares of Preferred
-------------------------
Stock shall be converted pursuant to Section 3 hereof, the shares so converted
shall be canceled and shall not be issuable by the corporation, and the Articles
of Incorporation of the corporation shall be appropriately amended to effect the
corresponding reduction in the corporation's authorized capital stock.
7. Repurchase of Shares. In connection with repurchases by the
--------------------
corporation of its Common Stock pursuant to its agreements with certain of the
holders thereof providing for such repurchases in the event of the termination
of the status of such holder as an employee, director or consultant to the
Company, each holder of Preferred Stock shall be deemed to have consented, for
purposes of Sections 502, 503 and 506 of the California General Corporation Law,
to distributions made by the corporation with respect to such repurchases.
8. Redemption.
----------
(a) Subject to the limitations of Section 500 et seq. of the
California Corporations Code, at any time after April 30, 2002, upon the written
request from the holders of not less than a majority of the then outstanding
shares of a Series of Preferred Stock, voting as one class, that such Series of
Preferred Stock be redeemed, this corporation shall, within thirty (30) days
(the "Initial Redemption Date") after the receipt by this corporation of such
-----------------------
written request, from any source of funds legally available therefor, redeem all
of the then outstanding shares of such Series of Preferred Stock in three annual
installments beginning on the Initial Redemption Date (the Initial Redemption
Date, together with the first and second anniversary of such date shall each be
referred to herein as a "Redemption Date"). The corporation shall effect such
---------------
redemptions by paying in cash therefor, $0.62 per share of Series A Preferred
Stock, $3.44 per share of Series B Preferred Stock, $4.93 per share of Series
C Preferred Stock and $6.59 per share of Series D Preferred Stock (as adjusted
for any stock dividends, combinations or splits with respect to such shares)
plus all declared but unpaid dividends on such shares to be redeemed (the
"Redemption Price"), in exchange for the shares of Series A, Series B, Series C
- -----------------
and Series D Preferred Stock to be redeemed (as adjusted for any stock
dividends, combinations or splits with respect to such shares), respectively.
The number of shares of Preferred Stock that the corporation shall be required
under this subsection 8(a) to redeem on any Redemption Date shall be equal to
the one-third (1/3) of the total number of shares of a Series of Preferred Stock
outstanding immediately prior to the Initial Redemption Date. Any redemption
effected pursuant to this subsection 8(a) shall be made on a pro rata basis
among the holders of a Series of Preferred Stock in proportion to the number of
shares of such Series of Preferred Stock then held by such holders.
(b) At least fifteen (15) but no more than thirty (30) days prior
to each Redemption Date, written notice shall be mailed, first class postage
prepaid, to each holder of record (at the close of business on the business day
next preceding the day on which notice is given) of the Preferred Stock to be
redeemed, at the address last shown on the records of this corporation for such
holder, notifying such holder of the redemption to be effected, specifying the
number of shares to be redeemed from such holder, the Redemption Date, the
Redemption Price, the place at which payment may be obtained and calling upon
such holder to surrender to this corporation, in the manner and at the place
designated, his, her or its certificate or certificates representing the shares
to be redeemed (the "Redemption Notice"). Except as
-----------------
-11-
<PAGE>
provided in subsection 8(c) below, on or after the Redemption Date, each holder
of Preferred Stock to be redeemed shall surrender to this corporation the
certificate or certificates representing such shares, in the manner and at the
place designated in the Redemption Notice, and thereupon the Redemption Price of
such shares shall be payable to the order of the person whose name appears on
such certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled. In the event less than all the shares represented
by any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(c) From and after the applicable Redemption Date, unless there
shall have been a default in payment of the Redemption Price, all rights of the
holders of shares of Preferred Stock designated for redemption in the Redemption
Notice for redemption as of the applicable Redemption Date as holders of
Preferred Stock (except the right to receive the Redemption Price without
interest upon surrender of their certificate or certificates) shall cease with
respect to such shares, and such shares shall not thereafter be transferred on
the books of this corporation or be deemed to be outstanding for any purpose
whatsoever. Subject to the rights of any Series of Preferred Stock which may
from time to time come into existence, if the funds of the corporation legally
available for redemption of shares of Preferred Stock on any Redemption Date are
insufficient to redeem the total number of shares of Preferred Stock to be
redeemed on such date, those funds which are legally available will be used to
redeem the maximum possible number of such shares ratably among the holders of
such shares to be redeemed based upon their holdings of Preferred Stock. The
shares of Preferred Stock not redeemed shall remain outstanding and entitled to
all the rights and preferences provided herein. Subject to the rights of a
Series of Preferred Stock which may from time to time come into existence, at
any time thereafter when additional funds of the corporation are legally
available for the redemption of shares of Preferred Stock, such funds will
immediately be used to redeem the balance of the shares which the corporation
has become obliged to redeem on any Redemption Date but which it has not
redeemed.
(d) On or prior to each Redemption Date, this corporation shall
deposit the Redemption Price of all shares of a Series of Preferred Stock
designated for redemption in the Redemption Notice, and not yet redeemed or
converted, with a bank or trust corporation having aggregate capital and surplus
in excess of One Hundred Million Dollars ($100,000,000) as a trust fund for the
benefit of the respective holders of the shares designated for redemption and
not yet redeemed, with irrevocable instructions and authority to the bank or
trust corporation to publish the notice of redemption thereof and pay the
Redemption Price for such shares to their respective holders on or after the
Redemption Date, upon receipt of notification from the corporation that such
holder has surrendered his, her or its share certificate to the corporation
pursuant to subsection 8(b) above. As of the date of such deposit (even if
prior to the Redemption Date), the deposit shall constitute full payment of the
shares to their holders, and from and after the date of the deposit the shares
so called for redemption shall be redeemed and shall be deemed to be no longer
outstanding, and the holders thereof shall cease to be shareholders with respect
to such shares and shall have no rights with respect thereto except the right to
receive from the bank or trust corporation payment of the Redemption Price of
the shares, without interest, upon surrender of their certificates therefor.
Such instructions shall also provide that any moneys deposited by the
corporation pursuant to this subsection 8(d) for the redemption of shares
thereafter converted into shares of the corporation's Common Stock pursuant to
Article III(B)(3) hereof prior to the Redemption Date shall be returned to the
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<PAGE>
corporation forthwith upon such conversion. The balance of any moneys deposited
by this corporation pursuant to this subsection 8(d) remaining unclaimed at the
expiration of two (2) years following the Redemption Date shall thereafter be
returned to this corporation upon its request expressed in a resolution of its
Board of Directors.
C. Common Stock.
------------
1. Dividend Rights. Subject to the prior rights of holders of all
---------------
classes of stock at the time outstanding having prior rights as to dividends,
the holders of the Common Stock shall be entitled to receive, when and as
declared by the Board of Directors, out of any assets of the corporation legally
available therefor, such dividends as may be declared from time to time by the
Board of Directors.
2. Liquidation Rights. Upon the liquidation, dissolution or winding
------------------
up of the corporation, the assets of the corporation shall be distributed as
provided in Section B.2. of this Article III.
3. Redemption. The Common Stock is not redeemable.
----------
4. Voting Rights. The holder of each share of Common Stock shall
-------------
have the right to one vote, and shall be entitled to notice of any shareholders
meeting in accordance with the By-laws of the corporation, and shall be entitled
to vote upon such matters and in such manner as may be provided by law.
ARTICLE V
The Board of Directors of the Corporation is expressly authorized to make,
alter or repeal Bylaws of the Corporation.
ARTICLE VI
Elections of directors need not be by written ballot unless otherwise provided
in the Bylaws of the Corporation.
ARTICLE VII
(A) To the fullest extent permitted by the Delaware General Corporation
Law, as the same exists or as may hereafter be amended, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
(B) The Corporation shall indemnify to the fullest extent permitted by law
any person made or threatened to be made a party to an action or proceeding,
whether criminal, civil, administrative or investigative, by reason of the fact
that he, his testator or intestate is or was a director or officer of the
Corporation or any predecessor of the Corporation, or serves or served at any
other enterprise as a director or officer at the request of the Corporation or
any predecessor to the Corporation.
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<PAGE>
(C) Neither any amendment nor repeal of this Article VII, nor the adoption
of any provision of the Corporation's Certificate of Incorporation inconsistent
with this Article VII, shall eliminate or reduce the effect of this Article VII
in respect of any matter occurring, or any action or proceeding accruing or
arising or that, but for this Article VII, would accrue or arise, prior to such
amendment, repeal or adoption of an inconsistent provision.
ARTICLE VIII
The name and mailing address of the incorporator are as follows:
David Lee
VENTURE LAW GROUP
2800 Sand Hill Road
Menlo Park, CA 94025
Executed this ___ day of April, 1999.
______________________________
David Lee, Incorporator
-14-
<PAGE>
EXHIBIT 3.4
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
RAMP NETWORKS, INC.
The undersigned, Mahesh Veerina and Tae Hea Nahm, hereby certify that:
1. They are the duly elected and acting President and Assistant Secretary,
respectively, of Ramp Networks, Inc., a Delaware corporation.
2. The Certificate of Incorporation of this corporation was originally
filed with the Secretary of State of Delaware on April __, 1999.
3. The Certificate of Incorporation of this corporation shall be amended
and restated to read in full as follows:
ARTICLE I
"The name of this corporation is Ramp Networks, Inc. (the "Corporation").
-----------
ARTICLE II
The address of the Corporation's registered office in the State of Delaware
is 1013 Centre Road, City of Wilmington, County of New Castle, Delaware 19805.
The name of its registered agent at such address is Corporation Service Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity
for which corporations may be organized under the General Corporation Law of
Delaware.
ARTICLE IV
(A) Classes of Stock. The 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, each with a par value of $0.001 per
share. One hundred million (100,000,000) shares shall be Common Stock and five
million (5,000,000) shares shall be Preferred Stock.
<PAGE>
(B) The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby authorized, within the limitations and
restrictions stated in this Certificate of Incorporation, to determine or alter
the rights, preferences, privileges and restrictions granted to or imposed upon
any wholly unissued series of Preferred Stock and the number of shares
constituting any such series and the designation thereof, or any of them; and to
increase or decrease the number of shares of any series subsequent to the
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 so
decreased, the shares constituting such decrease shall resume the status which
they had prior to the adoption of the resolution originally fixing the number of
shares of such series.
ARTICLE V
The number of directors of the Corporation shall be fixed from time to time
by a bylaw or amendment thereof duly adopted by the Board of Directors.
ARTICLE VI
(A) The Board of Directors of the Corporation shall divide the directors
into two classes, as nearly equal in number as reasonably possible, with the
term of office of the first class to expire at the first annual meeting of
stockholders following the date this Article VI becomes effective (the
"Effective Date") or any special meeting in lieu thereof, the term of office of
--------------
the second class to expire at the second annual meeting of stockholders after
the Effective Date or any special meeting in lieu thereof. At each annual
meeting of stockholders or special meeting in lieu thereof following such
initial classification, directors elected to succeed those directors whose terms
expire shall be elected for a term of office to expire at the second succeeding
annual meeting of stockholders or special meeting in lieu thereof after their
election and until their successors are duly elected and qualified.
(B) Subject to the rights of the holders of any series of Preferred Stock
then outstanding, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled only by a majority vote of the directors
then in office even though less than a quorum, or by a sole remaining director.
In the event of any increase or decrease in the authorized number of directors,
(i) each director then serving as such shall nevertheless continue as a director
of the class of which he or she is a member until the expiration of his or her
current term or his or her prior death, retirement, removal or resignation, and
(ii) the newly created or eliminated directorships resulting from such increase
or decrease shall, if reasonably possible, be apportioned by the Board of
Directors between the two classes of directors so as to ensure that no one class
has more than one director more than any other class. To the extent reasonably
possible, consistent with the foregoing rule, any newly created directorships
shall be added to those classes whose terms of office are to expire at the
latest dates following such allocation and newly eliminated directorships shall
be subtracted from those classes whose terms of office are to expire at the
earliest dates following such allocation, unless otherwise provided for from
time to time by resolution adopted by a
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<PAGE>
majority of the directors then in office, although less than a quorum. In the
event of a vacancy in the Board of Directors, the remaining directors, except as
otherwise provided by law, may exercise the powers of the full Board of
Directors until the vacancy is filled. Vacancies in the Board of Directors and
newly created directorships resulting from any increase in the authorized number
of directors shall be filled by a vote of the majority of the directors then in
office, though less than a quorum, or by a sole remaining director.
ARTICLE VII
In the election of directors, each holder of shares of any class or series
of capital stock of the Corporation shall be entitled to one vote for each share
held. No stockholder will be permitted to cumulate votes at any election of
directors.
ARTICLE VIII
No action shall be taken by the stockholders of the Corporation other than
at an annual or special meeting of the stockholders, upon due notice and in
accordance with the provisions of the Corporation's bylaws.
ARTICLE IX
The Corporation reserves the right to amend, alter, change or repeal any
provision contained in this Amended and Restated Certificate of Incorporation,
in the manner now or hereafter prescribed by statute, and all rights conferred
upon stockholders herein are granted subject to this reservation.
ARTICLE X
The Board of Directors of the Corporation is expressly authorized to make,
alter or repeal Bylaws of the Corporation.
ARTICLE XI
Meetings of stockholders may be held within or without the State of
Delaware, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the Bylaws of the Corporation.
ARTICLE XII
The Corporation shall have perpetual existence.
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<PAGE>
ARTICLE XIII
(A) To the fullest extent permitted by the General Corporation Law of
Delaware, as the same may be amended from time to time, a director of the
Corporation shall not be personally liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director.
If the General Corporation Law of Delaware is hereafter amended to authorize,
with the approval of a corporation's stockholders, further reductions in the
liability of the Corporation's directors for breach of fiduciary duty, then a
director of the Corporation shall not be liable for any such breach to the
fullest extent permitted by the General Corporation Law of Delaware, as so
amended.
(B) Any repeal or modification of the foregoing provisions of this Article
XIII shall not adversely affect any right or protection of a director of the
Corporation with respect to any acts or omissions of such director occurring
prior to such repeal or modification.
ARTICLE XIV
(A) To the fullest extent permitted by applicable law, the Corporation is
also authorized to provide indemnification of (and advancement of expenses to)
such agents (and any other persons to which Delaware law permits the Corporation
to provide indemnification) through bylaw provisions, agreements with such
agents or other persons, vote of stockholders or disinterested directors or
otherwise, in excess of the indemnification and advancement otherwise permitted
by Section 145 of the Delaware General Corporation Law, subject only to limits
created by applicable Delaware law (statutory or non-statutory), with respect to
actions for breach of duty to a corporation, its stockholders, and others.
(B) Any repeal or modification of any of the foregoing provisions of this
Article XIV shall not adversely affect any right or protection of a director,
officer, agent or other person existing at the time of, or increase the
liability of any director of the Corporation with respect to any acts or
omissions of such director, officer or agent occurring prior to such repeal or
modification."
* * *
-4-
<PAGE>
The foregoing Amended and Restated Certificate of Incorporation has been
duly adopted by this Corporation's Board of Directors and stockholders in
accordance with the applicable provisions of Section 228, 242 and 245 of the
General Corporation Law of the State of Delaware.
Executed at Santa Clara, California, on ____________________.
_________________________________
Mahesh Veerina, President
_________________________________
Tae Hea Nahm, Assistant Secretary
-5-
<PAGE>
EXHIBIT 3.5
BYLAWS
OF
TRANCELL SYSTEMS, INC.
<PAGE>
BYLAWS
OF
TRANCELL SYSTEMS, INC.
TABLE OF CONTENTS
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ARTICLE I CORPORATE OFFICES........................................ 1
1.1 PRINCIPAL OFFICE......................................... 1
1.2 OTHER OFFICES............................................ 1
ARTICLE II MEETINGS OF SHAREHOLDERS................................. 1
2.1 PLACE OF MEETINGS........................................ 1
2.2 ANNUAL MEETING........................................... 1
2.3 SPECIAL MEETING.......................................... 1
2.4 NOTICE OF SHAREHOLDERS' MEETINGS......................... 2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE............. 2
2.6 QUORUM................................................... 3
2.7 ADJOURNED MEETING; NOTICE................................ 3
2.8 VOTING................................................... 4
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT........ 4
2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A
MEETING.................................................. 5
2.11 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING
CONSENTS................................................. 6
2.12 PROXIES.................................................. 6
2.13 INSPECTORS OF ELECTION................................... 7
ARTICLE III DIRECTORS................................................ 7
3.1 POWERS................................................... 7
3.2 NUMBER OF DIRECTORS...................................... 8
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS................. 8
3.4 RESIGNATION AND VACANCIES................................ 8
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE................. 9
3.6 REGULAR MEETINGS......................................... 9
3.7 SPECIAL MEETINGS; NOTICE................................. 9
3.8 QUORUM................................................... 10
3.9 WAIVER OF NOTICE......................................... 10
3.10 ADJOURNMENT.............................................. 10
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
3.11 NOTICE OF ADJOURNMENT.................................... 10
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING........ 10
3.13 FEES AND COMPENSATION OF DIRECTORS....................... 11
3.14 APPROVAL OF LOANS TO OFFICERS............................ 11
ARTICLE IV COMMITTEES............................................... 11
4.1 COMMITTEES OF DIRECTORS.................................. 11
4.2 MEETINGS AND ACTION OF COMMITTEES........................ 12
ARTICLE V OFFICERS................................................. 12
5.1 OFFICERS................................................. 12
5.2 ELECTION OF OFFICERS..................................... 12
5.3 SUBORDINATE OFFICERS..................................... 13
5.4 REMOVAL AND RESIGNATION OF OFFICERS...................... 13
5.5 VACANCIES IN OFFICES..................................... 13
5.6 CHAIRMAN OF THE BOARD.................................... 13
5.7 PRESIDENT................................................ 13
5.8 VICE PRESIDENTS.......................................... 14
5.9 SECRETARY................................................ 14
5.10 CHIEF FINANCIAL OFFICER.................................. 14
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND
OTHER AGENTS............................................. 15
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS................ 15
6.2 INDEMNIFICATION OF OTHERS................................ 15
6.3 PAYMENT OF EXPENSES IN ADVANCE........................... 15
6.4 INDEMNITY NOT EXCLUSIVE.................................. 15
6.5 INSURANCE INDEMNIFICATION................................ 16
6.6 CONFLICTS................................................ 16
ARTICLE VII RECORDS AND REPORTS...................................... 16
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER............. 16
7.2 MAINTENANCE AND INSPECTION OF BYLAWS..................... 17
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE
RECORDS.................................................. 17
7.4 INSPECTION BY DIRECTORS.................................. 17
7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER.................... 18
7.6 FINANCIAL STATEMENTS..................................... 18
</TABLE>
(ii)
<PAGE>
<TABLE>
<S> <C> <C>
7.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS........... 18
ARTICLE VIII GENERAL MATTERS.......................................... 19
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND
VOTING................................................... 19
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS................ 19
8.3 CORPORATE CONTRACTS AND INSTRUMENTS;
HOW EXECUTED............................................. 19
8.4 CERTIFICATES FOR SHARES.................................. 20
8.5 LOST CERTIFICATES........................................ 20
8.6 CONSTRUCTION; DEFINITIONS................................ 20
ARTICLE IX AMENDMENTS............................................... 20
9.1 AMENDMENT BY SHAREHOLDERS................................ 20
9.2 AMENDMENT BY DIRECTORS................................... 21
</TABLE>
(iii)
<PAGE>
BYLAWS
------
OF
--
TRANCELL SYSTEMS, INC.
----------------------
ARTICLE I
CORPORATE OFFICES
-----------------
1.1 PRINCIPAL OFFICE
----------------
The board of directors shall fix the location of the principal executive
office of the corporation at any place within or outside the State of
California. If the principal executive office is located outside such state and
the corporation has one or more business offices in such state, then the board
of directors shall fix and designate a principal business office in the State of
California.
1.2 OTHER OFFICES
-------------
The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.
ARTICLE II
MEETINGS OF SHAREHOLDERS
------------------------
2.1 PLACE OF MEETINGS
-----------------
Meetings of shareholders shall be held at any place within or outside the
State of California designated by the board of directors. In the absence of any
such designation, shareholders' meetings shall be held at the principal
executive office of the corporation.
2.2 ANNUAL MEETING
--------------
The annual meeting of shareholders shall be held each year on a date and at
a time designated by the board of directors. In the absence of such
designation, the annual meeting of shareholders shall be held on the fourth
Monday of March of each year, at 10:00 a.m. However, if such day falls on a
legal holiday, then the meeting shall be held at the same time and place on the
next succeeding full business day. At the meeting, directors shall be elected,
and any other proper business may be transacted.
2.3 SPECIAL MEETING
---------------
A special meeting of the shareholders may be called at any time by the
board of directors, or by the chairman of the board, or by the president, or by
one or more shareholders holding
<PAGE>
shares in the aggregate entitled to cast not less than ten percent (10%) of the
votes at that meeting.
If a special meeting is called by any person or persons other than the
board of directors or the president or the chairman of the board, then the
request shall be in writing, specifying the time of such meeting and 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, the president, any vice president or
the secretary of the corporation. The officer receiving the request shall cause
notice to be promptly given to the shareholders entitled to vote, in accordance
with the provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will
be held at the time requested by the person or persons calling the meeting, so
long as that time is not less than thirty-five (35) nor more than sixty (60)
days after the receipt of the request. If the notice is not given within twenty
(20) days after receipt of the request, then the person or persons requesting
the meeting may give the notice. Nothing contained in this paragraph of this
Section 2.3 shall be construed as limiting, fixing or affecting the time when a
meeting of shareholders called by action of the board of directors may be held.
2.4 NOTICE OF SHAREHOLDERS' MEETINGS
--------------------------------
All notices of meetings of shareholders shall be sent or otherwise given in
accordance with Section 2.5 of these bylaws not less than ten (10) (or, if sent
by third-class mail pursuant to Section 2.5 of these bylaws, thirty (30)) nor
more than sixty (60) days before the date of the meeting. The notice shall
specify the place, date, and hour of the meeting and (i) in the case of a
special meeting, the general nature of the business to be transacted (no
business other than that specified in the notice may be transacted) or (ii) in
the case of the annual meeting, those matters which the board of directors, at
the time of giving the notice, intends to present for action by the shareholders
(but subject to the provisions of the next paragraph of this Section 2.4 any
proper matter may be presented at the meeting for such action). The notice of
any meeting at which directors are to be elected shall include the name of any
nominee or nominees who, at the time of the notice, the board intends to present
for election.
If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the Corporations Code of California (the
"Code"), (ii) an amendment of the articles of incorporation, pursuant to Section
902 of the Code, (iii) a reorganization of the corporation, pursuant to Section
1201 of the Code, (iv) a voluntary dissolution of the corporation, pursuant to
Section 1900 of the Code, or (v) a distribution in dissolution other than in
accordance with the rights of outstanding preferred shares, pursuant to Section
2007 of the Code, then the notice shall also state the general nature of that
proposal.
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE
--------------------------------------------
Written notice of any meeting of shareholders shall be given either (i)
personally or (ii) by first-class mail or (iii) by third-class mail but only if
the corporation has outstanding shares held of record by five hundred (500) or
more persons (determined as provided in Section 605 of the Code) on the record
date for the shareholders' meeting, or (iv) by telegraphic
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<PAGE>
or other written communication. Notices not personally delivered shall be sent
charges prepaid and shall be 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 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, then
all future notices or reports shall be deemed to have been duly given without
further mailing if the same shall be available to the shareholder on written
demand of the shareholder at the principal executive office of the corporation
for a period of one (1) year from the date of the giving of the notice.
An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.
2.6 QUORUM
------
The presence in person or by proxy of the holders of a majority of the
shares entitled to vote thereat constitutes a quorum for the transaction of
business at all meetings of shareholders. The shareholders present at a duly
called or held meeting 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, if any action taken (other than adjournment) is
approved by at least a majority of the shares required to constitute a quorum.
2.7 ADJOURNED MEETING; NOTICE
-------------------------
Any shareholders' meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by the vote of the majority of the
shares represented at that meeting, either in person or by proxy. In the
absence of a quorum, no other business may be transacted at that meeting except
as provided in Section 2.6 of these bylaws.
When any meeting of shareholders, either annual or special, is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place are announced at the meeting at which the adjournment is taken.
However, if a new record date for the adjourned meeting is fixed or if the
adjournment is for more than forty-five (45) days from the date set for the
original meeting, then notice of the adjourned meeting shall be given. Notice
of any such adjourned meeting shall be given to each shareholder of record
entitled to vote at the adjourned meeting in accordance with the provisions of
Sections 2.4 and 2.5 of these bylaws. At
-3-
<PAGE>
any adjourned meeting the corporation may transact any business which might have
been transacted at the original meeting.
2.8 VOTING
------
The shareholders entitled to vote at any meeting of shareholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 702 through 704 of the Code (relating to
voting shares held by a fiduciary, in the name of a corporation or in joint
ownership).
The shareholders' vote may be by voice vote or by ballot; provided,
however, that any election for directors must be by ballot if demanded by any
shareholder at the meeting and before the voting has begun.
Except as provided in the last paragraph of this Section 2.8, or as may be
otherwise provided in the articles of incorporation, each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to a
vote of the shareholders. Any shareholder entitled to vote on any matter may
vote part of the shares in favor of the proposal and refrain from voting the
remaining shares or, except when the matter is the election of directors, may
vote them against the proposal; but, if the shareholder fails to specify the
number of shares which the shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is with respect to
all shares which the shareholder is entitled to vote.
If a quorum is present, the affirmative vote of the majority of the shares
represented and voting at a duly held meeting (which shares voting affirmatively
also constitute at least a majority of the required quorum) shall be the act of
the shareholders, unless the vote of a greater number or a vote by classes is
required by the Code or by the articles of incorporation.
At a shareholders' meeting at which directors are to be elected, a
shareholder shall be entitled to cumulate votes (i.e., cast for any candidate a
number of votes greater than the number of votes which such shareholder normally
is entitled to cast) if the candidates' names have been placed in nomination
prior to commencement of the voting and the shareholder has given notice prior
to commencement of the voting of the shareholder's intention to cumulate votes.
If any shareholder has given such a notice, then every shareholder entitled to
vote may cumulate votes for candidates in nomination either (i) by giving one
candidate a number of votes equal to the number of directors to be elected
multiplied by the number of votes to which that shareholder's shares are
normally entitled or (ii) by distributing the shareholder's votes on the same
principle among any or all of the candidates, as the shareholder thinks fit.
The candidates receiving the highest number of affirmative votes, up to the
number of directors to be elected, shall be elected; votes against any candidate
and votes withheld shall have no legal effect.
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT
-------------------------------------------------
The transactions of any meeting of shareholders, either annual or special,
however called and noticed, and wherever held, shall be as valid as though they
had been taken at a meeting duly held after regular call and notice, if a quorum
be present either in person or by proxy, and if,
-4-
<PAGE>
either before or after the meeting, each person entitled to vote, who was not
present in person or by proxy, signs a written waiver of notice or a consent to
the holding of the meeting or an approval of the minutes thereof. The waiver of
notice or consent or approval need not specify either the business to be
transacted or the purpose of any annual or special meeting of shareholders,
except that if action is taken or proposed to be taken for approval of any of
those matters specified in the second paragraph of Section 2.4 of these bylaws,
the waiver of notice or consent or approval shall state the general nature of
the proposal. All such waivers, consents, and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of
notice of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by the Code to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.
2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING
-------------------------------------------------------
Any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take that action at a meeting at which all
shares entitled to vote on that action were present and voted.
In the case of election of directors, such a consent shall be effective
only if signed by the holders of all outstanding shares entitled to vote for the
election of directors. However, a director may be elected at any time to fill
any vacancy on the board of directors, provided that it was not created by
removal of a director and that it has not been filled by the directors, by the
written consent of the holders of a majority of the outstanding shares entitled
to vote for the election of directors.
All such consents shall be maintained in the corporate records. Any
shareholder giving a written consent, or the shareholder's proxy holders, or a
transferee of the shares, or a personal representative of the shareholder, or
their respective proxy holders, may revoke the consent by a writing received by
the secretary of the corporation before written consents of the number of shares
required to authorize the proposed action have been filed with 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 has not been received, then the secretary shall give prompt notice
of the corporate action approved by the shareholders without a meeting. Such
notice shall be given to those shareholders entitled to vote who have not
consented in writing and shall be given in the manner specified in Section 2.5
of these bylaws. In the case of approval of (i) a contract or transaction in
which a director has a direct or indirect financial interest, pursuant to
Section 310 of the Code, (ii) indemnification of a corporate "agent," pursuant
to
-5-
<PAGE>
Section 317 of the Code, (iii) a reorganization of the corporation, pursuant to
Section 1201 of the Code, and (iv) a distribution in dissolution other than in
accordance with the rights of outstanding preferred shares, pursuant to Section
2007 of the Code, the notice shall be given at least ten (10) days before the
consummation of any action authorized by that approval.
2.11 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS
-----------------------------------------------------------
For purposes of determining the shareholders entitled to notice of any
meeting or to vote thereat or entitled to give consent to corporate action
without a meeting, the board of directors may fix, in advance, a record date,
which shall not be more than sixty (60) days nor less than ten (10) days before
the date of any such meeting nor more than sixty (60) days before any such
action without a meeting, and in such event only shareholders of record on the
date so fixed are entitled to notice and to vote or to give consents, 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 Code.
If the board of directors does not so fix a record date:
(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 on which 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; and
(b) the record date for determining shareholders entitled to give
consent to corporate action in writing without a meeting, (i) when no prior
action by the board has been taken, shall be the day on which the first written
consent is given, or (ii) when prior action by the board has been taken, shall
be at the close of business on the day on which the board adopts the resolution
relating to that action, or the sixtieth (60th) day before the date of such
other action, whichever is later.
The record date for any other purpose shall be as provided in Article VIII
of these bylaws.
2.12 PROXIES
-------
Every person entitled to vote for directors, or on any other matter, shall
have the right to do so either in person or by one or more agents authorized by
a written proxy signed by the person and filed with the secretary of the
corporation. A proxy shall be deemed signed if the shareholder's name is placed
on the proxy (whether by manual signature, typewriting, telegraphic transmission
or otherwise) by the shareholder or the shareholder's attorney-in-fact. A
validly executed proxy which does not state that it is irrevocable shall
continue in full force and effect unless (i) the person who executed the proxy
revokes it prior to the time of voting by delivering a writing to the
corporation stating that the proxy is revoked or by executing a subsequent proxy
and presenting it to the meeting or by voting in person at the meeting, or (ii)
written notice of the death or incapacity of the maker of that proxy is received
by the corporation before the vote pursuant to that proxy is counted; provided,
however, that no proxy shall be valid after the expi-
-6-
<PAGE>
ration of eleven (11) months from the date of the proxy, unless otherwise
provided in the proxy. The dates contained on the forms of proxy presumptively
determine the order of execution, regardless of the postmark dates on the
envelopes in which they are mailed. The revocability of a proxy that states on
its face that it is irrevocable shall be governed by the provisions of Sections
705(e) and 705(f) of the Code.
2.13 INSPECTORS OF ELECTION
----------------------
Before any meeting of shareholders, the board of directors may appoint an
inspector or inspectors of election to act at the meeting or its adjournment.
If no inspector of election is so appointed, then the chairman of the meeting
may, and on the request of any shareholder or a shareholder's proxy shall,
appoint an inspector or inspectors of election to act at the meeting. The
number of inspectors shall be either one (l) or three (3). If inspectors are
appointed at a meeting pursuant to the request of one (l) or more shareholders
or proxies, then the holders of a majority of shares or their proxies present at
the meeting shall determine whether one (l) or three (3) inspectors are to be
appointed. If any person appointed as inspector fails to appear or fails or
refuses to act, then 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.
Such inspectors shall:
(a) determine the number of shares outstanding and the voting power of
each, the number of 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
(g) do any other acts that may be proper to conduct the election or
vote with fairness to all shareholders.
ARTICLE III
DIRECTORS
---------
-7-
<PAGE>
3.1 POWERS
------
Subject to the provisions of the Code and any limitations in the articles
of incorporation and these bylaws relating to actions 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.
3.2 NUMBER OF DIRECTORS
-------------------
The number of directors of the corporation shall be not less than five (5)
nor more than nine (9). The exact number of directors shall be five (5) until
changed, within the limits specified above, by a bylaw amending this Section
3.2, duly adopted by the board of directors or by the shareholders. The
indefinite number of directors may be changed, or a definite number may be fixed
without provision for an indefinite number, by a duly adopted amendment to the
articles of incorporation or by an amendment to this bylaw duly adopted by the
vote or written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that an amendment reducing the fixed number
or the minimum number of directors to a number less than five (5) cannot be
adopted if the votes cast against its adoption at a meeting, or the shares not
consenting in the case of an action by written consent, are equal to more than
sixteen and two-thirds percent (16-2/3%) of the outstanding shares entitled to
vote thereon. No amendment may change the stated maximum number of authorized
directors to a number greater than two (2) times the stated minimum number of
directors minus one (1).
No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS
----------------------------------------
Directors shall be elected at each annual meeting of shareholders to hold
office until the next annual meeting. Each director, including a director
elected to fill a vacancy, shall hold office until the expiration of the term
for which elected and until a successor has been elected and qualified.
3.4 RESIGNATION AND VACANCIES
-------------------------
Any director may resign effective on giving written notice to the chairman
of the board, the president, the secretary or the board of directors, unless the
notice specifies a later time for that resignation to become effective. If the
resignation of a director is effective at a future time, the board of directors
may elect a successor to take office when the resignation becomes effective.
Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote or
written consent of the shareholders or by court order may be filled only 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 a
-8-
<PAGE>
majority of the required quorum), or by the unanimous written consent of all
shares entitled to vote thereon. Each director so elected shall hold office
until the next annual meeting of the shareholders and until a successor has been
elected and qualified.
A vacancy or vacancies in the board of directors shall be deemed to exist
(i) in the event of the death, resignation or removal of any director, (ii) if
the board of directors by resolution declares vacant the office of a director
who has been declared of unsound mind by an order of court or convicted of a
felony, (iii) if the authorized number of directors is increased, or (iv) if the
shareholders fail, at any meeting of shareholders at which any director or
directors are elected, to elect the number of directors to be elected at that
meeting.
The shareholders may elect a director or directors at any time to fill any
vacancy or vacancies not filled by the directors, but any such election other
than to fill a vacancy created by removal, if by written consent, shall require
the consent of the holders of a majority of the outstanding shares entitled to
vote thereon.
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE
----------------------------------------
Regular meetings of the board of directors may be held at any place within
or outside the State of California that has been designated from time to time by
resolution of the board. In the absence of such a designation, regular meetings
shall be held at the principal executive office of the corporation. Special
meetings of the board may be held at any place within or outside the State of
California that has been designated in the notice of the meeting or, if not
stated in the notice or if there is no notice, at the principal executive office
of the corporation.
Any meeting, regular or special, may be held by conference telephone or
similar communication equipment, so long as all directors participating in the
meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.
3.6 REGULAR MEETINGS
----------------
Regular meetings of the board of directors may be held without notice if
the times of such meetings are fixed by the board of directors.
3.7 SPECIAL MEETINGS; NOTICE
------------------------
Special meetings of the board of directors for any purpose or purposes may
be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48)
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<PAGE>
hours before the time of the holding of the meeting. Any oral notice given
personally or by telephone may be communicated either to the director or to a
person at the office of the director who the person giving the notice has reason
to believe will promptly communicate it to the director. The notice need not
specify the purpose or the place of the meeting, if the meeting is to be held at
the principal executive office of the corporation.
3.8 QUORUM
------
A majority of the authorized number of directors shall constitute a quorum
for the transaction of business, except to adjourn as provided in Section 3.10
of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of
Section 310 of the Code (as to approval of contracts or transactions in which a
director has a direct or indirect material financial interest), Section 311 of
the Code (as to appointment of committees), Section 317(e) of the Code (as to
indemnification of directors), the articles of incorporation, and other
applicable law.
A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.
3.9 WAIVER OF NOTICE
----------------
Notice of a meeting need not be given to any director (i) who signs a
waiver of notice or a consent to holding the meeting or an approval of the
minutes thereof, whether before or after the meeting, or (ii) who attends the
meeting without protesting, prior thereto or at its commencement, the lack of
notice to such director. All such waivers, consents, and approvals shall be
filed with the corporate records or made part of the minutes of the meeting. A
waiver of notice need not specify the purpose of any regular or special meeting
of the board of directors.
3.10 ADJOURNMENT
-----------
A majority of the directors present, whether or not constituting a quorum,
may adjourn any meeting to another time and place.
3.11 NOTICE OF ADJOURNMENT
---------------------
Notice of the time and place of holding an adjourned meeting need not be
given unless the meeting is adjourned for more than twenty-four (24) hours. If
the meeting is adjourned for more than twenty-four (24) hours, then notice of
the time and place of the adjourned meeting shall be given before the adjourned
meeting takes place, in the manner specified in Section 3.7 of these bylaws, to
the directors who were not present at the time of the adjournment.
-10-
<PAGE>
3.12 BOARD 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, provided that all members of the board individually
or collectively consent in writing to that action. Such action by written
consent shall have the same force and effect as a unanimous vote of the board of
directors. Such written consent and any counterparts thereof shall be filed
with the minutes of the proceedings of the board.
3.13 FEES AND COMPENSATION OF DIRECTORS
----------------------------------
Directors and members of committees may receive such compensation, if any,
for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.13 shall not
be construed to preclude any director from serving the corporation in any other
capacity as an officer, agent, employee or otherwise and receiving compensation
for those services.
3.14 APPROVAL OF LOANS TO OFFICERS/*/
-----------------------------
The corporation may, upon the approval of the board of directors alone,
make loans of money or property to, or guarantee the obligations of, any officer
of the corporation or its parent or subsidiary, whether or not a director, or
adopt an employee benefit plan or plans authorizing such loans or guaranties
provided that (i) the board of directors determines that such a loan or guaranty
or plan may reasonably be expected to benefit the corporation, (ii) the
corporation has outstanding shares held of record by 100 or more persons
(determined as provided in Section 605 of the Code) on the date of approval by
the board of directors, and (iii) the approval of the board of directors is by a
vote sufficient without counting the vote of any interested director or
directors.
ARTICLE IV
COMMITTEES
----------
4.1 COMMITTEES OF DIRECTORS
-----------------------
The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of two or more directors, to serve at the pleasure of the board. The
board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent member at any meeting of the committee.
The appointment of members or alternate members of a committee requires the vote
of a majority of the authorized number of directors. Any committee, to the
extent provided in the resolution of the board, shall have all the authority of
the board, except with respect to:
- -----------------------
/*/ This section is effective only if it has been approved by the shareholders
in accordance with Sections 315(b) and 152 of the Code.
-11-
<PAGE>
(a) the approval of any action which, under the Code, also requires
shareholders' approval or approval of the outstanding shares;
(b) the filling of vacancies on the board of directors or in any
committee;
(c) the fixing of compensation of the directors for serving on the
board or any committee;
(d) the amendment or repeal of these bylaws or the adoption of new
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 the shareholders of the corporation, 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 any other committees of the board of directors
or the members of such committees.
4.2 MEETINGS AND ACTION OF COMMITTEES
---------------------------------
Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these bylaws, Section 3.5
(place of meetings), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice),
Section 3.10 (adjournment), Section 3.11 (notice of adjournment), and Section
3.12 (action without meeting), with such changes in the context of those bylaws
as are necessary to substitute the committee and its members for the board of
directors and its members; provided, however, that the time of regular meetings
of committees may be determined either by resolution of the board of directors
or by resolution of the committee, that special meetings of committees may also
be called by resolution of the board of directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The board of directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws.
ARTICLE V
OFFICERS
--------
5.1 OFFICERS
--------
The officers of the corporation shall be a president, a secretary, and a
chief financial officer. The corporation may also have, at the discretion of
the board of directors, a chairman of the board, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers, and such
other officers as may be appointed in accordance with the provisions of Section
5.3 of these bylaws. Any number of offices may be held by the same person.
-12-
<PAGE>
5.2 ELECTION OF OFFICERS
--------------------
The officers of the corporation, except such officers as may be appointed
in accordance with the provisions of Section 5.3 or Section 5.5 of these bylaws,
shall be chosen by the board, subject to the rights, if any, of an officer under
any contract of employment. Any contract of employment with an officer shall be
unenforceable unless in writing and specifically authorized by the board of
directors.
5.3 SUBORDINATE OFFICERS
--------------------
The board of directors may appoint, or may empower the president to
appoint, such other officers as the business of the corporation may require,
each of whom shall hold office for such period, have such authority, and perform
such duties as are provided in these bylaws or as the board of directors may
from time to time determine.
5.4 REMOVAL AND RESIGNATION OF OFFICERS
-----------------------------------
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
board of directors at any regular or special meeting of the board or, except in
case of an officer chosen by the board of directors, by any officer upon whom
such power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 VACANCIES IN OFFICES
--------------------
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.
5.6 CHAIRMAN OF THE BOARD
---------------------
The chairman of the board, if such an officer be elected, shall, if
present, preside at meetings of the board of directors and exercise and perform
such other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.
5.7 PRESIDENT
---------
Subject to such supervisory 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 chief executive
-13-
<PAGE>
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
the officers of the corporation. He shall preside at all meetings of the
shareholders and, in the absence or nonexistence of a chairman of the board, at
all meetings of the board of directors. He shall have the general powers and
duties of management usually vested in the office of president of a corporation,
and shall have such other powers and duties as may be prescribed by the board of
directors or these bylaws.
5.8 VICE PRESIDENTS
---------------
In the absence or disability of the president, the vice presidents, if any,
in order of their rank as fixed by the board of directors or, if not ranked, a
vice president designated by the board of directors, 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 upon, the president. The vice presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed for them respectively by the board of directors, these bylaws, the
president or the chairman of the board.
5.9 SECRETARY
---------
The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors and shareholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at shareholders'
meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the board of directors required to be given by law or by
these bylaws. He shall keep the seal of the corporation, if one be adopted, in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or by these bylaws.
5.10 CHIEF FINANCIAL OFFICER
-----------------------
The chief financial officer shall keep and maintain, or cause to be kept
and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
-14-
<PAGE>
The chief financial officer shall deposit all money and other valuables in
the name and to the credit of the corporation with such depositories as may be
designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as chief financial officer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or these bylaws.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
--------------------------------------------------
AND OTHER AGENTS
----------------
6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
The corporation shall, to the maximum extent and in the manner permitted by
the Code, indemnify each of its directors and officers against expenses (as
defined in Section 317(a) of the Code), judgments, fines, settlements, and other
amounts actually and reasonably incurred in connection with any proceeding (as
defined in Section 317(a) of the Code), arising by reason of the fact that such
person is or was an agent of the corporation. For purposes of this Article VI,
a "director" or "officer" of the corporation includes any person (i) who is or
was a director or officer of the corporation, (ii) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was a
director or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.2 INDEMNIFICATION OF OTHERS
-------------------------
The corporation shall have the power, to the extent and in the manner
permitted by the Code, to indemnify each of its employees and agents (other than
directors and officers) against expenses (as defined in Section 317(a) of the
Code), judgments, fines, settlements, and other amounts actually and reasonably
incurred in connection with any proceeding (as defined in Section 317(a) of the
Code), arising by reason of the fact that such person is or was an agent of the
corporation. For purposes of this Article VI, an "employee" or "agent" of the
corporation (other than a director or officer) includes any person (i) who is or
was an employee or agent of the corporation, (ii) who is or was serving at the
request of the corporation as an employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, or (iii) who was an
employee or agent of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
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<PAGE>
6.3 PAYMENT OF EXPENSES IN ADVANCE
------------------------------
Expenses incurred in defending any civil or criminal action or proceeding
for which indemnification is required pursuant to Section 6.1 or for which
indemnification is permitted pursuant to Section 6.2 following authorization
thereof by the Board of Directors shall be paid by the corporation in advance of
the final disposition of such action or proceeding upon receipt of an
undertaking by or on behalf of the indemnified party to repay such amount if it
shall ultimately be determined that the indemnified party is not entitled to be
indemnified as authorized in this Article VI.
6.4 INDEMNITY NOT EXCLUSIVE
-----------------------
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the articles of
incorporation.
6.5 INSURANCE INDEMNIFICATION
-------------------------
The corporation shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
corporation against any liability asserted against or incurred by such person in
such capacity or arising out of such person's status as such, whether or not the
corporation would have the power to indemnify him against such liability under
the provisions of this Article VI.
6.6 CONFLICTS
---------
No indemnification or advance shall be made under this Article VI, except
where such indemnification or advance is mandated by law or the order, judgment
or decree of any court of competent jurisdiction, in any circumstance where it
appears:
(1) That it would be inconsistent with a provision of the articles of
incorporation, these bylaws, a resolution of the shareholders or an agreement in
effect at the time of the accrual of the alleged cause of the action asserted in
the proceeding in which the expenses were incurred or other amounts were paid,
which prohibits or otherwise limits indemnification; or
(2) That it would be inconsistent with any condition expressly imposed
by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
-------------------
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<PAGE>
7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER
--------------------------------------------
The corporation shall keep either at its principal executive office or at
the office of its transfer agent or registrar (if either be appointed), as
determined by resolution of the board of directors, a record of its shareholders
listing the names and addresses of all shareholders and the number and class of
shares held by each shareholder.
A shareholder or shareholders of the corporation who holds at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation or who holds at least one percent (1%) of such voting shares and has
filed a Schedule 14B with the Securities and Exchange Commission relating to the
election of directors, may (i) inspect and copy the records of shareholders'
names, addresses, and shareholdings during usual business hours on five (5)
days' prior written demand on the corporation, (ii) obtain from the transfer
agent of the corporation, on written demand and on the tender of such transfer
agent's usual charges for such list, a list of the names and addresses of the
shareholders who are entitled to vote for the election of directors, and their
shareholdings, as of the most recent record date for which that list has been
compiled or as of a date specified by the shareholder after the date of demand.
Such list shall be made available to any such shareholder by the transfer agent
on or before the later of five (5) days after the demand is received or five (5)
days after the date specified in the demand as the date as of which the list is
to be compiled.
The record of shareholders shall also be open to inspection on the written
demand of any shareholder or holder of a voting trust certificate, at any time
during usual business hours, for a purpose reasonably related to the holder's
interests as a shareholder or as the holder of a voting trust certificate.
Any inspection and copying under this Section 7.1 may be made in person or
by an agent or attorney of the shareholder or holder of a voting trust
certificate making the demand.
7.2 MAINTENANCE AND INSPECTION OF BYLAWS
------------------------------------
The corporation shall keep at its principal executive office or, if its
principal executive office is not in the State of California, at its principal
business office in California the original or a copy of these bylaws as amended
to date, which bylaws shall be open to inspection by the shareholders at all
reasonable times during office hours. If the principal executive office of the
corporation is outside the State of California and the corporation has no
principal business office in such state, then the secretary shall, upon the
written request of any shareholder, furnish to that shareholder a copy of these
bylaws as amended to date.
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS
-----------------------------------------------------
The accounting books and records and the minutes of proceedings of the
shareholders, of the board of directors, and of any committee or committees of
the board of directors shall be kept at such place or places as are designated
by the board of directors or, in absence of such designation, at the principal
executive office of the corporation. The minutes shall be kept in written
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<PAGE>
form, and the accounting books and records shall be kept either in written form
or in any other form capable of being converted into written form.
The minutes and accounting books and records shall be open to inspection
upon the written demand of any shareholder or holder of a voting trust
certificate, at any reasonable time during usual business hours, for a purpose
reasonably related to the holder's interests as a shareholder or as the holder
of a voting trust certificate. The inspection may be made in person or by an
agent or attorney and shall include the right to copy and make extracts. Such
rights of inspection shall extend to the records of each subsidiary corporation
of the corporation.
7.4 INSPECTION BY DIRECTORS
-----------------------
Every director shall have the absolute right at any reasonable time to
inspect all books, records, and documents of every kind as well as the physical
properties of the corporation and each of its subsidiary corporations. Such
inspection by a director may be made in person or by an agent or attorney. The
right of inspection includes the right to copy and make extracts of documents.
7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER
-------------------------------------
The board of directors shall cause an annual report to be sent to the
shareholders not later than one hundred twenty (120) days after the close of the
fiscal year adopted by the corporation. Such report shall be sent at least
fifteen (15) days (or, if sent by third-class mail, thirty-five (35) days)
before the annual meeting of shareholders to be held during the next fiscal year
and in the manner specified in Section 2.5 of these bylaws for giving notice to
shareholders of the corporation.
The annual report shall contain (i) a balance sheet as of the end of the
fiscal year, (ii) an income statement, (iii) a statement of changes in financial
position for the fiscal year, and (iv) any report of independent accountants or,
if there is no such report, the certificate of an authorized officer of the
corporation that the statements were prepared without audit from the books and
records of the corporation.
The foregoing requirement of an annual report shall be waived so long as
the shares of the corporation are held by fewer than one hundred (100) holders
of record.
7.6 FINANCIAL STATEMENTS
--------------------
If no annual report for the fiscal year has been sent to shareholders, then
the corporation shall, upon the written request of any shareholder made more
than one hundred twenty (120) days after the close of such fiscal year, deliver
or mail to the person making the request, within thirty (30) days thereafter, a
copy of 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.
If a shareholder or shareholders holding at least five percent (5%) of the
outstanding shares of any class of stock of the corporation makes a written
request to the corporation for an
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<PAGE>
income statement of the corporation for the three-month, six-month or nine-month
period of the then current fiscal year ended more than thirty (30) days before
the date of the request, and for a balance sheet of the corporation as of the
end of that period, then the chief financial officer shall cause that statement
to be prepared, if not already prepared, and shall deliver personally or mail
that statement or statements to the person making the request within thirty (30)
days after the receipt of the request. If the corporation has not sent to the
shareholders its annual report for the last fiscal year, the statements referred
to in the first paragraph of this Section 7.6 shall likewise be delivered or
mailed to the shareholder or shareholders within thirty (30) days after the
request.
The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or by the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.
7.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS
----------------------------------------------
The chairman of the board, the president, any vice president, the chief
financial officer, the secretary or assistant secretary of this corporation, or
any other person authorized by the board of directors or the president or a vice
president, is authorized to vote, represent, and exercise on behalf of this
corporation all rights incident to any and all shares of any other corporation
or corporations standing in the name of this corporation. The authority herein
granted may be exercised either by such person directly or by any other person
authorized to do so by proxy or power of attorney duly executed by such person
having the authority.
ARTICLE VIII
GENERAL MATTERS
---------------
8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
-----------------------------------------------------
For purposes of determining the shareholders entitled to receive payment of
any dividend or other distribution or allotment of any rights or the
shareholders entitled to exercise any rights in respect of any other lawful
action (other than action by shareholders by written consent without a meeting),
the board of directors may fix, in advance, a record date, which shall not be
more than sixty (60) days before any such action. In that case, only
shareholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except as
otherwise provided in the Code.
If the board of directors does not so fix a record date, then the record
date for determining shareholders for any such purpose shall be at the close of
business on the day on which the board adopts the applicable resolution or the
sixtieth (60th) day before the date of that action, whichever is later.
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<PAGE>
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
-----------------------------------------
From time to time, the board of directors shall determine by resolution
which person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.
8.3 CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED
--------------------------------------------------
The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so 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.
8.4 CERTIFICATES FOR SHARES
-----------------------
A certificate or certificates for shares of the corporation shall be issued
to each shareholder when any of such shares are fully paid. The board of
directors may authorize the issuance of certificates for shares partly paid
provided that these certificates shall state the total amount of the
consideration to be paid for them and the amount actually paid. All
certificates shall be signed in the name of the corporation by the chairman of
the board or the vice chairman of the board or the president or a vice president
and by the chief financial officer or an assistant treasurer or 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 on a certificate ceases to be that officer,
transfer agent or registrar before that certificate is issued, it may be issued
by the corporation with the same effect as if that person were an officer,
transfer agent or registrar at the date of issue.
8.5 LOST CERTIFICATES
-----------------
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and canceled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.
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8.6 CONSTRUCTION; DEFINITIONS
-------------------------
Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Code shall govern the construction of these
bylaws. Without limiting the generality of this provision, the singular number
includes the plural, the plural number includes the singular, and the term
"person" includes both a corporation and a natural person.
ARTICLE IX
AMENDMENTS
----------
9.1 AMENDMENT BY SHAREHOLDERS
-------------------------
New bylaws may be adopted or these bylaws may be amended or repealed by the
vote or written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that if the articles of incorporation of
the corporation set forth the number of authorized directors of the corporation,
then the authorized number of directors may be changed only by an amendment of
the articles of incorporation.
9.2 AMENDMENT BY DIRECTORS
----------------------
Subject to the rights of the shareholders as provided in Section 9.1 of
these bylaws, bylaws, other than a bylaw or an amendment of a bylaw changing the
authorized number of directors (except to fix the authorized number of directors
pursuant to a bylaw providing for a variable number of directors), may be
adopted, amended or repealed by the board of directors.
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<PAGE>
Certificate by Secretary
------------------------
The undersigned hereby certifies that he is the duly elected, qualified,
and acting Secretary of Trancell Systems, Inc., and that the foregoing Bylaws,
comprising twenty-one (21) pages, were adopted as the Bylaws of the corporation
on September 14, 1995, by the Board of Directors of the corporation.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and affixed
the corporate seal this 14th day of September, 1995.
/s/ Raghu Bathina
_______________________________________
Raghu Bathina, Secretary
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<PAGE>
EXHIBIT 3.6
AMENDED AND RESTATED BYLAWS
OF
RAMP NETWORKS, INC.
-1-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - CORPORATE OFFICES......................................................1
1.1 Registered Office.........................................................1
1.2 Other Offices.............................................................1
ARTICLE II - MEETINGS OF STOCKHOLDERS..............................................1
2.1 Place Of Meetings.........................................................1
2.2 Annual Meeting............................................................1
2.3 Special Meeting...........................................................1
2.4 Notice Of Stockholders' Meetings..........................................2
2.5 Advance Notice of Stockholder Nominees....................................2
2.6 Advance Notice of Stockholder Business....................................3
2.7 Quorum....................................................................3
2.8 Adjourned Meeting; Notice.................................................4
2.9 Conduct Of Business.......................................................4
2.10 Voting...................................................................4
2.11 Waiver Of Notice.........................................................4
2.12 Record Date For Stockholder Notice; Voting; Giving Consents..............4
2.13 Proxies..................................................................5
ARTICLE III - DIRECTORS............................................................6
3.1 Powers....................................................................6
3.2 Number Of Directors.......................................................6
3.3 Election, Qualification And Term Of Office Of Directors...................6
3.4 Resignation And Vacancies.................................................6
3.5 Place Of Meetings; Meetings By Telephone..................................7
3.6 Regular Meetings..........................................................7
3.7 Special Meetings; Notice..................................................7
3.8 Quorum....................................................................8
3.9 Waiver Of Notice..........................................................8
3.10 Board Action By Written Consent Without A Meeting........................8
3.11 Fees And Compensation Of Directors.......................................9
3.12 Approval Of Loans To Officers............................................9
3.13 Removal Of Directors.....................................................9
3.14 Chairman Of The Board Of Directors.......................................9
ARTICLE IV - COMMITTEES...........................................................10
4.1 Committees Of Directors..................................................10
4.2 Committee Minutes........................................................10
4.3 Meetings And Action Of Committees........................................10
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(continued)
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ARTICLE V - OFFICERS..............................................................11
5.1 Officers.................................................................11
5.2 Appointment Of Officers..................................................11
5.3 Subordinate Officers.....................................................11
5.4 Removal And Resignation Of Officers......................................11
5.5 Vacancies In Offices.....................................................12
5.6 Chief Executive Officer..................................................12
5.7 President................................................................12
5.8 Vice Presidents..........................................................12
5.9 Secretary................................................................12
5.10 Chief Financial Officer.................................................13
5.11 Representation Of Shares Of Other Corporations..........................13
5.12 Authority And Duties Of Officers........................................14
ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS..14
6.1 Indemnification Of Directors And Officers................................14
6.2 Indemnification Of Others................................................14
6.3 Payment Of Expenses In Advance...........................................14
6.4 Indemnity Not Exclusive..................................................15
6.5 Insurance................................................................15
6.6 Conflicts................................................................15
ARTICLE VII - RECORDS AND REPORTS.................................................15
7.1 Maintenance And Inspection Of Records....................................15
7.2 Inspection By Directors..................................................16
7.3 Annual Statement To Stockholders.........................................16
ARTICLE VIII - GENERAL MATTERS....................................................16
8.1 Checks...................................................................16
8.2 Execution Of Corporate Contracts And Instruments.........................16
8.3 Stock Certificates; Partly Paid Shares...................................17
8.4 Special Designation On Certificates......................................17
8.5 Lost Certificates........................................................18
8.6 Construction; Definitions................................................18
8.7 Dividends................................................................18
8.8 Fiscal Year..............................................................18
8.9 Seal.....................................................................18
8.10 Transfer Of Stock.......................................................18
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8.11 Stock Transfer Agreements...............................................19
8.12 Registered Stockholders.................................................19
ARTICLE IX - AMENDMENTS...........................................................19
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BYLAWS
OF
RAMP NETWORKS, INC.
ARTICLE I
CORPORATE OFFICES
-----------------
1.1 Registered Office.
-----------------
The address of the Corporation's registered office in the State of
Delaware is 1013 Centre Road, City of Wilmington, County of New Castle, Delaware
19805. The name of its registered agent at such address is Corporation Service
Company.
1.2 Other Offices.
-------------
The Board of Directors may at any time establish other offices at any
place or places where the corporation is qualified to do business.
ARTICLE II
MEETINGS OF STOCKHOLDERS
------------------------
2.1 Place Of Meetings.
-----------------
Meetings of stockholders shall be held at any place, within or outside
the State of Delaware, designated by the Board of Directors. In the absence of
any such designation, stockholders' meetings shall be held at the registered
office of the corporation.
2.2 Annual Meeting.
--------------
The annual meeting of stockholders shall be held on such date, time
and place, either within or without the State of Delaware, as may be designated
by resolution of the Board of Directors each year. At the meeting, directors
shall be elected and any other proper business may be transacted.
2.3 Special Meeting.
---------------
(a) A special meeting of the stockholders may be called at any time
by the Board of Directors, the chairman of the board or the president.
(b) Only such business shall be conducted at a special meeting of
stockholders as shall have been brought before the meeting pursuant to the
notice of meeting given in accordance with the terms of these bylaws.
Nominations of persons for election to the board of
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directors may be made at a special meeting of stockholders at which directors
are to be selected pursuant to such 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 of notice provided for in this
paragraph, who shall be entitled to vote at the meeting and who complies with
the notice procedures set forth in Section 2.5.
2.4 Notice Of Stockholders' Meetings.
--------------------------------
All notices of meetings with stockholders shall be in writing and
shall be sent or otherwise given in accordance with Section 2.5 of these Bylaws
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. The notice shall
specify the place, date, and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called.
2.5 Advance Notice Of Stockholder Nominees.
--------------------------------------
Only persons who are nominated in accordance with the procedures set
forth in this Section 2.5 shall be eligible for election as directors.
Nominations of persons for election to the board of directors of the corporation
may be made at a meeting of stockholders by or at the direction of the board of
directors or by any stockholder of the corporation entitled to vote for the
election of directors at the meeting who complies with the notice procedures set
forth in this Section 2.5. Such nominations, other than those made by or at the
direction of the board of directors, shall be made pursuant to timely notice in
writing to the secretary of the corporation. To be timely, a stockholder's
notice shall be delivered to or mailed and received at the principal executive
offices of the corporation not less than one hundred twenty (120) days nor more
than one hundred fifty (150) days prior to the anniversary of the date of notice
of the Company's annual meeting for the prior fiscal year. Such stockholder's
notice shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or re-election as a Director, (i) the name, age, business
address and residence address of such person, (ii) the principal occupation or
employment of such person, (iii) the class and number of shares of the
corporation which are beneficially owned by such person and (iv) any other
information relating to such person that is required to be disclosed in
solicitations of proxies for election of Directors, or is otherwise required, in
each case pursuant to Regulation 14A under the Securities Exchange Act of 1934,
as amended (including, without limitation, such person's written consent to
being named in the proxy statement as a nominee and to serving as a director if
elected); and (b) as to the stockholder giving the notice (i) the name and
address, as they appear on the corporation's books, of such stockholder and (ii)
the class and number of shares of the corporation which are beneficially owned
by such stockholder. At the request of the Board of Directors any person
nominated by the Board of Directors for election as a director shall furnish to
the secretary of the corporation that information required to be set forth in a
stockholder's notice of nomination which pertains to the nominee. No person
shall be eligible for election as a director of the corporation unless nominated
in accordance with the procedures set forth in this Section 2.5. The Chairman
of the meeting shall, if the facts warrant, determine and declare to the meeting
that a nomination was not made in accordance with the procedures prescribed by
the Bylaws, and if
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he or she should so determine, he or she shall so declare to the meeting and the
defective nomination shall be disregarded.
2.6 Advance Notice Of Stockholder Business
--------------------------------------
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be: (a) specified in
the notice of meeting (or any supplement thereto) given by or at the direction
of the Board of Directors, (b) otherwise properly brought before the meeting by
or at the direction of the Board of Directors, or (c) otherwise properly brought
before the meeting by a stockholder. Business to be brought before an annual
meeting by a stockholder shall not be considered properly brought if the
stockholder has not given timely notice thereof in writing to the Secretary of
the corporation. To be timely, a stockholder's notice shall be delivered to or
mailed not less than one hundred twenty (120) days nor more than one hundred
eighty (180) days prior to (i) the anniversary of mailing of the notice of the
prior fiscal year's annual meeting, in the case of an annual meeting, or (ii)
the date of the meeting in question in the event of a special meeting; provided,
--------
however, that in the case of special meeting, where less than one hundred twenty
- -------
(130) days notice or prior public disclosure of the date of the meeting is given
or made to stockholder, notice by the stockholder, to be timely, must be so
received not later than the close of business on the fifth day following the day
on which such notice of the date of the meeting was mailed or such public
disclosure was made. Such stockholder's notice shall set forth as to each
matter the stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conduction of such business at the annual meeting, (ii) the name
and address of the stockholder proposing such business, (iii) the class and
number of shares of the corporation which are beneficially owned by the
stockholder, (iv) any material interest of the stockholder in such business, and
(v) any other information that is required by law to be provided by the
stockholder in his capacity as a proponent of a stockholder proposal.
Notwithstanding anything in these bylaws to the contrary, no business shall be
conducted an any annual meeting except in accordance with the procedures set
forth in this Section. The chairman of the annual meeting shall, if the facts
warrant, determine and declare at the meeting that business was not properly
brought before the meeting and in accordance with the provisions of this
Section, and, if he should so determine, he shall so declare at the meeting that
any such business not properly brought before the meeting shall not be
transacted.
2.7 Quorum.
------
The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the certificate of
incorporation. If, however, such quorum is not present or represented at any
meeting of the stockholders, then either (a) the chairman of the meeting or (b)
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum is present or
represented. At such adjourned meeting at which a quorum is present or
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represented, any business may be transacted that might have been transacted at
the meeting as originally noticed.
2.8 Adjourned Meeting; Notice.
-------------------------
When a meeting is adjourned to another time or place, unless these
Bylaws otherwise require, 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
that 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.
2.9 Conduct Of Business.
-------------------
The chairman of any meeting of stockholders shall determine the order
of business and the procedure at the meeting, including the manner of voting and
the conduct of business.
2.10 Voting.
------
The stockholders entitled to vote at any meeting of stockholders shall
be determined in accordance with the provisions of Section 2.11 of these Bylaws,
subject to the provisions of Sections 217 and 218 of the General Corporation Law
of Delaware (relating to voting rights of fiduciaries, pledgors and joint owners
of stock and to voting trusts and other voting agreements).
Except as may be otherwise provided in the certificate of
incorporation, each stockholder shall be entitled to one vote for each share of
capital stock held by such stockholder.
2.11 Waiver of Notice.
----------------
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the stockholders need be specified in any written waiver of notice unless so
required by the certificate of incorporation or these Bylaws.
2.12 Record Date For Stockholder Notice; Voting; Giving Consents.
-----------------------------------------------------------
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, or entitled to receive
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payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or exchange
of stock or for the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date, which shall not be more than sixty (60) nor
less than ten (10) days before the date of such meeting, nor more than sixty
(60) days prior to any other action.
If the Board of Directors does not so fix a record date:
(a) 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.
(b) The record date for determining stockholders 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.
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.
2.13 Proxies.
-------
Each stockholder entitled to vote at a meeting of stockholders may
authorize another person or persons to act for such stockholder by a written
proxy, signed by the stockholder and filed with the secretary of the
corporation, but no such proxy shall be voted or acted upon after three (3)
years from its date, unless the proxy provides for a longer period. A proxy
shall be deemed signed if the stockholder's name is placed on the proxy (whether
by manual signature, typewriting, telegraphic transmission or otherwise) by the
stockholder or the stockholder's attorney-in-fact. The revocability of a proxy
that states on its face that it is irrevocable shall be governed by the
provisions of Section 212(e) of the General Corporation Law of Delaware.
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ARTICLE III
DIRECTORS
---------
3.1 Powers.
------
Subject to the provisions of the General Corporation Law of Delaware
and any limitations in the certificate of incorporation or these Bylaws relating
to action required to be approved by the stockholders 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.
3.2 Number Of Directors.
-------------------
Upon the adoption of these bylaws, the number of directors
constituting the entire Board of Directors shall be four (4). Thereafter, this
number may be changed by a resolution of the Board of Directors or of the
stockholders, subject to Section 3.4 of these Bylaws. No reduction of the
authorized number of directors shall have the effect of removing any director
before such director's term of office expires.
3.3 Election, Qualification And Term Of Office Of Directors.
-------------------------------------------------------
Except as provided in Section 3.4 of these Bylaws, directors shall be
elected at each annual meeting of stockholders to hold office until the next
annual meeting. Directors need not be stockholders unless so required by the
certificate of incorporation or these Bylaws, wherein other qualifications for
directors may be prescribed. Each director, including a director elected to
fill a vacancy, shall hold office until his or her successor is elected and
qualified or until his or her earlier resignation or removal.
Elections of directors need not be by written ballot.
3.4 Resignation And Vacancies.
-------------------------
Any director may resign at any time upon written notice to the
attention of the Secretary of the corporation. When one or more directors so
resigns and the resignation is 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 as provided in this section in the filling of other vacancies.
Unless otherwise provided in the certificate of incorporation or these
Bylaws:
(a) Vacancies and newly created directorships resulting from any
increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum, or by a
sole remaining director.
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(b) Whenever the holders of any class or classes of stock or series
thereof are entitled to elect one or more directors by the provisions of the
certificate of incorporation, vacancies and newly created directorships of such
class or classes or series may be filled by a majority of the directors elected
by such class or classes or series thereof then in office, or by a sole
remaining director so elected.
If at any time, by reason of death or resignation or other cause, the
corporation should have no directors in office, then any officer or any
stockholder or an executor, administrator, trustee or guardian of a stockholder,
or other fiduciary entrusted with like responsibility for the person or estate
of a stockholder, may call a special meeting of stockholders in accordance with
the provisions of the certificate of incorporation or these Bylaws, or may apply
to the Court of Chancery for a decree summarily ordering an election as provided
in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created
directorship, the directors then in office constitute less than a majority of
the whole board (as constituted immediately prior to any such increase), then
the Court of Chancery may, upon application of any stockholder or stockholders
holding at least ten (10) percent 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 office as aforesaid,
which election shall be governed by the provisions of Section 211 of the General
Corporation Law of Delaware as far as applicable.
3.5 Place Of Meetings; Meetings By Telephone.
----------------------------------------
The Board of Directors of the corporation may hold meetings, both
regular and special, either within or outside the State of Delaware.
Unless otherwise restricted by the certificate of incorporation or
these Bylaws, members of the Board of Directors, or any committee designated by
the Board of Directors, may participate in a meeting of the Board of Directors,
or any committee, by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and such participation in a meeting shall constitute presence in
person at the meeting.
3.6 Regular Meetings.
----------------
Regular meetings of the Board of Directors may be held without notice
at such time and at such place as shall from time to time be determined by the
board.
3.7 Special Meetings; Notice.
------------------------
Special meetings of the Board of Directors for any purpose or purposes
may be called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.
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Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's address
as it is shown on the records of the corporation. If the notice is mailed, it
shall be deposited in the United States mail at least four (4) days before the
time of the holding of the meeting. If the notice is delivered personally or by
telephone or by telegram, it shall be delivered personally or by telephone or to
the telegraph company at least forty-eight (48) hours before the time of the
holding of the meeting. Any oral notice given personally or by telephone may be
communicated either to the director or to a person at the office of the director
who the person giving the notice has reason to believe will promptly communicate
it to the director. The notice need not specify the purpose or the place of the
meeting, if the meeting is to be held at the principal executive office of the
corporation.
3.8 Quorum.
------
At all meetings of the Board of Directors, a majority of the
authorized number of directors shall constitute a quorum for the transaction of
business and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the Board of Directors, except as
may be otherwise specifically provided by statute or by the certificate of
incorporation. If a quorum is not present at any meeting of the Board of
Directors, then the directors present thereat may adjourn the meeting from time
to time, without notice other than announcement at the meeting, until a quorum
is present.
A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, if any action
taken is approved by at least a majority of the required quorum for that
meeting.
3.9 Waiver Of Notice.
----------------
Whenever notice is required to be given under any provision of the
General Corporation Law of Delaware or of the certificate of incorporation or
these Bylaws, a written waiver thereof, signed by the person entitled to notice,
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of a person at a meeting shall constitute a waiver of notice
of such meeting, except when the person attends a meeting for the express
purpose of objecting, at the beginning of the meeting, to the transaction of any
business because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the directors, or members of a committee of directors, need be specified in
any written waiver of notice unless so required by the certificate of
incorporation or these Bylaws.
3.10 Board Action By Written Consent Without A Meeting.
-------------------------------------------------
Unless otherwise restricted by the certificate of incorporation or
these Bylaws, any action required or permitted to be taken at any meeting of the
Board of Directors, or of any committee thereof, may be taken without a meeting
if all members of the board or committee, as the case may be, consent thereto in
writing and the writing or writings are filed with the minutes of proceedings of
the board or committee. Written consents representing actions taken by the
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board or committee may be executed by telex, telecopy or other facsimile
transmission, and such facsimile shall be valid and binding to the same extent
as if it were an original.
3.11 Fees And Compensation Of Directors.
----------------------------------
Unless otherwise restricted by the certificate of incorporation or
these Bylaws, the Board of Directors shall have the authority to fix the
compensation of directors. No such compensation shall preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor.
3.12 Approval Of 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
subsidiary, including any officer or employee who is a director of the
corporation or its subsidiary, whenever, in the judgment of the directors, such
loan, guaranty or assistance may reasonably be expected to benefit the
corporation. The loan, guaranty or other assistance may be with or without
interest and may be unsecured, or secured in such manner as the Board of
Directors shall approve, including, without limitation, a pledge of shares of
stock of the corporation. Nothing in this section contained shall be deemed to
deny, limit or restrict the powers of guaranty or warranty of the corporation at
common law or under any statute.
3.13 Removal Of Directors.
--------------------
Unless otherwise restricted by statute, by the certificate of
incorporation or by these Bylaws, any director or the entire Board of Directors
may be removed, with or without cause, by the holders of a majority of the
shares then entitled to vote at an election of directors; provided, however,
that if the stockholders of the corporation are entitled to cumulative voting,
if less than the entire Board of Directors is to be removed, no director may be
removed without cause if the votes cast against his removal would be sufficient
to elect him if then cumulatively voted at an election of the entire Board of
Directors.
No reduction of the authorized number of directors shall have the
effect of removing any director prior to the expiration of such director's term
of office.
3.14 Chairman Of The Board Of Directors.
----------------------------------
The corporation may also have, at the discretion of the Board of
Directors, a chairman of the Board of Directors who shall not be considered an
officer of the corporation.
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ARTICLE IV
COMMITTEES
----------
4.1 Committees Of Directors.
-----------------------
The Board of Directors, by resolution passed by a majority of the
whole board, designate one or more committees, each committee to consist of one
or more of the directors of the corporation. The Board may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of a member of a committee, the member or members present at
any meeting and not disqualified from voting, whether or not such member or
members 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. Any such committee, to the extent provided in the
resolution of the Board of Directors, or in these Bylaws, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers which may require it; but no
such committee shall have the power or authority to (a) amend 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 as provided in Section 151(a) of the General
Corporation Law of Delaware, 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), (b) adopt an agreement of merger or
consolidation under Sections 251 or 252 of the General Corporation Law of
Delaware, (c) recommend to the stockholders the sale, lease or exchange of all
or substantially all of the corporation's property and assets, (d) recommend to
the stockholders a dissolution of the corporation or a revocation of a
dissolution, or (e) amend the Bylaws of the corporation; and, unless the board
resolution establishing the committee, the Bylaws or the certificate of
incorporation expressly so provide, no such committee shall have the power or
authority to declare a dividend, to authorize the issuance of stock, or to adopt
a certificate of ownership and merger pursuant to Section 253 of the General
Corporation Law of Delaware.
4.2 Committee Minutes.
-----------------
Each committee shall keep regular minutes of its meetings and report
the same to the Board of Directors when required.
4.3 Meetings And Action Of Committees.
---------------------------------
Meetings and actions of committees shall be governed by, and held and
taken in accordance with, the provisions of Section 3.5 (place of meetings and
meetings by telephone), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice), and
Section 3.10 (action without a meeting) of these Bylaws, with
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such changes in the context of such provisions as are necessary to substitute
the committee and its members for the Board of Directors and its members;
provided, however, that the time of regular meetings of committees may be
determined either by resolution of the Board of Directors or by resolution of
the committee, that special meetings of committees may also be called by
resolution of the Board of Directors and that notice of special meetings of
committees shall also be given to all alternate members, who shall have the
right to attend all meetings of the committee. The Board of Directors may adopt
rules for the government of any committee not inconsistent with the provisions
of these Bylaws.
ARTICLE V
OFFICERS
--------
5.1 Officers.
--------
The officers of the corporation shall be a president, a secretary, and
a chief financial officer. The corporation may also have, at the discretion of
the Board of Directors, a chief executive officer, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers, and any
such other officers as may be appointed in accordance with the provisions of
Section 5.3 of these Bylaws. Any number of offices may be held by the same
person.
5.2 Appointment Of Officers.
-----------------------
The officers of the corporation, except such officers as may be
appointed in accordance with the provisions of Sections 5.3 or 5.5 of these
Bylaws, shall be appointed by the Board of Directors, subject to the rights, if
any, of an officer under any contract of employment.
5.3 Subordinate Officers.
--------------------
The Board of Directors may appoint, or empower the chief executive
officer or the president to appoint, such other officers and agents as the
business of the corporation may require, each of whom shall hold office for such
period, have such authority, and perform such duties as are provided in these
Bylaws or as the Board of Directors may from time to time determine.
5.4 Removal And Resignation Of Officers.
-----------------------------------
Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by an
affirmative vote of the majority of the Board of Directors at any regular or
special meeting of the board or, except in the case of an officer chosen by the
Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
attention of the Secretary of the corporation. Any resignation shall take
effect at the date of the receipt of that
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notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.
5.5 Vacancies In Offices.
--------------------
Any vacancy occurring in any office of the corporation shall be filled
by the Board of Directors.
5.6 Chief Executive Officer.
-----------------------
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the chairman of the board, if any, the chief executive
officer of the corporation (if such an officer is appointed) shall, subject to
the control of the Board of Directors, have general supervision, direction, and
control of the business and the officers of the corporation. He or she shall
preside at all meetings of the stockholders and, in the absence or nonexistence
of a chairman of the board, at all meetings of the Board of Directors and shall
have the general powers and duties of management usually vested in the office of
chief executive officer of a corporation and shall have such other powers and
duties as may be prescribed by the Board of Directors or these bylaws.
5.7 President.
---------
Subject to such supervisory powers, if any, as may be given by the
Board of Directors to the chairman of the board (if any) or the chief executive
officer, the president shall have general supervision, direction, and control of
the business and other officers of the corporation. He or she shall have the
general powers and duties of management usually vested in the office of
president of a corporation and such other powers and duties as may be prescribed
by the Board of Directors or these Bylaws.
5.8 Vice Presidents.
---------------
In the absence or disability of the chief executive officer and
president, the vice presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranked, a vice president designated by the Board
of Directors, 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 upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors, these Bylaws, the president or the chairman of the board.
5.9 Secretary.
---------
The secretary shall keep or cause to be kept, at the principal
executive office of the corporation or such other place as the Board of
Directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors, and stockholders. The minutes shall
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<PAGE>
show the time and place of each meeting, the names of those present at
directors' meetings or committee meetings, the number of shares present or
represented at stockholders' meetings, and the proceedings thereof.
The secretary shall keep, or cause to be kept, at the principal
executive office of the corporation or at the office of the corporation's
transfer agent or registrar, as determined by resolution of the Board of
Directors, a share register, or a duplicate share register, showing the names of
all stockholders and their addresses, the number and classes of shares held by
each, the number and date of certificates evidencing such shares, and the number
and date of cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings
of the stockholders and of the Board of Directors required to be given by law or
by these Bylaws. He or she shall keep the seal of the corporation, if one be
adopted, in safe custody and shall have such other powers and perform such other
duties as may be prescribed by the Board of Directors or by these Bylaws.
5.10 Chief Financial Officer.
-----------------------
The chief financial officer shall keep and maintain, or cause to be
kept and maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.
The chief financial officer shall deposit all moneys and other
valuables in the name and to the credit of the corporation with such
depositories as may be designated by the Board of Directors. He or she shall
disburse the funds of the corporation as may be ordered by the Board of
Directors, shall render to the president, the chief executive officer, or the
directors, upon request, an account of all his or her transactions as chief
financial officer and of the financial condition of the corporation, and shall
have other powers and perform such other duties as may be prescribed by the
Board of Directors or the bylaws.
5.11 Representation Of Shares Of Other Corporations.
----------------------------------------------
The chairman of the board, the chief executive officer, the president,
any vice president, the chief financial officer, the secretary or assistant
secretary of this corporation, or any other person authorized by the Board of
Directors or the chief executive officer or the president or a vice president,
is authorized to vote, represent, and exercise on behalf of this corporation all
rights incident to any and all shares of any other corporation or corporations
standing in the name of this corporation. The authority granted herein may be
exercised either by such person directly or by any other person authorized to do
so by proxy or power of attorney duly executed by the person having such
authority.
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<PAGE>
5.12 Authority And Duties Of Officers.
--------------------------------
In addition to the foregoing authority and duties, all officers of the
corporation shall respectively have such authority and perform such duties in
the management of the business of the corporation as may be designated from time
to time by the Board of Directors or the stockholders.
ARTICLE VI
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS
-------------------------------------------------------------------
6.1 Indemnification Of Directors And Officers.
-----------------------------------------
The corporation shall, to the maximum extent and in the manner
permitted by the General Corporation Law of Delaware, indemnify each of its
directors and officers against expenses (including attorneys' fees), judgments,
fines, settlements and other amounts actually and reasonably incurred in
connection with any proceeding, arising by reason of the fact that such person
is or was an agent of the corporation. For purposes of this Section 6.1, a
"director" or "officer" of the corporation includes any person (a) who is or was
a director or officer of the corporation, (b) who is or was serving at the
request of the corporation as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise, or (c) who was a director
or officer of a corporation which was a predecessor corporation of the
corporation or of another enterprise at the request of such predecessor
corporation.
6.2 Indemnification Of Others.
-------------------------
The corporation shall have the power, to the maximum extent and in the
manner permitted by the General Corporation Law of Delaware, to indemnify each
of its employees and agents (other than directors and officers) against expenses
(including attorneys' fees), judgments, fines, settlements and other amounts
actually and reasonably incurred in connection with any proceeding, arising by
reason of the fact that such person is or was an agent of the corporation. For
purposes of this Section 6.2, an "employee" or "agent" of the corporation (other
than a director or officer) includes any person (a) who is or was an employee or
agent of the corporation, (b) who is or was serving at the request of the
corporation as an employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, or (c) who was an employee or agent of a
corporation which was a predecessor corporation of the corporation or of another
enterprise at the request of such predecessor corporation.
6.3 Payment Of Expenses In Advance.
------------------------------
Expenses incurred in defending any action or proceeding for which
indemnification is required pursuant to Section 6.1 or for which indemnification
is permitted pursuant to Section 6.2 following authorization thereof by the
Board of Directors shall be paid by the corporation in advance of the final
disposition of such action or proceeding upon receipt of an undertaking by or on
behalf of the indemnified party to repay such amount if it shall ultimately
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<PAGE>
be determined that the indemnified party is not entitled to be indemnified as
authorized in this Article VI.
6.4 Indemnity Not Exclusive.
-----------------------
The indemnification provided by this Article VI shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under any bylaw, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in an official capacity and as to
action in another capacity while holding such office, to the extent that such
additional rights to indemnification are authorized in the certificate of
incorporation
6.5 Insurance.
---------
The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee or agent of the corporation,
or is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against any liability asserted against him or her and incurred
by him or her in any such capacity, or arising out of his or her status as such,
whether or not the corporation would have the power to indemnify him or her
against such liability under the provisions of the General Corporation Law of
Delaware.
6.6 Conflicts.
---------
No indemnification or advance shall be made under this Article VI,
except where such indemnification or advance is mandated by law or the order,
judgment or decree of any court of competent jurisdiction, in any circumstance
where it appears:
(a) That it would be inconsistent with a provision of the certificate
of incorporation, these Bylaws, a resolution of the stockholders or an agreement
in effect at the time of the accrual of the alleged cause of the action asserted
in the proceeding in which the expenses were incurred or other amounts were
paid, which prohibits or otherwise limits indemnification; or
(b) That it would be inconsistent with any condition expressly imposed
by a court in approving a settlement.
ARTICLE VII
RECORDS AND REPORTS
-------------------
7.1 Maintenance And Inspection Of Records.
-------------------------------------
The corporation shall, either at its principal executive offices or at
such place or places as designated by the Board of Directors, keep a record of
its stockholders listing their names and addresses and the number and class of
shares held by each stockholder, a copy of these Bylaws as amended to date,
accounting books, and other records.
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<PAGE>
Any stockholder of record, in person or by attorney or other agent,
shall, upon written demand under oath stating the purpose thereof, have the
right during the usual hours for business to inspect for any proper purpose the
corporation's stock ledger, a list of its stockholders, and its other books and
records and to make copies or extracts therefrom. A proper purpose shall mean a
purpose reasonably related to such person's interest as a stockholder. In every
instance where an attorney or other agent is the person who seeks the right to
inspection, the demand under oath shall be accompanied by a power of attorney or
such other writing that authorizes the attorney or other agent to so act on
behalf of the stockholder. The demand under oath shall be directed to the
corporation at its registered office in Delaware or at its principal place of
business.
7.2 Inspection By Directors.
-----------------------
Any director shall have the right to examine the corporation's stock
ledger, a list of its stockholders, and its other books and records for a
purpose reasonably related to his or her position as a director. The Court of
Chancery is hereby vested with the exclusive jurisdiction to determine whether a
director is entitled to the inspection sought. The Court may summarily order
the corporation to permit the director to inspect any and all books and records,
the stock ledger, and the stock list and to make copies or extracts therefrom.
The Court may, in its discretion, prescribe any limitations or conditions with
reference to the inspection, or award such other and further relief as the Court
may deem just and proper.
7.3 Annual Statement To Stockholders.
--------------------------------
The Board of Directors shall present at each annual meeting, and at
any special meeting of the stockholders when called for by vote of the
stockholders, a full and clear statement of the business and condition of the
corporation.
ARTICLE VIII
GENERAL MATTERS
---------------
8.1 Checks.
------
From time to time, the Board of Directors shall determine by
resolution which person or persons may sign or endorse all checks, drafts, other
orders for payment of money, notes or other evidences of indebtedness that are
issued in the name of or payable to the corporation, and only the persons so
authorized shall sign or endorse those instruments.
8.2 Execution Of Corporate Contracts And Instruments.
------------------------------------------------
The Board of Directors, except as otherwise provided in these Bylaws,
may authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so 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
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<PAGE>
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.
8.3 Stock Certificates; Partly Paid Shares.
--------------------------------------
The shares of a corporation shall be represented by certificates,
provided that the Board of Directors of the corporation may provide by
resolution or resolutions that some or all of any or all classes or series of
its stock shall be uncertificated shares. Any such resolution shall not apply
to shares represented by a certificate until such certificate is surrendered to
the corporation. Notwithstanding the adoption of such a resolution by the Board
of Directors, every holder of stock represented by certificates and upon request
every holder of uncertificated shares shall be entitled to have a certificate
signed by, or in the name of the corporation by the chairman or vice-chairman of
the Board of Directors, or the president or vice-president, and by the chief
financial officer or an assistant treasurer, or the secretary or an assistant
secretary of such corporation representing the number of shares registered in
certificate form. Any or all of the signatures on the certificate may be a
facsimile. In case any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate has ceased to be
such officer, transfer agent or registrar before such certificate is issued, it
may be issued by the corporation with the same effect as if he or she were such
officer, transfer agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as
partly paid and subject to call for the remainder of the consideration to be
paid therefor. Upon the face or back of each stock certificate issued to
represent any such partly paid shares, upon the books and records of the
corporation in the case of uncertificated partly paid shares, the total amount
of the consideration to be paid therefor and the amount paid thereon shall be
stated. Upon the declaration of any dividend on fully paid shares, the
corporation shall declare a dividend upon partly paid shares of the same class,
but only upon the basis of the percentage of the consideration actually paid
thereon.
8.4 Special Designation On Certificates.
-----------------------------------
If the corporation is authorized to issue more than one class of stock
or more than one series of any class, then the powers, the designations, the
preferences, and the relative, participating, optional or other special rights
of each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate that the corporation shall
issue to represent such class or series of stock; provided, however, that,
except as otherwise provided in Section 202 of the General Corporation Law of
Delaware, in lieu of the foregoing requirements there may be set forth on the
face or back of the certificate that the corporation shall issue to represent
such class or series of stock a statement that the corporation will furnish
without charge to each stockholder who so requests the powers, the designations,
the preferences, and the 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.
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<PAGE>
8.5 Lost Certificates.
-----------------
Except as provided in this Section 8.5, no new certificates for shares
shall be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The corporation
may issue a new certificate of stock or uncertificated shares in the place of
any certificate previously issued by it, alleged to have been lost, stolen or
destroyed, and the corporation may require the owner of the lost, stolen or
destroyed certificate, or the owner's legal representative, to give the
corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate or uncertificated shares.
8.6 Construction; Definitions.
-------------------------
Unless the context requires otherwise, the general provisions, rules
of construction, and definitions in the Delaware General Corporation Law shall
govern the construction of these Bylaws. Without limiting the generality of
this provision, the singular number includes the plural, the plural number
includes the singular, and the term "person" includes both a corporation and a
natural person.
8.7 Dividends.
---------
The directors of the corporation, subject to any restrictions
contained in (a) the General Corporation Law of Delaware or (b) the certificate
of incorporation, may declare and pay dividends upon the shares of its capital
stock. Dividends may be paid in cash, in property, or in shares of the
corporation's capital stock.
The directors of the corporation may set apart out of any of the funds
of the corporation available for dividends a reserve or reserves for any proper
purpose and may abolish any such reserve. Such purposes shall include but not be
limited to equalizing dividends, repairing or maintaining any property of the
corporation, and meeting contingencies.
8.8 Fiscal Year.
-----------
The fiscal year of the corporation shall be fixed by resolution of the
Board of Directors and may be changed by the Board of Directors.
8.9 Seal.
----
The corporation may adopt a corporate seal, which may be altered at
pleasure, and may use the same by causing it or a facsimile thereof, to be
impressed or affixed or in any other manner reproduced.
8.10 Transfer Of Stock.
-----------------
Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession,
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<PAGE>
assignation or authority to transfer, it shall be the duty of the corporation to
issue a new certificate to the person entitled thereto, cancel the old
certificate, and record the transaction in its books.
8.11 Stock Transfer Agreements.
-------------------------
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.
8.12 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, shall be entitled to hold liable for calls and
assessments the person registered on its books as the owner of shares, and shall
not be bound to recognize any equitable or other claim to or interest in such
share or shares on the part of another person, whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Delaware.
ARTICLE IX
AMENDMENTS
----------
The Bylaws of the corporation may be adopted, amended or repealed by
the stockholders entitled to vote; provided, however, that the corporation may,
in its certificate of incorporation, confer the power to adopt, amend or repeal
Bylaws upon the directors. The fact that such power has been so conferred upon
the directors shall not divest the stockholders of the power, nor limit their
power to adopt, amend or repeal Bylaws.
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<PAGE>
EXHIBIT 4.2
RAMP NETWORKS, INC.
FOURTH AMENDED AND RESTATED RIGHTS AGREEMENT
THIS FOURTH AMENDED AND RESTATED RIGHTS AGREEMENT (the "Agreement") is made
---------
and entered into as of October 30, 1997, by and among Ramp Networks, Inc., a
California corporation (the "Company"), the persons identified on Exhibit A-1
-------
attached hereto (the "Founders") and the investors identified on Exhibit A-2
--------
attached hereto (the "Investors").
---------
RECITALS
WHEREAS, the Company and certain of the Investors have entered into a
Series A Preferred Stock Purchase Agreement dated September 22, 1995 (the
"Series A Purchase Agreement"), pursuant to which the Company sold, and such
---------------------------
Investors acquired, shares of the Company's Series A Preferred Stock (the
"Series A Shares");
---------------
WHEREAS, the Company and certain of the Investors have entered into a
Series B Preferred Stock Purchase Agreement dated March 28, 1996 (the "Series B
--------
Purchase Agreement"), pursuant to which the Company sold, and such Investors
- ------------------
acquired, shares of the Company's Series B Preferred Stock (the "Series B
--------
Shares");
- ------
WHEREAS, the Company and certain of the Investors have entered into an
Amended and Restated Series C Preferred Stock Purchase Agreement dated April 30,
1997 (the "Series C Purchase Agreement"), pursuant to which the Company sold,
---------------------------
and such Investors acquired, shares of the Company's Series C Preferred Stock
(the "Series C Shares");
---------------
WHEREAS, the Founders have purchased shares of the Company's Common Stock
pursuant to Common Stock Purchase Agreements (the "Founders' Shares");
----------------
WHEREAS, the Company and certain of the Investors are entering into a
Series D Preferred Stock Purchase Agreement of even date herewith (the "Series D
--------
Purchase Agreement"), pursuant to which the Company shall sell, and the
- ------------------
Investors shall acquire, shares of the Company's Series D Preferred Stock (the
"Series D Shares");
---------------
WHEREAS, the Company, the Founders and certain of the Investors have
entered into an existing Third Amended and Restated Rights Agreement (the
"Existing Rights Agreement") dated April 30, 1997, and wish to amend the
-------------------------
Existing Rights Agreement and grant the Investors who acquire Series D Shares
the registration rights provided herein, subject to execution of this agreement
by such Investors.
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties agree as follows:
Section 1. Termination of Prior Rights. Upon execution of this Agreement
---------------------------
by the Company and the holders of at least a majority of the outstanding
Registrable Securities (as
<PAGE>
defined in the Existing Rights Agreement) and the holders of at least a majority
of the outstanding Series C Preferred Stock, the Existing Rights Agreement is
hereby amended and restated pursuant to Sections 2 and 5.7 of the Existing
Rights Agreement to read as set forth in this Agreement.
Section 2. Amendment. Except as expressly provided herein, neither this
---------
Agreement nor any term hereof may be amended, waived, discharged or terminated
other than by a written instrument signed by the party against whom enforcement
of any such amendment, waiver, discharge or termination is sought; provided,
however, that any provision hereof may be amended, waived, discharged or
terminated upon the written consent of (i) the Company, (ii) the holders of a
majority of the outstanding Registrable Securities (as defined below) determined
on the basis of assumed conversion of all Series A Shares, Series B Shares,
Series C Shares and Series D Shares into Registrable Securities and (iii) the
holders of a majority of the outstanding Series C shares.
Section 3. Registration Rights.
-------------------
3.1 Definitions. As used in this Agreement:
-----------
(a) The terms "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act of 1933, as amended (the "Securities Act")
--------------
and the subsequent declaration or ordering of the effectiveness of such
registration statement.
(b) The term "Registrable Securities" means:
(i) the Founders' Shares;
(ii) the shares of Common Stock issuable or issued upon
conversion of the Series A Shares;
(iii) the shares of Common Stock issuable or issued upon
conversion of the Series B Shares;
(iii) the shares of Common Stock issuable or issued upon
conversion of the Series C Shares;
(iv) the shares of Common Stock issuable or issued upon
conversion of the Series D Shares (the shares of Common Stock referred to in
clauses (i), (ii), (iii) and (iv) hereof are collectively referred to hereafter
as the "Stock"); and
-----
(v) any other shares of 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, the Stock, excluding in all cases,
however, any Registrable Securities sold by a person in a transaction in which
his or her rights under this Agreement are not assigned;
-2-
<PAGE>
provided, however, that Common Stock or other securities shall only be treated
- -------- -------
as Registrable Securities if and so long as they have not been (A) sold to or
through a broker or dealer or underwriter in a public distribution or a public
securities transaction, or (B) sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) thereof so that all transfer restrictions, and restrictive legends
with respect thereto, if any, are removed upon the consummation of such sale.
(c) The number of shares of "Registrable Securities then outstanding"
shall be determined by the number of shares of Common Stock outstanding which
are, and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities which are, Registrable Securities.
(d) The term "Holder" means any holder of outstanding Registrable
Securities who acquired such Registrable Securities in a transaction or series
of transactions not involving any registered public offering.
(e) The term "Form S-3" means such form under the Securities Act of
1933, as amended (the "Act") as in effect on the date hereof or any registration
---
form under the Act subsequently adopted by the Securities and Exchange
Commission ("SEC") which permits inclusion or incorporation of substantial
---
information by reference to other documents filed by the Company with the SEC.
3.2 Requested Registration.
----------------------
(a) If the Company shall receive at any time after the earlier of (i)
five (5) years after April 30, 1997, or (ii) six (6) months after the effective
date of the first registration statement for a public offering of securities of
the Company (other than a registration statement relating either to the sale of
securities to employees of the Company pursuant to a stock option, stock
purchase or similar plan or a SEC Rule 145 transaction), a written request from
the Holders of forty percent (40%) of the Registrable Securities then
outstanding that the Company file a registration statement under the Act
covering the registration of the Registrable Securities then outstanding, the
anticipated aggregate offering price, net of underwriting discounts and
commissions, of which would exceed Seven Million Five Hundred Thousand Dollars
($7,500,000), then the Company shall, within ten (10) days of the receipt
thereof, give written notice of such request to all Holders and shall, subject
to the limitations of subsection 3.2(b), use its best efforts to effect as soon
as practicable, and in any event within ninety (90) days of the receipt of such
request, the registration under the Act of all Registrable Securities which the
Holders request to be registered in a written request given within twenty (20)
days of the mailing of such notice by the Company in accordance with Section
5.5.
(b) If the Holders initiating the registration request hereunder
("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 3.2 and the Company
shall include such information in the written notice referred to in subsection
3.2(a). In such event, the right of any Holder to include his Registrable
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<PAGE>
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 shall (together with the Company as provided in subsection
3.4(e)) 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. Notwithstanding any other provision of this
Section 3.2, if the underwriter advises the Initiating Holders in writing that
marketing factors require a limitation of the number of shares to be
underwritten, then the Initiating Holders shall so advise all Holders of
Registrable Securities which would otherwise be underwritten pursuant hereto,
and the number of shares of Registrable Securities that may be included in the
underwriting shall be allocated among all Holders thereof, including the
Initiating Holders, in proportion (as nearly as practicable) to the amount of
Registrable Securities of the Company owned by each Holder.
(c) The Company is obligated to effect only two (2) such registrations
pursuant to this Section 3.2; provided, however, that the Company shall be
obligated to effect one additional registration pursuant to this Section 3.2 if
the Company fails to qualify for use of Form S-3 under the Securities Act within
twelve (12) months after the effective date of the first registration statement
for a public offering of securities of the Company (other than a registration
statement relating either to the sale of securities to employees of the Company
pursuant to a stock option, stock purchase or similar plan or a SEC Rule 145
transaction).
(d) Notwithstanding the foregoing, if the Company shall furnish to
Holders requesting a registration statement pursuant to this Section 3.2, a
certificate signed by the President 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 filed and it is therefore essential to defer the filing of such
registration statement, 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 Initiating Holders; provided, however, that the Company may not utilize this
right more than once in any twelve (12) month period.
(e) Notwithstanding the foregoing, the Company shall not be obligated
to effect, or to take any action to effect, any such registration pursuant to
this Section 3.2 during the period starting with the date sixty (60) days prior
to the Company's good faith estimate of the date of filing of, and ending on a
date one hundred eighty (180) days after the effective date of, a Company-
initiated registration; provided the Company is actively employing in good faith
all reasonable efforts to cause such registration statement to become effective.
3.3 Company Registration. If (but without any obligation to do so)
--------------------
the Company, at any time or from time to time, proposes to register (including
for this purpose a registration effected by the Company for shareholders other
than the Holders) any of its Common Stock or other securities under the Act in
connection with the public offering of such securities solely for cash (other
than a registration relating either to the sale of securities to participants in
a
-4-
<PAGE>
Company stock option, stock purchase or similar plan or to a SEC Rule 145
transaction, or a registration on any form which does not include substantially
the same information as would be required to be included in a registration
statement covering the sale of the Registrable Securities), the Company shall,
at such time, promptly give each Holder written notice of such registration.
Upon the written request of each Holder given within twenty (20) days after
mailing of such notice by the Company in accordance with Section 5.5, the
Company shall, subject to the provisions of Section 3.8, use its best efforts to
cause to be registered under the Act all of the Registrable Securities that each
such Holder has requested to be registered.
3.4 Obligations of the Company. Whenever required under this Section
--------------------------
3 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 its best 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.
(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
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
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.
(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 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 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.
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<PAGE>
(g) Furnish, at the request of any Holder requesting registration of
Registrable Securities pursuant to this Section 3, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection
with a registration pursuant to this Section 3, 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 such date, of the outside
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, addressed to the underwriters, if any, and to the Holders requesting
registration of Registrable Securities and (ii) a letter dated 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, addressed to the underwriters,
if any, and to the Holders requesting registration of Registrable Securities.
3.5 Furnish Information. It shall be a condition precedent to the
-------------------
obligations of the Company to take any action pursuant to this Section 3 with
respect to the Registrable Securities of any selling Holder that such Holder
shall furnish to the Company such information regarding itself, the Registrable
Securities held by it, and the intended method of disposition of such securities
as shall be required to effect the registration of such Holder's Registrable
Securities.
3.6 Expenses of Demand Registration. All expenses other than
-------------------------------
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 3.2, including
(without limitation), all registration, filing and qualification fees, printers
and accounting fees, fees and disbursements of counsel for the Company and
reasonable fees and disbursements of one counsel selected by the selling Holders
shall be borne by the Company; provided, however, that the Company shall not be
-----------------
required to pay for any expenses of any registration proceeding begun pursuant
to Section 3.2 if the registration request is subsequently withdrawn at the
request of the Holders of a majority of the Registrable Securities to be
registered (in which case all participating Holders shall bear such expenses),
unless the Holders of a majority of the Registrable Securities agree to forfeit
their right to one demand registration pursuant to Section 3.2; provided
--------
further, that if at the time of such withdrawal, the Holders have learned of a
material adverse change in the condition, business or prospects of the Company
from that known to the Holders at the time of their request, then the Holders
shall not be required to pay any of such expenses and shall retain their rights
pursuant to Section 3.2.
3.7 Expenses of Company Registration. The Company shall bear and pay
--------------------------------
all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 3.3 for each Holder (which right may be assigned as provided
in Section 3.13), including (without limitation) all registration, filing, and
qualification fees, printers and accounting fees and fees and disbursements of
counsel for the Company relating or apportionable thereto, but excluding
underwriting discounts and commissions relating to Registrable Securities.
-6-
<PAGE>
3.8 Underwriting Requirements. In connection with any offering
-------------------------
involving an underwriting of shares being issued by the Company, the Company
shall not be required under Section 3.3 to include any of the Holders'
securities in such underwriting unless they accept the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it, and then
only in such quantity as will not, in the opinion of the underwriters,
jeopardize the success of the offering by the Company. If the total amount of
securities, including Registrable Securities, requested by shareholders to be
included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters reasonably believe compatible with the success
of the offering, then the Company shall be required to include in the offering
only that number of such securities, including Registrable Securities, which the
underwriters believe will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling shareholders
according to the total amount of securities entitled to be included therein
owned by each selling shareholder or in such other proportions as shall mutually
be agreed to by such selling shareholders); but in no event shall (i) the amount
of securities of the selling Holders included in the offering be reduced below
twenty percent (20%) of the total amount of securities included in such
offering, unless such offering is the initial public offering of the Company's
securities, in which case the selling shareholders may be excluded completely if
the underwriters make the determination described above and no other
shareholder's securities are included or (ii) notwithstanding (i) above, any
shares being sold by a shareholder exercising a demand registration right
similar to that granted in Section 3.2 be excluded from such offering. For
purposes of the preceding parenthetical concerning apportionment, for any
selling shareholder which is a holder of Registrable Securities and which is a
partnership or corporation, the partners, retired partners and shareholders of
such holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons shall be
deemed to be a single "selling shareholder," and any pro rata reduction with
respect to such "selling shareholder" shall be based upon the aggregate amount
of shares carrying registration rights owned by all entities and individuals
included in such "selling shareholder," as defined in this sentence.
3.9 Delay of Registration. 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 3.
3.10 Indemnification. In the event any Registrable Securities are
---------------
included in a registration statement under this Section 3:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, any underwriter (as defined in the Act) for such
Holder and each person, if any, who controls such Holder or underwriter within
the meaning of the Act or the Securities Exchange Act of 1934, as amended (the
"1934 Act"), against any losses, claims, damages, or liabilities (joint or
--------
several) to which they may become subject under the Act, the 1934 Act or other
federal or state law, 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"): (i)
---------
any untrue statement or alleged untrue statement of a material fact contained in
such registration statement, including any preliminary
-7-
<PAGE>
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 Act, the 1934 Act, any state securities law or any rule or
regulation promulgated under the Act, the 1934 Act or any state securities law;
and the Company will pay as incurred to each such Holder, underwriter or
controlling person, any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, or action; provided, the Company will not be liable in any such case
--------
to the extent that any such loss, claim, damage, liability, or action arises out
of or is based on any untrue statement or omission based upon written
information furnished to the Company by such Holder or underwriter and stated to
be specifically for use therein; provided further, the indemnity agreement
-------- -------
contained in this subsection 3.10(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
to a Holder, underwriter or controlling person 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, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless the Company, each of its directors, each of its officers who
has signed the registration statement, each person, if any, who controls the
Company within the meaning of the Act, any underwriter, any other Holder selling
securities in such registration statement and any controlling person of any such
underwriter or other Holder, against any losses, claims, damages, or liabilities
(joint or several) to which any of the foregoing persons may become subject,
under the Act, the 1934 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 expressly for use in connection
with such registration; and each such Holder will pay, as incurred, any legal or
other expenses reasonably incurred by any person intended to be indemnified
pursuant to this subsection 3.10(b), in connection with investigating or
defending any such loss, claim, damage, liability, or action; provided, however,
-----------------
that the indemnity agreement contained in this subsection 3.10(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 that in no event
shall any indemnity under this subsection 3.10(b) exceed the net proceeds from
the offering received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
3.10 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 3.10, 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
-8-
<PAGE>
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 3.10, 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 3.10.
(d) If the indemnification provided for in this Section 3.10 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
(f) The obligations of the Company and Holders under this Section 3.10
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 3, and otherwise.
3.11 Reports Under Securities Exchange Act of 1934. With a view to
---------------------------------------------
making available to the Holders the benefits of Rule 144 promulgated under the
Act and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or
pursuant to a registration on Form S-3, the Company agrees to:
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by the
Company for the offering of its securities to the general public;
-9-
<PAGE>
(b) take such action, including the voluntary registration of its
Common Stock under Section 12 of the 1934 Act, as is necessary to enable the
Holders to utilize Form S-3 for the sale of their Registrable Securities, such
action to be taken as soon as practicable after the end of the fiscal year in
which the first registration statement filed by the Company for the offering of
its securities to the general public is declared effective;
(c) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act; and
(d) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by the Company that
it has complied with the reporting requirements of SEC Rule 144 (at any time
after ninety (90) days after the effective date of the first registration
statement filed by the Company), the Act and the 1934 Act (at any time after it
has become subject to such reporting requirements), or that it qualifies as a
registrant whose securities may be resold pursuant to Form S-3 (at any time
after it so qualifies); (ii) a copy of the most recent annual or quarterly
report of the Company and such other reports and documents so filed by the
Company; and (iii) such other information as may be reasonably requested in
availing any Holder of any rule or regulation of the SEC which permits the
selling of any such securities without registration or pursuant to such form.
3.12 Form S-3 Registration. In case the Company shall receive from
---------------------
any Holder or Holders a written request or requests that the Company effect a
registration on Form S-3 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; 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 3.12, (i) if
Form S-3 is not available for such offering by the Holders; (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 (net of any
underwriters' discounts or commissions) of less than Five Hundred Thousand
Dollars ($500,000); (iii) if the Company shall furnish to the Holders a
certificate signed by the president 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 sixty (60) days after receipt of the request of the Holder
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<PAGE>
or Holders under this Section 3.12; provided, however, that the Company shall
-------- -------
not utilize this right more than once in any twelve (12) month period; (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 3.12; 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 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. All expenses other than underwriting discounts and commissions
incurred in connection with a registration requested pursuant to Section 3.12,
including (without limitation) all registration, filing, qualification,
printer's and accounting fees, fees and disbursements of counsel for the
Company, and the reasonable fees and disbursements of one counsel selected by
the selling Holders shall be borne by the Company. Registrations effected
pursuant to this Section 3.12 shall not be counted as demands for registration
or registrations effected pursuant to Section 3.2 or 3.3.
3.13 Assignment of Registration Rights. The rights to cause the
---------------------------------
Company to register Registrable Securities pursuant to this Section 3 may be
assigned by a Holder to a transferee or assignee of at least One Hundred
Thousand (100,000) shares of such securities provided the Company is, within a
reasonable time after such transfer, furnished with 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 provided, further, that
such assignment shall be effective only if immediately following such transfer
the further disposition of such securities by the transferee or assignee is
restricted under the Act. The foregoing One Hundred Thousand (100,000) share
limitation shall not apply, however, to transfers by a Holder to shareholders,
partners or retired partners of the Holder (including spouses and ancestors,
lineal descendants and siblings of such partners or spouses who acquire
Registrable Securities by gift, will or intestate succession) if all such
transferees or assignees agree in writing to appoint a single representative as
their attorney in fact for the purpose of receiving any notices and exercising
their rights under this Section 3.
3.14 Limitations on Subsequent Registration Rights. From and after
---------------------------------------------
the date of this Agreement, the Company shall not, without the prior written
consent of (i) the Holders of a majority of the outstanding Registrable
Securities and (ii) the Holders of a majority of the Series C Shares, enter into
any agreement with any holder or prospective holder of any securities of the
Company which would allow such holder or prospective holder (a) to include such
securities in any registration filed under Section 3.2 or Section 3.3 hereof,
unless under the terms of such agreement, such holder or prospective holder may
include such securities in any such registration only to the extent that the
inclusion of his securities will not reduce the amount of the Registrable
Securities of the Holders which is included or (b) to make a demand registration
which could result in such registration statement being declared effective prior
to the earlier of either of the dates set forth in subsection 3.2(a) or within
one hundred twenty (120) days of the effective date of any registration effected
pursuant to Section 3.2.
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<PAGE>
3.15 "Market Stand-Off" Agreement. The Holder hereby agrees that
----------------------------
during the one hundred eighty (180) day period following the effective date of a
registration statement of the Company filed under the Act, it shall not, to the
extent requested by the Company and such underwriter, sell or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any Common
Stock of the Company held by it at any time during such period 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 Company 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 Company, all other persons with
registration rights (whether or not pursuant to this Agreement) and all holders
of two percent (2%) or more of the Company's outstanding securities enter into
similar agreements.
To enforce the foregoing covenant, the Company may impose stop-
transfer instructions with respect to the Registrable Securities of the Holder
(and the shares or securities.
3.16 Termination of Registration Rights. No Holder shall be entitled
----------------------------------
to exercise any right provided for in this Section 3 (a) after five (5) years
following the consummation of the Company's sale of its Common Stock in a bona
fide, firm commitment underwriting pursuant to a registration statement on Form
S-1 under the Securities Act of 1933, as amended, which results in aggregate
gross cash proceeds to the Company in excess of Ten Million Dollars
($10,000,000) and the public offering price of which is not less than Five
Dollars ($5.00) per share (adjusted to reflect subsequent stock dividends, stock
splits or recapitalization) (other than a registration statement relating either
to the sale of securities to employees of the Company pursuant to a stock
option, stock purchase or similar plan or a SEC Rule 145 transaction) or (b) at
and after such time following the Company's initial public offering as such
Holder holds Registrable Securities equal to one percent (1%) or less of the
outstanding stock of the Company and is able to dispose of all of its
Registrable Securities in one three (3) month period pursuant to the provisions
of Rule 144.
Section 4. Additional Rights.
-----------------
4.1 Right of First Refusal. Subject to the terms and conditions
----------------------
specified in this Section 4.1, the Company hereby grants to each Investor (so
long as such Investor holds at least one hundred thousand (100,000) shares of
Stock) (the "Rightholder"), a right of first refusal with respect to future
sales by the Company of its New Securities (as hereinafter defined). For
purposes of this Section 4.1, the term Rightholder includes any partners,
retired partners, shareholders or affiliates of an Investor. An Investor shall
be entitled to apportion the right of first refusal hereby granted among itself
and its partners, retired partners, shareholders and affiliates in such
proportions as it deems appropriate.
(a) In the event the Company proposes to issue New Securities, it
shall give the Rightholder written notice (the "Notice") of its intention
stating (i) a description of the
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<PAGE>
New Securities it proposes to issue; (ii) the number of shares of New Securities
it proposes to offer; (iii) the price per share at which, and other terms on
which, it proposes to offer such New Securities; and (iv) the number of shares
that the Rightholder has the right to purchase under this Section 4.1, based on
the Rightholder's Percentage (as defined in Section 4.1(d)(ii)).
(b) Within twenty (20) days after the Notice is given (in accordance
with Section 5.5), the Rightholder may elect to purchase, at the price specified
in the Notice, up to the number of shares of the New Securities proposed to be
issued that the Rightholder has the right to purchase as specified in the
Notice. An election to purchase shall be made in writing and must be given to
the Company within such twenty (20) day period (in accordance with Section 5.5).
The closing of the sale of New Securities by the Company to the participating
Rightholder upon exercise of its rights under this Section 4.1 shall take place
simultaneously with the closing of the sale of New Securities to third parties.
(c) The Company shall have ninety (90) days after the last date on
which the Rightholder's right of first refusal lapsed to enter into an agreement
(pursuant to which the sale of New Securities covered thereby shall be closed,
if at all, within forty-five (45) days from the execution thereof) to sell the
New Securities which the Rightholder did not elect to purchase under this
Section 4.1, at or above the price and upon terms not materially more favorable
to the purchasers of such securities than the terms specified in the initial
Notice given in connection with such sale. In the event the Company has not
entered into an agreement to sell the New Securities within such ninety (90) day
period (or sold and issued New Securities in accordance with the foregoing
within forty-five (45) days from the date of said agreement), the Company shall
not thereafter issue or sell any New Securities without first offering such New
Securities to the Rightholder in the manner provided in this Section 4.1.
(d) (i) "New Securities" shall mean any shares of, or securities
convertible into or exercisable for any shares of, any class of the Company's
capital stock; provided that "New Securities" does not include: (i) the Series A
Shares, the Series B Shares, the Series C Shares, the Series D Shares or the
Common Stock issuable upon conversion thereof; (ii) securities issued pursuant
to the acquisition of another business entity by the Company by merger, purchase
of substantially all of the assets of such entity, or other reorganization
whereby the Company owns not less than a majority of the voting power of such
entity; (iii) up to Three Million Five Hundred Sixteen Thousand Three Hundred
Twenty-One (3,516,321) shares, or options to purchase shares, of the Company's
Common Stock and the shares of Common Stock issuable upon exercise of such
options, issued pursuant to any arrangement approved by the Board of Directors
to employees, officers and directors of, or consultants, advisors or other
persons performing services for, the Company; (iv) shares of the Company's
Common Stock or Preferred Stock of any series issued in connection with any
stock split, stock dividend or recapitalization of the Company; (v) Common Stock
issued upon exercise of warrants, options or convertible securities if the
issuance of such warrants, options or convertible securities was a result of the
exercise of the right of first refusal granted under this Section 4.1 or was
subject to the right of first refusal granted under this Section 4.1; (vi)
capital stock or warrants or options for the purchase of shares of capital stock
issued by the Company to a lender in connection with any loan or lease financing
transaction; (vii) capital stock or warrants or options for the purchase
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<PAGE>
of shares of capital stock issued by the Company to vendors or customers or
other persons in similar commercial situations with the Company if such
agreement is an arms-length transaction and such issuance is approved by the
Board of Directors; (viii) securities sold to the public in an offering pursuant
to a registration statement filed with the Securities and Exchange Commission
under the Act; and (ix) securities issued in connection with a corporate
partnering transaction if such issuance is approved by the Board of Directors.
(ii) The applicable "Percentage" for the Rightholder shall be
the number of shares of New Securities calculated by dividing (i) the total
number of shares of Common Stock owned by the Rightholder (assuming
conversion of all shares of Preferred Stock and exercise of any options or
warrants held by said Rightholder) by (ii) the total number of shares of
Common Stock outstanding at the time the Notice is given (assuming
conversion of all shares of Preferred Stock and exercise of all outstanding
rights, options and warrants to acquire Common Stock of the Company).
(e) The right of first refusal granted under this Section 4.1 shall
expire upon the consummation of the Company's sale of its Common Stock in a bona
fide, firm commitment underwriting pursuant to a registration statement on Form
S-1 under the Securities Act of 1933, as amended, which results in aggregate
gross cash proceeds to the Company in excess of Ten Million Dollars
($10,000,000) and the public offering price of which is not less than Five
Dollars ($5.00) per share (adjusted to reflect subsequent stock dividends, stock
splits or recapitalization) (other than a registration statement relating either
to the sale of securities to employees of the Company pursuant to a stock
option, stock purchase or similar plan or a SEC Rule 145 transaction).
(f) The right of first refusal granted under this section may only be
assigned by an Investor to a transferee or assignee of the Investor's shares of
the Company's stock acquiring the lesser of (a) at least one hundred thousand
(100,000) of the Investor's shares of the Company's Common Stock (treating all
shares of Preferred Stock for this purpose as though converted into Common
Stock) (equitably adjusted for any stock splits, subdivision stock dividends,
changes, combinations or the like) or (b) all of the Investor's remaining shares
of the Company's stock. In the event that the Investor shall assign its right
of first refusal pursuant to this Section 4.1 in connection with the transfer of
less than all of its shares of the Company's stock, the Investor shall also
retain its right of first refusal.
4.2 Delivery of Financial Statements
--------------------------------
(a) The Company shall deliver to each Investor, as soon as practicable,
but in any event within ninety (90) days after the end of each fiscal year of
the Company, an income statement for such fiscal year, a balance sheet of the
Company as of the end of such year, and statements of income and cash flows for
such year, such year-end financial reports to be in reasonable detail, prepared
in accordance with generally accepted accounting principles ("GAAP"), and
audited and certified by independent public accountants of nationally recognized
standing selected by the Company.
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<PAGE>
(b) The Company shall deliver to each Investor, so long as it holds at
least one hundred thousand (100,000) shares of Stock (or Common Stock issuable
upon conversion thereof):
(i) as soon as practicable, but in any event within forty-
five (45) days after the end of each fiscal quarter, a balance sheet of the
Company as of the end of each such quarterly period, and statements of income
and cash flows for such period and for the current fiscal year to date, prepared
in accordance with GAAP, subject to changes resulting from normal year-end audit
adjustments, all in reasonable detail and certified by the principal financial
or accounting officer of the Company, except that such financial statements need
not contain the notes required by GAAP;
(ii) within thirty (30) days of the end of each month, an
unaudited income statement and schedule as to the sources and application of
funds and balance sheet and comparison to budget for and as of the end of such
month, in reasonable detail;
(iii) as soon as practicable, but in any event within thirty
(30) days prior to the end of each fiscal year, a budget and business plan for
the next fiscal year, prepared on a monthly basis, including balance sheets and
sources and applications of funds statements for such months and, as soon as
prepared, any other budgets or revised budgets prepared by the Company; and
(iv) such other information relating to the financial
condition, business, prospects or corporate affairs of the Company as the
Investor may from time to time reasonably request; provided, however, that the
Company shall not be obligated to provide information which it deems in good
faith to be proprietary.
4.3 Inspection. The Company shall permit each Investor who holds at least
----------
one hundred thousand (100,000) shares of Stock (or Common Stock issuable upon
conversion thereof), at such Investor's expense, to visit and inspect the
Company's properties, to examine its books of account and records and to discuss
the Company's affairs, finances and accounts with its officers, all at such
reasonable times as may be requested by such Investor; provided, however, that
the Company shall not be obligated pursuant to this Section 4.3 to provide
access to any information which it considers to be a trade secret or similar
confidential information.
4.4 Termination of Information and Inspection Covenants. Except as otherwise
---------------------------------------------------
required by securities or other laws, the covenants set forth in Sections 4.2
and 4.3 shall terminate as to the Investors and be of no further force or effect
immediately upon the consummation of the Company's sale of its Common Stock in a
bona fide, firm commitment underwriting pursuant to a registration statement on
Form S-1 under the Act, which results in aggregate gross cash proceeds to the
Company in excess of Ten Million Dollars ($10,000,000) and the public offering
price of which is not less than Five Dollars
-15-
<PAGE>
($5.00) per share (adjusted to reflect subsequent stock dividends, stock splits
or recapitalization) (other than a registration statement relating either to the
sale of securities to employees of the Company pursuant to a stock option, stock
purchase or similar plan or a SEC Rule 145 transaction).
Section 5. Miscellaneous.
-------------
5.1 Assignment. Subject to the provisions of Section 3.13 hereof,
----------
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties hereto.
5.2 Third Parties Nothing in this Agreement, express or implied, is
-------------
intended to confer upon any party, other than the parties hereto, and their
respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement, except as expressly provided
herein.
5.3 Governing Law. This Agreement shall be governed by and construed
-------------
under the laws of the State of California in the United States of America as
applied to agreements among California residents entered into and to be
performed entirely within California.
5.4 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
5.5 Notices. Any notice required or permitted by this Agreement
-------
shall be in writing and shall be 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.
Such notice shall be deemed to have been given three (3) days after deposit in
the mail.
5.6 Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, portions of such provisions,
or such provisions in their entirety, to the extent necessary, shall be severed
from this Agreement, and the balance of this Agreement shall be enforceable in
accordance with its terms.
5.7 Amendment and Waiver. Any provision of this Agreement may be
--------------------
amended with the written consent of (i) the Company, (ii) the Investors holding
at least a majority of the outstanding shares of the Registrable Securities held
by the Investors and (iii) the Investors holding at least a majority of the
outstanding Series C Shares held by the Investors; provided, however, that any
amendment which would adversely affect the Founders in a manner different than
the Investors shall additionally require the consent of the Founders holding at
least a majority of the Registrable Securities held by the Founders. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each Holder of Registrable Securities, each Founder and the Company. In
the event that an underwriting agreement is entered into between the Company and
any Holder, and such underwriting agreement contains
-16-
<PAGE>
terms differing from this Agreement, as to any such Holder the terms of such
underwriting agreement shall govern.
5.8 Effect of Amendment or Waiver. The Investors and Founders and
-----------------------------
their respective successors and assigns acknowledge that by the operation of
Section 5.7 hereof the holders of a majority of the outstanding Registrable
Securities and the holders of a majority of the oustanding Series C shares
acting in conjunction with the Company, will have the right and power to
diminish or eliminate all rights pursuant to this Agreement.
5.9 Rights of Holders. Each Holder of Registrable Securities shall
-----------------
have the absolute right to exercise or refrain from exercising any right or
rights that such Holder may have by reason of this Agreement, including, without
limitation, the right to consent to the waiver or modification of any obligation
under this Agreement, and such Holder shall not incur any liability to any other
holder of any securities of the Company as a result of exercising or refraining
from exercising any such right or rights.
5.10 Delays or Omissions. No delay or omission to exercise any
-------------------
right, power or remedy accruing to any party to this Agreement, upon any breach
or default of the other party, shall impair any such right, power or remedy of
such non-breaching party nor shall it be construed to be a waiver of any such
breach or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement, must be made in writing and shall be effective
only to the extent specifically set forth in such writing. All remedies, either
under this Agreement, or by law or otherwise afforded to any Holder, shall be
cumulative and not alternative.
5.11 Attorney's Fees. If any action at law or in equity is
---------------
necessary to enforce or interpret the terms of this Agreement, the prevailing
party shall be entitled to reasonable attorney's fees, costs and necessary
disbursements in addition to any other relief to which such party may be
entitled.
[Signature pages follow]
-17-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Fourth Amended
and Restated Rights Agreement as of the day and year first above written.
THE COMPANY:
RAMP NETWORKS, INC.
By: /s/ Mahesh Veerina
___________________________
Mahesh Veerina, President
FOUNDERS:
/s/
______________________________
(Print Name)
By:___________________________
Title:________________________
INVESTOR:
/s/
______________________________
(Print Name)
By:___________________________
Title:________________________
Date:_________________________
SIGNATURE PAGE TO FOURTH AMENDED AND
RESTATED RIGHTS AGREEMENT
-18-
<PAGE>
EXHIBIT A-1
-----------
Schedule of Founders
Mahesh Veerina
959H La Mesa Terrace
Sunnyvale, CA 94086
Sridhar Bathina
959H La Mesa Terrace
Sunnyvale, CA 94086
Raghu Bathina
395 Ano Nuevo Ave., Apt. 1016
Sunnyvale, CA 94086
Rao Cherukuri
946-C Kiely Boulevard
Santa Clara, CA 95051
Ranganathan Kothandapani
1235 Wildwood Avenue, #319
Sunnyvale, CA 94089
-19-
<PAGE>
EXHIBIT A-2
-----------
Schedule of Investors
<TABLE>
<S> <C> <C>
Venrock Associates Draper International India, L.P. Dr. Puttagunta Ranga
30 Rockefeller Plaza, Room 5508 50 Fremont Street, Suite 3500 3920 Southland Road
New York, NY 10112 San Francisco, CA 94105 (State Rte. 66 at Southland Road)
Attn: Kim Rummelsburg Attn: William H. Draper III New Bremen, OH 45869-0098
Venrock Associates II, L.P. Sekhar Bathina Needham Capital Partners, L.P.
30 Rockefeller Plaza, Room 5508 Veda Trancell (Pvt. Ltd.) 445 Park Avenue
New York, NY 10112 8-2-348/3, 2nd Floor, Road #3 New York, NY 10022
Attn: Kim Rummelsburg Banjara Hills Attn: John Michaelson
Hyderabad - 500034, AP, India
Ravindranath Bathina Interwest Partners V, L.P. Needham Emerging Growth Partners, L.P.
1325 Sycamore Hills Pkwy. 3000 Sand Hill Road, Bldg. 3, Suite 225 445 Park Avenue
Fort Wayne, IN 46804 Menlo Park, CA 94025 New York, NY 10022
Attn: John Michaelson
Frank A. Bonsal, Jr. Interwest Investors V
c/o New Enterprise Associates 3000 Sand Hill Road, Bldg. 3, Suite 225 Charter Ventures II, L.P.
1119 St. Paul Street Menlo Park, CA 94025 525 University Ave., Suite 1500
Baltimore, MD 21202 Palo Alto, CA 94301
The Subhedar Irrevocable Trust, Vertex Investment II, Limited CPQ Holdings, Inc.
dated 1/19/95 c/o Vertex Management, Inc. 20555 S.H. 249
c/o Sanjay Subhedar as Trustee 3 Lagoon Drive, Suite 220 Houston, TX 77070
12649 Lido Way Redwood City, CA 94065 Attn.: Andrea Dillman, Legal Dept.
Saratoga, CA 95070
Stephen G. Tolchin and Veronica HWH Investment Party, Limited InveStar Burgeon Venture Capital, Inc.
M. Howard, TRUSTEES OF THE C/O Vertex Management, Inc. Attn: Herbert Chang
TOLCHIN FAMILY TRUST U/D/T 3 Lagoon Drive, Suite 220 C/O VentureStar, Inc.
dated July 10, 1991 Redwood City, CA 94065 1737 No. 1st Street, Ste. 650
738 Los Altos Ave. San Jose, CA 95112
Los Altos, CA 94022
VLG Investments 1995 Terence J. Garnett London Pacific Life & Annuity
VLG Investments 1996 c/o Venrock Associates Company
Venture Law Group 755 Page MIll Road, Suite A230 3109 Poplarwood Court
2800 Sand Hill Road Palo Also, CA 94304 Raleigh, North Carolina 27604
Menlo Park, CA 9402
</TABLE>
-20-
<PAGE>
<TABLE>
<S> <C> <C>
Tae Hea Nahm Mr. G. Arjavalingam Charter Growth Capital
Venture Law Group Needham & Company, Inc. 525 University Avenue, Suite 1500
2800 Sand Hill Road 445 Park Avenue Palo Alto, CA 94301
Menlo Park, CA 94025 New York, NY 10022
Charter Growth Capital John Zeisler
Co-Investment Fund, L.P. c/o Interwest Partners
525 University Avenue, Suite 1500 3000 Sand Hill Road
Palo Alto, CA 94301 Building 3
Menlo Park, CA 94025-7112
</TABLE>
-21-
<PAGE>
EXHIBIT 10.1
INDEMNIFICATION AGREEMENT
-------------------------
This Indemnification Agreement ("Agreement") is made as of
______________ by and between Ramp Networks, Inc., a California corporation (the
"Company"), and ____________________ ("Indemnitee").
WHEREAS, the Company and Indemnitee recognize the increasing
difficulty in obtaining directors' and officers' liability insurance, the
significant increases in the cost of such insurance and the general reductions
in the coverage of such insurance;
WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting officers and directors
to expensive litigation risks at the same time as the availability and coverage
of liability insurance has been severely limited.
WHEREAS, Indemnitee does not regard the current protection available
as adequate under the present circumstances, and Indemnitee and other officers
and directors of the Company may not be willing to continue to serve as officers
and directors without additional protection; and
WHEREAS, the Company desires to attract and retain the services of
highly qualified individuals, such as Indemnitee, to serve as officers and
directors of the Company and to indemnify its officers and directors so as to
provide them with the maximum protection permitted by law.
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. Indemnification.
---------------
(a) Third Party Proceedings. The Company shall indemnify
-----------------------
Indemnitee if Indemnitee is or was 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 (other than an action by or in
the right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred by
Indemnitee in connection with such action, suit or proceeding if Indemnitee
acted in good faith and in a manner Indemnitee
<PAGE>
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe Indemnitee's conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that Indemnitee did not act in good faith and in a manner which
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company; with respect to any criminal action or proceeding, the termination
of such action or proceeding shall not, of itself, create a presumption that
Indemnitee had reasonable cause to believe that Indemnitee's conduct was
unlawful.
(b) Proceedings By or in the Right of the Company. The Company
---------------------------------------------
shall indemnify Indemnitee if Indemnitee was or is a party or is threatened to
be made a party to any threatened, pending or completed action or proceeding by
or in the right of the Company or any subsidiary of the Company to procure a
judgment in its favor by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) and, to the fullest extent
permitted by law, amounts paid in settlement (if such settlement is approved in
advance by the Company, which approval shall not be unreasonably withheld), in
each case to the extent actually and reasonably incurred by Indemnitee in
connection with the defense or settlement of such action or suit if Indemnitee
acted in good faith and in a manner Indemnitee reasonably believed to be in or
not opposed to the best interests of the Company and its shareholders, except
that no indemnification shall be made in respect of any claim, issue or matter
as to which Indemnitee shall have been finally adjudicated by court order or
judgment to be liable to the Company in the performance of Indemnitee's duty to
the Company and its shareholders unless and only to the extent that the court in
which such action or proceeding is or was pending shall determine upon
application that, in view of all the circumstances of the case, Indemnitee is
fairly and reasonably entitled to indemnity for such expenses which such court
shall deem proper.
(c) Mandatory Payment of Expenses. To the extent that Indemnitee
-----------------------------
has been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 1(a) or Section 1(b) or the defense of any
claim, issue or matter therein, Indemnitee shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by Indemnitee in
connection therewith.
2. Agreement to Serve. In consideration of the protection afforded
------------------
by this Agreement, if Indemnitee is a director of the Company he or she agrees
to serve at least for the balance of the current term as a director and not to
resign voluntarily during such period without the written consent of a majority
of the Board of Directors. If Indemnitee is an officer of the Company not
serving under an employment contract, he or she agrees to serve in such capacity
at least for the balance of the current fiscal year of the Company and not to
resign voluntarily during such period without the written consent of a majority
of the Board of Directors. Following the applicable period set forth above,
Indemnitee agrees to continue to serve in such capacity at the will of the
Company (or under separate agreement, if such agreement exists) so long as he is
duly appointed or elected and qualified in accordance with the applicable
provisions of the Bylaws of the Company or any subsidiary of the Company or
until such time as he or she tenders his or her resignation in writing. Nothing
contained in this Agreement is intended to create in Indemnitee any right to
continued employment.
-2-
<PAGE>
3. Expenses; Indemnification Procedure.
-----------------------------------
(a) Advancement of Expenses. The Company shall advance all
-----------------------
expenses incurred by Indemnitee in connection with the investigation, defense,
settlement or appeal of any civil or criminal action, suit or proceeding
referred to in Section l(a) or Section 1(b) hereof (but not amounts actually
paid in settlement of any such action, suit or proceeding). Indemnitee hereby
undertakes to repay such amounts advanced only if, and to the extent that, it
shall ultimately be determined that Indemnitee is not entitled to be indemnified
by the Company as authorized hereby. The advances to be made hereunder shall be
paid by the Company to Indemnitee within twenty (20) days following delivery of
a written request therefor by Indemnitee to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a
--------------------------------
condition precedent to his or her right to be indemnified under this Agreement,
give the Company notice in writing as soon as practicable of any claim made
against Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to the Chief Executive
Office of the Company at the address shown on the signature page of this
Agreement (or such other address as the Company shall designate in writing to
Indemnitee). Notice shall be deemed received on the third business day after
the date postmarked if sent by domestic certified or registered mail, properly
addressed; otherwise notice shall be deemed received when such notice shall
actually be received by the Company. In addition, Indemnitee shall give the
Company such information and cooperation as it may reasonably require and as
shall be within Indemnitee's power.
(c) Procedure. Any indemnification and advances provided for in
---------
Section 1 and this Section 3 shall be made no later than forty-five (45) days
after receipt of the written request of Indemnitee. If a claim under this
Agreement, under any statute, or under any provision of the Company's Articles
of Incorporation or Bylaws providing for indemnification, is not paid in full by
the Company within forty-five (45) days after a written request for payment
thereof has first been received by the Company, Indemnitee may, but need not, at
any time thereafter bring an action against the Company to recover the unpaid
amount of the claim and, subject to Section 13 of this Agreement, Indemnitee
shall also be entitled to be paid for the expenses (including attorneys' fees)
of bringing such action. It shall be a defense to any such action (other than
an action brought to enforce a claim for expenses incurred in connection with
any action, suit or proceeding in advance of its final disposition) that
Indemnitee has not met the standards of conduct which make it permissible under
applicable law for the Company to indemnify Indemnitee for the amount claimed,
but the burden of proving such defense shall be on the Company and Indemnitee
shall be entitled to receive interim payments of expenses pursuant to Section
3(a) unless and until such defense may be finally adjudicated by court order or
judgment from which no further right of appeal exists. It is the parties'
intention that if the Company contests Indemnitee's right to indemnification,
the question of Indemnitee's right to indemnification shall be for the court to
decide, and neither the failure of the Company (including its Board of
Directors, any committee or subgroup of the Board of Directors, independent
legal counsel, or its shareholders) to have made a determination that
indemnification of Indemnitee is proper in the circumstances because Indemnitee
has met the applicable standard of
-3-
<PAGE>
conduct required by applicable law, nor an actual determination by the Company
(including its Board of Directors, any committee or subgroup of the Board of
Directors, independent legal counsel, or its shareholders) that Indemnitee has
not met such applicable standard of conduct, shall create a presumption that
Indemnitee has or has not met the applicable standard of conduct.
(d) Notice to Insurers. If, at the time of the receipt of a
------------------
notice of a claim pursuant to Section 3(b) hereof, the Company has director and
officer liability insurance in effect, the Company shall give prompt notice of
the commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(e) Selection of Counsel. In the event the Company shall be
--------------------
obligated under Section 3(a) hereof to pay the expenses of any proceeding
against Indemnitee, the Company, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by Indemnitee, upon the
delivery to Indemnitee of written notice of its election so to do. After
delivery of such notice, approval of such counsel by Indemnitee and the
retention of such counsel by the Company, the Company will not be liable to
Indemnitee under this Agreement for any fees of counsel subsequently incurred by
Indemnitee with respect to the same proceeding, provided that (i) Indemnitee
shall have the right to employ counsel in any such proceeding at Indemnitee's
expense; and (ii) if (A) the employment of counsel by Indemnitee has been
previously authorized by the Company, (B) Indemnitee shall have reasonably
concluded that there may be a conflict of interest between the Company and
Indemnitee in the conduct of any such defense or (C) the Company shall not, in
fact, have employed counsel to assume the defense of such proceeding, then the
fees and expenses of Indemnitee's counsel shall be at the expense of the
Company.
4. Additional Indemnification Rights; Nonexclusivity.
-------------------------------------------------
(a) Scope. Notwithstanding any other provision of this Agreement,
-----
the Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Articles of
Incorporation, the Company's Bylaws or by statute. In the event of any change,
after the date of this Agreement, in any applicable law, statute, or rule which
expands the right of a California corporation to indemnify a member of its board
of directors or an officer, such changes shall be, ipso facto, within the
purview of Indemnitee's rights and the Company's obligations under this
Agreement. In the event of any change in any applicable law, statute or rule
which narrows the right of a California corporation to indemnify a member of its
board of directors or an officer, such changes, to the extent not otherwise
required by such law, statute or rule to be applied to this Agreement shall have
no effect on this Agreement or the parties' rights and obligations hereunder.
(b) Nonexclusivity. The indemnification provided by this
--------------
Agreement shall not be deemed exclusive of any rights to which Indemnitee may be
entitled under the Company's
-4-
<PAGE>
Articles of Incorporation, its Bylaws, any agreement, any vote of shareholders
or disinterested members of the Company's Board of Directors, the General
Corporation Law of the State of California, or otherwise, both as to action in
Indemnitee's official capacity and as to action in another capacity while
holding such office. The indemnification provided under this Agreement shall
continue as to Indemnitee for any action taken or not taken while serving in an
indemnified capacity even though he may have ceased to serve in an such capacity
at the time of any action, suit or other covered proceeding.
5. Partial Indemnification. If Indemnitee is entitled under any
-----------------------
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred in the investigation, defense, appeal or settlement of any civil or
criminal action, suit or proceeding, but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion of
such expenses, judgments, fines or penalties to which Indemnitee is entitled.
6. Mutual Acknowledgment. Both the Company and Indemnitee
---------------------
acknowledge that in certain instances, Federal law or public policy may override
applicable state law and prohibit the Company from indemnifying its directors
and officers under this Agreement or otherwise. For example, the Company and
Indemnitee acknowledge that the Securities and Exchange Commission (the "SEC")
has taken the position that indemnification is not permissible for liabilities
arising under certain federal securities laws, and federal legislation prohibits
indemnification for certain ERISA violations. Indemnitee understands and
acknowledges that the Company has undertaken or may be required in the future to
undertake with the SEC to submit the question of indemnification to a court in
certain circumstances for a determination of the Company's right under public
policy to indemnify Indemnitee.
7. Officer and Director Liability Insurance. The Company shall, from
----------------------------------------
time to time, make the good faith determination whether or not it is practicable
for the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among other
considerations, the Company will weigh the costs of obtaining such insurance
coverage against the protection afforded by such coverage. In all policies of
director and officer liability insurance, Indemnitee shall be named as an
insured in such a manner as to provide Indemnitee the same rights and benefits
as are accorded to the most favorably insured of the Company's directors, if
Indemnitee is a director; or of the Company's officers, if Indemnitee is not a
director of the Company but is an officer; or of the Company's key employees, if
Indemnitee is not an officer or director but is a key employee. Notwithstanding
the foregoing, the Company shall have no obligation to obtain or maintain such
insurance if the Company determines in good faith that such insurance is not
reasonably available, if the premium costs for such insurance are
disproportionate to the amount of coverage provided, if the coverage provided
by such insurance is limited by exclusions so as to provide an insufficient
benefit, or if Indemnitee is covered by similar insurance maintained by a parent
or subsidiary of the Company.
-5-
<PAGE>
8. Severability. Nothing in this Agreement is intended to require or
------------
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 8. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
9. Exceptions. Any other provision herein to the contrary
----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) Claims Initiated by Indemnitee. To indemnify or advance
------------------------------
expenses to Indemnitee with respect to proceedings or claims initiated or
brought voluntarily by Indemnitee and not by way of defense, except with respect
to proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 317 of the California General Corporation Law, but such indemnification
or advancement of expenses may be provided by the Company in specific cases if
the Board of Directors finds it to be appropriate; or
(b) Lack of Good Faith. To indemnify Indemnitee for any expenses
------------------
incurred by Indemnitee with respect to any proceeding instituted by Indemnitee
to enforce or interpret this Agreement, if a court of competent jurisdiction
determines that each of the material assertions made by Indemnitee in such
proceeding was not made in good faith or was frivolous;
(c) Insured Claims. To indemnify Indemnitee for expenses or
--------------
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
officers' and directors' liability insurance maintained by the Company.
(d) Claims under Section 16(b). To indemnify Indemnitee for
--------------------------
expenses or the payment of profits arising from the purchase and sale by
Indemnitee of securities in violation of Section 16(b) of the Securities
Exchange Act of 1934, as amended, or any similar successor statute.
-6-
<PAGE>
10. Construction of Certain Phrases.
-------------------------------
(a) For purposes of this Agreement, references to the "Company"
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 if Indemnitee 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,
Indemnitee shall stand in the same position under the provisions of this
Agreement with respect to the resulting or surviving corporation as Indemnitee
would have with respect to such constituent corporation if its separate
existence had continued.
(b) For purposes of this Agreement, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on Indemnitee with respect to an employee
benefit plan; and references to "serving at the request of the Company" shall
include any service as a director, officer, employee or agent of the Company
which imposes duties on, or involves services by, such director, officer,
employee or agent with respect to an employee benefit plan, its participants, or
beneficiaries; and if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan, Indemnitee shall be deemed to have acted in a
manner "not opposed to the best interests of the Company" as referred to in this
Agreement.
11. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall constitute an original.
12. Successors and Assigns. This Agreement shall be binding upon the
----------------------
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
13. Attorneys' Fees. In the event that any action is instituted by
---------------
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement or to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled to
be paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of Indemnitee's material defenses to such
action were made in bad faith or were frivolous.
14. Notice. All notices, requests, demands and other communications
------
under this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and a
-7-
<PAGE>
receipt is signed by the party addressee, on the date of such receipt, or (ii)
if mailed by certified or registered mail with postage prepaid, on the third
business day after the date postmarked. Addresses for notice to either party are
as shown on the signature page of this Agreement, or as subsequently modified by
written notice.
15. Consent to Jurisdiction. The Company and the Indemnitee each
-----------------------
hereby irrevocably consent to the jurisdiction of the courts of the State of
California for all purposes in connection with any action or proceeding which
arises out of or relates to this Agreement and agree that any action instituted
under this Agreement shall be brought only in the state courts of the State of
California.
16. Choice of Law. This Agreement shall be governed by and its
-------------
provisions construed in accordance with the laws of the State of California, as
applied to contracts between California residents entered into and to be
performed entirely within California.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
RAMP NETWORKS, INC.
By:_________________________________________
Its:________________________________________
AGREED TO AND ACCEPTED:
___________________________
_____________________________________
(Signature)
Address:
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<PAGE>
EXHIBIT 10.2
TRANCELL SYSTEMS, INC.
1995 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this 1995 Stock Option Plan are
--------------------
to attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or non-statutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees appointed
-------------
pursuant to Section 4 of the Plan.
(b) "Board" means the Board of Directors of the Company.
-----
(c) "Code" means the Internal Revenue Code of 1986, as amended.
----
(d) "Committee" means the Committee appointed by the Board of
---------
Directors in accordance with Section 4(a) of the Plan.
(e) "Common Stock" means the Common Stock of the Company.
------------
(f) "Company" means Trancell Systems, Inc., a California corporation.
-------
(g) "Consultant" means any person, including an advisor, who is
----------
engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not, provided that if and in the event the
Company registers any class of any equity security pursuant to the Exchange Act,
the term Consultant shall thereafter not include directors who are not
compensated for their services or are paid only a director's fee by the Company.
(h) "Continuous Status as an Employee or Consultant" means the absence
----------------------------------------------
of any interruption or termination of service as an Employee or Consultant.
Continuous Status as an Employee or Consultant shall not be considered
interrupted in the case of: (i) sick leave; (ii) military leave; (iii) any
other leave of absence approved by the Administrator, provided that such leave
is for a period of not more than ninety (90) days, unless reemployment upon the
expiration of such leave is guaranteed by contract or statute, or unless
provided otherwise pursuant to Company policy adopted from time to time; or (iv)
in the case of transfers between locations of the Company or between the
Company, its Subsidiaries or their respective successors. For purposes of this
Plan, a change in status from an Employee to a Consultant or from a Consultant
<PAGE>
to an Employee will not constitute an interruption of Continuous Status as an
Employee or Consultant.
(i) "Employee" means any person, including officers and directors,
--------
employed by the Company or any Parent or Subsidiary of the Company, with the
status of employment determined based upon such minimum number of hours or
periods worked as shall be determined by the Administrator in its discretion,
subject to any requirements of the Code. The payment of a director's fee to a
Director shall not be sufficient to constitute "employment" of such Director by
the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(k) "Fair Market Value" means, as of any date, the fair market value
-----------------
of Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported), as quoted
on such system or exchange, or the exchange with the greatest volume of trading
in Common Stock for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is quoted on the NASDAQ System (but not
on the National Market thereof) or regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the high bid and low asked prices for the Common Stock for the last
market trading day prior to the time of determination, as reported in The Wall
Street Journal or such other source as the Administrator deems reliable; or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(l) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable written option agreement.
(m) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option, as designated in the applicable written
option agreement.
(n) "Option" means a stock option granted pursuant to the Plan.
------
(o) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(p) "Optionee" means an Employee or Consultant who receives an Option.
--------
-2-
<PAGE>
(q) "Parent" means a "parent corporation", whether now or hereafter
------
existing, as defined in Section 424(e) of the Code, or any successor provision.
(r) "Plan" means this 1995 Stock Option Plan.
----
(s) "Reporting Person" means an officer, director, or greater than ten
----------------
percent shareholder of the Company within the meaning of Rule 16a-2 under the
Exchange Act, who is required to file reports pursuant to Rule 16a-3 under the
Exchange Act.
(t) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act,
----------
as the same may be amended from time to time, or any successor provision.
(u) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 11 of the Plan.
(v) "Stock Exchange" means any stock exchange or consolidated stock
--------------
price reporting system on which prices for the Common Stock are quoted at any
given time.
(w) "Subsidiary" means a "subsidiary corporation," whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code, or any successor
provision.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
-------------------------
the Plan, the maximum aggregate number of shares that may be optioned and sold
under the Plan is 1,431,905 shares of Common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock. If an Option should
expire or become unexercisable for any reason without having been exercised in
full, the unpurchased Shares that were subject thereto shall, unless the Plan
shall have been terminated, become available for future grant under the Plan.
In addition, any shares of Common Stock which are retained by the Company upon
exercise of an Option in order to satisfy the exercise or purchase price for
such Option or any withholding taxes due with respect to such exercise shall be
treated as not issued and shall continue to be available under the Plan.
4. Administration of the Plan.
--------------------------
(a) Initial Plan Procedure. Prior to the date, if any, upon which the
----------------------
Company becomes subject to the Exchange Act, the Plan shall be administered by
the Board or a committee appointed by the Board.
(b) Plan Procedure After the Date, if any, Upon Which the Company
-------------------------------------------------------------
Becomes Subject to the Exchange Act.
- -----------------------------------
(i) Multiple Administrative Bodies. If permitted by Rule 16b-3,
------------------------------
the Plan may be administered by different bodies with respect to directors, non-
director officers and Employees or Consultants who are not Reporting Persons.
(ii) Administration With Respect to Reporting Persons. With
------------------------------------------------
respect to grants of Options to Employees who are Reporting Persons, the Plan
shall be administered by (A) the Board if the Board may administer the Plan in
compliance with Rule 16b-3 with respect
-3-
<PAGE>
to a plan intended to qualify thereunder as a discretionary plan, or (B) a
committee designated by the Board to administer the Plan, which committee shall
be constituted in such a manner as to permit the Plan to comply with Rule 16b-3
with respect to a plan intended to qualify thereunder as a discretionary plan.
Once appointed, such committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
committee and thereafter directly administer the Plan, all to the extent
permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder as
a discretionary plan. No person serving as a member of an Administrator that has
authority with respect to grants to Reporting Persons shall be eligible to
receive any grant under the Plan which would cause such member to cease to be
"disinterested" within the meaning of Rule 16b-3.
(iii) Administration With Respect to Consultants and Other
----------------------------------------------------
Employees. With respect to grants of Options to Employees or Consultants who are
- ---------
not Reporting Persons, the Plan shall be administered by (A) the Board or (B) a
committee designated by the Board, which committee shall be constituted in such
a manner as to satisfy the legal requirements relating to the administration of
incentive stock option plans, if any, of California corporate and securities
laws, of the Code and of any applicable Stock Exchange (the "Applicable Laws").
Once appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies, however caused, and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any Stock Exchange, the Administrator
shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(k) of the Plan;
(ii) to select the Consultants and Employees to whom Options may
from time to time be granted hereunder;
(iii) to determine whether and to what extent Options or any
combination thereof are granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such option granted hereunder;
(v) to approve forms of agreement for use under the Plan;
-4-
<PAGE>
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any option granted hereunder;
(vii) to determine whether and under what circumstances an Option
may be settled in cash under Section 9(f) instead of Common Stock;
(viii) in order to fulfill the purposes of the Plan and without
amending the Plan, to modify grants of Options to participants who are foreign
nationals or employed outside of the United States in order to recognize
differences in local law, tax policies or customs.
(c) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be final and binding on all
holders of Options.
5. Eligibility.
-----------
(a) Recipients of Grants. Nonstatutory Stock Options may be granted
--------------------
to Employees and Consultants. Incentive Stock Options may be granted only to
Employees. An Employee or Consultant who has been granted an Option may, if he
or she is otherwise eligible, be granted additional Options.
(b) Type of Option. Each Option shall be designated in the written
--------------
option agreement as either an Incentive Stock Option or a Nonstatutory Stock
Option. However, notwithstanding such designations, to the extent that the
aggregate Fair Market Value of the Shares with respect to which Options
designated as Incentive Stock Options are exercisable for the first time by any
Optionee during any calendar year (under all plans of the Company or any Parent
or Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 5(b), Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares subject to an Incentive Stock Option shall
be determined as of the date of the grant of such Option.
(c) The Plan shall not confer upon any Optionee any right with respect
to continuation of employment or consulting relationship with the Company, nor
shall it interfere in any way with such Optionee's right or the Company's right
to terminate his or her employment or consulting relationship at any time, with
or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 18 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 14 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement. However, in the case of an Option granted to
an Optionee who, at the time the Option is granted, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Comp-
-5-
<PAGE>
pany or any Parent or Subsidiary, the term of the Option shall be five (5) years
from the date of grant thereof or such shorter term as may be provided in the
Option Agreement.
8. Option Exercise Price and Consideration.
---------------------------------------
(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option that is:
(A) granted to an Employee who, at the time of the grant
of such Incentive Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
(B) granted to any other Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(ii) In the case of a Nonstatutory Stock Option that is:
(A) granted to a person who, at the time of the grant of
such Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of the grant.
(B) granted to any other person, the per Share exercise
price shall be no less than 85% of the Fair Market Value per Share on the date
of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares that (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender or such other period as may be required
to avoid a charge to the Company's earnings, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) authorization for the Company to
retain from the total number of Shares as to which the Option is exercised that
number of Shares having a Fair Market Value on the date of exercise equal to the
exercise price for the total number of Shares as to which the Option is
exercised, (6) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price and any applicable
income or employment taxes, (7) delivery of an irrevocable subscription
agreement for the Shares that irrevocably obligates the option holder to take
and pay for the Shares not more than twelve months after the date of delivery of
the subscription agreement, (8) any combination of
-6-
<PAGE>
the foregoing methods of payment, or (9) such other consideration and method of
payment for the issuance of Shares to the extent permitted under Applicable
Laws. In making its determination as to the type of consideration to accept, the
Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.
9. Exercise of Option.
------------------
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
-----------------------------------------------
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan; provided that such Option shall become exercisable at the rate of
at least twenty percent (20%) per year over five (5) years from the date the
Option is granted.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and the Company has
received full payment for the Shares with respect to which the Option is
exercised. Full payment may, as authorized by the Board, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a shareholder shall exist with respect to the Optioned Stock,
not withstanding the exercise of the Option. The Company shall issue (or cause
to be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares that thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment or Consulting Relationship. Subject to
----------------------------------------------------
Section 9(c), in the event of termination of an Optionee's Continuous Status as
an Employee or Consultant with the Company, such Optionee may, but only within
three (3) months (or such other period of time not less than thirty (30) days as
is determined by the Administrator, with such determination in the case of an
Incentive Stock Option being made at the time of grant of the Option and not
exceeding three (3) months) after the date of such termination (but in no event
later than the expiration date of the term of such Option as set forth in the
Option Agreement), exercise his or her Option to the extent that the Optionee
was entitled to exercise it at the date of such termination. To the extent that
Optionee was not entitled to exercise the Option at the date of such
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate. No
termination shall be deemed to occur and this Section 9(b) shall not apply if
(i) the Optionee is a Consultant who becomes an Employee; or (ii) the Optionee
is an Employee who becomes a Consultant.
-7-
<PAGE>
(c) Disability of Optionee.
----------------------
(i) Notwithstanding the provisions of Section 9(b) above, in
the event of termination of an Optionee's Continuous Status as an Employee or
Consultant as a result of his or her total and permanent disability (within the
meaning of Section 22(e)(3) of the Code), Optionee may, but only within twelve
(12) months from the date of such termination (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent otherwise entitled to exercise it
at the date of such termination. To the extent that Optionee was not entitled to
exercise the Option at the date of termination, or if Optionee does not exercise
such Option to the extent so entitled within the time specified herein, the
Option shall terminate.
(ii) In the event of termination of an Optionee's Continuous
Status as an Employee or Consultant as a result of a disability which does not
fall within the meaning of total and permanent disability (as set forth in
Section 22(e)(3) of the Code), Optionee may, but only within six (6) months from
the date of such termination (but in no event later than the expiration date of
the term of such Option as set forth in the Option Agreement), exercise the
Option to the extent otherwise entitled to exercise it at the date of such
termination. However, to the extent that such Optionee fails to exercise an
Option which is an Incentive Stock Option ("ISO") (within the meaning of Section
422 of the Code) within three (3) months of the date of such termination, the
Option will not qualify for ISO treatment under the Code. To the extent that
Optionee was not entitled to exercise the Option at the date of termination, or
if Optionee does not exercise such Option to the extent so entitled within six
months (6) from the date of termination, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee
-----------------
during the period of Continuous Status as an Employee or Consultant, or within
thirty (30) days following the termination of the Optionee's Continuous Status
as an Employee or Consultant, the Option may be exercised, at any time within
six (6) months following the date of death (but in no event later than the
expiration date of the term of such Option as set forth in the Option
Agreement), by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent the
Optionee was entitled to exercise the Option at the date of death or, if
earlier, the date of termination of the Continuous Status as an Employee or
Consultant. To the extent that Optionee was not entitled to exercise the Option
at the date of death or termination, as the case may be, or if Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate.
(e) Rule 16b-3. Options granted to Reporting Persons shall comply
----------
with Rule 16b-3 and shall contain such additional conditions or restrictions as
may be required thereunder to qualify for the maximum exemption for Plan
transactions.
(f) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
-8-
<PAGE>
10. Stock Withholding to Satisfy Withholding Tax Obligations. At the
--------------------------------------------------------
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option, which tax liability is subject to tax withholding
under applicable tax laws, and the Optionee is obligated to pay the Company an
amount required to be withheld under applicable tax laws, the Optionee may
satisfy the withholding tax obligation by one or some combination of the
following methods: (a) by cash payment, or (b) out of Optionee's current
compensation, (c) if permitted by the Administrator, in its discretion, by
surrendering to the Company Shares that (i) in the case of Shares previously
acquired from the Company, have been owned by the Optionee for more than six
months on the date of surrender, and (ii) have a fair market value on the date
of surrender equal to or less than Optionee's marginal tax rate times the
ordinary income recognized, or (d) by electing to have the Company withhold from
the Shares to be issued upon exercise of the Option, if any, that number of
Shares having a fair market value equal to the amount required to be withheld.
For this purpose, the fair market value of the Shares to be withheld shall be
determined on the date that the amount of tax to be withheld is to be determined
(the "Tax Date").
Any surrender by a Reporting Person of previously owned Shares to
satisfy tax withholding obligations arising upon exercise of this Option must
comply with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
All elections by an Optionee to have Shares withheld to satisfy
tax withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular
Shares of the Option as to which the election is made;
(c) all elections shall be subject to the consent or disapproval of
the Administrator;
(d) if the Optionee is a Reporting Person, the election must comply
with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
In the event the election to have Shares withheld is made by an
Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option is exercised but such
Optionee shall be unconditionally obligated to tender back to the Company the
proper number of Shares on the Tax Date.
-9-
<PAGE>
11. Adjustments Upon Changes in Capitalization, Merger or Certain Other
-------------------------------------------------------------------
Transactions.
- ------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock that have been
authorized for issuance under the Plan but as to which no Options have yet been
granted or that have been returned to the Plan upon cancellation or expiration
of an Option, as well as the price per share of Common Stock covered by each
such outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination, recapitalization or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option will terminate immediately prior to
the consummation of such proposed action.
(c) Merger or Sale of Assets. In the event of a proposed sale of all
------------------------
or substantially all of the Company's assets or a merger of the Company with or
into another corporation where the successor corporation issues its securities
to the Company's shareholders, each outstanding Option shall be assumed or an
equivalent option or right shall be substituted by such successor corporation or
a parent or subsidiary of such successor corporation, unless the successor
corporation does not agree to assume the Option or to substitute an equivalent
option, in which case such Option shall terminate upon the consummation of the
merger or sale of assets.
(d) Certain Distributions. In the event of any distribution to the
---------------------
Company's shareholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per share of Common Stock covered by each
outstanding Option to reflect the effect of such distribution.
12. Non-Transferability of Options. Options may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised or purchased
during the lifetime of the Optionee, only by the Optionee.
13. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such
-10-
<PAGE>
other date as is determined by the Board. Notice of the determination shall be
given to each Employee or Consultant to whom an Option is so granted within a
reasonable time after the date of such grant.
14. Amendment and Termination of the Plan.
-------------------------------------
(a) Authority to Amend or Terminate. The Board may at any time amend,
-------------------------------
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made that would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 or with Section 422
of the Code (or any other applicable law or regulation, including the
requirements of any Stock Exchange), the Company shall obtain shareholder
approval of any Plan amendment in such a manner and to such a degree as
required.
(b) Effect of Amendment or Termination. No amendment or termination
----------------------------------
of the Plan shall adversely affect Options already granted, unless mutually
agreed otherwise between the Optionee and the Board, which agreement must be in
writing and signed by the Optionee and the Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any Stock Exchange.
As a condition to the exercise of an Option, the Company may
require the person exercising such Option to represent and warrant at the time
of any such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by law.
16. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the
Company to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
17. Agreements. Options shall be evidenced by written agreements in such
----------
form as the Administrator shall approve from time to time.
18. Shareholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under
-11-
<PAGE>
applicable state and federal law and the rules of any Stock Exchange. All
Options issued under the Plan shall become void in the event such approval is
not obtained.
19. Information to Optionees. The Company shall provide financial
------------------------
statements at least annually to each Optionee during the period such Optionee
has one or more Options outstanding, and in the case of an individual who
acquired Shares pursuant to the Plan, during the period such individual owns
such Shares. The Company shall not be required to provide such information if
the issuance of Options under the Plan is limited to key employees whose duties
in connection with the Company assure their access to equivalent information.
-12-
<PAGE>
RAMP NETWORKS, INC.
1995 STOCK OPTION PLAN
NOTICE OF STOCK OPTION GRANT
NameofOptionee
AddressLine1
AddressLine2
You have been granted an option to purchase Common Stock of Ramp
Networks, Inc. (the "Company") as follows:
Date of Grant DateofGrant
Vesting Commencement Date VCD
Exercise Price per Share $ExercisePrice
Total Number of Shares Granted NoShares
Total Exercise Price $TotalExercisePrice
Type of Option: XX Incentive Stock Option
--
NSO Nonstatutory Stock Option
---
Term/Expiration Date: ExpirationDate
Vesting Schedule: This Option may be exercised, in whole
or in part, in accordance with the
following schedule: 25% of the Shares
subject to the Option shall vest on the
first anniversary of the Vesting
Commencement and, then, 1/36th of the
remaining Shares subject to the Option
shall vest on a monthly basis
thereafter.
Termination Period: Option may be exercised for 30 days
after termination of employment or
consulting relationship except as set
out in Sections 7 and 8 of the Stock
Option Agreement (but in no event later
than the Expiration Date).
By your signature and the signature of the Company's representative
below, you and the Company agree that this option is granted under and governed
by the terms and conditions of the 1995 Stock Option Plan and the Stock Option
Agreement, all of which are attached and made a part of this document.
OPTIONEE: RAMP NETWORKS, INC.
<PAGE>
By:
- -------------------------------- -----------------------------------
Title:
- -------------------------------- -------------------------------
Print Name
-2-
<PAGE>
RAMP NETWORKS, INC.
1995 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
1. Grant of Option. Ramp Networks, Inc., a California
---------------
corporation (the "Company"), hereby grants to the Optionee named in the Notice
of Grant (the "Optionee"), an option (the "Option") to purchase a total number
of shares of Common Stock (the "Shares") set forth in the Notice of Grant, at
the exercise price per share set forth in the Notice of Grant (the "Exercise
Price") subject to the terms, definitions and provisions of the Ramp Networks,
Inc. 1995 Stock Option Plan (the "Plan") adopted by the Company, which is
incorporated herein by reference. Unless otherwise defined herein, the terms
defined in the Plan shall have the same defined meanings in this Option.
If designated an Incentive Stock Option, this Option is
intended to qualify as an Incentive Stock Option as defined in Section 422 of
the Code.
2. Exercise of Option. This Option shall be exercisable during
------------------
its term in accordance with the Exercise Schedule set out in the Notice of Grant
and with the provisions of Section 9 of the Plan as follows:
(i) Right to Exercise.
-----------------
(a) This Option may not be exercised for a fraction of a
share.
(b) In the event of Optionee's death, disability or
other termination of employment, the exercisability of the Option is governed by
Sections 6, 7 and 8 below, subject to the limitation contained in subsection
2(i)(c).
(c) In no event may this Option be exercised after the
date of expiration of the term of this Option as set forth in the Notice of
Grant.
(ii) Method of Exercise. This Option shall be exercisable by
------------------
written notice (in the form attached as Exhibit A) which shall state the
election to exercise the Option, the number of Shares in respect of which the
Option is being exercised, and such other representations and agreements as to
the holder's investment intent with respect to such shares of Common Stock as
may be required by the Company pursuant to the provisions of the Plan. Such
written notice shall be signed by the Optionee and shall be delivered in person
or by certified mail to the Secretary of the Company. The written notice shall
be
<PAGE>
accompanied by payment of the Exercise Price. This Option shall be deemed to be
exercised upon receipt by the Company of such written notice accompanied by the
Exercise Price.
No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant provisions
of law and the requirements of any stock exchange upon which the Shares may then
be listed. Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
3. Optionee's Representations. In the event the Shares
--------------------------
purchasable pursuant to the exercise of this Option have not been registered
under the Securities Act of 1933, as amended, at the time this Option is
exercised, Optionee shall, if required by the Company, concurrently with the
exercise of all or any portion of this Option, deliver to the Company his
Investment Representation Statement in the form attached hereto as Exhibit B,
and shall read the applicable rules of the Commissioner of Corporations attached
to such Investment Representation Statement.
4. Method of Payment. Payment of the Exercise Price shall be by
-----------------
any of the following, or a combination thereof, at the election of the Optionee:
i. cash; or
ii. check; or
iii. surrender of other shares of Common Stock of the Company
which (A) in the case of Shares acquired pursuant to the exercise of a Company
option, have been owned by the Optionee for more than six (6) months on the date
of surrender, and (B) have a fair market value on the date of surrender equal to
the Exercise Price of the Shares as to which the Option is being exercised; or
iv. such other consideration, including promissory notes, as
may be determined by the Board in its absolute discretion to the extent
permitted under Sections 408 and 409 of the California General Corporation Law.
5. Restrictions on Exercise. This Option may not be exercised
------------------------
until such time as the Plan has been approved by the shareholders of the
Company, or if the issuance of such Shares upon such exercise or the method of
payment of consideration for such shares would constitute a violation of any
applicable federal or state securities or other law or regulation, including any
rule under Part 207 of Title 12 of the Code of Federal Regulations ("Regulation
G") as promulgated by the Federal Reserve Board. As a condition to the exercise
of this Option, the Company may require Optionee to make any representation and
warranty to the Company as may be required by any applicable law or regulation.
-2-
<PAGE>
6. Termination of Relationship. In the event of termination of
---------------------------
Optionee's consulting relationship or Continuous Status as an Employee, Optionee
may, to the extent otherwise so entitled at the date of such termination (the
"Termination Date"), exercise this Option during the Termination Period set out
in the Notice of Grant. To the extent that Optionee was not entitled to
exercise this Option at the date of such termination, or if Optionee does not
exercise this Option within the time specified herein, the Option shall
terminate.
7. Disability of Optionee.
----------------------
(i) Notwithstanding the provisions of Section 6 above, in the
event of termination of Optionee's consulting relationship or Continuous Status
as an Employee as a result of his total and permanent disability (as defined in
Section 22(e)(3) of the Code), Optionee may, but only within twelve (12) months
from the date of termination of employment (but in no event later than the date
of expiration of the term of this Option as set forth in Section 10 below),
exercise this Option to the extent he was entitled to exercise it at the date of
such termination. To the extent that Optionee was not entitled to exercise the
Option at the date of termination, or if Optionee does not exercise such Option
(which he was entitled to exercise) within the time specified herein, the Option
shall terminate.
(ii) Notwithstanding the provisions of Section 6 above, in the
event of termination of Optionee's consulting relationship or Continuous Status
as an Employee as a result of any disability not constituting a total and
permanent disability (as defined in Section 22(e)(3) of the Code), Optionee may,
but only within six (6) months from the date of termination of employment (but
in no event later than the date of expiration of the term of this Option as set
forth in Section 10 below), exercise this Option to the extent he was entitled
to exercise it at the date of such termination; provided, however, that if this
is an Incentive Stock Option and Optionee fails to exercise this Incentive Stock
Option within three (3) months from the date of termination of employment, this
Option will cease to qualify as an Incentive Stock Option (as defined in Section
422 of the Code) and Optionee will be treated for federal income tax purposes as
having received ordinary income at the time of such exercise in an amount
generally measured by the difference between the exercise price for the Shares
and the fair market value of the Shares on the date of exercise. To the extent
that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option (which he was entitled
to exercise) within the time specified herein, the Option shall terminate.
8. Death of Optionee. In the event of the death of Optionee:
-----------------
(i) during the term of this Option and while an Employee or
Consultant of the Company and having a consulting relationship with the Company
or having been in
-3-
<PAGE>
Continuous Status as an Employee since the date of grant of the Option, the
Option may be exercised, at any time within six (6) following the termination of
such status, months following the date of death (but in no event later than the
date of expiration of the term of this Option as set forth in Section 10 below),
by Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent of the right to
exercise that would have accrued had the Optionee continued living and remained
a consultant or remained in Continuous Status as an Employee six (6) months
after the date of death; or
(ii) within thirty (30) days after the termination of
Optionee's Status as an Employee or Consultant, the Option may be exercised, at
any time within six (6) months following the date of death (but in no event
later than the date of expiration of the term of this Option as set forth in
Section 10 below), by Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that had accrued at the date of termination.
9. Non-Transferability of Option. This Option may not be
-----------------------------
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by him.
The terms of this Option shall be binding upon the executors, administrators,
heirs, successors and assigns of the Optionee.
10. Term of Option. This Option may be exercised only within the
--------------
term set out in the Notice of Grant, and may be exercised during such term only
in accordance with the Plan and the terms of this Option. The limitations set
out in Section 7 of the Plan regarding Options designated as Incentive Stock
Options and Options granted to more than ten percent (10%) shareholders shall
apply to this Option.
11. Tax Consequences. Set forth below is a brief summary as of
----------------
the date of this Option of some of the federal and California tax consequences
of exercise of this Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING
OF THE SHARES.
(i) Exercise of Incentive Stock Option. If this Option
----------------------------------
qualifies as an incentive stock option, there will be no regular federal income
tax liability or California income tax liability upon the exercise of the
Option, although the excess, if any, of the fair market value of the Shares on
the date of exercise over the Exercise Price will be treated as an adjustment to
the alternative minimum tax for federal tax purposes and may subject the
Optionee to the alternative minimum tax in the year of exercise.
-4-
<PAGE>
(ii) Exercise of Nonstatutory Stock Option. If this Option
-------------------------------------
does not qualify as an incentive stock option, there may be a regular federal
income tax liability and a California income tax liability upon the exercise of
the Option. The Optionee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the fair
market value of the Shares on the date of exercise over the Exercise Price. If
Optionee is an employee, the Company will be required to withhold from
Optionee's compensation or collect from Optionee and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income
at the time of exercise.
(iii) Disposition of Shares. In the case of a nonstatutory
---------------------
stock option, if Shares are held for at least one year, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
and California income tax purposes. In the case of an incentive stock option,
if Shares transferred pursuant to the Option are held for at least one year
after exercise and are disposed of at least two years after the Date of Grant,
any gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal and California income tax purposes. If Shares
purchased under an incentive stock option are disposed of within such one-year
period or within two years after the Date of Grant, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the difference between the Exercise Price and the lesser
of (1) the fair market value of the Shares on the date of exercise, or (2) the
sale price of the Shares.
(iv) Notice of Disqualifying Disposition of Incentive Stock
------------------------------------------------------
Option Shares. If the Option granted to Optionee herein is an incentive stock
- -------------
option, and if Optionee sells or otherwise disposes of any of the Shares
acquired pursuant to the incentive stock option on or before the later of (1)
the date two years after the Date of Grant, or (2) the date one year after the
date of exercise, the Optionee shall immediately notify the Company in writing
of such disposition. Optionee agrees that Optionee may be subject to income tax
withholding by the Company on the compensation income recognized by the Optionee
from the early disposition by payment in cash or out of the current earnings
paid to the Optionee.
12. Withholding Tax Obligations. Optionee understands that, upon
---------------------------
exercising a nonstatutory stock option, he or she will recognize income for tax
purposes in an amount equal to the excess of the then fair market value of the
Shares over the exercise price. However, the timing of this income recognition
may be deferred for up to six months if Optionee is subject to Section 16 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). If the
Optionee is an employee, the Company will be required to withhold from
Optionee's compensation, or collect from Optionee and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income.
Additionally, the Optionee may at some point be required to satisfy tax
withholding obligations with respect to the disqualifying disposition of an
incentive stock option. The Optionee shall satisfy his or her tax withholding
obligation arising upon the exercise of this Option by one or some
-5-
<PAGE>
combination of the following methods: (i) by cash payment, or (ii) out of
Optionee's current compensation, or (iii) if permitted by the Administrator, in
its discretion, by surrendering to the Company Shares which (a) in the case of
Shares previously acquired from the Company, have been owned by the Optionee for
more than six months on the date of surrender, and (b) have a fair market value
on the date of surrender equal to or greater than Optionee's marginal tax rate
times the ordinary income recognized, (iv) by electing to have the Company
withhold from the Shares to be issued upon exercise of the Option that number of
Shares having a fair market value equal to the amount required to be withheld.
For this purpose, the fair market value of the Shares to be withheld shall be
determined on the date that the amount of tax to be withheld is to be determined
(the "Tax Date").
If the Optionee is subject to Section 16 of the Exchange Act (an
"Insider"), any surrender of previously owned Shares to satisfy tax withholding
obligations arising upon exercise of this Option must comply with the applicable
provisions of Rule 16b-3 promulgated under the Exchange Act ("Rule 16b-3") and
shall be subject to such additional conditions or restrictions as may be
required thereunder to qualify for the maximum exemption from Section 16 of the
Exchange Act with respect to Plan transactions.
All elections by an Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(1) the election must be made on or prior to the applicable
Tax Date;
(2) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made;
(3) all elections shall be subject to the consent or
disapproval of the Administrator;
(4) if the Optionee is an Insider, the election must comply
with the applicable provisions of Rule 16b-3 and shall be subject to such
additional conditions or restrictions as may be required thereunder to qualify
for the maximum exemption from Section 16 of the Exchange Act with respect to
Plan transactions.
Ramp Networks, Inc.,
a California corporation
By:
----------------------------------
Title:
-------------------------------
-6-
<PAGE>
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT
TO THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT
THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH HIS RIGHT OR THE COMPANY'S RIGHT TO TERMINATE HIS
EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents
that he is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Dated: , 19
----------------- -- ------------------------------
Signature of Optionee
-7-
<PAGE>
EXHIBIT A
---------
1995 STOCK OPTION PLAN
EXERCISE NOTICE
Ramp Networks, Inc.
3180 De La Cruz Blvd., Suite 200
Santa Clara, CA 95054
Attention: Chief Financial Officer
1. Exercise of Option. Effective as of today, _______________,
------------------
19___, the undersigned ("Optionee") hereby elects to exercise Optionee's option
to purchase _____________ shares of the Common Stock (the "Shares") of Ramp
Networks, Inc. (the "Company") under and pursuant to the Company's 1995 Stock
Option Plan, as amended (the "Plan") and the ISO NSO Agreement dated
_______________, 19__, (the "Option Agreement").
2. Representations of Optionee. Optionee acknowledges that
---------------------------
Optionee has received, read and understood the Plan and the Option Agreement and
agrees to abide by and be bound by their terms and conditions. Optionee
represents that Optionee is purchasing the Shares for Optionee's own account for
investment and not with a view to, or for sale in connection with, a
distribution of any of such Shares.
3. Compliance with Securities Laws. Optionee understands and
-------------------------------
acknowledges that the Shares have not been registered under the Securities Act
of 1933, as amended (the "1933 Act"), and, notwithstanding any other provision
of the Option Agreement to the contrary, the exercise of any rights to purchase
any Shares is expressly conditioned upon compliance with the 1933 Act, all
applicable state securities laws and all applicable requirements of any stock
exchange or over the counter market on which the Company's Common Stock may be
listed or traded at the time of exercise and transfer. Optionee agrees to
cooperate with the Company to ensure compliance with such laws.
4. Federal Restrictions on Transfer. Optionee understands that
--------------------------------
the Shares have not been registered under the 1933 Act and therefore cannot be
resold and must be held indefinitely unless they are registered under the 1933
Act or unless an exemption from such registration is available and that the
certificate(s) representing the Shares may bear a legend to that effect.
Optionee understands that the Company is under no obligation to register the
Shares and that an exemption may not be available or may not permit Optionee to
transfer Shares in the amounts or at the times proposed by Optionee.
Specifically, Optionee has been advised that Rule 144 promulgated under the 1933
Act, which permits certain resales of
<PAGE>
unregistered securities, is not presently available with respect to the Shares
and, in any event requires that the Shares be paid for and then be held for at
least two years (and in some cases three years) before they may be resold under
Rule 144.
5. Rights as Shareholder. Until the stock certificate evidencing
---------------------
such Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a shareholder shall exist with
respect to the optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 12 of the Plan.
Optionee shall enjoy rights as a shareholder until such time
as Optionee disposes of the Shares or the Company and/or its assignee(s)
exercises the Right of First Refusal hereunder. Upon such exercise, Optionee
shall have no further rights as a holder of the Shares so purchased except the
right to receive payment for the Shares so purchased in accordance with the
provisions of this Agreement, and Optionee shall forthwith cause the
certificate(s) evidencing the Shares so purchased to be surrendered to the
Company for transfer or cancellation.
6. Company's Right of First Refusal. Before any Shares held by
--------------------------------
Optionee or any transferee (either being sometimes referred to herein as the
"Holder") may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section (the "Right of First Refusal").
(a) Notice of Proposed Transfer. The Holder of the Shares
---------------------------
shall deliver to the Company a written notice (the "Notice") stating: (i) the
Holder's bona fide intention to sell or otherwise transfer such Shares; (ii) the
name of each proposed purchaser or other transferee ("Proposed Transferee");
(iii) the number of Shares to be transferred to each Proposed Transferee; and
(iv) the bona fide cash price or other consideration for which the Holder
proposes to transfer the Shares (the "Offered Price"), and the Holder shall
offer the Shares at the Offered Price to the Company or its assignee(s).
(b) Exercise of Right of First Refusal. At any time within
----------------------------------
thirty (30) days after receipt of the Notice, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase all, but not less
than all, of the Shares proposed to be transferred to any one or more of the
Proposed Transferees, at the purchase price determined in accordance with
subsection (c) below.
-2-
<PAGE>
(c) Purchase Price. The purchase price ("Purchase Price") for the
--------------
Shares purchased by the Company or its assignee(s) under this Section shall be
the Offered Price. If the Offered Price includes consideration other than cash,
the cash equivalent value of the non-cash consideration shall be determined by
the Board of Directors of the Company in good faith.
(d) Payment. Payment of the Purchase Price shall be made, at the
-------
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.
(e) Holder's Right to Transfer. If all of the Shares proposed in the
--------------------------
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section, then the Holder may
sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 120 days after the date of the Notice and provided further
that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are
not transferred to the Proposed Transferee within such period, a new Notice
shall be given to the Company, and the Company and/or its assignees shall again
be offered the Right of First Refusal before any Shares held by the Holder may
be sold or otherwise transferred.
(f) Exception for Certain Family Transfers. Anything to the contrary
--------------------------------------
contained in this Section notwithstanding, the transfer of any or all of the
Shares during the Optionee's lifetime or on the Optionee's death by will or
intestacy to the Optionee's immediate family or a trust for the benefit of the
Optionee's immediate family shall be exempt from the provisions of this Section.
"Immediate Family" as used herein shall mean spouse, lineal descendant or
----------------
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.
(g) Termination of Right of First Refusal. The Right of First Refusal
-------------------------------------
shall terminate as to any Shares 90 days after the first sale of Common Stock of
the Company to the general public pursuant to a registration statement filed
with and declared effective by the Securities and Exchange Commission under the
1933 Act.
7. Tax Consultation. Optionee understands that Optionee may
----------------
suffer adverse tax consequences as a result of Optionee's purchase or
disposition of the Shares. Optionee
-3-
<PAGE>
represents that Optionee has consulted with any tax consultants Optionee deems
advisable in connection with the purchase or disposition of the Shares and that
Optionee is not relying on the Company for any tax advice.
8. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. Optionee understands and agrees that the Company shall
-------
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER,
SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND RIGHT OF FIRST REFUSAL OPTIONS HELD BY
THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE
BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF
WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH
TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON
TRANSFEREES OF THESE SHARES.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS
OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S
RULES.
Optionee understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached to Exhibit B, the Investment Representation Statement.
-4-
<PAGE>
(b) Stop-Transfer Notices. Optionee agrees that, in order to
---------------------
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
9. Market Standoff Agreement. In connection with the initial
-------------------------
public offering of the Company's securities and upon request of the Company or
the underwriters managing any underwritten offering of the Company's securities,
Optionee hereby agrees not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any Shares (other than those
included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not to exceed
180 days) from the effective date of such registration as may be requested by
the Company or such managing underwriters.
10. Successors and Assigns. The Company may assign any of its
----------------------
rights under this Agreement to single or multiple assignees, and this Agreement
shall inure to the benefit of the successors and assigns of the Company.
Subject to the restrictions on transfer herein set forth, this Agreement shall
be binding upon Optionee and his or her heirs, executors, administrators,
successors and assigns.
11. Interpretation. Any dispute regarding the interpretation of
--------------
this Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the Plan,
which shall review such dispute at its next regular meeting. The resolution of
such a dispute by the Board or committee shall be final and binding on the
Company and on Optionee.
12. Governing Law; Severability. This Agreement shall be governed
---------------------------
by and construed in accordance with the laws of the State of California
excluding that body of law pertaining to conflicts of law. Should any provision
of this Agreement be determined by a court of law to be illegal or
unenforceable, the other provisions shall nevertheless remain effective and
shall remain enforceable.
13. Notices. 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 mail by certified mail, with postage and fees
prepaid, addressed to the other party at its
-5-
<PAGE>
address as shown below beneath its signature, or to such other address as such
party may designate in writing from time to time to the other party.
14. Further Instruments. The parties agree to execute such
-------------------
further instruments and to take such further action as may be reasonably
necessary to carry out the purposes and intent of this Agreement.
15. Delivery of Payment. Optionee herewith delivers to the
-------------------
Company the full Exercise Price for the Shares.
16. Entire Agreement. The Plan and Notice of Grant/Option
----------------
Agreement are incorporated herein by reference. This Agreement, the Plan and
the Notice of Grant/Option Agreement constitute the entire agreement of the
parties and supersede in their entirety all prior undertakings and agreements of
the Company and Optionee with respect to the subject matter hereof, and is
governed by California law except for that body of law pertaining to conflict of
laws.
Submitted by: Accepted by:
OPTIONEE: RAMP NETWORKS, INC.
By:
- ------------------------------- --------------------------------
NameofOptionee
Title:
-----------------------------
Address: Address: 3180 De La Cruz Blvd.,
---------------------- Suite 200
- ------------------------------- Santa Clara, CA 95054
-6-
<PAGE>
EXHIBIT B
---------
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE : NameofOptionee
COMPANY : Ramp Networks, Inc.
SECURITY : Common Stock
AMOUNT : ___________________ Shares
DATE : ___________________, 19___
In connection with the purchase of the above-listed Securities, I, the Optionee,
represent to the Company the following:
(a) I am aware of the Company's business affairs and financial
condition, and have acquired sufficient information about the Company to reach
an informed and knowledgeable decision to acquire the Securities. I am
purchasing these Securities for my 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 "Securities
Act").
(b) I understand 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 my
investment intent as expressed herein. In this connection, I understand that,
in the view of the Securities and Exchange Commission (the "SEC"), the statutory
basis for such exemption may be unavailable if my 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) I further understand that the Securities must be held indefinitely
unless subsequently registered under the Securities Act or unless an exemption
from registration is otherwise available. Moreover, I understand that the
Company is under no obligation to register the Securities. In addition, I
understand that the certificate evidencing the Securities will be imprinted with
a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel for
the Company.
<PAGE>
(d) I am familiar with the provisions of Rule 701 and Rule 144, each
promulgated under the Securities Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly, from the
issuer thereof, in a non-public offering subject to the satisfaction of certain
conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at
the time of issuance of the Securities, such issuance will be exempt from
registration under the Securities Act. In the event the Company later becomes
subject to the reporting requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, ninety (90) days thereafter the securities exempt under
Rule 701 may be resold, subject to the satisfaction of certain of the conditions
specified by Rule 144, including among other things: (1) 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); and, in the case of an affiliate, (2) the availability of
certain public information about the Company, and the amount of securities being
sold during any three month period not exceeding the limitations specified in
Rule 144(e), if applicable. Notwithstanding this paragraph (d), I acknowledge
and agree to the restrictions set forth in paragraph (e) hereof.
In the event that the Company does not qualify under Rule 701 at the
time of issuance of the Securities, then the Securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires
among other things: (1) the availability of certain public information about
the Company, (2) the resale occurring not less than two years after the party
has purchased, and made full payment for, within the meaning of Rule 144, the
securities to be sold; and, in the case of an affiliate, or of a non-affiliate
who has held the securities less than three years, (3) 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) and the amount of securities being sold during any three
month period not exceeding the specified limitations stated therein, if
applicable.
(e) I further understand that in the event all of the applicable
requirements of Rule 144 or Rule 701 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule 144 and
Rule 701 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 or Rule 701 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.
(f) I understand that the certificate evidencing the Securities may be
imprinted with a legend which prohibits the transfer of the Securities without
the consent of
-2-
<PAGE>
the Commissioner of Corporations of California. I have read the applicable
Commissioner's Rules with respect to such restriction, a copy of which is
attached.
Signature of Optionee:
----------------------------------
NameofOptionee
-3-
<PAGE>
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
----------------------------------------------------
Title 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: Restriction on Transfer.
---------- -----------------------
(a) The issuer of any security upon which a restriction on transfer
has been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534 shall
cause a copy of this section to be delivered to each issuee or transferee of
such security at the time the certificate evidencing the security is delivered
to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a
sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section
25102 of the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants or spouse, or
any custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or custodian
for the account of the transferee or the transferee's ancestors, descendants or
spouse;
(5) to holders of securities of the same class of the same
issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code
(either acting as such or as a finder) to a resident of a foreign state,
territory or country who is neither domiciled in this state to the knowledge of
the broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other
lien given by the purchaser to the seller upon a sale of the security for which
the Commissioner's written consent is obtained or under this rule not required;
(10) by way of a sale qualified under Sections 25111, 25112,
25113 or 25121 of the Code, of the securities to be transferred, provided that
no order under Section 25140 or Subdivision (a) of Section 25143 is in effect
with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111,
25112 or 25113 of the Code, provided that no order under Section 25140 or
Subdivision (a) of Section 25143 is in effect with respect to such
qualification;
(13) between residents of foreign states, territories or
countries who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed
Property Law or to the administrator of the unclaimed property law of another
state;
(15) by the State Controller pursuant to the Unclaimed
Property Law or by the administrator of the unclaimed property law of another
state if, in either such case, such person (i) discloses to potential purchasers
at the sale that transfer of the securities is restricted under this rule, (ii)
delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer
does not involve a change in the beneficial ownership of the securities; or
(17) by way of an offer and sale of outstanding securities in
an issuer transaction that is subject to the qualification requirement of
Section 25110 of the Code but exempt from that qualification requirement by
subdivision (f) of Section 25102;
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the legend
required by this section.
(c) The certificates representing all such securities subject to such
a restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY,
OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OR
CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN
THE COMMISSIONER'S RULES."
<PAGE>
EXHIBIT 10.3
RAMP NETWORKS, INC.
1999 STOCK INCENTIVE PLAN
1. Purposes of the Plan. The purposes of this 1999 Stock Incentive
--------------------
Plan are to attract and retain the best available personnel for positions of
substantial responsibility, to provide additional incentive to Employees and
Consultants of the Company and its Subsidiaries and to promote the success of
the Company's business. Options granted under the Plan may be incentive stock
options (as defined under Section 422 of the Code) or nonstatutory stock
options, as determined by the Administrator at the time of grant of an option
and subject to the applicable provisions of Section 422 of the Code, as amended,
and the regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall
-----------
apply:
(a) "Administrator" means the Board or any of its Committees
-------------
appointed pursuant to Section 4 of the Plan.
(b) "Affiliate" means an entity other than a Subsidiary (as
---------
defined below) in which the Company owns a significant interest, directly or
indirectly, as determined in the discretion of the Committee, or which, together
with the Company, is under common control of a third person or entity.
(c) "Applicable Laws" means the legal requirements relating to
---------------
the administration of stock option and restricted stock purchase plans under
applicable U.S. state corporate laws, U.S. federal and applicable state
securities laws, the Code, any Stock Exchange rules or regulations and the
applicable laws of any other country or jurisdiction where Options or Stock
Purchase Rights are granted under the Plan, as such laws, rules, regulations and
requirements shall be in place from time to time; provided, however, that to the
extent permitted under such laws, rules, regulations and requirements, the
rights of any participant under the Plan shall be determined in accordance with
the law of the State of California, without giving effect to principles of
conflict of law.
(d) "Board" means the Board of Directors of the Company.
-----
(e) "Change of Control" means a sale of all or substantially all
-----------------
of the Company's assets, or any merger or consolidation of the Company with or
into another corporation other than a merger or consolidation in which the
holders of more than 50% of the shares of capital stock of the Company
outstanding immediately prior to such transaction continue to hold (either by
the voting securities remaining outstanding or by their being converted into
voting securities of the surviving entity) more than 50% of the total voting
power represented by the voting securities of the Company, or such surviving
entity, outstanding immediately after such transaction.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
----
<PAGE>
(g) "Committee" means one or more committees or subcommittees of
---------
the Board appointed by the Board to administer the Plan in accordance with
Section 4 below.
(h) "Common Stock" means the Common Stock of the Company.
------------
(i) "Company" means Ramp Networks, Inc., a California
-------
corporation.
(j) "Consultant" means any person, including an advisor, who
----------
renders services to the Company or any Parent, Subsidiary or Affiliate and is
compensated for such services, and any Director of the Company whether
compensated for such services or not.
(k) "Continuous Service" means the absence of any interruption or
------------------
termination of service as an Employee or Consultant to the Company or a Parent,
Subsidiary or Affiliate. Continuous Service shall not be considered interrupted
in the case of (i) sick leave; (ii) military leave; (iii) any other leave of
absence approved by the Administrator, provided that such leave is for a period
of not more than 90 days, unless reemployment upon the expiration of such leave
is guaranteed by contract or statute, or unless provided otherwise pursuant to
Company policy adopted from time to time; or (iv) transfers between locations of
the Company or between the Company, its Parent(s), Subsidiaries, Affiliates or
their respective successors. Unless otherwise determined by the Administrator
or the Company, a change in status from an Employee to a Consultant or from a
Consultant to an Employee will not constitute a termination of Continuous
Service Status.
(l) "Corporate Transaction" means a sale of all or substantially
---------------------
all of the Company's assets, or a merger, consolidation or other capital
reorganization of the Company with or into another corporation.
(m) "Director" means a member of the Board.
--------
(n) "Employee" means any person (including, if appropriate, any
--------
Named Executive, Officer or Director) employed by the Company or any Parent,
Subsidiary or Affiliate of the Company. The payment by the Company of a
director's fee to a Director shall not be sufficient to constitute "employment"
of such Director by the Company.
(o) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(p) "Fair Market Value" means, as of any date, the value of
-----------------
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system including without limitation the National
Market of the National Association of Securities Dealers, Inc. Automated
Quotation ("Nasdaq") System, its Fair Market Value shall be the closing sales
------
price for such stock (or the closing bid, if no sales were reported) as quoted
on such system or exchange on the date of determination (or if no trading or
bids occurred on the date of determination, on the last trading day prior to the
date of determination), as reported in The Wall Street Journal or such other
source as the Administrator deems reliable;
-2-
<PAGE>
(ii) If the Common Stock is quoted on the Nasdaq System (but
not on the National Market thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
for the date of determination (or if no bids occurred on the date of
determination, on the last trading day prior to the date of determination); or
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(q) "Incentive Stock Option" means an Option intended to qualify
----------------------
as an incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable Option Agreement.
(r) "Listed Security" means any security of the Company that is
---------------
listed or approved for listing on a national securities exchange or designated
or approved for designation as a national market system security on an
interdealer quotation system by the National Association of Securities Dealers,
Inc.
(s) "Named Executive" means any individual who, on the last day
---------------
of the Company's fiscal year, is the chief executive officer of the Company (or
is acting in such capacity) or among the four most highly compensated officers
of the Company (other than the chief executive officer). Such officer status
shall be determined pursuant to the executive compensation disclosure rules
under the Exchange Act.
(t) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option, as designated in the applicable Option
Agreement.
(u) "Officer" means a person who is an officer of the Company
-------
within the meaning of Section 16(a) of the Exchange Act and the rules and
regulations promulgated thereunder.
(v) "Option" means a stock option granted pursuant to the Plan.
------
(w) "Option Agreement" means a written document, the form(s) of
----------------
which shall be approved from time to time by the Administrator, reflecting the
terms of an Option granted under the Plan and includes any documents attached to
or incorporated into such Option Agreement, including, but not limited to, a
notice of stock option grant and a form of exercise notice.
(x) "Option Exchange Program" means a program approved by the
-----------------------
Administrator whereby outstanding Options are exchanged for Options with a lower
exercise price.
(y) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(z) "Optionee" means an Employee or Consultant who receives an
--------
Option.
-3-
<PAGE>
(aa) "Parent" means a "parent corporation," whether now or
------
hereafter existing, as defined in Section 424(e) of the Code.
(bb) "Participant" means any holder of one or more Options or
-----------
Stock Purchase Rights, or the Shares issuable or issued upon exercise of such
awards, under the Plan.
(cc) "Plan" means this 1999 Stock Incentive Plan.
----
(dd) "Reporting Person" means an Officer, Director or greater
----------------
than 10% shareholder of the Company within the meaning of Rule 16a-2 of the
Exchange Act, who is required to file reports pursuant to Rule 16a-3 of the
Exchange Act.
(ee) "Restricted Stock" means shares of Common Stock acquired
----------------
pursuant to a grant of a Stock Purchase Right under Section 11 below.
(ff) "Restricted Stock Purchase Agreement" means a written
-----------------------------------
document, the form(s) of which shall be approved from time to time by the
Administrator, reflecting the terms of a Stock Purchase Right granted under the
Plan and includes any documents attached to such agreement.
(gg) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange
----------
Act, as amended from time to time, or any successor provision.
(hh) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 15 of the Plan.
(ii) "Stock Exchange" means any stock exchange or consolidated
--------------
stock price reporting system on which prices for the Common Stock are quoted at
any given time.
(jj) "Stock Purchase Right" means the right to purchase Common
--------------------
Stock pursuant to Section 11 below.
(kk) "Subsidiary" means a "subsidiary corporation," whether now
----------
or hereafter existing, as defined in Section 424(f) of the Code.
(ll) "Ten Percent Holder" means a person who owns stock
------------------
representing more than ten percent (10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary.
3. Stock Subject to the Plan. Subject to the provisions of Section
-------------------------
15 of the Plan, the maximum aggregate number of shares that may be sold under
the Plan is 4,000,000 Shares of Common Stock, plus an annual increase on the
first day of each of the Company's fiscal years beginning in 2000, 2001, 2002,
2003 and 2004 equal to the lesser of (i) 140,000 Shares, (ii) three and one-half
percent (3.5%) of the Shares outstanding on the last day of the immediately
preceding fiscal year, or (iii) such lesser number of Shares as is determined by
the Board. The Shares may be authorized, but unissued, or reacquired Common
Stock.
-4-
<PAGE>
If an Option expires or becomes unexercisable for any reason without
having been exercised in full, or is surrendered pursuant to an Option Exchange
Program, the unpurchased Shares that were subject thereto shall, unless the Plan
has been terminated, become available for future grant under the Plan. In
addition, any Shares of Common Stock that are retained by the Company upon
exercise of an Option or Stock Purchase Right in order to satisfy the exercise
or purchase price for such Option or Stock Purchase Right or any withholding
taxes due with respect to such exercise or purchase shall be treated as not
issued and shall continue to be available under the Plan. Notwithstanding any
other provision of the Plan, Shares issued under the Plan and later repurchased
by the Company pursuant to any repurchase right that the Company may have shall
not be available for future grant under the Plan.
4. Administration of the Plan.
--------------------------
(a) General. The Plan shall be administered by the Board or a
-------
Committee, or a combination thereof, as determined by the Board. The Plan may
be administered by different administrative bodies with respect to different
classes of Participants and, if permitted by the Applicable Laws, the Board may
authorize one or more officers (who may (but need not) be Officers) to grant
Options or Stock Purchase Rights to Employees and Consultants.
(b) Administration with respect to Reporting Persons. With
------------------------------------------------
respect to Options granted to Reporting Persons and Named Executives, the Plan
may (but need not) be administered so as to permit grants of Options to
Reporting Persons to qualify for the exemption set forth in Rule 16b-3 and to
qualify grants of Options to Named Executives as performance-based compensation
under Section 162(m) of the Code, and otherwise so as to satisfy the Applicable
Laws.
(c) Committee Composition. If a Committee has been appointed
---------------------
pursuant to this Section 4, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board. From time to time the
Board may increase the size of any Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill vacancies (however caused) and remove all members of
a Committee and thereafter directly administer the Plan, all to the extent
permitted by the Applicable Laws and, in the case of a Committee administering
the Plan pursuant to Section 4(b) above, to the extent permitted or required by
Rule 16b-3 and Section 162(m) of the Code.
(d) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and in the case of a Committee, the specific duties delegated by the Board
to such Committee, the Administrator shall have the authority, in its
discretion:
(i) to determine the Fair Market Value of the Common Stock,
in accordance with Section 2(p) of the Plan;
(ii) to select the Employees and Consultants to whom Options
and Stock Purchase Rights or any combination thereof may from time to time be
granted;
-5-
<PAGE>
(iii) to determine whether and to what extent Options and
Stock Purchase Rights or any combination thereof are granted;
(iv) to determine the number of Shares of Common Stock to be
covered by each such award granted;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder, which terms and
conditions include but are not limited to the exercise or purchase price, the
time or times when Options or Stock Purchase Rights may be exercised (which may
be based on performance criteria), any vesting acceleration or waiver of
forfeiture restrictions, and any restriction or limitation regarding any Option,
Optioned Stock, Stock Purchase Right or Restricted Stock, based in each case on
such factors as the Administrator, in its sole discretion, shall determine;
(vii) to determine whether and under what circumstances an
Option may be settled in cash under Section 10(f) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the
then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shall have declined since the date the Option was granted
and to make any other amendments or adjustments to any Option that the
Administrator determines, in its discretion and under the authority granted to
it under the Plan, to be necessary or advisable, provided however that no
amendment or adjustment to an Option that would materially and adversely affect
the rights of any Optionee shall be made without the prior written consent of
the Optionee;
(ix) to determine the terms and restrictions applicable to
Stock Purchase Rights and the Restricted Stock purchased by exercising such
Stock Purchase Rights;
(x) to initiate an Option Exchange Program;
(xi) to construe and interpret the terms of the Plan and
awards granted under the Plan; and
(xii) in order to fulfill the purposes of the Plan and
without amending the Plan, to modify grants of Options or Stock Purchase Rights
to Participants who are foreign nationals or employed outside of the United
States in order to recognize differences in local law, tax policies or customs.
(e) Effect of Administrator's Decision. All decisions,
----------------------------------
determinations and interpretations of the Administrator shall be final and
binding on all Participants.
5. Eligibility.
-----------
(a) Recipients of Grants. Nonstatutory Stock Options and Stock
--------------------
Purchase Rights may be granted to Employees and Consultants. Incentive Stock
Options may be granted
-6-
<PAGE>
only to Employees, provided however that Employees of Affiliates shall not be
eligible to receive Incentive Stock Options. An Employee or Consultant who has
been granted an Option or Stock Purchase Right may, if he or she is otherwise
eligible, be granted additional Options or Stock Purchase Rights.
(b) Type of Option. Each Option shall be designated in the Option
--------------
Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of Shares with respect to which Options are exercisable for
the first time by an Optionee during any calendar year (under all plans of the
Company or any Parent or Subsidiary) exceeds $100,000, such excess Options shall
be treated as Nonstatutory Stock Options. For purposes of this Section 5(b),
Incentive Stock Options shall be taken into account in the order in which they
were granted, and the Fair Market Value of the Shares shall be determined as of
the date of grant of such Option. In the event any Option designated as an
Incentive Stock Option fails to meet the requirements set forth in this Plan for
an Incentive Stock Option or as required to qualify as an incentive stock option
within the meaning of Code Section 422, such Option shall not be void but
instead shall be deemed a Nonstatutory Stock Option.
(c) No Employment Rights. The Plan shall not confer upon any
--------------------
Participant any right with respect to continuation of employment or consulting
relationship with the Company, nor shall it interfere in any way with his or her
right or the Company's right to terminate his or her employment or consulting
relationship at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon its adoption
------------
by the Board. It shall continue in effect for a term of ten (10) years unless
sooner terminated under Section 16 of the Plan.
7. Term of Option. The term of each Option shall be the term stated
--------------
in the Option Agreement; provided however that the term shall be no more than
ten (10) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement and provided further that, in the case of an
Incentive Stock Option granted to a person who at the time of such grant is a
Ten Percent Holder, the term of such Incentive Stock Option shall be five (5)
years from the date of grant thereof or such shorter term as may be provided in
the Option Agreement.
8. Limitation on Grants to Employees. Subject to adjustment as
---------------------------------
provided in Section 13 below, the maximum number of Shares which may be subject
to Options and Stock Purchase Rights granted to any one Employee under this Plan
for any fiscal year of the Company shall be 1,300,000.
9. Option Exercise Price and Consideration.
---------------------------------------
(a) Exercise Price. The per Share exercise price for the Shares
--------------
to be issued pursuant to exercise of an Option shall be such price as is
determined by the Administrator and set forth in the Option Agreement, but shall
be subject to the following:
(i) In the case of an Incentive Stock Option
-7-
<PAGE>
(A) granted to an Employee who at the time of grant is
a Ten Percent Holder, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant; and
(B) granted to any other Employee, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the grant
of such Option, is a Named Executive of the Company, the per share Exercise
Price shall be no less than 100% of the Fair Market Value on the date of grant
if such Option is intended to qualify as performance-based compensation under
Section 162(m) of the Code; and
(B) granted prior to the date on which the Common Stock
becomes a Listed Security to a person who is at the time of grant is a Ten
Percent Holder, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant if required by the Applicable
Laws and, if not so required, shall be such price as is determined by the
Administrator; and
(C) granted prior to the date on which the Common Stock
becomes a Listed Security to any person other than a Ten Percent Holder, the per
Share exercise price shall be no less than 85% of the Fair Market Value per
Share on the date of grant if required by Applicable Law and, if not so
required, shall be such price as is determined by the Administrator.
(iii) Notwithstanding the foregoing, Options may be granted
with a per Share exercise price other than as required above pursuant to a
Corporate Transaction.
(b) Permissible Consideration. The consideration to be paid for
-------------------------
the Shares to be issued upon exercise of an Option, including the method of
payment, shall be determined by the Administrator (and, in the case of an
Incentive Stock Option, shall be determined at the time of grant) and may
consist entirely of (1) cash; (2) check; (3) delivery of Optionee's promissory
note with such recourse, interest, security and redemption provisions as the
Administrator determines to be appropriate (subject to provisions of Applicable
Law); (4) cancellation of indebtedness; (5) surrender of other Shares that (x)
in the case of Shares acquired upon exercise of an Option either have been owned
by the Optionee for more than six months on the date of surrender (or such other
period as may be required to avoid a charge to the Company's earnings) or were
not acquired, directly or indirectly, from the Company, and (y) have a Fair
Market Value on the date of surrender equal to the aggregate exercise price of
the Shares as to which the Option is exercised; (6) authorization by the
Optionee for the Company to retain from the total number of Shares as to which
the Option is exercised that number of Shares having a Fair Market Value on the
date of exercise equal to the exercise price for the total number of Shares as
to which the Option is exercised; (7) delivery of a properly executed exercise
notice together with such other documentation as the Administrator and the
broker, if applicable, shall require to effect exercise of the Option and prompt
delivery to the Company of
-8-
<PAGE>
the sale or loan proceeds required to pay the exercise price and any applicable
withholding taxes; (8) any combination of the foregoing methods of payment; or
(9) such other consideration and method of payment for the issuance of Shares to
the extent permitted under the Applicable Laws. In making its determination as
to the type of consideration to accept, the Administrator shall consider whether
acceptance of such consideration may be reasonably expected to benefit the
Company, and the Administrator may refuse to accept a particular form of
consideration at the time of any Option exercise if, in its sole discretion,
acceptance of such form of consideration is not in the best interests of the
Company at such time.
10. Exercise of Option.
------------------
(a) Vesting. Any Option granted hereunder shall be exercisable at
-------
such times and under such conditions as determined by the Administrator,
consistent with the terms of the Plan, and reflected in the Option Agreement,
including vesting requirements and/or performance criteria with respect to the
Company and/or the Optionee; provided however that, if required by the
Applicable Laws, any Option granted prior to the date upon which the Common
Stock becomes a Listed Security shall become exercisable at a rate of at least
20% per year over five years from the date the Option is granted. In the event
that any of the Shares issued upon exercise of an Option (which exercise occurs
prior to the date upon which the Common Stock becomes a Listed Security) should
be subject to a right of repurchase in the Company's favor, such repurchase
right shall, if required by the Applicable Laws, lapse at the rate of at least
20% per year over five years from the date the Option is granted.
Notwithstanding the above, in the case of an Option granted to an officer
(including but not limited to Officers), Director or Consultant, the Option may
become exercisable, or a repurchase right, if any, in favor of the Company shall
lapse, at any time or during any period established by the Administrator. The
Administrator shall have the discretion to determine whether and to what extent
the vesting of Options shall be tolled during any unpaid leave of absence;
provided however that in the absence of such determination, vesting of Options
shall be tolled during any such leave.
(b) Procedure for Exercise. An Option may not be exercised for a
----------------------
fraction of a Share. An Option shall be deemed exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and the Company has
received full payment for the Shares with respect to which the Option is
exercised. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 9(b) of the Plan.
Exercise of an Option in any manner shall result in a decrease in the number of
Shares that thereafter may be available, both for purposes of the Plan and for
sale under the Option, by the number of Shares as to which the Option is
exercised.
(c) Rights as a Shareholder. Until the issuance (as evidenced by
-----------------------
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote or receive dividends or any other rights as a shareholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. The Company shall issue (or cause to be issued) such stock certificate
promptly upon exercise of the Option. No adjustment will be made for a
-9-
<PAGE>
dividend or other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 15 of the Plan.
(d) Termination of Continuous Service. In the event of
---------------------------------
termination of an Optionee's Continuous Service, such Optionee's right to
exercise the Option shall cease and the Option shall forthwith become void and
cease to have effect, except as set forth specifically in the Option Agreement.
If an Option Agreement provides that an Incentive Stock Option may be exercised
more than three (3) months after the termination of the Optionee's Continuous
Service, to the extent that such Optionee fails to exercise such Option within
three (3) months of the date of such termination, such Option thereafter shall
be treated as a Nonstatutory Stock Option.
Notwithstanding the foregoing, if required by the Applicable
Laws, any Option granted prior to the date upon which the Common Stock becomes a
Listed Security shall be exercisable by the Optionee for a period of time
following the termination of the Optionee's Continuous Service as follows:
(i) In the event of termination of Continuous Service for
reasons other than the Optionee's disability or death, the Option shall be
exercisable by the Optionee following such termination for a period of not less
than thirty (30) days, as is determined by the Administrator (with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option), after the date of such termination of Continuous Service
(but in no event later than the date of expiration of the term of such Option as
set forth in the Option Agreement), to the extent that the Optionee was entitled
to exercise it at the date of such termination. To the extent that the Optionee
was not entitled to exercise the Option at the date of such termination, or if
the Optionee does not exercise the Option to the extent so entitled within the
time specified above, the Option shall terminate and the Optioned Stock
underlying the unexercised portion of the Option shall revert to the Plan.
(ii) In the event of termination of Continuous Service as a
result of Optionee's disability, such Optionee may, but only within six (6)
months (or such longer period of time as is determined by the Administrator,
with such determination in the case of an Incentive Stock Option made at the
time of grant of the Option) from the date of such termination (but in no event
later than the date of expiration of the term of such Option as set forth in the
Option Agreement), exercise the Option to the extent he or she was entitled to
exercise it at the date of such termination. To the extent that the Optionee was
not entitled to exercise the Option at the date of termination, or if the
Optionee does not exercise the Option to the extent so entitled within the time
specified herein, the Option shall terminate and the Optioned Stock underlying
the unexercised portion of the Option shall revert to the Plan.
(iii) In the event of the death of an Optionee prior to
termination of his or her Continuous Service, the Option may be exercised at any
time within six (6) months (or such longer period of time as is determined by
the Administrator, with such determination in the case of an Incentive Stock
Option being made at the time of grant of the Option) following the date of
death (but in no event later than the expiration date of the term of such Option
as set forth in the Option Agreement) by such Optionee's estate or by a person
who acquired the right to
-10-
<PAGE>
exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that had accrued at the date of death or, if earlier, the date
of termination of the Optionee's Continuous Service. To the extent that the
Optionee was not entitled to exercise the Option at the date of death or
termination, as the case may be, or if the Optionee does not exercise such
Option to the extent so entitled within the time specified above, the Option
shall terminate and the Optioned Stock underlying the unexercised portion of the
Option shall revert to the Plan.
(e) Extension of Exercise Period. The Administrator shall have
----------------------------
full power and authority to extend the period of time for which an Option is to
remain exercisable following termination of an Optionee's Continuous Service
from the periods set forth in Sections 10(d)(i), (ii), or (iii) above or in the
Option Agreement to such greater time as the Board shall deem appropriate,
provided that in no event shall such Option be exercisable later than the date
of expiration of the term of such Option as set forth in the Option Agreement.
(f) Buy-Out Provisions. The Administrator may at any time offer
------------------
to buy out for a payment in cash or Shares an Option previously granted under
the Plan based on such terms and conditions as the Administrator shall establish
and communicate to the Optionee at the time such offer is made.
11. Stock Purchase Rights.
---------------------
(a) Rights to Purchase. Stock Purchase Rights may be issued
------------------
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing of the terms, conditions and restrictions related
to the offer, including the number of Shares that such person shall be entitled
to purchase, the consideration to be paid, and the time within which such person
must accept such offer, which shall in no event exceed 30 days from the date
upon which the Administrator made the determination to grant the Stock Purchase
Right. In the case of a Stock Purchase Right granted prior to the date on which
the Common Stock becomes a Listed Security and if required by the Applicable
Laws at such time, the purchase price of Shares subject to such Stock Purchase
Rights shall not be less than 85% of the Fair Market Value of the Shares as of
the date of the offer, or, in the case of a Ten Percent Holder, the price shall
not be less than 100% of the Fair Market Value of the Shares as of the date of
the offer. If the Applicable Laws do not impose the requirements set forth in
the preceding sentence and with respect to any Stock Purchase Rights granted
after the date on which the Common Stock becomes a Listed Security, the purchase
price of Shares subject to Stock Purchase Rights shall be as determined by the
Administrator. The offer to purchase Shares subject to Stock Purchase Rights
shall be accepted by execution of a Restricted Stock Purchase Agreement in the
form determined by the Administrator.
(b) Repurchase Option. Unless the Administrator determines
-----------------
otherwise, the Restricted Stock Purchase Agreement shall grant the Company an
irrevocable, exclusive option (the "Repurchase Option") exercisable upon the
-----------------
termination of the purchaser's Continuous Service. The purchase price for Shares
repurchased pursuant to the Restricted Stock Purchase Agreement shall be the
original purchase price paid by the purchaser and may be paid by cash,
-11-
<PAGE>
check or cancellation of any indebtedness of the purchaser to the Company, at
the Company's option. The Repurchase Option shall lapse at such rate as the
Administrator may determine; provided however that with respect to a Stock
Purchase Right granted prior to the date on which the Common Stock becomes a
Listed Security to a purchaser who is not an officer (including an Officer),
Director or Consultant of the Company or of any Parent or Subsidiary of the
Company, if required by the Applicable Laws, such Repurchase Option shall lapse
with respect to at least 20% of the Shares subject to the Stock Purchase Right
per year over five years from the date of grant of the Stock Purchase Right.
(c) Other Provisions. The Restricted Stock Purchase Agreement
----------------
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock Purchase Agreements need not be the
same with respect to each purchaser.
(d) Rights as a Shareholder. Once the Stock Purchase Right is
-----------------------
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 15
of the Plan.
12. Taxes.
-----
(a) As a condition of the exercise of an Option or Stock Purchase
Right granted under the Plan, the Participant (or in the case of the
Participant's death, the person exercising the Option or Stock Purchase Right)
shall make such arrangements as the Administrator may require for the
satisfaction of any applicable federal, state, local or foreign withholding tax
obligations that may arise in connection with the exercise of Option or Stock
Purchase Right and the issuance of Shares. The Company shall not be required to
issue any Shares under the Plan until such obligations are satisfied.
(b) In the case of an Employee and in the absence of any other
arrangement, the Employee shall be deemed to have directed the Company to
withhold or collect from his or her compensation an amount sufficient to satisfy
such tax obligations from the next payroll payment otherwise payable after the
date of an exercise of the Option or Stock Purchase Right.
(c) This Section 12(c) shall apply only after the date, if any,
upon which the Common Stock becomes a Listed Security. In the case of
Participant other than an Employee (or in the case of an Employee where the next
payroll payment is not sufficient to satisfy such tax obligations, with respect
to any remaining tax obligations), in the absence of any other arrangement and
to the extent permitted under the Applicable Laws, the Participant shall be
deemed to have elected to have the Company withhold from the Shares to be issued
upon exercise of the Option or Stock Purchase Right that number of Shares having
a Fair Market Value determined as of the applicable Tax Date (as defined below)
equal to the amount required to be withheld. For purposes of this Section 12,
the Fair Market Value of the Shares to be
-12-
<PAGE>
withheld shall be determined on the date that the amount of tax to be withheld
is to be determined under the Applicable Laws (the "Tax Date").
--------
(d) At the discretion of the Administrator, a Participant may
satisfy his or her tax withholding obligations arising in connection with an
Option or a Stock Purchase Right by one or some combination of the following
methods: (i) cash payment; (ii) payroll deduction out of the Optionee's current
compensation; or (iii) if permitted by the Administrator, in its discretion, a
Participant may satisfy his or her tax withholding obligations upon exercise of
an Option or Stock Purchase Right by surrendering to the Company Shares that (A)
in the case of Shares previously acquired from the Company, have been owned by
the Participant for more than six (6) months on the date of surrender, and (B)
have a Fair Market Value determined as of the applicable Tax Date equal to the
amount required to be withheld.
(e) Any election or deemed election by a Participant to have
Shares withheld to satisfy tax withholding obligations under Section 12(c) or
(d) above shall be irrevocable as to the particular Shares as to which the
election is made and shall be subject to the consent or disapproval of the
Administrator. Any election by a Participant under Section 12(d) above must be
made on or prior to the applicable Tax Date.
(f) In the event an election to have Shares withheld is made by a
Participant and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Participant shall receive
the full number of Shares with respect to which the Option or Stock Purchase
Right is exercised but such Participant shall be unconditionally obligated to
tender back to the Company the proper number of Shares on the Tax Date.
13. Non-Transferability of Options and Stock Purchase Rights.
--------------------------------------------------------
Options and Stock Purchase Rights may not be transferred or disposed of in any
manner other than by will or by the laws of descent or distribution or pursuant
to a domestic relations order (as defined by the Code or the rules thereunder);
provided that, after the date, if any, upon which the Common Stock becomes a
Listed Security, the Administrator may in its discretion grant transferable
Nonstatutory Stock Options pursuant to Option Agreements specifying (i) the
manner in which such Nonstatutory Stock Options are transferable and (ii) that
any such transfer shall be subject to the Applicable Laws. The designation of a
beneficiary by an Optionee will not constitute a transfer. An Option or Stock
Purchase Right may be exercised, during the lifetime of the holder of Option or
Stock Purchase Right, only by such holder or a transferee permitted by this
Section 13.
14. Time of Granting Options and Stock Purchase Rights. The date of
--------------------------------------------------
grant of an Option or Stock Purchase Right shall, for all purposes, be the date
on which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such later date as is determined by the Administrator;
provided however that in the case of an Incentive Stock Option, the grant date
shall be the later of the date on which the Administrator makes the
determination granting such Incentive Stock Option or the date of commencement
of the Optionee's employment relationship with the Company. Notice of the
determination shall be
-13-
<PAGE>
given to each Employee or Consultant to whom an Option or Stock Purchase Right
is so granted within a reasonable time after the date of such grant.
15. Adjustments Upon Changes in Capitalization, Corporate
-----------------------------------------------------
Transactions and Certain Other Transactions.
- -------------------------------------------
(a) Changes in Capitalization. Subject to any required action by
-------------------------
the shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, the number of Shares set forth
in Sections 3 and 8 above, and the number of shares of Common Stock that have
been authorized for issuance under the Plan but as to which no Options or Stock
Purchase Rights have yet been granted or that have been returned to the Plan
upon cancellation or expiration of an Option or Stock Purchase Right, as well as
the price per Share of Common Stock covered by each such outstanding Option or
Stock Purchase Right, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination, recapitalization or
reclassification of the Common Stock (including any change in the number of
Shares of Common Stock effected in connection with a change of domicile of the
Company), or any other increase or decrease in the number of issued Shares of
Common Stock effected without receipt of consideration by the Company; provided
however that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Administrator, whose determination in that
respect shall be final, binding and conclusive. Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of Shares of Common Stock subject to an Option or Stock Purchase Right.
(b) Certain Distributions. In the event of any distribution to
---------------------
the Company's shareholders of securities of any other entity or other assets
(other than dividends payable in cash or stock of the Company) without receipt
of consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per Share of Common Stock covered by each
outstanding Option or Stock Purchase Right to reflect the effect of such
distribution.
(c) Dissolution or Liquidation. In the event of the dissolution
--------------------------
or liquidation of the Company that is not a Corporate Transaction, each
outstanding Option or Stock Purchase Right shall terminate immediately upon the
consummation of such dissolution or liquidation, unless otherwise provided by
the Administrator.
(d) Corporate Transactions; Change of Control. In the event of a
-----------------------------------------
Corporate Transaction, including a Change of Control, the Administrator shall,
as to outstanding Options, either (i) provide that such Options shall be assumed
by the by the successor corporation or a Parent or Subsidiary of such successor
corporation (such entity, the "Successor Corporation") or that the Successor
---------------------
Corporation shall substitute with respect to such Options equivalent options;
(ii) provide upon notice to Optionees that all Options, to the extent then
exercisable or to be exercisable as a result of the Change of Control, must be
exercised on or
-14-
<PAGE>
before a specified date (which date shall be at least five (5) days from the
date of the notice), after which the Options shall terminate; or (iii) terminate
each Option in its entirety in exchange for a payment of cash, securities and/or
other property equal to the excess of the Fair Market Value of the Shares with
respect to which the Option is vested and exercisable immediately prior to the
consummation of the transaction over the aggregate exercise price thereof. In
the event of a Change of Control, all conditions and restrictions with respect
to Restricted Shares shall lapse, except to the extent such conditions and
restrictions are assigned to the successor corporation (or its Parent) in
connection with the Change of Control.
For purposes of this Section 15(d), an Option or a Stock Purchase
Right shall be considered assumed, without limitation, if, at the time of
issuance of the stock or other consideration upon a Corporate Transaction or a
Change of Control, as the case may be, each holder of an Option or Stock
Purchase Right would be entitled to receive upon exercise of the Option or Stock
Purchase Right the same number and kind of shares of stock or the same amount of
property, cash or securities as such holder would have been entitled to receive
upon the occurrence of the transaction if the holder had been, immediately prior
to such transaction, the holder of the number of Shares of Common Stock covered
by the Option or the Stock Purchase Right at such time (after giving effect to
any adjustments in the number of Shares covered by the Option or Stock Purchase
Right as provided for in this Section 15); provided however that if the
consideration received in the transaction is not solely common stock of the
Successor Corporation, the Administrator may, with the consent of the Successor
Corporation, provide for the consideration to be received upon exercise of the
Option or Stock Purchase Right to be solely common stock of the Successor
Corporation equal to the Fair Market Value of the per Share consideration
received by holders of Common Stock in the transaction.
16. Amendment and Termination of the Plan. The Board may at any time
-------------------------------------
amend, alter, suspend, discontinue or terminate the Plan, but no amendment,
alteration, suspension, discontinuance or termination (other than an adjustment
made pursuant to Section 15 above) shall be made that would materially and
adversely affect the rights of any Optionee or holder of Stock Purchase Rights
under any outstanding grant, without his or her consent. Such consent shall be
evidenced in writing signed by such Optionee or holder and the Company. In
addition, to the extent necessary and desirable to comply with the Applicable
Laws, the Company shall obtain shareholder approval of any Plan amendment in
such a manner and to such as degree as required.
17. Conditions Upon Issuance of Shares. Notwithstanding any other
----------------------------------
provision of the Plan or any agreement entered into by the Company pursuant to
the Plan, the Company shall not be obligated, and shall have no liability for
failure, to issue or deliver any Shares under the Plan unless such issuance or
delivery would comply with the Applicable Laws, with such compliance determined
by the Company in consultation with its legal counsel.
As a condition to the exercise of an Option or Stock Purchase
Right, the Company may require the person exercising such Option or Stock
Purchase Right to represent and warrant at the time of any such exercise that
the Shares are being purchased only for investment and
-15-
<PAGE>
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by
Applicable Laws.
18. Reservation of Shares. The Company, during the term of this
---------------------
Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
19. Agreements. Options and Stock Purchase Rights shall be evidenced
----------
by Option Agreements and Restricted Stock Purchase Agreements, respectively, in
such form(s) as the Administrator shall from time to time approve.
20. Shareholder Approval. If required by the Applicable Laws,
--------------------
continuance of the Plan shall be subject to approval by the shareholders of the
Company within twelve (12) months before or after the date the Plan is adopted.
Such shareholder approval shall be obtained in the manner and to the degree
required under the Applicable Laws.
21. Information and Documents to Optionees and Purchasers. Prior to
-----------------------------------------------------
the date upon which the Common Stock becomes a Listed Security and if required
by the Applicable Laws, the Company shall provide financial statements at least
annually to each Optionee and to each individual who acquired Shares pursuant to
the Plan, during the period such Optionee or purchaser has one or more Options
or Stock Purchase Rights outstanding, and in the case of an individual who
acquired Shares pursuant to the Plan, during the period such individual owns
such Shares. The Company shall not be required to provide such information if
the issuance of Options or Stock Purchase Rights under the Plan is limited to
key employees whose duties in connection with the Company assure their access to
equivalent information.
-16-
<PAGE>
RAMP NETWORKS, INC
1999 STOCK INCENTIVE PLAN
NOTICE OF STOCK OPTION GRANT
----------------------------
Optionee
OptioneeAddress1
OptioneeAddress2
You have been granted an option to purchase Common Stock of Ramp Networks,
Inc. (the "Company") as follows:
-------
Board Approval Date: BoardApprovDate
Date of Grant (Later of Board
Approval Date or Commence-
ment of Employment/Consulting): GrantDate
Exercise Price per Share: $ExercisePrice
Total Number of Shares Granted: NoofShares
Total Exercise Price: $TotalExercisePrice
Type of Option: NoSharesISO Incentive Stock Option
-----------
NoSharesNSO Nonstatutory Stock Option
-----------
Term/Expiration Date: Term/ExpirDate
Vesting Commencement Date: VestingCommenceDate
Vesting Schedule: This Option may be exercised, in whole
or in part, in accordance with the
following schedule: Vesting [Must be
at least 20% per year for Options
granted prior to the date the Common
Stock becomes a Listed Security (as
defined in the Plan).]
<PAGE>
Termination Period: Option may be exercised for 30 days
after termination of employment or
consulting relationship except as set
out in Section 5 of the Stock Option
Agreement (but in no event later than
the Expiration Date).
Transferability: [Not Transferable.] [Transferable as
follows: ]
By your signature and the signature of the Company's representative below,
you and the Company agree that this option is granted under and governed by the
terms and conditions of the 1999 Stock incentive plan and the Stock Option
Agreement, both of which are attached and made a part of this document.
Optionee: Ramp Networks, Inc.
______________________________ ______________________________
Signature By:
______________________________ ______________________________
Print Name Print Name and Title
Address (if different from above): Address:
______________________________ 3100 De La Cruz Blvd.
Santa Clara, CA 95054
______________________________
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<PAGE>
RAMP NETWORKS, INC.
1999 Stock incentive plan
STOCK OPTION AGREEMENT
----------------------
1. Grant of Option. Ramp Networks, Inc., a California corporation (the
---------------
"Company"), hereby grants to Optionee ("Optionee"), an option (the "Option") to
------- -------- ------
purchase a total number of shares of Common Stock (the "Shares") set forth in
------
the Notice of Stock Option Grant, at the exercise price per share set forth in
the Notice of Stock Option Grant (the "Exercise Price") subject to the terms,
--------------
definitions and provisions of the Ramp Networks, Inc. Stock incentive plan (the
"Plan") adopted by the Company, which is incorporated herein by reference.
----
Unless otherwise defined herein, the terms defined in the Plan shall have the
same defined meanings in this Option Agreement. In the event of a conflict
between the terms and conditions of the Plan and the terms and conditions of
this Option Agreement, the terms and conditions of the Plan shall prevail.
To the extent designated an Incentive Stock Option in the Notice of
Stock Option Grant, this Option is intended to qualify as an Incentive Stock
Option as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code") and, to the extent not so designated, this Option is
intended to be a Nonstatutory Stock Option. Notwithstanding the foregoing, if
designated as an Incentive Stock Option, in the event that the Shares subject to
this Option (and all other Incentive Stock Options granted to Optionee by the
Company or any Parent or Subsidiary) that first become exercisable in any
calendar year have an aggregate fair market value (determined for each Share as
of the date of grant of the option covering such Share) in excess of $100,000,
the Shares in excess of $100,000 shall be treated as subject to a Nonstatutory
Stock Option, in accordance with Section 5(b) of the Plan.
2. Exercise of Option.
------------------
(a) Right to Exercise. This Option is exercisable during its Term in
-----------------
accordance with the Vesting Schedule set out in the Notice of Stock Option Grant
and the applicable provisions of the Plan and this Stock Option Agreement. In
the event of Optionee's death, disability or the termination of Optionee's
Continuous Service, the exercisability of the Option is governed by the
applicable provisions of the Plan and this Stock Option Agreement. This Option
may not be exercised for a fraction of a Share.
(b) Method of Exercise.
------------------
(i) This Option shall be exercisable in whole or in part as to Shares
which have vested under the Vesting Schedule indicated on the Notice of Stock
Option Grant by execution and delivery to the Company a written notice of
exercise in the form attached as Exhibit A (the "Exercise Notice"), [for Grant
--------- ---------------
subject to early exercise: or in whole or in part at any time after the Date of
Grant as to Shares which have not vested under the Vesting Schedule indicated on
the Notice of Stock Option Grant (except that in the case
<PAGE>
of an Incentive Stock Option such exercise shall be limited to the number of
Shares which, when added to all other Shares first exercisable within the same
calendar year, do not exceed an aggregate fair market value of $100,000,
determined for each Share as of the date of grant of the option covering such
Share), by delivery of an early exercise notice and restricted stock purchase
agreement in the form attached as Exhibit A-1 (the "Early Exercise Notice and
----------- -------------------------
Restricted Stock Purchase Agreement"), in either case] which shall state the
- -----------------------------------
election to exercise the Option, the number of Shares in respect of which the
Option is being exercised (the "Exercised Shares"), and such other
representations and agreements as toholder's investment intent with respect to
such Shares of Common Stock as may be required by the Company pursuant to the
provisions of the Plan. Such written notice of exercise shall be signed by
Optionee and shall be delivered in person or by certified mail to the Secretary
of the Company. The written notice of exercise shall be accompanied by payment
of the aggregate Exercise Price as to all Exercised Shares. This Option shall be
deemed to be exercised upon receipt by the Company of such fully executed
written notice of exercise, accompanied by such aggregate Exercise Price.
(ii) As a condition to the exercise of this Option, Optionee agrees
to make adequate provision for federal, state or other tax withholding
obligations, if any, which arise upon the exercise of the Option or disposition
of Shares, whether by withholding, direct payment to the Company, or otherwise,
in accordance with Section 9 of this Agreement and Section 12 of the Plan.
(iii) No Shares will be issued pursuant to the exercise of an
Option unless such issuance and such exercise shall comply with all relevant
provisions of applicable law and the requirements of any stock exchange upon
which the Shares may then be listed. Assuming such compliance, for income tax
purposes the Shares shall be considered transferred to Optionee on the date on
which the Option is exercised with respect to such Shares.
3. Method of Payment. Payment of the Exercise Price shall be by any of
-----------------
the following, or a combination thereof, at the election of Optionee:
(a) cash;
(b) check;
(c) surrender of other Shares of Common Stock of the Company that (i)
in the case of Shares acquired upon exercise of an Option, have either been
owned by Optionee for more than six (6) months on the date of surrender (or such
other period as may be required to avoid a charge to the Company's earnings) or
were not acquired, directly or indirectly, from the Company, and (ii) have a
fair market value on the date of surrender equal to the Exercise Price of the
Shares as to which the Option is being exercised; or
(d) if there is a public market for the Shares and they are
registered under the Securities Act of 1933, as amended, delivery of a properly
executed exercise notice
-2-
<PAGE>
together with irrevocable instructions to a broker to deliver promptly to the
Company the amount of sale or loan proceeds required to pay the exercise price.
4. Restrictions on Exercise. This Option may not be exercised until such
------------------------
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of
this Option, the Company may require Optionee to make any representation and
warranty to the Company as may be required by any applicable law or regulation.
5. Termination of Continuous Service. In the event of termination of
---------------------------------
Optionee's Continuous Service, Optionee may, to the extent otherwise so entitled
at the date of such termination (the "Termination Date"), exercise this Option
----------------
during the Termination Period set forth in the Notice of Stock Option Grant. To
the extent that Optionee was not entitled to exercise this Option at such
Termination Date, or if Optionee does not exercise this Option within the
Termination Period, the Option shall terminate.
[The following provisions of this Section 5 shall be included for any
Option granted prior to the date the Common Stock becomes a Listed Security (as
defined in the Plan), and may be included at the discretion of the Administrator
for any Option granted after the date the Common Stock becomes a Listed Security
(with such revisions as to time periods as determined by the Administrator in
its discretion):
(a) Total and Permanent Disability of Optionee. Notwithstanding the
------------------------------------------
foregoing provisions of this Section 5, in the event of termination of
Optionee's Continuous Service as a result of Optionee's total and permanent
disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only
within twelve (12) months from the Termination Date (but in no event later than
the Expiration Date set forth in the Notice of Stock Option Grant), exercise
this Option to the extent Optionee was entitled to exercise it as of such
Termination Date. To the extent that Optionee was not entitled to exercise the
Option as of the Termination Date, or if Optionee does not exercise such Option
(to the extent so entitled) within the time specified in this Section 5(a), the
Option shall terminate.
(b) Other Disability of Optionee. Notwithstanding the foregoing
----------------------------
provisions of this Section 5, in the event of termination of Optionee's
Continuous Service as a result of disability not constituting a total and
permanent disability (as set forth in Section 22(e)(3) of the Code), Optionee
may, but only within six (6) months from the Termination Date (but in no event
later than the Expiration Date set forth in the Notice of Stock Option Grant),
exercise the Option to the extent Optionee was entitled to exercise it as of
such Termination Date; provided, however, that if this is an Incentive Stock
Option and Optionee fails to exercise this Incentive Stock Option within three
(3) months from the Termination Date, this Option will cease to qualify as an
Incentive Stock Option (as defined in Section 422 of the Code) and Optionee will
be treated for federal income tax purposes as having received ordinary income at
the time of such exercise in an amount generally measured by
-3-
<PAGE>
the difference between the Exercise Price for the Shares and the fair market
value of the Shares on the date of exercise. To the extent that Optionee was not
entitled to exercise the Option at the Termination Date, or if Optionee does not
exercise such Option to the extent so entitled within the time specified in this
Section 5(b), the Option shall terminate.
(c) Death of Optionee. Notwithstanding the foregoing provisions of
-----------------
this Section 5, in the event of the death of Optionee (i) during the Term of
this Option and while an Employee or Consultant of the Company and having been
in Continuous Service since the date of grant of the Option, or (ii) within
thirty (30) days after Optionee's Termination Date, the Option may be exercised
at any time within six (6) months following the date of death (but in no event
later than the Expiration Date set forth in the Notice of Stock Option Grant),
by Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent of the right to
exercise that had accrued at the Termination Date.
6. Non-Transferability of Option. This Option may not be transferred in
-----------------------------
any manner otherwise than by will or by the laws of descent or distribution or
pursuant to a domestic relations order (as defined by the Code or rules
thereunder), except as set forth in the Notice of Stock Option Grant and subject
to Applicable Laws. This Option may be exercised during the lifetime of
Optionee only by him or her or by a transferee permitted by this Section 6. The
terms of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of Optionee.
7. Term of Option. This Option may be exercised only within the Term set
--------------
forth in the Notice of Stock Option Grant, subject to the limitations set forth
in Section 7 of the Plan.
8. Tax Consequences. Optionee acknowledges that he or she has read the
----------------
brief summary set forth below of certain of the federal tax consequences of
exercise of this Option and disposition of the Shares under the laws in effect
as of the Date of Grant. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX
LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX
ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercise of Incentive Stock Option. If this Option qualifies as
----------------------------------
an Incentive Stock Option, there will be no regular federal income tax liability
upon the exercise of the Option, although the excess, if any, of the fair market
value of the Shares on the date of exercise over the Exercise Price will be
treated as an item of alternative minimum taxable income for federal tax
purposes and may subject Optionee to the alternative minimum tax in the year of
exercise.
(b) Exercise of Nonstatutory Stock Option. If this Option does not
-------------------------------------
qualify as an Incentive Stock Option, Optionee may incur regular federal income
tax liability upon the exercise of the Option. Optionee will be treated as
having received compensation income (taxable at ordinary income tax rates) equal
to the excess, if any, of the fair market
-4-
<PAGE>
value of the Shares on the date of exercise over the Exercise Price. If Optionee
is an employee, the Company will be required to withhold from Optionee's
compensation or collect from Optionee and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income at the
time of exercise.
(c) Disposition of Shares. In the case of a Nonstatutory Stock
---------------------
Option, if Shares are held for more than 12 months, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. In the case of an Incentive Stock Option, if Shares
transferred pursuant to the Option are held for more than one year after
exercise and more than two years after the Date of Grant, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If Shares purchased under an Incentive Stock Option are
disposed of within either of such two holding periods, then any gain realized on
such disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the difference between the Exercise Price and the
lesser of (i) the fair market value of the Shares on the date of exercise, or
(ii) the sales proceeds of the Shares.
(d) Notice of Disqualifying Disposition of Incentive Stock Option
-------------------------------------------------------------
Shares. If the Option granted to Optionee herein is an Incentive Stock Option,
- ------
and if Optionee sells or otherwise disposes of any of the Shares acquired
pursuant to the Incentive Stock Option on or before the later of (i) the date
two years after the Date of Grant, or (ii) the date one year after the date of
exercise, Optionee shall notify the Company in writing within thirty (30) days
after the date of any such disposition. Optionee acknowledges and agrees that
he or she may be subject to income tax withholding by the Company on the
compensation income recognized by Optionee from the early disposition by payment
in cash or out of the current earnings paid to Optionee.
9. Withholding Tax Obligations. Optionee acknowledges and agrees that
---------------------------
the delivery of any Shares under the Plan is conditioned on satisfaction by the
Optionee of applicable federal, state, local or foreign withholding tax
obligations that may arise in connection with the exercise of an Option. Such
withholding obligations shall be satisfied in accordance with the provisions of
Section 12 of the Plan.
10. Market Standoff Agreement. In connection with the initial public
-------------------------
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Optionee hereby agrees not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any Shares (other than those
included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not to exceed
180 days) from the effective date of such registration as may be requested by
the Company or such managing underwriters and to execute an agreement reflecting
the foregoing as may be requested by the underwriters at the time of the public
offering.
[Signature Page Follows]
-5-
<PAGE>
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
document.
RAMP NETWORKS, INC.
By: _______________________________
___________________________________
(Print name and title)
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
OPTION HEREOF IS EARNED ONLY BY CONTINUING EMPLOYMENT OR CONSULTANCY AT THE WILL
OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK INCENTIVE PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that he
or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Dated: ________________________ ______________________________
Optionee
-6-
<PAGE>
EXHIBIT A
---------
RAMP NETWORKS, INC.
1999 Stock incentive plan
NOTICE OF EXERCISE
------------------
To: RAMP NETWORKS, INC.
Attn: Stock Option Administrator
Subject: Notice of Intention to Exercise Stock Option
--------------------------------------------
This is official notice that the undersigned ("Optionee") intends to
--------
exercise Optionee's option to purchase __________ shares of RAMP NETWORKS, INC.
Common Stock, under and pursuant to the Ramp Networks, Inc. 1999 Stock incentive
plan and the Stock Option Agreement dated _______________, as follows:
Date of Grant (or Grant Number): ____________________________________
Type of Option (ISO or NSO): ____________________________________
Date of Purchase: ____________________________________
Number of Shares: ____________________________________
Purchase Price: ____________________________________
Method of Payment of ____________________________________
Purchase Price: ____________________________________
Social Security No.: ____________________________________
The shares should be issued as follows:
Name: ______________________________
Address: ______________________________
______________________________
______________________________
Signed: ______________________________
Date: ______________________________
<PAGE>
EXHIBIT A-1
-----------
RAMP NETWORKS, INC.
1999 Stock incentive plan
EARLY EXERCISE NOTICE AND RESTRICTED STOCK PURCHASE AGREEMENT
-------------------------------------------------------------
This Agreement ("Agreement") is made as of ______________, by and between
---------
Ramp Networks, Inc., a California corporation (the "Company"), and ____________
-------
("Purchaser"). To the extent any capitalized terms used in this Agreement are
---------
not defined, they shall have the meaning ascribed to them in the 1999 Stock
incentive plan.
1. Exercise of Option. Subject to the terms and conditions hereof,
------------------
Purchaser hereby elects to exercise his or her option to purchase ______________
shares of the Common Stock (the "Shares") of the Company under and pursuant to
------
the Company's 1999 Stock incentive plan (the "Plan") and the Stock Option
----
Agreement dated ______________ (the "Option Agreement"). Of these Shares,
----------------
Purchaser has elected to purchase _____________ Shares which have not yet vested
under the such Vesting Schedule (the "Unvested Shares"). The purchase price for
---------------
the Shares shall be _______ per Share for a total purchase price of
$_______________. The term "Shares" refers to the purchased Shares and all
------
securities received in replacement of the Shares or as stock dividends or
splits, all securities received in replacement of the Shares in a
recapitalization, merger, reorganization, exchange or the like, and all new,
substituted or additional securities or other properties to which Purchaser is
entitled by reason of Purchaser's ownership of the Shares.
2. Time and Place of Exercise. The purchase and sale of the Shares under
--------------------------
this Agreement shall occur at the principal office of the Company in accordance
with the provisions of Sections 9 and 10 of the Plan. Upon delivery to the
Company of this fully executed Early Exercise Notice and Restricted Stock
Purchase Agreement, together with payment of the purchase price therefor by
Purchaser by (a) cash, (b) check made payable to the Company, (c) delivery of
Shares of the Common Stock of the Company in accordance with Section 3 of the
Option Agreement, or (d) a combination of the foregoing, the Option shall be
deemed to be exercised as to the number of Shares set forth above in this Early
Exercise Notice. As soon as practicable thereafter, the Company will deliver to
Purchaser a certificate representing the Shares purchased by Purchaser (which
shall be issued in Purchaser's name).
3. Limitations on Transfer. In addition to any other limitation on
-----------------------
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares while the Shares are subject
to the Company's Repurchase Option (as defined below). After any Shares have
been released from such Repurchase Option, Purchaser shall not assign, encumber
or dispose of any interest in such Shares except in compliance with the
provisions below and applicable securities laws.
<PAGE>
4. Repurchase Option.
-----------------
(a) In the event of the voluntary or involuntary termination of
Purchaser's Continuous Service for any reason (including death or disability),
with or without cause, the Company shall upon the date of such termination (the
"Termination Date") have an irrevocable, exclusive option (the "Repurchase
---------------- ----------
Option") for a period of 60 days from such date to repurchase all or any portion
- ------
of the Unvested Shares held by Purchaser as of the Termination Date which have
not yet been released from the Company's Repurchase Option at the original
purchase price per Share specified in Section 1 (adjusted for any stock splits,
stock dividends and the like).
(b) The Repurchase Option shall be exercised by the Company by written
notice to Purchaser or Purchaser's executor and, at the Company's option, (A) by
delivery to Purchaser or Purchaser's executor with such notice of a check in the
amount of the purchase price for the Shares being purchased, or (B) in the event
Purchaser is indebted to the Company, by cancellation by the Company of an
amount of such indebtedness equal to the purchase price for the Shares being
repurchased, or (C) by a combination of (A) and (B) so that the combined payment
and cancellation of indebtedness equals such purchase price. Upon delivery of
such notice and payment of the purchase price in any of the ways described
above, the Company shall become the legal and beneficial owner of the Shares
being repurchased and all rights and interest therein or related thereto, and
the Company shall have the right to transfer to its own name the number of
Shares being repurchased by the Company, without further action by Purchaser.
(c) One hundred percent (100%) of the Unvested Shares shall initially
be subject to the Repurchase Option. The Unvested Shares shall be released from
the Repurchase Option in accordance with the Vesting Schedule and as set forth
in the Notice of Stock Option Grant.
(d) The right of the Company to purchase any part of the Shares may be
assigned in whole or in part to any shareholder or shareholders of the Company
or other persons or organizations; provided, however, that an assignee, other
than a corporation that is the Parent or a 100% owned Subsidiary of the Company,
must pay the Company, upon assignment of such right, cash equal to the
difference between the original purchase price and Fair Market Value, if the
original purchase price is less than the Fair Market Value of the Shares subject
to the assignment.
(e) All transferees of Shares or any interest therein will receive and
hold such Shares or interest subject to the provisions of this Agreement,
including, insofar as applicable, the Repurchase Option. Any sale or transfer
of the Shares shall be void unless the provisions of this Agreement are
satisfied.
5. Escrow of Unvested Shares. For purposes of facilitating the
-------------------------
enforcement of the provisions of Section 4 above, Purchaser agrees, immediately
upon receipt of the certificate(s) for the Shares subject to the Repurchase
Option, to deliver such certificate(s), together with an Assignment Separate
from Certificate in the form attached to this Agreement as Attachment A executed
------------
by Purchaser and by Purchaser's spouse (if required for transfer), in blank, to
the Secretary of the Company, or the Secretary's designee, to hold such
certificate(s) and
-2-
<PAGE>
Assignment Separate from Certificate in escrow and to take all such actions and
to effectuate all such transfers and/or releases as are in accordance with the
terms of this Agreement. Purchaser hereby acknowledges that the Secretary of the
Company, or the Secretary's designee, is so appointed as the escrow holder with
the foregoing authorities as a material inducement to make this Agreement and
that said appointment is coupled with an interest and is accordingly
irrevocable. Purchaser agrees that said escrow holder shall not be liable to any
party hereof (or to any other party). The escrow holder may rely upon any
letter, notice or other document executed by any signature purported to be
genuine and may resign at any time. Purchaser agrees that if the Secretary of
the Company, or the Secretary's designee, resigns as escrow holder for any or no
reason, the Board of Directors of the Company shall have the power to appoint a
successor to serve as escrow holder pursuant to the terms of this Agreement.
6. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. The certificate or certificates representing the Shares
-------
shall bear the following legends (as well as any legends required by applicable
state and federal corporate and securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
STOCKHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
[Include following legend if Shares are purchased prior to date Common
Stock is a Listed Security (as defined in the Plan):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AND HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO
SUCH SALE OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY TO THE
COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
-3-
<PAGE>
(d) Removal of Legend. When all of the following events have
-----------------
occurred, the Shares then held by Purchaser will no longer be subject to the
legend referred to in Section 6(a): (i) the expiration or termination of the
market standoff provisions of Section 5 (and of any agreement entered pursuant
to Section 5); and (ii) the expiration or exercise in full of the Repurchase
Option. After such time, and upon Purchaser's request, a new certificate or
certificates representing the Shares not repurchased shall be issued without the
legend referred to in Section 6(a), and delivered to Purchaser.
7. No Employment Rights. Nothing in this Agreement shall affect in any
--------------------
manner whatsoever the right or power of the Company, or a Parent or Subsidiary
of the Company, to terminate Purchaser's employment or consulting relationship,
for any reason, with or without cause.
8. Section 83(b) Election. Purchaser understands that Section 83(a) of
----------------------
the Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary
----
income for a Nonstatutory Stock Option the difference between the amount paid
for the Shares and the fair market value of the Shares as of the date any
restrictions on the Shares lapse. In this context, "restriction" means the
-----------
right of the Company to buy back the Shares pursuant to the Repurchase Option
set forth in Section 3(a) of this Agreement. Purchaser understands that
Purchaser may elect to be taxed at the time the Shares are purchased, rather
than when and as the Repurchase Option expires, by filing an election under
Section 83(b) of the Code (an "83(b) Election") with the Internal Revenue
--------------
Service within 30 days from the date of purchase. Even if the fair market value
of the Shares at the time of the execution of this Agreement equals the amount
paid for the Shares, the election must be made to avoid income treatment under
Section 83(a) in the future. Purchaser understands that failure to file such an
election in a timely manner may result in adverse tax consequences for
Purchaser. Purchaser further understands that an additional copy of such
election form should be filed with his or her federal income tax return for the
calendar year in which the date of this Agreement falls. Purchaser acknowledges
that the foregoing is only a summary of the effect of United States federal
income taxation with respect to purchase of the Shares hereunder, and does not
purport to be complete. Purchaser further acknowledges that the Company has
directed Purchaser to seek independent advice regarding the applicable
provisions of the Code, the income tax laws of any municipality, state or
foreign country in which Purchaser may reside, and the tax consequences of
Purchaser's death.
Purchaser agrees that he or she will execute and deliver to the Company
with this executed Agreement a copy of the Acknowledgment and Statement of
Decision Regarding Section 83(b) Election (the "Acknowledgment") attached hereto
--------------
as Attachment B. Purchaser further agrees that he or she will execute and
------------
submit with the Acknowledgment a copy of the 83(b) Election attached hereto as
Attachment C (for income tax purposes in connection with the early exercise of a
- ------------
Nonstatutory Stock Option) if Purchaser has indicated in the Acknowledgment his
or her decision to make such an election.
-4-
<PAGE>
9. Miscellaneous.
-------------
(a) 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, without giving effect to principles of conflicts of law.
(b) Entire Agreement; Enforcement of Rights. This Agreement sets
---------------------------------------
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(d) Construction. This Agreement is the result of negotiations
------------
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; 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.
(e) Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient when delivered personally or sent
by telegram or fax or forty-eight (48) hours after being deposited in the U.S.
mail, as certified or registered mail, with postage prepaid, and addressed to
the party to be notified at such party's address as set forth below or as
subsequently modified by written notice.
(f) 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.
(g) Successors and Assigns. The rights and benefits of this Agreement
----------------------
shall inure to the benefit of, and be enforceable by the Company's successors
and assigns. The rights and obligations of Purchaser under this Agreement may
only be assigned with the prior written consent of the Company.
-5-
<PAGE>
[Include the following Section 9(h) if Shares are purchased prior to
the date the Common Stock becomes a Listed Security (as defined in the Plan):
(h) California Corporate Securities Law. THE SALE OF THE SECURITIES
-----------------------------------
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
[Signature Page Follows]
-6-
<PAGE>
The parties have executed this Agreement as of the date first set forth
above.
RAMP NETWORKS, INC.
By: ________________________________
Name:_______________________________
(print)
Title:______________________________
Address:
PURCHASER:
[NAME OF OPTIONEE]
____________________________________
(Signature)
____________________________________
(Print Name)
Social Security Number: ____________
Address:
____________________________________
____________________________________
I, ______________________, spouse of [______________OPTIONEE], have read and
hereby approve the foregoing Agreement. In consideration of the Company's
granting my spouse the right to purchase the Shares as set forth in the
Agreement, I hereby agree to be bound irrevocably by the Agreement and further
agree that any community property or similar interest that I may have in the
Shares shall hereby be similarly bound by the Agreement. I hereby appoint my
spouse as my attorney-in-fact with respect to any amendment or exercise of any
rights under the Agreement.
_____________________________
Spouse of [__________OPTIONEE]
-7-
<PAGE>
ATTACHMENT A
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED and pursuant to that certain Early Exercise Notice
and Restricted Stock Purchase Agreement between the undersigned ("Purchaser")
--------
and Ramp Networks, Inc. (the "Company") dated _______________ (the "Agreement"),
------- ---------
Purchaser hereby sells, assigns and transfers unto the Company
_______________________________ (________) shares of the Common Stock of the
Company, standing in Purchaser's name on the books of the Company and
represented by Certificate No. ____, and hereby irrevocably appoints
_____________________________ to transfer said stock on the books of the Company
with full power of substitution in the premises. THIS ASSIGNMENT MAY ONLY BE
USED AS AUTHORIZED BY THE AGREEMENT AND THE ATTACHMENTS THERETO.
Dated: ________________
Signature:
_____________________________________________
[Name of Purchaser]
_____________________________________________
Spouse of [Name of Purchaser] (if applicable)
Instruction: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
Repurchase Option set forth in the Agreement without requiring additional
signatures on the part of Purchaser.
<PAGE>
ATTACHMENT B
ACKNOWLEDGMENT AND STATEMENT OF DECISION
----------------------------------------
REGARDING SECTION 83(b) ELECTION
--------------------------------
The undersigned (which term includes the undersigned's spouse), a purchaser
of ___________ shares of Common Stock of Ramp Networks, Inc., a California
corporation (the "Company"), by exercise of an option (the "Option") granted
------- ------
pursuant to the Company's 1999 Stock incentive plan (the "Plan"), hereby states
----
as follows:
1. The undersigned acknowledges receipt of a copy of the Plan relating to
the offering of such shares. The undersigned has carefully reviewed the Plan
and the option agreement pursuant to which the Option was granted.
2. The undersigned either [check and complete as applicable]:
(a) ____ has consulted, and has been fully advised by, the undersigned's own tax
advisor, _____________________________________, whose business address is
______________________________, regarding the federal, state and local tax
consequences of purchasing shares under the Plan, and particularly
regarding the advisability of making elections pursuant to Section 83(b) of
the Internal Revenue Code of 1986, as amended (the "Code") and pursuant to
----
the corresponding provisions, if any, of applicable state law; or
(b) ____ has knowingly chosen not to consult such a tax advisor.
3. The undersigned hereby states that the undersigned has decided [check
as applicable]:
(a) ____ to make an election pursuant to Section 83(b) of the Code, and is
submitting to the Company, together with the undersigned's executed Early
Exercise Notice and Restricted Stock Purchase Agreement, an executed form
entitled "Election Under Section 83(b) of the Internal Revenue Code of
1986;"
(b) ____ to make an election pursuant to Section 83(b) of the Code, and is
submitting to the Company, together with the undersigned's executed Early
Exercise Notice and Restricted Stock Purchase Agreement, an executed form
entitled "Election Under Section 83(b) of the Internal Revenue Code of 1986
for purposes of income tax; or
(c) ____ not to make an election pursuant to Section 83(b) of the Code.
<PAGE>
4. Neither the Company nor any subsidiary or representative of the
Company has made any warranty or representation to the undersigned with respect
to the tax consequences of the undersigned's purchase of shares under the Plan
or of the making or failure to make an election pursuant to Section 83(b) of the
Code or the corresponding provisions, if any, of applicable state law.
Date:__________________________ ____________________________
[Name of Purchaser]
Date:__________________________ ____________________________
Spouse of [Name of Purchaser]
-2-
<PAGE>
ATTACHMENT C
------------
ELECTION UNDER SECTION 83(b)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
------------------------------------
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code, to include in taxpayer's gross income for the current
taxable year, the amount of any compensation taxable to taxpayer in connection
with taxpayer's receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year
of the undersigned are as follows:
NAME OF TAXPAYER: [Name of Purchaser_________________-]
NAME OF SPOUSE: ________________
ADDRESS: ___________________________________
___________________________________
IDENTIFICATION NO. OF TAXPAYER: _______________
IDENTIFICATION NO. OF SPOUSE: _______________
TAXABLE YEAR: __________
2. The property with respect to which the election is made is described as
follows:
______________ shares of the Common Stock $.001 par value, of Ramp
Networks, Inc., a California corporation (the "Company").
-------
3. The date on which the property was transferred is: _______________
4. The property is subject to the following restrictions:
Repurchase option at cost in favor of the Company upon termination of
taxpayer's service as an employee or consultant of the Company.
5. The fair market value per share at the time of transfer, determined without
regard to any restriction other than a restriction which by its terms will
never lapse, of such property is: $____________
6. The amount (if any) paid per share for such property: $____________
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of the
above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
- --------------------------------------------------------------------------
except with the consent of the Commissioner.
- -------------------------------------------
<PAGE>
Dated: ____________ _____________________________
[Name of Purchaser]
Dated: ____________ _____________________________
Spouse of [Name of Purchaser]
-2-
<PAGE>
RAMP NETWORKS, INC
RESTRICTED STOCK PURCHASE AGREEMENT
-----------------------------------
1999 STOCK INCENTIVE PLAN
-------------------------
This Restricted Stock Purchase Agreement (the " Agreement ") is made as of
---------
__________________, 19__, by and between Ramp Networks, Inc., a Delaware
corporation (the "Company"), and __________________ ("Purchaser") pursuant
------- ---------
to the Company" "s 1999 Stock Incentive Plan.
1. Sale of Stock. Subject to the terms and conditions of this Agreement,
-------------
on the Purchase Date (as defined below) the Company will issue and sell to
Purchaser, and Purchaser agrees to purchase from the Company, _______________
shares of the Company's Common Stock (the "Shares") at a purchase price of
------
$_____ per Share for a total purchase price of $_________________. The term
"Shares" refers to the purchased Shares and all securities received in
replacement of or in connection with the Shares pursuant to stock dividends or
splits, all securities received in replacement of the Shares in a
recapitalization, merger, reorganization, exchange or the like, and all new,
substituted or additional securities or other properties to which Purchaser is
entitled by reason of Purchaser" "s ownership of the Shares.
2. Purchase. The purchase and sale of the Shares under this Agreement
--------
shall occur at the principal office of the Company, in accordance with Section
11 of the Plan, simultaneously with the execution of this Agreement by the
parties or on such other date as the Company and Purchaser shall agree (the
"Purchase Date"). On the Purchase Date, the Company will deliver to Purchaser a
- --------------
certificate representing the Shares to be purchased by Purchaser (which shall be
issued in Purchaser" "s name) against payment of the purchase price therefor by
Purchaser by check made payable to the Company.
3. Limitations on Transfer. In addition to any other limitation on
-----------------------
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares while the Shares are subject
to the Company" "s Repurchase Option (as defined below). After any Shares have
been released from the Repurchase Option, Purchaser shall not assign, encumber
or dispose of any interest in such Shares except in compliance with the
provisions below and applicable securities laws.
(a) Repurchase Option.
-----------------
(i) In the event of the voluntary or involuntary termination of
Purchaser" "s Continuous Service for any reason (including death or disability),
with or without cause, the Company shall upon the date of such termination (the
"Termination Date") have an irrevocable, exclusive option (the "Repurchase
---------------- ----------
Option") for a period of 60 days from such date to repurchase all or any portion
- ------
of the Shares held by Purchaser as of the Termination Date which have not yet
been released from the Company" "s Repurchase Option at the original purchase
price per Share specified in Section 1 (adjusted for any stock splits, stock
dividends and the like).
<PAGE>
(ii) The Repurchase Option shall be exercised by the Company by
written notice to Purchaser or Purchaser" "s executor and, at the Company" "s
option, (A) by delivery to Purchaser or Purchaser" "s executor with such notice
of a check in the amount of the purchase price for the Shares being purchased,
or (B) in the event Purchaser is indebted to the Company, by cancellation by the
Company of an amount of such indebtedness equal to the purchase price for the
Shares being repurchased, or (C) by a combination of (A) and (B) so that the
combined payment and cancellation of indebtedness equals such purchase price.
Upon delivery of such notice and payment of the purchase price in any of the
ways described above, the Company shall become the legal and beneficial owner of
the Shares being repurchased and all rights and interest therein or related
thereto, and the Company shall have the right to transfer to its own name the
number of Shares being repurchased by the Company, without further action by
Purchaser.
(iii) _______ percent (___%) of the Shares shall initially be
subject to the Repurchase Option. The Shares shall be released from the
Repurchase Option in accordance with the following Vesting Schedule: [Example:
(provided in each case that Purchaser's Continuous Service has not been
terminated prior to the date of any such release): __ of the total number of
Shares shall be released from the Repurchase Option on the __-month anniversary
of the Vesting Commencement Date (as set forth on the signature page of this
Agreement), and an additional __ of the total number of Shares shall be released
from the Repurchase Option each month thereafter on the Monthly Vesting Date (as
set forth on the signature page of this Agreement), until all Shares are
released from the Repurchase Option.] Fractional shares shall be rounded to the
nearest whole share.
(b) Restrictions Binding on Transferees. All transferees of Shares or
-----------------------------------
any interest therein will receive and hold such Shares or interest subject to
the provisions of this Agreement, including insofar as applicable the Company's
Repurchase Option. Any sale or transfer of the Shares shall be void unless the
provisions of this Agreement are satisfied.
(c) Termination of Rights. Upon the expiration or exercise of the
---------------------
Repurchase Option, a new certificate or certificates representing the Shares not
repurchased shall be issued, on request, without the legend referred to in
Section 5(a) below and delivered to Purchaser.
4. Escrow of Unvested Shares. For purposes of facilitating the
-------------------------
enforcement of the provisions of Section 3 above, Purchaser agrees, immediately
upon receipt of the certificate(s) for the Shares subject to the Repurchase
Option, to deliver such certificate(s), together with an Assignment Separate
from Certificate in the form attached to this Agreement as Exhibit A executed by
---------
Purchaser and by Purchaser's spouse (if required for transfer), in blank, to the
Secretary of the Company, or the Secretary" "s designee, to hold such
certificate(s) and Assignment Separate from Certificate in escrow and to take
all such actions and to effectuate all such transfers and/or releases as are in
accordance with the terms of this Agreement. Purchaser hereby acknowledges that
the Secretary of the Company, or the Secretary" "s designee, is so appointed as
the escrow holder with the foregoing authorities as a material inducement to
make this Agreement and that said appointment is coupled with an interest and is
accordingly
-2-
<PAGE>
irrevocable. Purchaser agrees that said escrow holder shall not be liable to any
party hereof (or to any other party). The escrow holder may rely upon any
letter, notice or other document executed by any signature purported to be
genuine and may resign at any time. Purchaser agrees that if the Secretary of
the Company, or the Secretary" "s designee, resigns as escrow holder for any or
no reason, the Board of Directors of the Company shall have the power to appoint
a successor to serve as escrow holder pursuant to the terms of this Agreement.
5. Restrictive Legends and Stop-Transfer Orders.
--------------------------------------------
(a) Legends. The certificate or certificates representing the Shares
-------
shall bear the following legend (as well as any legends required by applicable
state and federal corporate and securities laws):
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE TRANSFERRED ONLY IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN THE COMPANY AND THE
SHAREHOLDER, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE COMPANY.
(b) Stop-Transfer Notices. Purchaser agrees that, in order to ensure
---------------------
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
-------------------
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
6. No Employment Rights. Nothing in this Agreement shall affect in any
--------------------
manner whatsoever the right or power of the Company, or a parent or subsidiary
of the Company, to terminate Purchaser's employment or consulting relationship,
for any reason, with or without cause.
7. Section 83(b) Election. Purchaser understands that Section 83(a) of
----------------------
the Internal Revenue Code of 1986, as amended (the Code), taxes as ordinary
----
income the difference between the amount paid for the Shares and the fair market
value of the Shares as of the date any restrictions on the Shares lapse. In
this context, restriction means the right of the Company to buy back the
-----------
Shares pursuant to the Repurchase Option set forth in Section 3(a) of this
Agreement. Purchaser understands that Purchaser may elect to be taxed at the
time the Shares are purchased, rather than when and as the Repurchase Option
expires, by filing an election under Section 83(b) (an "83(b) Election") of the
--------------
Code with the Internal Revenue Service within 30 days from the date of purchase.
-------
Even if the fair market value of the Shares at the time of the execution of this
Agreement equals the amount paid for the Shares, the election must be made to
avoid income under Section 83(a) in the future. Purchaser understands that
failure to file such an election in a timely manner may result in adverse tax
consequences for Purchaser. Purchaser
-3-
<PAGE>
further understands that an additional copy of such election form should be
filed with his or her federal income tax return for the calendar year in which
the date of this Agreement falls. Purchaser acknowledges that the foregoing is
only a summary of the effect of United States federal income taxation with
respect to purchase of the Shares hereunder, and does not purport to be
complete. Purchaser further acknowledges that the Company has directed Purchaser
to seek independent advice regarding the applicable provisions of the Code, the
income tax laws of any municipality, state or foreign country in which Purchaser
may reside, the tax consequences of Purchaser" "s death and the decision as to
whether or not to file an 83(b) Election in connection with the acquisition of
the Shares.
Purchaser agrees that he will execute and deliver to the Company with this
executed Agreement a copy of the Acknowledgment and Statement of Decision
Regarding Section 83(b) Election (the "Acknowledgment"), attached hereto as
--------------
Exhibit B. Purchaser further agrees that Purchaser will execute and submit with
- ---------
the Acknowledgment a copy of the 83(b) Election, attached hereto as Exhibit C,
---------
if Purchaser has indicated in the Acknowledgment his or her decision to make
such an election.
8. Miscellaneous.
-------------
(a) 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, without giving effect to principles of conflicts of law.
(b) Entire Agreement; Enforcement of Rights. This Agreement sets
---------------------------------------
forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) Severability. If one or more provisions of this Agreement are
------------
held to be unenforceable under applicable law, the parties agree to renegotiate
such provision in good faith. In the event that the parties cannot reach a
mutually agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of this
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of this Agreement shall be enforceable in accordance with its terms.
(d) Construction. This Agreement is the result of negotiations
------------
between and has been reviewed by each of the parties hereto and their respective
counsel, if any; 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.
(e) Notices. Any notice required or permitted by this Agreement shall
-------
be in writing and shall be deemed sufficient when delivered personally or sent
by telegram or fax or 48 hours after being deposited in the U.S. mail, as
certified or registered mail, with postage prepaid,
-4-
<PAGE>
and addressed to the party to be notified at such party's address or fax
number as set forth below or as subsequently modified by written notice.
(f) 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.
(g) Successors and Assigns. The rights and benefits of this Agreement
----------------------
shall inure to the benefit of, and be enforceable by the Company's successors
and assigns. The rights and obligations of Purchaser under this Agreement may
only be assigned with the prior written consent of the Company.
[Signature Page Follows]
-5-
<PAGE>
The parties have executed this Agreement as of the date first set forth
above.
RAMP NETWORKS, INC.
By: __________________________________
Title:________________________________
Address:______________________________
______________________________________
______________________________________
PURCHASER ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR
CONSULTANT AT THE WILL OF THE COMPANY. PURCHASER FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT SHALL CONFER UPON PURCHASER ANY RIGHT WITH
RESPECT TO CONTINUATION OF SUCH EMPLOYMENT OR CONSULTING RELATIONSHIP WITH THE
COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH PURCHASER" "S RIGHT OR THE
COMPANY" "S RIGHT TO TERMINATE PURCHASER" "S EMPLOYMENT OR CONSULTING
RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.
PURCHASER:
[PURCHASER NAME]
______________________________________
(Signature)
Address:
______________________________________
______________________________________
Vesting Commencement
Date: ____________________
I, ________________________________, spouse of [Purchaser], have read and hereby
approve the foregoing Agreement. In consideration of the Company's granting
my spouse the right to purchase the Shares as set forth in the Agreement, I
hereby agree to be irrevocably bound by the Agreement and further agree that any
community property or similar interest that I may have in the Shares shall be
similarly bound by the Agreement. I hereby appoint my spouse as my attorney-in-
fact with respect to any amendment or exercise of any rights under the
Agreement.
_______________________________
Spouse of [Purchaser]
-6-
<PAGE>
EXHIBIT C
---------
EXHIBIT A
---------
ASSIGNMENT SEPARATE FROM CERTIFICATE
------------------------------------
FOR VALUE RECEIVED and pursuant to that certain Common Stock Purchase
Agreement between the undersigned ("Purchaser") and Ramp Networks, Inc. (the
---------
"Company") dated _______________ (the "Agreement"), Purchaser hereby sells,
-------- ---------
assigns and transfers unto the Company _________________________________
(________) shares of the Common Stock of the Company standing in Purchaser's
name on the Company's books and represented by Certificate No. _____, and does
hereby irrevocably constitute and appoint ______________________ to transfer
said stock on the books of the Company with full power of substitution in the
premises. THIS ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE AGREEMENT AND
THE EXHIBITS THERETO.
Dated: ______________________
Signature:
____________________________________
[Purchaser]
____________________________________
Spouse of [Purchaser] (if applicable)
Instruction: Please do not fill in any blanks other than the signature line.
The purpose of this assignment is to enable the Company to exercise its
repurchase option set forth in the Agreement without requiring additional
signatures on the part of Purchaser.
<PAGE>
RECEIPT
-------
Ramp Networks, Inc. hereby acknowledges receipt of a check in the amount of
$__________ given by [Purchaser] as consideration for Certificate No.
___________ for ____________ shares of Common Stock of Ramp Networks, Inc.
Dated: ________________
Ramp Networks, Inc.
By: ___________________________
Title:_________________________
<PAGE>
RECEIPT AND CONSENT
-------------------
The undersigned hereby acknowledges receipt of a photocopy of Certificate
No. ______ for _____________ shares of Common Stock of Ramp Networks, Inc. (the
"Company").
-------
The undersigned further acknowledges that the Secretary of the Company, or
his or her designee, is acting as escrow holder pursuant to the Restricted Stock
Purchase Agreement Purchaser has previously entered into with the Company. As
escrow holder, the Secretary of the Company, or his or her designee, holds the
original of the aforementioned certificate issued in the undersigned's name.
Dated: _________________________
_________________________
[Purchaser]
<PAGE>
EXHIBIT B
---------
ACKNOWLEDGMENT AND STATEMENT OF DECISION
-----------------------------------------
REGARDING SECTION 83(b) ELECTION
--------------------------------
The undersigned has entered a stock purchase agreement with Ramp Networks,
Inc., a Delaware corporation (the "Company"), pursuant to which the undersigned
-------
is purchasing ______________ shares of Common Stock of the Company (the
"Shares"). In connection with the purchase of the Shares, the undersigned
------
hereby represents as follows:
1. The undersigned has carefully reviewed the stock purchase agreement
pursuant to which the undersigned is purchasing the Shares.
2. The undersigned either [check and complete as applicable]:
(a) ____ has consulted, and has been fully advised by, the undersigned's
own tax advisor, __________________________, whose business address is
_____________________________, regarding the federal, state and local
tax consequences of purchasing the Shares, and particularly regarding
the advisability of making elections pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended (the "Code") and pursuant to
----
the corresponding provisions, if any, of applicable state law; or
(b) ____ has knowingly chosen not to consult such a tax advisor.
3. The undersigned hereby states that the undersigned has decided [check
as applicable]:
(a) ____ to make an election pursuant to Section 83(b) of the Code, and is
submitting to the Company, together with the undersigned's executed
Common Stock Purchase Agreement, an executed form entitled "Election
Under Section 83(b) of the Internal Revenue Code of 1986"; or
(b) ____ not to make an election pursuant to Section 83(b) of the Code.
<PAGE>
4. Neither the Company nor any subsidiary or representative of the
Company has made any warranty or representation to the undersigned with respect
to the tax consequences of the undersigned" "s purchase of the Shares or of the
making or failure to make an election pursuant to Section 83(b) of the Code or
the corresponding provisions, if any, of applicable state law.
Date: ____________________ ______________________
[Purchaser]
Date:____________________ ______________________
Spouse of [Purchaser]
<PAGE>
ELECTION UNDER SECTION 83(b)
----------------------------
OF THE INTERNAL REVENUE CODE OF 1986
------------------------------------
The undersigned taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code, to include in taxpayer" "s gross income for the current
taxable year, the amount of any compensation taxable to taxpayer in connection
with taxpayer's receipt of the property described below:
1. The name, address, taxpayer identification number and taxable year of the
undersigned are as follows:
NAME OF TAXPAYER: [Purchaser]
NAME OF SPOUSE:
ADDRESS: ____________________
____________________
IDENTIFICATION NO. OF TAXPAYER:
IDENTIFICATION NO. OF SPOUSE:
TAXABLE YEAR:
2. The property with respect to which the election is made is described as
follows:
______________ shares of the Common Stock $_______ par value, of Ramp
Networks, Inc., a Delaware corporation (the "Company").
3. The date on which the property was transferred is: __________________
4. The property is subject to the following restrictions:
Repurchase option at cost in favor of the Company upon termination of
taxpayer's employment or consulting relationship.
5. The fair market value at the time of transfer, determined without regard to
any restriction other than a restriction which by its terms will never
lapse, of such property is: $_____________.
6. The amount (if any) paid for such property: $______________
The undersigned has submitted a copy of this statement to the person for whom
the services were performed in connection with the undersigned's receipt of
the above-described property. The transferee of such property is the person
performing the services in connection with the transfer of said property.
The undersigned understands that the foregoing election may not be revoked
- --------------------------------------------------------------------------
except with the consent of the Commissioner.
- -------------------------------------------
Dated: ______________________ __________________________________
Taxpayer
Dated: ______________________ __________________________________
Spouse of Taxpayer
<PAGE>
EXHIBIT 10.4
RAMP NETWORKS, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
---------------------------------
The following constitute the provisions of the Ramp Networks, Inc. 1999
Employee Stock Purchase Plan.
1. Purpose. The purpose of the Plan is to provide employees of the
-------
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company. It is the intention of the Company to have the Plan
qualify as an "Employee Stock Purchase Plan" under Section 423 of the Code. The
provisions of the Plan shall, accordingly, be construed so as to extend and
limit participation in a manner consistent with the requirements of that section
of the Code.
2. Definitions.
-----------
(a) "Board" means the Board of Directors of the Company.
-----
(b) "Code" means the Internal Revenue Code of 1986, as amended.
----
(c) "Common Stock" means the Common Stock of the Company.
------------
(d) "Company" means Ramp Networks, Inc., a Delaware corporation.
-------
(e) "Compensation" means all regular straight time gross earnings and
------------
commissions, and shall not include payments for overtime, shift premium,
incentive compensation, incentive payments, bonuses and other compensation.
(f) "Continuous Status as an Employee" means the absence of any
--------------------------------
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of (i) sick leave;
(ii) military leave; (iii) any other leave of absence approved by the Company,
provided that such leave is for a period of not more than 90 days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute or unless provided otherwise pursuant to Company policy adopted from
time to time.
(g) "Contributions" means all amounts credited to the account of a
-------------
participant pursuant to the Plan.
(h) "Corporate Transaction" means a sale of all or substantially all
---------------------
of the Company's assets, or a merger, consolidation or other capital
reorganization of the Company with or into another corporation.
(i) "Designated Subsidiary" means any Subsidiary which has been
---------------------
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan; provided, however, that the Board shall only have the
discretion to designate a Subsidiary if the issuance of options to such
Subsidiary's Employees pursuant to the Plan would not cause the Company to incur
adverse accounting charges.
<PAGE>
(j) "Employee" means any person, including an Officer, who is
--------
customarily employed for at least twenty (20) hours per week and more than five
(5) months in a calendar year by the Company or a Designated Subsidiary.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(l) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined by the Board in its discretion based on the closing sales price
of the Common Stock for such date (or, in the event that the Common Stock is not
traded on such date, on the immediately preceding Trading Day), as reported by
the National Association of Securities Dealers Automated Quotation (Nasdaq)
National Market or, if such price is not reported, the mean of the bid and asked
prices per share of the Common Stock as reported by Nasdaq or, in the event the
Common Stock is listed on a stock exchange, the Fair Market Value per share
shall be the closing sales price on such exchange on such date (or, in the event
that the Common Stock is not traded on such date, on the immediately preceding
Trading Day), as reported in The Wall Street Journal. For purposes of the
Offering Date of the first Offering Period under the Plan, the Fair Market Value
of a share of the Common Stock of the Company shall be the initial price to the
public as set forth in the final prospectus included within the registration
statement in Form S-1 filed with the Securities and Exchange Commission pursuant
to Rule 424 under the Securities Act of 1933, as amended, for the initial public
offering of the Company's Common Stock (the "Registration Statement").
(m) "Offering Date" means the first Trading Day of each Offering
-------------
Period of the Plan.
(n) "Offering Period" means a period of approximately twenty-four (24)
---------------
months and not exceeding twenty-seven (27) months, except for the first Offering
Period as set forth in Section 4(a). The duration and timing of the Offering
Periods may be changed pursuant to Section 4 of the Plan.
(o) "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.
(p) "Plan" means this Ramp Networks, Inc. 1999 Employee Stock Purchase
----
Plan.
(q) "Purchase Date" means the last Trading Day of each Purchase
-------------
Period.
(r) "Purchase Period" means a period of approximately six (6) months
---------------
within an Offering Period, except for the first Purchase Period as set forth in
Section 4(b). The duration and timing of the Purchase Periods may be changed
pursuant to Section 4 of the Plan.
(s) "Purchase Price" means with respect to a Purchase Period an amount
--------------
equal to 85% of the Fair Market Value (as defined in Section 2(l) above) of a
Share of Common Stock on the Offering Date or on the Purchase Date, whichever is
lower; provided, however, that in the
-2-
<PAGE>
event (i) there is any increase in the number of Shares available for issuance
under the Plan (including without limitation an automatic increase pursuant to
Section 14(a) below or as a result of a shareholder-approved amendment to the
Plan), and (ii) all or a portion of such additional Shares are to be issued with
respect to one or more Offering Periods that are underway at the time of such
increase ("Additional Shares"), and (iii) the Fair Market Value of a Share of
-----------------
Common Stock on the date of such increase is higher than the Fair Market Value
on the Offering Date for any such Offering Period, then in such instance the
Purchase Price with respect to such Additional Shares shall be 85% of the Fair
Market Value of a Share of Common Stock on the date of such increase or the Fair
Market Value of a Share of Common Stock on the Purchase Date, whichever is
lower.
(t) "Share" means a share of Common Stock, as adjusted in accordance
-----
with Section 20 of the Plan.
(u) "Subsidiary" means a corporation, domestic or foreign, of which
----------
not less than 50% of the voting shares are held by the Company or a Subsidiary,
whether or not such corporation now exists or is hereafter organized or acquired
by the Company or a Subsidiary.
(v) "Trading Day" means a day on which national stock exchanges and
-----------
the Nasdaq System are open for trading.
3. Eligibility.
-----------
(a) Any person who is an Employee as of the Offering Date of a given
Offering Period shall be eligible to participate in such Offering Period under
the Plan, subject to the requirements of Section 5(a) and the limitations
imposed by Section 423(b) of the Code; provided, however, that eligible
Employees may not participate in more than one Offering Period at a time.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) to the extent that,
immediately after the grant, such Employee (or any other person whose stock
would be attributed to such Employee pursuant to Section 424(d) of the Code)
would own capital stock of the Company and/or hold outstanding options to
purchase 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 Subsidiary, or
(ii) to the extent such option would permit his or her rights to purchase stock
under all employee stock purchase plans (described in Section 423 of the Code)
of the Company and its Subsidiaries to accrue at a rate which exceeds twenty-
five thousand dollars ($25,000) of Fair Market Value (as defined in Section 2(l)
above) of such stock (determined at the time such option is granted) for each
calendar year in which such option is outstanding at any time.
4. Offering Periods and Purchase Periods.
-------------------------------------
(a) Offering Periods. The Plan shall be implemented by a series of
----------------
Offering Periods generally of twenty-four (24) months duration and not
exceeding twenty-seven (27) months duration, with new Offering Periods
commencing on or about May 1 and November 1 of
-3-
<PAGE>
each year, or at such other time or times as may be determined by the Board of
Directors. Offering Periods shall commence on a continuing and overlapping basis
until terminated in accordance with Section 21 hereof. Notwithstanding the
foregoing, the first Offering Period under the Plan shall commence on the
beginning of the effective date of the Registration Statement on Form S-1 for
the initial public offering of the Company's Common (the "IPO Date") and
--- ----
continue until the last Trading Day on or before April 30, 2001. The Board of
Directors of the Company shall have the power to change the duration and/or the
frequency of Offering Periods with respect to future offerings without
shareholder approval if such change is announced at least five (5) days prior to
the scheduled beginning of the first Offering Period to be affected.
(b) Purchase Periods. Each Offering Period shall generally consist of
----------------
four (4) Purchase Periods of approximately six (6) months duration, the first
commencing on the Offering Date and ending on the October 31 or April 30 next
following, and each other Purchase Period in such Offering Period commencing on
the day after the last day of the preceding Purchase Period and ending on the
October 31 or April 30 next following; provided, however, that the first
Purchase Period shall commence on the IPO Date and shall end on October 31,
1999. The Board of Directors of the Company shall have the power to change the
duration and/or frequency of Purchase Periods with respect to future purchases
without shareholder approval if such change is announced at least five (5) days
prior to the otherwise scheduled beginning of the first Purchase Period to be
affected.
5. Participation.
-------------
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement on the form provided by the Company and
filing it with the Company's payroll office prior to the applicable Offering
Date, unless a later time for filing the subscription agreement is set by the
Board for all eligible Employees with respect to a given Offering Period.
(b) The subscription agreement shall set forth the Employee's
participation election, either in the form of a designation of the percentage of
the Employee's Compensation the Employee elects to have deducted from his or her
pay on each pay day during the Offering Period and credited to his or her
account under the Plan to be used to purchase shares on the Purchase Date for
each of the relevant Purchase Periods, which percentage shall be not less than
one percent (1%) and not more than twenty percent (15%), or such greater
percentage as the Board may establish from time to time before an Offering Date
(which percentage shall not exceed twenty percent (20%) in any event), or, if
permitted by the Board, in the form of a designation of the number of whole
shares the Employee elects to purchase at the end of each Purchase Period with
respect to the Offering Period, up to such maximum number of shares as the Board
may establish from time to time before an Offering Date.
(c) A participant's subscription shall be effective for each
successive Offering Period in which he or she is eligible to participate, unless
the participant withdraws in accordance with Section 11(a).
-4-
<PAGE>
(d) In addition to the limits on an Employee's participation in the
Plan set forth herein, the Board may establish limits on the number of shares an
Employee may elect to purchase with respect to any Offering Period if such limit
is announced at least fifteen (15) days prior to the scheduled beginning of the
first Offering Period to be affected.
6. Grant of Option. On the Offering Date of each Offering Period, each
---------------
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Purchase Date a number of Shares of the Company's
Common Stock determined by dividing such Employee's Contributions accumulated
prior to such Purchase Date and retained in the participant's account as of the
Purchase Date by the applicable Purchase Price, provided, however, that the
maximum number of Shares an Employee may purchase during each Purchase Period
shall be 1,000 Shares (subject to adjustment pursuant to Section 20 below), and
provided further that such purchase shall be subject to the limitations set
forth in Sections 3(b) and 9(b).
7. Method of Payment of Contributions.
----------------------------------
(a) Payroll Deductions.
------------------
(i) If an Employee's participation election is in the form of an
election to contribute a percentage of his or her Compensation through payroll
deductions, or if an Employee otherwise elects to make contributions to the Plan
through payroll deductions of a specified percentage of his or her Compensation
as permitted by the Board with respect to an Employee's participation election
in the form of an election to purchase a designated number of shares at the end
of each Purchase Period, such payroll deductions shall commence on the first
payroll following the Offering Date and shall end on the last payroll paid in
the Offering Period to which such subscription agreement and payroll deduction
authorization is applicable, unless sooner terminated by the participant as
provided in Section 11. All payroll deductions made by a participant shall be
credited to his or her account under the Plan.
(ii) A participant may discontinue his or her participation in the
Plan as provided in Section 11, or to the extent permitted by the Board in its
discretion, may increase or decrease the rate of his or her payroll deductions
during the Offering Period by completing and filing with the Company a new
subscription agreement authorizing a change in payroll deduction rate. The
change in rate shall be effective as of the beginning of the next calendar month
commencing ten (10) or more business days after the date the new subscription is
filed.
(iii) Notwithstanding the foregoing, to the extent necessary to
comply with Section 423(b)(8) of the Code and Section 3(b) herein, a
participant's payroll deductions may be decreased by the Company to zero percent
(0%) at any time during a Purchase Period. Payroll deductions shall re-commence
at the rate provided in such participant's subscription agreement at the
beginning of the first Purchase Period which is scheduled to end in the
following calendar year, unless terminated by the participant as provided in
Section 11.
(b) Cash or Stock Contributions. To the extent permitted by the
---------------------------
Board, a participant may make contributions to the Plan for purchase of shares
in cash or by tendering Company stock or by election to receive shares
representing the difference between the Purchase
-5-
<PAGE>
Price and the Fair Market Value of the shares, less applicable withholding. Any
such cash or stock contribution, or any election to receive net shares, must be
received by the Company in accordance with procedures and at such times as
established by the Board, and a participant's failure to make such contributions
or such an election within the time required, to the extent the aggregate
Purchase Price of the number of shares the participant has an option to purchase
on the Purchase Date exceeds payroll deduction contributions made by the
participant as of the Purchase Date, shall be deemed a withdrawal from the
Offering Period with respect to shares subject to the option not purchased on
the applicable Purchase Date and with respect to all other Purchase Periods in
such Offering Period.
8. Withholding Tax Obligations. At the time the option is exercised, in
---------------------------
whole or in part, or at the time some or all of the Company's Common Stock
issued under the Plan is disposed of, the participant must make adequate
provision for payment to the Company of the Company's federal, state or other
tax withholding obligations, if any, which arise upon the exercise of the option
or the disposition of the Common Stock. At any time, the Company may, but shall
not be obligated to, withhold from the participant's compensation the amount
necessary for the Company to meet applicable withholding obligations, including
any withholding required to make available to the Company any tax deductions or
benefits attributable to the sale or early disposition of Common Stock by the
participant.
9. Exercise of Option.
------------------
(a) Unless a participant withdraws from the Plan as provided in
Section 11, his or her option for the purchase of Shares will be exercised
automatically on each Purchase Date of an Offering Period, and the maximum
number of full Shares subject to the option will be purchased at the applicable
Purchase Price with the accumulated Contributions in his or her account. The
Shares purchased upon exercise of an option hereunder shall be deemed to be
transferred to the participant on the Purchase Date. During his or her
lifetime, a participant's option to purchase Shares hereunder is exercisable
only by him or her.
(b) If the Board determines that, on a given Purchase Date, the number
of Shares with respect to which options are to be exercised may exceed (i) the
number of Shares of Common Stock that were available for sale under the Plan on
the Offering Date of the applicable Offering Period (after deduction of all
Shares for which options have been exercised or are then outstanding), or (ii)
the number of shares available for sale under the Plan on such Purchase Date
(after deduction of all Shares for which options have been exercised or are then
outstanding), the Board may, in its sole discretion, provide that the Shares of
Common Stock available for purchase on such Offering Date or Purchase Date, as
applicable, shall be allocated pro rata, in as uniform a manner as shall be
practicable and as it shall determine in its sole discretion to be equitable
among all participants exercising options to purchase Common Stock on such
Purchase Date and (x) continue all Offering Periods then in effect or (y)
pursuant to Section 21 below, terminate any or all Offering Periods then in
effect. The Board may direct that the Shares available on the Offering Date of
any applicable Offering Period pursuant to the preceding sentence be allocated
pro rata, notwithstanding any authorization of additional Shares for issuance
under the Plan by the Company's shareholders subsequent to such Offering Date.
-6-
<PAGE>
(c) Any cash remaining to the credit of a participant's account under
the Plan after a purchase by him or her of Shares at the termination of each
Purchase Period which is insufficient to purchase a full Share shall be carried
over to the next Purchase Period if the Employee continues to participate in the
Plan, or if the Employee does not continue to participate, shall be returned to
the participant. Any other amounts left over in a participant's account after a
Purchase Date shall be returned to the participant.
10. Rights as Shareholder; Delivery of Certificate.
----------------------------------------------
(a) The participant shall have no interest or voting right in Shares
covered by his or her option until such option has been exercised.
(b) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his or her spouse.
(c) As promptly as practicable after each Purchase Date of each
Offering Period, the Company shall arrange the delivery to each participant, as
appropriate, of a certificate representing the Shares purchased upon exercise of
his or her option.
11. Voluntary Withdrawal.
--------------------
(a) A participant may withdraw all but not less than all the
Contributions credited to his or her account under the Plan at any time prior to
each Purchase Date by giving written notice to the Company. All of the
participant's Contributions credited to his or her account will be paid to him
or her promptly after receipt of his or her notice of withdrawal and his or her
option for the current Offering Period will be automatically terminated, and no
further Contributions for the purchase of Shares will be made during and with
respect to such Offering Period.
(b) A participant's voluntary withdrawal from the Plan with respect to
an Offering Period will not have any effect upon his or her eligibility to
participate in a succeeding Offering Period or in any similar plan which may
hereafter be adopted by the Company.
12. Automatic Withdrawal.
--------------------
(a) Reduction of Hours. In the event an Employee fails to remain in
-------------------
Continuous Status as an Employee of the Company for at least twenty (20) hours
per week during the Offering Period in which the employee is a participant, he
or she will be deemed to have elected to withdraw from the Plan and the
Contributions credited to his or her account will be returned to him or her and
his or her option terminated.
(b) Termination of Employment. Upon termination of the participant's
-------------------------
Continuous Status as an Employee prior to the Purchase Date of an Offering
Period (other than on account of death), he or she will be automatically
withdrawn from the Plan effective as of the date of such termination of his or
her Continuous Status as an Employee, the Contributions
-7-
<PAGE>
credited to his or her account will be returned to him or her, and his or her
option will be automatically terminated.
(c) Death of Participant. Upon the death of a participant prior to
--------------------
the Purchase Date of an Offering Period, he or she will be automatically
withdrawn from the Plan, the Contributions credited to his or her account will
be returned to the person or persons entitled thereto under Section 16, and his
or her option will be automatically terminated.
(d) Reduction in Fair Market Value. To the extent permitted by any
------------------------------
applicable laws, regulations or stock exchange rules, if the Fair Market Value
of the Shares on a Purchase Date of an Offering Period (other than the final
Purchase Date of such Offering Period) is less than the Fair Market Value of the
Shares on the Offering Date for such Offering Period, then every participant
shall automatically (i) be withdrawn from such Offering Period at the close of
such Purchase Date and after the acquisition of Shares for such Purchase Period,
and (ii) be enrolled in the first Offering Period commencing subsequent to such
Purchase Date. All payroll deductions accumulated in a participant's account as
of such withdrawal date shall be returned to the participant.
13. Interest. No interest shall accrue on the Contributions of a
--------
participant in the Plan.
14. Stock. The maximum number of Shares which shall be made available for
-----
sale under the Plan shall be 600,000 Shares, plus an annual increase on the
first day of each of the Company's fiscal years beginning in 2000, 2001, 2002,
2003 and 2004, equal to the lesser of (A) 186,000 Shares, (B) 1% of the Shares
outstanding on the last day of the immediately preceding fiscal year, or (C)
such lesser number of Shares as is determined by the Board, subject to
adjustment upon changes in capitalization of the Company as provided in Section
20.
15. Administration. The Board, or a committee named by the Board, shall
--------------
supervise and administer the Plan and shall have full power to adopt, amend and
rescind any rules deemed desirable and appropriate for the administration of the
Plan and not inconsistent with the Plan, to construe and interpret the Plan, and
to make all other determinations necessary or advisable for the administration
of the Plan. Every finding, decision and determination made by the Board or its
committee shall, to the full extent permitted by law, be final and binding upon
all parties.
16. Designation of Beneficiary.
--------------------------
(a) A participant may file a written designation of a beneficiary who
is to receive any Shares and cash, if any, from the participant's account under
the Plan in the event of such participant's death subsequent to the end of a
Purchase Period but prior to delivery to him or her 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 prior to the Purchase Date of an Offering Period.
If a participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective. Such
designation of beneficiary may be changed by the
-8-
<PAGE>
participant (with the consent of his or her spouse, if any) at any time by
written notice effective upon receipt by the Company of such notice.
(b) In the absence of a beneficiary validly designated in accordance
with Section 16(a) who is living at the time of such participant's death, upon
the death of the participant 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 discretion, may deliver such Shares and/or cash to the
spouse or to any one 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 designate.
17. Transferability. Neither Contributions credited to a participant's
---------------
account nor any rights with regard to the exercise of an option or to receive
Shares under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way by the participant (other than by will, the laws of
descent and distribution, or as provided in Section 16). Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw funds in
accordance with Section 11.
18. Use of Funds. All Contributions received or held by the Company under
------------
the Plan may be used by the Company for any corporate purpose, and the Company
shall not be obligated to segregate such Contributions.
19. Reports. Individual accounts will be maintained for each participant
-------
in the Plan. Statements of account will be given to participating Employees at
least annually, which statements will set forth the amounts of Contributions,
the per Share Purchase Price, the number of Shares purchased and the remaining
cash balance, if any.
20. Adjustments Upon Changes in Capitalization; Corporate Transactions.
------------------------------------------------------------------
(a) Adjustment. Subject to any required action by the shareholders of
----------
the Company, the number of Shares covered by each option under the Plan which
has not yet been exercised and the number of Shares which have been authorized
for issuance under the Plan but have not yet been placed under option
(collectively, the "Reserves"), as well as the maximum number of shares of
--------
Common Stock which may be purchased by a participant in a Purchase Period, the
number of shares of Common Stock set forth in Section 14 above, and the price
per Share of Common Stock covered by each option under the Plan which has not
yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common Stock
(including any such change in the number of shares of Common Stock effected in
connection with a change in domicile of the Company), or any other increase or
decrease in the number of Shares effected without receipt of consideration by
the Company, which such increase or decrease occurs after the effective date of
this Plan; provided, however, that conversion of any convertible securities of
the Company shall not be deemed to have been "effected without receipt of
consideration." Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive. Except as
-9-
<PAGE>
expressly provided herein, no issue by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of Shares subject to an option.
(b) Corporate Transactions. In the event of a dissolution or
----------------------
liquidation of the Company, any Purchase Period and Offering Period then in
progress will terminate immediately prior to the consummation of such action,
unless otherwise provided by the Board. In the event of a Corporate
Transaction, each option outstanding under the Plan shall be assumed or an
equivalent option shall be substituted by the successor corporation or a parent
or subsidiary of such successor corporation, unless the Board determines, in the
exercise of its sole discretion and in lieu of such assumption or substitution,
to shorten any Purchase Period and Offering Period then in progress by setting a
new Purchase Date (the "New Purchase Date"), as of which date any Purchase
-----------------
Period and Offering Period then in progress will terminate. If the Board
shortens the Purchase Period and Offering Period then in progress in lieu of
assumption or substitution in the event of a Corporate Transaction, the Board
will notify each participant in writing, at least ten (10) days prior to the New
Purchase Date, that the Purchase Date for his or her option has been changed to
the New Purchase Date and that his or her option will be exercised automatically
on the New Purchase Date, unless prior to such date he or she has withdrawn from
the Offering Period as provided in Section 11. For purposes of this Section
20(b), an option granted under the Plan shall be deemed to be assumed, without
limitation, if, at the time of issuance of the stock or other consideration upon
a Corporate Transaction, each holder of an option under the Plan would be
entitled to receive upon exercise of the option the same number and kind of
shares of stock or the same amount of property, cash or securities as such
holder would have been entitled to receive upon the occurrence of the Corporate
Transaction if the holder had been, immediately prior to the Corporate
Transaction , the holder of the number of Shares of Common Stock covered by the
option at such time (after giving effect to any adjustments in the number of
Shares covered by the option as provided in Section 20(a)); provided however
that if the consideration received in the transaction is not solely common stock
of the successor corporation or its parent (as defined in Section 424(e) of the
Code), the Board may, with the consent of the successor corporation, provide for
the consideration to be received upon exercise of the option to be solely common
stock of the successor corporation or its parent equal in Fair Market Value to
the per Share consideration received by holders of Common Stock in the Corporate
Transaction.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per Share
of Common Stock covered by each outstanding option, in the event that the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of Shares of its outstanding Common Stock, and
in the event of the Company's being consolidated with or merged into any other
corporation.
21. Amendment and Termination.
-------------------------
(a) The Board may at any time and for any reason terminate or amend
the Plan. Except as provided in Section 20, no such amendment or termination of
the Plan may
-10-
<PAGE>
affect options previously granted, provided that the Plan or an Offering Period
may be terminated by the Board on a Purchase Date or by the Board's setting a
new Purchase Date with respect to an Offering Period and Purchase Period then in
progress if the Board determines that termination of the Plan and/or the
Offering Period is in the best interests of the Company and the shareholders or
if continuation of the Plan and/or the Offering Period would cause the Company
to incur adverse accounting charges as a result of a change after the effective
date of the Plan in the generally accepted accounting rules applicable to the
Plan. Except as provided in Section 20 and this Section 21, no amendment to the
Plan shall make any change in any option previously granted which adversely
affects the rights of any participant. In addition, to the extent necessary to
comply with Section 423 of the Code (or any successor rule or provision or any
other applicable law or regulation) or Rule 16b-3 under the Exchange Act, the
Company shall obtain shareholder approval in such a manner and to such a degree
as so required.
(b) Without shareholder consent and without regard to whether any
participant rights may be considered to have been adversely affected, the Board
(or its committee) shall be entitled to change the Offering Periods and Purchase
Periods, limit the frequency and/or number of changes in the amount withheld
from a participant's Compensation during an Offering Period, establish the
exchange ratio applicable to amounts withheld in a currency other than U.S.
dollars, permit payroll withholding in excess of the amount designated by a
participant in order to adjust for delays or mistakes in the Company's
processing of properly completed withholding elections, establish reasonable
waiting and adjustment periods and/or accounting and crediting procedures to
ensure that amounts applied toward the purchase of Common Stock for each
participant properly correspond with amounts withheld from the participant's
Compensation, establish such other limitations or procedures as the Board (or
its committee) determines in its sole discretion advisable which are consistent
with the Plan.
22. Notices. All notices or other communications by a participant to the
-------
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
23. Conditions Upon Issuance of Shares. Shares shall not be issued with
----------------------------------
respect to an option unless the exercise of such option and the issuance and
delivery of such Shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Exchange Act, the rules and regulations
promulgated thereunder, applicable state securities laws and the requirements of
any stock exchange upon which the Shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
-11-
<PAGE>
24. Term of Plan; Effective Date. The Plan shall become effective upon
----------------------------
the IPO Date. It shall continue in effect for a term of twenty (20) years
unless sooner terminated under Section 21.
25. Additional Restrictions of Rule 16b-3. The terms and conditions of
-------------------------------------
options granted hereunder to, and the purchase of Shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the Shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
-12-
<PAGE>
RAMP NETWORKS, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT
----------------------
New Election
------
Change of Election
------
1. I, ________________________, hereby elect to participate in the Ramp
Networks, Inc. 1999 Employee Stock Purchase Plan (the "Plan") commencing with
----
the Offering Period ______________, ____ to _______________, ____, and subscribe
to purchase shares of the Company's Common Stock in accordance with this
Subscription Agreement and the Plan.
2. I elect to have Contributions in the amount of ____% of my
Compensation, as those terms are defined in the Plan, applied to this purchase.
I understand that this amount must not be less than 1% and not more than 150% of
my Compensation during the Offering Period. (Please note that no fractional
percentages are permitted).
3. I hereby authorize payroll deductions from each paycheck during the
Offering Period at the rate stated in Item 2 of this Subscription Agreement. I
understand that all payroll deductions made by me shall be credited to my
account under the Plan and that I may not make any additional payments into such
account. I understand that all payments made by me shall be accumulated for the
purchase of shares of Common Stock at the applicable purchase price determined
in accordance with the Plan. I further understand that, except as otherwise set
forth in the Plan, shares will be purchased for me automatically on each
Purchase Date of an Offering Period unless I otherwise withdraw from the
Offering Period prior to a Purchase Date by giving written notice to the Company
for such purpose.
4. I understand that I may decrease the rate of my Contributions on one
occasion only during any Offering Period, and that I may increase the rate of my
Contributions on one occasion only during any Offering Period, by completing and
filing a new Subscription Agreement with such decrease or increase, as the case
may be, taking effect as of the beginning of the calendar month following the
date of filing of the new Subscription Agreement, if filed at least ten (10)
business days prior to the beginning of such month. I also understand that I
may change the rate of deductions for future Offering Periods by filing a new
Subscription Agreement, and any such change will be effective as of the
beginning of the next Offering Period in which I am eligible to participate
commencing after the new Subscription Agreement is filed.
5. I understand that I may discontinue my participation in an Offering
Period at any time prior to a Purchase Date as provided in Section 11 of the
Plan, and that if I do so I will not be permitted to renew participation in such
Offering Period.
<PAGE>
I understand that unless I discontinue my participation in an Offering
Period as provided in Section 11 of the Plan or change the rate of deductions by
filing a new Subscription Agreement, my election made under this Subscription
Agreement will continue to be effective for each successive Offering Period
commencing after the termination of an Offering Period in which I have
participated.
6. I have received a copy of the Company's most recent description of the
Plan and a copy of the complete "Ramp Networks, Inc. 1999 Employee Stock
Purchase Plan." I understand that my participation in the Plan is in all
respects subject to the terms of the Plan.
7. Shares purchased for me under the Plan should be issued in the name(s)
of (name of employee or employee and spouse only):
---------------------------------------
---------------------------------------
8. In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due to me under the Plan:
NAME: (Please print) ----------------------------------------
(First) (Middle) (Last)
- --------------------------- ----------------------------------------
(Relationship) (Address)
----------------------------------------
Summary of Tax Treatment on Sale of Shares
------------------------------------------
The following information regarding the federal tax treatment on sale of
------------------------------------------------------------------------
shares acquired under the Plan is only a summary and is subject to change, and
- ------------------------------------------------------------------------------
is not intended to represent or provide tax advice to the participant, his or
- -----------------------------------------------------------------------------
her spouse or beneficiaries. You should consult a tax advisor concerning the
- -----------------------------------------------------------------------------
tax implications of the purchase and sale of stock under the Plan.
- -----------------------------------------------------------------
If any shares received pursuant to the Plan are sold or otherwise disposed
of within two (2) years after the first day of the Offering Period during which
I purchased such shares or within one (1) year after the Purchase Date, the
excess of the fair market value of the shares on the Purchase Date over the
price paid for the shares on such Purchase Date will be treated for federal
income tax purposes as ordinary compensation income at the time of such
disposition, regardless of the amount received on sale or other disposition of
the shares, even if such amount is less than their fair market value at the
Purchase Date. The remainder of the gain or loss, if any, recognized on such
disposition will be treated as capital gain or loss.
-2-
<PAGE>
If any shares received pursuant to the Plan are sold or otherwise disposed
of at any time after expiration of the 2-year and 1-year holding periods, the
lesser of 15% of the fair market value of the shares on the Offering Date or the
excess of the fair market value of the shares at the time of such sale or
disposition over the price paid for the shares on the Purchase Date will be
treated for federal income tax purposes as ordinary compensation income. The
remainder of the gain or loss, if any, recognized on such disposition will be
treated as capital gain or loss.
9. I hereby agree to notify the Company in writing within 30 days after
the date of any disposition of shares within two (2) years after the first day
of the Offering Period during which I purchased such shares or within one (1)
year after the Purchase Date, and I will make adequate provision for federal,
state or other tax withholding obligations, if any, which arise upon the
disposition of the Common Stock. The Company may, but will not be obligated to,
withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to the sale or early
disposition of Common Stock by me.
10. I hereby agree to be bound by the terms of the Plan. The
effectiveness of this Subscription Agreement is dependent upon my eligibility to
participate in the Plan.
SIGNATURE:
------------------------------
SOCIAL SECURITY #:
----------------------
DATE:
-----------------------------------
SPOUSE'S SIGNATURE (necessary
if beneficiary is not spouse):
- -----------------------------------------
(Signature)
- -----------------------------------------
(Print name)
-3-
<PAGE>
RAMP NETWORKS, INC.
1999 EMPLOYEE STOCK PURCHASE PLAN
NOTICE OF WITHDRAWAL
--------------------
I, __________________________, hereby elect to withdraw my participation in
the Ramp Networks, Inc. 1999 Employee Stock Purchase Plan (the "Plan") for the
----
Offering Period _________. This withdrawal covers all Contributions credited to
my account and is effective on the date designated below.
I understand that all Contributions credited to my account will be paid to
me within ten (10) business days of receipt by the Company of this Notice of
Withdrawal and that my option for the current period will automatically
terminate, and that no further Contributions for the purchase of shares can be
made by me during the Offering Period.
I further understand and agree that I will be eligible to participate in
succeeding Offering Periods only by delivering to the Company a new Subscription
Agreement prior to the commencement of such Offering Period in accordance with
procedures established by the Company.
Dated:
---------------------- --------------------------------------
Signature of Employee
--------------------------------------
Social Security Number
<PAGE>
EXHIBIT 10.5
TABLE OF CONTENTS
ARTICLE 1.00 DEFINITIONS......................................................1
ARTICLE 2.00 GRANT OF LEASE....................................................3
ARTICLE 3.00 TERM AND POSSESSION..............................................3
ARTICLE 4.00 RENT AND OCCUPANCY COSTS.........................................5
ARTICLE. 5.00 USE OF PREMISES.................................................7
ARTICLE 6.00 SERVICES, MAINTENANCE, REPAIR, AND ALTERATIONS BY LESSOR..........7
ARTICLE 7.00 MAINTENANCE, REPAIR, ALTERATIONS AND IMPROVEMENTS BY
LESSEE........................................................................10
ARTICLE 8.00 TAXES...........................................................12
ARTICLE 9.00 INSURANCE.......................................................13
ARTICLE 10.00 INJURY TO PERSON OR PROPERTY...................................14
ARTICLE 11.00 ASSIGNMENT AND SUBLETTING......................................14
ARTICLE 12.00 SURRENDER......................................................17
ARTICLE 13.00 HOLDING OVER...................................................18
ARTICLE 14.00 RULES AND REGULATIONS..........................................19
ARTICLE 15.00 EMINENT DOMAIN.................................................19
ARTICLE 16.00 DAMAGE BY FIRE OR OTHER CASUALTY...............................20
ARTICLE 17.00 TRANSFERS BY LESSOR............................................22
ARTICLE 18.00 NOTICES, ACKNOWLEDGMENTS, AUTHORITIES FOR ACTION...............23
ARTICLE 19.00 DEFAULT........................................................24
ARTICLE 20.00 MISCELLANEOUS..................................................27
EXHIBIT "B"...................................................................30
SECTION 1.00 WORDS AND PHRASES.............................................30
SECTION 2.00 DETERMINATION OF OCCUPANCY COSTS..............................31
SECTION 3.00 LOADING AND UNLOADING.........................................32
EXHIBIT "C" RULES AND REGULATIONS.............................................33
-i-
<PAGE>
EXHIBIT "D" SUPPLEMENTAL TERMS AND CONDITIONS................................36
ARTICLE 21.00 COST OF LIVING ADJUSTMENTS...................................36
ARTICLE 22.00 FIRST MONTH'S RENT AND SECURITY DEPOSIT......................37
ARTICLE 23.00 MAINTENANCE, REPAIR, REPLACEMENT - ADDITIONAL PROVISIONS.....37
ARTICLE 24.00 LATE CHARGES.................................................37
ARTICLE 25.00 TENANT IMPROVEMENTS..........................................38
ARTICLE 26.00 OPINION TO EXTEND THE LEASE TERM.............................38
ARTICLE 27.00 OPTION ON HI AND H2 BUILDING.................................38
ARTICLE 28.00 PARKING......................................................39
ARTICLE 29.00 BROKERS......................................................39
ARTICLE 30.00 NETWORK CABLE................................................39
ARTICLE 31.00 ARBITRATION OF DISPUTES......................................40
EXHIBIT "E" TENANT ESTOPPEL, ATTORNMENT AND NONDISTURBANCE
AGREEMENT.....................................................................43
ESTOPPEL EXHIBIT "A"..........................................................49
ESTOPPEL EXHIBIT "B"..........................................................50
ESTOPPEL EXHIBIT "C"..........................................................51
-ii-
<PAGE>
OXFORD BUSINESS PARK
LEASE OF OFFICE SPACE
Date: February 24, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
BETWEEN: OXFORD BUSINESS PARK ("LESSOR")
(address) 2001 Union Street, Suite 300
San Francisco, CA 94123
AND: RAMP NETWORKS, INC. ("LESSEE")
(address) 3100 DE LA CRUZ BOULEVARD
SANTA CLARA, CA 95054
FOR PREMISES IN: The entire building, consisting of three floors, located at:
3100 DE LA CRUZ BOULEVARD
SANTA CLARA, CA 95054
</TABLE>
- --------------------------------------------------------------------------------
THIS LEASE SUPERCEDES AND SHALL PREVAIL OVER ANY
AND ALL DISCUSSIONS OR DOCUMENTS INCLUDING THE
MEMORANDUM OF UNDERSTANDING DATED JANUARY 23, 1998.
- --------------------------------------------------------------------------------
LESSOR AND LESSEE, in consideration of the covenants herein contained, hereby
agree as follows:
ARTICLE 1.00 DEFINITIONS
1.01 Definitions In this Lease:
(a) "Annual Rent" means the amount payable by LESSEE to LESSOR in respect
of each year of the Term under Article 4.01.
(b) "Article" means an article of this Lease.
-1-
<PAGE>
(c) "Commencement Date" means the first day of the Term.
(d) "Exhibit A" means the plan(s) attached hereto as Exhibit A.
(e) "Exhibit B" means the provisions relating to Occupancy Costs and
other matters attached hereto as Exhibit B.
(f) "Exhibit C" means the Rules and Regulations attached hereto as
Exhibit C.
(g) "Fiscal Year" means a twelve-month period (all or part of which falls
within the Term) from time to time determined by LESSOR with
concurrence of the appropriate taxation authorities, at the end of
which LESSOR'S books are balanced for auditing and/or taxation
purposes.
(h) "Lease" means this lease, Exhibits A, B, C, D and (if attached) E to
this lease, and every properly executed instrument which by its terms
amends, modifies, or supplements this lease.
(i) "Occupancy Costs" means amounts payable by LESSEE to LESSOR under
Article 4.02.
(j) "Other Charges" means amounts payable to LESSOR under Article 4.03.
(k) "Premises" means 42,097.50 rentable square feet, more or less, of the
entire facility located at 3100 De La Cruz Boulevard, consisting of
three floors of this Building (see Exhibit A), and as delineated
below. The building at 3100 De La Cruz Boulevard is scheduled to
have a beige stucco exterior with red brick detail and a red tile
roof. The area surrounding the building will be landscaped, in the
Oxford Business Park's standard fashion. The building lobby will
have a brick or granite floor with a border of carpet. In addition,
the building will contain an elevator.
<TABLE>
<CAPTION>
RENTABLE SQUARE
BUILDING ADDRESS FEET PER FLOOR % BUILDING
- ---------------- -------------- ----------
<S> <C> <C>
3100 De La Cruz Boulevard, 1st Floor 13,893.50 33.00%
3100 De La Cruz Boulevard, 2nd floor 13,825.00 32.84%
3100 De La Cruz Boulevard, 3rd floor 14,379.00 34.16%
--------- ------
42,097.50 100.00%
--------- ------
</TABLE>
(1) "Rent" means the aggregate of all amounts payable by LESSEE to LESSOR
under Articles 4.01, 4.02, and 4.03.
(m) "Term" means the period of time set out in Article 3.01.
-2-
<PAGE>
ARTICLE 2.00 GRANT OF LEASE
2.01 Grant LESSOR hereby demises and leases the Premises to LESSEE, and LESSEE
hereby leases and accepts the Premises from LESSOR, to have and to hold
during the Term, subject to the terms and conditions of this Lease.
2.01 Quiet Enjoyment LESSOR shall warrant and defend LESSEE in the quiet
enjoyment and possession of the Premises during the Term, subject to the
terms and conditions of this Lease.
2.03 Covenants of LESSOR and LESSEE LESSOR covenants to observe and perform
all of the terms and conditions to be observed and performed by LESSOR
under this Lease. LESSEE covenants to pay the Rent when due under this
Lease, and to observe and perform all of the terms and conditions to be
observed and performed by LESSEE under this Lease.
ARTICLE 3.00 TERM AND POSSESSION
3.01 Term Notwithstanding Articles 3.02 and 3.03, the term of this Lease shall
be Six (6) Years. The commencement date of the lease term will be
the date when Ramp Networks, Inc. begins occupancy of one floor
and/or a portion of another floor, but the lease term will begin no
later than August 1, 1998.
Rent will be pro-rated based on the portion of the building being
occupied. The building will be deemed ready for occupancy when Oxford
Park Associates and Ramp Networks, Inc. based on a walk through of the
building, agree that all LESSEE improvements have been substantially
completed and the building is in a state suitable for Ramp Networks,
Inc.'s normal business activities, and Lessee shall not unreasonably
withhold its consent regarding the building's substantial readiness for
Lessee's occupancy. The Date of Occupancy will be no later than ten (10)
business days following the date both parties agree that the building is
suitable for occupancy, which state both parties agree the building is
substantially ready for occupancy.
It is understood and agreed that if Lessor's ability to deliver
possession by the date as set forth in this Article 3.00 is delayed
as a result of any of the following causes, the date for delivery
shall be postponed without penalty to Lessor for a period of time
equivalent to the period caused by such delay:
A) acts or default of any Tenant, its agent or employees,
B) "Acts of God", public enemy and fires which Lessor could not reasonably have
foreseen or guarded against,
C) any strikes, boycotts, or like obstructive actions by employees or labor
organizations and which are beyond the control of Lessor and which
cannot be unreasonably overcome,
-3-
<PAGE>
D) unanticipated delays by City, Government and quasi-governmental authorities
having jurisdiction,
E) restrictive regulations by Federal Government which are enforced in
connection with a national emergency,
F) inability to procure labor or materials,
G) or any other causes beyond the reasonable control of Lessor, whether similar
to the matters herein specifically enumerated or not.
H) Inclement Weather Provision: The time schedule outlined in this lease
---------------------------
serves as a guideline and is extended by one (1) business day (Monday
through Friday less any holiday) for each business day (Monday-Friday less
holiday) that inclement weather precludes outdoor work activity and/or
receipt of occupancy certificate.
However, all such dates may be extended for sixty (60) day Periods in the event
- -------------------------------------------------------------------------------
of inclement weather or other unanticipated events including city government or
- -------------------------------------------------------------------------------
quasi-governmental agency delays.
- ---------------------------------
OCCUPANCY SCHEDULE
- ------------------
Occupancy of Third Floor:
------------------------
No later than July 1, 1998
Occupancy of Second Floor:
-------------------------
One-half of Second Floor by July 1, 1998
Second Half of Second Floor by August 1, 1998
Occupancy of First Floor
------------------------
No later than September 1, 1998
The building will be deemed ready for occupancy when Oxford Park Associates
and Ramp Networks, Inc. based on a walk through of the building, agree that
all LESSEE improvements have been substantially completed and the building is
in a state suitable for Ramp Networks, Inc.'s normal business activities, and
Lessee shall not unreasonably withhold its consent regarding the building's
substantial readiness for Lessee's occupancy. The Date of Occupancy will be
no later than ten (10) business days following the date both parties agree
that the building is suitable for occupancy.
Notwithstanding the above, Oxford Park Associates will allow Ramp Networks,
Inc. to have access to the building as soon as is reasonably practical, but
no later than May 1, 1998 to install telephone lines, network wiring and
other Ramp Networks, Inc. provided infrastructure as is agreed upon by the
parties. Any Ramp Networks, Inc. subcontractors will coordinate with
Oxford's General Contractor for any and all tenant work prior to the tenant
being given possession of their three (3) floors.
-4-
<PAGE>
Current lease: Oxford Park Associates will renew Ramp Networks, Inc.'s
current leases for 3160, 3170, 3180 De La Cruz Boulevard by May 1, 1998.
Said renewal will continue as necessary until Ramp Networks, Inc. occupies
their new premises at 3100 De La Cruz Boulevard.
3.02 Early Occupancy If LESSEE begins to conduct business in all or any
portion of the Premises before the Commencement Date, LESSEE shall pay to
LESSOR on the Commencement Date a rental in respect thereof for the
period from the date LESSEE begins to conduct business therein to the
Commencement Date, which rental shall be that proportion of Rent for one
calendar year which the number of days in such period bears to 365.
Except where clearly inappropriate, the provisions of this Lease shall be
applicable during such period. Rent shall be pro-rated based on the
portion of the building suitable for occupancy beginning ten (10) days
after Lessee and Lessor agree the space is suitable for occupancy, or on
the day occupancy occurs, which ever is sooner.
3.03 Delayed Possession If two floors of the building are not ready for Ramp
Networks, Inc.'s occupancy by September 30, 1998, Ramp Networks, Inc.
will have the right but not the obligation to terminate this lease of
Office Space without liability.
3.04 Acceptance of Premises Taking possession of all or any portion of the
Premises by LESSEE shall be conclusive evidence as against LESSEE that
the Premises or such portion thereof are in satisfactory condition on the
date of taking possession, subject only to latent defects and
deficiencies (if any) listed in writing in a notice delivered by LESSEE
to LESSOR not more than twenty (20) days after the later of the date of
taking possession and/or the Commencement Date.
ARTICLE 4.00 RENT AND OCCUPANCY COSTS
4.01 Annual Rent The rent is $2.10 per rentable square foot per month. LESSEE
shall pay to LESSOR as Annual Rent for the Premises the sum of ONE
MILLION AND SIXTY THOUSAND EIGHT HUNDRED AND FIFTY SEVEN AND NO/l00
($1,060,857.00) DOLLARS in respect of each year of the Term, payable in
advance and without notice in monthly installments of EIGHTY EIGHT
THOUSAND FOUR HUNDRED AND FOUR AND 75/100 ($88,404.75) DOLLARS each on
the Commencement Date and on the first day of each calendar month
thereafter during the Term, provided that the amount of Annual Rent
payable hereunder shall be adjusted at the times and in the manner
provided in Article 21.00 of Exhibit D.
-5-
<PAGE>
RENT SCHEDULE FOR ENTIRE BUILDING AT 3100 DE LA CRUZ BOULEVARD OVER SIX
-----------------------------------------------------------------------
YEAR TERM YEAR
--------------
<TABLE>
<CAPTION>
YEAR MONTHLY RENT ANNUAL RENT
---- ------------ -----------
<S> <C> <C>
1 $ 88,404.75 $1,060,857.00
2 $ 93,709.03 $1,124,508.42
3 $ 99,331.57 $1,191,978.84
4 $105,291.46 $1,263,497.52
5 $111,608.94 $1,339,307.28
6 $118,305.47 $1,419,665.71
</TABLE>
RENT SCHEDULE FOR EACH FLOOR OF BUILDING 3100 DE LA CRUZ BOULEVARD.
--------------------------------------------------------------------
DURING FIRST YEAR OF TERM ONLY. THE RATES FOR THE FOLLOWING FIVE YEARS
-----------------------------------------------------------------------
SHALL BE ADJUSTED PER ARTICLE 21.00, EXHIBIT D.
------------------------------------------------
<TABLE>
<CAPTION>
RENTABLE % OF BLG MONTHLY RENT ANNUAL RENT
FLOOR SQUARE FEET at 3100 PER FLOOR YR. ONE PER FLOOR YR. ONE
- ----- ----------- ------- ----------------- -----------------
<S> <C> <C> <C> <C>
1ST 13,893.50 33.00% $29,173.57 $ 350,082.81
2ND 13,825.00 32.84% $29,032.12 $ 348,385.44
3RD 14,379.00 34.16% $30.199.06 $ 362,388.75
--------- ------ ---------- -------------
42,097.50 100.00% $88.404.75 $1,060,857.00
--------- ------ ---------- -------------
</TABLE>
4.02 Occupancy Costs
4.03 Other Charges LESSEE shall pay to LESSOR, at the times and in the manner
provided in this Lease or, if not so provided, as reasonably required by
LESSOR, all amounts (other than that payable under Articles 4.01 and
4.02) which are payable by LESSEE to LESSOR under this Lease. Such other
charges, for example would include repairs to premises caused through
LESSEE neglect, a LESSEE request to change a lock, new and extra
building keys, kitchen damage caused through LESSEE breach, and other
such charges.
4.04 Payment of Rent - General All amounts payable by LESSEE to LESSOR under
this Lease shall be deemed to be Rent and shall be payable and
recoverable as Rent in the manner herein provided, and LESSOR shall have
all rights against LESSEE for default in any such payment as in the case
of arrears of rent. Rent shall be paid to LESSOR, without deduction or
set-off, in legal tender of the jurisdiction in which the Building is
located, at the address of LESSOR as set forth in the beginning of this
Lease, or to such other person or at such other address as LESSOR may
from time to time designate in writing. LESSEE'S obligation to pay Rent
shall survive the expiration or earlier termination of this Lease.
4.05 Annual Rent - Early Termination If the Term ends on a day other than the
last day of a calendar month, the installment of Annual Rent payable on
the first day of the last
-6-
<PAGE>
calendar month of the Term shall be that proportion of the Annual Rent
which the number of days from the first day of such last calendar month
to the last day of the Term bears to 365.
4.06 Payment - Occupancy Costs ARTICLE 21.00 OF EXHIBIT D.
ARTICLE. 5.00 USE OF PREMISES
5.01 Use The Premises shall be used and occupied only for the general business
use of its computer/networking hardware/software company for the business
of LESSEE as initially conducted in the Premises, or for such other
purpose as LESSOR may specifically authorize in writing.
5.02 Compliance with Laws The Premises shall be used and occupied in a safe,
careful and proper manner so as not to contravene any present or future
governmental or quasi-governmental laws in force or regulations or
orders. If due solely to LESSEE'S use of the Premises, improvements are
necessary to comply with any of the foregoing or with the requirements of
insurance carriers, LESSEE shall pay the entire cost thereof.
5.03 Abandonment LESSEE shall not vacate or abandon the Premises at any time
during the Term without LESSOR'S written consent.
5.04 Nuisance LESSEE shall not cause or maintain any nuisance in or about the
Premises, and shall keep the Premises free of debris, rodents, vermin and
anything of a dangerous, noxious or offensive nature or which could
create a fire hazard (through undue load on electrical circuits or
otherwise) or undue vibration, heat or noise.
ARTICLE 6.00 SERVICES, MAINTENANCE, REPAIR, AND
ALTERATIONS BY LESSOR
6.01 Operation of Building During the Term LESSOR shall operate and maintain
the Building in accordance with all applicable laws and regulations and
with standards from time to time prevailing for first-class office
buildings in the area in which the Building is located and, subject to
participation by LESSEE by payment of Occupancy Costs under Article 4.02,
shall provide the services set out in Article 6.02 and 6.03.
6.02 Services to Premises LESSOR shall provide in the Premises:
(a) heat, ventilation and cooling as required for the comfortable use and
occupancy of the Premises during normal business hours,
(b) janitor services, including exterior window washing, as reasonably
required to keep the Premises in a clean and wholesome condition,
provided that LESSEE
-7-
<PAGE>
shall leave the Premises in a reasonably tidy condition at the end of
each business day,
RAMP NETWORKS, INC. MAY ELECT TO ENGAGE JANITORIAL SERVICE DIRECTLY
AT ANY TIME UPON THIRTY (30) DAYS' WRITTEN NOTICE TO OXFORD PARK
ASSOCIATES. IF RAMP NETWORKS, INC. MAKES THIS ELECTION, OXFORD WILL
REDUCE THE FULL SERVICE RENT BY THE AMOUNT OF OXFORD PARK ASSOCIATES
COST OF JANITORIAL SERVICES.
(c) electric power for normal lighting and small business office
equipment (but not equipment using amounts of power disproportionate
to that used by other LESSEES in the Park),
(d) replacement of Building Standard fluorescent tubes, light bulbs and
ballasts as required from time to time as a result of normal usage,
and
(e) maintenance, repair, and replacement as set out in Article 6.04.
6.03 Building Services LESSOR shall provide in the Building:
(a) domestic running water and necessary supplies in washrooms sufficient
for the normal use thereof by occupants in the Building,
(b) access to and egress from the Premises, including elevator or
escalator service if included in the Building,
(c) heat, ventilation, cooling, lighting, electric power, domestic
running water, and janitor service in those areas of the Building
from time to time designated by LESSOR for use during normal business
hours by LESSEE in common with all LESSEES and other persons in the
Building but under the exclusive control of the LESSOR,
(d) a general directory board on which LESSEE shall be entitled to have
its name shown, provided that LESSOR shall have exclusive control
thereof and of the space thereon to be allocated to each LESSEE, and
(e) maintenance, repair, and replacement as set out in Article 6.04.
6.04 Maintenance, Repair, and Replacement LESSOR shall operate, maintain,
repair and replace the systems, facilities, and equipment necessary for
the proper operation of the Building and for provision of LESSOR'S
services under Article 6.02 and 6.03 (except as such may be installed by
or be the property of LESSEE), and shall be responsible for and shall
expeditiously maintain and repair the foundations, structure, and roof of
the Building and repair damage to the Building which LESSOR is obligated
to insure against under Article 9.00, provided that
-8-
<PAGE>
(a) if all or part of such systems, facilities, and equipment are
destroyed, damaged or impaired, LESSOR shall have a reasonable time
in which to complete the necessary repair or replacement, and during
that time shall be required only to maintain such services as are
reasonably possible in the circumstances,
(b) LESSOR may temporarily discontinue such services or any of them at
such times as may be necessary due to causes (except lack of funds)
beyond the reasonable control of LESSOR,
(c) LESSOR shall use reasonable diligence in carrying out its obligations
under this Article 6.04, but shall not be liable under any
circumstances for any consequential damage to any person or property
for any failure to do so.
(d) no reduction or discontinuance of such services under this Article
6.04 (a) or (b) shall be construed as an eviction of LESSEE or
(except as specifically provided in this Lease) release LESSEE from
any obligation of LESSEE under this Lease, and
(e) nothing contained herein shall derogate from the provisions of
Article 16.00.
6.05 Additional Services
(a) If from time to time requested in writing by LESSEE and to the extent
that it is reasonably able to do so, LESSOR shall provide in the
Premises services in addition to those set out in Article 6.02,
provided that LESSEE shall within ten days of receipt of any invoice
for any such additional service pay LESSOR therefore at such
reasonable rates as LESSOR may from time to time establish.
(b) LESSEE shall not without LESSOR'S written consent install in the
Premises equipment (including telephone equipment) which generates
sufficient heat to affect the temperature otherwise maintained in the
Premises by the air conditioning system as normally operated. LESSOR
may install supplementary air conditioning units, facilities or
services in the Premises, or modify its air conditioning system, as
may in LESSOR'S reasonable opinion be required to maintain proper
temperature levels, and LESSEE shall pay LESSOR within ten days of
receipt of any invoice for the cost thereof, including installation,
operation and maintenance expense.
(c) If LESSOR shall from time to time reasonably determine that the use
of electricity or any other utility or service in the Premises is
disproportionate to the use of other LESSEES, LESSOR may separately
charge LESSEE for the excess costs attributable to such
disproportionate use. At LESSOR'S request, LESSEE shall install and
maintain at LESSEE'S expense, metering devices for checking the use
of any such utility or service in the Premises.
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6.06 Alterations by LESSOR: LESSOR may from time to time
(a) make repairs, replacements, changes or additions to the structure,
systems, facilities and equipment in the Premises where necessary to
serve the Premises or other parts of the Building.
(b) make changes in or additions to any part of the Building not in or
forming part of the Premises, and
(c) change or alter the location of those areas of the Building from time
to time designated by LESSOR for use during normal business hours by
LESSEE in common with all LESSEES and other persons in the Building
but under the exclusive control of LESSOR.
provided that in doing so LESSOR shall not disturb or interfere with
LESSEE'S use of the Premises and operation of its business any more than
is reasonably necessary in the circumstances and shall repair any damage
to the Premises caused thereby.
6.07 Access by LESSOR LESSEE shall permit LESSOR to enter the Premises outside
normal business hours, and during normal business hours where such will
not unreasonably disturb or interfere with LESSEE'S use of the Premises
and operation of its business, to examine, inspect, and show the Premises
to persons wishing to lease them, to provide services or make repairs,
replacements, changes or alterations as set out in this Lease, and to
take such steps as LESSOR may deem necessary for the safety, improvement
or preservation of the Premises or the Building. LESSOR shall whenever
possible consult with or give reasonable notice to LESSEE prior to such
entry, but no such entry shall constitute an eviction or entitle LESSEE
to any abatement of Rent.
6.08 Energy, Conservation, and Security Policies LESSOR shall be deemed to have
observed and performed the terms and conditions to be performed by LESSOR
under this Lease, including those relating to the provision of utilities
and services, if in so doing it acts in accordance with a directive,
policy or request of a governmental or quasi-governmental authority
serving the public interest in the fields of energy, conservation or
security.
ARTICLE 7.00 MAINTENANCE, REPAIR, ALTERATIONS AND IMPROVEMENTS BY LESSEE
7.01 Condition of Premises Except to the extent that LESSOR is specifically
responsible therefore under this Lease, LESSEE shall maintain the
Premises and all improvements therein in good order and condition,
including
(a) repainting and redecorating the Premises and cleaning window
coverings, interior windows and carpets at reasonable intervals as
needed, and
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(b) making repairs, replacements and alterations as needed, including
those necessary to comply with the requirements of any governmental
or quasi-governmental authority having jurisdiction.
7.02 Failure to Maintain Premises If LESSEE fails to perform any obligation
under Article 7.01, then on not less than ten days' notice to LESSEE
LESSOR may enter the Premises and perform such obligation without
liability to LESSEE for any loss or damage to LESSEE thereby incurred,
and LESSEE shall pay LESSOR for the cost thereof, plus 20% of such cost
for overhead and supervision, within ten days of receipt of LESSOR'S
invoice therefor.
7.03 Alterations by LESSEE: LESSEE may from time to time at its own expense
make changes, additions and improvements in the Premises to better adapt
the same to its business, provided that any such change, addition or
improvement shall
(a) comply with the requirements of any governmental or quasi-
governmental authority having jurisdiction,
(b) be made only with the prior written consent of LESSOR,
(c) equal or exceed the then current standard for Building, and
(d) be carried out only by persons selected by LESSEE and approved in
writing by LESSOR, who shall if required by LESSOR deliver to LESSOR
before commencement of the work performance and payment bonds as well
as proof of worker's compensation and public liability and property
damage insurance coverage, with LESSOR named as an additional
insured, in amounts, with companies, and in form reasonably
satisfactory to LESSOR, which shall remain in effect during the
entire period in which the work will be carried out. Any increase in
property taxes on or fire or casualty insurance premiums for the
Building attributable to such change, addition or improvement shall
be borne by LESSEE.
7.04 Trade Fixtures and Personal Property LESSEE may install in the Premises
its usual trade fixtures and personal property in a proper manner,
provided that no such installation shall interfere with or damage the
mechanical or electrical systems or the structure of the Building. If
LESSEE is not then in default hereunder, trade fixtures and personal
property installed in the Premises by LESSEE may be removed from the
Premises
(a) from time to time in the ordinary course of LESSEE'S business or in
the course of reconstruction, renovation, or alteration of the
Premises by LESSEE, and
(b) during a reasonable period prior to the expiration of the Term,
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provided that LESSEE promptly repairs at its own expense any damage to
the Premises resulting from such installation and removal.
7.05 Mechanic Liens LESSEE shall pay before delinquency all costs for work
done or caused to be done by LESSEE in the Premises which could result in
any lien or encumbrance on LESSOR'S interest in the Land or Building or
any part thereof, shall keep the title to the Land or Building and every
part thereof free and clear of any lien or encumbrance in respect of such
work, and shall indemnify and hold harmless LESSOR against any claim,
loss, cost, demand and legal or other expense, whether in respect of any
lien or otherwise, arising out of the supply of material, services or
labor for such work. LESSEE shall immediately notify LESSOR of any such
lien, claim of lien or other action of which it has or reasonably should
have knowledge and which affects the title to the Land or Building or any
part thereof, and shall cause the same to be removed within five days (or
such additional time as LESSOR may consent to in writing), failing which
LESSOR may take such action as LESSOR deems necessary to remove the same
and the entire cost thereof shall be immediately due and payable by
LESSEE to LESSOR.
7.06 Signs Any sign, lettering or design of LESSEE which is visible from the
exterior of the Premises shall be at LESSEE'S expense and subject to
approval by LESSOR, and shall conform to the uniform pattern of
identification signs for LESSEES in the Building as prescribed by LESSOR.
Oxford Park Associates will allow Ramp Networks, Inc. at their expense to
place a sign on the building facing both Trimble Road and De La Cruz
Boulevard, as well as a sign over the main entrance and door of the
building with ramp Network's Inc.'s name and logo. Said signage shall be
approved by lessor, whose consent shall not be unreasonable withheld.
Ramp Networks, Inc. is responsible for obtaining Santa Clara approvals
for the signage, and the signage shall have an appearance appropriate to
the Park. As soon as this Lease of Office Space is signed, Oxford Park
Associates will allow Ramp Networks, Inc. to place a sign on the
building, at the expense of Ramp Networks, Inc., subject to the above
conditions.
ARTICLE 8.00 TAXES
8.01 LESSOR'S Taxes LESSOR shall pay before delinquency every real estate tax,
assessment, license fee and other charge, excepting LESSEE'S Taxes under
Article 8.02, which is imposed, levied, assessed or charged by any
governmental or quasi-governmental authority having jurisdiction and
which is payable in respect of the Term upon or on account of the Land or
Building.
8.02 LESSEE'S Taxes LESSEE shall pay before delinquency every tax, assessment,
license fee, excise and other charge, however described, which is
imposed, levied, assessed or charged by any governmental or quasi-
governmental authority having jurisdiction and which is payable in
respect of the Term upon or on account of
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(a) operations at, occupancy of, or conduct of business in or from the
Premises by or with the permission of LESSEE,
(b) fixtures or personal property in the Premises which do not belong to
the LESSOR, and
(c) the Rent paid or payable by LESSEE to LESSOR for the Premises or for
the use and occupancy of all or any part thereof:
provided that if LESSOR so elects by notice to LESSEE, LESSEE shall add
any amounts payable under this Article 8.02 to the monthly installments
of Annual Rent payable under Article 4.01 and LESSOR shall remit such
amounts to the appropriate authorities.
8.03 Right to Contest LESSOR and LESSEE shall each have the right to contest
in good faith the validity or amount of any tax, assessment, license fee,
excise fee and other charge which it is responsible to pay under this
Article 8.00, provided that no contest by LESSEE may involve the
possibility of forfeiture, sale or disturbance of LESSOR'S interest in
the Premises and that upon the final determination of any contest by
LESSEE, LESSEE shall immediately pay and satisfy the amount found to be
due, together with any costs, penalties and interest.
ARTICLE 9.00 INSURANCE
9.01 LESSOR'S Insurance During the Term, LESSOR shall maintain at its own
expense (subject to participation by LESSEE by payment of Occupancy Costs
under Article 4.02) liability insurance, fire insurance with extended
coverage, boiler and pressure vessel insurance, and other insurance on
the Building and all property and interest of LESSOR in the Building with
coverage and in amounts not less than those which are from time to time
acceptable to a prudent owner in the area in which the Building is
located. Policies for such insurance shall waive, to the extent
available from LESSOR'S carrier(s), any right of subrogation against
LESSEE.
9.02 LESSEE'S Insurance During the Term. LESSEE shall maintain at its own
expense
(a) fire insurance with extended coverage and water damage insurance in
amounts sufficient to fully cover LESSEE'S improvements and all
property in the Premises which is not owned by LESSOR, and
(b) liability insurance, with LESSOR named as an additional insured,
against claims for death, personal injury and property damage in or
about the Premises, in amounts which are from time to time acceptable
to a prudent LESSEE in the community in which the Building is
located, but liability of not less than $1,000,000/$3,000,000.00 and
real property damage of $4,000,000.
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Policies for such insurance shall be in a form and with an insurer
reasonably acceptable to LESSOR, shall require at least fifteen days'
written notice to LESSOR of termination or material alteration during the
Term, and shall waive, to the extent available, any right of subrogation
against LESSOR. If requested by LESSOR, LESSEE shall from time to time
but in no event less than once per calendar year promptly deliver to
LESSOR certified copies or other evidence of such policies, and evidence
satisfactory to LESSOR that all premiums thereon have been paid and the
policies are in full force and effect.
ARTICLE 10.00 INJURY TO PERSON OR PROPERTY
10.01 Indemnity by LESSEE: LESSEE shall indemnify and hold harmless LESSOR from
and against every demand, claim, cause of action, judgment and expense,
and all loss and damage arising from
(a) any injury or damage to the person or property of LESSEE, any other
LESSEE in the Building or to any other person rightfully in the
Building, where the injury or damage is caused by negligence or
misconduct of LESSEE, its agents, servants, or employees, or of any
other person entering upon the Premises under express or implied
invitation of LESSEE, or results from the violation of laws or
ordinances, governmental orders of any kind or of the provisions of
this Lease by any of the foregoing.
(b) any loss or damage, however caused, to books, records, files, money,
securities, negotiable instruments or papers in or about the
Premises,
(c) any loss or damage resulting from interference with or obstruction of
deliveries to or from the Premises, and
(d) any injury or damage not specified above to the person or property of
LESSEE, its agents, servants or employees, or any other person
entering upon the Premises under express or implied invitation of
LESSEE, where the injury or damage is caused by any reason other than
the negligence or misconduct of LESSOR, its agents, servants, or
employees.
10.02 Subrogation The provisions of this Article 10.00 are subject to the
waiver of any right of subrogation against LESSEE in LESSOR'S Insurance
under Article 9.01 and to the waiver of any right of subrogation against
LESSOR in LESSEE'S Insurance under Article 9.02.
ARTICLE 11.00 ASSIGNMENT AND SUBLETTING
All parties to a sublease at Oxford Business Park acknowledge that Oxford
Park Associates as Lessor has leased the entire building located at 3100
De La Cruz
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Boulevard to Ramp Networks, Inc. as the Lessee. As a condition of the
Prime Lease, Oxford Park Associates (Lessor) has granted to Ramp
Networks, Inc. (Lessee) and only to Ramp Networks, Inc. the right to
sublease to others (sublessee(s)) provided that:
a) all such subleases be approved by the Lessor, Oxford Park
Associates
b) The primary obligation for payment of rent is that of the
Lessee, Ramp Networks, Inc.
c) In the event of default of any portion of the lease by Ramp
Networks, Inc. and particularly payment of all present and
past due rent, this right of the Lessee Ramp Networks, Inc. to
sublease to a subtenant is hereby revoked unless approval is
respectfully granted by the Lessor on an individual basis to
the subtenant.
Any and all subleases and assignments Ramp Networks, Inc. enters into
shall contain an Addendum as stated below. Secondly, copies of all
subleases and assignments shall be forwarded to Lessor within five days
of their execution. Ramp Networks, Inc., hereby agrees to furnish Lessor
with any additional documentation that may or may not occur in the
future, pertaining to the sublease and/or assignment of the premises at
3100 De La Cruz Boulevard.
LEASE ADDENDUM FOR ANY SUBLEASE AND OR ASSIGNMENT AGREEMENT ENTERED INTO
------------------------------------------------------------------------
BY RAMP NETWORKS INC. Should Ramp Networks, Inc. default on their Lease
--------------------
of Office Space with Lessor Oxford Business Park, any and all of Ramp
Networks Inc.'s' rental payments due from Ramp Network, Inc.'s
sublessee(s) and/or assignee(s) shall revert to LESSOR as part payment of
rent, and LESSOR shall reserve and acquire all rights as their sole
LESSOR.
Said reversion shall require all sublessee(s) and/or assignee(s) to pay
their rent directly to Oxford Business Park and not to Ramp Networks,
Inc. Should sublessee(s) and assignee(s) be in compliance with the terms
and conditions of their respective contracts, and not be in default in
rent, Oxford Business Park shall in turn honor their contract until a new
contract is executed denoting Oxford Business Park as the sole Lessor.
Ramp Networks, Inc. hereby agrees and consents to this agreement, and its
signature on pages 31 and 48 indicate full concurrence to said terms and
conditions. Ramp Networks, Inc., in the event of its default on its
Lease with LESSOR will forfeit its right to collect any and all rent past
due, due or due in the future from its former sublessee(s)/assignee(s).
Oxford Business Park, in the circumstance of default by Ramp Networks,
Inc. shall reserve all rights as LESSOR.
11.01 Assignment LESSEE, with LESSOR'S prior written consent, may assign this
Lease. Said Lessor's prior written consent to an assignment shall be
only given after each of the following criteria have been satisfied:
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. the prospective assignee's prior tenant history is established, and
reflects a positive record for at least five years
. a credit report has been done, and this credit report is positive-
Negative credit is acceptable to neither Lessee Ramp Networks, Inc.
nor Lessor, Oxford Business Park
. the prospective assignee's financial statements, including but not
limited to current balance sheet, income statement and their
Financial Plan have been reviewed by Lessor
(a) to an assignee who is a purchaser of all or substantially all of the
business of the LESSEE that is conducted in the Premises, a parent or
wholly owned subsidiary company of LESSEE, a company which results
from the reconstruction, consolidation, amalgamation or merger of
LESSEE, or a partnership in which LESSEE (or not less than one-half
of the principals thereof) has a substantial interest, or
(b) subject to Article 11.03, to any other assignee who, in LESSOR'S sole
opinion, will not be inconsistent with the character of the Building
and its other LESSEES.
11.02 Subleasing Ramp Networks, Inc. will have the right to sublease any part
or all parts of the facility during the lease term, subject to LESSEE,
with LESSOR'S prior written consent, as detailed in the next paragraph.
The sublessee shall be a comparable office LESSEE who operates and
maintains a business operation suitable to the Lessor. Oxford Park
Associates will have the right to approve the sublessee, with such
approval not to be unreasonably withheld. Ramp Networks Inc., also
agrees to abide by any current, special lease clauses which bind Lessor
and a current Oxford LESSEE. Said special lease clauses mean any and all
binding clauses LESSOR and a LESSEE have agreed upon in a lease, such as
a non-competition clause with both the UC and on-site cafe. Ramp
Networks hereby agrees not to begin any subleasing activity until May 31,
1998. Ramp Networks hereby also agrees not to sublease beyond the
current lease term without Lessor's prior approval in writing.
Said Lessor's prior written consent to subleasing shall be only given
after each of the following criteria have been satisfied
. the prospective sublessees's prior tenant history is established,
and reflects a positive record for at least five years
. a credit report has been done, and this credit report is positive-
Negative credit is acceptable to neither Lessee Ramp Networks, Inc.
nor Lessor, Oxford Business Park
. the prospective sublessee's financial statements, including but not
limited to current balance sheet, income statement and their
Financial Plan have been reviewed by Lessor
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11.03 First Offer to LESSOR If LESSEE wishes to assign this Lease (except as
set out in Article 11.01(a)) or sublet all or any part of the Premises to
a named third party, LESSEE shall first offer in writing to assign or
sublet (as the case may be) to LESSOR on the same terms and conditions
and for the same Rent as provided in this Lease. Any such first offer
shall be deemed to have been rejected unless within ten days of receipt
thereof LESSOR delivers written notice of acceptance to LESSEE.
11.04 Limitation Except as specifically provided in this Article 11.00, LESSEE
shall not assign or transfer this Lease or any interest therein or in any
way part with possession of all or any part of the Premises, or permit
all or any part of the Premises to be used or occupied by any other
person. Any assignment, transfer or subletting or purported assignment,
transfer or subletting except as specifically provided herein shall be
null and void and of no force and effect. LESSOR shall not be required
to consent to an assignment of this Lease or a sublease of all or part of
the Premises by LESSEE to any LESSEE in a building in the same city in
which the Building is located and which is owned or managed by LESSOR or
any affiliate of LESSOR. The rights and interests of LESSEE under this
Lease shall not be assignable by operation of law without LESSOR'S
written consent, which consent may be withheld in LESSOR'S absolute
discretion.
11.05 LESSEE'S Obligations Continue No assignment, transfer or subletting (or
use or occupation of the Premises by any other person) which is permitted
under this Article 11.00 shall in any way release or relieve LESSEE of
its obligations under this Lease unless such release or relief is
specifically granted by LESSOR to LESSEE in writing.
11.06 Subsequent Assignments LESSOR'S consent to an assignment, transfer or
subletting (or use or occupation of the Premises by any other person)
shall not be deemed to be a consent to any subsequent assignment,
transfer, subletting, use or occupation.
ARTICLE 12.00 SURRENDER
12.01 Possession Upon the expiration or other termination of the Term, LESSEE
shall immediately quit and surrender possession of the Premises in
substantially the condition in which LESSEE is required to maintain the
Premises excepting only reasonable wear and tear and damage covered by
LESSOR'S insurance under Article 9.01. Upon such surrender, all right,
title and interest of LESSEE in the Premises shall cease.
12.02 Trade Fixtures, Personal Property and Improvements Subject to LESSEE'S
rights under Article 7.04, after the expiration or other termination of
the Term all of LESSEE'S trade fixtures, personal property and
improvements remaining in the Premises shall be deemed conclusively to
have been abandoned by LESSEE and may be appropriated, sold, destroyed or
otherwise disposed of by LESSOR without notice
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or obligation to compensate LESSEE or to account therefor, and LESSEE
shall pay to LESSOR on written demand all costs incurred by LESSOR in
connection therewith.
12.03 Merger The voluntary or other surrender of this Lease by LESSEE or the
cancellation of this Lease by mutual agreement of LESSEE and LESSOR shall
not work a merger, and shall at LESSOR'S option terminate all or any
subleases and subtenancies or operate as an assignment to LESSOR of all
or any subleases or subtenancies. LESSOR'S option hereunder shall be
exercised by notice to LESSEE and all known subleases or sublessees in
the Premises or any part thereof.
12.04 Payments After Termination No payments of money by LESSEE to LESSOR
after the expiration or other termination of the Term or after the giving
of any notice (other than a demand for payment of money) by LESSOR to
LESSEE, shall reinstate, continue or extend the Term or make ineffective
any notice given to LESSEE prior to the payment of such money. After the
service of notice or the commencement of a suit, or after final judgment
granting LESSOR possession of the Premises, LESSOR may receive and
collect any sums of Rent due under the Lease, and the payment thereof
shall not make ineffective any notice, or in any manner affect any
pending suit or any judgment theretofore obtained.
ARTICLE 13.00 HOLDING OVER
13.01 Month-to-Month Tenancy If with LESSOR'S written consent LESSEE remains
in possession of the Premises after the expiration or other termination
of the Term, LESSEE shall be deemed to be occupying the Premises on a
month-to-month tenancy only, at a monthly rental equal to the Rent as
determined in accordance with Article 4.00 or such other rental as is
stated in such written consent, and such month-to-month tenancy may be
terminated by LESSOR or LESSEE on the last day of any calendar month by
delivery of at least 30 days' advance notice of termination to the other.
13.02 Tenancy at Sufferance If without LESSOR'S written consent LESSEE remains
in possession of the Premises after the expiration or other termination
of the Term, LESSEE shall be deemed to be occupying the Premises upon a
tenancy at sufferance only, at a monthly rental equal to two times the
Rent determined in accordance with Article 4.00. Such tenancy at
sufferance may be terminated by LESSOR at any time by notice of
termination to LESSEE, and by LESSEE on the last day of any calendar
month by at least 30 days' advance notice of termination to LESSOR.
13.03 General Any month-to-month tenancy or tenancy at sufferance hereunder
shall be subject to all other terms and conditions of this Lease except
any right of renewal and nothing contained in this Article 13.00 shall be
construed to limit or impair any of LESSOR'S rights of re-entry or
eviction or constitute a waiver thereof.
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ARTICLE 14.00 RULES AND REGULATIONS
14.01 Purpose The Rules and Regulations in Exhibit C have been adopted by
LESSOR for the safety, benefit and convenience of all LESSEES and other
persons in the Building.
14.02 Observance LESSEE shall at all times comply with, and shall cause its
employees, agents, licensees, and invitees to comply with, the Rules and
Regulations from time to time in effect.
14.03 Modification LESSOR may from time to time, for the purposes set out in
Article 14.01, amend, delete from, or add to the Rules and Regulations,
provided that any modification
(a) shall not be repugnant to any other provision of this Lease.
(b) shall be reasonable and have general application to all LESSEES in
the Building, and
(c) shall be effective only upon delivery of a copy thereof to LESSEE at
the Premises.
14.04 Non-Compliance LESSOR shall use its best efforts to secure compliance by
all LESSEES and other persons with the Rules and Regulations from time to
time in effect, but shall not be responsible to LESSEE for failure of any
person to comply with such Rules and Regulations.
ARTICLE 15.00 EMINENT DOMAIN
15.01 Taking of Premises If during the Term all of the Premises shall be taken
for any public or quasi-public use under any statute or by right of
eminent domain, or purchased under threat of such taking, this Lease
shall automatically terminate on the date on which the condemning
authority takes possession of the Premises (hereinafter called the "date
of such taking").
15.02 Partial Taking of Building: If during the Term only part of the Building
is taken or purchased as set out in Article 15.01, then
(a) if in the reasonable opinion of LESSOR substantial alteration or
reconstruction of the Building is necessary or desirable as a result
thereof, whether or not the Premises are or may be affected, LESSOR
shall have the right to terminate this Lease by giving the LESSEE at
least 30 days' written notice of such termination, and
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(b) if more than one-third of the number of square feet in the Premises
is included in such taking or purchase, LESSOR and LESSEE shall each
have the right to terminate this Lease by giving the other at least
30 days? written notice thereof.
If either party exercises its right of termination hereunder, this Lease
shall terminate on the date stated in the notice, provided, however, that
no termination pursuant to notice hereunder may occur later than 60 days
after the date of such taking.
15.03 Surrender On any such date of termination under Article 15.01 or 15.02,
LESSEE shall immediately surrender to LESSOR the Premises and all
interests therein under this Lease. LESSOR may re-enter and take
possession of the Premises and remove LESSEE therefrom, and the Rent
shall abate on the date of termination, except that if the date of such
taking differs from the date of termination, Rent shall abate on the
former date in respect of the portion taken. After such termination, and
on notice from LESSOR stating the Rent then owing, LESSEE shall forthwith
pay LESSOR such Rent.
15.04 Partial Taking of Premises If any portion of the Premises (but less than
the whole thereof) is so taken, and no rights of termination herein
conferred are timely exercised, the Term of this Lease shall expire with
respect to the portion so taken on the date of such taking. In such
event the Rent payable hereunder with respect to such portion so taken
shall abate on such date, and the Rent thereafter payable with respect to
the remainder not so taken shall be adjusted pro rata by LESSOR in order
to account for the resulting reduction in the number of square feet in
the Premises.
15.05 Awards Upon any such taking or purchase, LESSOR shall be entitled to
receive and retain the entire award or consideration for the affected
lands and improvements, and LESSEE shall not have nor advance any claim
against LESSOR for the value of its property or its leasehold estate or
the unexpired Term of the Lease, or for costs of removal or relocation,
or business interruption expense or any other damages arising out of such
taking or purchase. Nothing herein shall give LESSOR any interest in or
preclude LESSEE from seeking and recovering on its own account from the
condemning authority any award or compensation attributable to the taking
or purchase of LESSEE'S improvements, chattels or trade fixtures, or the
removal or relocation of its business and effects, or the interruption of
its business. If any such award made or compensation paid to either
party specifically includes an award or amount for the other, the party
first receiving the same shall promptly account therefor to the other.
ARTICLE 16.00 DAMAGE BY FIRE OR OTHER CASUALTY
16.01 Limited Damage to Premises If all or part of the Premises are rendered
unleaseable by damage from fire or other casualty which, in the
reasonable opinion of an architect acceptable to LESSOR and LESSEE, can
be substantially repaired under applicable
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laws and governmental regulations within 180 days from the date of such
casualty (employing normal construction methods without overtime or other
premium), LESSOR shall forthwith at its own expense repair such damage
other than damage to improvements, furniture, chattels or trade fixtures
which do not belong to LESSOR.
16.02 Major Damage to Premises If all or part of the Premises are rendered
unleaseable by damage from fire or other casualty which, in the
reasonable opinion of an architect acceptable to LESSOR and LESSEE,
cannot be substantially repaired under applicable laws and governmental
regulations within 180 days from the date of such casualty (employing
normal construction methods without overtime or other premium), then
either LESSOR or LESSEE may elect to terminate this Lease as of the date
of such casualty by written notice delivered to the other not more than
10 days after receipt of such Architect's opinion, failing which LESSOR
shall forthwith at its own expense repair such damage other than damage
to improvements, furniture, chattels or trade fixtures which do not
belong to LESSOR.
16.03 Abatement If LESSOR is required to repair damage to all or part of the
Premises under Article 16.01 or 16.02 the Rent payable by LESSEE
hereunder shall be proportionately reduced to the extent that the
Premises are thereby rendered unusable by LESSEE in its business, from
the date of such casualty until five days after completion by LESSOR of
the repairs to the Premises (or the part thereof rendered unleaseable) or
until LESSEE again uses the Premises (or the part thereof rendered
unloadable) in its business, whichever first occurs.
16.04 Major Damage to Building If all or a substantial part (whether or not
including the Premises) of the Building is rendered unleaseable by damage
from fire or other casualty to such a material extent that in the
reasonable opinion of LESSOR the Building must be totally or partially
demolished, whether or not to be reconstructed in whole or in part,
LESSOR may elect to terminate this Lease as of the date of such casualty
(or on the date of notice if the Premises are unaffected by such
casualty) by written notice delivered to LESSEE not more than 60 days
after the date of such casualty.
16.05 Limitation on LESSOR'S Liability Except as specifically provided in this
Article 16.00, there shall be no reduction of Rent and LESSOR shall have
no liability to LESSEE by reason of any injury to or interference with
LESSEE'S business or property arising from fire or other casualty,
howsoever caused, or from the making or any repairs resulting therefrom
in or to any portion of the Building or the Premises. Notwithstanding
anything contained herein, Rent payable by LESSEE hereunder shall not be
abated, if the damage is caused by any act or omission of LESSEE, its
agents, servants, employees or any other person entering upon the
Premises under express or implied invitation of LESSEE.
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ARTICLE 17.00 TRANSFERS BY LESSOR
17.01 Sales, Conveyance and Assignment Nothing in this Lease shall restrict
the right of LESSOR to sell, convey, assign or otherwise deal with the
Building, subject only to the rights of LESSEE under this Lease.
17.02 Effect of Sale, Conveyance or Assignment A sale, conveyance or
assignment of the Building shall operate to release LESSOR from liability
from and after the effective date thereof upon all of the covenants,
terms and conditions of this Lease, express or implied, except as such
may relate to the period prior to such effective date, and LESSEE shall
thereafter look solely to LESSOR'S successor in interest in and to this
Lease. This Lease shall not be affected by any such sale, conveyance or
assignment, and LESSEE shall attorn to LESSOR'S successor in interest
thereunder.
17.03 Subordination This Lease is and shall be subject and subordinate in all
respects to any and all mortgages and deeds of trust now or hereafter
placed on the Building or Land, and to all renewals, modifications,
consolidations, replacements and extensions thereof.
17.04 Attornment Subject to Article 17.05, if the interest of LESSOR is
transferred to any person (herein called "Purchaser") by reason of
foreclosure or other proceedings for enforcement of any such mortgage or
deed of trust, or by delivery of a deed in lieu of such foreclosure or
other proceedings, LESSEE shall immediately and automatically attorn to
Purchaser.
17.05 Nondisturbance No attornment by LESSEE under Article 17.04 shall be
effective unless, before the date of transfer to Purchaser, Purchaser
delivers to LESSEE a written undertaking, binding upon Purchaser and
enforceable by and for the benefit of LESSEE under applicable law, that
this Lease and LESSEE'S rights hereunder shall continue undisturbed while
LESSEE is not in default despite such enforcement proceedings and
transfer.
17.06 Effect of Attornment Upon attornment under Article 17.04 this Lease
shall continue in full force and effect as a direct lease between
Purchaser and LESSEE, upon all of the same terms, conditions and
covenants as are set forth in this Lease except that, after such
attornment, Purchaser shall not be
(a) liable for any act or omission of LESSOR, or
(b) subject to any offsets or defenses which LESSEE might have against
LESSOR, or
(c) bound by any prepayment by LESSEE of more than one month's
installment of Rent, or by any previous modification of this Lease,
unless such prepayment or modification shall have been approved in
writing by Purchaser or any predecessor in interest except LESSOR.
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17.07 Execution of Instruments The subordination and attornment provisions of
this Article 17.00 shall be self-operating and except as set out in
Article 17.05 no further instrument shall be required. Nevertheless
LESSEE, on request by and without cost to LESSOR or any successor in
interest, shall execute and deliver any and all instruments further
evidencing such subordination and (where applicable hereunder)
attornment.
ARTICLE 18.00 NOTICES, ACKNOWLEDGMENTS, AUTHORITIES
FOR ACTION
18.01 Notices Any notice from one party to the other hereunder shall be in
writing and shall be deemed duly served if delivered personally to a
responsible employee of the party being served, or if mailed by
registered or certified mail addressed to LESSEE at the Premises (whether
or not LESSEE has departed from, vacated or abandoned the same) or to
LESSOR at the place from time to time established for the payment of
Rent. Any notice shall be deemed to have been given at the time of
personal delivery or, if mailed, seven days after the date of mailing
thereof. Either party shall have the right to designate by notice, in
the manner above set forth, a different address to which notices are to
be mailed.
18.02 Acknowledgments Each of the parties hereto shall at any time and from
time to time upon not less than 20 days prior notice from the other
execute, acknowledge and deliver a written statement certifying that
(a) this Lease is in full force and effect, subject only to such
modifications (if any) as may be set out therein,
(b) LESSEE is in possession of the Premises and paying Rent as provided
in this Lease,
(c) the dates (if any) to which Rent is paid in advance, and
(d) that there are not, to such party's knowledge, any uncured defaults
on the part of other party hereunder, or specifying such defaults if
any are claimed.
Any such statement may be relied upon by any prospective transferee or
encumbrancer of all or any portion of the Building, or any assignee of
any such persons. If LESSEE fails to timely deliver such statement,
LESSEE shall be deemed to have acknowledged that this Lease is in full
force and effect, without modification except as may be represented by
LESSOR, and that there are no uncured defaults in LESSOR'S performance.
18.03 Authorities for Action LESSOR may act in any matter provided for herein
by its Property Manager and any other person who shall from time to time
be designated by LESSOR by notice to LESSEE. LESSEE shall designate in
writing one or more persons to act on its behalf in any matter provided
for herein and may from time to
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time change, be notice to LESSOR, such designation. In the absence of any
such designation, the person or persons executing this Lease for LESSEE
shall be deemed to be authorized to act on behalf of LESSEE in any matter
provided for herein.
ARTICLE 19.00 DEFAULT
19.01 Interest and Costs LESSEE shall pay to LESSOR interest at a rate equal to
the lesser of 1 1/2% per month, or the maximum rate permitted by
applicable law, upon all Rent required to be paid hereunder from the due
date for payment thereof until the same is fully paid and satisfied.
LESSEE shall indemnify LESSOR against all costs and charges (including
legal fees) lawfully and reasonably incurred in enforcing payment
thereof, and in obtaining possession of the Premises after default of
LESSEE or upon expiration or earlier termination of the Term of this
Lease, or in enforcing any covenant, proviso, or agreement of LESSEE
herein contained.
19.02 Right of LESSOR to Perform Covenants All covenants and agreements to be
performed by LESSEE under any of the terms of this Lease shall be
performed by LESSEE, at LESSEE'S sole cost and expense, and without any
abatement of Rent. If LESSEE shall fail to perform any act on its part
to be performed hereunder, and such failure shall continue for 10 days
after notice thereof from LESSOR, LESSOR may (but shall not be obligated
so to do) perform such act without waiving or releasing LESSEE from any
of its obligations relative thereto. All sums paid or costs incurred by
LESSOR in so performing such acts under this Article 19.02, together with
interest thereon at the rate set out in Article 19.01 from the date each
such payment was made or each such cost incurred by LESSOR, shall be
payable by LESSEE to LESSOR on demand.
19.03 Events of Default The following events shall be deemed events of default
by LESSEE under this Lease:
(a) part or all of the Rent hereby reserved is not paid when due, and/or
becomes more than 30 days in arrears, or
(b) the Term or any goods, chattels or equipment of LESSEE is taken or
eligible in execution or in attachment or if a writ or execution is
issued against LESSEE, or
(c) LESSEE becomes insolvent or commits an act of bankruptcy or becomes
bankrupt or takes the benefit of any statute that may be in force for
bankrupt or insolvent debtors or becomes involved in voluntary or
involuntary winding-up proceedings or if a receiver shall be
appointed for the business, property, affairs or revenues of LESSEE,
unless Lessee remains current in their rent as stated in the lease
and continues to be so during the term of bankruptcy, or
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(d) LESSEE makes a bulk sale of its goods or moves or commences, attempts
or threatens to move its goods, chattels and equipment out of the
Premises (other than in the normal course of its business), or
(e) LESSEE fails to observe, perform and keep each and every of the
covenants, agreements, provisions, stipulations and conditions herein
contained to be observed, performed and kept by LESSEE (other than
payment of Rent).
Any shorter period for cure provided by law notwithstanding, and in lieu
thereof, LESSEE may cure any default under Article 19.03 (a) at any time
within 5 days after written notice of default is received by LESSEE from
LESSOR; and LESSEE may cure any default under Article 19.03 (e), above,
within 10 days after written notice of default is received by LESSEE from
LESSOR, provided that if such non-monetary default is curable but is of
such a nature that the cure cannot be completed within 10 days, LESSEE
shall be allowed to cure the default if LESSEE promptly commences the
cure upon receipt of the notice and diligently prosecutes the same to
completion as promptly as reasonably possible thereafter.
LESSOR'S notice of default may be accomplished by, and shall not be in
addition to, the notice required pursuant to Section 1161 of the
California Code of Civil Procedure.
19.04 Remedies upon Default Upon the occurrence of any event of default by
LESSEE, LESSOR shall have, in addition to any other remedies available to
LESSOR at law or in equity, the option to pursue any one or more of the
following remedies (each and all of which shall be cumulative and non-
exclusive) without any notice or demand whatsoever:
(a) Terminate this Lease, in which event LESSEE shall immediately
surrender the Premises to LESSOR, and if LESSEE fails to do so,
LESSOR may, without prejudice to any other remedy which it may have
for possession or arrearages in Rent, enter upon and take possession
of the Premises and expel or remove LESSEE and any other person who
may be occupying the Premises or any part thereof, without being
liable for prosecution or any claim or damages therefor; and LESSOR
may recover from LESSEE the following:
(1) the worth at the time of award of any unpaid Rent which has been
earned at the time of such termination; plus
(2) the worth at the time of award of the amount by which the unpaid
Rent which would have been earned after termination until the
time of award exceeds the amount of such loss of Rent that LESSEE
proves could have been reasonable avoided; plus
(3) 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 loss of Rent that LESSEE proves could have
been reasonably avoided; plus
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(4) any other amount necessary to compensate LESSOR for all the
detriment proximately caused by LESSEE'S failure to perform its
obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom, specifically including
but not limited to brokerage commissions and advertising expenses
incurred, expenses of remodeling the Premises or any portion
thereof for a new LESSEE, whether for the same or a different use,
and any special concessions made to obtain a new LESSEE; and
(5) at LESSOR'S election, such other amounts in addition to or in lieu
of the foregoing as may be permitted from time to time by
applicable law.
The term "Rent" as used in this Article 19.04 (a) shall be deemed to be
and to mean all sums of every nature required to be paid by LESSEE
pursuant to the terms of this Lease, whether to LESSOR or to others. Any
such sums which are based on percentages of income, increased costs or
other historical data shall be reasonable estimates or projections
computed by LESSOR on the basis of the amounts thereof accruing during
the 24-month period immediately prior the default, except that if it
becomes necessary to compute such sums before a 24-month period has
expired, then the computation shall be made on the basis of the amounts
accruing during such shorter period. As used in Article 19.04 (a) (1)
and (2), above, the "worth at the time of award" shall be computed by
allowing interest at the highest rate permitted by applicable law (but in
no event in excess of 25% per annum). As used in Article 19.04 (a) (3),
above, the "worth at the time of award" shall be computed by discounting
such amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award plus 1%.
(b) If LESSOR does not elect to terminate this Lease on account of any
default by LESSEE, LESSOR may, from time to time, without terminating
this Lease, enforce all of its rights and remedies under this Lease,
including the right to recover all Rent as it becomes due.
(c) Whether or not LESSOR elects to terminate this Lease on account of
any default by LESSEE, LESSOR shall have the right to terminate any
and all subleases, licenses, concessions or other consensual
arrangements for possession entered into by LESSEE and affecting the
Premises or may, in LESSOR'S sole discretion, succeed to LESSEE'S
interest in such subleases, licenses, concessions or arrangements.
In the event of LESSOR'S election to succeed to LESSEE'S interest in
any such subleases, licenses, concessions or arrangements, LESSEE
shall, as of the date of notice by LESSOR of such election, have no
further right to or interest in the Rent or other consideration
receivable thereunder.
19.05 Surrender of Premises Under the expiration of the Term of this Lease, or
upon any earlier termination of this Lease, LESSEE shall, subject to the
provisions of this Article 19.00, quit and surrender possession of the
Premises to LESSOR in as good
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order and condition as when LESSEE took possession and as thereafter
improved by LESSOR and/or LESSEE, reasonable wear and tear and repairs
which are specifically made the responsibility of LESSOR hereunder
excepted. Upon such expiration or termination, LESSEE shall, without
expense to LESSOR, remove or cause to be removed from the Premises all
debris and rubbish, and such items of furniture, equipment, free-standing
cabinet work, movable partitions and other articles of personal property
owned by LESSEE or installed or placed by LESSEE at its expense in the
Premises, and such similar articles of any other persons claiming under
LESSEE, as LESSOR may, in its sole discretion, require to be removed, and
LESSEE shall repair at its own expense all damage to the Premises and
Building resulting from such removal.
19.06 Disposition of Personal Property Whenever LESSOR shall re-enter the
Premises as provided in this Lease, any personal property of LESSEE not
removed by LESSEE upon the expiration of the Term of this Lease, or
within 48 hours after a termination by reason of LESSEE'S default as
provided in this Lease, shall be deemed abandoned by LESSEE and may be
disposed of by LESSOR in accordance with Sections 1980 through 1991 of
the California Civil Code and Section 1174 of the California Code of
Civil Procedure, or in accordance with any laws or judicial decisions
which may supplement or supplant those provisions from time to time.
19.07 Remedies Cumulative No reference to nor exercise of any specific right
or remedy by LESSOR shall prejudice or preclude LESSOR from exercising or
invoking any other remedy in respect thereof, whether allowed at law or
in equity or expressly provided for herein. No such remedy shall be
exclusive or dependent upon any other such remedy, but LESSOR may from
time to time exercise any one or more of such remedies independently or
in combination.
ARTICLE 20.00 MISCELLANEOUS
20.01 Relationship of Parties Nothing contained in this Lease shall create any
relationship between the parties hereto other than that of LESSOR and
LESSEE, and it is acknowledged and agreed that LESSOR does not in any way
or for any purpose become a partner of LESSEE in the conduct of its
business, or ajoint venturer or a member of a joint or common enterprise
with LESSEE.
20.02 Consent Not Unreasonably Withheld Except as otherwise specifically
provided, whenever consent or approval of LESSOR or LESSEE is required
under the terms of this Lease such shall not be unreasonably withheld or
delayed. LESSEE'S sole remedy if LESSOR unreasonably withholds or delays
consent or approval shall be an action for specific performance, and
LESSOR shall not be liable for damages. If either party withholds any
consent or approval, such party shall on written request deliver to the
other party a written statement giving the reasons therefor.
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20.03 Name of Building LESSOR shall have the right, after 30 days notice to
LESSEE, to change the name, number or designation of the Building, during
the Term without liability to LESSEE.
20.04 Applicable Law and Construction This Lease shall be governed by and
construed under the laws of the jurisdiction in which the Building is
located, and its provisions shall be construed as a whole according to
their common meaning and not strictly for or against LESSOR or LESSEE.
The words LESSOR and LESSEE shall include the plural as well as the
singular. If this Lease is executed by more than one LESSEE, LESSEE'S
obligations hereunder shall be joint and several obligations of such
executing LESSEES. Time is of the essence of this Lease and each of its
provisions. The captions of the Articles are included for convenience
only, and shall have no effect upon the construction or interpretation of
this Lease.
20.05 Entire Agreement If there are any terms and conditions which at the date
of execution of this Lease are additional or supplemental to those set
out on the first 39 pages and in Exhibits A, B, C, D, such terms and
conditions are contained in Exhibit E (if any) attached hereto as part of
this Lease. This Lease contains the entire agreement between the parties
hereto with respect to the subject matter of this Lease. LESSEE
acknowledges and agrees that it has not relied upon any statement,
representation, agreement or warranty except such as are set out in this
Lease. If this Lease is made pursuant to an Offer to Lease, then the
term "Lease" in this Article 20.05 shall be deemed to include such Offer
to Lease.
20.06 Amendment or Modification Unless otherwise specifically provided in this
Lease, no amendment, modification, or supplement to this Lease shall be
valid or binding unless set out in writing and executed by the parties
hereto in the same manner as the execution of this Lease.
20.07 Construed Covenants and Severablilty All of the provisions of this Lease
are to be construed as covenants and agreements as though the words
importing such covenants and agreements were used in each separate
Article hereof Should any provision of this Lease be or become invalid,
void, illegal or not enforceable, it shall be considered separate and
severable from the Lease and the remaining provisions shall remain in
force and be binding upon the parties hereto as though such provision had
not been included.
20.08 No Implied Surrender or Waiver No provisions of this Lease shall be
deemed to have been waived by LESSOR unless such waiver is in writing
signed by LESSOR. LESSOR'S waiver of a breach of any term or condition
of this Lease shall not prevent a subsequent act, which would have
originally constituted a breach, from having all the force and effect of
any original breach. LESSOR'S receipt of Rent with knowledge of a breach
by LESSEE of any term or condition of this Lease shall not be deemed a
waiver of such breach. LESSOR'S failure to enforce against LESSEE or any
other LESSEE in the Building any of the Rules and Regulations made under
Article 14.00
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shall not be deemed a waiver of such Rules and Regulations. No act or
thing done by LESSOR, its agents or employees during the Term shall be
deemed an acceptance of a surrender of the Premises, and no agreement to
accept a surrender of the Premises shall be valid, unless in writing
signed by LESSOR. The delivery of keys to any of LESSOR'S agents or
employees shall not operate as a termination of this Lease or a surrender
of the Premises. No payment by LESSEE, or receipt by LESSOR, of a lesser
amount than the Rent due hereunder shall be deemed to be other than on
account of the earliest stipulated Rent, nor shall any endorsement or
statement on any check or any letter accompanying any check, or payment
as Rent, be deemed an accord and satisfaction, and LESSOR may accept such
check or payment without prejudice to LESSOR'S right to recover the
balance of such Rent or pursue any other remedy available to LESSOR.
20.09 Successors Bound Except as otherwise specifically provided, the
covenants, terms, and conditions contained in this Lease shall apply to
and bind the heirs, successors, executors, administrators and assigns of
the parties hereto.
IN THE WITNESS OF THIS LEASE LESSOR and LESSEE have properly executed as of the
date set out on page one.
LESSOR: OXFORD PARK ASSOCIATES
/s/ [illegible] 3/3/98
___________________________________ ____________________
ITS GENERAL PARTNER DATED
LESSEE: RAMP NETWORKS, INC.
/s/ Mahesh Veerina 2/26/98
___________________________________ ____________________
ITS PRESIDENT, MAHESH VEERINA DATED
/s/ Scott Gorton 2/26/98
___________________________________ ____________________
ASSISTANT SECRETARY DATED
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OXFORD BUSINESS PARK
EXHIBIT "B"
SECTION 1.00 WORDS AND PHRASES
1.01 Definitions In the Lease, including this Exhibit
(a) "Architect" means such firm of professional architects or
engineers as Landlord may from time to time engage for preparation of
construction drawings for the Building or for general supervision of
architectural and engineering aspects and operations thereof and includes any
consultant(s) from time to time appointed by Landlord or the Architect whenever
such consultant(s) is acting within the scope of this appointment and specialty.
(b) "Land" means those lands in the City of Santa Clara, California,
legally described as:
PARCEL 22, 23, 24, 25, 26, 27, 28 and 29 all inclusive, as shown on Parcel Map
filed August 4, 1980 in Book 468 of Maps, pages 38 and 39, Santa Clara County:
Subject to a non-exclusive access easement as shown on the Map hereinabove
referred to affecting Parcel 25 and appurtenant to Parcel 14, as shown on Parcel
Map filed September 28, 1978 in Book 427 of Maps, pages 14 and 15, Santa Clara
County Records;
ALSO subject to an encroachment easement affecting Parcels 22, 25, 27 and 29 for
an existing concrete curb, as shown on the Map hereinabove referred to
appurtenant to Parcels 13, 14, and 15, as shown on Parcel Map filed September
28, 1978 in Book 427 of Maps, pages 14 and 15, Santa Clara County Records.
(c) "Project" means at any time the Land then owned by Landlord and
all improvements thereon which are part of Oxford Business Park.
(d) "Building" means the building in which the Premises are located,
as named in the Lease and constructed on and including the Land,
together with all attendant common, public and service areas
thereof.
(e) "Common Areas" means at any time those portions of the Project
which are not leased or designated for lease to tenants but are
provided to be used in common by (or by the sublessees, agents,
employees, customers, or
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(f) licensees of) Landlord, Tenant, and other tenants of the Project,
whether or not the same are open to the general public, and shall
include
(g) any fixtures, chattels, systems decor, signs, facilities,
sidewalks, landscaping, driveways, or parking areas contained
therein or maintained or used in connection therewith.
(h) "Rentable Components of the Project" means the Building and such
other portions of the Project as from time to time are leased or
designated for lease to tenants.
(h) "Section" means a section of this Exhibit B.
1.02 Normal Business Hours Except as otherwise specifically provided in the
Lease, normal business hours for the Building are from 7:00 am until 7:00 p.m.,
Monday through Friday, unless otherwise stated in the Lease.
SECTION 2.00 DETERMINATION OF OCCUPANCY COSTS
2.01 [was deleted from original copy]
2.02 [was deleted from original copy]
2.03 [was deleted from original copy]
2.04 [was deleted from original copy]
2.05 When Services Are Not Provided Notwithstanding Section 2.03, when and if
any service (such as janitor service) which is normally provided by Landlord to
tenants of the Building in their premises:
(a) is not provided by Landlord in the Premises under the specific
terms of this Lease, in determining Occupancy Costs for Tenant hereunder the
cost of such service (except as it relates to Common Areas) shall be excluded,
and
(b) is not provided by Landlord in a significant portion of the
Building, in determining Occupancy Costs for Tenant hereunder the cost of such
service shall be divided by the difference between the Square Feet in the
Building and the number of square feet (determined on the basis set out in
Sections 2.01(c) and 3.00) in the Building in which Landlord does not provide
such service.
2.06 Partial Fiscal Year If the Term commences after the beginning of or
terminates before the end of a Fiscal Year, any amount payable by Tenant or
Landlord under Section 2.02 and 2.07 shall be adjusted proportionately.
2.07 [was deleted from original copy]
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2.08 [was deleted from original copy]
2.09 Separate Assessment of Taxes Notwithstanding Sections 2.02 and 2.03, if
Taxes for the Land and Building other than those for the Tenant's Improvements
and personal property and all other portions of the Land and Building leased or
designated for lease to tenants are assessed separately for each tenant by any
competent authority:
(a) the amount payable in respect of the Premises shall be included in
Occupancy Costs, and
(b) the amount payable in respect of the Premises and on all other
portions of the Land and Building leased or designated for lease to
tenants shall be excluded from Taxes for the purpose of determining
Operating Cost.
SECTION 3.00 LOADING AND UNLOADING
3.01 The delivery and shipping of merchandise, supplies, fixtures, and other
materials or goods of whatsoever nature to or from the Premises and all loading,
unloading, and handling thereof shall be done only at such times, in such areas,
by such means, and through such elevators, entrances, malls, and corridors as
are designated by Landlord.
3.02 Landlord accepts no liability and is hereby relieved and released by
Tenant in respect of the operation of delivery facilities for the Building, or
the adequacy thereof, or of the acts or omissions of any person or persons
engaged in the operation thereof, or in the acceptance, holding, handling,
delivery or dispatch, or failure of any acceptance, holding handling or
dispatch, or any error, negligence or delay therein.
3.03 Landlord may from time to time make and amend regulations for the orderly
and efficient operation of the delivery facilities for the Building, and may
require the payment of reasonable and equitable charges for delivery services
and demurrage provided by the Landlord.
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OXFORD BUSINESS PARK
EXHIBIT "C" RULES AND REGULATIONS
1. Security Landlord may from time to time adopt appropriate systems and
procedures for the security or safety of the Building, any persons occupying,
using or entering the same, or any equipment, finishings or contents thereof,
and Tenant shall comply with Landlord's reasonable requirements relative
thereto.
2. Locks Landlord may from time to time install and change locking mechanisms
on entrances to the Building, common areas thereof, and the Premises, and
(unless 24 hour security is provided by the Building) shall provide to Tenant a
reasonable number of keys and replacements therefor to meet the bona fide
requirements of Tenant. In these rules "keys" include any device serving the
same purpose. Tenant shall not add to or change existing locking mechanisms on
any door in or to the Premises without Landlord's prior written consent. If
with Landlord's consent, Tenant installs lock(s) incompatible with the Building
master locking system:
(a) Landlord, without abatement of Rent, shall be relieved of any
obligation under the Lease to provide any service to the affected areas, which
require access thereto,
(b) Tenant shall indemnify Landlord against any expense as a result of
forced entry thereto which may be required in an emergency, and
(c) Tenant shall at the end of the Term and at Landlord's request remove
such lock(s) at Tenant's expense.
3. Return of Keys At the end of the Term, Tenant shall promptly return to
Landlord all keys for the Building and Premises, which are in possession of
Tenant.
4. Windows Tenant shall observe Landlord's rules with respect to maintaining
window coverings at all windows in the Premises so that the Building presents a
uniform exterior appearance, and shall not install any window shades, screens,
drapes, covers or other materials on or at any window in the Premises without
Landlord's prior written consent. Tenant shall ensure that window coverings are
closed on all windows in the Premises while they are exposed to the direct rays
of the sun.
5. Repair, Maintenance, Alterations and Improvements Tenant shall carry out
Tenant's repair, maintenance, alterations and improvements in the Premises only
during times agreed to in advance by Landlord and in a manner which will not
interfere with the rights of other tenants in the Park and Building.
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6. Water Fixtures Tenant shall not use water fixtures for any purpose for
which they are not intended, nor shall water be wasted by tampering with such
fixtures. Any cost or damage resulting from such misuse by Tenant shall be paid
for by Tenant.
7. Personal Use of Premises The Premises shall not be used or permitted to be
used for residential, lodging or sleeping purposes or for the storage of
personal effects or property not required for business purposes.
8. Heavy Articles Tenant shall not place in or move about the Premises without
Landlord's prior written consent any safe or other heavy article which in
Landlord's reasonable opinion may damage the Building, and Landlord may
designate the location of any heavy articles in the Premises.
9. Carpet Pads In those portions of the Premises where carpet has been
provided directly or indirectly by Landlord, Tenant shall at its own expense
install and maintain pads to protect the carpet under all furniture having
casters other than carpet casters.
10. Bicycles, Animals Tenant shall not bring any animals or birds into the
Building, and shall not permit bicycles or other vehicles inside or on the
sidewalks outside the Building except in areas designated from time to time by
Landlord for such purposes.
11. Deliveries Tenant shall ensure that deliveries of materials and supplies
to the Premises are made through such entrances, elevators, and corridors and at
such times as may from time to time be designated by Landlord, and shall
promptly pay or cause to be paid to Landlord the cost of repairing any damage in
the Building caused by any person making such deliveries.
12. Furniture and Equipment Tenant shall ensure that furniture and equipment
being moved into or out of the Premises is moved through such entrances,
elevators and corridors and at such times as may from time to time be designated
by Landlord, and by movers or a moving company approved by Landlord, and shall
promptly pay or cause to be paid to Landlord the cost of repairing any damage in
the Building caused thereby.
13. Solicitations Landlord reserves the right to restrict or prohibit
canvassing, soliciting, or peddling in the Building.
14. Food and Beverages Only persons approved from time to time by Landlord may
prepare, solicit orders for, sell, serve or distribute foods or beverages in the
Building, or use the elevators, corridors or common areas for any such purpose.
Except with Landlord's prior written consent and in accordance with arrangements
approved by Landlord, Tenant shall not permit on the Premises the use of
equipment for dispensing food or beverages or for the preparation, solicitation
of orders for, sale, serving or distribution of food or beverages.
15. Obstructions Tenant shall not obstruct or place anything in or on the
sidewalks or driveways outside the Building or in the lobbies, corridors,
stairwells, or other common areas of the Building, or use such locations for any
purpose except access to and exit from the Premises
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without Landlord's prior written consent. Landlord may remove at Tenant's
expense any such obstruction or thing (unauthorized by Landlord) without notice
or obligation to Tenant.
16. Dangerous or Immoral Activities Tenant shall not make any use of the
Premises which involves the danger of injury to any person, nor shall the same
be used for any immoral purpose.
17. Proper Conduct Tenant shall not conduct itself in any manner which is
inconsistent with the character of the Building as a first quality building or
which will impair the comfort and convenience of other tenants in the Building.
18. Employees, Agents and Invitees In these Rules and Regulations, Tenant
includes the employees, agents, invitees and licensees of Tenant and others
permitted by Tenant to use or occupy the Premises.
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EXHIBIT "D" SUPPLEMENTAL TERMS AND CONDITIONS
ARTICLE 21.00 COST OF LIVING ADJUSTMENTS
21.01 Adjustment of Annual Rent On each Anniversary Date, Annual Rent shall be
increased for the next twelve month period by an amount determined by
multiplying the Base Rent Schedule for the current year times the Inflation
Factor, and each monthly installment of Annual Rent shall be increased in the
same proportions. The annual inflation factor shall be six (.06%) percent.
21.02 Calculation and Notice by Landlord. Landlord shall calculate the
increase in the amount of Annual Rent and of the monthly installments of Annual
Rent in accordance with this Article 21.00, and shall give notice thereof to
Tenant (together with a statement of the calculations supporting the increase)
not less than twenty days prior to the Anniversary Date on which that increase
becomes effective. Tenant shall thereafter pay the adjusted amounts in
accordance with Article 4.01.
21.03 Failure to Give Notice Any delay or failure by Landlord to give timely
notice to Tenant of an increase in Annual Rent as provided in Article 21.02
shall not affect the obligation of Tenant to pay Annual Rent as provided herein.
21.04 Example An example of an adjustment in Annual Rent under this Article
is:
Index for the 14th month prior
to the Anniversary Date 100
Index for the 2nd month prior
to the Anniversary Date 107
Inflation Factor 107 = 1.07-1 = 07
---
100
Annual Rent Payable 17,500.00
Increase 17,500.00 x .07 = 1,225.00
Increased Annual Rent 18,725.00
21.05 Definitions In this Article
"Anniversary Date" means a date during the Term, which is the first or
any subsequent anniversary of the Commencement Date.
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"Inflation Factor" means the percentage for any Anniversary Date
determined by dividing the Index for the second month prior to the Anniversary
Date by the Index for the fourteenth month prior to that Anniversary Date. The
annual inflation factor shall be six (.06%) percent.
ARTICLE 22.00 FIRST MONTH'S RENT AND SECURITY DEPOSIT'
22.01 [was deleted from original copy]
22.02 Security Deposit Tenant shall deposit with Landlord upon the execution of
this Lease the sum of ONE HUNDRED AND SEVENTY SIX THOUSAND EIGHT HUNDRED
AND TEN ($176,810.00) DOLLARS as security for Tenant's faithful
performance of Tenant's obligations hereunder. If Tenant fails to pay
Rent or otherwise defaults with respect to any provision of this Lease,
Landlord may use, apply or retain all or any portion of the deposit for
the payment of Rent or for the payment of any other sum for which
Landlord may become obligated by reason of Tenant's default, or to
compensate Landlord for any loss or damage resulting therefrom. If
Landlord so uses or applies all or any portion of the deposit, Tenant
shall, within ten days after notice thereof; deposit cash with Landlord
in an amount sufficient to restore the deposit to the full amount. The
security deposit will be refunded to lessee within thirty days of
LESSEE'S move-out subject to any obligations herein contained. The
security deposit will be applied towards rent if and only if LESSOR goes
bankrupt. Otherwise, in on other situation is this security deposit to
be used as nor construed as rent.
The security deposit is payable as stated below:
[ ] $ 58,937.00 is due upon execution of this Lease of Office Space.
[ ] $117,873.00 is due on June 1, 1998 or the Date of Occupancy of any floor
or portion thereof, whichever date occurs later.
ARTICLE 23.00 MAINTENANCE, REPAIR, REPLACEMENT - ADDITIONAL
PROVISIONS
23.01 Repairs The following is added to Article 6.04 of the Lease:
(1) Tenant waives arid releases its right to make repairs at Landlord's expense
under Section 1942 (a) of the California Civil Code and the provisions of
Section 1932 (1) of the California Civil Code or any other applicable law,
statute or ordinance.
ARTICLE 24.00 LATE CHARGES
24.01 Late Charges A Late Charge of 10% of the current monthly rent amount
will be assessed on all monthly rental payments not received by the 5th of each
and every month that rent is delinquent.
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ARTICLE 25.00 TENANT IMPROVEMENTS
25.01 Tenant Improvements Prior to the effective date of the Definitive Lease
of Office Space Agreement, and no later than April 1, 1998 unless mutually
agreed by both parties, Oxford and Ramp Networks, Inc., will agree upon the
detailed improvements to be made to the building by Oxford prior to occupancy by
Ramp Networks, Inc. In return for the full service rent specified above, Oxford
will provide standard interior office/R&D improvements, making the building
ready for occupancy in keeping with the standard of the Ramp Networks, Inc.'s
offices currently located at Oxford Business Park. Ramp Networks, Inc. will
provide to Oxford the office design and floor plan to be used in making these
improvements. In addition, Ramp Networks, Inc. may request improvements over
and above the Oxford Business Park standard provided Ramp Networks, Inc. funds
these additional improvements. At Ramp Networks, Inc.'s option, these
additional improvements may be amortized over the lease term, as an additional
payment to rent.
As soon as possible after the execution of this Memorandum of Understanding, but
in no event later than February 21, 1998, Ramp Networks, Inc. will provide to
Oxford a detailed layout/floor-plan and design, consistent with the above.
ARTICLE 26.00 OPINION TO EXTEND THE LEASE TERM
26.01 Lease Term Extension. The Lessor hereby grants the Lessee a right to
extend the Lease term for an additional three or five years, at Ramp Network
Inc.'s election, provided notice is provided to Oxford Park Associates at lease
six (6) months prior to the end of the initial lease term, i.e. January 31,
2004, or the Lease Commencement date as determined in Section 3.01, Term. The
rent for any subsequent lease term will be that of the sixth year of the initial
lease term with an increase of six (6%) percent, or $125,403.80 per month.
Thereafter, monthly rent shall be adjusted by six percent on each anniversary
date of this lease.
The renewal option is subject however to the condition that said lease be not in
default under any term, provision, covenant or condition of this lease at the
expiration of the original term of this lease, and subject, further to the
condition that the expiration of the original term of this lease, the Lessee is
occupying the demised premises.
ARTICLE 27.00 OPTION ON HI AND H2 BUILDING
27.01 Option on H1 and H2 Building. Should the Lessor, during the term of this
agreement, elect to expand the building currently known as HI and H2, Lessee
shall have the option to obtain Additional Area in this building. Lessor shall
give written notice to Lessee, and Lessee shall within ten (10) business days
following receipt of such notice, give written notice to Lessor indicating
whether or not Lessee elects to expand into the afore-mentioned space. If
Lessee fails to give Lessor written notice of its intent to add or not add
additional space in building H1 and H2, Lessee shall be deemed to have waived
its right to add any additional space in the H1 and H2 building to its premises.
Upon Lessee's exercising of such option, the Additional Area shall become part
of the Premises, subject to all of the terms and conditions of this lease,
except the Base Monthly Rent payable
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hereunder shall be increased in proportion to the increase in the rentable
square footage of the Premises, and the security deposit shall be increased
respectively.
However, if such construction does not take place, Oxford Park Associates and
Ramp Networks, Inc. hereby agree this option is of no further force or effect.
It is also agreed that there is no obligation on Lessor's behalf, to begin
construction on the H1 and H2 building.
It is expressly agreed by and between the parties hereto that time is of the
essence in giving of said notice.
ARTICLE 28.00 PARKING
28.01 Parking. Oxford will provide Ramp Networks, Inc. with ten (10) reserved
parking spaces located in front of 3100 De La Cruz Boulevard, subject to Santa
Clara County restrictions. Oxford cannot guarantee that other Oxford tenants
will refrain from ever using these ten reserved spaces. Additional parking
spaces throughout the Park for common use by Ramp Networks, Inc.'s will be in
compliance with the City of Santa Clara requirements, and this additional
parking is not for the exclusive use of Lessee.
ARTICLE 29.00 BROKERS
29.01 Brokers. Ramp Networks, Inc. warrants it is not represented by a broker
in this Lease of Office Space, and that no broker was involved in any
discussions pertaining to this lease. If a claim is made by any broker stated
to represent Lessee, Lessee agrees to indemnify and hold Oxford Park Associates
harmless if tenant's party makes a claim for broker's, finder's, and/or legal
fees incurred, if any, to contest a Broker's claim.
Lessee acknowledges that its execution of this Lease of Office Space was not in
reliance upon any information, which Lessee may have been provided, or any
representations, which may have been made, by any real estate broker. Lessee
represents and warrants that Lessee knows of no Lessee party, representative, or
agent who is or might be entitled to a commission, finder's fee or other like
payment in connection herewith, except as provided herein, and Lessee agrees to
indemnify and hold Lessor free and harmless for and against any and all loss,
liability and expense including, all legal fees that Lessor may incur if
Lessee's party makes a claim for commission, finder's fee or other like payment.
ARTICLE 30.00 NETWORK CABLE
30.01 Network Cable. Oxford hereby agrees to permit Ramp Networks, Inc. to
extend networking cable between the 3160, 3170, 3180 buildings in order to
provide telephony and networking services to Ramp Networks, Inc. current
offices. This network cabling shall be installed either roof to roof, or via
underground cable, subject to the cable having an acceptable appearance to
Lessor.
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It is understood any and all costs incurred with the placement and removal of
said network cable shall be at the sole expense of the Lessee, including any and
all permits necessary to perform this work.
On or by February 25, 1998, Ramp Networks, Inc. hereby agrees to furnish Lessor
with a letter indicating the extent of the cable work, and also indicating that
this cabling shall be removed once Ramp moves into the new location at 3100 De
La Cruz Boulevard. Any and all changes to the Park caused due to the addition
of this cable shall be rectified within ten days of the cable's removal, and
Lessor and Lessee shall sign off on this work. Lessee shall also provide Lessor
with their cabling contractor's proof of worker's compensation and insurance
certificate, naming Lessor as additional insured.
ARTICLE 31.00 ARBITRATION OF DISPUTES
30.01 Arbitration of Disputes: EACH PARTY TO THIS AGREEMENT AND TO ANY PART OF
THIS AGREEMENT AND FOR ANY CONDITIONS OF THIS AGREEMENT, WHETHER EXPRESSED OR
IMPLIED, INDEPENDENTLY AND COLLECTIVELY, WAVE ANY RIGHT TO SEEK LEGAL REDRESS
AGAINST THE OTHER(S). ALL PARTIES TO THIS AGREEMENT AGREE TO SUBMIT ANY AREA(S)
OF DISPUTE TO ARBITRATION AND TO ABIDE BY THE DECISION OF THE ARBITERS. IN THE
EVENT OF A DISPUTE/LEGAL ACTION, ALL PARTIES AGREE TO PAY HIS, HER OR THEIR
LEGAL COSTS AND EXPENSES AND TO WAIVE ANY RIGHT TO PURSUE COLLECTION OF THE SAME
FROM THE OTHER(S).
In the event that (i) either party cannot mutually agree as to any matter
hereunder and, (ii) the Lease specifically provides for arbitration with respect
to such matter, pursuant to the provisions of this Article 31, the controversy
shall be determined by arbitration conducted in Santa Clara County, California
by three arbitrators to be appointed for that purpose as follows:
(a) Within ten (10) business days after notice by either party to the other
requesting arbitration, one arbitrator shall be appointed by each party.
Notice of such appointment when made, shall be given by each party to the
other.
(b) The two arbitrators shall forthwith choose a third arbitrator to act with
them. If they fail to select a third arbitrator within twenty business (20)
days of their appointment, upon application of either party the third
arbitrator shall be promptly appointed by the then presiding judge of the
Superior Court of California, in and for the County of Santa Clara, acting
in his individual and not official capacity. The party making such
application to such judge shall give the other party to this Lease five (5)
days notice of his/her application.
(c) The arbitrator shall proceed with due dispatch. The decision of any two of
the three arbitrators shall be binding, final and conclusive on the parties
to this Lease. Such decision shall be in writing and delivered to the
parties, and shall be in such form that a judgement may be entered on the
decision in the Superior Court of the State of California, in and for the
County of Santa Clara.
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(d) If either party fails to appoint an arbitrator as provided in this Article
31, the decision of the single arbitrator appointed shall be binding, final
and conclusive on the parties to this Lease. Such decision shall be in
writing an delivered to the parties, and shall be in such form that a
judgement may be entered on the decision in the Superior Court of
California, in and for the County of Santa Clara.
(e) In reaching their decision, the arbitrators shall use such definitions as
are set forth in this Lease. Only persons knowledgeable and experienced in
the matters in controversy shall be selected as arbitrators. The expense of
any such arbitration shall be borne as the arbitrators direct.
(f) All controversies to be arbitrated under this Lease shall be arbitrated in
accordance with the provisions of the California Arbitration Act, Sections
1280 through 1294.2 of California Code of Civil Procedure (The "Act") to the
extent the Act is not inconsistent with the provision of this Article 29.
NOTICE: BY INITIALING THE SPACE BELOW, YOU ARE AGREEING TO HAVE ANY DISPUTES
ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION
AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS
TO HAVE THE DISPUTE LITIGATED IN A COURT OF JURY TRIAL.
BY SIGNING AND INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL
RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN
THE "ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION
AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE
AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE.
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YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY. WE HAVE READ AND
UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS
INCLUDED IN THE ARBITRATION OF DISPUTES PROVISION TO NEUTRAL ARBITRATION.
LESSOR'S SIGNATURE: OXFORD PARK ASSOCIATES
/s/ [illegible] 3/3/98
_______________________________ ______________________
ITS GENERAL PARTNER DATED
LESSOR'S INITIALS: /s/ [illegible]
--------------------
LESSEE'S SIGNATURE: RAMP NETWORKS, INC.
/s/ Mahesh Veerina 2/26/98
_______________________________ ______________________
ITS PRESIDENT, MAHESH VEERINA DATED
PRESIDENT'S INITIALS: /s/ MV
----------
/s/ Scott Gorton 2/26/98
_______________________________ ______________________
ASSISTANT SECRETARY DATED
SECRETARY'S INITIALS: /s/ WSG
----------
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OXFORD BUSINESS PARK
EXHIBIT "E" TENANT ESTOPPEL, ATTORNMENT AND
NONDISTURBANCE AGREEMENT
This TENANT ESTOPPEL, ATTORNMENT AND NONDISTRURBANCE AGREEMENT ("Agreement"),
dated FEBRUARY 23, 1998 is made by OXFORD PARK ASSOCIATES, a California
Partnership (the "Landlord"), RAMP NETWORKS, INC. (the "Tenant"), and
_______________________________________________ a banking association (the
"Lender").
1. Preliminary Statement. The Landlord is the owner of the real property known
as 3100 DE LA CRUZ BOULEVARD, SANTA CLARA, CA 95054 a legal description of which
is attached hereto as Exhibit "A" (the "Property"). Pursuant to a lease dated
FEBRUARY 23, 1998 (such lease, as it may from time to time be supplemented,
modified, amended, renewed and extended, being referred to herein as the
"Lease"), the Tenant has leased or agreed to lease from the Landlord that
portion of the Property known as 3100 DE LA CRUZ BOULEVARD, SANTA CLARA,
CALIFORNIA (the "Leased Premises"). The Tenant is operating or intends to
operate a business at the Leased Premises under the name of RAMP NETWORKS, INC.
The Tenant has been informed that the Bank has made or proposed to make a loan
to the Landlord, and that the Landlord has executed or intends to execute in
favor of the Bank a deed of trust covering the Property (the "Trust Deed") and
an assignment of all leases affecting the Property. The parties desire to enter
into this Agreement in order to clarify and confirm various matters relating to
the Lease.
2. Tenant Estoppel. The Tenant hereby certifies and agrees, for the benefit of
the Lender, as follows:
(a) A complete copy of the Lease, including all supplements, modifications,
amendments, renewals and extensions thereof, are attached hereto as Exhibit "B".
Except as otherwise set forth in Exhibit "C" hereto: (i) the Lease is the only
agreement between the Landlord and the Tenant with respect to the Leased
Premises, is in full force and effect and binding on the Tenant, and has not
been supplemented, modified, amended, renewed or extended; (ii) (check
whichever is applicable) _____ the Tenant is currently in possession of the
Leased Premises (or is obligated to take possession on or before AUGUST 1,
1998), and all improvements to the Leased Premises required by the terms of the
Lease to be completed by the Landlord have been completed and accepted to the
satisfaction of the Tenant, and pursuant to building being deemed ready for
occupancy when Landlord agrees that all Tenant improvements have been
substantially completed and the building is in a state suitable for Tenant's
normal business activities. Tenant shall not unreasonably withhold its consent
regarding the building's substantial readiness for lessee's occupancy, and the
Tenant is obligated to take possession of the Leased Premises upon
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completion of all improvements required to be completed by the Landlord under
the term of the Lease; (iii) the Tenant has not sublet the Leased Premises or
assigned, transferred or encumbered any interest in the Lease; (iv) the Tenant
is in complete compliance with its obligations under the Lease and not in breach
or default thereunder (and no event or condition exists which, with the giving
of notice and/or the passage of time, could become such a breach or default);
(v) to the best knowledge of the Tenant, the Landlord is in compliance with its
obligations under the Lease, has satisfied all conditions on its part to be
satisfied thereunder, and is not in breach or default thereunder (and no event
or condition exists which, with the giving of notice and/or the passage of time,
could become such a breach or default), and the Tenant has no claims, offsets or
defenses to the enforcement of the Lease or to the payment of rent due or to
become due or the performance of any other obligations on its part to be
performed thereunder; (vi) the Tenant is not aware of any previous assignment
of, or lien on, the Landlord's interest in the Lease or any rent or other
amounts due or to become due thereunder; (vii) no disputes between the Landlord
and the Tenant with respect to the Leased Premises are presently pending; (viii)
to the best knowledge of the Tenant, the Leased Premises are in good condition
and repair; and (ix) no bankruptcy, insolvency or similar proceedings of any
nature are presently pending against the Tenant.
(b) The current term of the Lease (including any extension options, which have
been exercised by the Tenant prior to the date hereof) extends through July 31,
2004, (or, if applicable, through the date which are 72 months after August 1,
1998). Except as otherwise set forth in Exhibit "C" hereto, the Tenant has no
rights or interests in or with respect to the Property other than those set
forth in the Lease, and no right or option (i) to further extend the term of the
Lease, (ii) to cancel or terminate the Lease prior to the expiration of the
current term (except in accordance with the terms of the Lease for breach or
default by the Landlord, (iii) to lease any other portion of the Property, or
(iv) to purchase or otherwise acquire any interest in the Property. (c) The
Leased Premises contain approximately 42,097.50 square feet. Base rent under
the Lease is currently payable (or, if applicable, the Initial base rent under
the Lease will become payable commencing on August 1, 1998) in the amount of
(see Rent Schedule in Lease Document dated February 13, 1998, Article 4.00 Rent
and Occupancy Costs per annum, payable monthly in advance. Rent under the Lease
has been paid by the Tenant for and through the period ending NO RENT PAID AS
---------------
OF FEBRUARY 23 1998. Except as otherwise set forth in Exhibit "C" hereto, no
- -------------------
payment of rent has been made in respect of subsequent periods, no prepayments
or deposit has been made to cover or apply to future rent or other amounts
payable under the Lease or for security purposes, and the Tenant is not entitled
to possession of the Leased Premises for any period on a "rent free" or "reduced
rent" basis or to any similar credits or concessions. All rent and other
amounts payable by the Tenant under the Lease are payable in cash and all such
amounts payable prior to the date hereof have been so paid. (d) The Tenant
consents to the assignment of the Lease by the Landlord to the Bank, and agrees
that, unless the Bank otherwise consents in writing: (i) the Tenant will
continue to comply with its obligations under the Lease; (ii) no rent or other
amounts payable under the Lease will be paid more than 30 days in advance of the
date when due; and (iii) upon receipt by the Tenant of written request by the
Bank at any time, the Tenant shall pay all rent and other amounts due and to
become due under the Lease to the Bank may otherwise request without asserting
any claim, offset or defense that the Tenant may have against the Landlord
(subject, however, to completion of any improvements to be
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completed by the Landlord under the Lease and to the right of the Tenant to
terminate the Lease in accordance with the terms for breach or default by the
Landlord).
3. Attornment. In the event that the Landlord's interest in the Property is
acquired by any purchaser or transferee (including the Bank) at any foreclosure
sale under the Trust Deed or by conveyance in lieu of such foreclosure, or by
any transferee off any such purchaser or transferee (each such purchaser or
transferee being referred to herein as a "Transferee"), the Tenant shall remain
obligated to the Transferee under the terms of the Lease for the balance of the
term thereof and shall be deemed to have attorned to such Transferee under the
terms of the Lease, such attornment to be effective and self-operative without
notice and without the execution of any further instruments or agreements,
provided that the Tenant shall, upon written request of any such Transferee,
promptly confirm such in writing and, if so requested by the Transferee, shall
enter into a new lease with the Transferee for the balance of the term remaining
under the Lease on the same terms and conditions as those set forth in the
Lease.
4. Nondisturbance. In the event of a foreclosure sale under the Trust Deed or
conveyance in lieu of such foreclosure, so long as there shall not then exist
any breach or default on the part of the Tenant under the Lease, or any event or
condition which, with the giving of notice and/or the passage of time, could
become such a breach or default, or any other event that would permit the
Tenant's leasehold interest under the Lease to be terminated, and subject to
compliance by the Tenant with the terms hereof,
(a) the Tenant's right to possession of the Leased Premises and leasehold
interest under the Lease shall not be disturbed and shall continue in
effect, and
(b) the purchaser or transferee shall recognize and accept the Tenant as tenant
under the terms of the Lease, in each case subject to the terms,
requirements and provisions of the Lease and those set forth herein.
5. Default by the Landlord. Upon the occurrence of any breach or default on
the part of the Landlord under the Lease or any other event that would permit
early termination of the Lease by the Tenant, the Tenant shall promptly (and in
any event not later than the time that notice thereof is given by the Tenant to
the Landlord) given written notice to the Bank specifying the nature of such
breach, default or other event and the action, if any, that the Tenant proposes
to take with respect thereto. The Bank shall have the right (but not the
obligation) to cure any such breach, default or other event at any time prior to
the termination of the Lease by the Tenant. Anything contained herein or in the
Lease to the contrary notwithstanding, (a) the Tenant shall not declare a
termination of the Lease as a result of any such breach, default or other event
unless, within 30 days after the expiration of the time period provided in the
Lease for the cure thereof by the Landlord or the Bank's receipt of notice
thereof from the Tenant (whichever is later), the Bank shall have failed to
cause such breach, default or other event to be cured or, if the same cannot
reasonably be cured by the Bank within such 30-day period, the Bank shall have
failed to commence action within 30-day period to cause the same to be cured or
thereafter shall fail to pursue such cure with diligence, and (b) the Tenant
shall in no event terminate the Lease as a result of any breach, default or
other event, which relates solely to the financial condition, status or
condition of the Landlord. Except for a termination of the Lease arising by
reason of the
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Bank's failure to cause any breach, default or other event to be cured as set
forth above, the Tenant shall not terminate or permit any termination of the
Lease prior to the expiration of the term then remaining under the Lease without
the prior written consent of the Bank.
6. Assignment and Amendments. Unless the Bank otherwise consents in writing,
the Tenant shall not sublease the Leased Premises, or assign, transfer or
encumber any interest in the Lease, or permit or agree to any supplement,
modification, amendment, renewal, extension or subordination of the Lease, or
accept any waiver from the Landlord thereunder, except that the requirements of
this sentence shall not apply to the exercise of any extension option by the
Tenant in accordance with the terms of the Lease.
7. Rights and Obligations of the Bank and Transferees. Anything contained
herein or in the Lease to the contrary notwithstanding, neither the Bank nor any
Transferee shall be liable for, or subject to, (a) any obligations of the
Landlord under the Lease, or any breach or default or other act or omission of
the Landlord thereunder, (b) any claim, offset or defense which the Tenant may
have against the Landlord, or (c) the return of any sums which the Tenant may
have paid to the Landlord as and for security deposits, advance rentals or
otherwise, except to the extent that such sums are actually received by the Bank
or such Transferee. Nothing contained in the Lease or this Agreement shall (i)
relieve the Landlord from any obligations of the Landlord under this Lease, or
(ii) impose any liability on the Bank or any affiliate of the Bank or obligate
the Bank or any such affiliate to perform any of the Landlord's obligations
under the Lease except to the extent that such liability or obligations are
expressly assumed by the Bank or such affiliate (as the case may be) in writing.
If the Bank or any affiliate of the Bank, by succeeding to the interest of the
Landlord in the Property or under the Lease, should at any time become obligated
to perform the covenants of the Landlord under the Lease, then, upon any further
transfer of the Property or the Lease by the Bank or any such affiliate, all of
such obligations shall terminate as to the bank or such affiliate (as the case
may be). Under no circumstances shall the Bank or any affiliate of the Bank
become obligated to cure any breach or default by the Landlord under the Lease,
nor shall the Bank or any such affiliate or any Transferee be bound by (A) any
rent or other amounts paid under the Lease by the Tenant more than 30 days in
advance of the date when due, or (B) any supplements, modifications, amendments,
renewals, extensions or waivers not permitted by Section 6 above. Subject to
Section 5 hereof, nothing contained herein shall limit the right of the Tenant
to terminate the Lease in accordance with the terms thereof as against any
Transferee as a result of any breach or default in the performance of any the
Landlord's obligations under the Lease which occurs during such Transferee's
ownership of the Property.
8. Notices. All notices required or permitted to be given pursuant to the
provisions hereof shall be in writing and mailed or delivered to the appropriate
address set forth below (or at such other address as may be designated by any
party in a written notice sent to the other parties).
TO LESSOR: OXFORD PARK ASSOCIATES
2001 UNION STREET, #300
SAN FRANCISCO, CA 94123
-46-
<PAGE>
TO LESSEE: RAMP NETWORKS, INC.
3100 DE LA CRUZ BOULEVARD
SANTA CLARA, CA 95054
9. Miscellaneous. This Agreement shall remain in effect until released in
writing by the Bank. No supplement to, modification or amendment of, or waiver
or consent under, any provision of this Agreement shall be effective unless in
writing and signed by the Bank. This Agreement shall be binding on and inure to
the benefit of each of the parties and their respective successors and assigns,
except that neither the Landlord nor the Tenant shall have the right to assign
any interest under this Agreement without the prior written consent of the Bank.
Each party to this agreement and to any part of this agreement and for any
conditions of this agreement, whether expressed or implied, independently and
collectively, waive any right to seek legal redress against the other(s). All
parties to this agreement agree to submit any area(s) of dispute to arbitration
and to abide by the decision of the arbiters. In the event of a dispute/legal
action, all parties agree to pay his, her or their legal costs and expense and
to waive any right to pursue collection of the same from the other(s).
-47-
<PAGE>
"TENANT" Tenant's Address
RAMP NETWORKS, INC. RAMP NETWORKS, INC.
3100 DE LA CRUZ BOULEVARD
SANTA CLARA, CA 95054
By /s/ Mahesh Veerina
-----------------------------
ITS PRESIDENT, MAHESH VEERINA
By /s/ Scott Gorton
-----------------------------
ASSISTANT SECRETARY
"BANK": Bank's Address
_______________________________ C/O
By
-----------------------------
Title: ________________________
ACKNOWLEDGED AND AGREED TO:
- --------------------------
"LANDLORD": OXFORD PARK ASSOCIATES Landlord's Address:
OXFORD PARK ASSOCIATES
2001 Union Street, Suite 300
San Francisco, California 94123
By: /s/ [illegible]
----------------------------
-48-
<PAGE>
ESTOPPEL EXHIBIT "A"
REAL property situated in the City of Santa Clara, County of Santa Clara, State
of California, and description as follows:
Parcels 22, 23, 24, 25, 26, 27, 28 and 29, as shown on Parcel Map filed August
4, 1980 in Book 468 of Maps, pages 38 and 39, Santa Clara County Records.
-49-
<PAGE>
ESTOPPEL EXHIBIT "B"
LEASE DOCUMENTS
- ---------------
The LESSOR will transmit a copy of the Lease Documents and any subsequent Lease
Addenda to the BANK directly.
-50-
<PAGE>
ESTOPPEL EXHIBIT "C"
FIRST INSTALLMENT
The amount of the Security Deposit on hold by the LESSOR is $___________________
and was received on ______________________ via check #__________. Appended is a
photocopy of said check.
SECOND INSTALLMENT
The amount of the Security Deposit on hold by the LESSOR is $___________________
and was received on _________________________ via check # _______. Appended is a
photocopy of said check.
-51-
<PAGE>
EXHIBIT 10.6
SUBLEASE AND CONSENT TO SUBLEASE AGREEMENT
SECOND FLOOR OFFICE SPACE
3100 DE LA CRUZ BOULEVARD
SANTA CLARA, CALIFORNIA 95054
This agreement dated February 22, 1999 is entered into by and among Ramp
Networks, Inc. (hereinafter "Sublessor"), Analog Microelectronics, Inc.
(hereinafter "Sublessee") and Oxford Park Associates (hereinafter "Master
Lessor") as a Sublease and consent to sublease (hereinafter "Sublease") subject
to the terms and conditions of the Master Lease dated February 24,1998, entered
into by Ramp Networks, Inc. and Oxford Park Associates. A copy of said Master
Lease is attached hereto, designated Exhibit A, and incorporated herein by this
reference.
1. Premises
1.1 Sublessor hereby leases to Sublessee and Sublessee hereby hires from
Sublessor, on and subject to the terms and conditions hereinafter set
forth, the following described premises (hereinafter referred to as
"Subleased Premises"), a portion of the rentable space on the second floor
of 3l00 De La Cruz Boulevard, situated in the City of Santa Clara, County
of Santa Clara, State of California (hereinafter the "Building") comprising
3,197 rentable square feet of space.
1.2 In addition Sublessee shall have non-exclusive access to the public areas
of the building and surrounding area including, but not limited to, the
showers on the second floor and parking spaces in the parking lot.
2. Term
2.1 The term of this Sublease (hereinafter "Term") shall start on April 1, 1999
and terminate on March 31, 2001 unless earlier terminated pursuant to any
provision hereof, or of the Master Lease.
2.2 Notwithstanding the above, Sublessor and Master Lessor will allow Sublessee
to have access to the building as soon as is reasonably practical to
install telephone lines, network wiring and other Sublessee provided
infrastructure as agreed by the parties. Any Sublessee contractors will
coordinate with Sublessor's contractors and Master Lessor's General
Contractor for the above work.
Sublessee shall install their own voice/data cabling, as well as provide
any 220 electrical requirements at their own expense. All such installation
shall be subject to pre-approval by the Sublessor, which shall not be
unreasonably withheld.
2.3 Upon expiration of the Term or upon early termination of the Sublease,
Sublessee shall immediately surrender the Subleased Premises in good
condition to the Sublessor, normal wear and tear excepted. In addition,
upon surrender of the Subleased Premises, Sublessee shall remove any of its
trade fixtures and all its personal property from the Subleased Premises.
2.4 If the Subleased Premises remain in the possession of the Sublessee with
the consent of the Sublessor after the Term has expired, the Sublessee
shall be deemed to be occupying the Subleased Premises on a month to month
basis with a monthly rent equal to the last Rent amount in effect. Such
month to month occupancy shall be subject to the terms of this Sublease,
and be subject to termination upon 30 days' written notice by either party.
2.5 If the Subleased Premises remain in the Sublessee's possession after the
expiration of the Term without the consent of the Sublessor, or after early
termination of the Sublease, the Sublessee's occupancy shall be deemed
tenancy at sufferance and Sublessee shall be liable for monthly rent in the
amount of two times the last Rent in effect.
<PAGE>
2.6 At the end of the Sublease Term, Sublessor shall determine whether
Sublessor requires the Subleased Premises for its own use. If the Sublessor
decides to sublease the Subleased Premises, the Sublessor shall negotiate
in good faith with the Sublessee to extend the sublease term, provided the
Sublessee has not defaulted under the Sublease and such default remains
uncured. The Sublessor shall provide three (3) months notice of their
intent.
3. Base Rent
3.1 Payment of rent shall be due and payable on the date of general occupancy.
Rent shall be at the rate of $2.15 per rentable square foot. Sublessee
shall pay to Sublessor without deduction, setoff, prior notice or demand,
as rent for the Subleased Premises, equal monthly payments as shown below
(hereinafter "Rent"):
4/1/99 to 3/31/01 $6,873.55 per month
in advance on the first day of each month of the Term hereof. In the event
the payment of Rent is not received by the Sublessor by the first day of
each month, the Sublessor shall send written notice of non-receipt of the
payment. Sublessee shall have a grace period of five (5) days after receipt
of the written notice to pay the Rent. If Sublessee does not pay the Rent
within five days after receipt of the written notice, Sublessee shall have
defaulted under this Sublease and be subject to the provisions of section 7
of this Sublease.
The above rent is based on rentable space of 3,197 square feet.
If the date of general occupancy is not the first day of the month, or if
the termination date is not the last day of the month, a pro rata portion
of the monthly Rent shall be paid to the Sublessor at the then current rate
for the fractional month during which the Sublease commences and/or
terminates based on a 30-day month. Sublessee shall pay Sublessor on or
before the occupancy date hereof the prorated sum due for the initial
fractional month plus the sum due for the first full month of rent.
3.2 Services to the Subleased Premises shall be provided by the Master Lessor
as per Article 6.00 of the Master Lease Agreement. Such services shall
include heat, ventilation, cooling, janitorial services, electric power for
normal lighting and small business office equipment (e.g. copiers, PC's,
etc.), running water, and maintenance, repair and replacement as defined in
the referenced Article of the Master Lease. Master Lessor covenants to
furnish all those services to the Subleased Premises and to the Building
agreed by Master Lessor to be provided pursuant to Article 6.0 of the
Master Lease.
4. Security Deposit
Sublessee shall deposit with Sublessor upon execution of this Sublease
hereof the sum of $6,873.55 as security for Sublessee's faithful
performance of Sublessee's obligations hereunder. If Sublessee fails to pay
Rent or other charges due hereunder, or otherwise defaults with respect to
any provision of this Sublease, and fails to commence a cure of such
default within the time provided therefor in this Sublease, Sublessor may
use, apply or retain all or any portion of said deposit for the payment of
any Rent or other charge in default or for the payment of any other sum
which Sublessor may become obligated by reason of Sublessee's default, or
to compensate Sublessor for any loss or damage which Sublessor may suffer
thereby. If Sublessor so uses or applies all or any portion of said
deposit, Sublessee shall within ten (10) days after written demand
therefore, deposit cash with Sublessor in an amount sufficient to restore
said deposit to the full amount herein above stated, and Sublessee's
failure to do so shall be a default under this Sublease, and Sublessor may
at its option terminate this Sublease. Sublessor shall not be required to
keep said deposit separate from its general accounts. If Sublessee performs
all of Sublessee's obligations hereunder, said deposit, or so much thereof
as has not theretofore been applied by Sublessor, shall be returned without
payment of interest for its use to Sublessee within ten (10) days after the
expiration of the Term hereof, or after Sublessee has vacated the Subleased
Premises, whichever is later.
-2-
<PAGE>
Sublessee's Security deposit shall not bear interest.
5. Use
5.1 The Subleased Premises shall be used and occupied for general office and
R&D purposes, including light assembly and prototyping, and for no other
purpose without prior written consent of Sublessor.
5.2 Master Lessor warrants to Sublessee that the Subleased Premises, in its
intended state, but without regard for Sublessee's stated use, does not
violate any applicable statute, law, deed restrictions, building code,
regulation or ordinance, including the Americans With Disabilities Act (42
USC Sec. 12111 et. Seq.), at the time that this Sublease is executed. If
this warranty hereafter is found not to be true, Sublessor shall work with
the Master Lessor to bring the Subleased Premises into compliance.
Sublessee shall, at Sublessee's expense, comply promptly with all
applicable statutes, ordinances, rules, regulations, orders, restrictions
of record, and requirements in effect during the Term hereof regulating the
use of the Subleased Premises, provided, however, that Sublessee shall not
be required to expend any of its funds for capital improvements or changes
related to the Americans with Disabilities Act.
5.3 Except for latent and undisclosed defects, Sublessee hereby accepts the
Subleased Premises in their condition existing as of the commencement date
of the Term hereof, subject to all applicable zoning, municipal, county and
state laws, ordinances and regulations governing and regulating the use of
Subleased Premises, and accepts this Sublease subject thereto.
5.4 Sublessee acknowledges that neither Sublessor nor Sublessor's agents have
made any representation or warranty as to the suitability of the Subleased
Premises for the conduct of the Sublessee's business.
5.5 Sublessee shall not assign or transfer the Sublease, or otherwise allow
occupancy in whole or in part of the Subleased Premises by any other party
without advance written consent from the Sublessor.
5.6 Sublessee shall keep the Subleased Premises in good condition. In the
event the Sublessee fails to maintain the Subleased Premises, the Sublessor
may, following no less than 48 hours' prior notice, enter the Subleased
Premises, perform any needed repairs or maintenance, and charge the
Sublessee for the cost incurred plus a 20% administrative fee. Any such
entry into the Subleased Premises by the Sublessor, except in case of
emergency, shall be as accompanied by an employee or designated
representative of the Sublessee.
5.7 Sublessee shall obtain prior approval from the Sublessor for any
alterations to the Subleased Premises. Sublessor shall, in turn, obtain
prior written approval from the Master Lessor. All requested alterations
will be at Sublessee's expense.
5.8 Sublessee may store very small amounts of hazardous materials in its
hardware lab including solder, flux, alcohol, tech spray, flux cleaner etc.
Except for these Hazardous Materials, Sublessee shall not use, generate,
store, dispose or otherwise allow Hazardous Materials to be present within
the Subleased Premises without prior written approval by the Sublessor.
Except with respect to any such Hazardous Materials used, generated, stored
or disposed of, on or about the Subleased Premises by Sublessee, its
employees, officers, directors, agents or contractors, Sublessor shall
indemnify, defend, and hold Sublessee harmless from and against any and all
liabilities, remediation costs, investigation costs, claims, damages,
injuries, losses, costs, fines, judgments, causes of action and expenses
whatsoever incurred in connection with or arising in any way out of the
release, treatment, storage, use or disposal of Hazardous Materials on or
about the Subleased Premises.
-3-
<PAGE>
6. Master Lease
6.1 This Sublease is subject and subordinate to the Master Lease designated as
Exhibit A. Sublessee shall not commit or permit to be committed on the
Subleased Premises any act or omission which shall violate any term or
condition of the Master Lease.
6.2 Sublessee shall hold Sublessor and Master Lessor harmless of and from all
liability, judgements, costs, damages, claims or demands, including
reasonable attorney's fees, arising out of Sublessee's failure to comply
with or perform Sublessee's obligations under both the Master Lease and
this Sublease, as such obligations apply to the Premises.
6.3 Sublessor represents to Sublessee that the Master Lease is in full force
and effect and that no default exists on the part of any party to the
Master Lease.
7. Default
7.1 Sublessee shall pay a penalty of 5% of the Rent amount due as a late fee in
the event Rent payments are received by the Sublessor more than 10 days
after the due date for the Rent. If the Sublessor does not receive the Rent
payment within 15 days after its due date, then the Sublessee shall owe
interest on the amount due at an interest rate that is the lesser of one
and one-half percent (1.5%) per month, or the maximum rate allowed by law,
on all Rent not paid when due, from the due date until the payment is fully
paid and satisfied. Sublessee shall indemnify Sublessor and Master Lessor
against all costs and charges (including legal fees) lawfully and
reasonably incurred in enforcing payment of the Rent, and in obtaining
possession of the Subleased Premises after default of the Sublessee or upon
expiration or earlier termination of the Term of this sublease.
7.2 All covenants and agreements to be performed by the Sublessee under any of
the terms of this Sublease shall be performed by the Sublessee at
Sublessee's sole cost and expense, and without any abatement of Rent. If
Sublessee fails to perform any act on its part to be performed hereunder,
and such failure shall continue for 10 days after notice thereof from
Sublessor, Sublessor may perform such act (but shall not be obligated to do
so) without waiving or releasing Sublessee from any of its obligations
relative thereto. All reasonable sums paid or costs incurred by Sublessor
in so performing such acts together with interest thereon at the rate set
in paragraph 7.1 herein from the date payment was made or each cost
incurred by the Sublessor shall be payable by Sublessee to Sublessor on
demand.
7.3 The following events shall be deemed events of default by Sublessee under
this Sublease:
(a) part or all of the Rent is not paid when due and Sublessee has not paid
the Rent within five (5) days after receipt of a written notice from
the Sublessor, or
(b) Sublessee becomes insolvent or commits an act of bankruptcy or becomes
bankrupt or takes benefit of any statute that may be in force for
bankrupt or insolvent debtors or becomes involved in involuntary or
involuntary winding-up proceedings or if a receiver is appointed for
the business, property, affairs or revenues of Sublessee, or
(c) Sublessee ceases to conduct business from the Subleased Premises, or
(d) Sublessee fails to observe, perform, and keep each and every material
covenant, agreement, provision, stipulation and condition herein
contained to be observed, performed, and kept by Sublessee.
7.4 Upon the occurrence of any event of default by Sublessee, Sublessor shall
have, in addition to other remedies available to Sublessor at law or in
equity, the option to pursue any one or more of the following remedies
(each and all of which shall be cumulative and non-exclusive) without any
notice or demand whatsoever:
(a) Terminate this Sublease, in which case Sublessee shall immediately
surrender the Subleased Premises to Sublessor, and if Sublessee fails
to do so, Sublessor may enter and take possession of the Subleased
Premises and expel or remove the Sublessee and any other person who may
be occupying the
-4-
<PAGE>
Subleased Premises or any part thereof, without being liable for
prosecution or any claim or damages therefore; and Sublessor may
recover from Sublessee the following:
(i) the worth at the time of award of any unpaid Rent which has been
earned at the time of termination, plus
(ii) the worth at the time of award of the amount by which the unpaid
Rent which would have been earned after termination until the
time of award exceeds the amount of such loss of Rent that
Sublessee proves could have been reasonably avoided; plus
(iii) the worth at the time of award by which the unpaid Rent for the
balance of the Term after the time of award exceeds the amount of
such loss of rent that Sublessee proves could have been
reasonably avoided; plus
(iv) any other amount necessary to compensate Sublessor for all the
detriment proximately caused by Sublessee's failure to perform
its obligations under this Sublease; and
(v) at Sublessor's election, such other amounts in addition to or in
lieu of the foregoing as may be permitted from time to time by
applicable law.
(b) If Sublessor does not elect to terminate this Sublease on account of
any default by Sublessee, Sublessor may, from time to time, without
terminating this Sublease, enforce all of its rights and remedies under
this Sublease, including the right to recover all Rent as it becomes
due.
(c) If the Sublessee defaults under this agreement, Sublessor shall have
the right to terminate any and all subleases, licenses, concessions or
other arrangements for possession entered into by Sublessee and
affecting the Subleased Premises or may, in Sublessor's sole
discretion, succeed to Sublessee's interest in such subleases,
licenses, concessions or arrangements. In the event of Sublessor's
election to succeed to Sublessee's interest in any such subleases,
licenses, concessions or arrangements, Sublessee shall, as of the date
of notice by Sublessor of such election, have no farther right to or
interest in the rent or other consideration receivable thereunder.
8. Liability and Damages
Sublessee shall maintain at its own expense liability and fire insurance
covering the Subleased Premises and its improvements and personal property
residing there in an amount not less than acceptable to a prudent owner.
Sublessee's liability insurance shall include Sublessor and Master Lessor
as insured parties, and cover death, personal injury and property damage in
the amount of $1 million per occurrence and $3 million cumulative.
If the Subleased Premises become unusable due to damage by fire or other
casualty, then Article 16.00 of the Master Lease shall apply to the
relationship between the Sublessor and Sublessee as well.
9. Arbitration of Disputes
MEDIATION OF DISPUTES. Sublessee and Sublessor hereby agree to and shall
---------------------
mediate any dispute or claim between them arising out of this Sublease or
any resulting transaction. The mediation shall be held prior to any court
action or arbitration. The mediation shall be confidential and in
accordance with California Evidence Code # 1152.5. If the parties are
unable to agree on a mediator within thirty (30) days of written notice by
one party to the other of said party's desire to seek mediation, the
Presiding Judge of the Superior Court of Santa Clara County shall have
jurisdiction to appoint a mediator. If the mediator determines that
additional mediation sessions are warranted, such mediation sessions shall
be conducted in accordance with this Article. Should either party attempt
an arbitration or a court action before attempting to mediate, said party
shall not be entitled to attorney's fees that might otherwise be payable to
said party in a court action or arbitration, and such party may, in
addition, be subject to sanctions by the arbitrator or judge who determines
that said party has resisted mediation. Mediation fees, if any, shall be
divided equally by the parties.
-5-
<PAGE>
ARBITRATION OF DISPUTES. Subject to the foregoing Paragraph, Sublessee and
-----------------------
Sublessor agree that any dispute relating to this Sublease shall be subject
to neutral, binding arbitration and not by court action, unless this
Sublease expressly states that such dispute is not subject to arbitration
or the parties subsequently agree not to submit the dispute to arbitration.
The arbitration shall be conducted in accordance with the rules of either
the American Arbitration Association (`AAA') or Judicial Arbitration and
Mediation Services, Inc./Endispute (`JAMS/Endispute'). The selection shall
be made by the party first filing for arbitration. The parties to an
arbitration may agree in writing to use different rules and/or arbitrators.
In all other respects, the arbitration shall be conducted in accordance
with Part III, Title 9 (beginning with Section 1280) of the California Code
of Civil Procedure. The arbitration shall be held in San Mateo County,
California. Subject to the provisions of this Lease, an award of the
arbitrator selected by the parties or by the court shall be final and
binding upon the parties hereto and judgment may be entered upon it in a
court having jurisdiction pursuant to Section 36.E. hereof. The expenses of
such arbitration shall be borne equally by Sublessor and Sublessee. In any
arbitration under this Lease the parties shall be entitled to discovery in
like manner as if the matter were a California Superior Court trial.
NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF
DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY
CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE
THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE
BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL,
UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE "ARBITRATION OF
DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING
TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF
THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION
PROVISION IS VOLUNTARY. WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE
TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION
OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION.
Consent to neutral arbitration by:
SUBLESSEE: /s/ GC 2/17/99
----------------
SUBLESSOR: /s/ SG 2/17/99
----------------
10. Notices
All notices or demands of any kind required to be given by Sublessor or
Sublessee hereunder shall be in writing and shall be deemed delivered
forty-eight (48) hours after depositing the notice or demand in the United
States Mail, certified or registered, postage prepaid, addressed to
Sublessor or Sublessee, respectively, at the addresses set forth after
their signatures at the end of this Sublease. All Rent and other payments
due under this Sublease or the Master Lease shall be made by Sublessee to
Sublessor at the same address.
11. Broker's Fee
The broker's fee has been pre-arranged and is part of a separate agreement
between Ramp Networks, Inc. and CRESA Partners LLC.
12. General
Master Lessor and Sublessor acknowledge that as of the date hereof,
Sublessor has not committed an event of default with respect to the Master
Lease. The undersigned agrees that execution of this Sublease and
-6-
<PAGE>
Sublessee's usage of the Subleased Premises for general office purposes
will not cause a default in the Master Lease, and, further, the undersigned
Landlord agrees that it shall recognize the Sublease and Sublessee's rights
of possession, if Sublessee has not incurred an event of default with
respect thereto, in the event the Master Lease is terminated for any
reason. Neither Sublessor nor Sublessee are bound by the Sublease Agreement
until the Landlord has executed the Sublease Agreement.
13. Entire Agreement
This Sublease constitutes the entire agreement between Ramp Networks, Inc.
and Analog Microelectronics, Inc. regarding this Sublease. Both parties
acknowledge that there are no agreements or understandings except as
presented in this Sublease document.
14. Relationship of the Parties
Nothing contained in this Sublease shall create any relationship between
the parties hereto other than that of Sublessor and Sublessee, and it is
acknowledged and agreed that Sublessor does not in any way or for any
purpose become a partner of Sublessee in the conduct of its business, or a
joint venturer or a member of a joint or common enterprise with Sublessee.
15. Severability
If any provision of this Sublease or the application thereof to any person,
entity or circumstance shall, to any extent, be invalid or unenforceable,
the remainder of this Sublease, or the application of such provision to
persons, entities or circumstances other than those as to which it is
invalid or unenforceable, shall not be affected thereby, and each provision
of this Sublease shall be valid and be enforced to the full extent
permitted by law.
16. Time of the Essence
Time is hereby expressly declared to be of the essence of this Sublease and
of each and every term, covenant, Agreement, condition and provision
hereof.
17. Sublease Construed as a Whole
The language in all parts of this Sublease shall in all cases be construed
as a whole according to its fair meaning and not strictly for or against
either Sublessor or Sublessee. The parties acknowledge that each party and
its counsel have reviewed this Sublease and participated in its drafting
and therefore that the rule of construction that any ambiguities are to be
resolved against the drafting party shall not be employed nor applied in
the interpretation of this Sublease.
18. Meaning of Terms
Whenever the context so requires, the neuter gender shall include the
masculine and the feminine, and the singular shall include the plural and
vice versa.
19. Forum
This Sublease shall be construed and enforced in accordance with the laws
of the State of California.
20. Attorneys' Fees
In the event of any action or proceeding at law, in equity or stipulated
arbitration to enforce or interpret any provision of this Lease or to
protect or establish any right or remedy of either party hereunder, the
party not prevailing in such action or proceeding, whether in court,
through arbitration or by way of out-of-court
-7-
<PAGE>
settlement, shall pay to the prevailing party all costs and expenses,
including without limitation, reasonable attorneys' fees and expenses
(which shall include attorneys fees and expenses of in-house attorneys),
incurred therein by such prevailing party and if such prevailing party
shall recover judgment in any such action or proceeding, such costs,
expenses and attorneys' fees shall be included in and as a part of such
judgment.
An arbitrator, if any, is hereby authorized to make such an award to the
prevailing party in arbitration. The term "prevailing party" shall mean the
party that received substantially the relief requested, whether by
settlement, dismissal, summary judgment, mediation, arbitration, judgment
or otherwise.
21. No Memorandum Without Consent
Neither Sublessor or Sublessee shall record this Sublease or a short form
memorandum hereof without the consent of the other, not to be unreasonably
withheld.
22. Waiver
The waiver by either party of a breach of any provision of this Sublease
shall not be deemed a continuing waiver or a waiver of any subsequent
breach, whether of a like nature or otherwise.
23. In consideration of Sublessee's paying the rent and performing all the
covenants, conditions and provisions on Sublessee's part to be observed and
performed under this Sublease, Sublessee shall have quiet possession and
quiet enjoyment of the Subleased Premises.
24. If the Subleased Premises or any portion thereof are taken under the power
of eminent domain or sold under the threat of the exercise of said power,
either party shall have the right to terminate this Sublease upon written
notice to the other.
25. Nondisturbance
In the event of a foreclosure sale under the Trust Deed or conveyance in
lieu of such foreclosure so long as there shall not then exist any breach
or default on the part of the Sublessee under the Sublease, or any event or
condition which, with the giving of notice and/or the passage of time,
could become such a breach or default, or any other event that would permit
the Sublessee's leasehold interest under the Sublease to be terminated and
subject to compliance by the Sublessee with the terms hereof,
(a) the Sublessee's right to possession of the Leased Premises and
leasehold interest under the Sublease shall not be disturbed and shall
continue in effect, and
(b) the purchaser or transferee shall recognize and accept the Sublessee as
Sublessee under the terms of the purchaser in each case subject to the
terms, requirements and provisions of the Sublease and those set forth
herein.
26. Default by the Sublessor:
Upon the occurrence of any breach or default on the part of the Sublessor
under the Sublease or any other event that would permit early termination
nation of the Sublease by the Sublessee the Sublessee shall promptly (and
in any event not later than the time that notice thereof is given by the
Sublessee to the Sublessor) given written notice to the Bank and Master
Lessor specifying the nature of such breach, default or other event and the
action, if any, that the Sublessee proposes to take with respect thereto.
The Bank shall have the right (but not the obligation) to cure any such
breach, default or other event at any time prior to the termination of the
Sublease by the Sublessee Anything contained herein or in the Sublease to
the contrary notwithstanding, (a) the Sublessee shall not declare a
termination of the ease as a result of any such breach, default or other
event unless, within 30 days after the expiration of the time period
provided in the Sublease for the cure thereof by the Sublessor or the
Bank's receipt of notice thereof from the Sublessee (whichever is
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<PAGE>
later), the Bank shall have failed to cause such breach, default or other
event to be cured or, if the same cannot reasonably be cured by the Bank
within such 30-day period, the Bank shall have failed to commence action
within 30-day period to cause the same to be cured or thereafter shall fail
to pursue such cure with diligence, and (b) the Sublessee shall in no event
terminate the Sublease as a result of any breach, default or other event,
which relates solely the financial condition, status or condition of the
Sublessor Except for a termination of the ease arising by reason of the
Bank's failure to cause any breach, default or other event to be cured as
set forth above, the Sublessee shall not terminate or permit any
termination of the Sublease prior to the expiration of the term then
remaining under the Sublease without the prior written consent of the Bank.
27. Signage:
Sublessee, at Sublessee's sole cost, will be allowed signage on the second
floor at the entrance of their suite. All signage is subject to approval by
the Sublessor and Master Landlord, not to be unreasonably withheld.
Sublessor, at Sublessor's sole cost, will create entry signage on the first
floor displaying names of all occupants in the building. No external
signage shall be permitted.
Dated: 2/17/99 Dated: 2/17/99
---------------------- ----------------------
Sublessor Sublessee
By: /s/ Scott Gorton By: /s/ George Chen
-------------------------- --------------------------
Address: Ramp Networks Address: 3150 De La Cruz Blvd #200
--------------------- --------------------------
Santa Clara, CA 95054
--------------------------
Agreed and Accepted:
Landlord
By: /s/ [illigible]
-------------------------
Date: 2/26/99
-----------------------
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<PAGE>
EXHIBIT 10.7
SUBLEASE AND CONSENT TO SUBLEASE AGREEMENT
FIRST FLOOR
3100 DE LA CRUZ BOULEVARD
SANTA CLARA, CALIFORNIA 95054
This agreement dated August 4, 1998 is entered into by and among Ramp Networks,
Inc. (hereinafter "Sublessor"), XaQti Corporation (hereinafter "Sublessee") and
Oxford Park Associates (hereinafter "Master Lessor") as a Sublease and consent
to sublease (hereinafter "Sublease") subject to the terms and conditions of the
Master Lease dated February 24, 1998, entered into by Ramp Networks, Inc. and
Oxford Park Associates. A copy of said Master Lease is attached hereto,
designated Exhibit A, and incorporated herein by this reference.
1. Premises
1.1 Sublessor hereby leases to Sublessee and Sublessee hereby hires from
Sublessor, on and subject to the terms and conditions hereinafter set
forth, the following described premises (hereinafter referred to as
"Subleased Premises"), the entire rentable space on the first floor of 3100
De La Cruz Boulevard, situated in the City of Santa Clara, County of Santa
Clara, State of California (hereinafter the "Building") comprising
approximately 13,500 rentable square feet of space.
1.2 In addition Sublessee shall have non-exclusive access to the public areas
of the building and surrounding area including, but not limited to, the
showers on the second floor and parking spaces in the parking lot.
Sublessee's access to the parking spaces shall not be less than that of
sublessor or any other tenant of the facility at 3100 De La Cruz Blvd.
2. Term
2.1 The term of this Sublease (hereinafter "Term") shall be for a period of 18
months from the date of general occupancy unless sooner terminated pursuant
to any provision hereof, or of the Master Lease. Occupancy shall commence
on October 15, 1998 or such other date as mutually agreed by Sublessor and
Sublessee.
2.2 In the event occupancy is delayed due to the construction schedule for the
Subleased Premises, the Sublessor shall bear no liability for any expenses,
costs or penalties of the Sublessee. In the event of such a delay,
occupancy shall commence on the earliest date, agreed by the Sublessor and
Sublessee, when the Subleased Premises are suitable for general occupancy.
In the event that the construction work is completed and the premises are
suitable for general occupancy, but the Sublessee not prepared to take
occupancy, then the occupancy date will be deemed to commence on such date
as the premises first were available for Sublessee's occupancy and the
related rent shall commence. The Sublessee may terminate this Sublease if
the Subleased Premises are not ready for occupancy by November 15, 1998.
2.3 Notwithstanding the above, Sublessor and Master Lessor will allow Sublessee
to have access to the building as soon as is reasonably practical, but not
later than October 1, 1998, to install telephone lines, network wiring and
other Sublessee provided infrastructure as agreed by the parties. Any
Sublessee contractors will coordinate with Sublessor's contractors and
Master Lessor's General Contractor for any and all Sublessee work prior to
occupancy.
2.4 Upon expiration of the Term or upon early termination of the Sublease,
Sublessee shall immediately surrender the Subleased Premises in good
condition to the Sublessor, normal wear and tear excepted. In addition,
upon surrender of the Subleased Premises, Sublessee shall remove any of its
trade fixtures and all its personal property from the Subleased Premises.
2.5 If the Subleased Premises remain in the possession of the Sublessee with
the consent of the Sublessor after the Term has expired, the Sublessee
shall be deemed to be occupying the Subleased Premises on a month to month
basis with a monthly rent equal to the last Rent amount in effect. Such
month to month occupancy
<PAGE>
shall be subject to the terms of this Sublease, and be subject to
termination upon 30 days' written notice by either party.
2.6 If the Subleased Premises remain in the Sublessee's possession after the
expiration of the Term without the consent of the Sublessor, or after early
termination of the Sublease, the Sublessee's occupancy shall be deemed
tenancy at sufferance and Sublessee shall be liable for monthly rent in the
amount of two times the last Rent in effect.
2.7 At the end of the Sublease Term, Sublessor shall determine whether
Sublessor requires the Subleased Premises for its own use. If the Sublessor
decides to sublease the Subleased Premises, the Sublessor shall negotiate
in good faith with the Sublessee to extend the sublease term, provided the
Sublessee has not defaulted under the Sublease and such default remains
uncured.
3. Base Rent
3.1 Payment of rent shall be due and payable on the date of general occupancy.
Rent shall be at the rate of $2.60 per rentable square foot. Sublessee
shall pay to Sublessor without deduction, setoff, prior notice or demand,
as rent for the Subleased Premises, equal monthly payments as shown below
(hereinafter "Rent"):
10/15/98 to 10/14/99 $35,100 per month
10/15/99 to 4/14/2000 $37,908 per month
in advance on the first day of each month of the Term hereof. In the event
the payment of Rent is not received by the Sublessor by the first day of
each month, the Sublessor shall send written notice of non-receipt of the
payment. Sublessee shall have a grace period of five (5) days after receipt
of the written notice to pay the Rent. If Sublessee does not pay the Rent
within five days after receipt of the written notice, Sublessee shall have
defaulted under this Sublease and be subject to the provisions of section 7
of this Sublease.
The above rent is based on an estimated rentable space of 13,500 square
feet. Upon completion of the construction, the rentable square feet shall
be measured and adjusted. Such measurement shall be agreed by the parties
and the rent adjusted accordingly, based on the revised rentable space, and
an amendment shall signed by the parties and incorporated into this
agreement. Notwithstanding the above, the rentable square sheet shall not
exceed 13,500 square feet.
If the date of general occupancy is not the first day of the month, or if
the termination date is not the last day of the month, a pro rata portion
of the monthly Rent shall be paid to the Sublessor at the then current rate
for the fractional month during which the Sublease commences and/or
terminates based on a 30-day month. Sublessee shall pay Sublessor on or
before the occupancy date hereof the prorated sum due for the initial
fractional month plus the sum due for the first full month of rent.
3.2 Services to the Subleased Premises shall be provided by the Master Lessor
as per Article 6.00 of the Master Lease Agreement. Such services shall
include heat, ventilation, cooling, janitorial services, electric power for
normal lighting and small business office equipment, running water, and
maintenance, repair and replacement as defined in the referenced Article of
the Master Lease. Master Lessor covenants to furnish all those services to
the Subleased Premises and to the Building agreed by Master Lessor to be
provided pursuant to Article 6.0 of the Master Lease.
4. Security Deposit
Sublessee shall deposit with Sublessor upon execution of this Sublease
hereof the sum of $70,200 as security for Sublessee's faithful performance
of Sublessee's obligations hereunder. If Sublessee fails to pay Rent or
other charges due hereunder, or otherwise defaults with respect to any
provision of this Sublease, and fails to commence a cure of such default
within the time provided therefor in this Sublease, Sublessor may use,
apply
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<PAGE>
or retain all or any portion of said deposit for the payment of any Rent or
other charge in default or for the payment of any other sum which Sublessor
may become obligated by reason of Sublessee's default, or to compensate
Sublessor for any loss or damage which Sublessor may suffer thereby. If
Sublessor so uses or applies all or any portion of said deposit, Sublessee
shall within ten (10) days after written demand therefore, deposit cash
with Sublessor in an amount sufficient to restore said deposit to the full
amount herein above stated, and Sublessee's failure to do so shall be a
default under this Sublease, and Sublessor may at its option terminate this
Sublease. Sublessor shall not be required to keep said deposit separate
from its general accounts. If Sublessee performs all of Sublessee's
obligations hereunder, said deposit, or so much thereof as has not
theretofore been applied by Sublessor, shall be returned without payment of
interest for its use to Sublessee within ten (10) days after the expiration
of the Term hereof, or after Sublessee has vacated the Subleased Premises,
whichever is later.
Sublessee's Security deposit shall not bear interest unless the Master
Lessor pays interest under the Master Lease to the Sublessor for
Sublessor's security deposit, in which case Sublessee's security deposit
with the Sublessor shall bear interest at the same rate under this Sublease
as Sublessor's Security Deposit bears interest under the Master Lease.
5. Use
5.1 The Subleased Premises shall be used and occupied for general office and
R&D purposes, including light assembly and prototyping, and for no other
purpose without prior written consent of Sublessor.
5.2 Master Lessor warrants to Sublessee that the Subleased Premises, in its
intended state, but without regard for Sublessee's stated use, does not
violate any applicable statute, law, deed restrictions, building code,
regulation or ordinance, including the Americans With Disabilities Act (42
USC Sec. 12111 et. Seq.), at the time that this Sublease is executed. If
this warranty hereafter is found not to be true, Sublessor shall work with
the Master Lessor to bring the Subleased Premises into compliance.
Sublessee shall, at Sublessee's expense, comply promptly with all
applicable statutes, ordinances, rules, regulations, orders, restrictions
of record, and requirements in effect during the Term hereof regulating the
use of the Subleased Premises, provided, however, that Sublessee shall not
be required to expend any of its funds for capital improvements or changes
related to the Americans with Disabilities Act.
5.3 Except for latent and undisclosed defects, Sublessee hereby accepts the
Subleased Premises in their condition existing as of the commencement date
of the Term hereof, subject to all applicable zoning, municipal, county and
state laws, ordinances and regulations governing and regulating the use of
the Subleased Premises, and accepts this Sublease subject thereto.
5.4 Sublessee acknowledges that neither Sublessor nor Sublessor's agents have
made any representation or warranty as to the suitability of the Subleased
Premises for the conduct of the Sublessee's business.
5.5 Sublessee shall not assign or transfer the Sublease, or otherwise allow
occupancy in whole or in part of the Subleased Premises by any other party
without advance written consent from the Sublessor.
5.6 Sublessor agrees to work with Sublessee on signage subject to the
following: (a) Sublessee's signage will be in a secondary position to any
of the Sublessor's own signage; (b) Sublessee's signage shall be easily
visible and legible to traffic on Trimble Road and/or De La Cruz Blvd.; (c)
Sublessee shall bear the cost of installing and de-installing any signage,
including any electrical requirements; (d) all signage will be subject to
prior approval by the Master Lessor and the Sublessor, which approval shall
not be unreasonably withheld; and (e) Sublessee shall be responsible for
obtaining any required approvals from the City of Santa Clara.
5.7 Sublessee shall keep the Subleased Premises in good condition. In the
event the Sublessee fails to maintain the Subleased Premises, the Sublessor
may, following no less than 48 hours' prior notice, enter the Subleased
Premises, perform any needed repairs or maintenance, and charge the
Sublessee for the cost incurred plus a
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<PAGE>
20% administrative fee. Any such entry into the Subleased Premises by the
Sublessor, except in case of emergency, shall be as accompanied by an
employee or designated representative of the Sublessee.
5.8 Sublessee shall obtain prior approval from the Sublessor for any
alterations to the Subleased Premises. All requested alterations will be at
Sublessee's expense.
5.9 Sublessee uses very small amounts of hazardous materials in it's hardware
lab including solder, flux, alcohol, tech spray, flux cleaner etc. Except
for these Hazardous Materials, Sublessee shall not use, generate, store,
dispose or otherwise allow Hazardous Materials to be present within the
Subleased Premises without prior written approval by the Sublessor. Except
with respect to any such Hazardous Materials used, generated, stored or
disposed of, on or about the Subleased Premises by Sublessee, its
employees, officers, directors, agents or contractors, Sublessor shall
indemnify, defend, and hold Sublessee harmless from and against any and all
liabilities, remediation costs, investigation costs, claims, damages,
injuries, losses, costs, fines, judgments, causes of action and expenses
whatsoever incurred in connection with or arising in any way out of the
release, treatment, storage, use or disposal of Hazardous Materials on or
about the Subleased Premises.
6.0 Master Lease
6.1 This Sublease is subject and subordinate to the Master Lease designated as
Exhibit A. Sublessee shall not commit or permit to be committed on the
Subleased Premises any act or omission which shall violate any term or
condition of the Master Lease.
6.2 Sublessee shall hold Sublessor harmless of and from all liability,
judgements, costs, damages, claims or demands, including reasonable
attorney's fees, arising out of Sublessee's failure to comply with or
perform Sublessee's obligations under both the Master Lease and this
Sublease, as such obligations apply to the Premises.
6.3 Sublessor represents to Sublessee that the Master Lease is in full force
and effect and that no default exists on the part of any party to the
Master Lease.
7.0 Default
7.1 Sublessee shall pay a penalty of 5% of the Rent amount due as a late fee in
the event Rent payments are received by the Sublessor more than 10 days
after the due date for the Rent. If the Sublessor does not receive the Rent
payment within 15 days after its due date, then the Sublessee shall owe
interest on the amount due at an interest rate that is the lesser of one
and one-half percent (1.5%) per month, or the maximum rate allowed by law,
on all Rent not paid when due, from the due date until the payment is fully
paid and satisfied. Sublessee shall indemnify Sublessor against all costs
and charges (including legal fees) lawfully and reasonably incurred in
enforcing payment of the Rent, and in obtaining possession of the Subleased
Premises after default of the Sublessee or upon expiration or earlier
termination of the Term of this sublease.
7.2 All covenants and agreements to be performed by the Sublessee under any of
the terms of this Sublease shall be performed by the Sublessee at
Sublessee's sole cost and expense, and without any abatement of Rent. If
Sublessee fails to perform any act on its part to be performed hereunder,
and such failure shall continue for 10 days after notice thereof from
Sublessor, Sublessor may perform such act (but shall not be obligated to do
so) without waiving or releasing Sublessee from any of its obligations
relative thereto. All reasonable sums paid or costs incurred by Sublessor
in so performing such acts together with interest thereon at the rate set
in paragraph 7.1 herein from the date payment was made or each cost
incurred by the Sublessor shall be payable by Sublessee to Sublessor on
demand.
7.3 The following events shall be deemed events of default by Sublessee under
this Sublease:
(a) part or all of the Rent is not paid when due and Sublessee has not paid
the Rent within five (5) days after receipt of a written notice from
the Sublessor, or
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<PAGE>
(b) Sublessee becomes insolvent or commits an act of bankruptcy or becomes
bankrupt or takes benefit of any statute that may be in force for
bankrupt or insolvent debtors or becomes involved in involuntary or
involuntary winding-up proceedings or if a receiver is appointed for
the business, property, affairs or revenues of Sublessee, or
(c) Sublessee ceases to conduct business from the Subleased Premises, or
(d) Sublessee fails to observe, perform, and keep each and every material
covenant, agreement, provision, stipulation and condition herein
contained to be observed, performed, and kept by Sublessee, or
(e) If a writ of execution is issued against Sublessee. Sublessee may cure
any default under this Sublease at any time within 10 days after
written notice is received by Sublessee from Sublessor.
7.4 Upon the occurrence of any event of default by Sublessee, Sublessor shall
have, in addition to other remedies available to Sublessor at law or in
equity, the option to pursue any one or more of the following remedies
(each and all of which shall be cumulative and non-exclusive) without any
notice or demand whatsoever:
(a) Terminate this Sublease, in which case Sublessee shall immediately
surrender the Subleased Premises to Sublessor, and if Sublessee fails
to do so, Sublessor may enter and take possession of the Subleased
Premises and expel or remove the Sublessee and any other person who may
be occupying the Subleased Premises or any part thereof, without being
liable for prosecution or any claim or damages therefore; and Sublessor
may recover from Sublessee the following:
(i) the worth at the time of award of any unpaid Rent which has been
earned at the time of termination, plus
(ii) the worth at the time of award of the amount by which the unpaid
Rent which would have been earned after termination until the
time of award exceeds the amount of such loss of Rent that
Sublessee proves could have been reasonably avoided; plus
(iii) the worth at the time of award by which the unpaid Rent for the
balance of the Term after the time of award exceeds the amount
of such loss of rent that Sublessee proves could have been
reasonably avoided; plus
(iv) any other amount necessary to compensate Sublessor for all the
detriment proximately caused by Sublessee's failure to perform
its obligations under this Sublease; and
(v) at Sublessor's election, such other amounts in addition to or in
lieu of the foregoing as may be permitted from time to time by
applicable law.
(b) If Sub lessor does not elect to terminate this Sublease on account of
any default by Sublessee, Sublessor may, from time to time, without
terminating this Sublease, enforce all of its rights and remedies under
this Sublease, including the right to recover all Rent as it becomes
due.
(c) If the Sublessee defaults under this agreement, Sublessor shall have
the right to terminate any and all sub leases, licenses, concessions or
other arrangements for possession entered into by Sublessee and
affecting the Subleased Premises or may, in Sublessor's sole
discretion, succeed to Sublessee's interest in such subleases,
licenses, concessions or arrangements. In the event of Sublessor's
election to succeed to Sublessee's interest in any such subleases,
licenses, concessions or arrangements, Sublessee shall, as of the date
of notice by Sublessor of such election, have no further right to or
interest in the rent or other consideration receivable thereunder.
8.0 Liability and Damages
Sublessee shall maintain at its own expense liability and fire insurance
covering the Subleased Premises and its improvements and personal property
residing there in an amount not less than acceptable to a prudent owner.
Sublessee's liability insurance shall include Sublessor and Master Lessor as
insured parties, and cover death, personal injury and property damage in the
amount of $1 million per occurrence and $3 million cumulative.
If the Subleased Premises become unusable due to damage by fire or other
casualty, then Article 16.00 of the Master Lease shall apply to the relationship
between the Sublessor and Sublessee as well.
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<PAGE>
9.0 Arbitration of Disputes
MEDIATION OF DISPUTES. Sublessee and Sublessor hereby agree to and shall
mediate any dispute or claim between them arising out of this Sublease or
any resulting transaction. The mediation shall be held prior to any court
action or arbitration. The mediation shall be confidential and in
accordance with California Evidence Code # 1152.5. If the parties are
unable to agree on a mediator within thirty (30) days of written notice by
one party to the other of said party's desire to seek mediation, the
Presiding Judge of the Superior Court of Santa Clara County shall have
jurisdiction to appoint a mediator. If the mediator determines that
additional mediation sessions are warranted, such mediation sessions shall
be conducted in accordance with this Article. Should either party attempt
an arbitration or a court action before attempting to mediate, said party
shall not be entitled to attorney's fees that might otherwise be payable to
said party in a court action or arbitration, and such party may, in
addition, be subject to sanctions by the arbitrator or judge who determines
that said party has resisted mediation. Mediation fees, if any, shall be
divided equally by the parties.
ARBITRATION OF DISPUTES. Subject to the foregoing Paragraph, Sublessee
and Sublessor agree that any dispute relating to this Sublease shall be
subject to neutral, binding arbitration and not by court action, unless
this Sublease expressly states that such dispute is not subject to
arbitration or the parties subsequently agree not to submit the dispute to
arbitration.
The arbitration shall be conducted in accordance with the rules of
either the American Arbitration Association ("AAA") or Judicial Arbitration
and Mediation Services, Inc./Endispute ("JAMS/Endispute"). The selection
shall be made by the party first filing for arbitration. The parties to an
arbitration may agree in writing to use different rules and/or arbitrators.
In all other respects, the arbitration shall be conducted in accordance
with Part III, Title 9 (beginning with Section 1280) of the California Code
of Civil Procedure. The arbitration shall be held in San Mateo County,
California. Subject to the provisions of this Lease, an award of the
arbitrator selected by the parties or by the court shall be final and
binding upon the parties hereto and judgment may be entered upon it in a
court having jurisdiction pursuant to Section 36.E. hereof. The expenses of
such arbitration shall be borne equally by Sublessor and Sublessee. In any
arbitration under this Lease the parties shall be entitled to discovery in
like manner as if the matter were a California Superior Court trial.
NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY
DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF
DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY
CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE
THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE
BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL,
UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE "ARBITRATION OF
DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING
TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF
THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION
PROVISION IS VOLUNTARY. WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE
TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION
OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION.
Consent to neutral arbitration
by: SUBLESSEE SUBLESSOR (_____) (_____) (_____) (_____)
10.0 Notices
All notices or demands of any kind required to be given by Sublessor or
Sublessee hereunder shall be in writing and shall be deemed delivered
forty-eight (48) hours after depositing the notice or demand in the United
States Mail, certified or registered, postage prepaid, addressed to
Sublessor or Sublessee, respectively,
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<PAGE>
at the addresses set forth after their signatures at the end of this
Sublease. All Rent and other payments due under this Sublease or the
Master Lease shall be made by Sublessee to Sublessor at the same address.
11.0 Broker's Fee
Each party hereto warrants to the other that no person or selling agency
has been employed or retained by such party to solicit or secure this
Sublease upon an agreement or understanding for a commission, percentage,
brokerage or contingent fee. Each party indemnifies the other against a
breach of the foregoing warranty.
12.0 General
Master Lessor and Sublessor acknowledge that as of the date hereof,
Sublessor has not committed an event of default with respect to the Master
Lease. The undersigned agrees that execution of this Sublease and
Sublessee's usage of the Subleased Premises for general office purposes
will not cause a default in the Master Lease, and, further, the
undersigned Landlord agrees that it shall recognize the Sublease and
Sublessee's rights of possession, if Sublessee has not incurred an event
of default with respect thereto, in the event the Master Lease is
terminated for any reason. Neither Sublessor nor Sublessee are bound by
the Sublease Agreement until the Landlord has executed the Sublease
Agreement.
13.0 Entire Agreement
This Sublease constitutes the entire agreement between Ramp Networks, Inc.
and XaQti Corporation regarding this Sublease. Both parties acknowledge
that there are no agreements or understandings except as presented in this
Sublease document.
14.0 Relationship of the Parties
Nothing contained in this Sublease shall create any relationship between
the parties hereto other than that of Sublessor and Sublessee, and it is
acknowledged and agreed that Sublessor does not in any way or for any
purpose become a partner of Sublessee in the conduct of its business, or a
joint venturer or a member of a joint or common enterprise with Sublessee.
15.0 Severability
If any provision of this Sublease or the application thereof to any
person, entity or circumstance shall, to any extent, be invalid or
unenforceable, the remainder of this Sublease, or the application of such
provision to persons, entities or circumstances other than those as to
which it is invalid or unenforceable, shall not be affected thereby, and
each provision of this Sublease shall be valid and be enforced to the full
extent permitted by law.
16.0 Time of the Essence: Time is hereby expressly declared to be of the
essence of this Sublease and of each and every term, covenant, Agreement,
condition and provision hereof.
17.0 Sublease Construed as a Whole: The language in all parts of this Sublease
shall in all cases be construed as a whole according to its fair meaning
and not strictly for or against either Sublessor or Sublessee. The parties
acknowledge that each party and its counsel have reviewed this Sublease
and participated in its drafting and therefore that the rule of
construction that any ambiguities are to be resolved against the drafting
party shall not be employed nor applied in the interpretation of this
Sublease.
18.0 Meaning of Terms: Whenever the context so requires, the neuter gender
shall include the masculine and the feminine, and the singular shall
include the plural and vice versa.
19.0 Forum: This Sublease shall be construed and enforced in accordance with
the laws of the State of California.
20.0 Attorneys' Fees: In the event of any action or proceeding at law, in
equity or stipulated arbitration to enforce or interpret any provision of
this Lease or to protect or establish any right or remedy of either party
-7-
<PAGE>
hereunder, the party not prevailing in such action or proceeding, whether
in court, through arbitration or by way of out-of-court settlement, shall
pay to the prevailing party all costs and expenses, including without
limitation, reasonable attorneys' fees and expenses (which shall include
attorneys fees and expenses of in-house attorneys), incurred therein by
such prevailing party and if such prevailing party shall recover judgment
in any such action or proceeding, such costs, expenses and attorneys' fees
shall be included in and as a part of such judgment. An arbitrator, if
any, is hereby authorized to make such an award to the prevailing party in
arbitration. The term "prevailing party" shall mean the party that
received substantially the relief requested, whether by settlement,
dismissal, summary judgment, mediation, arbitration, judgment or
otherwise.
21.0 No Memorandum Without Consent: Neither Sublessor or Sublessee shall record
this Sublease or a short form memorandum hereof without the consent of the
other, not to be unreasonably withheld.
22.0 Waiver. The waiver by either party of a breach of any provision of this
Sublease shall not be deemed a continuing waiver or a waiver of any
subsequent breach, whether of a like nature or otherwise.
23.0 In consideration of Sublessee's paying the rent and performing all the
covenants, conditions and provisions on Sublessee's part to be observed
and performed under this Sublease, Sublessee shall have quiet possession
and quiet enjoyment of the Subleased Premises.
24.0 If the Subleased Premises or any portion thereof are taken under the power
of eminent domain or sold under the threat of the exercise of said power,
either party shall have the right to terminate this Sublease upon written
notice to the other.
-8-
<PAGE>
Dated: 8/4/98 Dated 8/4/98
Sublessor: Sublessee: /s/ [illegible]
By: /s/ Scott Gorton By: Henry [illegible]
Scott Gorton
Address: Ramp Networks Address: 1630 Oakland Road
Bldg A-214
San Jose, CA 95131
Agreed and Accepted: Oxford Park Assn.
Landlord
By: /s/ [illegible]
Date: 8/27/98
-9-
<PAGE>
EXHIBIT 10.8
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
OEM Purchase Agreement
Between
Sonic Systems, Inc. and Ramp Networks
THIS AGREEMENT is entered into between Sonic Systems, Inc. a California
corporation principally located at 5400 Betsy Ross Drive, Suite 206, Santa
Clara, CA 95054 ("Sonic") and Ramp Networks, a California corporation located at
-----
3100 De La Cruz Blvd., Santa Clara, CA 95054 ("Ramp") is made as of this 5th day
----
of January 1999 ("Effective Date").
--------------
Background
----------
Sonic has developed an Internet Security appliance called SonicWALL. Ramp
wishes to OEM the standard version of the 2-port SonicWALL with minor cosmetic
modifications. Sonic has agreed to provide this customized version of the 2-
port SonicWALL to Ramp subject to the terms of this Agreement and in reliance
upon Ramp's representation that it has the technical, marketing, financial, and
business capabilities to fulfill Ramp's obligations set forth in this Agreement.
1. Definitions.
-----------
Channel Partners. "Channel Partners" shall mean any third party authorized
----------------
by Ramp to resell the Product and includes, but is not limited to, distributors,
resellers, value-added resellers, system integrators, and OEMs.
Confidential Information. "Confidential Information" means any data or
------------------------
information, oral or written, treated as confidential that relates to either
Party's (or, if either Party is bound to protect the confidentiality of any
other person's information, such other person's) past, present, or future
research, development, or business activities, including any unannounced
products and services, and including any information relating to services,
developments, inventions, processes, plans, financial information, customer and
supplier lists, forecasts, and projections. Confidential Information also
includes the terms of this Agreement. Notwithstanding the foregoing,
Confidential Information is deemed not to include information that: (i) is
publicly available or in the public domain at the time disclosed; (ii) is or
becomes publicly available or enters the public domain through no fault of the
Party receiving such information; (iii) is rightfully communicated to the
recipient by persons not bound by confidentiality obligations with respect
thereto; (iv) is already in the recipient's possession free of any
confidentiality obligations with respect thereto (excluding, however, any copies
of the Product that may be in Ramp's possession prior to the date of this
Agreement); (v) is independently developed by the recipient; (vi) is approved
for release or disclosure by the disclosing Party without restriction; or (vii)
is required to be disclosed or is disclosed pursuant to the order or requirement
of a court, administrative agency, or other governmental body; provided,
however, that the recipient shall provide prompt notice thereof to the
disclosing Party to enable the disclosing Party to seek a protective order or
otherwise prevent or restrict such disclosure.
Deliverables. "Deliverables" shall mean the items listed in Exhibit A.
------------
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
Derivative Works. "Derivative Works" means programming or design changes
----------------
made to the Product.
Documentation. "Documentation" shall mean the user manual associated with
-------------
the Products.
End User. "End-User" means end user customers located within the Territory
--------
who receive the Product.
Enhancements. "Enhancements" means any modification or addition that, when
------------
made or added to the Product, materially changes its utility, efficiency,
functional capability, or application, but that does not constitute solely an
Error Correction. Enhancements may be designated by Sonic as minor or major,
depending on Sonic's assessment of their value and of the function added to the
preexisting Product.
Error. "Error" means the failure of the Product to conform in all material
-----
respects to its functional specifications as published from time to time by
Sonic, the current version of which is attached as Exhibit C hereto. However,
any nonconformity resulting from Ramp's or its customers' misuse, improper use,
alteration, or damage of the Product is not an Error.
Error Correction. "Error Correction" means either a modification or an
----------------
addition that, when made or added to the Product, establishes material
conformity of the Product to its Specifications
First-Tier Support. "First-Tier Support" shall mean technical support of
------------------
the Product directly to End Users.
Initial Purchase Order. "Initial Purchase Order" shall mean the first
----------------------
purchase order submitted by Ramp and accepted by Sonic and dated ___________.
Licensed Upgrades. "Licensed Upgrades" shall mean any upgrade for the
-----------------
Product for which there is a defined upgrade price in Exhibit B and for which
Sonic will provide to Ramp a software upgrade key to enable such upgrade.
Modifications. "Modifications" means any changes to the Product made by
-------------
Sonic.
NRE. "NRE" means non-recurring engineering.
---
Options. "Options" shall mean Product Software add-ons that may be made
-------
available to customers from time to time for an additional charge.
Party or Parties. "Party" or "Parties" means Sonic or Ramp, as applicable,
----------------
or both Sonic and Ramp as parties to this Agreement.
Products and Prices. "Products" and "Prices" shall mean the Products (as
-------------------
modified for Ramp in accordance with Exhibit A and Section 5) and Prices listed
in Exhibit B. Products includes all
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
Documentation, Software, Enhancements, Error Corrections, Modifications,
Licensed Upgrades, and Releases Sonic makes available to Ramp hereunder.
Releases. "Releases" means new versions of the Software or Product, which
--------
may include, without limitation, Error Corrections, Enhancements, and
Modifications.
Second-Tier Support. "Second-Tier Support" shall mean technical support of
-------------------
the Product directly to Channel Partners.
Severity I Bug. "Severity I Bug" shall mean any demonstrable Error in the
--------------
Product that: (i) causes the Product to have a significant loss of intended
function as set forth in the applicable Specifications; (ii) causes or is likely
to cause data to be lost or destroyed; or (iii) prevents the Product from being
installed or executed on the properly configured environment.
Software. "Software" shall mean the computer programs and/or firmware
--------
which are necessary in order to cause the Products to operate properly, which
are described on Exhibit A, and which Sonic will provide to Ramp hereunder.
Specifications. "Specifications" shall mean the specifications for the
--------------
Products set forth on Exhibit A, Exhibit C, and as otherwise mutually agreed
upon by the Parties in writing.
Third-Tier Support. "Third-Tier Support" shall mean technical support of
------------------
the Product directly to Ramp.
Territory. The "Territory" is the world, subject to the export
---------
restrictions covered in Section 11.1.
2. Rights and Restrictions.
-----------------------
2.1 License Grants. Sonic hereby grants to Ramp a non-exclusive, world-
--------------
wide right to reproduce the Documentation and to use, support, sell, modify (as
set forth in Section 3.4), and distribute the Products. Ramp does not have the
right to re-license the Products to a third party for purposes of manufacturing
the Products. However, should a case arise where Ramp needs manufacturing
rights or to convey manufacturing rights to a third party in order to secure a
large OEM opportunity, the Parties agree to negotiate such an arrangement in
good faith.
2.2 Use of Trademarks/Logos. No license is granted to Ramp to use any
-----------------------
Sonic trademarks, service marks or logos, or those trademarks or logos of any of
Sonic's OEMs without the prior, express written permission of Sonic.
2.3 Ownership of Intellectual Property in Products. The Sonic Products,
----------------------------------------------
including any associated intellectual property rights and/or Derivative Works,
are and remain the sole property of Sonic. Ramp shall from time to time take
any further action and execute and deliver any further instrument, including
documents of assignment or acknowledgment, that Sonic may reasonably request in
order to establish and perfect its exclusive ownership rights in such Products,
including any associated intellectual property rights.
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
2.4 Software License Restrictions. Ramp shall not reverse compile or
-----------------------------
disassemble object code versions of the Software included in the Product or
otherwise create, attempt to create, or permit or assist others to create a
source code of the Software.
2.5 Independent Developments. It is understood that the Parties have
------------------------
performed and will continue to perform substantial independent development
relating to networking products and associated technologies. Each Party also
understands that, over time, the other Party's employees may gain familiarity
with the general concepts and ideas in the other Party's technology disclosed
under the Agreement from independent sources. Consequently, each Party
acknowledges that each Party shall be free to use such independently developed
or received concepts and ideas free of all restrictions, other than those set
forth in this Section 2.
3. Consideration.
-------------
3.1 Purchase from Sonic. Products may be purchased by Ramp at the Prices
-------------------
listed in Exhibit B. Ramp shall issue individual purchase orders for each
Product listed in Exhibit B. Each purchase order must be received 60 days in
advance of the applicable shipping date and must be non-cancelable; however, the
purchase orders may be increased by up to 50% in quantity of Products being
ordered upon not less than 30 days notice prior to the scheduled shipping date.
A non-binding 90 day forecast must accompany all purchase orders covering the
three consecutive months following the current purchase order. All Products are
fully tested and verified in accordance with existing manufacturing procedures.
All Products are shipped in bulk packaging in anti-static bags individually
wrapped, FOB Sonic's factory in San Jose, CA. However, the second shipment
against the Initial Purchase Order, due to arrive at Ramp no earlier than April
1, 1999, shall be F.O.B. Ramp's location in Fremont, California. All other
shipments shall be F.O.B. Sonic's factory in San Jose, CA. Title and risk of
loss for the Product shall pass to Ramp once it is turned over to Ramp's
shipping agent or freight forwarder.
3.2 Terms of Purchase. Terms of purchase shall be net 30 days. Sonic
-----------------
will grant such credit approval to Ramp, provided Ramp meets Sonic's credit
approval standards. However, payment terms for only the first shipment against
the Initial Purchase Order (due January 29, 1999) shall be net 45 days.
3.3 Minimum Purchase Orders. Each purchase order presented to Sonic must
-----------------------
be for a minimum of [* * * ] of Product to be delivered in a single shipment.
3.4 Inventory Balancing. Ramp will have the right to modify Product in
-------------------
its inventory as needed via a software key to increase or decrease the number of
users per model (for example, if Ramp needs 25-user units and only has 5-user
units in inventory, Ramp can use a software key to upgrade the 5-user units to
25-user units). The detailed mechanics of how such upgrade shall be done will
be mutually agreed to by the Parties. The charge or credit to Ramp (depending
on the nature of the upgrade/downgrade) shall be the actual price difference
between the models, and shall be reconciled and paid no later than fifteen (15)
days following the end of each calendar quarter.
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
4.0 Upgrade License Accounting Reports and Audit Rights.
---------------------------------------------------
4.1 Accounting Reports. Ramp shall maintain an accurate list of Licensed
------------------
Upgrade units based on the Product's serial number associated with each copy of
the Licensed Upgrades described in Exhibit B for a period of three (3) years
after such Licensed Upgrade is made in accordance with Section 3.4. Within
fifteen (15) days after the end of each calendar quarter, Ramp shall complete
and submit to Sonic a detailed report setting forth all sales of the Licensed
Upgrades during such calendar month and remit to Sonic the appropriate license
or other fee payments due based on such report. If necessary and at Sonic's
discretion, Ramp shall allow a mutually agreed upon, third party auditor to
review Ramp records associated with such Licensed Upgrades per the Audit Rights
in Section 4.2 below.
4.2 Audit Rights. Sonic has the right to direct a mutually agreed upon
------------
third party auditor to conduct, during normal business hours and upon reasonable
prior written notice to Ramp, an audit of the appropriate records of Ramp to
verify the accuracy of Ramp's reports to Sonic; provided, that Sonic shall
conduct no more than one (1) such audit during any twelve (12) month period.
Such audit shall be at Sonic's expense, unless the adjustment to the Licensed
Upgrade or other fees owing from Ramp is greater than [* * * ] of fees reported
by Ramp, in which case Ramp shall pay all expenses associated with the audit.
Within ten (10) days after receipt of notice from Sonic, Ramp shall remit to
Sonic all amounts found in any such audit to be due to Sonic and not previously
paid by Ramp.
5. Customization and Deliverables.
------------------------------
5.1 Customization. Sonic agrees, at no charge to Ramp, to make specific
-------------
minor cosmetic and pre-configuration modifications to Sonic's pre-existing
products as set forth on Exhibit A.
5.2 Deliverables. The Deliverables are fully described in Exhibit A
------------
attached. Sonic will deliver all Deliverables to Ramp in accordance with the
schedule set forth on Exhibit D. Ramp will have the right to test the
Deliverables for a period of five (5) working days following Ramp's receipt of
such Deliverables to determine whether the Deliverables conform to the
Specifications. If Ramp determines the Deliverables fall to conform to the
Specifications, Ramp will notify Sonic, and Sonic will use its best efforts to
correct such defect within two (2) days. At the end of this period, Sonic will
submit the corrected Deliverables to Ramp for acceptance by Ramp under this
Section 5.2; provided, however, that if the corrected Deliverables fail to
conform to the Specifications, Ramp will have the right to terminate this
Agreement upon written notice to Sonic. The procedure set forth in this Section
5.2 will repeat until Ramp either accepts or permanently rejects the
Deliverables.
6. Support Obligations, Product Updates, and Product Upgrades.
----------------------------------------------------------
6.1 Scope of Services. During the term of this Agreement, Sonic shall
-----------------
render certain services in support of the Products, during Sonic's normal
working hours (Monday through Friday, 9am to 5pm, PST, excluding holidays).
(a) Sonic shall maintain a trained staff capable of rendering the
services set forth in this Agreement.
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
(b) Ramp shall provide First-Tier Support and Second-Tier Support.
(c) Sonic shall only provide Third-Tier support. Under no
circumstances shall Sonic be obligated to directly support a Ramp Channel
Partner or an End User of the Product.
6.2 Updates and Upgrades. During the term of this Agreement Sonic, at its
--------------------
own discretion, shall release Product updates and upgrades and shall make such
updates and upgrades available to Ramp. Sonic shall not charge Ramp for such
upgrades or updates unless Sonic generally charges its customers for such
upgrades and updates.
(a) Sonic is responsible for using all reasonable diligence to correct
verifiable and reproducible Errors when reported to Sonic by Ramp in accordance
with Sonic's standard reporting procedures communicated in writing to Ramp.
Sonic shall, within two (2) days of verifying that such an Error is present,
initiate work in a diligent manner toward development of an Error Correction.
Following completion of the Error Correction, Sonic shall make such Error
Correction available to Ramp and shall include the Error Correction in all
subsequent Releases of the Product. Sonic shall not be responsible for
correcting Errors in any version of the Product other than the most recent
Release of the Product, provided that Sonic continues to support prior Releases
superseded by recent Releases in accordance with Section 6.3.
(b) Sonic may, from time to time, issue new firmware releases of the
Software at no cost to its customers generally, containing error corrections,
minor Enhancements, and, in certain instances if Sonic so elects, major
Enhancements. These new releases shall be provided to Ramp at no additional
charge as new Ramp versions (which replace prior Ramp versions, as customized by
Sonic for Ramp hereunder pursuant to Section 5) within 30 days after the general
release.
(c) Sonic may, from time to time, offer major Enhancements and/or
Options to its customers generally for an additional per unit charge. Ramp, at
its discretion, may choose to purchase and resell these major Enhancements
and/or Options to its customers.
(d) Sonic shall consider and evaluate the custom development of
Enhancements for the specific use of Ramp and shall respond to Ramp's requests
for additional services pertaining to the Product (including, without
limitation, graphical user interface modifications, new custom functionality,
and formatting assistance), provided that such assistance, if agreed to be
provided, is subject to supplemental NRE charges and support fees mutually
agreed to by Sonic and RAMP. The Parties shall negotiate in good faith for
Sonic to accommodate Ramp customization requests and the associated NRE fee, but
Sonic may decline the request due to lack of available engineering resources,
scheduling conflicts, or the nature of the requested customization.
(e) Sonic shall make its best effort to fix Severity I Bugs within 5
working days, and other bugs within 15 working days. The Parties acknowledge
that due to the unpredictable nature of future bugs Sonic can not be expected to
absolutely deliver the fixes within the specified timeframes in every case.
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
6.3 Support for Previous Releases. Sonic shall continue to provide Third-
-----------------------------
Tier Support to Ramp for the firmware release immediately preceding the latest
release of firmware for a period of ninety (90) days after delivery of a new
version to Ramp.
7. Confidentiality.
---------------
During the course of performance of this Agreement, and thereafter, either
Party may disclose certain Confidential Information to the other Party. The
Party receiving any such Confidential Information shall maintain the
confidentiality of such Confidential Information and shall not use, disclose, or
otherwise exploit any Confidential Information for any purpose not expressly
contemplated by this Agreement.
8. Representation and Warranties.
-----------------------------
8.1 Non-infringement. Sonic is a corporation duly organized, validly
----------------
existing and in good standing under the laws of the State of California, and has
full corporate power and authority to enter into this Agreement. In addition,
Sonic has good and marketable tide to all of the Products, free and clear of
restrictions on or conditions to the license, transfer or assignment of the
Products. No person has made a claim against Sonic that any of the Products
infringe any patent, copyright, or proprietary process of interest of another,
and Sonic does not require rights under any patent, copyright (or any
application or registration respecting any thereof), discovery, improvement,
process, formula, know-how, data, plan, specification, drawing or the like
belonging to another. Finally, Sonic represents and warrants that the Products
do not and shall not infringe any patent, copyright, mask right or trade secret
of any third party.
8.2 Warranty. Sonic represents and warrants that the Products will
--------
perform in accordance with their uses and be substantially free of errors in
their operation for a period of 15 months after the date of shipment by Sonic.
Products that are found to be defective and are under warranty that are returned
to Sonic shall be replaced with new or refurbished Products within 30 days of
receipt. In the event that the Products are found to be modified (except as
specifically permitted under this Agreement), tampered with, or mis-used this
warranty shall not apply.
8.3 Limitation of Liability. EXCEPT AS SET FORTH IN THIS SECTION 8, SONIC
-----------------------
DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTIES AS TO THE SUITABILITY OR MERCHANTABILITY OR FITNESS
FOR ANY PARTICULAR PURPOSE.
8.4 Indemnification by Sonic. Except to the extent Ramp indemnifies Sonic
------------------------
pursuant to Section 8.5 below, and except for claims which arise from Ramp's
negligence or willful misconduct, Sonic agrees to indemnify and hold harmless
Ramp, its successors and assigns, officers, directors, employees and customers
(collectively "Indemnitees"), from and against any and all claims and causes of
-----------
action arising out of any claims of any third parties with respect to Sonic's
breach of any of its representations, warranties or covenants contained in this
Agreement; provided that Sonic receives prompt written notice of and has sole
control over the defense and settlement of such claims and actions. Sonic shall
pay all costs, expenses and reasonable attorneys fees incurred by Ramp in
connection with any such defense unless Ramp chooses to defend itself, in which
case it would be at Ramp' own cost. In the event of any
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
such claim or suit, unless Ramp chooses to defend itself at its own cost, Sonic
shall have the right to select counsel and the right to control the defense and
settlement of such suit or claim. Sonic further agrees to indemnify and save
harmless Indemnitees from all claims or causes of action based upon defective
design, manufacture, or a failure of the Products to perform according to their
specifications.
8.5 Indemnification by Ramp. Except to the extent Sonic indemnifies Ramp
-----------------------
pursuant to Section 8.4 above, and except for claims which arise from Sonic's
negligence or willful misconduct, Ramp agrees to indemnify and hold harmless
Sonic from any losses from claims of personal injury arising from Ramp' sale and
distribution of the Product, or from its breach of any representations,
warranties or covenants contained in this Agreement; provided that Ramp receives
prompt written notice of and has sole control over the defense and settlement of
such claims and actions. Ramp shall pay all costs, expenses and reasonable
attorneys fees incurred by Sonic in connection with any such defense, unless
Sonic chooses to defend itself. This indemnity shall not expire upon
termination of this Agreement, but shall remain in force and effect thereafter.
8.6 Limitation of Liability. Except for claims which arise from the
-----------------------
negligence or willful misconduct of Sonic or Sonic's employees, officers, or
agents, the maximum cumulative liability owed by Sonic to Ramp under Section 8.4
above shall be limited to the total amount paid by Ramp to Sonic as of the date
a court makes a final determination in any action alleging a breach of Sonic's
rights or representations under Section 8.1 or 8.2. Except for claims which
arise from the negligence or willful misconduct of Ramp or Ramp's employees,
officers, or agents, the maximum cumulative liability owed by Ramp to Sonic
under Section 8.5 above shall be limited to the total amount received by Sonic
from Ramp as of the date a court makes a final determination in any action
brought by Sonic under section 8.5. As used in this section 8.6, a `final
determination' is the date no further appeal is possible in the action at issue.
9. Term & Termination.
------------------
9.1 Term. Subject to Section 9.2, the term of this Agreement begins on
----
the Effective Date and shall continue for a period of 1 year, provided that this
Agreement shall automatically renew for successive one year terms, unless either
Party gives the other Party thirty (30) days written notice prior to the
expiration of the then-current term of such Party's intent to terminate this
Agreement.
9.2 Termination. Either Party may terminate this Agreement in the event
-----------
the other Party is in material breach of this Agreement (including any failure
to timely pay amounts owed to a Party) and the breaching Party fails to cure
such breach within thirty (30) days following its receipt of written notice of
such breach from the other Party; provided, however, that such cure period shall
be shortened to a period of five (5) days if Ramp is in material breach of any
of the terms of Section 2 of this Agreement.
9.3 Custom Inventory. In the event of termination of this Agreement by
----------------
either Party, any custom parts in Sonic's inventory that were ordered
specifically to fulfill a purchase order submitted by Ramp and accepted by Sonic
shall be paid for by Ramp to Sonic within 30 days of the termination of this
Agreement.
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
9.4 Minimum Quantities. Ramp agrees to use commercially reasonable
------------------
efforts to purchase certain initial, quarterly, and annual minimum quantities.
With the exception of the Initial Purchase Order, these minimum quantities are
not binding financial commitments, except as set forth in Section 9.5(c). Such
minimum quantities include:
(a) Initial Purchase Order. The Initial Purchase Order of [* * * ]
----------------------
units total will be delivered in two batches of [* * * ], the first to have a
requested delivery date of no later than [* * * ], and the second to have a
requested delivery date no earlier than [* * * ].
(b) Quarterly Minimum. From the Effective Date of this Agreement,
-----------------
Ramp will use commercially reasonable efforts to purchase [* * *] units per
quarter. The first shipment of [* * * ] on the Initial Purchase Order shall
constitute the entire minimum with respect to the first calendar quarter during
the term of this Agreement and the second shipment of [* * *] shall be counted
towards meeting the minimum with respect to the second calendar quarter.
(c) Annual Minimum. From the Effective Date of this Agreement, of
--------------
[* * *] units per calendar year.
9.5 Default. The following are events of default:
-------
(a) Failure to Pay or Breach. If either Party is in default of any
------------------------
material term or condition hereunder and such default continues for thirty (30)
days following written notice thereof by the non-breaching Party; or
(b) Insolvency, Assignment or Bankruptcy. If either Party is in
------------------------------------
material default of its obligations to its vendors or suppliers, becomes
insolvent, files or has filed against it a petition under any Bankruptcy Law
(which, if involuntary, is unresolved after sixty days); or
(c) Performance. Should Ramp fail to meet the quarterly minimum of
-----------
[* * *] units as specified in Section 9.4(b) for any two consecutive quarters.
(d) Right to Cure Default. Notwithstanding Sections 9.5(a), 9.5(b),
---------------------
and 9.5(c) above, either Party will have a 30 day right to cure any deficiency
claimed or presented in writing that would constitute default.
9.6 Return of Confidential Information. Upon termination of this
----------------------------------
Agreement and receipt of written request from either Party, each Party shall
return at its expense any and all copies of Confidential Information or
materials in its possession or under its control.
9.7 Purchases after Termination. Upon termination of this Agreement
---------------------------
(except for termination due to breach of contract by Ramp) Ramp shall be able to
continue to purchase the Product and receive Third-Tier Support for a period of
ninety (90) days per the original terms of this Agreement.
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
10. Source Code and Hardware Design Escrow.
--------------------------------------
10.1 Escrow Agreement. Sonic agrees to deposit a full and complete
----------------
electronic copy of the source code and hardware design to the Product, and all
updates and enhancements thereto (the "Source Materials"), into escrow with a
----------------
mutually agreed upon escrow services company. The Parties will enter into a
mutually agreeable escrow agreement. Ramp shall pay all fees for such escrow
and Sonic shall bear its own costs in preparing the Source Materials for
deposit. The escrow agreement shall provide for the release of such Source
Materials upon the occurrence of an Event (as defined in 10.2).
10.2 Release Event. The definitive escrow agreement will provide for the
-------------
release of the Source Materials to Ramp in the event of (a) institution by or
against Sonic of insolvency, receivership or bankruptcy proceedings or any other
proceedings for the settlement of Sonic's debts, provided such proceeding is not
dismissed within forty-five (45) days after its filing, (b) upon Sonic's making
an assignment for the benefit of creditors, or (c) upon Sonic's dissolution or
ceasing to do business (each of Sections 10.2(a), (b), and (c) an "Event").
-----
10.3 Source Code License. Subject to the terms and conditions of this
-------------------
Agreement, upon release from escrow Ramp shall have a nonexclusive,
nontransferable license to use and modify the Source Materials and distribute
the same in accordance with the licenses herein granted. Title in all Source
Materials shall remain in Sonic and Ramp will take all reasonable precautions to
maintain the secrecy of the Source Materials. Further, upon the release from
escrow of the Source Materials, Ramp shall pay royalties to Sonic, or Sonic's
designate or successor, in the amount of [* * *] per unit shipped which contains
the Source Materials or any portion thereof.
10.4 Right to Use Source Materials. Upon the release from escrow of the
-----------------------------
Source Materials, Ramp agrees to not integrate the Source Materials into
products other than the Products.
11. Miscellaneous.
-------------
11.1 Export Restrictions. Ramp shall not re-export, either directly or
-------------------
indirectly, the Product (including any technical data, manuals, or other
materials delivered pursuant to this Agreement) to any country or countries to
which such re-exports are prohibited under the laws of the United States or the
laws of any country in the Territory, including but not limited to any
Derivative Works or Modifications. Ramp shall obtain appropriate license
approvals and certifications necessary, if any, to comply with the applicable
export and re-export restrictions of the United States or any country in the
Territory. Ramp understands and recognizes that the Product and other materials
made available to it hereunder may be subject to the Export Administration
Regulations of the U.S. Department of Commerce and other U.S. government
regulations relating to the export of technical data and equipment and products
produced therefrom. Ramp is familiar with and agrees to comply, and to require
Channel Partners and End-Users to, with all such regulations, including any
future modifications thereof.
11.2 Force Majeure. If either Party is prevented from performing any
-------------
portion of the Agreement by causes beyond its control, including labor disputes,
civil commotion, war, governmental regulations or
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
controls, casualty, inability to obtain materials or services, or acts of
God, such defaulting Party shall be excused from performance for a period of
delay and for a reasonable time thereafter.
11.3 Governing Law. This Agreement shall in all respects be governed by
-------------
and interpreted in accordance with the laws of the State of California, without
reference to conflict of law provisions.
11.4 Arbitration. Any controversy or claim arising out of this Agreement
-----------
or a breach thereof shall, on written request of either Party served on the
other, be submitted to binding arbitration before a single arbitrator to be
conducted in accordance with the Rules and Regulations of the American
Arbitration Association (Commercial Division). If the Parties are unable to
agree on an arbitrator within thirty (30) days after a Party has served notice
of a request to arbitrate, then an arbitrator shall be selected by the American
Arbitration Association pursuant to its then current rules, within fifteen (15)
days after the Parties are unable to agree on the arbitrator. Arbitration shall
take place in the County of Santa Clara, California. No discovery shall be
allowed in such arbitration. The maximum number of days of hearing in such
arbitration shall be ten (10), all of which shall occur in a twenty (20) day
period. The arbitrators shall issue a written decision in the arbitration
giving the findings of facts and reasons for the award made by the arbitrator.
The award shall be specifically enforceable in a court of law with jurisdiction
over the Parties and subject matter.
11.5 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.
11.6 Consequential Damages. EXCEPT AS EXPLICITLY SET FORTH IN THIS
---------------------
AGREEMENT, UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO THE OTHER OR
ANY OTHER PARTY FOR ANY CONSEQUENTIAL, INCIDENTAL, INDIRECT, OR SPECIAL DAMAGES
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR A PARTY'S PERFORMANCE OR FAILURE
TO PERFORM HEREUNDER.
11.7 The terms of any invoice, acknowledgment, purchase order, or any
other document issued in connection with any transaction under this Agreement
shall be disregarded except for quantities ordered, prices applicable, freight
and insurance charges, and delivery dates specified. The terms of this
Agreement shall supersede and void any and all standard terms and conditions on
each Party's respective forms as described in the first sentence of this Section
11.7.
11.8 Binding Nature and Assignment. Neither Party may assign any of its
-----------------------------
rights or obligations under this Agreement without the prior written consent of
the other Party; provided, that either Party may in its sole discretion assign
its rights and obligations under this Agreement to an entity which acquires all
or substantially all of its assets or to any successor in a merger or
acquisition without the prior written consent of the other Party. Subject to
the foregoing, this Agreement is binding on the Parties and their respective
successors and assigns.
11.9 Amendment and Waiver. No modification, amendment, or waiver of or
--------------------
under this Agreement is binding unless executed in writing by the Party against
whom enforcement of such modification, amendment or waiver is sought. No waiver
of any of the provisions of this
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
Agreement constitutes a waiver of any other provision nor shall such waiver
constitute a continuing waiver unless otherwise expressly provided.
11.10 Further Assurances. Each Party shall provide such further documents
------------------
or instruments required by the other Party as may be reasonably necessary or
desirable to give effect to this Agreement and to carry out its provisions.
11.11 Publicity. For purposes of marketing the Products each Party may
---------
publicize the business relationship generally contemplated by this Agreement
only with the prior consent of the other Party.
11.12 Severability. Any provision of this Agreement which is prohibited
------------
or unenforceable in any jurisdiction is, as to such jurisdiction, ineffective to
the extent of such prohibition or unenforceability without invalidating the
remaining provisions or affecting the validity or enforceability of such
provision in any other jurisdiction.
11.13 Entire Agreement. This Agreement, including the Exhibits hereto,
----------------
constitutes the entire agreement between the Parties pertaining to the subject
matter hereof and supersedes all prior and contemporaneous agreements,
understandings, negotiations and discussions, whether oral or written, of the
Parties pertaining to the subject matter hereof. There are no representations
or warranties of the Parties in connection with the subject matter hereof except
as specifically referenced herein.
11.14 Notices. Any notice, demand or other communication required or
-------
permitted to be given under this Agreement must be in writing and is deemed
delivered to a Party (a) when delivered by hand or courier, (b) when sent by
confirmed facsimile with a copy sent by another means specified in this Section,
or (c) six (6) days after the date of mailing if mailed by certified or
registered mail, return receipt requested, postage prepaid, in each case to the
address of such Party set forth below (or at such other address as the Party may
from time to time specify by notice delivered in the foregoing manner):
If to Sonic:
-----------
Sonic Systems
5400 Betsy Ross Drive, #206
Santa Clara, CA 95054
Attn: Sreekanth Ravi
If to RAMP:
----------
Ramp Networks, Inc.
3180 De La Cruz Blvd., Suite 200
Santa Clara, CA 95054
Attn: John Humphreys
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
11.15 Independent Contractors. The Parties act as independent contractors
-----------------------
of each other. Nothing herein is deemed to constitute Sonic and Ramp as
partners, joint venturers, or principal and agent. Except as expressly
contemplated by this Agreement, the Parties have no authority to bind each other
legally or equitably by contract, admission, acknowledgment, or undertaking or
to represent each other as to any matters.
11.16 No Third Party Beneficiaries. Nothing in this Agreement confers any
----------------------------
rights on any person or entity not a Party to this Agreement.
11.17 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which is deemed an original but all of which taken
together constitute one and the same instrument.
11.18 Survival. Sections 1, 2.3, 2.4, 2.5,4, 8, 9.6, 9.7, 10.3, 11, and
--------
all payment obligations incurred prior to the termination of this Agreement,
will survive the termination or expiration of this Agreement for any reason.
Section 7 will survive the termination of this Agreement for a period of five
(5) years.
IN WITNESS WHEREOF the Parties have entered into this Agreement to take
effect on the date executed by Sonic.
RAMP NETWORKS, INC. SONIC SYSTEMS, INC.
Signature__________________ Signature__________________
Print Name Mahesh Veerina Print Name Sreekanth Ravi
---------------- ----------------
Print Title President Print Title President
--------------- ----------------
Date_______________________ Date_______________________
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
EXHIBIT A
---------
Deliverables
PRODUCT OVERVIEW
- ----------------
Sonic shall deliver a customized version of its two-port SonicWALL product.
There will be three models of this single hardware version, each model software-
keyed to limit it to a particular maximum number of Users. The limit will be
based on the first "x" number of IP Addresses on the LAN that attempt to access
the WAN through the SonicWALL. The three models shall be 5-User, 25-User, and
100-User.
PRODUCT SPECIFICATION
The product specifications for the purposes of this Agreement are as detailed
below. The baseline product is Sonic Systems' current two-port SonicWALL
Internet Security Appliance, Firmware version 3.x Exhibit C attached). Sonic
---------
will make the following modifications:
HARDWARE:
. The Product shall include Sonic's standard SonicWALL Plastic faceplate
. The entire enclosure will have a standard plastic color to match or
complement current Ramp products.
. Product and Ramp company name to be customized on the hardware
SOFTWARE
. Versions shall only be 5-User, 10-User, and 100-User.
. Product and Ramp company name to be customized in the software Graphical User
Interface (GUI)
. Set default IP address to Ramp Default
. Customer registration to be directed to Ramp URL
. [* * *].
MISCELLANEOUS
. Future Sonic charged Options (such as VPN) are not included in the base
Product and are only available if they are list in the Table in Exhibit B.
. An electronic version of the SonicWALL documentation shall be provided by
Sonic to Ramp for Ramp to customize and produce hard copy documentation.
. Only the individual units shall be supplied and bulk shipped by Sonic. Hard
copy documentation, product packaging (other than anti-static bags), and
power supplies are not part of this Agreement.
. Sonic to provide Ramp technical training prior to February 5, 1999
. A list of known bugs shall be provided and updated as available.
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
EXHIBIT B
---------
Products and Pricing
--------------------
Product Pricing
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Product Model Per Unit Price
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
5-user [* * *]
- ------------------------------------------------------------------------------------------------------------------------------
25-user [* * *]
- ------------------------------------------------------------------------------------------------------------------------------
100-user [* * *]
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Upgrade Pricing
<TABLE>
<CAPTION>
Upgrade Per Unit Upgrade Price
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
[* * *] [* * *]
- ------------------------------------------------------------------------------------------------------------------------------
[* * *] [* * *]
- ------------------------------------------------------------------------------------------------------------------------------
[* * *] [* * *]
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
EXHIBIT C
---------
Product Specification
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
[Graphic: diagram illustrating set up of network and traffic flow from the
Internet to network]
Business can greatly benefit from the wealth of information that is available on
the Internet. But with that benefit comes the security risk that unauthorized
users may access the network to steal information. Some hackers get their
thrill by crashing or corrupting PCs and servers. To help companies reduce
these security risks, Sonic Systems developed SonicWALL. SonicWALL offers state
of the art software and hardware technology to provide a secure, easy-to-
install, reliable, and affordable firewall for businesses with a few users to
several hundreds of users.
To protect the private network against Internet-based theft, destruction, or
modification of data, SonicWALL implements stateful packet inspection, a
technology similar to that used in enterprise-level firewall products offered by
Check Point and Cisco. SonicWALL will allow data coming from the Internet only
if it's part of a session that was initiated by one of the users on the secure
Local Area Network (LAN). Hackers and other unauthorized users will be stopped
at SonicWALL and not allowed on the private network.
When SonicWALL is installed, the network is protected from Denial of Service
Attacks, such as Ping of Death, SYN Flood, IP Spoofing, and LAND. When new
hacker attacks are discovered, Sonic adds protection from them to the SonicWALL
software. SonicWALL goes an extra step by automatically notifying the
administrator when there is a new software release available. SonicWALL
customers get free software updates.
In addition to stopping unauthorized users form accessing the secure LAN,
SonicWALL allows company management to determine which Internet sites or
Newsgroups should be accessible. The network administrator simply selects the
categories of content to block, such as pornography, intolerance or violence,
and SonicWALL will automatically block the sites that fall under those
categories. SonicWALL uses the highly regarded CyperNOT filter list from
Microsystems Software, also used in products offered by distinguished
organizations such as America Online, AT&T, IBM, Microsoft, Netscape, and The
Scholastic Network.
SonicWALL was designed for ease of installation and administration.
Installation involves simply connecting SonicWALL between the private network
and Internet router, spending a few minutes selecting the filtering options from
the intuitive, Web browser based configuration screen, and the users and network
are secure. No reconfiguration of any PC applications is needed.
[Graphic: Table with product specifications]
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
[Graphic: Picture of SonicWALL Internet Firewall product]
[Graphic: running sidebar with graphics, product marketing quotations,
company contact information]
Internet Firewall Appliance
Firewall Security. SonicWALL uses stateful packet inspection to protect the
private LAN from hackers and vandals on the Internet. Stateful packet
inspection is similar to the algorithms used by enterprise level firewall
vendors, such as Check Point and Cisco, and is widely considered to be the most
effective method of protecting the private LAN.
Hacker Attack Prevention. SonicWALL is pre-configured to automatically detect
and thwart Denial of Service (DoS) attacks such as Ping of Death, SYN Flood,
LAND Attack, IP Spoofing, etc. The goal of a DOS Attack is not to steal
information, but to disable a device or network so users no longer have access
to network resources. For example, "WinNuke," a widely available DoS tool, is
used to remotely crash any unprotected Windows PC on the Internet; SonicWALL
protects the private LAN from WinNuke and many other DoS attacks.
Internet Content Filtering. Content filtering allows businesses to create and
enforce Internet access policies tailored to the needs of the organization. An
option Content Filter List subscription is available which allows the
administrator to select categories of Internet sites, such as pornography or
racial intolerance, to block or monitor access. Automatic weekly updates of the
customizable Content Filter List make sure that access restrictions to new and
relocated sites are properly enforced. Users may be given a password to bypass
the filter, giving them unrestricted access to the Internet.
Network Address Translation (NAT). NAT translates the IP addresses used on the
private LAN to a single, valid IP address that is used n the Internet. This
adds a level of security since the address of a PC on the LAN is never
transmitted on the Internet. NAT also allows SonicWALL to support LANs using
low cost Internet accounts, such as xDSL or cable modems, where only one IP
address is provided by the ISP.
DHCP Server and Client. DHCP Server provides centralized management of IP
clients on the LAN by automatically configuring their IP address, gateway
address, DNS address, and more. DHCP Client allows SonicWALL to acquire its IP
settings (such as IP address, gateway address, DNS address, etc.) from the ISP.
This is ideal when the IP settings, which may change from time to time, are
automatically provided by the ISP, as is the case with some xDSL and cable modem
Internet accounts.
Remote Access Authentication. Users can access Intranet resources on the
private LAN by successfully logging into SonicWALL from the Internet.
Authentication is established using an MD5-based encrypted security mechanism.
Web Browser Management. SonicWALL is easily and securely configured and
monitored through a Web-basd interface. Authentication is established using an
MD5-based encrypted security mechanism.
Network Access Rules. Network Access Rules allow the administrator to extend
SonicWALL's firewall functions. For example, a rule may be created which blocks
all traffic of a certain type, such as Internet Chat (IRC), from the LAN to the
Internet; another rule may be created which gives Internet users access to a
server on the LAN, such as the organization's public Web server.
ICSA Certified. After being subjected to a rigorous suite of tests intended to
expose vulnerabilities to attacks and intrusions, SonicWALL Plus has features
that make it ideally suited for use in larger, enterprise networks.
SonicWALL/10 and SonicWALL/50 may be upgraded to support more users and to add
the following Optional Enterprise Features.
Custom Network Access Rules. The administrator has fine grain control over
network traffic. For example, Custom Network Access Rules may be created
which allow access to a Web server
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
to everyone but competitors, or restrict use of certain protocols, such as
Telnet, to authorized users on the LAN.
Web Proxy Relay. If use of a caching proxy server is required, SonicWALL
Plus may be used to transparently redirect all Web requests to the proxy
without client configuration.
Intranet Support. SonicWALL Plus allows Intranet firewalling by allowing
the administrator to restrict access to certain resources on the LAN. For
example, protectieon may be required for a company's accounting department
against unauthorized access by other users on the same network.
Static Routes. SonicWALL Plus may be configured to support large networks
with internal routers.
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
EXHIBIT D
---------
Deliverables Schedule
The customized version of the software is to be delivered to Ramp no later
than [* * *].
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
EXHIBIT 10.9
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
DISTRIBUTION AGREEMENT BETWEEN
TECH DATA CORPORATION AND
TRANCELL SYSTEMS
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
DISTRIBUTION AGREEMENT
THIS AGREEMENT, dated as of this _16__ day of _December___________ 19_96_
(the "Effective Date"), is between TECH DATA CORPORATION, a Florida corporation
("Tech Data"), with its principal corporate address at 5350 Tech Data Drive,
Clearwater, Florida 34620 and TRANCELL SYSTEMS, a California corporation
("Trancell"), with its principal corporate address at 3180 De La Cruz Blvd.,
Suite 200, Santa Clara, California 95054.
RECITALS
A. Tech Data desires to purchase certain Products from Trancell from time
to time and Trancell desires to sell certain Products to Tech Data in accordance
with the terms and provisions set forth in this Agreement.
B. Trancell desires to appoint Tech Data as its non-exclusive distributor
to market Products within the territory defined below and Tech Data accepts such
appointment on the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the Recitals, the mutual covenants
contained in this Agreement and other good and valuable consideration, Tech Data
and Trancell hereby agree as follows:
ARTICLE I. DEFINITIONS, APPOINTMENT AND TERM OF AGREEMENT
----------------------------------------------------------
1.1 Definitions. The following definitions shall apply to this Agreement.
-----------
(a) "Customers" of Tech Data shall include dealers, resellers, value
added resellers, mail order resellers and other entities that acquire
the Products from Tech Data.
(b) "DOA" shall mean Product, or any portion thereof, which fails to
operate properly on initial "bum in", boot, or use, as applicable.
(c) "Documentation" shall mean user manuals, training materials,
product descriptions and specifications, brochures, technical manuals,
license agreements, supporting materials and other printed information
relating to the Products, whether distributed in print, electronic, or
video format.
(d) "End Users" shall mean the final retail purchasers or licensees
who have acquired Products for their own use and not for resale,
remarketing or redistribution.
(e) "Non-Saleable Products" shall mean any Product that has been
returned to Tech Data by its Customers that has had the outside shrink
wrapping or other packaging seal broken or any components of the
original package are missing, damaged or modified.
-2-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
(f) "Products" shall mean, individually or collectively as
appropriate, hardware, licensed software, Documentation, supplies,
accessories, and other commodities related to any of the foregoing
produced by Trancell.
(g) "Services" means any warranty, maintenance, advertising, marketing
or technical support and any other services performed or to be
performed by Trancell.
(h) "Territory" shall mean worldwide.
1.2 Term of Agreement. The term of this Agreement shall commence on the
-----------------
Effective Date and, unless terminated by either party as set forth in this
Agreement, shall remain in full force and effect for a term of one (1)
year, and will be automatically renewed for successive one (1) year terms
unless prior written notification of termination is delivered by one of the
parties in accordance with the notice provision of this Agreement.
1.3 Appointment as Distributor. Trancell hereby grants to Tech Data the non-
--------------------------
exclusive right to distribute Products during the term of this Agreement
within the Territory. This Agreement does not grant Trancell or Tech Data
an exclusive right to purchase or sell Products and shall not prevent
either party from developing or acquiring other vendors or customers or
competing Products. Tech Data will use commercially reasonable efforts to
promote sales of the Products. Trancell agrees that Tech Data may obtain
Products in accordance with this Agreement for the benefit of subsidiaries
of Tech Data. Wholly owned subsidiaries of Tech Data shall be entitled to
order Products directly from Trancell pursuant to this Agreement.
ARTICLE II. PURCHASE ORDERS
----------------------------
2.1 Issuance and Acceptance of Purchase Order.
-----------------------------------------
(a) This Agreement shall not obligate Tech Data to purchase any
Products or services except as specifically set forth in a written
purchase order.
(b) Tech Data may issue to Trancell one or more purchase orders
identifying the Products Tech Data desires to purchase from Trancell.
The terms and provisions of this Agreement shall govern all purchase
orders except that purchase order may include other terms and
provisions which are consistent with the terms and provisions of this
Agreement, or which are mutually agreed to by Tech Data and Trancell.
Purchase orders will be placed by Tech Data by fax or electronically
transferred.
(c) A purchase order shall be deemed accepted by Trancell unless
Trancell notifies Tech Data in writing within five (5) days after
receiving the purchase order that Trancell does not accept the
purchase order.
-3-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
2.2 Purchase Order Alterations or Cancellations. Prior to shipment of
-------------------------------------------
Products, Trancell shall accept alterations or cancellation to a purchase
order in order to: (i) change a location for delivery, (ii) modify the
quantity or type of Products to be delivered or (iii) correct typographical
or clerical errors.
2.3 Evaluation or Demonstration Purchase Orders. Trancell shall provide to
-------------------------------------------
Tech Data a reasonable number of demonstration or evaluation products at no
charge.
2.4 Product Shortages. If for any reason Trancell's production is not on
-----------------
schedule, Trancell may allocate available inventory to Tech Data and make
shipments based upon a fair and reasonable percentage allocation among
Trancell's customers. Such allocations shall not impact the calculation of
performance rebates.
ARTICLE III. DELIVERY AND
--------------------------
ACCEPTANCE OF PRODUCTS
----------------------
3.1 Acceptance of Products. Tech Data shall, after a reasonable time to
----------------------
inspect each shipment, accept Product (the "Acceptance Date") if the
Products and all necessary documentation delivered to Tech Data are in
accordance with the purchase order. Any Products not ordered or not
otherwise in accordance with the purchase order, (e.g. mis-shipments,
overshipments) may be returned to Trancell at Trancell's expense (including
without limitation costs of shipment or storage). Trancell shall refund to
Tech Data within ten (10) business days following notice thereof, all
monies paid in respect to such rejected Products. Tech Data shall not be
required to accept partial shipment unless Tech Data agrees prior to
shipment.
3.2 Title and Risk of Loss. FOB Trancell Shipping Point title and risk of loss
----------------------
or damage to Products shall pass to Tech Data at the time that the Products
are shipped by Trancell (i.e., delivered to Common Carrier).
3.3 Transportation of Products. Trancell shall deliver the Products clearly
--------------------------
marked on the Product package with serial number, product description and
machine readable bar code (employing UPC or other industry standard bar
code) to Tech Data 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
Trancell. Trancell shall use only those common carriers preapproved by
Tech Data or listed in Tech Data's published routing instructions, unless
prior written approval of Tech Data is received.
ARTICLE IV. RETURNS
--------------------
4.1 Inventory Adjustment. Trancell agrees to accept return of overstocked
--------------------
Products as determined by Tech Data, of not more than [ * * * ]. Shipments
of Product being returned shall be new, unused and in sealed cartons.
Vendor shall credit Tech Data's account in the amount of the price paid by
Tech Data therefor less any price protection credits but not including any
early payment or prepayment discounts (the "Return
-4-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
Credit"). Tech Data will supply Trancell with an offsetting purchase order
of equal or greater value.
4.2 Defective Products/Dead on Arrival (DOA). Tech Data shall have the right
----------------------------------------
to return to Trancell for credit any DOA Product that is returned to Tech
Data within sixty (60) days after the initial delivery date to the End User
and any Product that fails to perform in accordance with Trancell's product
warranty, for credit. Trancell shall bear all costs of shipping and risk
of loss of DOA and in-warranty Products to Trancell's location and back to
Tech Data or Tech Data's Customer. If Trancell delivers defective and DOA
Product of more than [* * * ], Trancell shall [* * * ].
4.3 Obsolete or Outdated Product. Tech Data shall have the right to return for
----------------------------
full credit, without limitation as to the dollar amount, all Products that
become obsolete or Trancell discontinues or are removed from Trancell's
current price list; provided Tech Data returns such Products within ninety
(90) days after Tech Data receives written notice from Trancell that such
Products are obsolete, superseded by a newer version, discontinued or are
removed from Trancell price list.
4.4 Miscellaneous Returns.
---------------------
(a) Bad Box. Tech Data shall return for credit Products which have boxes
-------
that are or become damaged. Tech Data will place an offsetting
purchase order for equal or greater value.
(b) Non-Saleable. Tech Data may return Non-Saleable Product to Trancell
------------
for credit. Tech Data will request a Return Material Authorization
Number (RMA) for this return. Tech Data will place an offsetting
purchase order for equal or greater value.
ARTICLE V. PAYMENT TO VENDOR
-----------------------------
5.1 Charges, Prices and Fees for Products. Charges, prices, quantities and
-------------------------------------
discounts, if any, for Products shall be determined as set forth in
Schedule 5.1, or as otherwise mutually agreed upon by the parties in
writing, and may be confirmed at the time of order. In no event shall
charges exceed Trancell's then current established charges. Tech Data
shall not be bound by any of Trancell's suggested prices.
5.2 Payment. Except as otherwise set forth in this Agreement, any undisputed
-------
sum due to Trancell pursuant to this Agreement shall be payable as follows:
[* * * ], net forty-five (45) days after the invoice receipt. Trancell
shall invoice Tech Data no earlier than the applicable shipping date for
the Products covered by such invoice. Products which are shipped from
outside the United States, shall not be invoiced to Tech Data prior to the
Products being placed on a common carrier within the United States for
final delivery to Tech Data. The due date for payment shall be extended
during any time the parties have a bona fide dispute concerning such
payment. Notwithstanding anything herein to the contrary, for the initial
order only, payment shall be made by Tech Data upon resale of
-5-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
the Products and Tech Data may return any of the Products delivered under
the initial order for credit.
5.3 Invoices. A "correct" invoice shall contain (i) Trancell's name and
--------
invoice date, (ii) a reference to the purchase order or other authorizing
document, (iii) separate descriptions, unit prices and quantities of the
Products actually delivered, (iv) credits (if applicable), (v) shipping
charges (if applicable) (vi) name (where applicable), title, phone number
and complete mailing address as to where payment is to be sent, and (vii)
other substantiating documentation or information as may reasonably be
required by Tech Data from time to time.
5.4 Taxes. Tech Data shall be responsible for franchise taxes, sales or use
-----
taxes or shall provide Trancell with an appropriate exemption certificate.
Trancell shall be responsible for all other taxes, assessments, permits and
fees, however designated which are levied upon this Agreement or the
Products, except for taxes based upon Tech Data's income. No taxes of any
type shall be added to invoices without the prior written approval of Tech
Data.
5.5 Fair Pricing and Terms. Trancell represents that the prices charged and
----------------------
the terms offered to Tech Data are and will be at least as beneficial to
Tech Data as those charged or offered by Trancell to any of its other
distributors or customers in the channel. If Trancell offers price
discounts, payment discounts, promotional discounts or other special prices
to its other distributors or customers in the channel, Tech Data shall also
be entitled to participate and receive notice of the same no later than
other distributors or customers.
5.6 Price Adjustments:
-----------------
(a) Price Increases. Trancell shall have the right to increase prices
---------------
from time to time, upon written notice to Tech Data not less than
thirty (30) days prior to the effective date of such increase. All
orders placed prior to the effective date of the increase, for
shipment within thirty (30) days after the effective date, shall be
invoiced by Trancell at the lower price.
(b) Price Decreases. Trancell shall have the right to decrease prices
---------------
from time to time, upon written notice to Tech Data not less than days
prior to the effective date of such decrease. Trancell shall grant to
Tech Data, its subsidiaries and Tech Data's Customers a price credit
for the full amount of any Trancell price decrease on all Products on
order, in transit and in their inventory on the effective date of such
price decrease. Tech Data and its Customers shall, within sixty (60)
days after receiving written notice of the effective date of the price
decrease, provide a list of all Products for which they claim a
credit. Trancell shall have the right to a reasonable audit at
Trancell's expense.
5.7 Advertising.
-----------
-6-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
(a) Cooperative Advertising. Trancell offers a [* * * ] and may offer
-----------------------
additional advertising credits, or other promotional programs or
incentives to Tech Data as it offers to its other distributors or
customers. Tech Data shall have the right, at Tech Data's option, to
participate in such programs. Attached as Schedule 5.7 is a copy of
Trancell's co-op policy.
(b) Advertising Support. Trancell shall provide at no charge to Tech
-------------------
Data and the Customers of Tech Data, marketing support, and
advertising materials in connection with the resale of Products as are
currently offered or that may be offered by Trancell. Tech Data
reserves the right to charge Trancell for advertising, marketing and
training services.
(c) Prior to receipt of the initial purchase order, Trancell shall pay
Tech Data for all launch funds expenditures that Trancell and Tech
Data have agreed to related to the Products.
ARTICLE VI. WARRANTIES,
-------------------------
INDEMNITIES AND OTHER OBLIGATIONS OF VENDOR
-------------------------------------------
6.1 Warranty. Trancell hereby represents and warrants that Trancell has all
--------
right, title, ownership interest and/or marketing rights necessary to
provide the Products to Tech Data. Trancell further represents and
warrants that it has not entered into any agreements or commitments which
are inconsistent with or in conflict with the rights granted to Tech Data
in this Agreement; the Products are new and shall be free and clear of all
liens and encumbrances; Tech Data and its Customers and End Users shall be
entitled to use the Products without disturbance; the Products have been
listed with Underwriters' Laboratories or other nationally recognized
testing laboratory whenever such listing is required; the Products meet all
FCC requirements; the Products do and will conform to all codes, laws or
regulations; and the Products conform in all respects to the Product
warranties. Trancell agrees that Tech Data shall be entitled to pass
through to Customers of Tech Data and End Users of the Products all Product
warranties granted by Trancell. Tech Data shall have no authority to alter
or extend any of the warranties of Trancell expressly contained or referred
to in this Agreement without prior approval of Trancell. Trancell has made
express warranties in this Agreement and in Documentation, promotional and
advertising materials. EXCEPT AS SET FORTH HEREIN OR THEREIN, TRANCELL
DISCLAIMS ALL WARRANTIES WITH REGARD TO THE PRODUCTS, INCLUDING WITHOUT
LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE. THIS SECTION SHALL SURVIVE TERMINATION OR EXPIRATION
OF THIS AGREEMENT.
6.2 Proprietary Rights Indemnification. Trancell hereby represents and
----------------------------------
warrants that the Products and the sale and use of the Products do not
infringe upon any copyright, patent, trade secret or other proprietary or
intellectual property right of any third party, and that there are no suits
or proceeding, pending or threatened alleging any such infringement.
-7-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
Trancell shall indemnify and hold Tech Data, Tech Data's subsidiaries and
their respective, officers, directors, employees and agents harmless from
and against any and all actions, claims, losses, damages, liabilities,
awards, costs and expenses, which they or any of them incur or become
obligated to pay resulting from or arising out of any breach or claimed
breach of the foregoing warranty. Tech Data shall inform Trancell of any
such suit or proceeding filed against Tech Data and shall have the right,
but not the obligation, to participate in the defense of any such suit or
proceeding at Tech Data's expense. Trancell shall, at its option and
expense, either (i) procure for Tech Data, its Customers and End Users the
right to continue to use the Product as set forth in this Agreement, or
(ii) replace, to the extent Products are available, or modify the Product
to make its use non-infringing while being capable of performing the same
function without degradation of performance. Trancell shall have no
liability under this Section 6.2 for any infringement based on the use of
any Product, if the Product is used in a manner or with equipment for which
it was not reasonably intended. Trancell's obligations under this Section
6.2 shall survive termination of this Agreement.
6.3 Indemnification.
---------------
(a) VENDOR. Trancell shall be solely responsible for the design,
------
development, supply, production and performance of the Products.
Trancell agrees to indemnify and hold Tech Data, its subsidiaries and
their officers, directors and employees harmless from and against any
and all claims, damages, costs, expenses (including, but not limited
to, reasonable attorney's fees and costs) or liabilities that may
result, in whole or in part, from any warranty or product liability
claim, or any claim for infringement, or for claims for violation of
the warranties contained in Sections 6.1 and 6.2 of this Agreement.
(b) Tech Data. Tech Data agrees to indemnify and hold Trancell, its
---------
officers, directors and employees harmless from and against any and
all claims, damages, costs, expenses (including, but not limited to,
reasonable attorneys' fees and costs) or liabilities that may result,
in whole or in part, from Tech Data's gross negligence or willful
misconduct in the distribution of the Products pursuant to this
Agreement, or for representations or warranties made by Tech Data
related to the Products in excess of the warranties of Trancell.
6.4 Insurance.
---------
(a) The parties shall be responsible for providing Worker's
Compensation insurance in the statutory amounts required by the
applicable state laws.
(b) Without in any way limiting Trancell's indemnification obligation
as set forth in this Agreement, Trancell shall maintain Commercial
General Liability and/or Comprehensive General Liability Insurance in
such amounts as is reasonable and standard for the industry. Either
policy form should contain the following coverages: Personal and
Advertising Injury, Broad Form Property
-8-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
Damage, Products and Completed Operations, Contractual Liability,
employees as Insured and Fire Legal Liability.
(c) Trancell will provide evidence of the existence of insurance
coverages referred to in this Section 6.4 by certificates of insurance
which should also provide for at least thirty (30) days notice of
cancellation, non-renewal or material change of coverage to Tech Data.
The certificates of insurance shall name Tech Data Corporation as an
additional insured for the limited purpose of claims arising pursuant
to this Agreement.
6.5 Limitation of Liability. NEITHER PARTY SHALL BE LIABLE TO THE OTHER
-----------------------
PURSUANT TO THIS AGREEMENT FOR AMOUNTS INDIRECT, SPECIAL, INCIDENTAL,
CONSEQUENTIAL, DAMAGES OF THE OTHER PARTY ARISING FROM THE PERFORMANCE OR
BREACH OF ANY TERMS OF THIS AGREEMENT.
6.6 ECCN/Export. Trancell agrees to provide Tech Data, upon signing this
-----------
Agreement and at any time thereafter that Trancell modifies or adds
Products distributed or to be distributed by Tech Data, with the Export
Control Classification Number (ECCN) for each of Trancell's Products, and
information as to whether or not any of such Products are classified under
the U.S. Munitions List.
6.7 Financial Statements. Trancell agrees that for the term of this Agreement,
--------------------
Trancell financial statements annually and semi annually shall provide as
follows:
a. Within one hundred and twenty (120) days after the end of
Trancell's fiscal year audited financial statements for the fiscal
year prepared by an independent certified public accountant.
b. Within sixty (60) days after the end of the Trancell's second
fiscal quarter, semi-annual unaudited financial statements, prepared
by Trancell's authorized representative.
Such financial statements shall include profit and loss statement, balance
sheets and such other accounting data as may be requested by Tech Data and
be acknowledged by the Trancell's authorized representative in writing as
true and correct.
In addition, Trancell shall provide other financial information upon
reasonable request by Tech Data.
6.8 Trancell Reports. Trancell shall, if requested, render monthly reports to
----------------
Tech Data setting forth the separate Products, dollars invoiced for each
Product, and total dollars invoiced to Tech Data for the month, and such
other information as Tech Data may reasonably request.
-9-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
6.9 Tech Data Reports. Tech Data shall, render monthly sales out reports on
-----------------
Tech Data's BBS system no later than 15 days after the month end.
Information provided will include: month and year sales activity occurred,
internal product number (assigned by Tech Data), written description, state
and zip-code of Customers location, unit cost (distributor's cost at
quantity 1), quantity and extended cost (cost times quantity). A monthly
inventory report, will be provided on a paper format once a month.
6.10 Trademark Usage. Tech Data is hereby authorized to use trademarks and
---------------
trade names of Trancell and third parties licensing Trancell, if any, used
in connection with advertising, promoting or distributing the Products.
Tech Data recognizes Trancell or other third parties may have rights or
ownership of certain trademarks, trade names and patents associated with
the Products. Tech Data will act consistent with such rights, and Tech
Data shall comply with any reasonable written guidelines when provided by
Trancell or third parties licensing Trancell related to such trademark or
trade name usage. Tech Data will notify Trancell of any infringement of
which Tech Data has actual knowledge. Tech Data shall discontinue use of
Trancell's trademarks or trade names upon termination of this Agreement,
except as may be necessary to sell or liquidate any Product remaining in
Tech Data's inventory.
ARTICLE VII. TERMINATION
-------------------------
7.1 Termination.
-----------
(a) Termination With or Without Cause: Either party may terminate
---------------------------------
this Agreement, without cause, upon giving the other party thirty (30)
days prior written notice. In the event that either party materially
or repeatedly defaults in the performance of any of its duties or
obligations set forth in this Agreement, and such default is not
substantially cured within thirty (30) days after written notice is
given to the defaulting party specifying the default, then the party
not in default may, by giving written notice thereof to the defaulting
party, terminate this Agreement or the applicable purchase order
relating to such default as of the date specified in such notice of
termination.
(b) Termination for Insolvency or Bankruptcy. Either party may
----------------------------------------
immediately terminate this Agreement and any purchase orders by giving
written notice to the other party in the event of (i) the liquidation
or insolvency of the other party, (ii) the appointment of a receiver
or similar officer for the other party, (iii) an assignment by the
other party for the benefit of all or substantially all of its
creditors, (iv) entry by the other party into an agreement for the
composition, extension, or readjustment of all or substantially all of
its obligations, or (v) the filing of a petition in bankruptcy by or
against a party under any bankruptcy or debtors' law for its relief or
reorganization which is not dismissed within ninety (90) days.
7.2 Rights Upon Termination
-----------------------
-10-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
(a) Termination of this Agreement shall not affect Trancell's right
to be paid for undisputed invoices for Products already shipped and
accepted by Tech Data or Tech Data's rights to any credits or payments
owed or accrued to the date of termination. Tech Data's rights to
credits upon termination shall include credits against which Tech Data
would, but for termination, be required under this Agreement to apply
to future purchases.
(b) Trancell shall accept purchase orders from Tech Data for
additional Products which Tech Data is contractually obligated to
furnish to its Customers and does not have in its inventory upon the
termination of this Agreement; provided Tech Data notifies Trancell of
any and all such transactions in writing within sixty (60) days
following the termination date.
(c) Upon termination of this Agreement, Tech Data shall discontinue
holding itself out as a distributor of the Products.
7.3 Repurchase of Products Upon Termination or Expiration. Upon the effective
-----------------------------------------------------
date of termination or expiration of this Agreement for any reason,
Trancell agrees to repurchase all Products in Tech Data's inventory or
which are returned to Tech Data within sixty (60) days following the
effective date of termination or expiration. Trancell will repurchase the
Products at the original purchase price; less any deductions for price
protection. The repurchase price shall not be reduced by any deductions or
offsets for early pay or prepay discounts. Such returns shall not reduce
or offset any co-op payments or obligations owed to Tech Data. Tech Data
shall submit to Trancell within sixty-five (65) days after the termination
or expiration date, the quantity of Product that Tech Data will be
returning to Trancell for repurchase. Trancell will issue a Return
Material Authorization (RMA) to Tech Data for all such Products; provided,
however, that Trancell shall accept returned Products in accordance with
this Section absent an RMA if Trancell fails to issue said RMA within five
(5) business days of Tech Data's request. Trancell shall credit any
outstanding balances owed to Tech Data. If such credit exceeds amounts due
from Tech Data, Trancell shall remit in the form of a check to Tech Data
the excess within ten (10) business days of receipt of the Product.
Customized Products shall not be eligible for repurchase pursuant to this
Section.
7.4 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. The termination of this Agreement
shall not affect any of Trancell's warranties, indemnification's or
obligations relating to returns, co-op advertising payments, credits or any
other matters set forth in this Agreement that should survive termination
in order to carry out their intended purpose, all of which shall survive
the termination of this Agreement.
ARTICLE VIII. MISCELLANEOUS
----------------------------
-11-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
8.1 Binding Nature, Assignment, and Subcontracting. This Agreement shall be
----------------------------------------------
binding on the parties and their respective successors and assigns.
Neither party shall have the power to assign this Agreement without the
prior written consent of the other party, provided, however, that Tech Data
shall at all times have the right to assign or transfer this Agreement, in
whole or in part, without Trancell's prior consent, to a wholly-owned
subsidiary of Tech Data.
8.2 Counterparts. This Agreement may be executed in several counterparts, all
------------
of which taken together shall constitute one single agreement between the
parties.
8.3 Headings. The Article and Section headings used in this Agreement are for
--------
reference and convenience only and shall not affect the interpretation of
this Agreement.
8.4 Relationship of Parties. Tech Data is performing pursuant to this
-----------------------
Agreement only as an independent contractor. Nothing set forth in this
Agreement shall be construed to create the relationship of principal and
agent between Tech Data and Trancell. Neither party shall act or represent
itself, directly or by implication, as an agent of the other party.
8.5 Confidentiality. Each party acknowledges that in the course of performance
---------------
of its obligations pursuant to this Agreement, it may obtain certain
information specifically marked as "confidential" and/or "proprietary".
Each party hereby agrees that all such information communicated to it by
the other party, its subsidiaries, or Customers, whether before or after
the Effective Date, shall be and was received in strict confidence, shall
be used only for purposes of this Agreement, and shall not be disclosed
without the prior written consent of the other party, except as may be
necessary by reason of legal, accounting or regulatory requirements beyond
either party's reasonable control. The provisions of this Section shall
survive the term or termination of this Agreement for any reason for a
period of one (1) year after termination.
8.6 Arbitration. Any disputes arising under this Agreement shall be submitted
-----------
to arbitration in accordance with such rules as the parties jointly agree.
If the parties are unable to agree on arbitration procedures, arbitration
shall be conducted in Pinellas County, Florida in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. Any
such award shall be final and binding upon both parties.
8.7 Notices. Wherever one party is required or permitted to give notice to the
-------
other pursuant to this Agreement, such notice shall be deemed given when
actually delivered by hand, by telecopier, via overnight courier or when
mailed by registered or certified mail, return receipt requested, postage
prepaid, and addressed as follows:
<TABLE>
<CAPTION>
<S> <C>
In the Case of Vendor: In the Case of Tech Data:
- --------------------- ------------------------
Trancell Systems Tech Data Corporation
3180 De La Cruz Blvd., Ste 200 5350 Tech Data Drive
Santa Clara, CA 95054 Clearwater, FL 34620
Attn: [* * * ] Attn: Vice President-Marketing Operations
</TABLE>
-12-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
cc: Contracts Administration
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.
8.8 Force Majeure. The term "Force Majeure" shall be defined to include fires
-------------
or other casualties or accidents, acts of God, severe weather conditions,
strikes or labor disputes, war or other violence, or any law, order,
proclamation, regulation, ordinance, demand or requirement of any
governmental agency.
(a) A party whose performance is prevented, restricted or interfered
with by reason of a Force Majeure condition shall be excused from such
performance to the extent of such Force Majeure condition so long as
such party provides the other party with prompt written notice
describing the Force Majeure condition immediately continues
performance whenever and to the extent such causes are removed.
(b) If, due to a Force Majeure condition, the scheduled time of
delivery or performance is or will be delayed for more than ninety
(90) days after the scheduled date, the party not relying upon the
Force Majeure condition may terminate, without liability to the other
party, any purchase order or portion thereof covering the delayed
Products.
8.9 Return Material Authorization Numbers. Trancell is required to issue a
-------------------------------------
Return Material Authorization Number (RMA) to Tech Data within two (2)
business days of Tech Data's request; however, if the Return Material
Authorization is not received within two (2) business days, Trancell shall
accept returned Products absent a Return Material Authorization Number.
8.10 Credits to Tech Data. In the event any provisions of this Agreement or
--------------------
any other agreement between Tech Data and Trancell require that Trancell
grant credits to Tech Data's account, and such credits are not received
within thirty (30) days then, all such credits shall become effective
immediately upon notice to Trancell. In such event, Tech Data shall be
entitled to deduct any such credits from the next monies owed to Trancell.
In the event credits exceed any balances owed by Tech Data to Trancell
,then Trancell shall, upon request from Tech Data, issue a check payable to
Tech Data within ten (10) days of such notice. Credits owed to Tech Data
shall not be reduced by early payment or prepayment discounts. Tech Data
shall have the right to set off against any amounts due to Trancell under
this Agreement or any invoices issued by Trancell related to this Agreement
any and all amounts due to Tech Data from Trancell, whether or not arising
under this Agreement.
8.11 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 agreement of the parties
-13-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
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.
8.12 Waiver. A waiver by either of the parties of any covenants, provisions 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.
8.13 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.
8.14 Entire Agreement. This Agreement, including any Exhibits and documents
----------------
referred to in this Agreement or attached hereto, constitutes the entire
and exclusive statement of Agreement between the parties with respect to
its subject matter and there are no oral or written representations,
understandings or agreements relating to this Agreement which are not fully
expressed herein. The parties agree that the terms and provisions of this
Agreement shall prevail over any contrary or additional terms in any
purchase order (unless agreed to in writing by both parties), sales
acknowledgment, confirmation or any other document issued by either party
effecting the purchase and/or sale of Products.
8.15 Governing Law. This Agreement shall have Florida as its situs and shall
-------------
be governed by and construed in accordance with the laws of the State of
Florida, without reference to choice of laws.
8.16 Software Licenses. Whenever the Products described in this Agreement
-----------------
shall include software licenses, Trancell hereby grants to Tech Data a non-
exclusive right to market, demonstrate and distribute the software to
Customers of Tech Data. Tech Data acknowledges that no title or ownership
of the proprietary rights to any software is transferred by virtue of this
Agreement notwithstanding the use of terms such as "purchase", "sale" or
the like within this Agreement.
8.17 Time of Performance. Time is hereby expressly made of the essence with
-------------------
respect to each and every term and provision of this Agreement.
IN WITNESS WHEREOF, the parties have each caused this Agreement to be
signed and delivered by its duly authorized officer or representative as of the
Effective Date.
<TABLE>
<CAPTION>
<S> <C>
TRANCELL SYSTEMS TECH DATA CORPORATION
By: /s/ [****] By: /s/ Peggy K. Caldwell
---------------------------- ---------------------------------
Printed Name: [****] Printed Name: PEGGY K. CALDWELL
Title:Vice President Sales Title: Senior Vice President, Sales and
Marketing
</TABLE>
-14-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
Date: 12/5/96 Date: 12/16/96
-15-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
SCHEDULE 5.7
CO-OP GUIDELINES
To increase the effectiveness of advertising and sales promotions Tech Data has
developed the following advertising requirements:
HOW CO-OP IS EARNED:
- - Co-op dollars will be at least [* * * ] of the purchases made by Tech Data,
net of returns.
- - Co-op dollars will be accrued on a monthly basis.
HOW CO-OP IS SPENT:
- - Tech Data will be reimbursed for [* * * ] that feature vendor products.
- - Co-op dollars will be used within the 12 months immediately following the
month in which they are earned.
HOW CO-OP IS CLAIMED:
- - Claims for co-op will be submitted to vendor within 60 days of the event date.
- - Claims for co-op will be submitted with a copy of vendor prior approval and
proof of performance.
- - Payment must be remitted within 30 days of the claim date, or Tech Data
reserves the right to deduct from the next invoice.
CO-OP REPORTING:
- - Vendor will submit a monthly co-op statement outlining (i) co-op earned, (ii)
co-op used and (iii) co-op claims paid.
Accepted
/s/ [****]
---------------------
Name: [****]
Title: Vice-President Sales
Date: 12/5/96
-16-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
EXHIBIT 10.10
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
DISTRIBUTION AGREEMENT
----------------------
THIS DISTRIBUTION AGREEMENT ("Agreement"), is entered into this 15th day of
May, 1997, by and between INGRAM MICRO INC. ("Ingram"), a Delaware corporation,
having its principal place of business at 1600 E. St. Andrew Place, Santa Aria,
California 92705, and RAMP NETWORKS ("Vendor"), a California corporation, having
its principal place of business at 3180 De La Cruz Blvd., Suite 200, Santa
Clara, California 95054. The parties desire to and hereby do enter into a
distributor/supplier relationship, the governing terms and mutual promises of
which are set out in this Agreement.
1. DISTRIBUTION RIGHTS.
-------------------
1.1 Territory. Vendor grants to Ingram, including its affiliates for
---------
resale, and Ingram accepts, the non-exclusive right to distribute worldwide all
computer products produced and/or offered by Vendor ("Product") during the term
of this Agreement. Ingram shall have the right to purchase, sell and ship to
any reseller within the territory or to Ingram's affiliate, or at Vendor's
option Ingram's affiliate may purchase direct from Vendor.
1.2 Product. Vendor agrees to make available and to sell to Ingram
-------
such Product as Ingram shall order from Vendor at the prices and subject to the
terms set forth in this Agreement. Ingram shall not be required to purchase any
minimum amount or quantity of the Product.
2. TERM AND TERMINATION.
--------------------
2.1 Term. The initial term of this Agreement is one (1) year.
----
Thereafter the Agreement will automatically renew for successive one (1) year
terms, unless it is earlier terminated.
2.2 Termination.
-----------
(a) Either party may terminate this Agreement, with or without
cause, by giving thirty (30) days written notice to the other party.
(b) Either party may immediately terminate this Agreement with
written notice if the other party:
(i) materially breaches any term of this Agreement and such
breach continues for thirty (30) business days after written notification
thereof, or
(ii) ceases to conduct business in the normal course, becomes
insolvent, makes a general assignment for the benefit of creditors, suffers or
permits the appointment of a receiver for its business or assets, or avails
itself of or becomes subject to any proceeding under any Bankruptcy Act or any
other federal or state statute relating to insolvency or the protection of
rights of creditors; or
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
(iii) attempts to assign or otherwise transfer its rights
hereunder unless both have agreed in writing to such assignment or transfer.
3. INGRAM OBLIGATIONS.
------------------
3.1 Product Availability. Ingram will list Product in its catalog(s)
--------------------
as appropriate and endeavor to make such Product available to customers.
3.2 Advertising. Ingram will advertise and/or promote Product in a
-----------
commercially reasonable manner and will transmit as reasonably necessary Product
information and promotional materials to its customers.
3.3 Support. Ingram will make its facilities reasonably available
-------
for Vendor and will assist in Product training and support. Ingram will provide
reasonable, general Product technical assistance to its customers, and will
direct all other technical issues directly to Vendor.
3.4 Administration.
--------------
(a) Upon request, Ingram will furnish Vendor with a valid tax
exemption certificate.
(b) Ingram will provide Vendor standard sales-out and inventory
reports via its electronic Bulletin Board System.
(c) Ingram may handle its customers' Product returns by batching
them for return to Vendor at regular intervals.
4. VENDOR OBLIGATIONS.
------------------
4.1 Shipping/Export.
---------------
(a) Vendor shall ship Product pursuant to Ingram purchase
order(s) ("P.O."). Product shall be shipped F.O.B. Vendor's shipping deck with
risk of loss or damage to pass to Ingram upon delivery to the carrier specified
in Ingram's P.O. Vendor shall ship all Products in accordance with the
instructions specified in the Vendor Routing Guide, attached hereto as Exhibit
A.
(b) Ingram requires concurrent with the execution of this
Agreement Export Administration Regulations product classification and
supporting documentation: Certificate of Origin (General Use and/or NAFTA),
Export Commodity Control Number's; (ECCN's), General License and/or Individual
Validated License information and Schedule "B"/Harmonized Numbers. This applies
when distribution rights granted under Section 1.1 are outside the United States
for the initial Product/s and when additions or changes to these Products occur.
-2-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
4.2 Invoicing. For each Product shipment to Ingram, Vendor shall
---------
issue to Ingram an invoice showing Ingram's order number, the Product part
number, description, price and any discount. At least monthly, Vendor shall
provide Ingram with a current statement of account, listing all invoices
outstanding and any payments made and credits given since the date of the
previous statement.
4.3 Product Availability. Vendor agrees to maintain sufficient
--------------------
Product inventory to fill Ingram's orders. If a shortage of any Product exists,
Vendor agrees to allocate its available inventory of such Product to Ingram in
proportion to Ingram's percentage of all of Vendor's customer orders for such
Product during the previous sixty (60) days.
4.4 Product Marking. Vendor will clearly mark each unit of Product
---------------
with the Product name and computer compatibility. Such packaging will also bear
a machine-readable bar code identifier scannable in standard Uniform Product
Code (UPC) format. The bar code must identify the Product as specified by the
Uniform Code Council (UCC). If the Vendor or Ingram customers' require serial
number tracking the serial number must be clearly marked and bar coded on the
outside of the individual selling unit. The bar code shall fully comply with
all conditions regarding standard product labeling set forth in Exhibit B in the
then-current Ingram Guide to Bar Code: The Product Label. Vendor may be
------------------------------------
assessed a reasonable per unit charge for all Product not in conformance
herewith.
4.5 Product Notes. Vendor will either within thirty (30) days
-------------
provide product note information in accordance with Ingram's specifications
noted in Exhibit C or instruct Ingram to do so in which case a charge per SKU
will apply.
4.6 Support. At no charge to Ingram, Vendor shall support Product
-------
and any reasonable Ingram efforts to sell Product. Vendor shall also provide to
Ingram, its employees, and its customers reasonable amounts of sales literature,
advertising materials, and training and support in Product sales.
4.7 New Product. Vendor shall make its best efforts to notify Ingram
-----------
at least thirty (30) days before the date any new Product is introduced. Vendor
shall make such Product available for distribution by Ingram no later than the
date it is first offered for sale in the marketplace.
4.8 Insurance. Vendor shall carry insurance coverage for product
---------
liability/completed operations with minimum limits of five million dollars
($5,000,000). Within ten (10) days of full execution of this Agreement, Vendor
shall provide Ingram with a Certificate of Insurance. This Certificate of
Insurance must include: (i) a broad form endorsement naming Ingram as an
additional insured, and (ii) a mandatory thirty (30) day notice to Ingram of
insurance cancellation.
-3-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
4.9 Warranties/Certification.
------------------------
(a) General Warranty. Vendor represents and warrants that (i) it
----------------
has good transferable title to the Products, (ii) the Product will perform in
conformity with specifications and documentation supplied by Vendor, (iii) the
Product or its use does not infringe any patents, copyrights, trademarks, trade
secrets, or any other intellectual property rights, (iv) that there are no suits
or proceedings pending or threatened which allege any infringement of such
proprietary rights, and (v) the Product sales to Ingram do not in any way
constitute violations of any law, ordinance, rule or regulation in the
distribution territory.
(b) Warranty. Vendor hereby represents and warrants that any
--------
Product offered for distribution does not contain any obscene, defamatory or
libelous matter or violate any right of publicity or privacy.
(c) End-User Warranty. Vendor shall provide a warranty statement
-----------------
with Product for end user benefit. This warranty shall commence upon Product
delivery to end-user.
(d) Class B Warranty. Vendor hereby represents and warrants that
----------------
the Product has been or will be at the time of shipment certified as a Class B
computing device as required by the rules of the U.S.A. Federal Communications
Commission ("FCC Rules").
(e) EU Warranty. Vendor further warrants and represents for
-----------
Products distributed to the European Union ("EU") that the Products will be
accepted under all EU directives, regulations and the EU country's legislation.
(f) Made in America Certification. Vendor by the execution of
-----------------------------
this Agreement certifies that it will not label any of its products as being
"Made in America," "Made in U.S.A.," or with similar wording, unless all
components or elements of such Product is in fact made in the United States of
America. Vendor further agrees to defend, indemnify and hold harmless from and
against any and all claims, demands, liabilities, penalties, damages, judgments
or expenses (including attorney's fees and court costs) arising out of or
resulting in any way from Product that does not conform to the Certification.
5. PRICING.
-------
5.1 Ingram Pricing. The suggested retail price and any Ingram
--------------
discount for Product is set out in Exhibit D. Vendor may modify Exhibit D with
a minimum of thirty (30) days advance written notice to Ingram. All Ingram
orders for Product will be billed at the price in effect when the order is
placed. Ingram shall have sole discretion as to selling price of Product to its
customers.
5.2 Vendor Pricing. Vendor agrees that the prices and terms it
--------------
offers to Ingram and will continue to be at least as low as those it offers to
similar customers. If Vendor offers price discounts, promotional discounts or
other special prices to its other customers,
-4-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
Ingram shall also be entitled to participate in and receive notice of the same
no later than Vendor's other customers.
5.3 International Pricing. If Vendor offers a better price to like
---------------------
distributors outside the U.S. and Ingram has distribution rights in that
territory then the same price shall be offered to Ingram for Product sales into
that territory.
5.4 Price Adjustments. If Vendor reduces any Product price, or
-----------------
offers increased discounts to any like distributors, Vendor will promptly credit
Ingram for the difference between the original Product price and the reduced
Product price for Ingram's only Product inventory, including: (i) any Customer
Product in-transit from/to Ingram, (ii) any unshipped orders, and (iii) orders
in-transit to Ingram on the price reduction or increased discount offer date net
of unshipped new orders. In the event that Vendor shall raise the list price of
a Product, all orders for such Product placed prior to the effective date of the
price increase shall be invoiced at the lower price. Vendor shall provide
Ingram with thirty (30) days advance notice of any price increases.
5.5 Payment Terms. Ingram's initial order payment terms shall be [ *
-------------
* *], after receipt of Vendors invoice. Subsequent order payment terms shall be
[* * *], net forty-five (45) days. Payment shall be deemed made on the payment
postmark date.
5.6 Right to Withhold. Notwithstanding any other provision in this
-----------------
Agreement to the contrary, Ingram shall not be deemed in default if it withholds
any specific amount to Vendor because of a legitimate dispute between the
parties as to that specific amount pending the timely resolution of the disputed
amount.
6. MARKETING.
---------
6.1 Trademarks. Ingram may advertise and promote the Product and/or
----------
Vendor, and may thereby use Vendor's trademarks, service marks and trade names.
Neither party shall acquire any rights in the trademarks, service marks or trade
names of the other.
6.2 Advertising. Vendor agrees to cooperate in Ingram's or Ingram's
-----------
customers' advertising and promotion of Product and hereby grants Ingram a
cooperative advertising allowance of [* * * ] of Product invoice amount for such
advertising featuring Product and/or Vendor. Ingram shall submit advertising to
Vendor for review and approval prior to any initial release, and Vendor shall
not unreasonably withhold or delay such approval. Upon receipt of reasonable
evidence of such advertising expenditures, Vendor agrees to credit the amount
thereof against future Ingram purchases.
6.3 Programs.
--------
(a) Ingram may offer marketing programs to Vendor including but
not limited to launch programs and reseller pass through opportunities. If
Vendor elects to participate, Vendor agrees to pay such funds as may be required
for this purpose.
-5-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
(b) Vendor may be asked to prepay all marketing activities until
a mutually agreed upon sell through rate is achieved.
6.4 Support Product. Vendor shall consign a reasonable amount of
---------------
demonstration Product quantity agreed upon by Vendor to aid Ingram in its
support and promotion of Product. All such consigned Product will be returned
to Vendor upon request.
7. RETURNS.
-------
7.1 Stock Balancing. Notwithstanding anything herein to the
---------------
contrary, Ingram may return throughout the term up to [* * * ] of previous
ninety (90) days purchases which are in their original packaging to Vendor for
full credit of the Products' purchase price when the return is accompanied by a
P.O. for equal or greater value. The initial order is subject to full stock
balancing privileges in offsetting order. Vendor will pay all freight charges
for returned Products.
7.2 Post-Term/Termination. For one hundred eighty (180) days after
---------------------
the expiration or earlier termination of this Agreement, Ingram may return to
Vendor any Product for credit against outstanding invoices, or if there are no
outstanding invoices for a cash refund. Any credit or refund due Ingram for
returned Product shall be equal to the Product purchase price plus all freight
charges incurred by Ingram in returning the Product.
7.3 Product Discontinuation. Vendor shall give Ingram thirty (30)
-----------------------
days' advance written notice of Product discontinuation. Ingram may return all
such Product to Vendor for full credit of Product purchase price plus all
freight charges incurred by Ingram in returning the Product.
7.4 Defective Product.
-----------------
(a) Ingram may return any Product to Vendor that Ingram or its
customer finds defective. Vendor shall immediately credit Ingram for the
Product net purchase price.
(b) If any Product is recalled by Vendor because of defects,
revisions or upgrades, Ingram will, at Vendor's request, provide reasonable
assistance with the recall. Vendor will pay Ingram's expenses in connection with
such recall.
8. INDEMNIFICATION.
---------------
8.1 Product Indemnity. Vendor shall defend, indemnify, and hold
-----------------
harmless Ingram from and against any claims, demands, liabilities, or expenses
(including attorney's fees and costs) for any injury or damage, including, but
not limited to, any personal or bodily injury or property damage, arising out of
or resulting in any way from any defect in Products. This duty to indemnify
Ingram shall be in addition to the warranty obligations of Vendor.
-6-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
8.2 General Indemnity. Each party shall indemnify, defend and hold
-----------------
the other harmless from and against any and all claims, actions, damages,
demands, liabilities, costs and expenses, including reasonable attorney's fees
and expenses, resulting from any act or omission of the acting party or its
employees under this Agreement, that causes or results in property damage,
personal injury or death.
8.3 Intellectual Property Rights Indemnity. Vendor shall defend,
--------------------------------------
indemnify and hold Ingram, its resellers and their customers, harmless from and
against all damages and costs incurred by any of them arising from the
infringement of any patent, copyright, trademark, trade secret or other
proprietary right by reason of the manufacture, sale, marketing, or use of
Product.
8.4 Product Infringement. Upon threat of claim of infringement,
--------------------
Vendor may, at its expense and option (i) procure the right to continue using
any part of Product, (ii) replace the infringing Product with a non-infringing
Product of similar performance, or (iii) modify Product to make it non-
infringing. If Vendor does not so act within ninety (90) days after such claim,
Ingram may return Product to Vendor for a full credit against future purchases
or for a cash refund, at Ingram's option.
8.5 Multi-Media Indemnity. Vendor shall defend, indemnify and hold
---------------------
Ingram, its resellers and their customers, harmless from and against all damages
and costs incurred by any of them to the extent it is based upon a claim that
the Product either (i) violates a third party's right of publicity and/or right
of privacy, or (ii) contains any obscene, defamatory or libelous matter.
8.6 European Indemnity. For Products distributed to a country of the
------------------
EU, the Vendor accepts full responsibility for, and will indemnify Ingram for,
all costs and damages arising from any non-compliance with any manufacturer-
directed EU decree, regulation or directive.
8.7 Limitation of Liability. NEITHER PARTY SHALL BE LIABLE TO THE
-----------------------
OTHER FOR LOST PROFITS OF BUSINESS, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES,
WHETHER BASED IN CONTRACT OR TORT (INCLUDING NEGLIGENCE, STRICT LIABILITY OR
OTHERWISE), AND WHETHER OR NOT ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
THIS LIMITATION IS IN NO WAY MEANT TO LIMIT VENDOR'S LIABILITY FOR
PERSONAL INJURY OR DEATH AS A RESULT OF A DEFECT IN ANY PRODUCT IN THOSE
JURISDICTIONS WHERE THE LAW DOES NOT ALLOW THIS LIMITATION.
9. COMPLIANCE WITH FEDERAL LAWS AND REGULATIONS.
--------------------------------------------
-7-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
9.1 Executive Order 11246. Vendor agrees to include the Equal
---------------------
Employment Opportunity Clause by reference in every contract, agreement and
purchase order entered into with subcontractors or suppliers as required by 41
CFR 60-1.4.
9.2 Employer Information Report EEO-1/ Written Affirmative Action
-------------------------------------------------------------
Program. Vendor agrees that if the value of any contract or purchase order is
- -------
fifty thousand dollars ($50,000) or more and the Vendor has fifty (50) or more
employees, Vendor will (i) file an EEO-l report (Standard Form 100) and comply
with and file such other compliance reports as may be required under Executive
Order 11246, as amended, and Rules and Regulations adopted thereunder and (ii)
will develop a written affirmative action compliance program for each of its
establishments as required by Title 41 CFR 60-1.40.
9.3 Veterans Employment. Clause Vendor agrees to abide by and comply
-------------------
with the provisions of the Affirmative Action Clause, 41 CFR 60-250.4.
9.4 Employment of Handicapped Persons. Vendor agrees that it will
---------------------------------
abide by and comply with the provisions of the Affirmative Action Clause, 41 CFR
60-741.4.
9.5 Small Business Concerns and Small Business Concerns Owned and
-------------------------------------------------------------
Controlled by Socially and Economically Disadvantaged Individuals. Where a
- -----------------------------------------------------------------
government contract is expected to exceed five hundred thousand dollars
($500,000), Vendor agrees to comply with all requirements of P.L. 95-507 and
regulations promulgated thereunder. Vendor shall comply with instructions
contained in Exhibit F.
9.6 Women-Owned Business Concerns. Vendor shall comply with
-----------------------------
instructions contained in Exhibit F. Where a government contract is expected to
exceed five hundred thousand dollars ($500,000), Vendor agrees to comply with
all requirements of Executive Order 12138 and all regulations promulgated
thereunder.
10. GOVERNMENT PROGRAM.
------------------
10.1 Partnership America. Vendor may, at its sole option,
-------------------
participate in Ingram's government reseller program in which case the provisions
of Exhibit G, Partnership America, shall apply. A draft copy is provided solely
for your information and review.
11. GENERAL PROVISIONS.
------------------
11.1 Notices. Any notice which either party may desire to give the
-------
other party must be in writing and may be given by (i) personal delivery to an
officer of the party, (ii) by mailing the same by registered or certified mail,
return receipt requested, to the party to whom the party is directed at the
address of such party as set forth at the beginning of this Agreement, or such
other address as the parties may hereinafter designate, and (iii) by facsimile
or telex communication subsequently to be confirmed in writing pursuant to item
(ii) herein.
-8-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
11.2 Governing Law. This Agreement shall be construed and enforced
-------------
in accordance with the laws of the State of California, except that body of law
concerning conflicts of law. The United Nations Convention on Contracts for the
International Sale of Goods shall not apply to this Agreement.
11.3 Cooperation. Each party agrees to execute and deliver such
-----------
further documents and to cooperate as may be necessary to implement and give
effect to the provisions contained herein.
11.4 Force Majeure. Neither party shall be liable to the other for
-------------
any delay or failure to perform which results from causes outside its reasonable
control.
11.5 Attorneys Fees. In the event there is any dispute concerning
--------------
the terms of this Agreement or the performance of any party hereto pursuant to
the terms of this Agreement, and any party hereto retains counsel for the
purpose of enforcing any of the provisions of this Agreement or asserting the
terms of this Agreement in defense of any suit filed against said party, each
party shall be solely responsible for its own costs and attorney's fees incurred
in connection with the dispute irrespective of whether or not a lawsuit is
actually commenced or prosecuted to conclusion.
11.6 Export Regulations. Ingram agrees by the purchase of Products
------------------
to conform to, and abide by, the export laws and regulations of the United
States, including but not limited to, the Export Administration Act of 1979 as
amended and its implementing regulations. Ingram shall include a statement in
it's standard sales terms and conditions that any shipment of Product outside
the United States will require a valid export license. Ingram further agrees to
distribute Product in accordance with the territory as defined in Section 1.1.
Whenever a EU country is specified as Territory under Section 1.1, Territory
shall include all EU countries.
12. AGREEMENT.
---------
12.1 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.2 Section Headings. Section headings in this Agreement are for
----------------
convenience only, and shall not be used in construing the Agreement.
12.3 Incorporation of all Exhibits. Each and every exhibit referred
-----------------------------
to hereinabove and attached hereto is hereby incorporated herein by reference as
if set forth herein in full.
12.4 Severability. A judicial determination that any provision of
------------
this Agreement is invalid in whole or in part shall not affect the
enforceability of those provisions found to be valid.
-9-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
12.5 No Implied Waivers. If either party fails to require
------------------
performance of any duty hereunder by the other party, such failure shall not
affect its right to require performance of that or any other duty thereafter.
The waiver by either party of a breach of any provision of this Agreement shall
not be a waiver of the provision itself or a waiver of any breach thereafter, or
a waiver of any other provision herein.
12.6 Binding Effect/Assignment. This Agreement shall be binding upon
-------------------------
and shall inure to the benefit of the parties hereto, and their respective
representatives, successors and permitted assigns. This Agreement shall not be
assignable by Vendor, without the express written consent of Ingram, which
consent shall not be unreasonably withheld, including to a Person in which it
has merged or which has otherwise succeeded to all or substantially all of such
party's business and assets to which this Agreement pertains and which has
assumed in writing or by operation of law its obligations under this Agreement.
Any attempted assignment in violation of this provision will be void.
12.7 Survival. Sections 5.5 (Payment Terms), 5.6 (Right to
--------
Withhold), 7.2 (Post-Term Termination) and 8 (Indemnification) shall survive the
expiration or earlier termination of this Agreement.
12.8 Entirety. This Agreement constitutes the entire agreement
--------
between the parties regarding its subject matter. This Agreement supersedes any
and all previous proposals, representations or statements, oral or written. Any
previous agreements between the parties pertaining to the subject matter of this
Agreement are expressly terminated. The terms and conditions of each party's
purchase orders, invoices, acknowledgments/conformations or similar documents
shall not apply to any order under this Agreement, and any such terms and
conditions on any such document are objected to without need of further notice
or objection. Any modifications to this Agreement must be in writing and signed
by authorized representatives of both parties.
12.9 Authorized Representatives. Either party's authorized
--------------------------
representative for execution of this Agreement or any amendment hereto shall be
president, a partner, or a duly authorized vice-president of their respective
party. The parties executing this Agreement warrant that they have the
requisite authority to do so.
-10-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
IN WITNESS WHEREOF, the parties hereunto have executed this Agreement.
<TABLE>
<CAPTION>
"Ingram" "Vendor"
<S> <C>
Ingram Micro Inc. Ramp Networks
1600 E. St. Andrew Place 3180 De La Cruz Blvd., Suite 200
Santa Ana, California 92705 Santa Clara, California 95054
By: /s/ Michael Terrell By: /s/ Patty Burke
----------------------------------- --------------------------------------
Name: Micheal Terrell Name: Patty Burke
---------------------------------- ------------------------------------
Title: Vice President Purchasing Title: VP Marketing
--------------------------------- -----------------------------------
Date: June 2, 1997 Date: 5/22/97
----------------------------------- -------------------------------------
</TABLE>
*Agreement must be signed by President or by a
duly authorized Vice President or Partner.
EXHIBITS:
- ---------
A - Vendor Routing Guide (if applicable)
B - Guide to Bar Code: The Product Label
C - Product Notes
D - Product Price List
E - "IMAGINE" Program (deleted)
F - Small And Disadvantaged Business Certification
G - Partnership America
-11-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
September, 22, 1997
Mike Terrell
Vice President, Purchasing
Ingram Micro, Inc.
1600 St. Andrews Place
POB 25125
Santa Ana, CA 92799
Dear Mr. Terrell,
Please accept this letter as an addendum to the Distribution Agreement between
Ramp Networks and Ingram Micro, dated May 15, 1997. This addendum affects
Section 1.1 of the agreement (Territory).
---------
Ramp Networks grants Ingram, including its affiliates for resale, and Ingram
accepts the non-exclusive right to distribute within the territories listed
below all computer products produced and/or offered by Ramp Networks during the
term of this Agreement. Ingram shall have the right to purchase, sell and ship
to any reseller within the territory or to Ingram's affiliate, or at Vendor's
option Ingram's affiliate may purchase direct from Ramp Networks.
Territories
-----------
United States
Canada
Accepted:
Ingram Micro Ramp Networks
1600 E. St. Andrew Place 3180 De La Cruz Blvd. Ste. 200
Santa Ana, California 92705 Santa Clara, California 95054
By: By: /s/ Patty Burke
---------------------------- ----------------------------
Name: Name: PATTY BURKE
------------------------- --------------------------
Title: Title:VP Marketing
------------------------ --------------------------
Date: Date: 9/23/97
------------------------- -------------------------
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
EXHIBIT A
PRODUCTS
Products may be changed, abandoned or added by Ramp Networks, at its sole
discretion, and Ramp Networks shall be under no obligation to continue the
production of any Product. Ramp Networks shall give thirty (30) days prior
written notice to Distributor regarding such Product changes.
The following products shall be supplied by Ramp Networks to Distributor
pursuant to the terms set out in the Agreement.
Products
--------
-- [* * *]
-- [* * *]
-- [* * *]
-- [* * *]
-- [* * *]
-- [* * *]
-- [* * *]
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
EXHIBIT B
PRODUCT PRICES
The prices below represent the per unit amounts that the Distributor will
pay Ramp Networks for the listed products.
<TABLE>
<CAPTION>
Product Part # MSRP Disty
- ------- ------ ---- -----
<S> <C> <C> <C>
[* * *] 150 [* * *] [* * *]
[* * *] 160 [* * *] [* * *]
[* * *] 200 [* * *] [* * *]
[* * *] 250 [* * *] [* * *]
[* * *] 74000301 [* * *] [* * *]
[* * *] 155 [* * *] [* * *]
[* * *] 165 [* * *] [* * *]
</TABLE>
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
EXHIBIT C
BACK-UP SUPPORT
(1) Ramp Networks will provide reasonable third-level technical
support ("Level 3 Support") to Distributor (in English only) concerning
technical aspects and use of Products as follows in order for Distributor to
provide support to its end-user customers. Such back-up support shall include:
(a) Ramp shall use its reasonable efforts to correct any
reproducible programming error identified in the Software attributable to Ramp
Networks with a level of effort commensurate with the severity of the error by
issuing defect correction information, including, but not limited to,
documentation, corrected code or a restriction, and work-arounds, provided that
Ramp Networks shall have no obligation to correct all errors in the Software.
Upon identification of any programming error, Distributor shall notify Ramp
Networks of such error, which notice shall provide Ramp Networks with enough
information to locate the error. Errors attributable to Ramp Networks shall be
those that are reproducible by Ramp Networks on unmodified Software.
(b) Ramp will provide reasonable telephone support to designated
employees of Distributor, during Ramp Networks' normal business hours and during
such other schedule as communicated to Distributor by Ramp Networks.
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
EXHIBIT D
PRODUCT MODIFICATIONS
None.
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
Incentives
Increased MDF Allocation
In return for Internetreseller.net's commitment,
we will add a bonus MDF allocation to [* * *] of the total 3 month buy-in. This
will allow Ramp to participate ii more marketing programs with 1
internetreseller.net
Value, based on [* * *] total buy-in: [* * *]
Upfront Spending of Co-op Dollars
Ramp Networks will allocate co-op dollars accrued on the total 3 month buy-in
immediately to available marketing programs and events. This allow Ramp in
effect to use future coo-op on programs today.
Value of [* * *] co-op funds on total buy-in: [* * *]
Online Advertising
Ramp Networks has planned insertions in online reseller publications, including
CRN and VARBusiness along with ISP-specific publications like BoardWatch. Ramp
- --- -----------
Networks will tag y g Internetreseller.net as a partner on all online reseller
advertising, as well as any reseller-focused print and insert your SKUs on
product promotions where applicable.
Value of committed advertising: [* * *]
Web Page Promotions
Ramp Networks is preparing to roll-out our Extranet site this month. The
Extranet will be a reseller-only site dedicated to providing viewers all the
information they need about Ramp Networks' products and services, including all
promotions and where-to-buy information. The site will be hot-linked ____ to
your web site in key areas, ensuring resellers will order product from you with
ease.
Value of web page promotions: [* * *]
3 Month Multi-level Spiff Program
Ramp Networks has put together a comprehensive, multi-level spiff program
designed to incent the sales team and buyers at all levels on sales of the
feature-rich M3t product. We expect this program to significantly increase M3t
sales through You and with Ramp more visibility within the internetreseller.net
Sales Team
<TABLE>
<CAPTION>
February March April
- -----------------------------------------------------------------------
<S> <C> <C>
[* * *] [* * *] [* * *] Distributor Spiff
[* * *] [* * *] Reseller Spiff
[* * *] End-User Spiff
</TABLE>
POS Incentive Rebate
When Internetreseller.net meets the POS target for the 3 month period, Ramp
Networks will pay an incentive rebate of [* * *] in return.
Value of POS incentive rebate: [* * *]
=======
Total Value of Incentives to Internetreseller [* * *]
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
3 Month Buy-In
Ramp Networks has calculated a reasonable 3 month buy-in for you. We have taken
into account past sell-through rates as well as growth factors attributable to
aggressive programs and a focused Ramp reseller account team.
We would require the buy-in order to be placed in one set of non-cancelable
purchase orders, which we would then split into appropriate month-end releases
for January/February/March.
Internetreseller.net Buy-in
<TABLE>
<CAPTION>
Cost Units Total
<S> <C> <C> <C>
[* * *] [* * *] [* * *] [* * *]
[* * *] [* * *] [* * *] [* * *]
[* * *] [* * *] [* * *] [* * *]
[* * *] [* * *] [* * *] [* * *]
[* * *] [* * *] [* * *] [* * *]
[* * *] [* * *] [* * *] [* * *]
[* * *] [* * *] [* * *] [* * *]
------
$[* * *]
</TABLE>
Proposed shipment - end January
<TABLE>
<CAPTION>
Cost Units Total
<S> <C> <C> <C>
[* * *] [* * *] [* * *] [* * *]
[* * *] [* * *] [* * *] [* * *]
[* * *] [* * *] [* * *] [* * *]
[* * *] [* * *] [* * *] [* * *]
[* * *] [* * *] [* * *] [* * *]
[* * *] [* * *] [* * *] [* * *]
[* * *] [* * *] [* * *] [* * *]
-------
$[* * *]
</TABLE>
Proposed shipment - end February
<TABLE>
<CAPTION>
Cost Units Total
<S> <C> <C> <C>
[* * *] [* * *] [* * *] [* * *]
[* * *] [* * *] [* * *] [* * *]
[* * *] [* * *] [* * *] [* * *]
[* * *] [* * *] [* * *] [* * *]
[* * *] [* * *] [* * *] [* * *]
[* * *] [* * *] [* * *] [* * *]
[* * *] [* * *] [* * *] [* * *]
-------
$[* * *]
</TABLE>
Proposed shipment - end March
<TABLE>
<CAPTION>
Cost Units Total
<S> <C> <C> <C>
[* * *] [* * *] [* * *] [* * *]
[* * *] [* * *] [* * *] [* * *]
[* * *] [* * *] [* * *] [* * *]
[* * *] [* * *] [* * *] [* * *]
[* * *] [* * *] [* * *] [* * *]
[* * *] [* * *] [* * *] [* * *]
[* * *] [* * *] [* * *] [* * *]
-------
$[* * *]
</TABLE>
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
EXHIBIT 10.11
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
LICENSE AGREEMENT
This License Agreement ("Agreement") entered into on the 24th day of March
1997 ("Effective Date") is between Ramp Networks, a California corporation with
a principal place of business at 3180 De La Cruz Blvd., Suite 200, Santa Clara,
California 95054 ("Ramp"), and Compaq Computer Corporation, a Delaware
corporation with a principal place of business at Houston, Texas ("Compaq").
WITNESSETH
WHEREAS, Ramp has developed the WebRamp Internet access device, and has
acquired all intellectual property rights contained in such product, and
WHEREAS, Ramp desires to grant to Compaq and Compaq desires to have, under
the terms and conditions of this Agreement, a royalty bearing manufacturing and
distribution license for the Term of this Agreement, to a modified version of
such WebRamp Internet access device to be made by Compaq or for Compaq under
Ramp patents, copyrights, know how, trade secrets and any other necessary and/or
useful Ramp intellectual property rights, and
WHEREAS, Compaq desires to own all rights to the Exclusive Features (as
defined below).
NOW, THEREFORE, the parties agree as follows:
SECTION 1.0
DEFINITIONS
In this Agreement, the following terms shall have the following meanings:
1.1 "Change of Control" shall be deemed to have occurred if (i) any
person or entity becomes the beneficial owner (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934), directly or indirectly, of securities
representing more than fifty percent (50%) of the combined voting power of
Ramp's outstanding securities, or (ii) a merger or consolidation of Ramp with
any other entity is approved, unless the voting securities of Ramp outstanding
immediately prior thereto continue to represent (either by remaining outstanding
or by being converted into voting securities of the surviving entity) more than
fifty percent (50%) of the combined voting power of the outstanding securities
of the surviving entity immediately after such merger or consolidation.
1.2 "Code" shall mean computer programming instructions which are used in
or shipped with a Licensed Product or for use in the manufacture, testing, sale
or support of the Licensed Products. Unless specifically stated otherwise, Code
shall include Executable Code, Object Code, Source Code, Third Party Code, and
any bug fixes thereof in existence from time to time during the course of this
Agreement.
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
a) "Executable Code" shall mean Code that loads and executes without
further processing by a software compiler or linker.
b) "Object Code" shall mean the Code that results when Source Code is
processed by a software compiler, but is not Executable Code.
c) "Source Code" shall mean the human-readable form of the Code and
related system documentation, including all comments and any procedural
language.
d) "Third Party Code" shall mean Code which Compaq, Ramp or another,
respectively owns the copyrights and other intellectual property rights or
otherwise has sufficient authorization to grant or assert rights in such Code.
1.3 "Compaq" shall mean Compaq Computer Corporation and its Subsidiaries,
1.4 "Deliverables" shall mean the Ramp Documentation, Licensed Product,
and any other materials, know how and support reasonably required by Compaq
and/or Fabco to efficiently and effectively start up and manufacture, test,
and/or support the Licensed Products in accordance with this Agreement.
Deliverables include but are not limited to those items listed in Attachment A,
and any Revisions thereto, and any of such items that Ramp generally provides to
its manufacturers, and Source Code solely for the purpose stated in Section 4.3.
1.5 "Exclusive Features" shall mean the Licensed Product features
identified in Exhibit A-1.
1.6 "Fabco" shall mean Compaq, or any manufacturing company that has
agreed to make Licensed Products for Compaq pursuant to the license rights
acquired under this Agreement. Fabco shall include any of Fabco's
subcontractors engaged to package, test or otherwise assist in the completion or
support of the Licensed Products.
1.7 "Make or Have Made" shall mean to use or have used, reproduce or have
reproduced, practice or have practiced, all or any part or derivative of the
Ramp Licensed Technology for the fabrication, manufacturing, testing, packaging,
maintenance and any other related activities of the Licensed Products.
1.8 "Licensed Products" shall mean the Compaq version of Ramp's WebRamp
Internet access device as described in the Specification, including the
Exclusive Features, any Revisions thereof, and, when developed, the "feature
enhancements" provided for in Section 3.4 and future versions of the Licensed
Product identified in Exhibit A-2.
1.9 "Milestones" means that set of milestones which are set forth in
Exhibit B.
1.10 "Ramp Documentation" is one or more of datasheets, PG tapes,
brochures, application notes, user and technical manuals, test programs and
procedures, and similar documents authored or created by or for Ramp and which
are necessary in the manufacture of
-2-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
Licensed Products or in the manufacture, sale and/or support of Licensed
Products, excluding Source Code.
1.11 "Ramp Know-How" shall mean all current or future trade secrets and
other information of Ramp, whether confidential, proprietary or otherwise,
including without limitation all designs, circuitry, software, microcode,
specifications, processes, test programs, working drawings, product schedules,
yield and cost data, and know how which are necessary in the manufacture of
Licensed Products or in the manufacture, sale and/or support of Licensed
Products, excluding Source Code.
1.12 "Ramp Licensed Documentation Copyrights" are copyrights for Ramp
Documentation provided to Compaq hereunder.
1.13 "Ramp Licensed Patents" are all patents and utility models issued or
issuing on current or future patent applications with an effective filing date
prior to termination or expiration of this Agreement and under which patents or
applications therefor Ramp now has or hereafter during the Term of this
Agreement obtains rights sufficient to enable Ramp to grant a license or
sublicense to Compaq hereunder for the manufacture, sale and/or support of the
Licensed Products.
1.14 "Ramp Licensed Software Copyrights" are all copyrights for any and
all Code (including but not limited to, drivers, test suites, diagnostics,
firmware, BIOS hypercode, and microcode) which are used in or shipped with a
Licensed Product, and/or developed by or for Ramp for use in the manufacture,
testing, sale or support of the Licensed Products.
1.15 "Ramp Licensed Technology" shall mean all Ramp Licensed Patents, Ramp
Licensed Documentation Copyrights, Ramp Know-How, and Ramp Licensed Software
Copyrights contained in the Deliverables or which are necessary in the
manufacture, assembly, testing, sale, support and/or use of Licensed Products.
Ramp Licensed Technology shall include any other technology, means, methods,
processes, practices, formulas, techniques, procedures, designs, specifications,
assembly procedures, schematics and other information and/or intellectual
property of whatever nature, whether confidential or not, and whether
proprietary or not, which is now in (or hereafter during the term of this
Agreement comes into) the possession of Ramp and which are necessary in the
manufacture, assembly, testing, sale, distribution, support and/or use of
Licensed Products, excluding Source Code. Ramp Licensed Technology shall
include Revisions thereto and shall include all items relating to the Licensed
Products generally provided by Ramp to its manufacturers. In no event shall
Ramp Licensed Technology include any Proprietary Third Party Information unless
Ramp has obtained sufficient rights to provide such Proprietary Third Party
Information to Compaq under this Agreement.
1.16 "Proprietary Third Party Information" shall mean information that
includes a third party's intellectual property.
1.17 "Revisions" are improvements resulting from bug fixes made by or for
Ramp to the Licensed Product. Revisions shall not include improvements or
changes to Licensed Product that add additional functionality.
-3-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
1.18 "Schedule" shall mean the development schedule set in Exhibit B.
1.19 "Specification" means the External Functional Specifications
contained in Exhibit A.
1.20 "Subsidiaries" shall mean any entity of which more than fifty percent
(50%) of the voting rights are owned or controlled, directly or indirectly, by
Compaq, provided, however, that such entity shall be deemed to be a Subsidiary
only for so long as such ownership or control exists.
SECTION 2.0
DEVELOPMENT
2.1 Ramp agrees to develop and provide the Deliverables in conformance
with the Specifications. Compaq and Ramp shall mutually agree on any changes to
the Specification for the Deliverables.
2.2 Ramp agrees that the Milestones shall not have been satisfied until
the Deliverables are accepted by Compaq. If Compaq fails to notify Ramp in
writing that it rejects a Deliverable within ten (10) days of its receipt of a
Deliverable, then Compaq will be deemed to have accepted such Deliverable. Any
rejection of acceptance by Compaq shall include a detailed explanation of the
reasons for such rejection.
2.3 Within two (2) business days from determining that there may be a
change or adjustment to the Schedule in the development or testing of Licensed
Products, Ramp agrees to inform Compaq in writing of any such proposed changes
or adjustments. Upon agreement by Compaq to adjust the Schedule, both parties
agree to cooperate to minimize the impact to the project. Compaq's agreement to
such changes or adjustments shall not be unreasonably withheld.
2.4 Ramp understands that time shall be of the essence in meeting the
Schedule.
2.5 Ramp agrees to provide Compaq weekly development status reports.
2.6 Ramp and Compaq shall hold project program review meetings during the
development of the Deliverables and thereafter, as the parties mutually agree.
Compaq may, at its option and expense, send its employees to Ramp's facilities
to review the status of the development of the Deliverables for Compaq.
2.7 In consideration for Ramp's agreement to develop the Licensed Product
and provide the Deliverables in conformance with the Schedule and the
Specifications Compaq shall pay to Ramp a [* * *] payable as follows:
[* * *] shall be due and payable within 30 days of the execution of
LOI dated 2/27/97.
-4-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
[* * *] shall be due and payable within 45 days of acceptance of the
Alpha version of the Licensed Product by Compaq.
[* * *] shall be due and payable within 45 days of acceptance of the
Beta version of the Licensed Product by Compaq.
[* * *] shall be due and payable within 45 days of the first
revenueable shipment of the Licensed Product by Compaq.
2.8 In the event of a material default by Ramp, Ramp agrees to refund any
NRE paid by Compaq.
2.9 In consideration of the covenants and obligations set forth in this
Agreement, Ramp agrees that it shall focus the appropriate resources to the
development of the Deliverables. A breach of this provision shall be deemed to
be a material breach of this Agreement.
2.10 Ramp agrees that Compaq shall have no obligations to provide any
technology, licenses, firmware, development resources, engineering resources or
any contribution for the development of the Deliverables, other than the NRE
listed above and as provided in the Exhibit C entitled "Compaq Deliverables".
2.11 Ramp agrees to enhance or alter the Deliverables to include the
future versions of Licensed Products specified in Exhibit A-2, for reasonable
NRE fees, in accordance with the schedule contained in Exhibit A-2.
SECTION 3.0
LICENSED PRODUCTS DESIGNED FOR COMPAQ
3.1 Approximately every six months, or at Compaq's request, the parties
will discuss the feasibility of designing to Compaq's specifications other
devices which may be manufactured and distributed by Compaq; provided, however,
that neither party has any obligation to enter into any agreement as a result of
such discussions.
3.2 Ramp shall use reasonable efforts to provide product planning, and
engineering resources to evaluate the feasibility and design efforts as
contemplated under Section 3.1.
3.3 In addition, Ramp shall provide Compaq notice of any new Ramp remote
access product development and shall provide Compaq a detailed summary of the
product functional specification within thirty (30) days of its release from
engineering.
3.4 Ramp shall provide Compaq notice of any new "feature enhancement" of
the current Web Ramp internet access device and shall provide Compaq a detailed
summary of the feature functional specification within thirty (30) days of its
release from engineering. In the event Compaq desires to include such "feature
enhancements" in the Licensed Products, for reasonable NRE fees, Ramp shall make
reasonable commercial efforts to include such "feature enhancements" in the
Licensed Product within sixty (60) days of such "features enhancements"
-5-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
release in a Web Ramp Internet access device. For purposes of this paragraph,
"features enhancements" shall mean modifications which enhance existing
functionality but do not provide new functionality (by way of example only;
increasing SNMP support by providing additional GET's would be considered a
"feature enhancement" while adding SNMP support to a nonSNMP capable product
would not be considered a "feature enhancement" because it adds new
functionality). In no event shall Ramp be required to include modifications in
the Licensed Products that add new functionality other than as provided in
Exhibit A-2.
SECTION 4.0
LICENSE GRANT
4.1 Ramp hereby grants to Compaq for the Term of this Agreement a
worldwide, royalty bearing (to the extent specified in Section 5.1), non-
exclusive license under the Ramp Licensed Technology to Make or Have Made by
Fabco, Licensed Products for use, lease, sale and/or distribution by Compaq to
its distributors, resellers, and end users. The foregoing shall include the
right for Compaq to sublicense some or all of the foregoing rights to (i) Fabco,
to the extent necessary to enable Fabco to make the Licensed Products for Compaq
as contemplated in this Agreement; and (ii) Compaq's distributors and/or end
users to the extent necessary to enable such distributors and/or end users to
use, lease, sell or otherwise distribute Licensed Products. Notwithstanding the
foregoing, the non-exclusive license granted above shall be exclusive to Compaq
in regards to the Exclusive Features, and Compaq shall own all rights, title and
interest in the Exclusive Features, including, without limitation, the exclusive
right to use, lease, sell and/or distribute the Exclusive Features. Compaq
shall have no ownership rights to the Licensed Products except for the Exclusive
Features.
4.2 Ramp hereby grants to Compaq for the Term of this Agreement a
worldwide, non-exclusive, royalty bearing (to the extent specified in Section
5.1) license to use, modify, reproduce and to distribute copies, in softcopy
and/or hardcopy form, of non-confidential Ramp Documentation covered by a Ramp
Licensed Documentation Copyright insofar as that documentation is required by
Compaq and its distributors, resellers and end users for the use, sale, support
and/or servicing of Licensed Products. Ramp hereby further grants to Compaq for
the Term of this Agreement a non-exclusive, non-transferable, royalty bearing
(to the extent specified in Section 5.1) license to use, distribute and
sublicense Executable Code that is covered by the Ramp Licensed Software
Copyrights solely as part of and/or used in Licensed Products to Compaq's
distributors, resellers and end users.
4 3 Ramp hereby grants to Compaq a non-exclusive internal use license to
all Source Code contained in the Licensed Product for the sole purpose of
providing service and support for the Licensed Products. Such Source Code will
be escrowed at Compaq's facility and shall be used be Compaq in accordance with
the Attachment B entitled "Source Code Protection and Access Control
Procedures". Any derivative works created by Compaq from such Source Code will
be provided by Compaq to Ramp, and Compaq shall assign all rights associated
with such derivative works to Ramp.
-6-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
4.4 Compaq hereby grants to Ramp a non-exclusive, non-transferable
internal use license to use the Compaq Deliverables for the sole purpose of
creating Exclusive Features to be incorporated into the Licensed Products in
accordance with this Agreement. Such license is limited to Licensed Products
only, and cannot be incorporated into any Ramp products or Ramp technology.
4.5 Compaq hereby grants to Ramp a non-exclusive, non-transferable
internal use license to use the "Multipurpose Auto PHY Media Detection Circuit"
document dated 8/12/96 for the sole purpose of creating an Exclusive Feature
which is to be incorporated into Licensed Products in accordance with the
Schedule and Specifications, and is to be returned to Compaq after such
Exclusive Feature has been accepted by Compaq. Such license is limited to
Licensed Products only, and cannot be incorporated into Ramp products or Ramp
technology.
SECTION 5.0
ROYALTY PAYMENTS
5.1 Compaq shall pay royalties to Ramp for Licensed Products in accordance
with the following:
(a) Within forty five (45) days after the end of each calendar
quarter, Compaq shall pay a royalty to Ramp for all Licensed Products shipped by
Compaq to its distributors, resellers and/or customers during the previous
calendar quarter. Such royalty shall accrue at the time of sale of Licensed
Products to a Compaq distributor, reseller and/or customer. This royalty shall
be computed initially at [ * * ] per net revenueable unit, which shall be
reduced by [ * * ] for each [ * * * ] net revenueable units sold (eg. Royalty
goes from [ * * ] after [ * * ] net revenueable units, from [ * * * ] after
[* * * ] net revenueable units, etc.) until the royalty is reduced to a minimum
of [* * * ] per net revenueable units sold. Such royalty schedule will remain
with the Licensed Products (including the new versions identified in Exhibit A-
2), and other royalty schedules will be mutually agreed upon for any new product
family.
(b) No royalty shall accrue to Ramp for copies of a Licensed Product
(i) used solely for testing; (ii) shipped as replacement for products found to
be defective in materials, manufacture, or reproduction; (iii) used for
demonstrations to prospective customers or as internal use units, not to exceed
[ * * * ] per each Licensed Product.
5.2 Each party shall keep records that, under generally accepted
accounting principles, will enable the royalties payable to Ramp to be
accurately determined
5.3 Ramp shall have the right for a period of one year after receiving any
royalty report from Compaq to appoint an independent certified public
accountant, reasonably acceptable to Compaq, who will have access to Compaq's
records during reasonable hours for the purpose of verifying the royalties
payable under this Agreement. However, this right cannot be exercised more than
once in any calendar year, and the accountant will disclose to Ramp only
information relating to the accuracy of the royalty report and payments made
under this Agreement. The failure of Ramp to request verification of any
royalty report during the one year period will be
-7-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
considered acceptance of the accuracy of the report, and Compaq will have no
obligation to maintain any records pertaining to that report beyond the two year
period.
5.4 All payments to Ramp under this Agreement shall be in U.S. dollars and
sent to the address below, which address Ramp may change from time to time by
notice to Compaq. Payments shall be accompanied by a report which references
this Agreement and includes the reporting period, and the basis for the payment
amount.
Ramp Networks, Inc.
3180 De La Cruz Blvd. Suite 200
Santa Clara, California 95054
5.5 All payments to Compaq under this Agreement shall be in U.S. dollars
and sent to the address below, which address Compaq may change from time to time
by notice to Ramp. Payments shall be accompanied by a report which references
this Agreement and includes the reporting period, and the basis for the payment
amount.
Compaq Computer Corporation
P.O. Box 692000
20555 S.H. 249
Houston, TX 77269-2000
ATTN: Accounts Receivable
SECTION 6.0
DELIVERABLES AND TECHNICAL ASSISTANCE
6 1 Ramp agrees to provide Fabco with the Deliverables and all necessary
information, and necessary and reasonable technical assistance, including, but
not limited to, the items listed in Attachment A entitled "Deliverables and
Technical Assistance", to start up Fabco and fully enable Fabco to manufacture,
assemble, and test the Licensed Products, as soon as such items are available,
and on an equal priority basis with Ramp's efforts to start up and fully enable
Ramp or any of Ramps other manufacturers.
6.2 Ramp agrees to provide Fabco with all necessary information and
technical assistance, including, but not limited to, the items listed in
Attachment A to (i) improve the speed with which Licensed Products reach full
production status; (ii) for reasonable fees, improve yields and frequency
distributions of Licensed Products over time; (iii) for reasonable fees, lower
manufacturing costs of Licensed Products over time; and (iv) for reasonable
fees, reduce the time required to achieve yield, distribution and cost
improvements to the Licensed Products.
6.3 Ramp agrees to deliver to Fabco the Deliverables, and the items listed
in Attachment A as soon as such Deliverables are available, but in all cases no
later than the date that Ramp delivers such Deliverables to any of Ramp's
manufacturers.
-8-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
6.4 Compaq shall be responsible for obtaining all necessary
certifications, including UL and FCC requirements, in order for Licensed
Products to be manufactured, sold, and distributed. Compaq will also obtain all
homologation and certification requirements.
SECTION 7.0
START UP AND OPERATIONAL COSTS
7.1 Except for the NRE, Ramp shall be responsible for the costs of
providing all Deliverables hereunder. Each party shall be responsible for its
own costs incurred in (i) starting up manufacturing at Fabco; and (ii) the
ongoing operational support of manufacturing Licensed Products at Fabco.
SECTION 8.0
CONFIDENTIAL INFORMATION
8.1 Each party recognizes that as part of this Agreement, it will be
necessary to disclose to the other party certain confidential information
(hereinafter referred to as ("Information"). Information disclosed that is
considered in good faith by the disclosing party as confidential and/or
proprietary shall be clearly marked as "Confidential" or "Proprietary" and shall
be disclosed in accordance with the Non-Disclosure Agreement signed by Compaq
and Ramp dated July 29, 1996. Information not easily marked, including
information orally disclosed, shall be summarized in writing and designated
confidential by the disclosing party within thirty (30) days of its disclosure.
8.2 Both parties agree that the party receiving Information will maintain
such Information in confidence for a period of five (5) years from the date of
disclosure of such Information.
8.3 Each party shall protect the other party's Information to the same
extent that it protects it own confidential and proprietary information and
shall take all reasonable precautions to prevent unauthorized disclosure to
third parties. Ramp agrees that Compaq may disclose Ramp Information to Fabco
pursuant to an agreement which contains confidentiality provisions substantially
similar to those contained herein solely for the purposes specified in this
Agreement.
8.4 The parties acknowledge that the unauthorized disclosure of such
Information may cause irreparable harm. Accordingly, the parties agree that the
injured party shall have the right to seek immediate injunctive relief enjoining
such unauthorized disclosure.
8.5 This provision shall not apply to information (1) known to the
receiving party without obligation of confidentiality at the time of receipt
from the other party as shown by the receiving party's files and records
immediately prior to the time of disclosure, (2) generally known or available to
the public through no act or failure to act by the receiving party, (3)
furnished to third parties by the disclosing party without restriction on
disclosure, or (4) furnished to the receiving party by a third party as a matter
of right and without restriction on disclosure.
-9-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
8.6 Immediately upon termination of this Agreement, at the request of the
other party, each of the parties shall promptly return all materials in its
possession containing Information of the other party except that Compaq may
retain and use any Information necessary in providing, and for the sole purpose
of providing, support to its customer base in accordance with the terms of this
Agreement.
8.7 The terms of this Agreement shall be confidential to the parties
hereto and may not be disclosed by either party to the public, or to any other
third party, without the prior written consent of the other party. The parties
agree to issue a press release announcing the existence of this Agreement upon
Compaq's first commercial shipment of a Licensed Product. The contents of such
press release must be mutually agreed to by both parties. However either party
may deliver a copy of this Agreement to one or more bona fide, prospective
investors or underwriters who are subject to a reasonable confidentiality
agreement. Either party may also disclose the existence and terms of this
Agreement, and file a copy of this Agreement in any filing with the S.E.C. if
required by the Securities Act of 1933, as amended, or as otherwise required by
a court order, law or regulation with reasonable advance notice to the other
party.
SECTION 9.0
REPRESENTATIONS and WARRANTIES
9.1 Ramp represents and warrants that Ramp has full and sufficient rights
to grant the rights and licenses granted to Compaq herein. Ramp further
represents and warrants the Deliverables and the use thereof for their intended
purpose do not infringe any patent, copyright, mask work right, trade secret,
trademark or other intellectual property rights of any third party. Ramp
documents this in the Attachment C "Certificate of Originality" as it relates to
any Code delivered by Ramp to Compaq as part of the Deliverables.
9.2 Ramp represents and warrants that in entering into this Agreement,
Ramp does not and will not rely on any promises, inducements, or representations
made by Compaq with respect to the subject matter of this Agreement, nor on the
expectation of any other business dealings with Compaq, now or in the future,
except as specifically provided in this Agreement.
9.3 Ramp hereby represents, warrants and covenants that the Licensed
Products provided to Compaq will operate accurately in the manner in which they
are intended as it relates to date related operations when given a valid date
containing century, year, month and day, including the following specific
performance features, but not limited to: (i) the Licensed Products' must
accurately calculate and execute dates using a four digit year; (ii) the
Licensed Products' functionality (on-line and batch), including but not limited
to entry, inquiry, maintenance and update, must accurately support and execute
four digit year processing; (iii) the Licensed Products' interfaces and reports
must accurately support and execute four digit processing; (iv) the Licensed
Products shall accurately execute the translation into the year 2000 with the
correct system date (e.g., 1/1/2000) without human intervention; (v) the
Licensed Products must accurately process with a four digit year after
transition to and beyond the year 2000, including accurate calculations of leap
year, without human intervention; and (vi) the Licensed Products must accurately
provide results in forward and backward date calculation
-10-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
spanning century boundaries, and shall accurately convert years previously
stored as two digits to four digits. Ramp shall be responsible for, indemnifying
and holding Compaq harmless from any damages, costs, liabilities, and/or
expenses, including attorneys' fees and other legal costs, arising out of the
breach of the foregoing.
9.4 Ramp represents, warrants and agrees that, as provided by Ramp to
Compaq, no material portion of the Code contained in the Licensed Product, other
than under documented control of Compaq: (i) is or will be intended, at some
specific time or on a specific instruction or occurrence of a given event, to
stop, limit or interfere with the operation of the Licensed Product, (ii) is or
will be intended to damage or materially alter or render inaccessible the
Licensed Product, or any other hardware, software or data which such Code is
designed to process or use, or any other hardware, software or data attached to,
resident on, or accessible to the system on which such Code is executed or
stored, or (iii) contains or will contain any feature which would impair in any
way the operation of the Product including, but not limited to, such Code locks
or drop-dead devices, date/time expiration codes, or serial number dependent
passwords. Ramp shall be responsible for, indemnifying and holding Compaq
harmless from any damages, costs, liabilities, and/or expenses, including
attorneys' fees and other legal costs, arising out of the breach of the
foregoing.
9 5 Compaq represents and warrants that Compaq has full and sufficient
rights to grant the rights and licenses granted to Ramp herein. Compaq further
represents and warrants the Compaq Deliverables and the use thereof for their
intended purpose does not infringe any patent, copyright, mask work right, trade
secret, trademark or other intellectual property rights of any third party.
9.6 Compaq represents and warrants that in entering into this Agreement,
Compaq does not and will not rely on any promises, inducements, or
representations made by Ramp with respect to the subject matter of this
Agreement, nor on the expectation of any other business dealings with Ramp, now
or in the future, except as specifically provided in this Agreement.
SECTION 10.0
INDEMNIFICATION
10 l Ramp will defend, indemnify and hold Compaq harmless from any and all
costs, expenses and damages suffered by Compaq in connection with any legal
action brought against Compaq by any third party alleging infringement of any
patent, copyright, mask work, trade secret or intellectual property right by the
Deliverables, or the use thereof for its intended purpose. Ramp's indemnity
obligations to Compaq under this Section 10.1 shall not apply unless: (i) Ramp
is promptly notified in writing of such legal action and given the option to
take sole control, at it's expense, of the defense of such legal action
including any settlement negotiations; and (ii) Compaq agrees, at its expense,
to provide reasonable assistance in the defense of such legal action. Without
prejudice to the foregoing indemnity, in case any of the Deliverables are held
to constitute such infringement and the use for its intended purpose of the
Licensed Product(s) is enjoined, Ramp shall at its discretion and expense,
either (i) procure for Compaq the right to continue using the Deliverables, or
(ii) modify such Deliverables so that it
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*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
becomes non-infringing. Notwithstanding the foregoing, to the extent a
Deliverable is the result of Ramp's implementation of a Compaq Deliverable, then
Ramp shall not be responsible for indemnification under this Section 10.1,
unless Ramp's implementation, rather than the Compaq Deliverable causes the
third party intellectual property infringement in question.
10.2 Notwithstanding the provisions of Section 10.1 above, Ramp assumes no
liability for (i) any claim arising out of a modification of a Deliverable, or
any part thereof, not made by or for Ramp, (ii) to any claim arising out of the
combination, operation or use of the Deliverable with hardware or software not
furnished by Ramp to the extent such claim would not have arisen had such
combination, operation or use not occurred, (iii) any third party equipment
furnished hereunder to complete Compaq's order, or (iv) any trademark
infringements involving any marking or branding not applied by Ramp or involving
any marking or branding applied at the request of Compaq.
10.3 Compaq will defend, indemnify and hold Ramp harmless from any and all
costs, expenses and damages suffered by Ramp in connection with any claim or
action brought against Ramp by any third party alleging infringement of any
patent, copyright, mask work, trade secret or intellectual property right by a
derivative work (excluding the underlying Deliverables) made by Compaq pursuant
to this Agreement, a Compaq Deliverable, or an Exclusive Feature, that is
incorporated into the Licensed Product. Compaq's indemnity obligations to Ramp
under this Section 10.3 shall not apply unless: (i) Compaq is promptly notified
in writing of such legal action and given the option to take sole control, at
it's expense, of the defense of such legal action including any settlement
negotiations; and (ii) Ramp agrees, at its expense, to provide reasonable
assistance in the defense of such legal action. Notwithstanding the foregoing,
to the extent an Exclusive Feature results from Ramp's implementation of a
Compaq Deliverable, and Ramp's implementation, rather than the Compaq's
Deliverable causes the third party intellectual property infringement in
question, then Compaq shall not be responsible for indemnification under this
Section 10.3 for such Exclusive Feature.
10.4 THE FOREGOING STATES THE ENTIRE LIABILITY AND OBLIGATION OF A PARTY
AND THE EXCLUSIVE REMEDY OF THE OTHER PARTY WITH RESPECT TO ANY ALLEGED OR
ACTUAL INFRINGEMENT OF PATENTS, COPYRIGHTS OR OTHER INTELLECTUAL PROPERTY
RIGHTS.
SECTION 11.0
LOGO and DOCUMENTATION
11.1 Ramp shall provide Ramp Documentation to Compaq as soon as available
so that Compaq may provide marketing and technical support to its customers for
Licensed Products.
11.2 No rights to Compaq's or Ramp's trademarks, trade names or brand
names are conferred, either expressly or by implication.
SECTION 12.0
CUSTOMER SUPPORT
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*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
12.1 During the term of this Agreement, and for a period of 5 years from
the date of the last shipped unit, Ramp will provide 3rd level product support
to Compaq as provided in Attachment D.
12.2 Ramp shall provide to Compaq all Revisions and modifications
hereafter developed by Ramp that correct defects in the Licensed Products, Ramp
Licensed Technology, or Code and such modifications and Revisions shall be
included in the license granted by this Agreement.
SECTION 13.0
TERM and TERMINATION
13.1 The term of this Agreement shall commence upon the Effective Date and
shall continue for a period of two (2) years ("Term"). This Agreement shall be
automatically renewed at the conclusion of the Term for successive one (1) year
periods unless one of the parties indicates by written notice to the other party
not less than one hundred and twenty (120) days prior to the end of the then
current Term that it does not intend to renew the Agreement.
13.2 Either party has the right to terminate this Agreement by giving
written notice of the breach if the other party fails to observe the material
terms, covenants, and conditions hereof, and fails to correct said breach within
thirty days after that party has given written notice thereof Termination by the
non-defaulting party may take place upon expiration of the thirty day period,
unless (i) the default cannot reasonably be cured within thirty (30) days; and
(ii) the defaulting party is using its good faith efforts to cure the breach
expeditiously; and (iii) the defaulting party has provided the non defaulting
party with a plan and date to cure the breach that is acceptable to the non
defaulting party in its reasonable discretion. In the event that the breach is
still not cured at the end of the planned cure date, the non defaulting party
may terminate this Agreement by sending a written notice of termination with
such termination to be effective immediately upon its receipt by the defaulting
party.
13.3 Compaq shall have the right to terminate this Agreement:
(a) in the event Ramp becomes bankrupt or insolvent, suffers a
receiver to be appointed, makes an assignment for the benefit of creditors, or
undergoes a Change in Control; or
(b) at will, as Compaq deems necessary, upon 90 days prior written
notice. In the event Compaq terminates for convenience then Compaq shall pay to
Ramp any remaining NRE.
13.4 Waiver by a party of a single failure or succession of failures of
performance by the other party will not deprive a party of its right to
terminate this Agreement by reason of a subsequent failure of performance.
13.5 Upon termination or expiration of this Agreement, the licenses in
Section 4 (excluding Section 4.3) shall terminate. Compaq agrees to cease all
sale and use of Licensed
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*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separtely with the Securities and Exchange
Commission.
<PAGE>
Products except that Compaq may finish manufacturing and selling any Licensed
Products either in process, or already manufactured by Fabco and/or
subcontractors. Compaq shall make no further use of and shall return to Ramp,
any and all designs, literature, and written technical information relating to
Licensed Products and copies thereof except as necessary for Fabco to complete
the manufacture of all in process Licensed Products and deliver such to Compaq,
and for Compaq to support Licensed Products pursuant to Section 4.3. Compaq may,
in accordance with the terms of this Agreement, continue to manufacture and sell
any inventory of Licensed Products, on hand or in process, at the time of
termination or expiration.
13.6 Notwithstanding the termination of this Agreement, neither party may
be relieved of liability to the other for any breach of this Agreement occurring
prior to the date of termination or for payment of any monies which became due
or payable prior to the date of termination or after termination with respect to
Licensed Products sold by Compaq pursuant to Section 13.5 above.
13.7 The termination or expiration of this Agreement shall not affect any
rights or licenses exercised or granted by Compaq and/or Fabco prior to
termination or expiration with respect to Licensed Products made by Fabco and
used by Compaq in accordance with this Agreement, including those delivered to
customers or used internally by Compaq.
13.8 The provisions of Sections 5.0 (Royalty Payments), 8.0 (Confidential
Information), 10.0 (Indemnification), 11.2 (Logo and Documentation), 12.0
(Support), 13.5, 13.6, 13.7 and 13.8 (Termination), 16.0 (Notice), and 17.0
(Limitation of Liability) shall survive and continue with respect to the subject
matter of this Agreement after the termination or expiration of this Agreement.
The provisions of Section 4.3 shall survive for a period of 5 years from the
date of the last shipped Licensed Product unit.
SECTION 14.0
ASSIGNMENT
14.1 Neither party may assign this Agreement or any part without the
express written consent of the other party. However, either party may assign
this Agreement in its entirety to a successor in ownership of all or
substantially all of its assets if the successor expressly assumes in writing
all of the terms and conditions of this Agreement.
SECTION 15.0
FORCE MAJEURE
15.1 Neither party shall be liable for its failure to perform any of its
obligations hereunder during any period in which such performance is delayed by
fire, flood, war, embargo, riot or the intervention of any government authority
or any other factor beyond the control of either party ("Force Majeure"),
provided that the party suffering such delay immediately notifies the other
party of the delay.
SECTION 16.0
NOTICE
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*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
16.1 Any notice to be given by either party to the other may be given in
person or by facsimile transmission or by first class letter sent to the last
known address or place of business of the other party and the notice will be
deemed to have been given at the expiration of two business days from the date
of the facsimile or five business days from the date the letter is deposited
with the U.S. Postal Service unless actual receipt at an earlier date is
established, and proof that the facsimile was sent or that the letter was
properly addressed and deposited will be sufficient evidence of service. Until
further advised, all notices will be sent as follows:
Ramp: Compaq:
Ramp Networks, Inc. Compaq Computer Corporation
3180 De La Cruz Blvd. P.O. Box 692000
Suite 200 20555 S.H. 249
Santa Clara, CA 95054 Houston, TX 77269-2000
ATTN.: President ATTN.: [ * * * ]
with a copy to: with a copy to:
Venture Law Group Compaq Computer Corporation
2800 Sand Hill Road P.O. Box 692000
Menlo Park, CA 94025 20555 S.H. 249
ATTN.: Tae Hea Nahm Houston, TX 77269-2000
ATTN.: General Counsel
SECTION 17.0
LIMITATION OF LIABILITY
17.1 IN NO EVENT WILL EITHER PARTY BE LIABLE TO THE OTHER FOR ANY LOST
PROFITS, INCIDENTAL DAMAGES OR CONSEQUENTIAL DAMAGES, EVEN IF THE PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, PROVIDED, HOWEVER, THAT THE
LIMITATIONS OF THIS SENTENCE WILL NOT APPLY TO (i) CLAIMS BY EITHER PARTY FOR
BODILY INJURY OR DAMAGE TO REAL PROPERTY OR TANGIBLE PERSONAL PROPERTY CAUSED BY
THE OTHER PARTY'S GROSS NEGLIGENCE.
SECTION 18.0
GENERAL PROVISIONS
18.1 This Agreement and its Attachments and Exhibits are the entire
agreement between Ramp and Compaq with respect to the subject matter hereof, and
it supersedes any and all prior or contemporaneous related discussions,
agreements and understandings with respect to the subject matter hereof.
18.2 Neither party is an agent of the other as a result of this Agreement
or any transaction relating to this Agreement.
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*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
18.3 The waiver of any breach or of any term or condition of the Agreement
does not waive any other breach of that term or condition or of any other term
or condition.
18.4 Each party shall pay when due all taxes imposed on it as the result
of its performance of this Agreement.
18.5 This Agreement shall be governed by the laws of the United States of
America and the substantive laws of the State of Texas, excluding that body law
known as conflict of laws.
18.6 If any part of this Agreement is for any reason found to be
unenforceable, all other parts nevertheless remain enforceable.
18.7 The headings used in this Agreement are for convenience only and
shall not be used to construe or interpret this Agreement.
18.8 No amendment, modification, addition or deletion to this Agreement
shall be effective unless it is in writing and signed by both parties.
18.9 This Agreement may be executed in any number of counterparts, and all
of which shall constitute one instrument.
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*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separtely with the Securities and Exchange
Commission.
<PAGE>
In witness whereof, Ramp and Compaq have caused this Agreement to be
executed and delivered in duplicate.
Ramp Networks, Inc. Compaq Computer Corporation
/s/ Mahesh Veerina /s/ [***]
- -------------------------- -------------------------------
Signature (date) Signature (date)
MAHESH VEERINA [* * *]
- -------------------------- -------------------------------
Name Name
PRESIDENT & CEO VICE PRESIDENT, COMMUNICATION PRODUCTS
- -------------------------- -------------------------------
Title Title
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*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
EXHIBIT A
[* * *]
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
-18-
<PAGE>
Exhibit B
Milestones and Schedule
Deliver Beta version of Licensed Product [* * *]
[* * *] [* * *]
[* * *] [* * *]
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
Exhibit C
Compaq Deliverables
[* * *].
Software interface specifications for interoperability with Compaq's [* * *]
The following [* * *] shall be [* * *] to Ramp pursuant to the [* * *] attached
hereto as Appendix A to Exhibit C;
- [* * *]
- [* * *]
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
COMPAQ
[* * *]
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
EXHIBIT 10.12
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
GOODS AGREEMENT
STATEMENT OF WORK
This Statement of Work # 4998RL1061 ("SOW") adopts and incorporates by reference
the terms and conditions of Goods Agreement # 4998RL1060 ("GA") between Ramp
Networks ("Supplier") and IBM Corporation ("Buyer"). Transactions performed
under this SOW will be conducted in accordance with and be subject to the terms
and conditions of this SOW, and the balance of this Agreement. This SOW is not
a WA. Unless otherwise stated herein or in writing from Buyer's procurement
personnel, the only WA hereunder will be written or electronic purchase orders.
All WAs issued for Products during the term of this SOW (regardless of whether
the WAs reference this Agreement or not) are incorporated herein by reference.
Unless otherwise qualified, all references to days in this SOW will mean
calendar days.
1.0 PRODUCT DESCRIPTION AND REQUIREMENTS
1.1 General Description. The Product, an internet gateway router product
targeted toward the home/home office environment, will be shipped as an option
to the IBM Home Director Connection Center. The Product will: (i) support
internet connections over an integrated V.90 modem and/or externally attached
modem (V.90 or ISDN); (ii) provide simultaneous access on the LAN side to the
internet and file and printer sharing via a 4 port Ethernet hub; and (iii)
incorporate a DHCP server for automatic IP address assignment. Product part
numbers are set forth in Attachment A. The primary intended uses of the Product
are for incorporation into Buyer's product offerings, resale as a stand-alone
product, and/or for field support to Buyer's products. The Products are further
described by the specifications, certifications and other requirements
referenced in this SOW, in addition to all specifications, catalogs, and other
documentation published by Supplier. All such specifications, certifications,
and other documents are incorporated herein by reference, and Supplier
acknowledges receipt of each of them.
1.2 Product Specifications.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Buyer Engineering Description
Specification # Change Level #
(if applicable) (if applicable)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Attachment A, entitled "Product Specifications," to this SWO*
- ---------------------------------------------------------------------------------------------------------------------
[* * *] General Quality Requirements for IBM/RTP Suppliers
- ---------------------------------------------------------------------------------------------------------------------
[* * *] Supplier Quality Requirements (Feature Cards) dated February 16, 1998
- ---------------------------------------------------------------------------------------------------------------------
[* * *] IBM Packaging Engineering Specifications, FRU (Field Replaceable Unit)
Packaging Requirements (February 1994)
- ---------------------------------------------------------------------------------------------------------------------
[* * *] Automatic Identification for Packaging, Distribution and Manufacturing
(1997-08)
- ---------------------------------------------------------------------------------------------------------------------
[* * *] IBM PCCo Packaged Product Bar Code Guidelines
- ---------------------------------------------------------------------------------------------------------------------
Bar Code Label Implementation Guide for IBM Suppliers (May 2, 1994), Release
3.1.
- ---------------------------------------------------------------------------------------------------------------------
[* * *] Label, IBM FRU
- ---------------------------------------------------------------------------------------------------------------------
[* * *] Label, Standard Bar Code Specification
- ---------------------------------------------------------------------------------------------------------------------
[* * *] Buyer's "Supplier Packaging and Materials Handling Specification"
- ---------------------------------------------------------------------------------------------------------------------
Supplier's published specifications, catalogs, and other documentation
- ---------------------------------------------------------------------------------------------------------------------
Note: * Attachment A is intended to indicate additions or changes being requested by Buyer to [* * *].
- ----
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
1.3 Required Product Certifications. Supplier has secured, and shall maintain
during the term of this SOW, all certifications required for Buyer to sell the
Products in the United States and Canada, including, without limitation, all ISO
requirements, as well as those certifications described below.
<TABLE>
<CAPTION>
Certification Title Certification Description
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
CE mark, commercial Electromagnetic Emissions
- -------------------------------------------------------------------------------------------------------------------
FCC Part 15 Class B Electromagnetic Emissions
- -------------------------------------------------------------------------------------------------------------------
EN 55 022 (CSSPR), Class B Electromagnetic Emissions
- -------------------------------------------------------------------------------------------------------------------
VCCI Class B ITE Electromagnetic Emissions
- -------------------------------------------------------------------------------------------------------------------
CE mark, commercial Safety Agency Approval (Power Adapter)
- -------------------------------------------------------------------------------------------------------------------
UL listed (UL 1950) Safety Agency Approval (Power Adapter)
- -------------------------------------------------------------------------------------------------------------------
CSA certified (CSA 22.2 #950) Safety Agency Approval (Power Adapter)
- -------------------------------------------------------------------------------------------------------------------
TUV licensed (EN 60 950) Safety Agency Approval (Power Adapter)
- -------------------------------------------------------------------------------------------------------------------
T-Mark Safety Agency Approval (Power Adapter)
- -------------------------------------------------------------------------------------------------------------------
FCC Part 68 Modem Certification
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
1.4 FAA Certification. Supplier certifies that all Products and their packages
do not contain explosives, hazardous materials, incendiaries and/or destructive
devices.
1.5 COO Product Certification. Supplier certifies that the Products purchased
hereunder have the following country(ies) of origin. If there are any changes
to this information, Supplier will notify Buyer by providing a new country of
origin certification signed by an authorized Supplier representative before
shipping any Products other than those with the country of origin listed below
for such Product. Supplier acknowledges that Buyer will rely upon this
certification, and timely updates to it, in making representations to Buyer's
customers and to comply with various laws and regulations. If any part number
listed has more than one country of origin, Supplier certifies that each country
of origin is listed below, and Supplier agrees to deliver to Buyer, by March
1,1999, instructions regarding how Buyer can distinguish each country of origin
for part numbers with more than one country of origin.
<TABLE>
<CAPTION>
Buyer Assigned Part Product Description Country of Origin and Is Product Marked with
Number Complete Street an Industry Standard
Address Barcode (y/n)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
[* * *] [* * *] [* * *] Y
- ------------------------------------------------------------------------------------------------------------------------
[* * *] [* * *] [* * *] Y
- ------------------------------------------------------------------------------------------------------------------------
[* * *] [* * *] [* * *] Y
- ------------------------------------------------------------------------------------------------------------------------
[* * *] [* * *] [* * *] Y
- ------------------------------------------------------------------------------------------------------------------------
[* * *] [* * *] [* * *] Y
- ------------------------------------------------------------------------------------------------------------------------
[* * *] [* * *] [* * *] Y
- ------------------------------------------------------------------------------------------------------------------------
[* * *] [* * *] [* * *] Y
- ------------------------------------------------------------------------------------------------------------------------
[* * *] [* * *] [* * *] Y
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
1.6 Compatibility Requirements. The Products will be compatible with the IBM
Home Director Connection Center and its integrated 4 port Ethernet hub, Buyer's
system units, peripherals and including, but not limited to those operating
systems, applications, games and internet service providers ("ISPs") identified
in Attachment A. Supplier agrees to enhance, correct, and test Products to
ensure such compatibility. Supplier shall provide compatibility text reports to
Buyer, when requested by Buyer.
1.7 Product Field Support: In addition to the Product warranties, Supplier will
provide the following services in support of the Product during the warranty
period:
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*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
(1) support Buyer on all end user telephone calls regarding the Product. Buyer
shall be the primary interface with the end user in all situations and no
end user may contact Supplier directly.
(2) support Buyer regarding the determination of whether there is a defect
(patent or latent), error or other problem ("Defects") with the Product,
including without limitation, failure analysis of the affected Product in
the filed or that have been returned to Buyer or Supplier; and
(3) isolate and promptly correct all Defects with the Products, and provide
such corrections to Buyer in accordance with the parameters set forth below
(these parameters are "time of the essence"):
(a) for Defects that result in an emergency condition that causes critical
impact to Buyer's schedule or that makes performance or continued
performance of any feature or function impossible or impractical
("Severity Level 1 Defect" or "SLI Defect"), Supplier will use bests
efforts to provide corrections within twenty-four (24) hours of the
earlier of Supplier discovering the SL1 Defect or being informed of the
SL1 Defect;
(b) for Defects that significantly affects Buyer's schedule or that make
the performance or continued performance of any feature or function
difficult and that cannot easily be circumvented or avoided on a
temporary basis by the end user ("Severity Level 2 Defect" or "SL2
Defect"), Supplier will use best efforts to provide corrections within
5 days of the earlier of Supplier discovering the SL2 Defect or being
informed of the SL2 Defect;
(c) for Defects that are not critical in that performance can be continued
without difficulty or loss of data by easy circumvention or avoidance
by the end user ("Severity Level 3 Defect" or "SL3 Defect"), Supplier
will use best efforts to provide corrections within 15 days of the
earlier of Supplier discovering the SL3 Defect or being informed of the
SL3 Defect; and
(d) for Defects that are minor which can be easily avoided or circumvented
by the end user ("Severity Level 4 Defect" or "SL4 Defect"), Supplier
will use best efforts to provide corrections within 45 days of the
earlier of Supplier discovering the SL4 Defect or being Informed of the
SL4 Defect.
(4) In all cases, Supplier shall provide failure analysis results, including
definition of root cause and corrective actions taken.
(5) Supplier shall provide a[* * * ] Buyer Personnel, [* * *], at a location
and date to be identified by Buyer and agreed upon by Supplier, whose
agreement shall not be unreasonably withheld, in support of the Products
and each updated version thereof.
1.8 Product Software and Documentation. Product code (object code only) and
documentation Include: the Easy Start CD, and firmware contained in the Product
itself. The delivery of this CD and firmware will be included with the Product,
to be delivered on a mutually agreed to schedule. Schedule dates to be
determined after initial sizing and included as an addendum to this document.
Supplier will deliver a fully completed and signed certificate of originality
(in a form to be provided by Buyer) for all such code and documentation. Such
deliverables will be due to Buyer as follows:
Golden CD media delivery: February 1, 1999
Documentation delivery: February 1, 1999
Certificate of originality delivery: February 1, 1999
Supplier will promptly deliver to Buyer all updates (including, without
limitation, all error corrections and minor enhancements/revisions) to such
Product code in the same format set forth above, and that all such updates are
included in the Product definition as provided in section 5.0.
In connection with Buyer's purchase of Product, Supplier grants to Buyer, its
Affiliates, its and their successors and assigns, a worldwide, Irrevocable,
royalty-free, fully-paid-up right and license, without accounting:
(a) to use, execute, preload, reproduce copy, distribute copies of (internally
and/or externally), display and/or perform all, and/or any portion of the
deliverables and such rights and licenses shall include all rights and
licenses in and to pictorial, graphic and/or audio visual works, including
icons, screens, music, sound and/or characters, created as a result of
execution of the deliverables whether such pictorial, graphic and/or
audio/visual works are created by use of the deliverables and/or with other
programming and/or through other means;
-3-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
(b) under any trade secret, patent application and/or patent owned and/or
licensable by Supplier to use have used, lease, sell and/or otherwise
transfer each Product either alone and/or in combination with equipment or
software or both, and/or to practice and/or have practiced any process
and/or method;
(c) to use, in connection with the marketing of Product, the Product name(s),
logos trade names, service names, trademarks, and/or service marks used by
Supplier to identify and/or promote the Products, including any portions
thereof.
(d) to sublicense all and/or any portions of the Products to end users and/or
others under similar provisions used by Buyer to sublicense Buyer products
or, at Buyer's sole discretion, under provisions provided by Supplier to
license and/or similarly transfer Products;
(e) to authorize others, to do any of the foregoing.
The above grant of rights and licenses shall be [* * * ]. Further the above
grant of rights and licenses includes the royalty-free, fully-paid-up right and
license to distribute the deliverables, including any subset thereof by any
means, in various media (including without limitation hard drives, CD-ROMs,
diskettes, tapes, and/or over the Internet and/or electronic bulletin boards)
either alone and/or with Buyer and/or third party code included on the same
media.
Notwithstanding any other provisions of this Agreement, Supplier shall have no
right to use the trademarks, trade names, or product names of Buyer or its
Affiliates directly or Indirectly In connection with any product, promotion or
publication without the prior written approval of Buyer.
1.9 Translations. The Product (including Product code and documentation) will
be available in the following languages in accordance with the schedule below:
Language Release Date
-------- ------------
English (U.S.A.) February 1, 1999
1.10 Product Modifications. No changes of any kind will be made by Supplier to
the Products, without Buyer's prior written consent. In proposing Product
changes, Supplier must demonstrate that the Product quality level is not
diminished. For Products of the same type and essentially equivalent in design
and function which Supplier offers to other customers as OEM products, Supplier
will notify Buyer of all changes to such OEM products, and notify Buyer of the
impact of such changes and their relationship to the Products.
1.11 Buyer Proprietary Materials. Supplier shall use Buyer proprietary
components only to build Products sold to Buyer hereunder. "Buyer proprietary
components" include, without limitation, documentation and packaging that bears
Buyer artwork, Buyer Product labels, and Buyer tamper evident seals and any
other components that Buyer expressly identifies as Buyer proprietary in any
Buyer bill of materials for the Product In Attachment A or other writing from
Buyer. Any item of packaging identified in any Product bill of materials or
other Buyer writing as an "Buyer proprietary component" shall be purchased by
Supplier directly from suppliers approved by Buyer and at the same pricing
afforded to Buyer, provided, however that Supplier shall be responsible for the
relationship with such suppliers, and Buyer shall not be liable in any manner
regarding purchases or related activity.
1.12 Tamper Evident Protection. Each Product (except for spare parts that are
clearly marked as "USED PARTS FOR SPARE PARTS OR FIELD REPLACEABLE UNITS" will
be required to have tamper evident protection to ensure that the Products are
new when received by end user customers. This tamper evident protection will be
in the form of "IBM" logo tape applied to the finished Product packaging in such
a manner that if removed or tampered with, it would be evident that the finished
Product packaging has been opened. Such tamper evident method must not be
resealable, without evidence of tampering.
Supplier agrees to treat Buyer's logo tape as confidential and will have
controls to prevent unauthorized use or dissemination (including tracking the
purchase, internal use, application, and destruction [to avoid use by others,
and to limit access to such materials to only those with a need to know to carry
out the tamper evident sealing on the
-4-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
Products. Supplier agrees to use the Buyer logo tape in connection with new
Product, and not with any other product or with any spare part or field
replacement unit.
2.0 PART NUMBERS, PRICES AND OTHER TERMS
2.1 Product Unique Terms.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
Buyer Part # Supplier Part # Unit Price and Delivery Term Payment Term* Lead Time
Current prior to
Delivery to
issue WAs**
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
[* * *] N/A [* * *] FOB Origin 45 days after 30 Business Day
receipt of valid
invoice
- -------------------------------------------------------------------------------------------------------------------------------
[* * *] N/A [* * *] FOB Origin 45 days after 30 Business Days
receipt of valid
invoice
- -------------------------------------------------------------------------------------------------------------------------------
[* * *] N/A [* * *] FOB Origin 45 days after 30 Business Days
receipt of valid
invoice
- -------------------------------------------------------------------------------------------------------------------------------
Note: * Supplier will not invoice Buyer, until after Product delivery.
** Any increase in the agreed to lead-time must have Buyer's prior written approval.
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Product part numbers, unit Pricing, Delivery terms, lead times and other
logistics may be changed via a letter that references this SOW and that is
signed by both parties. Regardless of the FOB point, Buyer will select the
common carrier, unless Buyer notifies Supplier to the contrary. Supplier agrees
to cooperate with Buyer and common carrier to ensure the Products arrive at the
destination addressed in the WA.
2.2 Product Availability. Supplier will notify Buyer prior to Supplier's
withdrawal of any Product(s). Such withdrawal notice will not occur during the
term of this SOW.
2.3 Taxes and Duties. Supplier warrants that the Prices do not include sales
use or similar taxes applied against the finished Product sold to Buyer.
Notwithstanding the F.O.B. point, Supplier will be responsible for all legal,
regulatory and administrative requirements. Buyer will be responsible for all
associated duties and fees, associated with importation of Products into the
country where the Product is received by Buyer.
2.4 Epidemic Defect Rate and Warranty Period. The Epidemic Failure Rate
equates to any defects at or above [* * ] of Products purchased with the same
manufacturing lot code. Products shall also be considered to have an Epidemic
Failure if Buyer implements a Product recall. The warranty period for the
Products is [ * * * ] from the time of shipment to Buyer.
2.5 Common Carriers and Customer Information. Regardless of the FOB point,
Supplier will prepare all shipping labels and transfer materials (as submitted
by Buyer) to identify Buyer, not Supplier, as the party shipping Product, except
to the extent that Supplier, and not Buyer, must be identified for customs
clearances or to comply with other laws. To the extent Supplier must be
identified on the final Product packaging, Supplier will have prior written
agreements in place with each carrier (regardless whether Buyer or Supplier
controls the common carrier) that will require each carrier to remove (after
applicable customs clearances, but before delivery to any customer of Buyer),
hold in confidence, and return (or certify destruction or hold in confidence in
perpetuity until destruction is certified for cases where the carrier requires
to keep such documents for archival purposes) to Supplier all documents and
markings that reflect transaction information between Supplier and Buyer
(including without limitation, all pricing information), while retaining or
placing the appropriate transaction information between
-5-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
Buyer and Buyer's customers. Supplier will ensure that no markings, labels of
any kind, are placed on the Products (including customer packaging), other than
as expressly specified by Buyer in writing, or as required by law, provided that
Supplier first notify and secure Buyer's written confirmation with such
requirements. Such concurrence shall not relieve Supplier's obligations
hereunder.
Notwithstanding anything to the contrary, Supplier shall hold the following
special confidential information in trust and confidence: (a) customer names,
addresses, purchase histories and requirements; (b) Buyer's order fulfillment
and related processes, including Buyer's relationship and Agreement with
Supplier; (c) Buyer's artwork, customer packaging, and other intellectual
property of Buyer; (d) Buyer's business plans, Product plans, and forecasts; and
(e) the relative success or failure of any Product or supporting process.
Supplier may use such special confidential information only for the benefit of
Buyer and only to fulfill the purpose of this SOW. Supplier may disclose such
information to Supplier's employees who have a need to know to fulfill the
purpose of this SOW, provided that Supplier has a written agreement in place
with all such employees sufficient to enable Supplier to fulfill its obligations
under this SOW. Further, Supplier may comply with valid legal process requiring
disclosure, but only to the extent required by law, and provided that Supplier
notifies Buyer prior to any such disclosure and assists Buyer in seeking a
protective order and/or limiting disclosure to the extent possible. Supplier
shall remain solely liable for the contents of such disclosures.
Supplier shall not disclose that it is developing or assembling Buyer's Products
in press releases, marketing materials, point of sale materials, customer/trade
briefings, or otherwise, without prior written approval from Buyer. Supplier
agrees that Buyer's trademarks, trade names, and goodwill are valuable assets,
and these disclosures will constitute a material breach of this Agreement which
could damage Buyer and Buyer's trademarks, trade names, and goodwill.
Supplier shall not distribute special confidential information outside of the
Supplier location that received such information, without Buyer's prior written
authorization. Supplier shall maintain adequate controls over all special
confidential information to ensure that it is held in trust and confidence for
Buyer and used only as expressly authorized by Buyer in this SOW. Supplier
shall immediately notify Buyer of any lost or unapproved disclosures of special
confidential information. Supplier shall return or destroy all special
confidential information, no later than ten days after Buyer's request.
Supplier shall allow Buyer to periodically inspect Supplier's premises during
normal working hours to verify these requirements for custody and use of special
confidential information.
2.6 Product Returns. To maintain customer satisfaction, Buyer and its
authorized service providers will replace Products that do not conform to
warranties hereunder. Buyer may return these units to Supplier any time within
the warranty period. Supplier shall inspect and test returns. For returns that
conform to Product specifications (i.e., NDF or "no defect found"), Supplier may
elect to return these Products to Buyer as FRU's, subject to Buyer approval, and
subject to marking such parts as "USED PARTS FOR SPARE PARTS OR FIELD
REPLACEABLE UNITS" and only for FRU use. For returns that do not conform to
Product specifications and have defects covered under the Product warranty,
Supplier shall provide Buyer with a credit against future WAs equal to the price
that Buyer paid. For Product returns not covered under Product warranty
including Epidemic Defect) no credit or replacement will be provided by
Supplier.
2.7 Supplier will treat all Product returns and components therein as used, and
will not redistribute them as new Products regardless of any refurbishment or
repairs they may undergo. Supplier may use Product returns as spare parts or
field replacement units sold to Buyer under this SOW, provided that Supplier
first refurbishes, tests, and confirms that these Products perform like new, and
provided that Supplier clearly labels all such spare parts "USED PARTS FOR SPARE
PARTS OR FIELD REPLACEABLE UNITS." Prior to any other redistribution or reuse of
Product returns, Supplier will remove and destroy all Product labels, packaging,
documentation, Buyer proprietary components, and other characteristics
(including, without limitation all items described in Attachment 3) that
identify it as a Buyer Product.
3.0 RESCHEDULING/CANCELLATION
-6-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
Supplier will use reasonable efforts to comply with Buyer's requested changes to
delivery of Products specified in a WA as described in the table below, without
additional charge to Buyer.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Number of Days prior to a Increase of Product Decrease (cancellation) of Reschedule of Product
WA Scheduled Delivery Date Quantity to a WA Scheduled Product Quantity to a WA Quantity to a WA Scheduled
Delivery Date (% of Order Scheduled Delivery Date (% Delivery Date (% of Order
Quantity) of Order Quantity) Quantity)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
[* * * ] [* * * ] [* * * ] [* * * ]
- ------------------------------------------------------------------------------------------------------------------------
[* * * ] [* * * ] [* * * ] [* * * ]
- ------------------------------------------------------------------------------------------------------------------------
[* * * ] [* * * ] [* * * ] [* * * ]
- ------------------------------------------------------------------------------------------------------------------------
[* * * ] [* * * ] [* * * ] [* * * ]
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
4.0 COMMUNICATIONS
- ------------------
All communications between the parties will be carried out through the
designated coordinators:
All procurement, business and administrative communications between the parties
will be conducted through the following "Business Coordinators":
Buyer Supplier
Attention: [* * * ] Attention: [* * * ]
IBM Corporation 3180 De La Cruz Boulevard Suite 200
3039 Cornwallis Road Santa Clara, CA 95054
Research Triangle Park, NC 27709 Phone: [* * * ]
Phone: [* * * ] Fax: [* * * ]
Fax: [* * * ]
Technical communications between the parties will be conducted through the
following "Technical Coordinators":
Buyer Supplier
Attention: [* * * ] Attention: [* * * ]
IBM Corporation Ramp Networks 3
3039 Cornwallis Road 3180 De La Cruz Boulevard Suite 200
Research Triangle Park, NC 27709 Santa Clara, CA 95054
Phone: [* * * ] Phone: [* * * ]
Fax: [* * * ] Fax: [* * * ]
All legal notices will be sent to the following addresses and will be deemed
received (a) 2 days after mailing if sent by certified mail, return receipt
requested or (b) on the date confirmation is received if sent by facsimile
transmittal, to the party set forth below.
Buyer Supplier
Attention: [* * * ] Attention: [* * * ]
IBM Corporation Ramp Networks
3039 Cornwallis Road 3180 De La Cruz Boulevard Suite 200
Research Triangle Park, NC 27709 Santa Clara, CA 95054 081
Phone: [* * * ] Phone: [* * * ]
Fax: [* * * ] Fax: [* * * ]
-7-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
Each party may change its designated coordinators and/or addresses any time by a
written notification to the Business Coordinator (with a carbon copy to the
Technical Coordinator or legal notice coordinator, as applicable).
5.0 GENERAL
5.1 As part of Supplier's post-warranty service, Supplier will maintain the
capability to supply Spare Parts (i.e., the entire Product or portions of the
Product as described herein or as may be subsequently described by Buyer) during
the term of this SOW and for a period of [* * * ] thereafter. Buyer may
require additional post-warranty service requirements and such post-warranty
service shall be subject to Supplier's normal pricing.
5.2 If Supplier refers or encourages Buyer to refer to future performance
and/or future upgrade features (collectively, "Upgrades") that are not included
in the Products at the time of the referral (including, without limitation,
references in marketing materials, web pages, and Product documentation), then
Supplier agrees to offer to Buyer for inclusion under this SOW, on reasonable
terms and conditions which shall be no less favorable than the most favorable
terms and conditions to which Supplier has licensed other third parties, all
Upgrades that Supplier creates with respect to the Product. Such offer(s) shall
be made by Supplier to Buyer within a reasonable period of time but in no event
later than the earliest availability date suggested by the reference. Supplier
will Include In such Upgrades all of the performance functions and features
suggested by the reference.
6.0 COMPENSATION
Upon execution of this SOW, Buyer will issue to Supplier a WA to compensate
Supplier for its work in modifying the deliverables which Supplier shall provide
under this SOW. In consideration for Supplier's satisfactory performance in
providing such modifications, Buyer will pay to Supplier an amount not to exceed
[* * * ] which is comprised of the following price elements:
1. Standard Software Customization: ................................ [* * * ]
[* * * ]
[* * * ]
[* * * ]
2. IBM Additional Software Development:............................. [* * * ]
[* * * ]
1. [* * * ]
2. [* * * ]
3. [* * * ]
4. [* * * ]
3. Testing of New Compiled Software:................................ [* * * ]
Payment will be made by Buyer to Supplier upon receipt of acceptable invoice(s)
in accordance with Buyer's WA Number 2000930863.
7.0 SURVIVAL
The rights and obligations of sections 1.4, 1.5, 1.7, 1.8, 1.11, 2.2, 2.3, 2.4,
2.5, 4.0, 5.0 and 7.0 of this SOW will survive and continue after termination of
the Agreement or this SOW, and will remain in full force and effect and will
bind the parties and their legal representatives, successors, heirs and assigns.
For purposes of this SOW, the rights and obligations of sections 6.3 and 6.4 of
the GA will also survive and continue (in addition to those sections
-8-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
set forth as surviving in section 14.12 of the GA) after termination of this
Agreement or this SOW and will remain in full force and effect, and will bind
the parties and their legal representatives, successors, heirs and assigns. The
rights and obligations of the entire GA and SOW, as they apply to outstanding
WAs that may not have been not canceled as part of the Agreement or SOW
termination, will survive and continue after termination of this SOW and will
bind the parties and their legal representatives, successors, heirs and assigns
until expiration or cancellation of such WAs.
ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
INTERNATIONAL BUSINESS MACHINES RAMP NETWORKS
CORPORATION
[****] 1/5/99 /s/ Timothy McElwee 1/4/99
- ----------------------- ------- ----------------------- -------
Authorized Signature Date Authorized Signature Date
[****] Timothy J. McElwee
- ----------------------------------- -----------------------------------
Printed Name
[****] Vice President, Sales
- ----------------------------------- -----------------------------------
Title Title
-9-
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
Attachment A
Product Specifications
1.1 Product Description
Internet Gateway products are proposed for homes that have the Home Director
Connection Center installed with 1 or more personal computers (PCs). Either
pre-installed or retrofitted CAT 5 UTP wiring must exist for networking support.
Products shall also support Internet connections made over V.90 modem and/or
ISDN. There are two fundamental functions that the proposed Internet Gateway
product will support:
. Create a TCP/IP-based "home intranet" which involves basic connectivity,
and higher-level protocols to automate the administration of the "home
intranet" (e.g., DHCP for automatic IP address assignment).
. Provide shared simultaneous Internet or work Intranet access for the
multiple PCs in the home (or small business), over a single modem
connection and a single ISP account.
The Internet Gateway product is designed to work in conjunction with the
Connection Center's 4 port Ethernet hub, effectively providing for a total of
seven Ethernet ports.
The Product connects to the Internet via an Integrated V.90 (56Kbps) modem
and/or an externally attached V.90 or ISDN TA, and provides network connectivity
(4 port hub support) for Ethernet over Cat5 Unshielded Twisted Pair wiring. It
is envisioned to be a self contained, stand-alone device, ideally without a
power switch. It is intended to be always on and ready for use. The package
would be small and unobtrusive, designed to fit within the Connection Center.
1.1 Key Functional Requirements
Connectivity
- ------------
. "Controlled Dial on demand" (the Product will dial the customer's
ISP and logon automatically when the user requests dial-up access). The
user will also be able to request the dial-up connection to terminate. The
connection will be established automatically whenever Internet access is
requested. Optionally the dialup connection can be switched to a manual
connect/disconnect operation.
. Inactivity time-out (the Internet Gateway terminates the ISP connection if
no activity has taken place within a programmable interval).
. ISPs Supported
--------------
America on-line
AT&T Worldnet
CompuServe
IBM Global Network
MSN
Mindspring
Netcom
Prodigy
Sprint Internet
Passport
Sprynet
. Multiple modem capability - The ability to upgrade to add
additional WAN bandwidth, either V.90 or ISDN, without replacing the base
box.
Protocols
- ---------
* [* * * ]
* [* * * ]
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
* [* * * ]
Operating Systems Supported
- ---------------------------
Product does not rely on any operating systems in order to provide internet
connectivity.
Applications and Multiplayer Games with which Product must be compatible
- ------------------------------------------------------------------------
Need for Speed III
Quake II
Madden `99
Tiger Woods `99
Police Swat II
F-I5
Usability
- ---------
. Product will not require the customer to enter any advanced configuration
parameters to get the Product up and accessing the Internet. Allowable
parameters are:
1. lSP name
2. ISP address type (static or dynamically-assigned)
3. If static, the actual IP address assigned by the ISP
4. Primary DNS server's IP address
5. Secondary DNS server's IP address
6. User ID
7. Password
. The user will be able to enter these parameters using a Web
browser on any PC in the home
. Product will have adequate help/prompts/explanations to help the
user specify the customer configurable parameters.
. Product will include an "administrative password" to prevent unauthorized
people (e.g., children or guests) from viewing or changing the
configuration information stored in the Internet Gateway. Product will
support "logon scripts"
. The Product will frequently be installed in an out-of-the-way location.
Consequently, the operation of the Product cannot require the customer to
physically push any buttons or manipulate any switches on the Product.
All configuration and operational tasks must be accomplished remotely,
via a Web browser on a PC in the home. (One possible exception to this
would be a "hard reset" button to reset the Product if it hangs.)
. Dial-in support - The Product will be upgradeable to support dial-in
access. The upgrade path will be able to be performed without going on
site.
Additional Required Features Include
- ------------------------------------
1. [* * * ]
2. [* * * ]
3. [* * * ]
4. [* * * ]
5. [* * * ]
Diagnostic Capabilities
- -----------------------
. From a Web browser on any PC in the home, the user will be able
to display HTML pages that contain information about the current status of
the Internet Gateway. Examples of the kind of status information include:
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
Whether or not the Internet Gateway is currently connected to the ISP
If currently connected, the speed of the connection (e.g., 14.4, 28.8,
56Kbps)
If currently connected, the elapsed time of the connection
If currently connected, what IP address the ISP has assigned to the
Product.
Number of bytes transferred in each direction
. From a Web browser on any PC in the home, the user will be able
to request the Internet Gateway to terminate a connection with the ISP. If
no other users have requested dial-up access the connection will terminate.
If other users have requested dial-up access the connection will remain up.
. From a Web browser on any PC in the home, the user will be able
to force the Internet Gateway to reset itself ("soft reset", must not
destroy previously entered configuration Information).
NOTE: Access to the last function should be restricted to people
who know the administrative password (see previous section).
Physical Connection of the Internet Gateway product
The Internet gateway product will require at a minimum a single
POTS line for connecting the WAN interface.
. Interface to Dedicated Processor
The Supplier will modify the DP IP addresses as follows: dedicated
processor NIC [* * *], dedicated processor modem [* * *]. The
Installer's laptop IP address will be fixed at [* * *]. Addresses
[* * *] through [* * *] will be reserved on the Product. The
Product will have an IP address of [* * *]. The DP will not be
accessible by the customer (password required).
1.2 Product Development
The Product will be purchased complete from Supplier. Buyer will maintain
control and signoff authority of all hardware and software development changes
after initial Product ship.
Supplier will develop two custom cables to be shipped with the Internet Gateway
product: (i) One cable will connect the Internet Gateway product to the
telephone Interface module in the IBM Connection Center; and (ii) one cable will
connect the Internet Gateway product to the existing Ethernet hub In the IBM
Connection Center. Cables have been defined under separate documentation sent
on or about 11/18/98.
Buyer will make the modification of the reference manual, and setup guide from
source provided by Supplier. Supplier will then receive the source from Buyer
and manufacture the components based on the Buyer source for the exclusive use
of Buyer.
. HTML pages will be customized by Supplier for Buyer. Customization will
include: (i) adding function to allow manual control over the dial-up
connection as outlined earlier in this document; and (ii) incorporating new
logo's and graphics into the HTML pages for customization of the look and
feel to meet Buyer's requirements. In addition, the HTML pages used for
configuring the box will be customized by Supplier as defined in a release
of sample HTML code by Buyer.
. Supplier will modify the existing Supplier model 200i HTML pages
to perform the following functions as illustrated in the sample code sent
on 11/10/98:
1. [* * *]
2. [* * *]
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
3. [* * *]
4. [* * *]
5. [* * *]
1.3 Warranty
Supplier will provide a [* * * ] warranty on the Product.
1.4 Publications
. Customer Support Documentation
Internet Gateway Setup - setup card based on Supplier's example. Source
provided by Supplier, modifications made by Buyer, production handled by
Supplier.
Network Setup Support - Supplier will produce a Buyer logo'd CD with all
references to Supplier Network and Web Ramp changed to IBM and Web
Connector. Buyer to provide artwork for CD label. This CD is to provide the
equivalent function of the existing Easy Start CD.
Setup instructions should also include a section on network security (how
to), to be written by Buyer.
Customer will be responsible for assigning a configuration password for the
box. The box will initially ship with the password disabled.
Product Reference Guide - Currently provided as a PDF file on CD. Buyer
Information Development will take source code provided by Supplier and
modify it to change all Supplier references to Home Director. This will
include text and graphics changes. The changes will be sent to Supplier for
production.
. Customer Guide - The customer guide will consist of a setup card,
which will be based on the Supplier setup card. The setup card will be
modified to have the IBM Home Director look and feel and include a section
on network security. No additional hardcopy documentation will be provided
to the customer.
1.5 Product Reliability
. The Product will typically be installed in an out-of-the-way
location, and will typically be left powered-on for an indefinite period of
time. The Product must be capable of operating indefinitely in a powered-
on state. There must be an easy way to reset the Product from any PC
connected to the Product (ideally, this would be via a Web browser on the
PC).
. Supplier to verify proper operation of the Product in the IBM
Connection Center. This will include an analysis of the power supply and
cooling characteristics when mounted in the Connection Center.
Manufacturing / Procurement Plans
2.1 Components
Source (all components):
------------------------
The Product, cables, CD and documentation will be obtained and/or
manufactured by the Supplier.
Lead-time (all components):
---------------------------
TBD
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
2.2 EC Release Plan / BOM
. Fulfillment - The Product will be bulk shipped from the Supplier
to a Buyer warehouse. Labeling on the individual product boxes will be per
Buyer labeling specifications for tracking purposes. No serial number
tracking will be provided.
. Packaging - Product to be shipped in plain white box. Field Replaceable
Units FRU's) to be individually packaged per Buyer specifications. Refer to
IBM Packaging Specification [* * *]. Packaging spec [* * *] applies
for manufacturing shipments, and [* * *] applies for FRU shipments. FRUs
are to be individually packaged.
Lot Size - P/N: [* * *] to be shipped TBD per pallet
Stocking - FRU parts to be stocked in Mechanicsburg and orderable
through ECLAIM
Part Numbers and Sources
Web Connect top bill part number: [* * *]
EC number: [* * *]
Contents of top bill:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Orderable Component Description Qty
Part Number Part Number
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
[* * * ] [* * * ]
- ------------------------------------------------------------------------------------------------------------------------
[* * * ] [* * * ] 1.00
- ------------------------------------------------------------------------------------------------------------------------
[* * * ] [* * * ]
- ------------------------------------------------------------------------------------------------------------------------
[* * * ] [* * * ] 1.00
- ------------------------------------------------------------------------------------------------------------------------
[* * * ] [* * * ] 1.00
- ------------------------------------------------------------------------------------------------------------------------
[* * * ] [* * * ] 1.00
- ------------------------------------------------------------------------------------------------------------------------
[* * * ] [* * * ] 1.00
- ------------------------------------------------------------------------------------------------------------------------
[* * * ] [* * * ] 1.00
- ------------------------------------------------------------------------------------------------------------------------
[* * * ] [* * * ] 1.00
- ------------------------------------------------------------------------------------------------------------------------
[* * * ] [* * * ] 1.00
- ------------------------------------------------------------------------------------------------------------------------
[* * * ] [* * * ] 1.00
- ------------------------------------------------------------------------------------------------------------------------
[* * * ] [* * * ] 1.00
- ------------------------------------------------------------------------------------------------------------------------
[***] [***]
- ------------------------------------------------------------------------------------------------------------------------
[***] [***] 1.00
- ------------------------------------------------------------------------------------------------------------------------
[***] [***] 1.00
- ------------------------------------------------------------------------------------------------------------------------
[***] [***] 1.00
- ------------------------------------------------------------------------------------------------------------------------
[***] [***] 1.00
- ------------------------------------------------------------------------------------------------------------------------
[***] [***]
- ------------------------------------------------------------------------------------------------------------------------
[***] [***] 1.00
- ------------------------------------------------------------------------------------------------------------------------
[***] [***] 1.00
- ------------------------------------------------------------------------------------------------------------------------
[***] [***] 1.00
- ------------------------------------------------------------------------------------------------------------------------
[***] [***] 1.00
- ------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Notes: 1) [***]
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
-5-
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
2) [***]
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
-6-
<PAGE>
GOODS AGREEMENT # 4998RL1060
This Agreement dated as of December 22, 1998 ("Effective Date"), between
International Business Machines Corporation ("Buyer") and Ramp Networks
("Supplier"), establishes the basis for a multinational procurement relationship
under which Buyer may purchase from Supplier the Products and Services which are
described in SOWs issued under this Agreement.
1.0 Definitions:
"Affiliates" means entities that control, are controlled by, or are under common
control with a party to this Agreement and that have signed a PA.
"Agreement" means this agreement and any relevant Statements of Work ("SOW"),
Work Authorizations ("WA"), Participation Attachments ("PA"), and other
attachments or appendices specifically referenced in this Agreement.
"Buyer" means either IBM or one of its Affiliates.
"Buyer Personnel" means agents, employees, contractors or remarketers engaged by
Buyer.
"Participation Attachment" or "PA" means an attachment to this Agreement which
evidences the signing Affiliate's intent to conduct transactions, if any, in
accordance with this Agreement.
"Prices" means the agreed upon prices and currency for Products and Services,
including all applicable taxes, as specified in the relevant SOW.
"Products" means items identified in the relevant SOW.
"Services" means the services identified in the relevant SOW.
"Statement of Work" or "SOW" means any document attached to or included in this
Agreement which describes the Products and Services, including any requirements,
specifications or schedules.
"Supplier" means either Supplier or one of its Affiliates.
"Supplier Personnel" means agents, employees or subcontractors engaged by
Supplier.
"Work Authorization" or "WA" means a purchase order or other Buyer designated
document, in either electronic or hard copy form, issued by Buyer's procurement
personnel, and is the only authorization for Supplier to perform any work under
this Agreement. A SOW is a WA only if designated as such in writing by Buyer.
2.0 Statement of Work: Supplier will provide the Products or Services as
specified the relevant SOW only when specified in a WA Supplier will begin work
only after receiving written authorization from Buyer. Buyer may request
changes to a SOW and Supplier will submit to Buyer the impact of such changes.
Changes accepted by Buyer will be specified in an amended SOW or change order
signed by both parties. Supplier will maintain the capability to supply agreed
upon Products, including parts of Products, for a period of months after
withdrawal of such Products as specified in the relevant SOW. Supplier will
notify Buyer of its intent to withdraw any Product and will continue to deliver
such withdrawn Products for the periods as specified in the relevant SOW.
3.0 Term and Termination
3.1 Term: Products and Services acquired by Buyer on or after the
Effective Date will be covered by this Agreement. This Agreement will remain in
effect until terminated.
3.2 Termination of this Agreement: Either party may terminate this
Agreement, without any cancellation charge, for a material breach of the
Agreement by the other party or if the other party becomes insolvent or file or
has filed against it a petition in bankruptcy ("Cause"), to the extent permitted
by law. Such termination will be effective at the end of a thirty (30) day
written notice period if the Cause remains uncured. Either party may terminate
this Agreement without Cause when there are no outstanding SOWs.
3.3 Termination of a SOW or WA: Buyer may terminate a SOW or a WA with or
without Cause. Upon termination, in accordance with Buyer's written direction,
Supplier will immediately: (i) cease work; (ii) prepare and submit to Buyer an
itemization of all completed and partially completed Products and Services;
(iii) deliver to Buyer Products satisfactorily completed up to the date of
termination at the agreed upon Prices in the relevant SOW; and (iv) deliver upon
request any work in process. In the event Buyer terminates without Cause, Buyer
will compensate Supplier for the actual and reasonable expenses incurred by
Supplier for work in process up to and including the date of termination,
provided Supplier uses reasonable efforts to mitigate Buyer's liability
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
-7-
<PAGE>
under this Subsection by, among other actions, accepting the return of,
returning to its suppliers, selling to others, or otherwise using the canceled
Products (including raw materials or works in process) and provided such
expenses do not exceed the Prices.
4.0 Pricing
4.1 Pricing: Supplier will provide Products and Services to Buyer for the
Prices. The Prices for Products and Services specified in a WA and accepted by
Buyer will be the only amount due to Supplier from Buyer.
4.2 Competitive Pricing: If Supplier offers lower prices to another
customer for like or lesser quantities of Products or Services during the same
period and under similar terms and conditions as Buyer, those prices will be
made known and available to Buyer at the time of their availability to the
customer. Prices will at least be competitive with industry prices and, if not,
Supplier will use reasonable efforts to adjust its Prices so that they are
competitive.
5.0 Payments and Acceptance: Terms for payment will be specified in the
relevant SOW or WA Payment of invoices will not be deemed acceptance of Products
or Services, but rather such Products or Services will be subject to inspection,
test and rejection by Buyer until successful integration into Buyer's products,
or for a period as specified in the relevant SOW, whichever occurs first. Buyer
may, at its option, either reject Products or Services that do not comply with
the specifications and requirements for a refund plus any inspection, test and
transportation charges paid by Buyer, or require prompt correction or
replacement of such Products upon Buyer's written instructions. Buyer may
reject entire lots of Products which do not meet quality levels as specified in
the relevant SOW.
6.0 Warranties
6.1 Ongoing Warranties: Supplier makes the following ongoing
representations and warranties: (i) it has the right to enter into this
Agreement and its performance of this Agreement will not violate the terms of
any contract, obligation, law, regulation or ordinance to which it is or becomes
subject; (ii) no claim, lien, or action exists or is threatened against Supplier
that would interfere with Buyer's use or sale of the Products; (iii) Products
are free from defects in design (except for written designs provided by Buyer
unless such designs are based entirely on Supplier's specifications), material
and workmanship and will conform to the warranties, specifications and
requirements in this Agreement for the time period from the date of shipment as
specified in the relevant SOW; (iv) Products are safe for any use consistent
with and will comply with the warranties, specifications and requirements in
this Agreement; (v) Products and Services are Year 2000 ready such that they are
capable of correctly processing, providing, receiving and displaying date data,
as well as exchanging accurate date data with all products with which the
Products are intended to be used within and between the twentieth and twenty-
first centuries; (vi) Products and Services are euro-ready such that they will
correctly process, send, receive, present, store, and convert monetary data in
the euro denomination, respecting the euro currency formatting conventions
(including the euro symbol); (vii) none of the Products contain nor are any of
the Products manufactured using ozone depleting substances known as halons,
chlorofluorocarbons, methyl chloroform and carbon tetrachloride; (viii) Products
are new and do not contain used or reconditioned parts; and (ix) Products and
Services do not infringe any intellectual property right of a third party. THE
WARRANTIES AND CONDITIONS IN THIS AGREEMENT ARE IN LIEU OF ALL OTHER WARRANTIES
AND CONDITIONS, EXPRESS OR IMPLIED, INCLUDING THOSE WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE.
6.2 Warranty Redemption: If Products or Services do not comply with the
warranties in this Agreement, Supplier will repair or replace Products (at the
latest revision level) or re-perform Services, or credit or refund the Price of
Products or Services, such remedy at Buyer's discretion. For such Products,
Supplier will issue to Buyer a Return Material Authorization ("RMA") within five
(5) days of Buyer's notice. If Supplier fails to repair, or replace Products or
re-perform Services in a timely manner, Buyer may do so and Supplier will
reimburse Buyer for actual and reasonable expenses. Buyer may return Products
which do not conform to the warranties in
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
this Agreement from any Buyer location to the nearest authorized Supplier
location at cost of Supplier and Supplier will, at cost of Supplier, return any
repaired or replaced Product in a timely manner.
6.3 Post Warranty Service: Supplier will offer post warranty Services as
specified in the relevant SOW or identify a third party which will provide such
Services. In the event a third party or Buyer will provide such Services,
Supplier will provide the designated party with the information required for the
performance of the Services.
6.4 Epidemic Defects: Supplier will, at Buyer's discretion, repair or
replace, or credit or refund Products which have the same or similar defect at a
rate as specified in the relevant SOW ("Epidemic Defect Rate"), or where a
safety defect is found. Supplier will commence such performance within five (5)
calendar days of Buyer's notice to Supplier of an Epidemic Defect Rate.
Supplier will reimburse Buyer for all actual and reasonable expenses incurred by
Buyer for such repair and replacement of Products, including expenses associated
with problem diagnosis, field and finished goods inventory repair or
replacement.
7.0 Delivery
7.1 Delivery Logistics: Delivery under this Agreement means delivery to
the Buyer location and delivery point as specified in the relevant SOW or WA
Buyer may cancel or reschedule the delivery date or change the delivery point as
specified in the relevant SOW. The term of sale will be specified a SOW or WA.
Buyer may issue a twelve (12) month rolling forecast for quantities of Products
that may be required. Supplier will only deliver the Products specified in a
WA. ANY PRODUCT QUANTITIES CITED IN OR PURSUANT TO THIS AGREEMENT, EXCEPT FOR
QUANTITIES CITED IN A WA AS FIRM, ARE PRELIMINARY AND NON-BINDING ONLY. BUYER
MAKES NO REPRESENTATION OR WARRANTY AS TO THE QUANTITY OF PRODUCTS THAT IT WILL
PURCHASE, IF ANY.
7.2 On-Time Delivery: The lead-time for Buyer to issue a WA prior to
delivery will be specified in a SOW. Products specified in a WA for delivery
with such lead-time will be delivered on time. Supplier will use reasonable
efforts when Buyer requests delivery with a shorter lead-time. If Supplier
cannot comply with a delivery commitment, Supplier will promptly notify Buyer of
a revised delivery date and Buyer may: (i) cancel without charge Products or
Services not yet delivered; (ii) procure such Products or Services elsewhere and
charge Supplier the cost differential; (iii) require Supplier to deliver
Products using priority freight delivery at Supplier's expense for the
incremental freight charges; and (iv) exercise all other remedies provided at
law, in equity and in this Agreement.
8.0 Intellectual Property: Supplier grants Buyer all intellectual property
rights licensable by Supplier which are necessary for Buyer to use and sell the
Products. This Agreement does not grant either party the right to use the other
party's trademarks, trade names or service marks.
9.0 Indemnification
9.1 General Indemnification: Supplier will defend, hold harmless and
indemnify, including attorney's fees, Buyer and Buyer Personnel against claims
that arise or are alleged to have arisen as a result of negligent or intentional
acts or omissions of Supplier or Supplier Personnel or breach by Supplier of any
term of this Agreement.
9.2 Intellectual Property Indemnification: Supplier will defend, or at
Buyer's option cooperate in the defense of, hold harmless and indemnify,
including attorney's fees, Buyer and Buyer Personnel from claims that Supplier's
Products or Services infringe the intellectual properly rights of a third party.
If such a claim is or is likely to be made, Supplier will, at its own expense,
exercise the first of the following remedies that is practicable: (i) obtain
for Buyer the right to continue to use and sell the Products and Services
consistent with this Agreement; (ii) modify the Products and Services so they
are non-infringing and in compliance with this Agreement; (iii) replace the
Products and Services with non-infringing ones that comply with this Agreement;
or (iv) at Buyer's
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
request, accept the cancellation of infringing Services and the return of the
infringing Products and refund any amount paid.
9.3 Exceptions to Indemnification: Supplier will have no obligation to
indemnify Buyer or Buyer Personnel for claims that Supplier's Products or
Services infringe the intellectual property rights of a third party to the
extent such claims arise as a result of: (i) Buyer's combination of Products or
Services with other products or services not foreseeable by Supplier; (ii)
Supplier's implementation of a Buyer originated design; or (iii) Buyer's
modification of the Products except for intended modifications required for use
of the Products.
10.0 Limitation of Liability: Except for liability under the Section entitled
Indemnification and the Subsection entitled Epidemic Defects, in no event will
either party be liable to the other for any lost revenues, lost profits,
incidental, indirect, consequential, special or punitive damages.
11.0 Supplier and Supplier Personnel: Supplier is an independent contractor
and this Agreement does not create an agency relationship between Buyer and
Supplier or Buyer and Supplier Personnel. Buyer assumes no liability or
responsibility for Supplier Personnel. Supplier will: (i) ensure it and
Supplier Personnel are in compliance with all laws, regulations, ordinances, and
licensing requirements; (ii) be responsible for the supervision, control,
compensation, withholdings, health and safety of Supplier Personnel; (iii)
ensure Supplier Personnel performing Services on Buyer's premises comply with
the On Premises Guidelines; and (iv) inform Buyer if a former employee of Buyer
will be assigned work under this Agreement, such assignment subject to Buyer
approval.
12.0 Electronic Commerce: Supplier will use best efforts to participate in
Electronic Data Interchange ("EDI") or other electronic commerce approach, under
which the parties will electronically transmit and receive legally binding
purchase and sale obligations ("Documents"), including electronic credit entries
transmitted by Buyer to the Supplier account specified in the relevant SOW.
Each party, at its own expense, will provide and maintain the equipment,
software, services and testing necessary for it to effectively and reliably
transmit and receive such Documents. Either party may use a third party service
provider for network services, provided the other party is given sixty (60) days
prior written notice of any changes to such services. A Document will be deemed
received upon arrival at the receiving party's mailbox or Internet address and
the receiving party will promptly send an acknowledgment of such receipt. The
receiving party will promptly notify the originating party if a Document is
received in an unintelligible form, provided that the originating party can be
identified. In the absence of such notice, the originating party's record of
the contents of such Document will prevail. Each party will authenticate
Documents using a digital signature or User ID, as specified by Buyer, and will
maintain security procedures to prevent its unauthorized use.
13.0 Recordkeeping and Audit Rights: Supplier will maintain (and provide to
Buyer upon request) relevant accounting records to support invoices under this
Agreement for three (3) years following completion or termination of the
relevant SOW. All accounting records will be maintained in accordance with
generally accepted accounting principles.
14.0 General
14.1 Amendments: This Agreement may only be amended by a writing
specifically referencing this Agreement which has been signed by authorized
representatives of the parties.
14.2 Assignment: Neither party will assign their rights or delegate or
subcontract their duties under this Agreement to third parties or affiliates
without the prior written consent of the other party, such consent not to be
withheld reasonably, except that Buyer may assign this Agreement in conjunction
with the sale of a substantial part of its business utilizing this Agreement.
Any unauthorized assignment of this Agreement is void.
14.3 Choice of Law and Forum; Waiver of Jury Trial; Limitation of Action:
This Agreement and the performance of transactions under this Agreement will be
governed by the laws of the country in which the transaction is performed,
except that the laws of the State of New York applicable to contracts executed
in and
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
performed entirely within that State will apply if any part of the transaction
is performed within the United States. The parties expressly waive any right to
a jury trial regarding disputes related to this Agreement. The United Nations'
Convention on International Sale of Goods does not apply to this Agreement.
Unless otherwise provided by local law without the possibility of contractual
waiver or limitation, any legal or other action related to a breach of this
Agreement must be commenced no later than two (2) years from the date of the
breach in a court sited within the country in which the breach occurred, or in a
court sited in the State of New York if any part of the transaction is performed
within the United States.
14.4 Communications: All communications between the parties regarding
this Agreement will be conducted through the parties' representatives as
specified in the relevant SOW. Supplier will use reasonable efforts to
participate in replenishment logistics programs presented by Buyer.
14.5 Counterparts: This Agreement may be signed in one or more
counterparts, each of which will be deemed to be an original and all of which
when taken together will constitute the same agreement. Any copy of this
Agreement made by reliable means considered an original.
14.6 Exchange of Information: Unless required otherwise by law, all
information exchanged by the parties will be considered non-confidential. If
the parties require the exchange of confidential information, such exchange will
be made under a confidentiality agreement. The parties will not publicize the
terms or conditions of this Agreement in any advertising, marketing or
promotional materials except as may be required by law, provided the party
publicizing obtains any confidentiality treatment available. Supplier will use
information regarding this Agreement only in the performance of this Agreement
14.7 Freedom of Action: This Agreement is nonexclusive and either party
may design, develop, manufacture, acquire or market competitive products or
services. Buyer will independently establish prices for resale of Products or
Services and is not obligated to announce or market any Products or Services and
does not guarantee the success of its marketing efforts, if any.
14.8 Force Majeure: Neither party will be in default or liable for any
delay or failure to comply with this Agreement due to any act beyond the control
of the affected party, excluding labor disputes, provided such party immediately
notifies the other.
14.9 Obligations of Affiliates: Affiliates will acknowledge acceptance of
the terms and conditions of this Agreement through the signing of a PA before
conducting any transaction under this Agreement.
14.10 Prior Communications and Order of Precedence: This Agreement
replaces any prior oral or written agreements or other communication between the
parties with respect to the subject matter of this Agreement, excluding any
confidential disclosure agreements. In the event of any conflict in these
documents, the order of precedence will be: (i) the quantity, payment and
delivery terms of the relevant WA; (ii) the relevant SOW; (iii) the relevant PA;
(iv) this agreement; and (v) the remaining terms of the relevant WA.
14.11 Severability: If any term in this Agreement is found by competent
judicial authority to be unenforceable in any respect, the validity of the
remainder of this Agreement will be unaffected, provided that such
unenforceability does not materially affect the parties' rights under this
Agreement.
14.12 Survival: The provisions set forth in the following Sections and
Subsections of this Agreement will survive alter termination of this Agreement
and will remain in effect until fulfilled: "Ongoing Warranties", "Warranty
Redemption" "Intellectual Property", "Indemnification", "Limitation of
Liability", "Record Keeping and Audit Rights", "Choice of Law and Forum; Waiver
of Jury Trial; Limitation of Action", "Exchange of Information", and "Prior
Communications and Order of Precedence".
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
14.13 Waiver: An effective waiver under this Agreement must be in writing
signed by the party waiving its right. A waiver by either party of any instance
of the other party's noncompliance with any obligation or responsibility under
this Agreement will not be deemed a waiver of subsequent instances.
ACCEPTED AND AGREED TO: ACCEPTED AND AGREED TO:
By /s/ Timothy J. McElwee 1/4/99 By /s/ [***] 1/5/99
------------------------------------------ ------ ------------
Authorized Signature Date Authorized Signature Date
Timothy J. McElwee [***]
- --------------------------------------------- ------ --------------------
Printed Name Printed Name
Vice President Sales/Ramp Networks [***]
- --------------------------------------------- --------------------------
Title & Organization Title & Organization
*Material has been omitted pursuant to a request for confidential treatment.
Such material has been filed separately with the Securities and Exchange
Commission.
<PAGE>
EXHIBIT 10.13
MASTER LEASE AGREEMENT
MASTER LEASE AGREEMENT (the "Master Lease") dated December 2, 1998 by and
between COMDISCO, INC. ("Lessor") and RAMP 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.
<PAGE>
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
-2-
<PAGE>
(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 to log and maintenance records available
to Lessor for inspection.
8. Representations and Warranties of Lessee. Lessee hereby represents,
----------------------------------------
warrants and convenants that with respect to the Master Lease and each Schedule
executed hereunder.
-3-
<PAGE>
(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
Company'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 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.
-4-
<PAGE>
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
-5-
<PAGE>
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
-6-
<PAGE>
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
(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
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<PAGE>
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) terminates the Lease and
all relevant Schedules. If Lessor elects to consent to the assignment, Lessee
and its successor will sign the assignment document provided by Lessor. If
Lessor elects to terminates 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 understanding 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.
-8-
<PAGE>
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.
-9-
<PAGE>
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, but 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 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.
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.
-----------------
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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<PAGE>
Fair Market Value - means the aggregate amount which would be
-----------------
obtainable in an 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 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 Commencement Date through but not including the first day of the
first full Rent Interval included in the Initial Term.
Late Charge - means the lessor of five percent (5%) of the
-----------
payment due or the 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 the Equipment.
Like Equipment - means replacement Equipment which is lien free
--------------
and of the same 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.
-----
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 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
-11-
<PAGE>
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.
RAMP NETWORKS, INC. COMDISCO, INC.
as Lessee as Lessor
By: /s/ Mahesh Veenia By: /s/ James Labe
_______________________ _______________________
James P. Labe
Title: President & CEO Title: President
____________________ Comdisco Ventures Division
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<PAGE>
ADDENDUM TO THE
MASTER LEASE AGREEMENT DATED AS OF DECEMBER 2, 1998
BETWEEN RAMP NETWORKS, INC., AS LESSEE
AND COMDISCO, INC., AS LESSOR
The undersigned hereby agree that the terms and conditions of the above-
referenced Master Lease are hereby modified and amended as follows:
1) 14.1., "Board Attendance"
----------------
Delete this section in its entirety.
RAMP NETWORKS, INC. COMDISCO, INC.
as LESSEE as LESSOR
By: /s/ Mahesh Veerina By: /s/ James Labe
---------------------- ----------------------
Title: President & CEO Title: James P. Labe
-------------------- -------------------
Date: 12/7/98 Date: President
-------------------- Comdisco Ventures Division
----------------------------
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<PAGE>
EXHIBIT 10.14
LOAN AND SECURITY AGREEMENT
Dated as of January 4, 1999
between
RAMP NETWORKS, INC.
a California corporation
as "Borrower",
and
VENTURE LENDING & LEASING II, INC.,
a Maryland corporation
as "Lender"
<PAGE>
LOAN AND SECURITY AGREEMENT
The Borrower and Lender identified on the cover page of this document have
entered or anticipate entering into one or more transactions pursuant to which
Lender agrees to make available to Borrower a loan facility governed by the
terms and conditions set forth in this document and one or more Supplements
executed by Borrower and Lender which incorporate this document by reference.
Each Supplement constitutes a supplement to and forms part of this document, and
will be read and construed as one with this document, so that this document and
the Supplement constitute a single agreement between the parties (collectively
referred to as this "Agreement").
Accordingly, the parties agree as follows:
ARTICLE 1 - INTERPRETATION
1.1 Definitions. The terms defined in Article 10 and in the Supplement will
have the meanings therein specified for purposes of this Agreement.
1.2 Inconsistency. In the event of any inconsistency between the provisions
of any Supplement and this document, the provisions of the Supplement will be
controlling for the purpose of all relevant transactions.
ARTICLE 2 - THE COMMITMENT AND LOANS
2.1 The Commitment. Subject to the terms and conditions of this Agreement,
Lender agrees to make term loans to Borrower from time to time from the Closing
Date and to, but not including, the Termination Date in an aggregate principal
amount not exceeding the Commitment. The Commitment is not a revolving credit
commitment, and Borrower does not have the right to repay and reborrow
hereunder. Each Loan requested by Borrower to be made on a single Business Day
shall be for a minimum principal amount set forth in the Supplement, except to
the extent the remaining Commitment is a lesser amount.
2.2 Notes Evidencing Loans; Repayment. Each Loan shall be evidenced by a
separate Note payable to the order of Lender, in the total principal amount of
the Loan. Principal and interest of each Loan shall be payable at the times and
in the manner set forth in the Note.
2.3 Procedures for Borrowing.
(a) Borrower shall give Lender, at least five (5) Business Days' prior to a
proposed Borrowing Date, written notice of any request for borrowing hereunder
(a "Borrowing Request"). Each Borrowing Request shall be in substantially the
form of Exhibit "B" to the Supplement, shall be executed by a responsible
-----------
executive or financial officer of Borrower, and shall state how much is
requested, and shall be accompanied by such other information and documentation
as Lender may reasonably request.
(b) No later than 1:00 p.m. Pacific Standard Time on the Borrowing Date, if
Borrower has satisfied the conditions precedent in Article 4, Lender shall make
the Loan available to Borrower in immediately available funds.
2.4 Interest. Basic Interest on the outstanding principal balance of each
Loan shall accrue daily at the Designated Rate from the Borrowing Date until the
Maturity Date.
2.5 Terminal Payment. Borrower shall pay the Terminal Payment with respect
to each Loan on the Maturity Date of such Loan.
2.6 Interest Rate Calculation. Basic Interest, along with charges and fees
under this Agreement and any Loan Document, shall be calculated for actual days
elapsed on the basis of a 360-day year, which results in higher interest, charge
or fee payments than if a 365-day year were used. In no event shall Borrower be
obligated to pay Lender interest, charges or fees at a rate in excess of the
highest rate permitted by applicable law from time to time in effect.
2.7 Default Interest. Any unpaid payments of principal or interest or the
Terminal Payment with respect to any Loan shall bear interest from their
respective maturities, whether scheduled or accelerated, at the Designated Rate
for such Loan plus five percent (5.00%) per annum, until paid in full, whether
----
before or after judgment (the "Default Rate"). Borrower shall pay such interest
on demand.
-1-
<PAGE>
2.8 Late Charges. If Borrower is late in making any payment of principal or
interest or Terminal Payment under this Agreement by more than five (5) days,
Borrower agrees to pay a late charge of five percent (5%) of the installment
due, but not less than fifty dollars ($50.00) for any one such delinquent
payment. This late charge may be charged by Lender for the purpose of defraying
the expenses incidental to the handling of such delinquent amounts. Borrower
acknowledges that such late charge represents a reasonable sum considering all
of the circumstances existing on the date of this Agreement and represents a
fair and reasonable estimate of the costs that will be sustained by Lender due
to the failure of Borrower to make timely payments. Borrower further agrees
that proof of actual damages would be costly and inconvenient. Such late charge
shall be paid without prejudice to the right of Lender to collect any other
amounts provided to be paid or to declare a default under this Agreement or any
of the other Loan Documents or from exercising any other rights and remedies of
Lender.
2.9 Lender's Records. Principal, Basic Interest, Terminal Payments and all
other sums owed under any Loan Document shall be evidenced by entries in records
maintained by Lender for such purpose. Each payment on and any other credits
with respect to principal, Basic Interest, Terminal Payments and all other sums
outstanding under any Loan Document shall be evidenced by entries in such
records. Absent manifest error, Lender's records shall be conclusive evidence
thereof.
2.10 Grant of Security Interests. To secure the timely payment and
performance of all of Borrower's Obligations to Lender, Borrower hereby grants
to Lender continuing security interests in all of the Collateral.
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants that, except as set forth in the Supplement
or any schedule of exceptions executed by the parties, as of the Closing Date
and each Borrowing Date:
3.1 Due Organization. Borrower is a corporation duly organized and validly
existing in good standing under the laws of the jurisdiction of its
incorporation, and is duly qualified to conduct business and is in good standing
in each other jurisdiction in which its business is conducted or its properties
are located, except where the failure to be so qualified would not reasonably be
expected to have a Material Adverse Effect.
3.2 Authorization, Validity and Enforceability. The execution, delivery and
performance of all Loan Documents executed by Borrower are within Borrower's
powers, have been duly authorized, and are not in conflict with Borrower's
articles or certificate of incorporation or by-laws, or the terms of any charter
or other organizational document of Borrower, as amended from time to time; and
all such Loan Documents constitute valid and binding obligations of Borrower,
enforceable in accordance with their terms (except as may be limited by
bankruptcy, insolvency and similar laws affecting the enforcement of creditors'
rights in general, and subject to general principles of equity).
3.3 Compliance with Applicable Laws. Borrower has complied with all
licensing, permit and fictitious name requirements necessary to lawfully conduct
the business in which it is engaged, and to any sales, leases or the furnishing
of services by Borrower, including without limitation those requiring consumer
or other disclosures, the noncompliance with which would have a Material Adverse
Effect.
3.4 No Conflict. The execution, delivery, and performance by Borrower of all
Loan Documents are not in conflict with any law, rule, regulation, order or
directive, or any indenture, agreement, or undertaking to which Borrower is a
party or by which Borrower may be bound or affected.
3.5 No Litigation, Claims or Proceedings. There is no litigation, tax claim,
proceeding or dispute pending, or, to the knowledge of Borrower, threatened
against or affecting Borrower or its property.
3.6 Correctness of Financial Statements. Borrower's financial statements
which have been delivered to Lender fairly and accurately reflect Borrower's
financial condition as of the latest date of such financial statements; and,
since that date there has been no Material Adverse Change.
3.7 No Subsidiaries. Borrower is not a majority owner of or in a control
relationship with any other business entity. Borrower intends to establish a
development subsidiary in India.
-2-
<PAGE>
3.8 Environmental Matters. Borrower has reviewed, or caused to be reviewed
on its behalf, all Environmental Laws applicable to its business operations and
materials handled therein, and as a result thereof has reasonably concluded that
Borrower is in compliance with such Environmental Laws, except to the extent a
failure to be in such compliance could not reasonably be expected to have a
Material Adverse Effect on Borrower's operations, properties or financial
condition.
3.9 No Event of Default. No Default or Event of Default has occurred and is
continuing.
3.10 Full Disclosure. None of the representations or warranties made by
Borrower in the Loan Documents as of the date such representations and
warranties are made or deemed made, and none of the statements contained in any
exhibit, report, statement or certificate furnished by or on behalf of Borrower
in connection with the Loan Documents (including disclosure materials delivered
by or on behalf of Borrower to Lender prior to the Closing Date), contains any
untrue statement of a material fact or omits any material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they are made, not misleading as of the time when made
or delivered.
3.11 Specific Representations Regarding Collateral.
(a) Title. Except for the security interests created by this Agreement and
Permitted Liens, (i) Borrower is and will be the unconditional legal and
beneficial owner of the Collateral, and (ii) the Collateral is genuine and
subject to no Liens, rights or defenses of others. There exist no prior
assignments or encumbrances of record with the U.S. Patent and Trademark Office
affecting any Collateral in favor of any third party other than Lender.
(b) Rights to Payment. The names of the obligors, amount owing to Borrower,
due dates and all other information with respect to the Rights to Payment are
and will be correctly stated in all material respects in all Records relating to
the Rights to Payment. Borrower further represents and warrants, to its
knowledge, that each Person appearing to be obligated on a Right to Payment has
authority and capacity to contract and is bound as it appears to be.
(c) Location of Collateral. Borrower's chief executive office, Inventory,
Records, Equipment, and any other offices or places of business are located at
the address(es) shown on the Supplement.
(d) Business Names. Other than its full corporate name, Borrower has not
conducted business using any trade names or fictitious business names except as
shown on the Supplement.
3.12 Copyrights, Patents, Trademarks and Licenses.
(a) Borrower owns or is licensed or otherwise has the right to use all of the
patents, trademarks, service marks, trade names, copyrights, contractual
franchises, authorizations and other similar rights that are reasonably
necessary for the operation of its business, without conflict with the rights of
any other Person.
(b) To Borrower's knowledge, no slogan or other advertising device, product,
process, method, substance, part or other material now employed, or now
contemplated to be employed, by Borrower infringes upon any rights held by any
other Person.
(c) No claim or litigation other than 3M's claim regarding Borrower's use of
the M3 name, regarding any of the foregoing is pending or, to Borrower's
knowledge, threatened, and no patent, invention, device, application, principle
or any statute, law, rule, regulation, standard or code is pending or proposed
which, in either case, could reasonably be expected to have a Material Adverse
Effect.
ARTICLE 4 - CONDITIONS PRECEDENT
4.1 Conditions to First Loan. The obligation of Lender to make its first
Loan hereunder is, in addition to the conditions precedent specified in Section
-------
4.2, subject to the fulfillment of the following conditions and to the receipt
- ---
by Lender of the documents described below, duly executed and in form and
substance satisfactory to Lender and its counsel:
(a) Resolutions. A certified copy of the resolutions of the Board of
Directors of Borrower authorizing the execution, delivery and performance by
Borrower of the Loan Documents.
(b) Incumbency and Signatures. A certificate of the secretary of Borrower
certifying the names of the officer or officers of Borrower authorized to sign
-3-
<PAGE>
the Loan Documents, together with a sample of the true signature of each such
officer.
(c) Legal Opinion. The opinion of legal counsel for Borrower as to such
matters as Lender may reasonably request, including the matters covered by
Sections 3.1, 3.2, 3.4 and 3.5 hereof.
(d) Articles and By-Laws. Certified copies of the Articles or Certificate of
Incorporation and By-Laws of Borrower, as amended through the Closing Date.
(e) This Agreement. A counterpart of this Agreement and an initial
Supplement, with all schedules completed and attached thereto, and disclosing
such information as is acceptable to Lender.
(f) Financing Statements. Filing copies (or other evidenced of filing
satisfactory to Lender and its counsel) of such Uniform Commercial Code
financing statements, collateral assignments and termination statements, with
respect to the Collateral as Lender shall request.
(g) Patent and Trademark Assignments. If required by the Supplement, patent
and trademark collateral assignments executed by Borrower.
(h) Lien Searches. Uniform Commercial Code lien, judgment, bankruptcy and tax
lien searches of Borrower from such jurisdictions or offices as Lender may
reasonably request, all as of a date reasonably satisfactory to Lender and its
counsel.
(i) Good Standing Certificate. A Certificate of status or good standing of
Borrower as of a date acceptable to Lender from the jurisdiction of Borrower's
organization and any foreign jurisdictions where Borrower is or should be
qualified to do business.
(j) Warrant. A warrant issued by Borrower to Lender exercisable for such
number, type and class of shares of Borrower's capital stock, and for an initial
exercise price as is specified in the Supplement.
4.2 Conditions to All Loans. The obligation of Lender to make its initial
Loan and each subsequent Loan is subject to the following further conditions
precedent that:
(a) No Default. No Default or Event of Default has occurred and is continuing
or will result from the making of any such Loan, and the representations and
warranties of Borrower contained in Article 3 of this Agreement are true and
correct as of the Borrowing Date of such Loan.
(b) No Material Adverse Change. No Material Adverse Change shall have
occurred since the date of the most recent financial statements submitted to
Lender.
(c) Borrowing Request. Borrower shall have delivered to Lender a Borrowing
Request for such Loan.
(d) Note. Borrower shall have delivered an executed Note evidencing such
Loan, in form and substance satisfactory to Lender.
(e) Supplemental Lien Filings. Borrower shall have executed and delivered
such amendments or supplements to this Agreement and such financing statements
as Lender may reasonably request in connection with the proposed Loan, in order
to create or perfect or to maintain the perfection of Lender's Liens on the
Collateral.
(f) VCOC Limitation. Lender shall not be obligated to make any Loan under its
Commitment if at the time of or after giving effect to the proposed Loan Lender
would no longer qualify as: (A) a "venture capital operating company" under
U.S. Department of Labor Regulations Section 2510.3-101(d), Title 29 of the Code
of Federal Regulations, as amended; and (B) a "business development company"
under the provisions of federal Investment Company Act of 1940, as amended; and
(C) a "regulated investment company" under the provisions of the Internal
Revenue Code of 1986, as amended.
ARTICLE 5 - AFFIRMATIVE COVENANTS
During the term of this Agreement and until its performance of all obligations
to Lender, Borrower will:
5.1 Notice to Lender. Promptly give written notice to Lender of:
(a) Any litigation or administrative or regulatory proceeding affecting
Borrower where the amount claimed against Borrower is at the Threshold Amount or
more, or where the granting of the relief requested could have a Material
Adverse Effect.
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(b) Any substantial dispute which may exist between Borrower or any
governmental or regulatory authority.
(c) The occurrence of any Default or any Event of Default.
(d) Any change in the location of any of Borrower's places of business or
Collateral at least thirty (30) days in advance of such change, or of the
establishment of any new, or the discontinuance of any existing, place of
business.
(e) Any dispute or default by Borrower or any other party under any joint
venture, partnering, distribution, cross-licensing, strategic alliance,
collaborative research or manufacturing, license or similar agreement which
could reasonably be expected to have a Material Adverse Effect.
(f) Any other matter which has resulted or might reasonably result in a
Material Adverse Change.
5.2 Financial Statements. Deliver to each Lender or cause to be delivered to
Lender, in form and detail satisfactory to Lender the following financial
information, which Borrower warrants shall be accurate and complete in all
material respects:
(a) Monthly Financial Statements. As soon as available but no later than
thirty (30) days after the end of each month, Borrower's balance sheet as of the
end of such period, and Borrower's income statement for such period and for that
portion of Borrower's financial reporting year ending with such period, prepared
and attested by a responsible financial officer of Borrower as being complete
and correct and fairly presenting Borrower's financial condition and the results
of Borrower's operations. Prior to the initial funding and after a Qualified
Public Offering, the foregoing interim financial statements shall be delivered
no later than 45 days after each fiscal quarter and for the quarter-annual
fiscal period then ended.
(b) Year-End Financial Statements. As soon as available but no later than one
hundred twenty (120) days after and as of the end of each financial reporting
year, a complete copy of Borrower's audit report, which shall include balance
sheet, income statement, statement of changes in equity and statement of cash
flows for such year, prepared and certified by an independent certified public
accountant selected by Borrower and satisfactory to Lender (the "Accountant").
The Accountant's certification shall not be qualified or limited due to a
restricted or limited examination by the Accountant of any material portion of
Borrower's records or otherwise.
(c) Compliance Certificates. Simultaneously with the delivery of each set of
financial statements referred to in paragraphs (a) and (b) above, a certificate
of the chief financial officer of Borrower substantially in the form of Exhibit
"C" to the Supplement (i) setting forth in reasonable detail any calculations
required to establish whether Borrower is in compliance with any financial
covenants or tests set forth in the Supplement, and (ii) stating whether any
Default or Event of Default exists on the date of such certificate, and if so,
setting forth the details thereof and the action which Borrower is taking or
proposes to take with respect thereto.
(d) Government Required Reports; Press Releases. Promptly after sending,
issuing, making available, or filing, copies of all statements released to any
news media for publication, all reports, proxy statements, and financial
statements that Borrower sends or makes available to its stockholders, and, not
later than five (5) days after actual filing or the date such filing was first
due, all registration statements and reports that Borrower files or is required
to file with the Securities and Exchange Commission, or any other governmental
or regulatory authority.
(e) Other Information. Such other statements, lists of property and accounts,
budgets, forecasts, reports, or other information as Lender may from time to
time reasonably request.
5.3 Managerial Assistance from Lender. Permit Lender, as a "venture capital
operating company" to participate in, and influence the conduct of management of
Borrower through the exercise of "management rights," as such terms are defined
in 29 C.F.R. (S) 2510.3-101(d), and:
(a) Permit Lender to make available to Borrower, at no cost to Borrower,
"significant managerial assistance", as defined in Section 2(a)(47) of the
Investment Company Act of 1940, as amended, either in the form of: (i)
consulting arrangements with Lender or any of its officers, directors, employees
or affiliates, (ii) Borrower's allowing Lender to provide recommendations of
prospective candidates for election to Borrower's Board of Directors, or (iii)
Lender, at Borrower's request, seeking the services of third-party consultants
to aid Borrower with respect to its management and operations;
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(b) Permit Lender to make available consulting and advisory services to
officers of Borrower regarding Borrower's equipment acquisition and financing
plans, and such other matters affecting the business, financial condition and
prospects of Borrower as Lender shall reasonably deem relevant; and
(c) If Lender reasonably believes that financial or other developments
affecting Borrower have impaired or are likely to impair Borrower's ability to
perform its obligations under this Agreement, permit Lender reasonable access to
Borrower's management and/or Board of Directors and opportunity to present
Lender's views with respect to such developments.
5.4 Existence. Maintain and preserve Borrower's existence, present form of
business, and all rights and privileges necessary or desirable in the normal
course of its business; and keep all Borrower's property in good working order
and condition, ordinary wear and tear excepted.
5.5 Insurance. Obtain and keep in force insurance in such amounts and types
as is usual in the type of business conducted by Borrower, with insurance
carriers having a policyholder rating of not less than "A" and financial
category rating of Class VII in "Best's Insurance Guide," unless otherwise
approved by Lender. Such insurance policies must be in form and substance
satisfactory to Lender, and shall list Lender as an additional insured or loss
payee, as applicable, on endorsement(s) in form reasonably acceptable to Lender.
Borrower shall furnish to Lender such endorsements, and upon Lender's request,
copies of any or all such policies.
5.6 Accounting Records. Maintain adequate books, accounts and records, and
prepare all financial statements in accordance with GAAP, and in compliance with
the regulations of any governmental or regulatory authority having jurisdiction
over Borrower or Borrower's business; and permit employees or agents of Lender
at such reasonable times as Lender may request, at Borrower's expense, to
inspect Borrower's properties, and to examine, and make copies and memoranda of
Borrower's books, accounts and records. Such inspections shall occur no more
frequently than twice per year unless Borrower is in Default.
5.7 Compliance With Laws. Comply with all laws (including Environmental
Laws), rules, regulations applicable to, and all orders and directives of any
governmental or regulatory authority having jurisdiction over, Borrower or
Borrower's business, and with all material agreements to which Borrower is a
party, except where the failure to so comply would not have a Material Adverse
Effect.
5.8 Taxes and Other Liabilities. Pay all Borrower's obligations when due;
pay all taxes and other governmental or regulatory assessments before
delinquency or before any penalty attaches thereto, except as may be contested
in good faith by the appropriate procedures and for which Borrower shall
maintain appropriate reserves; and timely file all required tax returns.
5.9 Special Collateral Covenants.
(a) Maintenance of Collateral; Inspection. Do all things reasonably necessary
to maintain, preserve, protect and keep all Collateral in good working order and
salable condition, ordinary wear and tear excepted, deal with the Collateral in
all ways as are considered good practice by owners of like property, and use the
Collateral lawfully and, to the extent applicable, only as permitted by
Borrower's insurance policies. Maintain, or cause to be maintained, complete
and accurate Records relating to the Collateral. Upon reasonable prior notice
at reasonable times during normal business hours, Borrower hereby authorizes
Lender's officers, employees, representatives and agents to inspect the
Collateral and to discuss the Collateral and the Records relating thereto with
Borrower's officers and employees, and, in the case of any Right to Payment,
with any Person which is or may be obligated thereon.
(b) Financing Statements and Other Actions. Execute and deliver to Lender
all financing statements, notices and other documents from time to time
reasonably requested by any Lender to maintain a first perfected security
interest in the Collateral in favor of Lender; perform such other acts, and
execute and deliver to Lender such additional conveyances, assignments,
agreements and instruments, as Lender may at any time request in connection with
the administration and enforcement of this Agreement or Lender's rights, powers
and remedies hereunder.
(c) Liens. Not create, incur, assume or permit to exist any Lien or grant
any other Person a negative pledge on any Collateral, except Permitted Liens.
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(d) Documents of Title. Except as permitted in the Supplement, not sign or
authorize the signing of any financing statement or other document naming
Borrower as debtor or obligor, or acquiesce or cooperate in the issuance of any
bill of lading, warehouse receipt or other document or instrument of title with
respect to any Collateral, except those negotiated to Lender, or those naming
Lender as secured party.
(e) Disposition of Collateral. Not sell, transfer, lease or otherwise
dispose of any Equipment; or dispose of any other Collateral except for fair
consideration and in the ordinary course of its business.
(f) Change in Location or Name. Without at least 30 days' prior written
notice to Lender: (a) not relocate any Collateral or Records, its chief
executive office, or establish a place of business at a location other than as
specified in the Supplement; and (b) not change its name, mailing address,
location of Collateral, or its legal structure.
(g) Decals, Markings. At the request of Lender, firmly affix a decal,
stencil or other marking to designated items of Equipment, indicating thereon
the security interest of Lender.
(h) Agreement With Real Property Owner/Landlord. Obtain and maintain such
acknowledgments, consents, waivers and agreements from the owner, lienholder,
mortgagee and landlord with respect to any real property on which Equipment is
located as Lender may require, all in form and substance satisfactory to Lender.
(i) Certain Agreements on Rights to Payment. Other than in the ordinary
course of business, not make any material discount, credit, rebate or other
reduction in the original amount owing on a Right to Payment or accept in
satisfaction of a Right to Payment less than the original amount thereof.
ARTICLE 6 - NEGATIVE COVENANTS
During the term of this Agreement and until the performance of all obligations
to Lender, Borrower will not (without Lender's prior written consent):
6.1 Indebtedness. Be indebted for borrowed money, the deferred purchase
price of property, or leases which would be capitalized in accordance with GAAP;
or become liable as a surety, guarantor, accommodation party or otherwise for or
upon the obligation of any other Person, except:
(a) Indebtedness incurred for the acquisition of supplies or inventory on
normal trade credit; and other indebtedness incurred pursuant to one or more
transactions permitted under Section 6.4;
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(b) Indebtedness not to exceed One Hundred Thousand Dollars ($100,000) in
aggregate principal amount outstanding at any time secured by security interests
covered by clause (c) of the definition of Permitted Lien;
(c) Indebtedness of Borrower under this Agreement; and
(d) Any Indebtedness approved by Lender prior to the Closing Date.
6.2 Liens. Create, incur, assume or permit to exist any Lien, or grant any
other Person a negative pledge, on any of Borrower's property, except Permitted
Liens. Borrower and Lender agree that this covenant is not intended to
constitute a lien, deed of trust, equitable mortgage, or security interest of
any kind on any of Borrower's real property, and this Agreement shall not be
recorded or recordable. Notwithstanding the foregoing, however, violation of
this covenant by Borrower shall constitute an Event of Default.
6.3 Dividends. Except after a Qualified Public Offering, pay any dividends
or purchase, redeem or otherwise acquire or make any other distribution with
respect to any of Borrower's capital stock, except (a) dividends or other
distributions solely of capital stock of Borrower, (b) repurchases of stock from
employees upon termination of employment under reverse vesting or similar
repurchase plans, or (c) redemption's financed by additional stock issuance's.
6.4 Changes/Mergers. Liquidate or dissolve, or enter into any consolidation,
merger, partnership, joint venture or other combination except for joint
------
ventures, strategic alliances, licensing and similar arrangements customary in
Borrower's industry for businesses in the development stage of Borrower and
which do not require Borrower to assume or otherwise become liable for the
Obligations of any third party not directly related to or arising out of such
arrangement or, without the prior written consent of Lender, require Borrower to
transfer ownership of assets to such joint venture or other entity; prepay any
subordinated debt,
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debt for borrowed money, or debt secured by any Permitted Lien, or enter into or
modify any agreement as a result of which the terms of payment of any such debt
are accelerated.
6.5 Sales of Assets. Sell, transfer, lease or otherwise dispose of any of
Borrower's assets except for fair consideration and in the ordinary course of
its business.
6.6 Loans/Investments. Make or suffer to exist any loans, guaranties,
advances, or investments, except:
(a) Accounts receivable in the ordinary course of Borrower's business;
(b) Investments in domestic certificates of deposit issued by, and other
domestic investments with, financial institutions organized under the laws of
the United States or a state thereof, having One Hundred Million Dollars
($100,000,000) in capital and a rating of at least "investment grade" or "A" by
Moody's or any successor rating agency;
(c) Investments in marketable obligations of the United States of America and
in open market commercial paper given the highest credit rating by a national
credit agency and maturing not more than one year from the creation thereof; and
(d) Temporary advances to cover incidental expenses to be incurred in the
ordinary course of business.
6.7 Transactions With Related Persons. Directly or indirectly enter into any
transaction with or for the benefit of a Related Person on terms more favorable
to the Related Person than would have been obtainable in an "arms' length"
dealing.
6.8 Other Business. Engage in any material line of business other than the
business Borrower conducts as of the Closing Date.
6.9 Financial Covenants. Fail to comply with any financial covenants or
tests set forth in the Supplement.
ARTICLE 7 - EVENTS OF DEFAULT
7.1 Events of Default; Acceleration. Upon the occurrence and during the
continuation of any Default, the obligation of Lender to make any additional
Loan shall be suspended. The occurrence of any of the following (each, an
"Event of Default") shall terminate any obligation of Lender to make any
additional Loan; and shall, at the option of Lender (1) make all sums of Basic
Interest and principal, all Terminal Payments, and any Obligations and other
amounts owing under any Loan Documents immediately due and payable without
notice of default, presentment or demand for payment, protest or notice of
nonpayment or dishonor or any other notices or demands, and (2) give Lender the
right to exercise any other right or remedy provided by contract or applicable
law:
(a) Borrower shall fail to pay any principal, interest or Terminal Payment
under this Agreement, or fail to pay any fees or other charges when due under
any Loan Document, and such failure continues for five (5) Business Days or more
after the same first becomes due; or an Event of Default as defined in any other
Loan Document shall have occurred.
(b) Any representation or warranty made, or financial statement, certificate
or other document provided, by Borrower under any Loan Document shall prove to
have been false or misleading in any material respect when made or deemed made
herein.
(c) Borrower shall fail to pay its debts generally as they become due or shall
commence any Insolvency Proceeding with respect to itself; an involuntary
Insolvency Proceeding shall be filed against Borrower, or a custodian, receiver,
trustee, assignee for the benefit of creditors, or other similar official, shall
be appointed to take possession, custody or control of the properties of
Borrower, and such involuntary Insolvency Proceeding, petition or appointment is
acquiesced to by Borrower or is not dismissed within sixty (60) days; or the
dissolution or termination of the business of Borrower.
(d) Borrower shall be in default beyond any applicable period of grace or cure
under any other agreement involving the borrowing of money, the purchase of
property, the advance of credit or any other monetary liability of any kind to
Lender or to any Person which results in the acceleration of payment of such
obligation in an amount in excess of the Threshold Amount.
(e) Any governmental or regulatory authority shall take any judicial or
administrative action, or any defined benefit pension plan maintained by
Borrower shall have any unfunded liabilities, any of which, in the
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reasonable judgment of Lender, might have a Material Adverse Effect.
(f) Any sale, transfer or other disposition of all or a substantial or
material part of the assets of Borrower, including without limitation to any
trust or similar entity, shall occur.
(g) Any judgment(s) singly or in the aggregate in excess of the Threshold
Amount shall be entered against Borrower which remain unsatisfied, unvacated or
unstayed pending appeal for ten (10) or more days after entry thereof.
(h) Any Person or two or more Persons acting in concert, excluding current
investors, shall have acquired beneficial ownership (within the meaning of Rule
13d-3 of the Securities and Exchange Commission) of fifty percent (50%) or more
of the outstanding shares of voting stock of Borrower.
(i) Borrower shall fail to perform or observe any covenant contained in
Article 6 of this Agreement.
(j) Borrower shall fail to perform or observe any covenant contained in this
Agreement or any other Loan Document (other than a covenant which is dealt with
specifically elsewhere in this Article 7) and the breach of such covenant is not
cured within 30 days after the sooner to occur of Borrower's receipt of notice
of such breach from Lender or the date on which such breach first becomes known
to any officer of Borrower; provided, however that if such breach is not capable
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of being cured within such 30-day period and Borrower timely notifies Lender of
such fact and Borrower diligently pursues such cure, then the cure period shall
be extended to the date requested in Borrower's notice but in no event more than
90 days from the initial breach; provided, further, that such additional 60-day
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opportunity to cure shall not apply in the case of any failure to perform or
observe any covenant which has been the subject of a prior failure within the
preceding 180 days or which is a willful and knowing breach by Borrower.
7.2 Remedies Upon Default. Upon the occurrence and during the continuance of
an Event of Default, Lender shall be entitled to, at its option, exercise any or
all of the rights and remedies available to a secured party under the Uniform
Commercial Code or any other applicable law, and exercise any or all of its
rights and remedies provided for in this Agreement and in any other Loan
Document. The obligations of Borrower under this Agreement shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any Obligations is rescinded or must otherwise be returned by Lender upon, on
account of, or in connection with, the insolvency, bankruptcy or reorganization
of Borrower or otherwise, all as though such payment had not been made.
7.3 Sale of Collateral. Upon the occurrence and during the continuance of an
Event of Default, Lender may sell all or any part of the Collateral, at public
or private sales, to itself, a wholesaler, retailer or investor, for cash, upon
credit or for future delivery, and at such price or prices as Lender may deem
commercially reasonable. To the extent permitted by law, Borrower hereby
specifically waives all rights of redemption and any rights of stay or appraisal
which it has or may have under any applicable law in effect from time to time.
Any such public or private sales shall be held at such times and at such
place(s) as Lender may determine. In case of the sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so sold may be
retained by Lender until the selling price is paid by the purchaser, but Lender
shall not incur any liability in case of the failure of such purchaser to pay
for the Collateral and, in case of any such failure, such Collateral may be
resold. Lender may, instead of exercising its power of sale, proceed to enforce
its security interest in the Collateral by seeking a judgment or decree of a
court of competent jurisdiction.
7.4 Borrower's Obligations Upon Default. Upon the request of Lender after
the occurrence and during the continuance of an Event of Default, Borrower will:
(a) Assemble and make available to Lender the Collateral at such place(s) as
Lender shall reasonably designate, segregating all Collateral so that each item
is capable of identification; and
(b) Subject to the rights of any lessor, permit Lender, by Lender's officers,
employees, agents and representatives, to enter any premises where any
Collateral is located, to take possession of the Collateral, to complete the
processing, manufacture or repair of any Collateral, and to remove the
Collateral, or to conduct any public or private sale of the Collateral, all
without any liability of Lender for rent or other compensation for the use of
Borrower's premises.
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ARTICLE 8 - SPECIAL COLLATERAL PROVISIONS
8.1 Compromise and Collection. Borrower and Lender recognize that setoffs,
counterclaims, defenses and other claims may be asserted by obligors with
respect to certain of the Rights to Payment; that certain of the Rights to
Payment may be or become uncorrectable in whole or in part; and that the expense
and probability of success of litigating a disputed Right to Payment may exceed
the amount that reasonably may be expected to be recovered with respect to such
Right to Payment. Borrower hereby authorizes Lender, after and during the
continuance of an Event of Default, to compromise with the obligor, accept in
full payment of any Right to Payment such amount as Lender shall negotiate with
the obligor, or abandon any Right to Payment. Any such action by Lender shall
be considered commercially reasonable so long as Lender acts in good faith based
on information known to it at the time it takes any such action.
8.2 Performance of Borrower's Obligations. Without having any obligation to
do so, upon reasonable prior notice to Borrower, Lender may perform or pay any
obligation which Borrower has agreed to perform or pay under this Agreement,
including, without limitation, the payment or discharge of taxes or Liens levied
or placed on or threatened against the Collateral. In so performing or paying,
Lender shall determine the action to be taken and the amount necessary to
discharge such obligations. Borrower shall reimburse Lender on demand for any
amounts paid by Lender pursuant to this Section, which amounts shall constitute
Obligations secured by the Collateral and shall bear interest from the date of
demand at the Default Rate.
8.3 Power of Attorney. For the purpose of protecting and preserving the
Collateral and Lender's rights under this Agreement, Borrower hereby irrevocably
appoints Lender, with full power of substitution, as its attorney-in-fact with
full power and authority, after the occurrence and during the continuance of an
Event of Default, to do any act which Borrower is obligated to do hereunder; to
exercise such rights with respect to the Collateral as Borrower might exercise;
to use such Inventory, Equipment, Fixtures or other property as Borrower might
use; to enter Borrower's premises; to give notice of Lender's security interest
in, and to collect the Collateral; and to execute and file in Borrower's name
any financing statements, amendments and continuation statements necessary or
desirable to perfect or continue the perfection of Lender's security interests
in the Collateral. Borrower hereby ratifies all that Lender shall lawfully do
or cause to be done by virtue of this appointment.
8.4 Authorization for Lender to Take Certain Action. The power of attorney
created in Section 8.3 is a power coupled with an interest and shall be
irrevocable. The powers conferred on Lender hereunder are solely to protect its
interests in the Collateral and shall not impose any duty upon Lender to
exercise such powers. Lender shall be accountable only for amounts that it
actually receives as a result of the exercise of such powers and in no event
shall Lender or any of its directors, officers, employees, agents or
representatives be responsible to Borrower for any act or failure to act, except
for gross negligence or willful misconduct. After the occurrence and during the
continuance of an Event of Default, Lender may exercise this power of attorney
without notice to or assent of Borrower, in the name of Borrower, or in Lender's
own name, from time to time in Lender's sole discretion and at Borrower's
expense. To further carry out the terms of this Agreement, after the occurrence
and during the continuance of an Event of Default, Lender may:
(a) Execute any statements or documents or take possession of, and endorse and
collect and receive delivery or payment of, any checks, drafts, notes,
acceptances or other instruments and documents constituting Collateral, or
constituting the payment of amounts due and to become due or any performance to
be rendered with respect to the Collateral.
(b) Sign and endorse any invoices, freight or express bills, bills of lading,
storage or warehouse receipts; drafts, certificates and statements under any
commercial or standby letter of credit relating to Collateral; assignments,
verifications and notices in connection with Accounts; or any other documents
relating to the Collateral, including without limitation the Records.
(c) Use or operate Collateral or any other property of Borrower for the
purpose of preserving or liquidating Collateral.
(d) File any claim or take any other action or proceeding in any court of law
or equity or as otherwise deemed appropriate by Lender for the purpose of
collecting any and all monies due or securing any performance to be rendered
with respect to the Collateral.
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(e) Commence, prosecute or defend any suits, actions or proceedings or as
otherwise deemed appropriate by Lender for the purpose of protecting or
collecting the Collateral. In furtherance of this right, upon the occurrence
and during the continuance of an Event of Default, Lender may apply for the
appointment of a receiver or similar official to operate Borrower's business.
(f) Prepare, adjust, execute, deliver and receive payment under insurance
claims, and collect and receive payment of and endorse any instrument in payment
of loss or returned premiums or any other insurance refund or return, and apply
such amounts at Lender's sole discretion, toward repayment of the Obligations or
replacement of the Collateral.
8.5 Application of Proceeds. Any Proceeds and other monies or property
received by Lender pursuant to the terms of this Agreement or any Loan Document
may be applied by Lender first to the payment of expenses of collection,
including without limitation reasonable attorneys' fees, and then to the payment
of the Obligations in such order of application as Lender may elect.
8.6 Deficiency. If the Proceeds of any disposition of the Collateral are
insufficient to cover all costs and expenses of such sale and the payment in
full of all the Obligations, plus all other sums required to be expended or
distributed by Lender, then Borrower shall be liable for any such deficiency.
8.7 Lender Transfer. Upon the transfer of all or any part of the
Obligations, Lender may transfer all or 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 Lender hereunder with respect to such Collateral so
transferred, but with respect to any Collateral not so transferred, Lender shall
retain all rights and powers hereby given.
8.8 Lender's Duties.
(a) Lender shall use reasonable care in the custody and preservation of any
Collateral in its possession. Without limitation on other conduct which may be
considered the exercise of reasonable care, Lender shall be deemed to have
exercised reasonable care in the custody and preservation of such Collateral if
such Collateral is accorded treatment substantially equal to that which Lender
accords its own property, it being understood that Lender shall not have any
responsibility for ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, declining value, tenders or other matters
relative to any Collateral, regardless of whether Lender has or is deemed to
have knowledge of such matters; or taking any necessary steps to preserve any
rights against any Person with respect to any Collateral. Under no
circumstances shall Lender be responsible for any injury or loss to the
Collateral, or any part thereof, arising from any cause beyond the reasonable
control of Lender.
(b) Lender may at any time deliver the Collateral or any part thereof to
Borrower and the receipt of Borrower shall be a complete and full acquittance
for the Collateral so delivered, and Lender shall thereafter be discharged from
any liability or responsibility therefor.
(c) Neither Lender, nor any of its directors, officers, employees, agents,
attorneys or any other person affiliated with or representing Lender shall be
liable for any claims, demands, losses or damages, of any kind whatsoever, made,
claimed, incurred or suffered by Borrower or any other party through the
ordinary negligence of Lender, or any of its directors, officers, employees,
agents, attorneys or any other person affiliated with or representing Lender.
8.9 Termination of Security Interests. Upon the payment in full of the
Obligations and if Lender has no further obligations under its Commitment, the
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to Borrower. Upon any such termination, the Lender
shall, at Borrower's expense, execute and deliver to Borrower such documents as
Borrower shall reasonably request to evidence such termination.
ARTICLE 9 - GENERAL PROVISIONS
9.1 Notices. Any notice given by any party under any Loan Document shall be
in writing and personally delivered, sent by overnight courier, or United States
mail, postage prepaid, or sent by facsimile, or other authenticated message,
charges prepaid, to the other party's or parties' addresses shown on the
Supplement. Each party may change the address or facsimile number to which
notices, requests and other communications are to be sent by giving written
notice of such change to each other party.
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Notice given by hand delivery shall be deemed received on the date delivered; if
sent by overnight courier, on the next business day after delivery to the
courier service; if by first class mail, on the third business day after deposit
in the U.S. Mail; and if by facsimile, on the date of transmission.
9.2 Binding Effect. The Loan Documents shall be binding upon and inure to
the benefit of Borrower and Lender and their respective successors and assigns;
provided, however, that Borrower may not assign or transfer Borrower's rights or
obligations under any Loan Document without Lender's prior written consent.
Lender reserves the right to sell, assign, transfer, negotiate or grant
participations in all or any part of, or any interest in, Lender's rights and
obligations under the Loan Documents. In connection with any of the foregoing,
Lender may disclose all documents and information which Lender now or hereafter
may have relating to the Loans, Borrower, or its business; provided that any
person who receives such information shall have agreed in writing in advance to
maintain the confidentiality of such information on terms reasonably acceptable
to Borrower.
9.3 No Waiver. Any waiver, consent or approval by Lender of any Event of
Default or breach of any provision, condition, or covenant of any Loan Document
must be in writing and shall be effective only to the extent set forth in
writing. No waiver of any breach or default shall be deemed a waiver of any
later breach or default of the same or any other provision of any Loan Document.
No failure or delay on the part of Lender in exercising any power, right, or
privilege under any Loan Document shall operate as a waiver thereof, and no
single or partial exercise of any such power, right, or privilege shall preclude
any further exercise thereof or the exercise of any other power, right or
privilege. Lender has the right at its sole option to continue to accept
interest and/or principal payments due under the Loan Documents after default,
and such acceptance shall not constitute a waiver of said default or an
extension of the Maturity Date unless Lender agrees otherwise in writing.
9.4 Rights Cumulative. All rights and remedies existing under the Loan
Documents are cumulative to, and not exclusive of, any other rights or remedies
available under contract or applicable law.
9.5 Unenforceable Provisions. Any provision of any Loan Document executed by
Borrower which is prohibited or unenforceable in any jurisdiction, shall be so
only as to such jurisdiction and only to the extent of such prohibition or
unenforceability, but all the remaining provisions of any such Loan Document
shall remain valid and enforceable.
9.6 Accounting Terms. Except as otherwise provided in this Agreement,
accounting terms and financial covenants and information shall be determined and
prepared in accordance with GAAP.
9.7 Indemnification; Exculpation. Borrower shall pay and protect, defend and
indemnify Lender and Lender's employees, officers, directors, shareholders,
affiliates, correspondents, agents and representatives (other than Lender,
collectively "Agents") against, and hold Lender and each such Agent harmless
from, all claims, actions, proceedings, liabilities, damages, losses, expenses
(including, without limitation, attorneys' fees and costs) and other amounts
incurred by Lender and each such Agent, arising from (i) the matters
contemplated by this Agreement or any other Loan Documents or (ii) any
contention that Borrower has failed to comply with any law, rule, regulation,
order or directive applicable to Borrower's business; provided, however, that
this indemnification shall not apply to any of the foregoing incurred solely as
the result of Lender's or any Agent's gross negligence or willful misconduct.
This indemnification shall survive the payment and satisfaction of all of
Borrower's Obligations to Lender.
9.8 Reimbursement. Borrower shall reimburse Lender for all reasonable costs
and expenses, including without limitation reasonable attorneys' fees and
disbursements expended or incurred by Lender in any arbitration, mediation,
judicial reference, legal action or otherwise in connection with (a) the
preparation and negotiation of the Loan Documents, (b) the amendment and
enforcement of the Loan Documents, including without limitation during any
workout, attempted workout, and/or in connection with the rendering of legal
advice as to Lender's rights, remedies and obligations under the Loan Documents,
(c) collecting any sum which becomes due Lender under any Loan Document, (d) any
proceeding for declaratory relief, any counterclaim to any proceeding, or any
appeal, or (e) the protection, preservation or enforcement of any rights of
Lender. For the purposes of this section, attorneys' fees shall include,
without limitation, fees incurred in connection with the following: (1)
contempt proceedings; (2) discovery; (3) any motion, proceeding or other
activity of any kind in connection with an Insolvency Proceeding; (4)
garnishment, levy, and debtor and third party
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examinations; and (5) postjudgment motions and proceedings of any kind,
including without limitation any activity taken to collect or enforce any
judgment. All of the foregoing costs and expenses shall be payable upon demand
by Lender, and if not paid within forty-five (45) days of presentation of
invoices shall bear interest at the highest applicable Default Rate.
9.9 Execution in Counterparts. This Agreement may be executed in any number
of counterparts which, when taken together, shall constitute but one agreement.
9.10 Entire Agreement. The Loan Documents are intended by the parties as
the final expression of their agreement and therefore contain the entire
agreement between the parties and supersede all prior understandings or
agreements concerning the subject matter hereof. This Agreement may be amended
only in a writing signed by Borrower and Lender.
9.11 Governing Law and Jurisdiction.
(a) THIS AGREEMENT AND THE LOAN DOCUMENTS SHALL BE GOVERNED BY, AND CONSTRUED
IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF CALIFORNIA.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT OR ANY OTHER
LOAN DOCUMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF CALIFORNIA OR OF THE
UNITED STATES FOR THE NORTHERN DISTRICT OF CALIFORNIA, AND BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, EACH OF BORROWER AND LENDER CONSENTS, FOR ITSELF AND
IN RESPECT OF ITS PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS.
EACH OF BORROWER AND LENDER IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO. BORROWER AND LENDER EACH WAIVE PERSONAL SERVICE OF ANY SUMMONS,
COMPLAINT OR OTHER PROCESS, WHICH MAY BE MADE BY ANY OTHER MEANS PERMITTED BY
CALIFORNIA LAW.
9.12 Waiver of Jury Trial. BORROWER AND LENDER EACH WAIVES ITS RESPECTIVE
RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF OR RELATED TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR
ANY PARTICIPANT OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT
CLAIMS, OR OTHERWISE. BORROWER AND LENDER EACH AGREES THAT ANY SUCH CLAIM OR
CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT
LIMITING THE FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO
A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION,
COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEMS, IN WHOLE OR IN PART, TO CHALLENGE
THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR THE OTHER LOAN DOCUMENTS OR
ANY PROVISION HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
ARTICLE 10 - DEFINITIONS
The definitions appearing in this Agreement or any Supplement shall be
applicable to both the singular and plural forms of the defined terms:
"Account" means a right to payment for goods sold or leased by Borrower or for
services rendered by Borrower, which right is not evidenced by an instrument or
chattel paper, whether or not earned by performance.
"Affiliate" means any Person which directly or indirectly controls, is
controlled by, or is under common control with Borrower. "Control," "controlled
by" and "under common control with" mean direct or indirect possession of the
power to direct or cause the direction of management or policies (whether
through ownership of voting securities, by
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contract or otherwise); provided, that control shall be conclusively presumed
when any Person or affiliated group directly or indirectly owns five percent
(5%) or more of the securities having ordinary voting power for the election of
directors of a corporation.
"Agreement" means this Loan and Security Agreement and each Supplement thereto,
as each may be amended or supplemented from time to time.
"Bankruptcy Code" means the Federal Bankruptcy Reform Act of 1978 (11 U.S.C.
(S)101, et seq.), as amended.
-- ---
"Basic Interest" means the fixed rate of interest payable on the outstanding
balance of each Loan at the applicable Designated Rate.
"Borrowing Date" means the Business Day on which the proceeds of a Loan are
disbursed by Lender.
"Borrowing Request" means a written request from Borrower in substantially the
form of Exhibit "B" to the Supplement, requesting the funding of one or more
-----------
Loans on a particular Borrowing Date.
"Business Day" means any day other than a Saturday, Sunday or other day on which
commercial banks in New York City or San Francisco are authorized or required by
law to close.
"Closing Date" means the date of this Agreement.
"Collateral" means all Borrower's Accounts, Deposit Accounts, Equipment,
Fixtures, General Intangibles, Goods, Inventory, Rights to Payment, and
securities now owned or hereafter acquired or arising, wherever located, and
whether held by Borrower or any third party, and all royalties, proceeds and
products thereof, including all insurance and condemnation proceeds
("Proceeds"), and all monies now or at any time hereafter in the possession or
under the control of Lender or a bailee or affiliate of Lender, including any
cash collateral in any cash collateral or other account, and all Records.
"Commitment" means the obligation of Lender to make Loans to Borrower up to the
aggregate principal amount set forth in the Supplement.
"Default" means an event which with the giving of notice, passage of time, or
both would constitute an Event of Default.
"Default Rate" is defined in Section 2.7.
"Deposit Accounts" means all Borrower's demand, time, savings, passbook or
similar accounts maintained with a financial institution or credit union.
"Designated Rate" means the rate of interest per annum described in the
Supplement as being applicable to an outstanding Loan from time to time.
"Environmental Laws" means all 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, or safety matters.
"Equipment" means all of Borrower's equipment now owned or hereafter acquired,
including but not limited to machinery, machine parts, furniture, furnishings
and all tangible personal property used in the business of Borrower and all such
property which is or is to become fixtures on real property, and all
improvements, replacements, accessions and additions thereto, wherever located,
and all proceeds thereof arising from the sale, lease, rental or other use or
disposition of any such property, including all rights to payment with respect
to insurance or condemnation, returned premiums, or any cause of action relating
to any of the foregoing.
"Event of Default" means any event described in Section 7.1.
"Fixtures" means all items of personal property of Borrower that are so related
to the real property upon which they are located that an interest in them arises
under real property law, and improvements, replacements, parts, accessions and
additions thereto, and substitutions therefor.
"GAAP" means generally accepted accounting principles and practices consistent
with those principles and practices promulgated or adopted by the Financial
Accounting Standards Board and the Board of the American Institute of Certified
Public Accountants, their respective predecessors and successors. Each
accounting term used but not otherwise expressly defined herein shall have the
meaning given it by GAAP.
"General Intangibles" means all personal property of Borrower, other than Goods,
not otherwise defined as
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Collateral, including without limitation all interests or claims in insurance
policies, permits, franchises and like privileges or rights issued by any
governmental or regulatory authority; income tax refunds; customer lists; claims
and causes of action (whether in contract, tort or otherwise), judgments and all
guaranty claims, leasehold interests in personal property, security interests or
other security held by or guaranteed to the Borrower to secure the payment by an
account debtor of any of the Accounts; but excluding Intellectual Property.
"Goods" means all money and other personal property of Borrower, other than
General Intangibles, not otherwise defined as Collateral.
"Indebtedness" of any Person means at any date, without duplication and without
regard to whether matured or unmatured, absolute or contingent: (i) all
Obligations of such Person for borrowed money; (ii) all Obligations of such
Person evidenced by bonds, debentures, notes, or other similar instruments;
(iii) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable arising in the ordinary
course of business; (iv) all obligations of such Person as lessee under capital
leases; (v) all obligations of such Person to reimburse or prepay any bank or
other Person in respect of amounts paid under a letter of credit, banker's
acceptance, or similar instrument, whether drawn or undrawn; (vi) all
obligations of such Person to purchase securities which arise out of or in
connection with the sale of the same or substantially similar securities; (vii)
all obligations of such Person to purchase, redeem, exchange, convert or
otherwise acquire for value any capital stock of such Person or any warrants,
rights or options to acquire such capital stock, now or hereafter outstanding,
except to the extent that such obligations remain performable solely at the
option of such Person; (viii) all obligations to repurchase assets previously
sold (including any obligation to repurchase any accounts or chattel paper under
any factoring, receivables purchase, or similar arrangement); (ix) obligations
of such Person under interest rate swap, cap, collar or similar hedging
arrangements; and (x) all obligations of others of any type described in clause
(i) through clause (ix) above guaranteed by such Person.
"Insolvency Proceeding" means (a) any case, action or proceeding before any
court or other governmental authority relating to bankruptcy, reorganization,
insolvency, liquidation, receivership, dissolution, winding-up or relief of
debtors, or (b) any general assignment for the benefit of creditors,
composition, marshalling of assets for creditors, or other, similar arrangement
in respect of its creditors generally or any substantial portion of its
creditors, undertaken under U.S. Federal, state or foreign law, including the
Bankruptcy Code.
"Inventory" means all Borrower's raw materials, advertising, packaging and
shipping materials, work in process, finished goods and goods held for sale or
lease or furnished under contracts of service, and all returned and repossessed
goods, and all goods covered by documents of title, including warehouse
receipts, bills of lading and all other documents of every type covering all or
any part of the Collateral.
"Lien" means any voluntary or involuntary security interest, mortgage, pledge,
claim, charge, encumbrance, title retention agreement, or third party interest,
covering all or any part of the property of Borrower or any other Person.
"Loan" means an extension of credit by Lender under this Agreement.
"Loan Documents" means, individually and collectively, this Loan and Security
Agreement, each Supplement, each Note, and any other security or pledge
agreement(s), any Warrants issued by Borrower in connection with this Agreement,
and all other contracts, instruments, addenda and documents executed in
connection with this Agreement or the extensions of credit which are the subject
of this Agreement.
"Material Adverse Effect" or "Material Adverse Change" means (a) a material
adverse change in, or a material adverse effect upon, the operations, business,
properties, or condition (financial or otherwise) of Borrower; (b) a material
impairment of the ability of Borrower to perform under any Loan Document; or (c)
a material adverse effect upon the legality, validity, binding effect or
enforceability against Borrower of any Loan Document.
"Maturity Date" means, with regard to a Loan, the earlier of (i) its maturity by
reason of acceleration, or (ii) its stated maturity date; and is the date on
which payment of all outstanding principal, accrued interest, and the Terminal
Payment with respect to such Loan is due.
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"Note" means a promissory note substantially in the form attached to the
Supplement as Exhibit "A", executed by Borrower evidencing each Loan.
-----------
"Obligations" means all debts, obligations and liabilities of Borrower to Lender
currently existing or now or hereafter made, incurred or created under, pursuant
to or in connection with this Agreement, whether voluntary or involuntary and
however arising or evidenced, whether direct or acquired by Lender by assignment
or succession, whether due or not due, absolute or contingent, liquidated or
unliquidated, determined or undetermined, and whether Borrower may be liable
individually or jointly, or whether recovery upon such debt may be or become
barred by any statute of limitations or otherwise unenforceable; and all
renewals, extensions and modifications thereof; and all attorneys' fees and
costs incurred by Lender in connection with the collection and enforcement
thereof as provided for in any Loan Document.
"Patent License" means any written agreement now or hereafter in existence
granting to Borrower any right to make, use, sell or practice any invention on
which a Patent is in existence.
"Patents" means all of the following: (i) all letters patent of the United
States or any other country, all registrations and recordings thereof, and all
applications for letters patent of the United States or any other country,
including, without limitation, registrations, recordings and applications in the
United States Patent and Trademark Office or in any similar office or agency of
the United States, any state thereof or any other country or any political
subdivision thereof, and (ii) all reissues, divisions, continuations,
continuations-in-part, renewals or extensions thereof.
"Patent Collateral Assignment" means any Patent Collateral Assignment executed
and delivered by Borrower in favor of Lender, as the same may be amended from
time to time.
"Permitted Lien" means
(a) Involuntary Liens which, in the aggregate, would not have a Material
Adverse Effect and which in any event would not exceed the Threshold Amount;
(b) Liens for current taxes or other governmental or regulatory assessments
which are not delinquent, or which are contested in good faith by the
appropriate procedures and for which appropriate reserves are maintained;
(c) security interests on any property held or acquired by Borrower in the
ordinary course of business securing Indebtedness incurred or assumed for the
purpose of financing all or any part of the cost of acquiring such property;
provided, that such Lien attaches solely to the property acquired with such
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Indebtedness and that the principal amount of such Indebtedness does not exceed
one hundred percent (100%) of the cost of such property; and further provided,
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that such property is not equipment with respect to which a Loan has been made
hereunder.
(d) Liens in favor of Lender;
(e) bankers' liens, rights of setoff and similar Liens incurred on deposits
made in the ordinary course of business;
(f) materialmen's, mechanics', repairmen's, employees' or other like Liens
arising in the ordinary course of business and which are not delinquent for more
than 45 days or are being contested in good faith by appropriate proceedings;
(g) any judgment, attachment or similar Lien, unless the judgment it secures
has not been discharged or execution thereof effectively stayed and bonded
against pending appeal within 30 days of the entry thereof;
(h) licenses or sublicenses of Patents, Patent Licenses, Trademarks or
Trademark Licenses permitted under the Trademark Collateral Assignment or the
Patent Collateral Assignment; and,
(i) Liens which have been approved by Lender in writing prior to the Closing
Date.
"Person" means any individual or entity.
"Qualified Public Offering" means the closing of a firmly underwritten public
offering of Borrower's common stock with aggregate proceeds of not less than
$20,000,000 (prior to underwriting expenses and commissions).
"Records" means all Borrower's computer programs, software, hardware, source
codes and data processing information, all written documents, books, invoices,
ledger sheets, financial information and statements, and all other writings
concerning Borrower's business.
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"Related Person" means any Affiliate of Borrower, or any officer, employee,
director or equity security holder of Borrower or any Affiliate.
"Rights to Payment" means all Borrower's accounts, instruments, contract rights,
documents, chattel paper and all other rights to payment, including, without
limitation, the Accounts, all negotiable certificates of deposit and all rights
to payment under any Patent License, any Trademark License, or any commercial or
standby letter of credit.
"Terminal Payment" means, with respect to each Loan, an amount payable on the
Maturity Date of such Loan in an amount equal to that percentage of the original
principal amount of such Loan specified in the Supplement.
"Termination Date" has the meaning specified in the Supplement.
"Threshold Amount" has the meaning specified in the Supplement.
"Trademark License" means any written agreement now or hereafter in existence
granting to Borrower any right to use any Trademark.
"Trademarks" means all of the following: (i) all trademarks, trade names,
corporate names, company names, business names, fictitious business names, trade
styles, service marks, logos, other source or business identifiers, prints and
labels on which any of the foregoing have appeared or will appear, designs and
general intangibles of like nature, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, including, without limitation, registrations, recordings
and applications in the United States Patent and Trademark Office or in any
similar office or agency of the United States, any state thereof or any other
country or any political subdivision thereof, and (ii) all reissues, divisions,
continuations, continuations-in-part, renewals or extensions thereof.
"Trademark Collateral Assignment" means any Trademark Collateral Assignment
executed and delivered by Borrower in favor of Lender, as the same may be
amended from time to time.
"UCC" means the Uniform Commercial Code as enacted in the applicable
jurisdiction, in effect on the Closing Date and as amended from time to time.
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SUPPLEMENT
to the
Loan and Security Agreement
Dated as of January 4, 1999
between
Ramp Networks, Inc. ("Borrower")
and
Venture Lending & Leasing II, Inc. ("Lender")
- --------------------------------------------------------------------------------
This is a Supplement identified in the document entitled Loan and Security
Agreement dated as of January 4, 1999 between Borrower and Lender. All
capitalized terms used in this Supplement and not otherwise defined in this
Supplement have the meanings ascribed to them in Section 10 of the Loan and
Security Agreement, which is incorporated in its entirety into this Supplement.
In the event of any inconsistency between the provisions of that document and
this Supplement, this Supplement is controlling. Execution of this Supplement
by the Lender and Borrower shall constitute execution of the Loan and Security
Agreement.
In addition to the provisions of the Loan and Security Agreement, the
parties agree as follows:
(1) - Additional Definitions:
----------------------
"Collateral Coverage Ratio": Prior to a release to another lender
under section 1(c) of this Supplement means, as of any date of determination,
the ratio of (i) Borrower's total Obligations to Lender then outstanding, to
(ii) the sum of (a) 100% of Eligible Accounts and (b) 50% of Eligible Inventory,
as of such date of determination and subsequent to a release under section 2(c)
of this Supplement means as of any date of determination, the ratio of (i)
Borrower's total Obligations to Lender and to any other lenders providing such
financing then outstanding, to (ii) the sum of (a) 80% of Eligible Accounts.
"Commitment": Lender commits to make Loans to Borrower up to the
aggregate, original principal amount of Five Million Dollars ($5,000,000).
Except to the extent the remaining Commitment is a lesser amount, each Loan
requested by Borrower to be made on a single Business Day shall be for a minimum
principal amount of One Hundred Thousand Dollars ($100,000.00), and in
increments of One Hundred Thousand Dollars ($100,000.00) in excess thereof.
"Designated Rate": The Designated Rate is Eight and 40/100 percent
(8.40%) per annum.
"Eligible Accounts": means gross Accounts which may be international
and meet each of the following requirements: arise in the ordinary course of
Borrower's business; upon which Borrower's right to payment is absolute and not
contingent on the fulfillment of any conditions; against which there has not
been asserted by customer any defense, offset or discount; are owned free and
clear of Liens by Borrower except in favor of Lender and are not more than 90
days past due.
"Eligible Collateral" means and shall include (i) Eligible Accounts;
and (ii) Eligible Inventory.
"Eligible Inventory" means the value of Inventory (both Finished
Goods and Raw Parts) as recorded on Borrower's financial statements in
accordance with GAAP, which is located in the continental United States and
owned by Borrower free and clear of all Liens except in favor of Lender and in
the reasonable judgment of Lender is not obsolete, unsalable, damaged or unfit
for further processing.
"Intellectual Property": shall mean any literary property; trade
names, trade name rights; trademarks, trademark rights, copyrights(including
common law copyrights, patents, and all applications therefor; licenses,
permits, franchises and like privileges or rights issued by any governmental or
regulatory authority.
<PAGE>
"Terminal Payment": Each Terminal Payment shall be an amount equal to
Twelve and one half percent (12.5%) of the original principal amount of the
associated Loan.
"Termination Date": The Termination Date is the earlier of (a) the
date Lender may terminate making Loans or extending other credit pursuant to the
rights of Lender under Article 7 of the Agreement, or (b) June 30, 2000.
"Threshold Amount": One Hundred Thousand Dollars ($100,000.00).
(2) - Additional Terms and Conditions:
-------------------------------
A. Issuance of Warrant to Lender. As additional consideration for the
making of the Loans under the Loan and Security Agreement, upon the making of,
and as a condition to, the initial Loan, Lender shall be entitled to receive a
warrant to purchase a number of shares of preferred stock of Borrower ("Warrant
Shares") with an aggregate initial exercise price of $625,000 and a per share
exercise price equal to the price per share of the preferred stock issued in the
next round of venture capital equity financing after to the Closing Date, unless
the next round of venture capital equity financing closes after May 1, 1999,
then the per share exercise price shall be the average of the D round price
($3.95512) and the price of the preferred stock issued in the next round of
venture capital equity financing. The warrant issued under this Agreement shall
be in substantially the form attached hereto as Exhibit "D"; shall be
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transferable by Lender, subject to compliance with applicable securities laws;
shall expire not earlier than June 30, 2005; and shall include registration
rights and anti-dilution protections on par with those of other holders of the
same series of Preferred Stock and "net issuance" provisions reasonably
satisfactory to Lender and its counsel.
B. Limitation on Reimbursement of Documentation Costs.
Notwithstanding anything to the contrary in Section 9.8 of the Loan and Security
Agreement, Borrower's obligation to reimburse Lender its attorneys' fees and
costs of documenting this transaction shall not exceed $5,000.
C. Release of Lien. Lender will subordinate its lien on accounts
receivable, to a bank providing working capital financing, upon the following:
1) the closing of a IPO or next round of Venture Capital Equity funding for a
minimum of $20 million; or 2) the Borrower has completed two successive quarters
of increasing profits which in total generate a minimum of $10 million in
revenue and $750 thousand in pretax profit. Both parties will work in good faith
to review additional financing needs of the Borrower.
D. Negative Pledge. Borrower shall not create or permit to exist any
Liens against its Intellectual Property to any other entity so long as any Loans
are outstanding under this Agreement.
E. Prepayment of Loans. No Loan may be voluntarily prepaid except as
provided in this Section. Borrower may prepay any Loan, in whole or in part in
minimum payments of One Hundred Thousand Dollars ($100,000) or any multiple of
One Hundred Thousand Dollars ($100,000) in excess thereof, at any time after the
first anniversary of the latest Borrowing Date for the Loan; provided that any
--------
prepayment, whether voluntary or involuntary as a result of acceleration or
otherwise, must be accompanied by payment of: (i) a premium equal to two
percent (2%) of the amount of principal so prepaid if the loan is prepaid prior
to the second anniversary of the Borrowing Date for the Loan or a premium equal
to one percent (1%) of the amount of principal so prepaid if the loan is prepaid
prior to the third anniversary of the Borrowing Date for the Loan; (ii) accrued
Basic Interest to the date of such prepayment; and (iii) the Terminal Payment on
the Loan so prepaid (or a ratable portion of such Terminal Payment, if less than
all of the Loan is prepaid). Unless otherwise agreed by Lender, any partial
prepayment of principal of a Loan shall be applied in inverse order of maturity
to the most remote principal installment then unpaid on such Loan.
F. Collateral Coverage Ratio. Borrower shall have at the applicable
Borrowing Date, and shall maintain at all times thereafter a Collateral Coverage
Ratio of at least 1.0 to 1.0. If at any time such ratio falls below 1.0 to 1.0,
then no later than ten (60) days after the first due date of a Compliance
Certificate in which such failure to be in compliance with the Collateral
Coverage Ratio is or should be reported, Borrower shall either prepay
<PAGE>
Loans by such amount, without premium or penalty, and/or provide such additional
Eligible Collateral as is necessary to bring Borrower into compliance with such
ratio. Each Compliance Certificate delivered under Section 5.2 shall include
statements showing the aging and reconciliation of Accounts collections, setting
forth the amounts of Eligible Accounts and Eligible Inventory, all as of the
relevant financial reporting date.
(3) - Additional Representations:
--------------------------
Borrower represents and warrants that as of the Closing Date:
Its chief executive office is located at: 3100 De La Cruz Blvd.,
Santa Clara, CA 95054
Its Inventory is located at: Same and Discopy Labs
48641 Milmont Drive,
Fremont, CA 94538
Its Records are located at: Same
In addition to its chief executive office, Borrower maintains
offices or operates its business at the following locations:
Hyderabad, India
Other than its full corporate name, Debtor has conducted business
using the following trade names or fictitious business names:
Trancell Systems, Inc.,
and Axiom Communications
4) - Additional Loan Documents:
-------------------------
Form of Note Exhibit "A"
Form of Borrowing Request Exhibit "B"
Form of Compliance Certificate Exhibit "C"
Form of Warrant Exhibit "D"
IN WITNESS WHEREOF, the parties have executed this Supplement as of the
date first above written.
<TABLE>
<S> <C>
BORROWER: LENDER:
RAMP NETWORKS, INC. VENTURE LENDING & LEASING II INC.
By:________________________________________ By:_________________________________
Name:________________________________________ Name:_________________________________
Title:________________________________________ Title_________________________________
</TABLE>
<TABLE>
<S> <C> <C>
Address for Notices: Attn: Chief Financial Officer Attn: Chief Financial Officer
3100 De La Cruz Blvd. 2010 North First Street, Suite 310
Santa Clara, CA 95054 San Jose, CA 95131
Fax# (408) 988-7605 Fax# (408) 436-8625
</TABLE>
<PAGE>
EXHIBIT A
[Note No. X-XXX]
FORM OF PROMISSORY NOTE
$[Face Amount of Note] [Note Date]
- ---------------------- ---------
San Jose, California
The undersigned ("Borrower") promises to pay to the order of VENTURE LENDING &
LEASING II, INC., a Maryland corporation ("Lender") at its office at 2010 North
First Street, Suite 310, San Jose, California 95131, or at such other place as
Lender may designate in writing, in lawful money of the United States of
America, the principal sum of ______________________________ Dollars
($__________), with Basic Interest thereon from the date hereof until maturity,
whether scheduled or accelerated, at a fixed rate per annum of Eight and 40/100
percent (8.40%), and a Terminal Payment in the sum of [12.5% of face amount]
_________________________
Dollars ($__________) payable on the Maturity Date.
This Note is one of the Notes referred to in, and is entitled to all the
benefits of, a Loan and Security Agreement dated January 4, 1999, between
Borrower and Lender (the "Loan Agreement"). Each capitalized term not otherwise
defined herein shall have the meaning set forth in the Loan Agreement. The Loan
Agreement contains provisions for the acceleration of the maturity of this Note
upon the happening of certain stated events.
Principal of and interest on this Note shall be payable as follows:
(i) Notes with a Borrowing Date of March 31, 1999 or before will be payable
as follows: On the Borrowing Date, Borrower shall pay (a) interest only, in
advance, on the outstanding principal balance of this Note at the pro rata
portion of 1% per month for the period from the Borrowing Date through the
last day of the same month; and (b) a first (1st) interest only installment
at 1% of the Loan Amount per month, in advance for the month of the first
full month after the Borrowing Date.
Commencing on the first day of the second full month after the Borrowing
Date, and continuing on the first day of each consecutive month thereafter,
interest only shall be payable, Monthly, in advance of One percent (1%) of
the Loan Amount per month until April 1, 1999 when Principal and Basic
Interest of three and 13/100 percent (3.13%) of the Loan Amount per month
shall be paid in thirty-five (35) equal consecutive installments, with a
thirty-sixth (36th) installment equal to the entire unpaid principal
balance and accrued Basic Interest.
The Terminal Payment amount shall be payable one month after such 36th
installment becomes due.
(ii) Notes with a Borrowing Date after March 31, 1999 will be payable as
follows: On the Borrowing Date, Borrower shall pay (a) Basic Interest, in
advance, on the outstanding principal balance of this Note at the
Designated Rate for the period from the Borrowing Date through the last day
of the same month; and (b) a first (1st) installment of Principal and Basic
Interest, in advance for the month of the first full month after the
Borrowing Date.
Commencing on the first day of the second full month after the Borrowing
Date, and continuing on the first day of each consecutive month thereafter,
Principal and Basic Interest shall be payable, Monthly, in advance of three
and 13/100 percent (3.13%) of the Loan Amount per month shall be paid in
thirty-four (34) equal consecutive installments, with a thirty-fifth (35th)
installment equal to the entire unpaid principal balance and accrued Basic
Interest.
The Terminal Payment amount shall be payable one month after such 36th
installment becomes due.
<PAGE>
Any unpaid payments of principal or interest on this Note shall bear interest
from their respective maturities, whether scheduled or accelerated, at a rate
per annum equal to the Default Rate. Borrower shall pay such interest on
demand.
Interest, charges and fees shall be calculated for actual days elapsed on the
basis of a 360-day year, which results in higher interest, charge or fee
payments than if a 365-day year were used. In no event shall Borrower be
obligated to pay interest, charges or fees at a rate in excess of the highest
rate permitted by applicable law from time to time in effect.
If Borrower is late in making any payment under this Note by more than five
(5) days, Borrower agrees to pay a "late charge" of five percent (5%) of the
installment due, but not less than fifty dollars ($50.00) for any one such
delinquent payment. This late charge may be charged by Lender for the purpose
of defraying the expenses incidental to the handling of such delinquent amounts.
Borrower acknowledges that such late charge represents a reasonable sum
considering all of the circumstances existing on the date of this Note and
represents a fair and reasonable estimate of the costs that will be sustained by
Lender due to the failure of Borrower to make timely payments. Borrower further
agrees that proof of actual damages would be costly and inconvenient. Such late
charge shall be paid without prejudice to the right of Lender to collect any
other amounts provided to be paid or to declare a default under this Note or any
of the other Loan Documents or from exercising any other rights and remedies of
Lender.
This Note shall be governed by, and construed in accordance with, the laws
of the State of California.
Ramp Networks, Inc.
By:_______________________________
Name:_____________________________
Its:______________________________
<PAGE>
EXHIBIT B
BORROWING REQUEST
________________, ____
Venture Lending & Leasing II, Inc.
2010 North First Street, Suite 310
San Jose, CA 95131
Re: Ramp Networks, Inc.
Gentlemen:
Reference is made to the Loan and Security Agreement dated as of
January 4, 1999 (as the same have been and may be amended from time to time, the
"Loan Agreement", the capitalized terms used herein as defined therein), between
Venture Lending & Leasing II, Inc. on one hand and Ramp Networks, Inc. (the
"Company") on the other.
The undersigned is an Officer of the Company, authorized to borrow
under The Loan Agreement, and hereby requests Loan under the Loan Agreement, and
in that connection certifies as follows:
1. The aggregate amount of the proposed Loan is $____________. The
Business Day of the proposed Loan is _____, 1999.
2. As of this date, no Default or Event of Default has occurred and
is continuing, or will result from the making of the proposed Loan, and the
representations and warranties of the Company contained in the Loan Agreement
are true and correct.
3. No Material Adverse Change has occurred since the date of the
most recent financial statements submitted to you by the Company.
The Company agrees to notify you promptly before the funding of the
Loan if any of the matters to which I have certified above shall not be true and
correct on the Borrowing Date.
Very Truly Yours,
By:______________________
Name:____________________
Its:_____________________
<PAGE>
EXHIBIT C
COMPLIANCE CERTIFICATE
Venture Lending & Leasing II, Inc.
2010 North First Street, Suite 310
San Jose, CA 95131
Re: Ramp Networks, Inc.
Gentlemen:
Reference is made to the Loan and Security Agreement dated as of January
4, 1999 (as the same have been and may be amended from time to time, the "Loan
Agreement", the capitalized terms used herein as defined therein), between
Venture Lending & Leasing II, Inc. on one hand and Ramp Networks, Inc. (the
"Company") on the other.
The undersigned authorized representative of the Company hereby certifies that
in accordance with the terms and conditions of the Loan Agreement, the Company
is in complete compliance for the period ending ___________ of all required
conditions and terms except as noted below. Attached herewith are the required
documents supporting the above certification. The representative further
certifies that these are prepared in accordance with Generally Accepted
Accounting Principles and are consistent from one period to the next except as
explained below.
Indicate compliance status by circling Yes/No under "Complies"
<TABLE>
<S> <C> <C>
REPORTING REQUIREMENT REQUIRED COMPLIES
- --------------------- -------- --------
Interim Financial Statements Monthly within 30 days* YES / NO
Audited Financial Statements FYE within 120 days YES / NO
COLLATERAL COVENANTS REQUIRED COMPLIES
- -------------------- -------- --------
Collateral Coverage Ratio At least 1.0:1.0 YES / NO
(Sum of (a) 100% of Eligible Accounts and (b) 50% of Eligible Inventory: Total
Obligations) or (80% of Eligible Accounts: Total Obligations)
</TABLE>
*Quarterly prior to the initial funding and after an IPO.
REQUIRED EXPLANATIONS:
- ---------------------
________________________________________________________________________________
________________________________________________________________________________
Very Truly Yours,
By:____________________
Name:__________________
Its:___________________
<PAGE>
SUPPLEMENT NUMBER 2
to the
Loan and Security Agreement
Dated as of January 4, 1999
between
Ramp Networks, Inc. ("Borrower")
and
Venture Lending & Leasing II, Inc. ("Lender")
- --------------------------------------------------------------------------------
This is a Supplement identified in the document entitled Loan and Security
Agreement dated as of January 4, 1999 between Borrower and Lender. An
capitalized terms used in this Supplement and not otherwise defined in this
Supplement have the meanings ascribed to them in Section 10 of the Loan and
Security Agreement or the first Supplement, which is incorporated in its
entirety into this Supplement. In the event of any inconsistency between the
provisions of that document or any prior Supplement thereto and this Supplement,
this Supplement is controlling.
In addition to the provisions of the Loan and Security Agreement, the
parties agree as follows:
(1) - Additional Definitions:
----------------------
"Commitment": Lender commits to make a Loan to Borrower up to the
aggregate, original principal amount of Three Million Dollars ($3,000,000) in
addition to those previously committed to. This additional, incremental Loan
shall be referred to as the "Bridge Loan".
"Designated Rate": The Designated Rate for the Bridge Loan is
Fourteen and 60/100 percent (14.60%) per annum.
"Terminal Payment": There shall be no Terminal Payment f6r the Bridge
Loan.
"Termination Date": The Termination Date with respect to any Bridge
Loan is the earlier of (a) the date Lender may terminate making Loans or
extending other credit pursuant to the rights of Lender under Article 7 of the
Agreement, or (b) March31, 1999.
(2) - Additional Terms and Conditions:
-------------------------------
A. Issuance of Warrant to Lender. As additional consideration for
the commitment to make the Bridge Loan , alpine execution of this Supplement No.
2 Lender shall be entitled to receive an additional warrant to purchase 46,667
shares of Series D preferred stock of Borrower with an aggregate initial
exercise price of $210,000 and a per share exercise price equal to $4.50. The
warrant issued under this Agreement shall be in substantially the form attached
hereto as Exhibit "B"; shall be transferable by Lender, subject to compliance
-----------
with applicable securities laws; shall expire not earlier than March31, 2004;
and shall include registration rights and anti-dilution protections on par with
those of other holders of the same series of Preferred Stock and "net issuance
provisions reasonably satisfactory to Lender and its counsel.
B. Limitation on Reimbursement of Documentation Costs.
Notwithstanding anything to the contrary in Section 9.8 of the Loan and Security
Agreement, Borrower's obligation to reimburse Lender its attorneys' fees and
costs of documenting this Bridge Loan transaction shall not exceed $3,000.
C. Payment and Prepayment of Bridge Loan. The Bridge Loan shall be
evidenced by a promissory note in substantially the form of Exhibit "A" attached
hereto, which note shall be executed and delivered to Lender as a condition to
the funding of the Bridge Loan. Principal of and interest on the Bridge Loan
shall be due
<PAGE>
and payable as set forth in the note. The Bridge Loan may be pre-paid at
Borrower's option at Lender's book value, at any time in whole or in part,
without paying a prepayment fee or premium.
D. Call Feature. Lender may, at its option call the outstanding
balance of principal and accrued unpaid interest due under the Bridge Loan
facility at any time after March31, 2000.
E. Collateral Coverage Ratio. The balance outstanding under the
Bridge Loan from time to time shall not be included as Obligations to Lender
then outstanding for purposes of calculating the Collateral Coverage Ratio.
(3) - Additional Representations:
--------------------------
Borrower represents and warrants that as of the date of execution of
this Supplement No.2 and as the funding of the Bridge Loan:
Its chief executive office is located at: 3100 De La Cruz Blvd.,
Santa Clara, CA 95054
Its Records are located at: Same
In addition to its chief executive office, Borrower maintains offices
or operates its business at the following locations:
Hyderabad, India
Other than its full corporate name, Debtor has conducted business
using the following trade names or fictitious business names:
Trancell Systems, Inc.,
and Axiom Communications
No Default or Event of Default has occurred and is continuing under
the Loan and Security Agreement.
- Additional Loan Documents:
--------------------------
Form of Note for Bridge Loan Exhibit "A"
Form of Warrant for Bridge Loan Exhibit "B"
IN WITNESS WHEREOF, the parties have executed this Supplement as of March
30, 1999.
BORROWER: LENDER:
RAMP NETWORKS, INC. VENTURE LENDING & LEASING II INC.
By: /s/ Mahesh Veerina By: /s/ Salvador Gutierrez
------------------------- ---------------------------
Name: Mahesh Veerina Name: Salvador Gutierrez
----------------------- -------------------------
Title: President & CEO Title President
----------------------- -------------------------
<TABLE>
<S> <C> <C>
Address for Notices: Attn: Chief Financial Officer Attn: Chief Financial Officer
3100 De La Cruz Blvd. 2010 North First Street, Suite 310
Santa Clara, CA 95054 San Jose, CA 95131
Fax# (408) 988-7605 Fax# (408) 436-8625
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 1998
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1998
<PERIOD-START> JAN-01-1997 JAN-01-1998
<PERIOD-END> DEC-31-1997 DEC-31-1998
<CASH> 15,112 3,764
<SECURITIES> 0 0
<RECEIVABLES> 2,113 767
<ALLOWANCES> (107) (123)
<INVENTORY> 816 2,151
<CURRENT-ASSETS> 176 720
<PP&E> 1,239 2,386
<DEPRECIATION> (602) (1,087)
<TOTAL-ASSETS> 18,854 8,878
<CURRENT-LIABILITIES> 2,189 4,310
<BONDS> 0 0
36,644 37,346
0 0
<COMMON> 251 628
<OTHER-SE> (20,470) (33,992)
<TOTAL-LIABILITY-AND-EQUITY> 18,854 8,878
<SALES> 5,587 9,858
<TOTAL-REVENUES> 5,587 9,858
<CGS> 4,872 7,019
<TOTAL-COSTS> 4,872 7,019
<OTHER-EXPENSES> 12,358 16,683
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 51 60
<INCOME-PRETAX> (11,534) (13,418)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> (11,534) (13,418)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (11,534) (13,418)
<EPS-PRIMARY> (3.92) (3.50)
<EPS-DILUTED> (3.92) (3.50)
</TABLE>
